Contract Assets The Company has elected the practical expedient which allows costs incurred in connection with obtaining a contract to be expensed as incurred for those contracts with a duration of one year or less. For those contracts which have a duration of greater than one year, the Company capitalizes those costs and amortizes them over the duration of the agreement. As of December 31, 2022 and December 31, 2021, there were no contract assets recognized. Shipping and Handling Costs The Company’s shipping and handling costs are included in both cost of sales and selling and distribution expense, depending on the nature of such costs. Cost of sales reflects cost incurred for inbound freight on ingredients to be used in production. Internal freight costs included in selling and distribution expenses consist primarily of those costs associated with moving products from production facilities through the Company’s distribution network. Total internal freight costs recorded within selling and distribution expenses during the years ended December 31, 2022 and 2021, were $4.0 million and $3.3 million, respectively. Shipping and handling costs associated with outbound freight are included within selling and distribution expenses and are accounted for as a fulfillment cost as incurred. Total of these costs recorded within selling and distribution expenses were $12.0 million and $7.9 million during the year ended December 31, 2022 and 2021, respectively. Marketing Expenses Marketing costs are expensed as incurred. The Company incurred $6.0 million and $20.6 million during the year ended December 31, 2022 and 2021, respectively. During 2021, approximately $15.8 million of marketing expenses related to equity compensation expense. Marketing costs are recorded in Operating expenses in the Company’s consolidated statements of operations. Research and Development Expenses Research and development expenses are recorded in administrative expense in the statements of operations as incurred. During the years ended December 31, 2022 and 2021, the Company incurred $4.8 million and $2.0 million of research and development expenses, respectively. Business Combination The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations, which requires the Company to recognize separately from goodwill the assets acquired, and the liabilities assumed at their acquisition date fair values. The amount by which the fair value of consideration transferred exceeds the fair value of the identifiable net assets acquired is recorded as goodwill. While the Company uses its best estimates and assumptions to accurately value assets acquired, and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, the estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the identifiable assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the statements of operations. Acquisition-Related Contingent Consideration Contingent consideration in a business combination is included as part of the purchase consideration and is recognized at fair value as of the acquisition date. For contingent consideration, management is responsible for determining the appropriate valuation model and estimated fair value, and in doing so, considers a number of 60
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