What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-24 compared with 2024-08-14 · 99 added, 87 removed, 102 unchanged (65% of the section changed)

27 unchanged sentences

of Operations

of Operation for the Three Months Ended June 30, 2024 as Compared to the Three Months Ended June 30, 2023

of Operation for the Three Months Ended September 30, 2024 as Compared to the Three Months Ended September 30, 2023

and cost of revenue

decreased $47,000, or 3%, to $1,464,000 in 2024 as compared to $1,511,000 in 2023.

Our revenue in 2024 benefited from continued acceptance

of our carton packaging format and improvements in bulk sales due to the reintroduction of our WHIRLZ 100% juice product in the fourth

quarter of 2023.

Our revenues in 2023 were positively impacted by adjustments to estimated credits related to the dispute with the Manufacturer.

Excluding such adjustments, revenue increased by 6%.

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 been able to expand our capacity on a limited basis at

our existing smoothie bottle manufacturer and in July 2024 contracted with an additional manufacturer.

We expect expanded capacity to

become available in the third quarter of 2024, subject to the risks and uncertainties associated with pre-production activities.

of revenue decreased $82,000, or 8%, to $955,000 in 2024 as compared to $1,037,000 in 2023.

Cost of revenue decreased at a higher rate

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

increased $1,034,000, or 40%, to $3,637,000 in 2024 as compared to $2,603,000 in 2023.

Our revenue in 2024 benefited from increased sales

of our bottled Twist & Go smoothies due to improved availability resulting from inventory built over the months prior to the commencement

of the school year, continued acceptance of Twist & Go smoothies provided in cartons, and improvements in bulk sales due to the reintroduction

of our WHIRLZ 100% juice product in the fourth quarter of 2023.

have been able to expand our capacity on a limited basis at our existing smoothie bottle manufacturer and in July 2024 contracted with

an additional manufacturer.

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

associated with pre-production activities.

of revenue increased $687,000, or 41%, to $2,377,000 in 2024 as compared to $1,690,000 in 2023.

Cost of revenue increased at a slightly

higher rate compared to revenue due to $126,000 in cost incurred to relocate our single-serve smoothie pouch production line.

gross profit was $1,260,000 (35%) and $913,000 (35%) for 2024 and 2023, respectively.

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.

Excluding production relocation costs, our gross

profit was $1,386,000 in 2024 (38%).

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

1 unchanged sentence

Three months ended

September 30,

Three months ended

September 30,

Sales and marketing

Storage and outbound freight

marketing and distribution expense decreased approximately $42,000 (7%) from approximately $625,000 in 2023 to $583,000 in 2024.

and marketing expense decreased approximately $7,000 (5%) from approximately $373,000 in 2023 to $366,000 in 2024.

The increase is a

result of a reduction in compensation expense, partially offset by higher broker commissions due to expansion of the broker network.

and outbound freight expense decreased approximately $35,000 (14%) from approximately $252,000 in 2023 to $217,000 in 2024, primarily

because of freight efficiencies, and lower storage and inventory management cost in 2024.

marketing and distribution expense increased approximately $293,000 (42%) from approximately $697,000 in 2023 to $990,000 in 2024.

and marketing expense increased approximately $183,000 (56%) from approximately $327,000 in 2023 to $510,000 in 2024.

The increase is

a result of higher personnel cost, travel and broker commissions due to expansion of the broker network.

and outbound freight expense increased approximately $110,000 (30%) from approximately $370,000 in 2023 to $480,000 in 2024, lower than

the 40% rate of increase in revenue primarily because of freight efficiencies, and lower storage and inventory management cost in 2024.

and administrative expense

Three months ended

September 30,

Three months ended

September 30,

Personnel costs

6 unchanged sentences

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

Personnel cost increased by

approximately $97,000 (40%) from approximately $244,000 in 2023 to $341,000 in 2024.

The increase in personnel cost resulted from the

non-recurrence of the recognition of a COVID-19 related Employee Retention Tax Credit in 2023.

compensation increased by approximately $229,000 from ($15,000) in 2023 to $214,000 in 2024 as a result of the Company adopting an equity-only

structure for management incentives Board of Directors compensation, implemented to conserve cash and to achieve compliance with NASDAQ

listing regulations.

general and administrative expenses increased by approximately $95,000 (66%) due to recruiting fees incurred to broaden the capabilities

of our management team.

had net losses of approximately $1,011,000 and $742,000 for the three-month periods ended June 30, 2024 and 2023, respectively.

in net loss of approximately $269,000, was primarily the result of a shift to stock-based compensation and the non-recurrence of recognizing

ERTC benefits in 2023.

of Operation for the Six Months Ended June 30, 2024 as Compared to the Six Months Ended June 30, 2023

Personnel cost increased

by approximately $116,000 (59%) from approximately $196,000 in 2023 to $312,000 in 2024.

The increase in personnel cost resulted

from the non-recurrence of the 2023 reversal of cash bonuses in favor of increased performance-based stock compensation in the third

quarter, increased head count and higher staff utilization, and resulting deferral of paid time off.

Similarly, director fees paid

in cash decreased as a result of a shift to stock-based compensation in the third quarter of 2023.

compensation decreased by approximately $61,000 (25%) from $240,000 in 2023 to $179,000 in 2024 as a result of the aforementioned 2023

third quarter shift to performance-based stock-based compensation, partially offset by stock-based compensation associated with increased

general and administrative expenses increased by approximately $28,000 (29%) due to increased information technology costs and the non-recurrence

of certain 2023 adjustments to estimates.

had net losses of approximately $513,000 and $476,000 for the three-month periods ended September 30, 2024 and 2023, respectively.

increase in net loss of approximately $37,000, was primarily the result of operating expense increases of $384,000 due to headcount,

and variable freight and broker commission costs, partially offset by increased gross profit of $347,000 from our 40% increase in revenue.

of Operation for the Nine Months Ended September 30, 2024 as Compared to the Nine Months Ended September 30, 2023

and cost of revenue

1 unchanged sentence

Our revenue in 2024 benefited from continued acceptance

of our carton packaging format and improvements in bulk sales due to the reintroduction of our WHIRLZ 100% juice product in the fourth

quarter of 2023.

of our carton packaging format, increased sales of our bottled Twist & Go smoothies due to improved availability in the third quarter

of 2024, and improvements in bulk sales due to the reintroduction of our WHIRLZ 100% juice product in the fourth quarter of 2023.

of revenue increased $1,028,000, or 26%, to $4,991,000 in 2024 as compared to $3,963,000 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.

rate compared to revenue due to product mix and slight improvements in raw material and other input costs, partially offset by $176,000

in cost incurred to relocate our single-serve smoothie pouch production line.

gross profit was $2,938,000 (37%) and $2,242,000 (36%) for 2024 and 2023, respectively.

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.

Excluding production relocation costs, our gross

profit was $3,114,000 in 2024 (39%).

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

Six months ended

Nine months ended

September 30,

Nine months ended

September 30,

Sales and marketing

Storage and outbound freight

marketing and distribution expense decreased approximately $16,000 (1%) from approximately $1,293,000 in 2023 to $1,277,000 in 2024.

and marketing expense decreased approximately $35,000 (5%) from approximately $731,000 in 2023 to $696,000 in 2024.

The decrease is a

result of a reduction in compensation expense.

Advertising and sample expense were lower as a result of non-recurring costs in 2023 associated

with the launch of our smoothie carton format offering.

These cost reductions were partially offset by higher broker commissions due

to expansion of the broker network.

marketing and distribution expense increased approximately $277,000 (14%) from approximately $1,990,000 in 2023 to $2,267,000 in 2024.

and marketing expense increased approximately $148,000 (14%) from approximately $1,058,000 in 2023 to $1,206,000 in 2024.

is a result of higher personnel costs, travel and broker commission due to expansion of the broker network.

Advertising and sample expense

were lower as a result of non-recurring costs in 2023 associated with the launch of our smoothie carton format offering.

and outbound freight expense increased approximately $129,000 (14%) from approximately $932,000 in 2023 to $1,061,000 in 2024, primarily

2 unchanged sentences

and administrative expense

Six months ended

Nine months ended

September 30,

Nine months ended

September 30,

Personnel costs

1 unchanged sentence

Legal, professional and consulting fees

Director fees paid in cash

Research and development

5 unchanged sentences

partially offset by the non-recurrence of the recognition of a COVID-19 related Employee Retention Tax Credit in 2023.

compensation increased by approximately $326,000 from $191,000 in 2023 to $517,000 in 2024 as a result of the Company adopting an equity-only

structure for management incentives Board of Directors compensation, implemented to conserve cash and to achieve compliance with NASDAQ

listing regulations.

compensation increased by approximately $265,000 (61%) from $431,000 in 2023 to $696,000 in 2024 as a result of the Company adopting

an equity-only structure for management incentives and Board of Directors compensation, implemented to conserve cash and to achieve compliance

with NASDAQ listing regulations.

Increases in management headcount and the issuance of long-term incentive awards also contributed to

the increase.

general and administrative expenses increased by approximately $84,000 (22%) due to recruiting fees incurred to broaden the capabilities

of our management team, partially offset by a decrease in patent fees due to targeted renewals in 2024.

had net losses of approximately $1,460,000 and $1,647,000 for the six-month periods ended June 30, 2024 and 2023, respectively.

in net loss of approximately $187,000, was primarily the result an increase in gross profit of approximately $350,000, partially offset

by increased operating expense of $163,000 due to the shift to stock-based compensation and the non-recurrence of recognizing ERTC benefits

had net losses of approximately $1,973,000 and $2,123,000 for the nine-month periods ended September 30, 2024 and 2023, respectively.

The decrease in net loss of approximately $150,000, was primarily the result an increase in gross profit of approximately $696,000, partially

offset by increased operating expense of $546,000 due to variable freight and broker commission costs, increased headcount, and the non-recurrence

of recognizing ERTC benefits in 2023.

and Capital Resources

18 unchanged sentences

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

the six months ended June 30, 2024, we used $1,549,000 in operations.

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

of $799,000, while changes in non-cash current assets and liabilities consumed $750,000 primarily as a result of increased inventory

built at our Twist & Go bottle manufacturer in advance of orders for the 2024/25 academic year to alleviate capacity constraints

while we bring up additional locations contracted in the third quarter of 2024.

Additionally, our accounts payable decreased with other

manufacturing locations as we slowed purchases in anticipation of the summer recess in the education channel.

of June 30, 2024, we had working capital of $1,185,000 compared with $1,846,000 at December 31, 2023.

The decrease in working capital

is primarily due to losses incurred in the six months ended June 30, 2024, partially offset by capital raised in the six months ended

June 30, 2024 through the sale convertible notes and the conversion of those notes and other current liabilities to equity.

the nine months ended September 30, 2024, we used $1,544,000 in operations.

Our net loss adjusted for non-cash operating expenses was

a loss of $982,000, while changes in non-cash current assets and liabilities consumed $562,000 primarily because of increased accounts

receivable resulting from our 40% increase in revenue compared to the nine months ended September 30, 2024.

Additionally, our accounts

payable decreased as we improved adherence with vendor terms.

These changes were partially offset by a $444,000 reduction in inventory.

of September 30, 2024, we had working capital of $1,371,000 compared with $2,345,000 at December 31, 2023, both excluding disputed accounts

payable of $499,000 resulting from our dispute with the Manufacturer.

The decrease in working capital is primarily due to losses incurred

in the nine months ended September 30, 2024, partially offset by capital raised in the nine months ended September 30, 2024 through the

sale of 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

1 unchanged sentence

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 contracted with a co-manufacturer for additional smoothie

bottle manufacturing capacity.

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

with 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, obtaining non-recourse litigation financing, and securing

receivables financing in the third quarter of 2024.

of product supply and legal expense have negatively impacted our financial position, results of operations and cash flow.

While the introduction

of our carton packaging format in 2023 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 contracted with a co-manufacturer for additional smoothie bottle

manufacturing capacity.

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

associated with 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, obtaining non-recourse litigation financing,

and securing receivables financing in the third quarter of 2024.

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

including related party advances.

If we are unable to generate sufficient cash flow from operations with the capital raised we will be

required to raise additional funds either in the form of equity or in the form of debt.

There are no assurances that we will be able

to generate the necessary capital to carry out our current plan of operations.

If we are unable to generate sufficient cash flow from operations with the capital raised we will be required to raise additional funds

either in the form of equity or in the form of debt.

There are no assurances that we will be able to generate the necessary capital to

carry out our current plan of operations.

Sheet Arrangements

5 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