What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-15 compared with 2023-10-26 · 67 added, 164 removed, 75 unchanged (75% of the section changed)

27 unchanged sentences

of Operations

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

of Operation for the Three Months Ended March 31, 2024 as Compared to the Three Months Ended March 31, 2023

and cost of revenue

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

increased $738,000, or 35%, to $2,829,000 in 2024 as compared to $2,091,000 in 2023.

Our revenue in 2024 benefited from continued acceptance

of our carton packaging format and improvements in bulk sales, including our WHIRLZ 100% juice product that was reintroduced in the fourth

quarter of 2023, as the impact of venue closures and labor shortages resulting from the pandemic had substantially resolved.

in 2023 were adversely impacted because of lost customers and supply constraints resulting from the product issues and related dispute

with the Manufacturer.

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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.

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.

We have been able to expand our capacity

on a limited basis at our existing smoothie bottle manufacturer and are actively working to develop additional manufacturing capacity.

We expect expanded capacity to become available in 2024, subject to the risks and uncertainties associated with contracting and pre-production

of revenue increased $423,000, or 34%, to $1,659,000 in 2024 as compared to $1,236,000 in 2023.

Cost of revenue increased at a lower

rate compared to revenue due to product mix and slight improvements in raw material and other input costs.

gross profit was $1,170,000 (41.4%) and $855,000 (40.9%) for 2024 and 2023, 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.

The improvement in gross margin 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

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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.

marketing and distribution expense increased approximately $27,000 (4%) from approximately $667,000 in 2023 to $694,000 in 2024.

and marketing expense decreased approximately $26,000 (-7%) from approximately $356,000 in 2023 to $330,000 in 2024.

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.

a result of headcount reductions and lower advertising expense, partially offset by higher broker commissions due to expansion of the

broker network and the increase in revenue.

and outbound freight expense increased approximately $53,000 (17%) from approximately $311,000 in 2023 to $364,000 in 2024, primarily

because of the 35% increase in revenue, freight efficiencies, and lower storage and inventory management cost in 2024 because of inventory

disposals following the dispute with the Manufacturer.

and administrative expense

September 30,

Three months ended March 31,

Personnel costs

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Other general and administrative expenses

General and administrative expense

and administrative expense decreased approximately $136,000 (-14%) from approximately $994,000 in 2023 to $858,000 in 2024.

4 unchanged sentences

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

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 $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

September 30,

Personnel costs

Stock based compensation

Legal, professional and consulting fees

Director fees paid in cash

Research and development

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 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.

compensation in lieu of cash bonuses.

Additionally, approximately $54,000 in officer salaries and vacation pay were settled in our stock

and classified as stock-based compensation in the three months ended March 31, 2024.

Further, directors’ fees previously paid in

cash were instead paid in our stock.

The actions surrounding cash bonuses, conversion of other cash compensation and directors’

fees as well as the first quarter performance in 2024 against annual operating plan targets resulted in a $94,000 increase in stock-based

compensation in 2024 compared to 2023.

professional, and consulting fees increased by $42,000 (37%) as a result of legal spend in pursuit of our claim against the Manufacturer.

general and administrative expenses decreased by approximately $29,000 (-21%) due to a reduction in operating costs associated

with the product withdrawal.

had net losses of approximately $449,000 and $889,000 for the three-month periods ended March 31, 2024 and 2023, respectively.

in net loss of approximately $440,000, was the result of improved revenue and margins, and a reduction of approximately $125,000 in operating

expenses due to cost-saving measures.

and Capital Resources

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.

The direct impact to our operations had begun to take effect at the close of

the first quarter ended March 31, 2020.

Specifically, our business was impacted by dining bans targeted at restaurants to reduce the

size of public gatherings.

Such bans precluded our single serve products from being served at those establishments for a number of weeks,

and in some instances, resulted in abandoned product launches.

Furthermore, many school districts closed regular attendance for a period

of time thereby disrupting sales of product into that channel.

More recently, we have experienced a disruption in the supply chain for

manufacturing our products due to COVID-19.

While further developments surrounding COVID-19 may arise, the business climate appears to

have stabilized in 2023.

June 1, 2021, the Company completed a private placement of 1,282,051 shares of its common stock at $4.68 per share, resulting in gross

proceeds of $6,000,000.

In addition, holders of debt converted a total of $399,000 in principal and $234,000 in interest into 133,991

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

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

June 1, 2021, we completed a private placement of 1,282,051 shares of its common stock at $4.68 per share, resulting in gross proceeds

of $6,000,000.

In addition, holders of debt converted a total of $399,000 in principal and $234,000 in interest into 133,991 shares of

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

July 2023 to March 2024, we executed subscription agreements for substantially all of a $2,000,000 privately placed convertible debt

The debt was available to be drawn in 25% increments, maturing on the anniversary of the draw, bearing interest at 10% per

annum for the term, regardless of earlier payment or conversion, and was mandatorily convertible as to principal and interest into shares

of our 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 we had not

exercised the mandatory conversion, the holder of the debt had 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 our common stock at the Conversion Price.

On October 23, 2023, we 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 stock.

Additionally, on December 19, 2023, we drew down $470,000 in convertible debt and

converted a total of $653,000 of principal and $4,000 of accrued interest into 495,331 shares of common stock.

Finally, on March 27 and

29, 2024 we drew down $136,000 in convertible debt and converted the total drawn into 124,208 shares, settling all debt.

the three months ended March 31, 2024, we used $769,000 in operations.

Our net loss adjusted for non-cash operating expenses was essentially

breakeven, while changes in non-cash current assets and liabilities consumed $760,000 primarily as a result of increased accounts receivable

due to the $907,000 increase in revenue compared to the fourth quarter of 2023 and to a lesser extent due to timing of inventory purchases

and resulting payments to vendors.

of March 31, 2024, we had working capital of $1,981,000 compared with $1,846,000 at December 31, 2023.

The increase in working capital

is primarily due to capital raised in the three months ended March 31, 2024 through the sale convertible notes and the conversion of

those notes and other current liabilities to equity.

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

6 unchanged sentences

smoothie bottle manufacturing capacity.

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

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

associated with contracting and pre-production activities.

Additionally, we have taken other measures to reduce our liquidity requirements,

including compensating our directors and employees with equity to reduce cash compensation requirements.

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