What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-14 compared with 2022-07-28 · 115 added, 87 removed, 104 unchanged (66% of the section changed)

30 unchanged sentences

of Operations

of Operation for Three Months Ended June 30, 2022 as Compared to the Three Months Ended June 30, 2021

of Operation for Three Months Ended September 30, 2022 as Compared to the Three Months Ended September 30, 2021

and cost of revenue

1 unchanged sentence

The overall revenue

for the second quarter 2022 was higher due to growth in “Twist & Go”™

for the third quarter 2022 was higher due to growth in “Twist & Go”™

revenue and the gradual return of single serve demand.

Revenue in the third quarter of 2022 was adversely impacted by a withdrawal of

“Twist & Go”™ product manufactured by one of its co-manufacturers.

The withdrawal resulted from quality complaints that are the subject of a legal dispute that is more fully described in the footnotes

of the accompanying financial statements.

As a result of the withdrawal, we recorded a reserve for anticipated sales claims and distributor

administrative fees of $630,000.

The Company anticipates that its revenues will be adversely impacted as a result of the dispute unless

and until a suitable resolution is reached or new sources of reliable supply at sufficient volume can be identified and developed, the

timing of which is uncertain.

of revenue for 2022 was approximately $3,129,000 as compared to approximately $1,209,000 in 2021.

Our gross profit was approximately $883,000

(32%) and $562,000 (43%) for 2022 and 2021, respectively.

Gross margins decreased in the second quarter primarily due to product mix

which includes “Twist & Go”™ at slightly lower product margins.

and marketing expenses

Cost of revenue in the third quarter

of 2022 was adversely impacted by the anticipated disposal of withdrawn inventory, amounting to $932,000 including ancillary costs.

gross profit was approximately ($723,000) (-30%) and $721,000 (37%) for 2022 and 2021, respectively.

Excluding the impact of the product

withdrawal on both revenue and cost of revenue, our gross profit in the third quarter was $839,000 (28%).

The decrease in the third quarter

is primarily due to product mix which includes a higher proportion of “Twist & Go”™

at slightly lower product margins.

marketing and distribution expense

operations were primarily directed towards increasing sales and expanding our distribution network.

Three months ended

Three months ended September 30,

Sales and marketing

Storage and outbound freight

and marketing expenses increased approximately $133,000 (72%) from approximately $186,000 in 2021 to $319,000 in 2022.

and marketing expense increased approximately $201,000 (123%) from approximately $164,000 in 2021 to $365,000 in 2022.

The increase in

sales and marketing expenses was primarily the result of the retention of new employees and outside service providers to assist with

sales and initiatives, as well as participation in education nutrition trade shows in 2022.

sales and marketing expense was primarily the result of the retention of new employees and outside service providers to assist with sales

and initiatives, including, beginning in the third quarter of 2022, brokers specializing in the school market.

Additionally, the Company

increased its participation in education nutrition trade shows in 2022.

and outbound freight expense increased approximately $134,000 (42%) from approximately $316,000 in 2021 to $450,000 in 2022.

was primarily a result of the 115% increase in revenue, tempered by logistics efficiencies from the increased volume in core markets

and administrative expenses

general and administrative expenses increased by 41%, or approximately $237,000, from approximately $575,000 in 2021 to approximately

$813,000 in 2022, primarily driven by personnel, including non-cash stock-based compensation, and other general and administrative expenses.

The following is a breakdown of our general and administrative expenses for the three months ended June 30, 2022, and 2021:

Three months ended

was primarily a result of the 25% increase in revenue and the additional shipments that were ultimately not recognized as revenue due

to the aforementioned product withdrawal.

and administrative expense

general and administrative expense increased by 81%, or approximately $472,000, from approximately $586,000 in 2021 to approximately

$1,058,000 in 2022, primarily driven by research and development, personnel, including non-cash stock-based compensation, and other general

and administrative expense.

The following is a breakdown of our general and administrative expense for the three months ended September

30, 2022, and 2021:

Three months ended September 30,

Personnel costs

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Stock based compensation for the three months

ended June 30, 2022 was approximately $64,000 compared to $45,000 for the three months ended June 30, 2021 due to the aforementioned

increase in staffing.

and development expenses increased approximately $27,000 (39%) from approximately $70,000 in 2021 to $96,000 in 2022.

The increase is

primarily due to material consumption and expiration, partially offset by a reduction in labor hours for our development consulting team.

expenses increased approximately $93,000 (122%) from approximately $76,000 in 2021 to $169,000 in 2022.

In 2022, we incurred approximately

ended September 30, 2022 was approximately $118,000 compared to $42,000 for the three months ended September 30, 2021 due to the aforementioned

increase in staffing as well as the implementation of a performance-based stock compensation program.

and development expense increased approximately $186,000 (547%) from approximately $34,000 in 2021 to $220,000 in 2022.

is primarily due to materials consumed in pre-production runs at a new co-manufacturer that will provide our Twist

& Go™ product in carton format starting in the fourth quarter of 2022.

expense increased approximately $59,000 (40%) from approximately $149,000 in 2021 to $208,000 in 2022, primarily related to an increase

in maintenance costs on equipment loaned to our bulk product customers, costs related to our annual meeting, and approximately $8,000

in one-time costs related to the uplist of our common stock to the NASDAQ Stock Market.

Additionally, 2021 benefited from the

results of vendor payables reconciliation resulting in the reduction of vendor liabilities.

had operating losses of approximately $737,000 and $602,000 for the three-month periods ended June 30, 2022 and 2021, respectively.

increase of approximately $135,000 or 22%, was primarily due to the increase in operating expenses, partially offset by the increase

in gross profit.

income and expense

expense was approximately $69,000 and loss on debt extinguishment was approximately $194,000 for the three months ended June 30, 2021.

Interest related to convertible debt that was converted and repaid in 2021.

We did not incur any interest expense for the three months

ended June 30, 2022.

We also recognized gain of $568,000 from the forgiveness of our PPP loan in 2021

had net losses of approximately $737,000 and $297,000 in the three-month periods ended June 30, 2022 and 2021, respectively, with the

primary change due to the $568,000 gain on the forgiveness of the PPP loan in 2021.

of Operation for Six Months Ended June 30, 2022 as Compared to the Six Months Ended June 30, 2021

loss and net loss

had operating and net losses of approximately $2,708,000 and $508,000 for the three-month periods ended September 30, 2022 and 2021,

respectively.

The increase of approximately $2,200,000 or 433%, was primarily due to $1,785,000 in charges related to the aforementioned

product quality issue and withdrawal.

of Operation for Nine Months Ended September 30, 2022 as Compared to the Nine Months Ended September 30, 2021

and cost of revenue

1 unchanged sentence

The overall revenue

for the six months ended June 30, 2022 was higher due to growth in “Twist & Go”™

for the nine months ended September 30, 2022 was higher due to growth in “Twist & Go”™

revenue and the gradual return of single serve demand.

Revenue in the third quarter of 2022 was adversely impacted by a withdrawal

of “Twist & Go”™ product manufactured by one of its co-manufacturers.

The withdrawal resulted from quality complaints that are the subject of a legal dispute that is more fully described in the footnotes

of the accompanying financial statements.

As a result of the withdrawal, we recorded a reserve for anticipated sales claims and distributor

administrative fees of $630,000.

The Company anticipates that its revenues will be adversely impacted as a result of the dispute unless

and until a suitable resolution is reached or new sources of reliable supply at sufficient volume can be identified and developed, the

timing of which is uncertain.

of revenue for 2022 was approximately $6,807,000 as compared to approximately $2,614,000 in 2021.

Our gross profit was approximately

$1,647,000 (31%) and $911,000 (39%) for 2022 and 2021, respectively.

Gross margins decreased in the six months ended June 30, 2022 primarily

due to product mix which includes “Twist & Go”™ at slightly lower

product margins.

and marketing expenses

Six months ended

Cost of revenue in the third quarter

of 2022 was adversely impacted by the anticipated disposal of withdrawn inventory, amounting to $932,000 including ancillary costs.

gross profit was approximately $924,000 (12%) and $1,632,000 (38%) for 2022 and 2021, respectively.

Excluding the impact of the product

withdrawal on both revenue and cost of revenue, our gross profit in the nine months ended September 30, 2022 was $2,486,000 (30%).

margins decreased in the nine months ended September 30, 2022 primarily due to product mix which includes “Twist

& Go”™ at slightly lower product margins.

marketing and distribution expense

Nine months ended September 30,

Sales and marketing

Storage and outbound freight

and marketing expenses increased approximately $210,000 (59%) from approximately $355,000 in 2021 to $565,000 in 2022.

and marketing expense increased approximately $410,000 (79%) from approximately $519,000 in 2021 to $929,000 in 2022.

The increase in

sales and marketing expenses was primarily the result of the retention of new employees and outside service providers to assist with

sales initiatives, as well as participation in education nutrition trade shows in 2022.

sales and marketing expense was primarily the result of the retention of new employees and outside service providers to assist with sales

and initiatives, including, beginning in the third quarter of 2022, brokers specializing in the school market.

Additionally, the Company

increased its participation in education nutrition trade shows in 2022.

and outbound freight expense increased approximately $491,000 (68%) from approximately $717,000 in 2021 to $1,208,000 in 2022.

was primarily a result of the 130% increase in revenue, tempered by logistics efficiencies from the increased volume in core markets

and administrative expenses

general and administrative expenses increased by 66%, or approximately $665,000, from approximately $1,013,000 in 2021 to approximately

$1,677,000 in 2022, primarily driven by personnel, including non-cash stock-based compensation, shipping and storage and other general

and administrative expenses.

The following is a breakdown of our general and administrative expenses for the six months ended June 30,

was primarily a result of the 82% increase in revenue, tempered by logistics efficiencies from the increased volume in core markets served.

and administrative expense

general and administrative expense increased by 71%, or approximately $1,138,000, from approximately $1,598,000 in 2021 to approximately

$2,736,000 in 2022, primarily driven by personnel, including non-cash stock-based compensation, other general and administrative expense,

and research and development.

The following is a breakdown of our general and administrative expense for the nine months ended September

30, 2022, and 2021:

Six months ended

Nine months ended September 30,

Personnel costs

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stock issued and options granted to employees and non-employees.

Stock based compensation for the six months ended June 30, 2022 was

approximately $93,000 compared to $10,000 for the six months ended June 30, 2021 due to the aforementioned increase in staffing coupled

with the departure of two key employees and the forfeiture of their unvested options in 2021.

Stock based compensation for the nine months ended September 30, 2022

was approximately $211,000 compared to $52,000 for the nine months ended September 30, 2021 due to the aforementioned increase in staffing,

and the institution of our performance-based stock compensation program in the third quarter of 2022.

Stock-based compensation in 2021

benefited from forfeiture credits due to the departure of two key employees.

professional, and consulting fees increased approximately $98,000 (40%) from approximately $244,000 in 2021 to $342,000 in 2022.

increase was primarily due to corporate development activities.

and development expenses decreased approximately $11,000 (8%) from approximately $138,000 in 2021 to $127,000 in 2022.

The reduction

is primarily due to a reduction in labor hours for our development consulting team.

expenses increased approximately $263,000 (185%) from approximately $142,000 in 2021 to $405,000 in 2022.

and development expense increased approximately $174,000 (101%) from approximately $173,000 in 2021 to $347,000 in 2022.

is primarily due to materials consumed in pre-production runs at a new co-manufacturer that will provide our Twist

& Go™ product in carton format starting in the fourth quarter of 2022 .

expense increased approximately $321,000 (110%) from approximately $292,000 in 2021 to $613,000 in 2022.

In 2022, we incurred approximately

$175,000 in one-time costs related to the uplist of our common stock to the NASDAQ Stock Market.

Additionally, 2021 benefited from the

results of vendor payables reconciliation resulting in the reduction of vendor liabilities.

had operating losses of approximately $1,631,000 and $1,151,000 for the six-month periods ended June 30, 2022 and 2021, respectively.

The increase of approximately $480,000 or 42%, was primarily due to the increase in operating expenses, partially offset by the increase

in gross profit.

Additionally, we experienced maintenance

cost increases related to equipment loaned to our bulk product customers, and an increase in annual meeting costs.

had operating losses of approximately $4,339,000 and $1,658,000 for the nine-month periods ended September 30, 2022 and 2021, respectively.

The increase of approximately $2,681,000 or 162%, was primarily due to $1,785,000 in charges related to the aforementioned product quality

issue and withdrawal and increases in operating expense.

income and expense

1 unchanged sentence

The gain of approximately

$16,000 for the six months ended June 30, 2021 was a result of the change in components of the Black-Scholes model.

The derivative liability

was settled upon conversion and repayment of the convertible notes in the second quarter of 2021.

expense was approximately $128,000 for the six months ended June 30, 2021.

Interest related to convertible debt that was converted and

repaid in 2021.

We did not incur any interest expense for the six months ended June 30, 2022.

had net losses of approximately $1,631,000 and $889,000 in the six-month periods ended June 30, 2022 and 2021, respectively, with the

primary change due to the $568,000 gain on forgiveness of the PPP loan in 2021.

$16,000 for the nine months ended September 30, 2021 was a result of the change in components of the Black-Scholes model.

The derivative

liability was settled upon conversion and repayment of the convertible notes in the second quarter of 2021, which resulted in an extinguishment

loss of $194,000.

recorded a gain on extinguishment of covid-19 related Paycheck Protection Program (“PPP”) loan of $568,000 in the nine months

ended September 30, 2021.

expense was approximately $128,000 for the nine months ended September 30, 2021.

Interest related to convertible debt that was converted

and repaid in 2021.

We did not incur any interest expense for the nine months ended September 30, 2022.

had net losses of approximately $4,339,000 and $1,396,000 in the nine-month periods ended September 30, 2022 and 2021, respectively,

with the primary change due to the $568,000 gain on forgiveness of the PPP loan in 2021.

and Capital Resources

of June 30, 2022, we had working capital of approximately $4,996,000 as compared with approximately $6,172,000 at December 31, 2021.

The decrease in working capital surplus is primarily due to operating loss for the six months ended June 30, 2022.

the six months ended June 30, 2022, we used cash of approximately $1,923,000 in operations, and $13,000 for the purchase of equipment,

of September 30, 2022, we had working capital of approximately $2,619,000 as compared with approximately $6,172,000 at December 31, 2021.

The decrease in working capital surplus is primarily due to operating loss for the nine months ended September 30, 2022.

the nine months ended September 30, 2022, we used cash of approximately $2,619,000 in operations, and $13,000 for the purchase of equipment,

partially offset by $5,000 from the issuance of stock pursuant to an outstanding warrant.

liquidity needs will depend on how quickly we are able to profitably ramp up sales, as well as our ability to control and reduce variable

operating expenses, and to continue to control fixed overhead expense.

operating expense, and to continue to control fixed overhead expense.

operations to date have been financed by the sale of securities, the issuance of convertible debt and the issuance of short-term debt,

6 unchanged sentences

The aggregate minimum lease payments

under the non-cancellable direct lease as of June 30, 2022 are approximately $60,000.

under the non-cancellable direct lease as of September 30, 2022 are approximately $40,000.

Sheet Arrangements

have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition,

changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that

changes in financial condition, revenues or expense, results of operations, liquidity, capital expenditures or capital resources that

are material to stockholders.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis