What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-10-26 compared with 2023-08-14 · 148 added, 70 removed, 91 unchanged (71% of the section changed)

27 unchanged sentences

of Operations

of Operation for the Three Months Ended June 30, 2023 as Compared to the Three Months Ended June 30, 2022

of Operation for the Three Months Ended September 30, 2023 as Compared to the Three Months Ended September 30, 2022

and cost of revenue

decreased $1,288,000, or 46%, from $2,799,000 in 2022 to $1,511,000 in 2023.

The decline in revenue was due to limited supply caused

by our product withdrawal resulting from the quality complaints with product purchased from the Manufacturer.

We anticipate that our

revenues will be adversely impacted as a result of the dispute unless and until new sources of reliable supply at sufficient volume can

be identified and developed, the timing of which is uncertain.

increased $197,000, or 8%, from $2,406,000 in 2022 to $2,603,000 in 2023.

Revenue in 2022 was negatively impacted by the $630,000 claims

estimate resulting from the market withdrawal of product purchased from the Manufacturer due to quality complaints.

Excluding the refund

claims estimate, revenue was $3,036,000 in 2022 and therefore decreased by $433,000 in 2023, or 14% based on product shipped.

have been adversely impacted as a result of lost customers and supply constraints resulting from the product issues and related dispute

with the Manufacturer.

While the introduction of our carton packaging format has mitigated the loss of supply, the product offering has

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

We have identified and are actively working

to develop additional smoothie bottle manufacturing capacity.

We expect expanded capacity to become available in early 2024, subject

to the risks and uncertainties associated with contracting and pre-production activities.

of revenue for 2023 was $1,690,000 as compared to $3,129,000 in 2022.

Our gross profit was $474,000 (31%) and $883,000 (32%) for 2023

and 2022, respectively.

Cost of revenue declined as a result of the 46% decrease in revenue as well as a shift in product mix resulting

from the limited supply of smoothie bottles, partially offset by additional inventory reserves, resulting from the quality complaints.

Cost of revenue in 2022 was negatively impacted by the $932,000

inventory write-off related to the product withdrawal.

Excluding the inventory write-off, cost of revenue was $2,197,000 in 2022, and

therefore decreased by $507,000 in 2023, or 23% based on product shipped.

Excluding the impact of the product withdrawal, cost of revenue

declined due to lower revenue, and lower product cost due to a shift in product mix resulting from the limited supply of smoothie bottles.

gross profit was $913,000 (35%) and ($723,000) (-30%) for 2023 and 2022, respectively.

Adjusted for the product withdrawal, our 2022

gross profit was $839,000 (28%).

Adjusted comparative gross margin improvement is a result of favorable product mix, pricing actions,

and a slight improvement in the cost of supply chain components.

marketing and distribution expense

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

September 30,

Sales and marketing

Storage and outbound freight

Sales, marketing and distribution expense

marketing and distribution expense decreased approximately $163,000 (-19%) from approximately $860,000 in 2022 to $697,000 in 2023.

and marketing expense decreased approximately $83,000 (-20%) from approximately $410,000 in 2022 to $327,000 in 2023.

and outbound freight expense decreased approximately $68,000 (21%) from approximately $319,000 in 2022 to $251,000 in 2023.

was the result of the 46% decrease in revenue, offset by higher costs resulting from product mix and inefficiencies due to production

The decrease is

a result of headcount reductions and lower broker commissions due to lower revenue and product mix.

and outbound freight expense decreased approximately $80,000 (-18%) from approximately $450,000 in 2022 to $370,000 in 2023, primarily

as a result of the 14% decrease in product shipped as described in the discussion of revenue for the comparative quarters.

The volume-related

decrease in expense was enhanced by freight efficiencies compared to 2022.

and administrative expense

Three months ended June 30,

September 30,

Personnel costs

4 unchanged sentences

Other general and administrative expenses

General and administrative expense

and administrative expense decreased approximately $435,000 (-43%) from approximately $1,013,000 in 2022 to $578,000 in 2023.

cost represents the cost of employees including salaries, bonuses, employee benefits and employment taxes and continues to be our largest

Personnel cost decreased by approximately $118,000 (33%) from approximately $362,000 to $244,000 and stock-based compensation decreased

by approximately $129,000 (113%) from $114,000 to ($15,000).

The decrease in personnel cost and stock-based compensation resulted primarily

from the confirmation and recognition of our 2021 COVID-related tax credit, reduction in headcount, and reversal of previously recognized

compensation under our 2023 performance stock unit program, as management does not currently expect that performance criteria will be

and development expense decreased approximately $61,000 (64%) from approximately $96,000 in 2022 to $35,000 in 2023 as activities were

minimized to conserve working capital.

had net losses of approximately $742,000 and $716,000 for the three-month periods ended June 30, 2023 and 2022, respectively.

of approximately $26,000, was the result of the aforementioned changes in revenue, partially offset by reductions in cost and expenses.

of Operation for the Six Months Ended June 30, 2023 as Compared to the six Months Ended June 30, 2022

cost represents the cost of employees including salaries, bonuses, employee benefits and employment taxes.

Personnel cost decreased by

approximately $140,000 (-42%) from approximately $336,000 to $196,000 and stock-based compensation increased by approximately $84,000

(54%) from $156,000 to $240,000.

The decrease in personnel cost resulted from a reduction in headcount and the decision to issue stock-based

compensation in lieu of cash bonuses for a portion of the performance criteria in 2023, resulting in a year-to-date reduction of personnel

costs of $87,000, including a $60,000 reclassification of expense incurred in the first two quarters of 2023.

Additionally, unpaid directors’

fees for 2023 that were expected to be paid in cash were also converted to stock-based compensation, resulting in a year-to-date reduction

in cash expense of $75,000, including a $50,000 reclassification of expense incurred in the first two quarters of 2023.

Excluding the

impact of the compensation modifications for employees and directors, stock-based compensation decreased by $26,000 due to headcount

reductions and the non-recurrence of a one-time grant in 2022.

professional and consulting fees decreased by $37,000 (-38%) as a result of a reduction in outside services in an effort to conserve

working capital.

and development expense decreased approximately $188,000 (-85%) from approximately $220,000 in 2022 to $32,000 in 2023.

Expense was elevated

in 2022 as we incurred pre-production expense related to the launch of our carton format, while 2023 expense was limited as activities

were minimized to conserve working capital.

general and administrative expenses decreased by approximately $79,000 (-44%) due to a reduction in local non-income based taxes and

the timing of the Company’s annual meeting.

had net losses of approximately $476,000 and $2,687,000 for the three-month periods ended September 30, 2023 and 2022, respectively.

The decrease in net loss of approximately $2,211,000, was the result of the non-recurrence of the estimated refund claims and inventory

disposal costs associated with the product withdrawal, improved margins, and a reduction of approximately $575,000 in operating expenses

due to cost saving measures and to a lesser extent, reduced volume of product shipped.

of Operation for the Nine Months Ended September 30, 2023 as Compared to the Nine Months Ended September 30, 2022

and cost of revenue

decreased $1,723,000, or 32%, from $5,325,000 in 2022 to $3,602,000 in 2023.

The decline in revenue was due to limited supply caused

by our product withdrawal resulting from quality complaints with product purchased from the Manufacturer.

We anticipate that our revenues

will be adversely impacted as a result of the dispute unless and until new sources of reliable supply at sufficient volume can be identified

and developed, the timing of which is uncertain.

of revenue for 2023 was $2,273,000 as compared to $3,678,000 in 2022.

Our gross profit was $1,329,000 (37%) and $1,647,000 (31%) for

2023 and 2022, respectively.

Cost of revenue declined as a result of the 32% decrease in revenue as well as a shift in product mix resulting

from the limited supply of smoothie bottles, partially offset by additional inventory reserves resulting from the quality complaints.

was $6,205,000 in 2023 compared to $7,731,000 in 2022, a decrease of $1,526,000, or 20%.

Revenue in 2022 was negatively impacted by the

$630,000 claims estimate resulting from the market withdrawal of product purchased from the Manufacturer.

Excluding the refund claims

estimate, revenue was $8,361,000 in 2022 and therefore decreased by $2,156,000 in 2023, or 26% based on product shipped.

have been adversely impacted as a result of lost customers and supply constraints resulting from the product issues and related dispute

with the Manufacturer.

While the introduction of our carton packaging format has mitigated the loss of supply, the product offering has

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

We have identified and are actively working

to develop additional smoothie bottle manufacturing capacity.

We expect expanded capacity to become available in early 2024, subject

to the risks and uncertainties associated with contracting and pre-production activities.

of revenue was $3,963,000 in 2023 compared to $6,807,000 in 2022, a decrease of $2,844,000, or 42%.

Cost of revenue in 2022 was negatively

impacted by the $932,000 inventory write-off related to the product withdrawal.

Excluding the inventory write-off, cost of revenue was

$5,875,000 in 2022, and therefore decreased by $1,912,000 in 2023, or 33% based on product shipped.

Excluding the impact of the product

withdrawal, cost of revenue declined due to lower revenue, and lower product cost due to a shift in product mix resulting from the limited

supply of smoothie bottles.

gross profit was $2,242,000 (36%) and $924,000 (12%) for 2023 and 2022, respectively.

Adjusted for the product withdrawal, our 2022 gross

profit was $2,486,000 (30%).

Adjusted comparative gross margin improvement is a result of favorable product mix, pricing actions, and

a slight improvement in the cost of supply chain components.

marketing and distribution expense

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

September 30,

Sales and marketing

Storage and outbound freight

Sales, marketing and distribution expense

marketing and distribution expense decreased approximately $246,000 (-11%) from approximately $2,236,000 in 2022 to $1,990,000 in 2023.

and marketing expense increased approximately $123,000 (20%) from approximately $608,000 in 2022 to $731,000 in 2023, primarily due to

product sampling of smoothie carton products and equipment maintenance incurred to relaunch bulk product sales in locations that had

been non-operational as a result of COVID shutdowns and subsequent labor shortages.

and outbound freight expense decreased approximately $206,000 (27%) from approximately $768,000 in 2022 to $562,000 in 2023.

was the result of the 32% decrease in revenue, offset by higher costs resulting from product mix and inefficiencies due to production

and marketing expense increased approximately $39,000 (4%) from approximately $1,019,000 in 2022 to $1,058,000 in 2023.

We incurred additional

expense for product sampling of smoothie carton products, equipment maintenance incurred to relaunch bulk product sales in locations

that had been non-operational as a result of COVID shutdowns and subsequent labor shortages, and broker commissions as we engaged numerous

regional K-12 specialists to expand our geographic reach in the third quarter of 2022.

These increases were partially offset by a reduction

in personnel costs.

and outbound freight expense decreased approximately $285,000 (-23%) from approximately $1,217,000 in 2022 to $932,000 in 2023 primarily

as a result of the 26% decrease in product shipped as described in the discussion of revenue for the comparative year-to-date periods.

The volume-related decrease in expense was partially offset by higher costs resulting from product mix and inefficiencies due to production

and administrative expense

ended June 30,

September 30,

Personnel costs

4 unchanged sentences

Other general and administrative expenses

General and administrative expense

and administrative expense decreased approximately $572,000 (-22%) from approximately $2,637,000 in 2022 to $2,065,000 in 2023.

cost represents the cost of employees including salaries, bonuses, employee benefits and employment taxes and continues to be our largest

Personnel cost increased by approximately $63,000 (9%) from approximately $670,000 to $733,000.

The increase in personnel cost

resulted primarily from an increase in headcount during the first quarter of 2023, partially offset by the confirmation and recognition

of our 2021 COVID-related tax credit, and a reduction in headcount in the second quarter of 2023.

and development expense decreased approximately $70,000 (56%) from approximately $126,000 in 2022 to $56,000 in 2023 as activities were

minimized to conserve working capital.

Other general and administrative expenses decreased approximately $82,000

(22%) from approximately $366,000 in 2022 to $284,000 in 2023 primarily as a result of non-recurring costs related to our uplisting to

the NASDAQ stock exchange in 2022, partially offset by costs related by our dispute with the Manufacturer.

had net losses of approximately $1,647,000 and $1,589,000 for the six-month periods ended June 30, 2023 and 2022, respectively.

of approximately $58,000, was the result of the aforementioned changes in revenue, partially offset by reductions in cost and expenses.

Personnel cost decreased by approximately $77,000 (-8%) from approximately $1,006,000 to $929,000.

The decrease in personnel cost

resulted primarily from the confirmation and recognition of our 2021 COVID-related tax credit, partially offset by bonus expense from

the 2023 decision to cash settle a portion of the 2022 performance stock units.

compensation increased by approximately $76,000 (21%) from $355,000 to $431,000 because 2023 directors’ fees that were expected

to be paid in cash were converted to stock-based compensation.

professional and consulting fees decreased by $75,000 (-24%).

We reduced outside services in an effort to conserve working capital.

and development expense decreased approximately $259,000 (-75%) from approximately $347,000 in 2022 to $88,000 in 2023.

Expense was elevated

in 2022 as we incurred pre-production expense related to the launch of our carton format, while 2023 expense was limited as activities

were minimized to conserve working capital.

general and administrative expenses decreased approximately $162,000 (-30%) from approximately $543,000 in 2022 to $381,000 in 2023 primarily

as a result of non-recurring costs related to our uplisting to the NASDAQ stock exchange in 2022, partially offset by legal costs related

by our dispute with the Manufacturer.

had net losses of approximately $2,123,000 and $4,276,000 for the nine-month periods ended September 30, 2023 and 2022, respectively.

The decrease in net loss of approximately $2,153,000, was the result of the non-recurrence of the estimated refund claims and inventory

disposal costs associated with the product withdrawal, improved margins, and a reduction of approximately $835,000 in operating expenses

due to cost saving measures, reduced volume of product shipped, and the recognition of our COVID-related tax credit.

and Capital Resources

of June 30, 2023, we had working capital of $554,000 compared with $1,801,000 at December 31, 2022.

The decrease in working capital is

primarily due to the operating loss for the six months ended June 30, 2023.

the six months ended June 30, 2023, we used $2,067,000 in operations.

of September 30, 2023, we had working capital of $541,000 compared with $1,801,000 at December 31, 2022.

The decrease in working capital

is primarily due to the operating loss for the nine months ended September 30, 2023 as adjusted for non-cash depreciation, amortization

and stock-based compensation.

the nine months ended September 30, 2023, we used $2,008,000 in operations.

impact of COVID-19 on the Company is constantly evolving.

15 unchanged sentences

shares of common stock and debt in the amount of $840,000 was retired, leaving the Company with no debt.

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.

July to October 2023, the Company executed subscription agreements for $1,880,000 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

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.

On October 23, 2023, the Company issued $1,390,000 of convertible notes pursuant to the subscription

agreements, and immediately converted $1,207,000 of principal and interest into approximately 820,000 shares of common

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 and reduce fixed overhead expense.

Our recent business developments with the Manufacturer

impact our supply chain and will result in increased legal cost and are expected to have a negative impact on our financial position,

results of operations and cash flow.

Our current dispute with the Manufacturer and the resulting

loss of product supply and legal expense continue to negatively impact our financial position, results of operations and cash flow.

the introduction of our carton packaging format has mitigated the loss of supply, the product offering has not been accepted by some

customers or as a substitute for the bottle product in all use cases.

We have identified and are actively working to develop additional

smoothie bottle manufacturing capacity.

We expect expanded capacity to become available in early 2024, subject to the risks and uncertainties

associated with contracting and pre-production activities.

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

11 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