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Note 14 - Revenue Recognition
9 Months Ended
Sep. 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 it 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.

 

As reflected in the table below, 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 September 30,

 
  

2024

  

2023

 
  

$

  

% of Total

  

$

  

% of Total

 

Coffee creamers

 $6,273,157   53% $5,804,273   63%

Coffee, tea, and hot chocolate products

  3,298,363   28%  1,981,731   22%

Hydration and beverage enhancing supplements

  2,520,402   21%  1,726,512   19%

Harvest snacks and other food items

  1,558,611   13%  1,747,908   19%

Other

  75,339   1%  132,284   1%

Gross sales

  13,725,872   116%  11,392,708   124%

Shipping income

  142,002   1%  214,982   2%

Discounts and promotional activity

  (2,091,528)  (17)%  (2,427,909)  (26)%

Sales, net

 $11,776,346   100% $9,179,781   100%

 

  

Nine Months Ended September 30,

 
  

2024

  

2023

 
  

$

  

% of Total

  

$

  

% of Total

 

Coffee creamers

 $16,540,456   52% $15,583,969   62%

Coffee, tea, and hot chocolate products

  7,977,157   25%  5,894,632   24%

Hydration and beverage enhancing supplements

  6,855,274   22%  3,395,671   14%

Harvest snacks and other food items

  4,546,448   14%  5,350,252   21%

Other

  289,261   1%  286,965   1%

Gross sales

  36,208,596   114%  30,511,489   122%

Shipping income

  373,832   1%  778,051   3%

Discounts and promotional activity

  (4,893,490)  (15)%  (6,272,730)  (25)%

Sales, net

 $31,688,938   100% $25,016,810   100%

 

The Company generates revenue through two channels: e-commerce and wholesale, which is summarized below for the periods presented:

 

  

Three Months Ended September 30,

 
  

2024

  

2023

 
  

$

  

% of Total

  

$

  

% of Total

 

E-commerce

 $6,887,356   58% $4,842,389   53%

Wholesale

  4,888,990   42%  4,337,392   47%

Sales, net

 $11,776,346   100% $9,179,781   100%

 

  

Nine Months Ended September 30,

 
  

2024

  

2023

 
  

$

  

% of Total

  

$

  

% of Total

 

E-commerce

 $18,854,020   59% $13,409,443   54%

Wholesale

  12,834,918   41%  11,607,367   46%

Sales, net

 $31,688,938   100% $25,016,810   100%

 

Receivables from contracts with customers are included in accounts receivable. 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 nine months ended September 30, 2024. For the periods presented below, the balances of receivables from contracts with customers and contract liabilities were as follow:

 

  

January 1,

  

December 31,

  

September 30,

 
  

2023

  

2023

  

2024

 

Accounts receivable, net

 $1,494,469  $1,022,372  $1,807,756 

Contract liabilities

 $(729,667) $(427,974) $(345,229

)

 

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). Pursuant to the Factoring Agreement, the Purchaser can require repurchase of uncollectable or ineligible accounts. 

 

The Factoring Agreement has an initial term of 12 months and will automatically 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. 

 

Factored receivables due from the purchaser to the Company of $1,534 and $0 as of September 30, 2024 and  December 31, 2023, respectively, were included in accounts receivable on the balance sheet.