Note 14 - Revenue Recognition

6 Months Ended

Jun. 30, 2024

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

14. Revenue Recognition

The Company’s primary source of revenue is sales of coffee creamers, hydration and beverage enhancing supplements, harvest snacks and other food items, and coffee, tea, and hot chocolate products. The Company recognizes revenue when control of the promised good is transferred to the customer and in amounts that the Company expects to collect. The timing of revenue recognition takes into consideration the various shipping terms applicable to the Company’s sales. Each delivery or shipment made to a customer is considered to satisfy a performance obligation. Performance obligations generally occur at a point in time and are satisfied when control of the goods passes to the customer. The Company is entitled to collect the sales price under normal credit terms. Additionally, the Company estimates the impact of certain common practices employed by us and other manufacturers of consumer products, such as scan-based trading, product rebate and other pricing allowances, product returns, trade promotions, sales broker commissions and slotting fees. These estimates are recorded at the end of each reporting period.

In accordance with ASC Topic 606, Revenue from Contracts with Customers, the Company disaggregates net sales from contracts with customers based on the characteristics of the products sold:

	Three Months Ended June 30,
	2024						2023
	$			% of Total			$			% of Total
Coffee creamers	$	4,696,979			47	%	$	4,647,553			60	%
Coffee, tea, and hot chocolate products		2,503,529			25	%		1,957,760			25	%
Hydration and beverage enhancing supplements		2,309,600			23	%		998,309			13	%
Harvest snacks and other food items		1,683,776			17	%		1,849,947			24	%
Other		91,909			1	%		124,953			2	%
Gross sales		11,285,793			113	%		9,578,522			124	%
Shipping income		120,402			1	%		259,843			3	%
Returns and discounts		(1,402,541	)		(14	)%		(2,114,274	)		(27	)%
Sales, net	$	10,003,654			100	%	$	7,724,091			100	%

	Six Months Ended June 30,
	2024						2023
	$			% of Total			$			% of Total
Coffee creamers	$	10,267,299			52	%	$	9,779,696			62	%
Coffee, tea, and hot chocolate products		4,678,794			23	%		3,912,901			25	%
Hydration and beverage enhancing supplements		4,334,872			22	%		1,669,159			11	%
Harvest snacks and other food items		2,987,837			15	%		3,602,344			23	%
Other		213,921			1	%		154,683			1	%
Gross sales		22,482,723			113	%		19,118,783			122	%
Shipping income		231,830			1	%		563,069			4	%
Returns and discounts		(2,801,961	)		(14	)%		(3,844,823	)		(26	)%
Sales, net	$	19,912,592			100	%	$	15,837,029			100	%

The Company generates revenue through two channels: e-commerce and wholesale:

	Three Months Ended June 30,
	2024					2023
	$		% of Total			$		% of Total
E-commerce	$	6,098,327		61	%	$	4,139,373		54	%
Wholesale		3,905,327		39	%		3,584,718		46	%
Sales, net	$	10,003,654		100	%	$	7,724,091		100	%

	Six Months Ended June 30,
	2024					2023
	$		% of Total			$		% of Total
E-commerce	$	11,966,664		60	%	$	8,567,054		54	%
Wholesale		7,945,928		40	%		7,269,975		46	%
Sales, net	$	19,912,592		100	%	$	15,837,029		100	%

Receivables from contracts with customers are included in accounts receivable. Contract assets include deferred cost of goods sold associated with deferred revenue and are included in finished goods inventories. Contract liabilities include deferred revenue, customer deposits, rewards programs, and refund liabilities, and are included in accrued expenses. All contract liabilities as of December 31, 2023, were recognized in net sales for the six months ended June 30, 2024. The balances of receivables from contracts with customers, contract assets, and contract liabilities were as follow:

	January 1,			December 31,			June 30,
	2023			2023			2024
Accounts receivable, net	$	1,494,469		$	1,022,372		$	1,168,726
Contract assets	$	57,249		$	—		$	10,342
Contract liabilities	$	(729,667	)	$	(427,974	)	$	(478,311	)

On  May 7, 2024, the Company entered into an accounts receivable factoring agreement (the “Factoring Agreement”) with Alterna Capital Solutions LLC (the “Purchaser”). The Factoring Agreement allows the Company to access up to $2 million on a revolving basis. The upfront purchase price for factored accounts is up to 70% of their face value, with the remainder payable to the Company upon collection by the Purchaser. The proceeds will be used to fund general working capital needs. The Company will pay fees, including a funds usage fee (prime rate + 1.5%, minimum 10% per annum) and a collateral monitoring fee (0.05% per month). The Purchaser can require repurchase of uncollectable or ineligible accounts. 

The Factoring Agreement has an initial term of 12 months and will renew annually, unless terminated in accordance with the Factoring Agreement. The Company  may terminate the Factoring Agreement at any time upon 30 days prior written notice and payment to Purchaser of an early termination fee equal to 2.0% of the Maximum Amount if terminated during the first 12 months and 1.0% of the Maximum Amount during the subsequent terms.

The Company has granted a security interest it's personal property to secure the payment and performance of all obligations under the Factoring Agreement. The Factoring Agreement includes customary provisions, including representations, warranties and covenants, indemnification, waiver of jury trial, and the exercise of remedies upon a breach or default. Such description is qualified in its entirety by reference to the full text of the Factoring Agreement, a copy of which is attached as Exhibit 10.1 to this Quarterly Report on Form 10-Q.

Factored receivables due to the purchaser of $106,552 and $0 as of June 30, 2024 and December 31, 2023, respectively, were included in accounts receivable on the balance sheet.