Laird Superfood Inc

1. Summary of Significant Accounting Policies and Estimates

Financial Statement Preparation

The accompanying unaudited consolidated condensed financial statements (the "balance sheet(s)," "statement(s) of operations," "statement(s) of stockholders' equity," "statement(s) of cash flows," and, collectively, the "financial statements") include the accounts of Laird Superfood, Inc., a Nevada corporation, and its wholly owned subsidiary, Picky Bars, LLC, (collectively, the “Company,” “Laird Superfood,” “we,” or "our"). In management's opinion, the financial statements contain all adjustments, which are normal recurring adjustments, necessary for a fair presentation of its financial position and its results of operations, changes in stockholders’ equity, and cash flows for the interim periods.

Segment information is prepared on the same basis that the Company's Chief Executive Officer, who is deemed to be the Company's Chief Operating Decision Maker, reviews financial information for operational decision-making purposes.

The financial statements and related financial information should be read in conjunction with the Company's Annual Report on Form10-K for the year ended* December 31, 2023 (the"2023* Form10-K") filed with the Securities and Exchange Commission (the "SEC") on* March 13, 2024.The financial information as of December 31, 2023* was derived from the audited financial statements and notes for the fiscal year ended* December 31, 2023included in Item8* of the2023 Form10-K. The information included in this Quarterly Report on Form10-Q should be read in conjunction with the footnotes and management's discussion and analysis of the consolidated financial statements in the10-K. Certain information in footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") has been condensed or omitted pursuant to the rules and regulations of the SEC and the accounting standards for interim financial statements.

Operating results for thethree andsix months ended* June 30, 2024* arenot necessarily indicative of the results expected for the fiscal year ending* December 31, 2024*.

Recently Issued Accounting Pronouncements

In* November 2023,the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update ("ASU")2023-07, Segment Reporting (Topic280*): Improvements to Reportable Segment Disclosures, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The expanded annual disclosures are effective for the year ending* December 31, 2024,and the expanded interim disclosures are effective in2025* and will be applied retrospectively to all prior periods presented. While the Company is currently evaluating the expanded disclosure requirements, the Company doesnot expect the adoption of these amendments to have a material impact on our consolidated financial statements.

In* December 2023,the FASB issued ASU2023*-09, Income Taxes (Topic740):Improvements to Income Tax Disclosures ("ASU2023-09"), which requires, among other things, additional disclosures primarily related to the income tax rate reconciliation and income taxes paid. The expanded annual disclosures are effective for our year ending* December 31, 2025.The Company is currently evaluating the impact that ASU2023*-09 will have on its consolidated financial statements and whether the Company will apply the standard prospectively or retrospectively.

Subsequent Events

Subsequent events are events or transactions that occur after the balance sheet date but before the financial statements are available to be issued. The Company has evaluated events and transactions subsequent to* June 30, 2024* for potential recognition of disclosure in the financial statements and determined that there wereno such subsequent events, aside from those discussed below.

On* July 12, 2024,the Company granted 694,650 shares of common stock issuable upon settlement of restricted stock units granted pursuant to the Laird Superfood, Inc.2020 Omnibus Incentive Plan, as amended, to the reporting persons. The RSUs had a grant date fair value of $4.40 and will vest in equal installments, with 20% of the shares vesting on each of February 23, 2025,*2026, 2027, 2028 and2029, respectively.

8

On* September 15, 2023,the Company entered into a settlement agreement (the“2023* Settlement Agreement”) with a supplier (the “Supplier”) to recover losses incurred in connection with the product quality issue with coconut milk powder that it experienced in2023, pursuant to which the Supplier was obligated to, among other things, pay the Company $50,000 and provide a discount to the Company on the sale of future products of up to $950,000. On* February 27, 2024,the Company filed a complaint against the Supplier in the District Court of Boulder, Colorado alleging that the Supplier breached the2023* Settlement Agreement by failing to deliver acceptable coconut milk powder (the “Litigation”). Both parties dispute liability. As a result of the Litigation, on* July 30, 2024,the Company entered into an additional settlement agreement with the Supplier (the“2024* Settlement Agreement”), pursuant to which, among other things, the Supplier agreed to remit cash payment to the Company of approximately $0.5 million.

2. Cash, Cash Equivalents, and Restricted Cash

Cash, cash equivalents, and restricted cash are highly liquid instruments with an original maturity ofthree months or less when purchased. For the purposes of the statements of cash flows, the Company includes cash on hand, cash in clearing accounts, cash on deposit with financial institutions, investments with an original maturity ofthree months or less, and restricted cash in determining the total balance.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheets as of:

Amounts in restricted cash represent those that are required to be set aside by the following contractual agreements:

Cash, cash equivalents, and restricted cash balances that exceeded the Federal Deposit Insurance Corporation (“FDIC”) and Securities Investor Protection Corporation ("SPIC") insurable limits as of* June 30, 2024* and* December 31, 2023* totaled $6,907,907 and $6,756,207, respectively. The Company hasnot experienced any losses related to these balances. The Company’s cash, cash equivalents, and restricted cash are with what the Company believes to be a high-quality financial institution and considers the risks associated with these funds in excess of FDIC and SPIC insurable limits to be low.

9

3. Inventory

Inventory is stated at the lower of cost or net realizable value, or the value of consideration that can be received upon sale of said product, and approximate costs determined on thefirst-infirst-out basis and consists primarily of raw materials and packaging and finished goods and includes co-packing fees, indirect labor, and allocable overhead. The following table presents the components of inventory, net of reserves, as of:

The Company periodically reviews the value of items in inventory and provides write-offs of inventory based on current market assessment, which are charged to cost of goods sold. For thethree andsix months ended* June 30, 2024*, the Company recorded $145,697 and $187,901, respectively, of inventory obsolescence and disposal costs. For thethree andsix months ended* June 30, 2023*, the Company recorded $144,465 and $378,859, respectively, of inventory obsolescence and disposal costs.

As of* June 30, 2024*, inventory reserves totaled $1,078,595. This is comprised of estimated reserves based on inventory turnover, quantities on hand, and expiration dates of $238,055, products quarantined for quality issues of $448,258, and discontinued inventories of $392,282. As of* December 31, 2023*, inventory reserves totaled $1,029,657. This was comprised of estimated reserves based on inventory turnover, quantities on hand, and expiration dates of $385,069, products quarantined for quality issues of $306,276, and discontinued inventories of $338,312.

As of* June 30, 2024* and* December 31, 2023*, the Company had a total of $451,289 and $449,242, respectively, of prepayments for future raw materials inventory which are included in prepaid expenses and other current assets, net on the balance sheets.

4. Prepaid Expenses and Other Current Assets

The following table presents the components of prepaid expenses and other current assets, as of:

5. Revolving Lines of Credit

On* September 2, 2021,the Company entered into a revolving line of credit with Wells Fargo Bank National Association in a principal amountnot* exceeding $9,500,000. Any outstanding amounts under the line of credit would have had an interest rate calculated as Daily Simple Secured Overnight Financing Rate (“SOFR”) plus 1.5% per annum until paid in full. The line of credit was renewed on* September 1, 2022,with a maturity date of August 31, 2023,and the available credit was reduced to $5,000,000. The line of credit was terminated pursuant to its terms on August 31, 2023,andno* amounts were due thereunder. The line of credit wasnot renewed.

10

6. Property and Equipment

Property and Equipment

Property and equipment, net is comprised of the following as of:

Depreciation expense was $19,866 and $39,580 for thethree andsix months ended* June 30, 2024*, respectively. Depreciation expense was $23,857 and $60,088 for thethree andsix months ended* June 30, 2023*, respectively.

Assets Classified as Held-for-Sale

In thefourth quarter of2022, the Company entered into purchase agreements for the sale of the production equipment for an aggregate sales price of $800,000. In thefirst quarter of2023, consideration amounting to $218,165 was received and $581,835 was receivable and included in prepaid expenses and other current assets on the balance sheets. Consideration was received in full by the end of2023 andno amounts were receivable as of* June 30, 2024and December 31, 2023.*

7. Intangible Assets

Intangible assets are comprised of the following:

The weighted-average useful life of all the Company’s intangible assets is 6.6 years.

For thethree andsix months ended* June 30, 2024*, amortization expense was $47,278 and $98,999, respectively. For thethree andsix months ended* June 30, 2023,*amortization expense was $51,722 and $103,444, respectively.

Definite-lived intangible assets

Definite life intangible assets are evaluated for impairment whenever events or changes in circumstances indicate the carrying value* may**not* be recoverable. Examples include a significant adverse change in the extent or manner in which the Company uses the asset, or an unexpected change in financial performance. When evaluating definite life intangible assets for impairment, the Company compares the carrying value of the asset to the asset’s estimated undiscounted future cash flows. An impairment is indicated if the estimated future cash flows are less than the carrying value of the asset. The Company considered the above factors when assessing whether the Company’s long-lived assets will be recoverable.

Based on the analysis of the qualitative factors above, management determined that there wereno triggering events or impairment charges in thethree andsix months ended* June 30, 2024* and2023.

11

Intangible assets are amortized using the straight-line method over estimated useful lives ranging from three toten years. The estimated amortization expense for each of the nextfive years and thereafter is as follows:

Indefinite-lived intangible assets

On* August 3, 2015,the Company entered into a license agreement with the Company’s co-founder Laird Hamilton (the “LH License”). The LH License stated Mr. Hamilton’s contribution to the Company was in the form of intellectual property, granting the Company the right to use Mr. Hamilton’s name and likeness. This contribution, which was reported on the balance sheets as of June 30, 2024* and* December 31, 2023,was valued at $132,000 and satisfied with the issuance of 660,000 shares of common stock. The Company has determined that the intangible asset associated with the LH License has an indefinite life, as there isno* foreseeable limit on the period of time over which it is expected to contribute to the cash flows of the Company.

On* May 2, 2018,the Company entered into a license agreement with Gabrielle Reece, who is married to Mr. Hamilton (the “GR License”). Pursuant to the GR License, Ms. Reece granted the Company rights to her name, signature, voice, picture, image, likeness, and biographical information. This contribution, which is reported on the consolidated balance sheets as of June 30, 2024* and* December 31, 2023,was valued at $100 based on the consideration exchanged. The Company has determined that the intangible asset associated with the GR License has an indefinite life, as there isno* foreseeable limit on the period of time over which it is expected to contribute to the cash flows of the Company.

On* November 19, 2018,*the Company executed a License and Preservation Agreement with Mr. Hamilton and Ms. Reece which superseded the predecessor license agreements with both individuals. The agreement added specific terms related to non-competition and allowable usage of the property under the license.No additional consideration was exchanged in connection with the agreement and the life of the agreement was set at 100 years.

On* May 26, 2020,the Company executed a License and Preservation Agreement with Mr. Hamilton, and Ms. Reece (the“2020* License”), which superseded the predecessor license and preservation agreement with both individuals. Among other modifications, the agreement (i) modified certain approval rights of Mr. Hamilton and Ms. Reece for use of their respective images, signatures, voices, and names (other than those owned by the Company), rights of publicity and common law and statutory rights to the foregoing in the Company’s products, (ii) modified certain assignment, change of control and indemnification provisions, and (iii) granted the Company the right to extend the term of the agreement for additionalten-year terms upon the expiration of the initialone-hundred year term.No additional consideration was exchanged in connection with the agreement.

8. Leases

Lessee

The Company leased its warehouse space under a commercial lease with RII Lundgren Mill, LLC, dated* March 1, 2018.The lease commenced March 1, 2018.The initial lease term wasten years, and the Company had the option to renew the lease fortwo* additionalfive-year periods.

The Company executed asecond lease for additional warehouse and office space under a commercial lease with RII Lundgren Mill, LLC, dated* December 17, 2018.The lease commenced on July 1, 2019.However, for accounting purposes the lease commencement date was June 6, 2019.*The initial lease term wasten years.

The Company executed athird lease for additional warehouse and office space under a commercial lease with RII Lundgren Mill, LLC, dated* October 1, 2021.The lease commenced on October 1, 2021.*The initial lease term wasten years.

12

The Company executed a lease cancellation agreement dated* December 12, 2022.Under this agreement, the Company'sthree* leases with RII Lundgren Mill, LLC, were terminated effective* January 31, 2023,and the Company agreed to pay $1,550,000, of which $500,000 was remitted in2022* and $1,050,000 was satisfied in thefirst quarter of2023.

The Company assumed an operating lease in the acquisition of Picky Bars, LLC on* May 3, 2021.The initial lease term is 62 months, and the Company has the option to renew the lease fortwo* additionalthree-year periods.

The Company entered into a sublease agreement with Somatic Experiencing Trauma Institute with a commencement date of* January 1, 2023,for a 5,257 square foot office space in Boulder, Colorado which serves as the Company's current headquarters. This lease will expire on July 1, 2027.*

The components of lease expense were as follows:

As of* June 30, 2024*, future minimum payments during the nextfive years and thereafter are as follows:

13

Lessor

The Company executed a sublease agreement of the Picky Bars, LLC operating lease on* March 1, 2022.The lease commenced on April 1, 2022.The initial sublease term expires on April 30, 2025.The sublease meets all of the criteria of an operating lease and is accordingly recognized straight line over the sublease term with a related sublease rental asset accounting for abatements and initial direct costs. The Company had $7,803 and $11,881 of sublease rental assets as of June 30, 2024* and* December 31, 2023*, respectively, included in prepaid expenses and other current assets on the balance sheets.

The components of rental income were as follows:

As of* June 30, 2024*, future minimum payments to be received during the nextfive years and thereafter, as applicable, are as follows:

9. Income Taxes

The Company had a tax net loss for thethree andsix months ended* June 30, 2024and2023*, and therefore has recordedno assessment of current federal income taxes. The Company is subject to minimum state taxes for various jurisdictions as well as subject to franchise taxes considered income taxes under Accounting Standards Codification ("ASC")740, Income Taxes. A reconciliation of income tax expense at the federal statutory rate to the income tax provision at the Company's effective rate is as follows:

14

The Company’s deferred tax assets consisted of the following as of:

As of* June 30, 2024*, the Company didnot provide a current or deferred U.S. federal income tax provision or benefit for any of the periods presented because the Company has reported cumulative losses since inception. The Company has recorded a provision for state income taxes and a corresponding current state income tax payable of approximately $3,598 and $7,373 as of* June 30, 2024* and* December 31, 2023,*respectively.

As of* June 30, 2024* and* December 31, 2023,the Company had aggregate net operating losses ("NOLs") totaling approximately $140.5 million and $136.8 million, respectively. As of June 30, 2024* and* December 31, 2023,the Company had federal NOLs totaling approximately $1.9 million from2017* and prior years that can be carried forward for20 years and which begin to expire in2036. As of* June 30, 2024* and* December 31, 2023,the Company had federal NOLs totaling approximately $79.9 million and $77.8 million, respectively, from2018* and subsequent years that can be carried forward indefinitely. As of* June 30, 2024* and* December 31, 2023,the Company had state NOLs totaling $57.7 million and $57.1 million, respectively, that can be carried forward for between15* and20 years. As of* June 30, 2024* and* December 31, 2023,the Company had credits totaling $0.3 million and $0.2 million, respectively, that can be carried forward forfive* years. As of* June 30, 2024* and* December 31, 2023,the Company had other carryforwards totaling $0.6 million that can be carried forward for betweenone* andfive years.

The use of net operating losses* maybe subject to certain limitations, such as those triggered by ownership changes under Section382* of the Internal Revenue Code. Because these provisions, the use of a portion of the Company's NOLs and tax credit carryforwards* maybe limited in future periods. Further, a portion of the carryforwards may*expire before being applied to reduce future income tax liabilities.

The Company assesses its deferred tax assets and liabilities to determine if it is more likely thannot, they will be realized; ifnot, a valuation allowance is required to be recorded. Management has determined it is more likely thannot that the deferred tax assets wouldnot be realized, thus a full valuation allowance was recorded against the deferred tax assets. The Company* mayreduce the valuation allowance against definite-lived deferred tax assets at such a time when it becomes more likely thannot* that the definite-lived deferred tax assets will be realized. The change in the valuation allowance for deferred tax assets and liabilities for thesix months ended* June 30, 2024and2023* were net increases of $0.8 million and $1.8 million, respectively.

GAAP requires management to evaluate and report information regarding its exposure to various tax positions taken by the Company. The Company has determined whether there are any tax positions that have met the recognition threshold and has measured the Company’s exposure to those tax positions. Management believes that the Company has adequately addressed all relevant tax positions and that there areno unrecorded tax liabilities.

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. U.S. and state jurisdictions have statutes of limitations that generally range from3 to5 years.

15

10. Stock Incentive Plan

The Company adopted an incentive plan (as amended, he*“2020* Omnibus Incentive Plan”) on* September 22, 2020,as amended by the First Amendment to the2020* Omnibus Incentive Plan, which was approved by the Company's stockholders on* June 27, 2024,to provide for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units ("RSUs"), deferred stock units, unrestricted stock, dividend equivalent rights, performance shares, other performance-based awards, other equity-based awards, and cash bonus awards to Company employees, non-employee directors, and certain consultants and advisors. As of June 30, 2024*, the Company has 1,441,996 additional authorized shares to award under the2020 Omnibus Incentive Plan excluding 1,944,131 of shares to be issued upon vesting and exercise of outstanding options and RSUs.

Stock Options

The following tables summarize the Company’s stock option activity during thesix months ended* June 30, 2024and2023*:

(1) Includes 86,643 shares of common stock which were withheld to cover option costs.

The fair value of each stock option granted is estimated on the grant date using the Black-Scholes option valuation model. The assumptions used to calculate the fair value of options granted are evaluated and revised, as necessary, to reflect market conditions and our historical experience.

16

Restricted Stock Units

The following tables summarize the Company’s RSU activity during thesix months ended* June 30, 2024and2023*:

(1) Includes 13,080 shares of common stock which were withheld to cover taxes.

(1) Includes 17,613 shares of common stock which were withheld to cover taxes.

The Company estimates the fair value of each RSU using the fair value of the Company’s common stock on the date of grant.

Market-Based Stock Units ("MSUs")

The following tables summarize the Company’s MSU activity during thesix months ended* June 30, 2024and2023*:

17

The MSUs vest upon the30-day weighted average stock price reaching or exceeding established targets within the requisite service period. We estimate the grant-date fair value of the MSUs using a Monte Carlo simulation which requires assumptions for expected volatility, risk-free rate of return and dividend yield. Compensation expense for these MSUs is recognized over the requisite service period regardless of whether the market conditions are satisfied.

Stock-Based Compensation

Stock-based compensation expense is recognized ratably over the requisite service period for all awards. The following tables summarize the Company’s stock-based compensation recorded as a result of applying the provisions of ASC Topic718, Compensation - Stock Compensation to equity awards:

18

11. Earnings (Loss) per Share

Basic earnings (loss) per share is determined by dividing the net loss attributable to the Company's common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is similarly determined, except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if all dilutive potential common shares had been issued. Dilutive potential common shares consist of employee stock options, RSUs, and MSUs. The dilutive effect of employee stock options, RSUs, and MSUs by the Company are calculated using the treasury stock method. Basic earnings per share is reconciled to diluted earnings per share in the following table:

12. Concentrations

The following table details the concentration of vendor accounts payable balances in excess of10% of total accounts payable at each period:

The following table details the concentration of customer accounts receivable balances in excess of10% of total trade accounts receivable at each period:

The following table details the concentration of sales to specific customers in excess of10% of total net sales for each year and the accounts receivable balances from those customers at the end of each period:

19

The Company purchased a substantial portion of raw materials and packaging from certain suppliers. The following table details the concentration of purchases from specific suppliers in excess of10% of total purchases for each period:

The Company purchased a substantial portion of raw materials and packaging originating from certain geographical regions. The following table details the concentration of purchases from specific regions in excess of10% of total purchases for each period:

13. Related Parties

FASB ASC Topic850, Related Party Disclosures, requires that information about transactions with related parties that would influence decision making shall be disclosed so that users of the financial statements can evaluate their significance. The Company conducts business with suppliers and service providers who are also stockholders of the Company. From time to time, service providers are offered shares of common stock as compensation for their services. Shares provided as compensation are calculated based on the grant date fair value of the service provided. Additional material related party transactions are noted below.

License Agreements

On* May 26, 2020,the Company executed a License and Preservation Agreement which superseded the predecessor license and preservation agreement with both Mr. Hamilton and Ms. Reece. Among other modifications, the agreement (i) modified certain approval rights, (ii) modified certain assignment, change of control and indemnification provisions, and (iii) granted the Company the right to extend the term of the agreement for additionalten*-year terms upon the expiration of the initialone-hundred-year term.No additional consideration was exchanged in connection with the agreement. See additional discussion related to the2020 License in Note7 of the financial statements.

Marketing Agreements

On* October 26, 2022,the Company executed an influencer agreement with Gabby Reece to provide certain marketing services for a term ending December 31, 2023,with an option to renew forone*-year terms. In connection with these services, we recognized advertising expenses totaling $63,566 and $126,067, for thethree andsix months ended* June 30, 2024*, respectively, and $74,776 and $164,564 for thethree andsix months ended* June 30, 2023,respectively. As of June 30, 2024* and* December 31, 2023*, amounts payable to Gabby Reece of $29,167 and $2,688, respectively, are included in related party liabilities in the balance sheets.

20

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 Topic606, Revenue from Contracts with Customers, the Company disaggregates net sales from contracts with customers based on the characteristics of the products sold:

21

The Company generates revenue throughtwo channels: e-commerce and wholesale:

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 thesix months ended June 30, 2024*. The balances of receivables from contracts with customers, contract assets, and contract liabilities were as follow:

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* mayterminate the Factoring Agreement at any time upon30* days prior written notice and payment to Purchaser of an early termination fee equal to 2.0% of the Maximum Amount if terminated during thefirst 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 Exhibit10.1 to this Quarterly Report on Form10-Q.

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