What changed in this filing

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Item 1. Financial Statements

2023-10-26 compared with 2023-08-14 · 177 added, 117 removed, 314 unchanged (48% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

September 30,

Current assets:

22 unchanged sentences

23,000,000 shares authorized;

13,002,603 and 12,934,741 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

13,104,614 and 12,934,741 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Additional paid in capital

7 unchanged sentences

Consolidated Statements of Operations

the three and six months ended June 30, 2023 and 2022

For the three months ended June 30,

For the six months ended June 30,

the three and nine months ended September 30, 2023 and 2022

For the three months ended September 30,

For the nine months ended September 30,

Cost of revenue

10 unchanged sentences

Weighted average shares outstanding

Weighted average shares outstanding - basic

Net loss per share

Net loss per share - Basic

the accompanying notes to the consolidated financial statements

1 unchanged sentence

Statements of Cash Flows

the six months ended June 30, 2023 and 2022

the nine months ended September 30, 2023 and 2022

$ ( 2,123,000 )

$ ( 4,276,000 )

Adjustments to reconcile net loss

to net cash used in operating activities

Adjustments to reconcile net loss to net cash used in operating activities

4 unchanged sentences

Accounts receivable

( 1,033,000 )

Other receivables

59 unchanged sentences

were as follows:

of Company’s Contract Manufacturers of Finished Goods

For the three months ended June 30,

For the six months ended June 30,

Schedule of Company’s Contract Manufacturers of Finished Goods

For the three months ended September 30,

For the nine months ended September 30,

Manufacturer A

8 unchanged sentences

Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements

and Disclosures (“ASC 820”), that requires the valuation of assets and liabilities permitted to be either recorded or

disclosed at fair value based on a hierarchy of available inputs as follows:

and Disclosures (“ASC 820”), requires the valuation of assets and liabilities permitted to be either recorded or disclosed

at fair value based on a hierarchy of available inputs as follows:

1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or

17 unchanged sentences

losses are recorded as general and administrative expenses on our condensed consolidated statements of operations.

As of June 30, 2023

As of September 30,

2023 and December 31, 2022, there was no allowance for expected credit losses.

24 unchanged sentences

revenue when or as the Company satisfies a performance obligation

Company recognizes revenue from the sale of frozen beverages when title and risk of loss passes and the customer accepts the goods,

which generally occurs at the time of delivery to a customer warehouse.

Customer sales incentives such as volume-based rebates or

discounts are treated as a reduction of sales at the time the sale is recognized.

Shipping and handling costs are treated as fulfilment

costs and presented in distribution, selling and administrative costs.

Company recognizes revenue from the sale of frozen beverages when title and risk of loss

passes and the customer accepts the goods, which generally occurs at the time of delivery

to a customer warehouse.

Customer sales incentives such as volume-based rebates or discounts

are treated as a reduction of sales at the time the sale is recognized.

Shipping and handling

costs are treated as fulfilment costs and presented in distribution, selling and administrative

that are received before performance obligations are recorded are shown as current liabilities.

3 unchanged sentences

and outbound freight costs are included in selling, marketing and distribution expense.

For the three months ending June 30, 2023 and

2022, storage and outbound freight totaled approximately $ 251,000 and $ 319,000 , respectively.

For the six months ending June 30, 2023

For the three months ending September 30, 2023

and 2022, storage and outbound freight totaled approximately $ 370,000 and $ 273,000 , respectively.

For the nine months ending September

30, 2023 and 2022, storage and outbound freight totaled approximately $ 932,000 and $ 1,040,000 , respectively.

and Development

1 unchanged sentence

The Company incurred approximately

$ 35,000 and $ 96,000 , in research and development expense for the three months ending June 30, 2023 and 2022, respectively.

months ending June 30, 2023 and 2022, the Company incurred approximately $ 56,000 and $ 126,000 , respectively.

the three and six months ended June 30, 2023 and 2022 common stock equivalents have not been included in the calculation of net loss

per share as their effect is anti-dilutive as a result of losses incurred.

$ 32,000 and $ 220,000 , in research and development expense for the three months ending September 30, 2023 and 2022, respectively.

the nine months ending September 30, 2023 and 2022, the Company incurred approximately $ 88,000 and $ 347,000 , respectively.

the three and nine months ended September 30, 2023 and 2022 common stock equivalents have not been included in the calculation of net

loss per share as their effect is anti-dilutive as a result of losses incurred.

Reclassifications

reclassifications have been made to the 2022 financial statements to conform to the 2023 presentation, namely the presentation of

selling, marketing and distribution expense apart from general and administrative expense in the consolidated statement of

operations, the reclassification of materials shipping from selling, marketing and distribution to cost of revenue, and the

presentation of the components of cash used in operations.

reclassifications have been made to the 2022 financial statements to conform to the 2023 presentation, namely the presentation of selling,

marketing and distribution expense apart from general and administrative expense in the consolidated statement of operations, the reclassification

of materials shipping from selling, marketing and distribution to cost of revenue, and the presentation of the components of cash used

in operations.

Pronouncements

8 unchanged sentences

of the correction of previously issued financial statements is summarized below:

of Prior Financial Information

Schedule of Prior Financial Information

As Previously Reported

December 31, 2022

7 unchanged sentences

Total liabilities and stockholders’ equity

Three-months ended June 30, 2022

As Previously Reported

Three-months ended September 30, 2022

As Previously Reported

Consolidated Statement of Operations

3 unchanged sentences

$ ( 2,687,000 )

Six-months ended June 30, 2022

As Previously Reported

Nine-months ended September 30, 2022

As Previously Reported

Consolidated Statement of Operations

11 unchanged sentences

consists of the following:

Schedule of Inventory

September 30,

Raw materials

3 unchanged sentences

and equipment, net consist of the following:

of Property and Equipment, Net

Schedule of Property and Equipment, Net

September 30,

Manufacturing equipment

5 unchanged sentences

Property and equipment, net of depreciation

expense related to these assets was approximately $ 87,000 and $ 90,000 each of the three months ended June 30, 2023 and 2022, respectively,

and $ 174,000 and $ 212,000 , respectively, for the six months ended June 30, 2023 and 2022.

Depreciation expense in cost of revenue was

$ 5,000 and $ 10,000 for the three months ended June 30, 2023 and 2022, respectively, and $ 10,000 for each of the six months ended June

30, 2023 and 2022, respectively.

expense related to these assets was approximately $ 102,000 and $ 85,000 each of the three months ended September 30, 2023 and 2022, respectively,

and $ 277,000 and $ 297,000 , respectively, for the nine months ended September 30, 2023 and 2022.

Depreciation expense in cost of revenue

was $ 4,000 and $ 10,000 for the three months ended September 30, 2023 and 2022, respectively, and $ 13,000 and $ 19,000 for the nine months

ended September 30, 2023 and 2022, respectively.

Commitments and Contingencies

Company leases office space under a non-cancellable operating lease which expired on March 31, 2023 , and was extended through September

The Company’s periodic lease cost was approximately $ 20,000 for each of the three months ended June 30, 2023 and 2022

and $ 40,000 for each of the six months ended June 30, 2023 and 2022.

Company leases office space under a non-cancellable operating lease which expired on March

31, 2023 , and was extended

in a series of amendments through March 31, 2024 .

The Company’s periodic lease cost was approximately $ 20,000

for each of the three months ended September 30, 2023 and 2022 and $ 60,000

for each of the nine months ended September 30, 2023 and 2022.

Company’s products are produced to its specifications through several contract manufacturers.

9 unchanged sentences

However, on November 4,

4, 2022, in response to a formal proposal of alternate resolutions, the Company received notification from the Manufacturer that it

was denying any responsibility for the defective manufacture of the product.

In response, on November 10, 2022, the Company filed a

complaint in the United States District Court for the Central District of California, Western Division (the

“Complaint”), claiming that the Manufacturer had not met its obligations under the Supply Agreement, and seeking

economic damages.

In response, the Manufacturer terminated the Supply Agreement.

On January 20, 2023, the Company filed a voluntary

dismissal of the Complaint which allows the parties to reach a potential resolution outside of the court system.

However, if the

parties are once again unable to come to an agreement, the Company has informed the Manufacturer that it intends to re-file the

Complaint in California State Court by the end of August , 2023.

to the uncertainties surrounding the claim, the Company is not able to predict either the outcome or a range of reasonably possible

recoveries that could result from its actions against the Manufacturer, and no gain contingencies have been recorded.

The disruption

in its supply resulting from the dispute has and will continue to adversely impact the Company’s results of operations and

cash flow 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.

The Company has partially mitigated the impact of the supply disruption with the introduction of its single-serve

smoothie cartons.

2022, in response to a formal proposal of alternate resolutions, the Company received notification from the Manufacturer that it was

denying any responsibility for the defective manufacture of the product.

In response, on November 10, 2022, the Company filed a complaint

in the United States District Court for the Central District of California, Western Division (the “Complaint”), claiming

that the Manufacturer had not met its obligations under the Supply Agreement, and seeking economic damages.

In response, the Manufacturer

terminated the Supply Agreement.

On January 20, 2023, the Company filed a voluntary dismissal of the Complaint which allowed the parties

to reach a potential resolution outside of the court system.

However, as the parties were once again unable to come to an agreement,

the Company re-filed the Complaint in California State Court in August 2023.

to the uncertainties surrounding the claim, the Company is not able to predict either the outcome or a range of reasonably possible recoveries

that could result from its actions against the Manufacturer, and no gain contingencies have been recorded.

The disruption in its supply

resulting from the dispute has and will continue to adversely impact the Company’s results of operations and cash flow 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.

The Company has mitigated the impact of the supply disruption with the introduction of its single-serve smoothie

however the product format has not been accepted by some customers or as a substitute for the bottle product in all use cases.

legal matters

5 unchanged sentences

of a material unfavorable outcome is remote.

Convertible Debt Subscriptions

From July to October of 2023, the

Company executed subscription agreements for $ 1,880,000 of a $ 2,000,000

privately placed convertible debt offering.

debt may be drawn in 25% increments, matures on the anniversary of the draw, bears interest at 10% per annum for the term,

regardless of earlier payment or conversion, and is mandatorily convertible as to principal and interest into shares of the

Company’s common stock at any time prior to maturity at the greater of $1.20 or 85% of the volume-weighted average price of

the common stock for the ten trading days immediately preceding the written notice of the conversion (the “Conversion

If the Company has not exercised the mandatory conversion, the holder of the debt has the option after six

months and on up to four occasions to convert all or any portion of the principal and interest into shares of the Company’s

common stock at the Conversion Price.

The Company made its initial drawdown on the convertible debt on October 23, 2023, as described in Note 10.

Stockholders’ Equity

following are changes in stockholders’ equity for the six months ended June 30, 2022 and 2023:

following are changes in stockholders’ equity for the nine months ended September 30, 2022 and 2023:

Schedule of Changes in Stockholders' Equity

3 unchanged sentences

Equity-based compensation

Cash settlement of equity-based compensation

Issuance of stock and options for services

1 unchanged sentence

( 4,276,000 )

Balance June 30, 2022

Balance September 30, 2022

$ ( 56,114,000 )

7 unchanged sentences

( 2,123,000 )

Balance June 30, 2023

Balance September 30, 2023

$ ( 60,095,000 )

the six months ended June 30, 2023, 684,639 warrants at a weighted average exercise price of $ 5.85 per share expired.

the nine months ended September 30, 2023, 936,375 warrants at a weighted average exercise price of $ 6.00 per share expired.

Incentive Plan

3 unchanged sentences

The Board of Directors discontinued further grants under the 2015 Plan.

of June 30, 2023, the Company has $ 194,000 of total unrecognized share-based compensation expense relative to unvested options, stock

awards and stock units, which is expected to be recognized over the remaining weighted average period of 1.7 years.

following is a summary of stock option activity for the six months ended June 30, 2023:

of September 30, 2023, the Company has $ 153,000 of total unrecognized share-based compensation expense relative to unvested options,

stock awards and stock units, which is expected to be recognized over the remaining weighted average period of 1.5 years.

following is a summary of stock option activity for the nine months ended September 30, 2023:

Summary of Stock Options Activity

Number of Options

exercise price

2 unchanged sentences

Cancelled/expired

Outstanding on June 30, 2023

Exercisable, June 30, 2023

Outstanding on September 30, 2023

Exercisable, September 30, 2023

fair value of the options issued was calculated using the Black-Scholes option pricing model, based on the following:

5 unchanged sentences

Weighted average grant date fair value per share

following is a summary of restricted stock award and restricted stock unit activity for the six months ended June 30, 2023:

of Restricted Stock Award and Restricted Stock Unit Activity

following is a summary of restricted stock award and restricted stock unit activity for the nine months ended September 30, 2023:

Summary of Restricted Stock Award and Restricted Stock Unit Activity

average grant

1 unchanged sentence

Unvested at January 1, 2023

Unvested at June 30, 2023

Unvested at September 30, 2023

2022 and 2023, the Company issued performance share units (“PSUs”) that represented shares potentially issuable based upon

Company and individual performance in the years of issuance.

following table summarizes the activity for the Company’s unvested PSUs for the three months ended June 30, 2023:

of Performance Stock Unit Activity

following table summarizes the activity for the Company’s unvested PSUs for the nine months ended September 30, 2023:

Summary of Performance Stock Unit Activity

Number of shares

2 unchanged sentences

Unvested at January 1, 2023

Unvested at June 30, 2023

Unvested at September 30, 2023

February 2023, the unvested awards issued for individual performance and outstanding at January 1, 2023 were modified to cash-settle

2 unchanged sentences

Additionally, the Company performance targets were modified to allow

approximately 71,000 PSU to vest, with an additional time-based vesting requirement for approximately 26,000 of the PSU.

approximately 71,000 PSUs to vest, with an additional time-based vesting requirement for approximately 26,000 of the PSUs.

awards did not vest based on the original terms, the modification was considered a new grant, resulting in $ 64,000 in compensation expense

in the six-months ended June 30, 2023.

Company adopted a 2023 PSU program in April 2023, granting approximately 211,000 PSUs at target performance.

The results for the three-month

period ended June 30, 2023 include the reversal of $ 67,000 in stock-based compensation expense recorded in the three months ended March

31, 2023, as management does not anticipate at this time that 2023 performance will be achieved.

The results of operations for the six

months ended June 30, 2023 includes no expense for the 2023 PSU program.

Estimates of expense associated with 2023 performance will be

reassessed each quarter through the performance period.

in the nine-months ended September 30, 2023.

Company adopted a 2023 PSU program in April 2023, granting approximately 211,000 PSUs at target performance against company-wide metrics.

An additional 76,000 PSUs were granted in September 2023 for performance against individual goals, replacing the Company’s cash

bonus program.

The results for the three and nine months ended September 30, 2023 include $ 84,000 in expense for the 2023 PSU program.

Estimates of expense associated with 2023 performance will be reassessed each quarter through the performance period.

740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of evidence, it is more than likely

2 unchanged sentences

valuation allowance on all tax assets.

As of June 30, 2023, the estimated effective tax rate for 2023 was zero .

As of September 30, 2023, the estimated effective tax rate for 2023 was zero .

are open statutes of limitations for taxing authorities in federal and state jurisdictions to audit our tax returns from 2018 through

1 unchanged sentence

Our policy is to account for income tax related interest and penalties in income tax expense in the statement of

the three and six months ended June 30, 2023 and 2022, the Company did not incur any interest and penalties associated with tax positions.

As of June 30, 2023, the Company did not have any significant unrecognized uncertain tax positions.

Subsequent Event

August 2023, the Company received subscriptions of approximately $ 1,130,000 of a $ 2,000,000 privately placed convertible debt offering.

The debt may be drawn in 25% increments, matures on the anniversary of the draw, bears interest at 10% per annum for the term, regardless

of earlier payment or conversion, and is mandatorily convertible as to principal and interest into shares of the Company’s common

stock at any time prior to maturity at the greater of $1.20 or 85% of the volume-weighted average price of the common stock for the ten

trading days immediately preceding the written notice of the conversion (the “Conversion Price”).

If the Company has not

exercised the mandatory conversion, the holder of the debt has the option after six months and on up to four occasions to convert all

or any portion of the principal and interest into shares of the Company’s common stock at the Conversion Price.

the six months ended June 30, 2023, the Company used cash for operations of $ 2,067,000 .

The Company has a history of operating losses

and negative cash flow, which were expected to improve with growth, offset by working capital required to achieve such growth.

more fully in Note 5, the dispute and subsequent contract termination with the Manufacturer has resulted in uncertainty around our ability

to procure product, which in turn may inhibit our ability to achieve positive cash flow.

Additionally, management has considered that

dispute resolution, including litigation, is costly and will require the outlay of cash.

as of June 30, 2023, the Company has $ 952,000

of cash and in August 2023, obtained a funding commitment of approximately $ 1,130,000

as more fully described in Note 8.

As such, even though management has identified certain indicators, these indicators do not raise

substantial doubt regarding the Company’s ability to continue as a going concern.

However, management cannot predict, with

certainty, the outcome of its potential actions to generate liquidity, including the availability of additional financing, or

whether such actions would generate the expected liquidity as planned.

the three and nine months ended September 30, 2023 and 2022, the Company did not incur any interest and penalties associated with tax

As of September 30, 2023, the Company did not have any significant unrecognized uncertain tax positions.

the nine months ended September 30, 2023, the Company used cash for operations of $ 2,008,000 .

The Company has a history of operating

losses and negative cash flow, which were expected to improve with growth, offset by working capital required to achieve such growth.

As described more fully in Note 5, the dispute and subsequent contract termination with the Manufacturer has resulted in limitations

in our ability to procure certain products, which has and may continue to inhibit our ability to achieve positive cash flow until we

are able to expand our manufacturing capacity.

Additionally, management has considered that dispute resolution, including litigation,

is costly and will require the outlay of cash.

as of September 30, 2023, the Company has $ 1,011,000 of cash and funding commitments of approximately $ 1,880,000 , as more fully described

As such, even though management has identified certain indicators, these indicators do not raise substantial doubt regarding

the Company’s ability to continue as a going concern.

However, management cannot predict, with certainty, the outcome of its potential

actions to generate liquidity, including the availability of additional financing, or whether such actions would generate the expected

liquidity as planned.

Subsequent Event – Nasdaq Compliance

May 5, 2023, the Company received a notice letter from the Listing Qualifications Staff of The Nasdaq Stock Market, LLC (“Nasdaq”)

notifying the Company that it was not in compliance with the Listing Rule 5550(b) (the “Rule”), which requires listed companies

to maintain a minimum $ 2,500,000 stockholders’ equity, $ 35,000,000 market value of listed securities, or $ 500,000 net income from

continuing operations.

In its quarterly report for the period ended March 31, 2023, the Company reported stockholders’ equity of

$ 1,845,000 , and as a result, did not satisfy the Rule.

On June 14, 2023, the Company received a letter from Nasdaq granting the Company

an extension through October 30, 2023 to regain compliance with the Rule.

October 23, 2023, the Company issued convertible notes in the amount of $ 1,390,000

pursuant to the subscription agreements described in Note 6.

Note balances of $ 1,207,000

were immediately converted into approximately 820,000 shares of common stock.

A pro-forma balance sheet giving effect to the transactions is

presented below:

Schedule of Pro-forma Balance Sheet

September 30,

Convertible Debt

Conversion of

Debt to Equity

September 30, 2023

(proforma, unaudited)

Current assets:

Trade accounts receivable, net

Other receivables

Inventory, net

Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net of depreciation

Intangible assets, net of amortization

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

Disputed co-manufacturer accounts payable

Accrued expenses

Accrued payroll and employee related

Convertible notes payable

( 1,207,000 )

Total current liabilities

( 1,207,000 )

Total liabilities

( 1,207,000 )

Stockholders’ equity:

Additional paid in capital

Accumulated deficit

( 60,095,000 )

( 58,888,000 )

Total stockholders’ equity

Total liabilities and stockholders’ equity

believes that taking into consideration the October 23, 2023 note issuance and conversion, the Company satisfies the

stockholders’ equity requirement on a pro-forma basis as of September 30, 2023 and as of October 26, 2023.

Nasdaq will continue to monitor the

Company’s ongoing compliance with the Rule and, if at the time of its next periodic report the Company does not evidence

compliance, it may be subject to delisting.

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 1. Financial Statements