What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-14 compared with 2024-08-13 · 154 added, 156 removed, 295 unchanged (51% of the section changed)

31 unchanged sentences

of Operations

the six months ended June 30, 2024, the Company continued to strengthen its supply chain, implement gross margin enhancement initiatives,

the nine months ended September 30, 2024, the Company continued to focus on strengthening its supply chain, implement gross margin enhancement initiatives,

drive efficiencies in transportation and warehouse costs and reduce operating expenses.

2 unchanged sentences

Stormy Mule, and Reed’s Hard Ginger Ale.

Company remains focused on driving sales growth, improving gross margin, and reducing freight costs.

Company remains engaged on driving sales growth, improving gross margin, and reducing freight costs.

The sales growth focus is on channel

16 unchanged sentences

ability to obtain raw materials required to manufacture our products and adversely affect our operations.

During the three months ending June 30, 2024, the Company continued to

experience moderation from the elevated freight costs experienced in 2023.

The average cost of shipping and handling for the three months

ended June 30, 2024, was $2.18 as compared to $3.05 in the three months ended June 30, 2023.

During the six months ended June 30, 2024,

the average cost of shipping and handling was $2.54 per case, as compared to $3.27 per case for the six months ended June 30, 2023.

the Company has experienced decreases in freight costs over the last four quarters, in the Company’s opinion there remains a volatile

environment and the Company will continue to monitor pricing and availability in transportation.

Mitigation plans have been implemented

to manage this risk.

The Company has been negatively impacted by supply chain challenges affecting our ability to benefit from strong

demand for, and increased sales of our product.

The disruption caused by labor shortages, significant raw material cost inflation, logistics

issues and increased freight costs, and ongoing port congestion, resulted in suppressed margins.

The Company has experienced moderation

in inflation and anticipates this to continue throughout 2024.

the six months ended June 30, 2024, we continued to generate cash flows to meet our short-term liquidity needs, and we expected to maintain

access to the capital markets.

of Operations – Three Months Ended June 30, 2024, as compared to Three Months Ended June 30, 2023

following table sets forth key statistics for the three months ended June 30, 2023 and 2022, respectively, in thousands.

the three months ending September 30, 2024, the Company continued to experience moderation from the elevated freight costs experienced

The average cost of shipping and handling for the three months ended September 30, 2024, was $2.99 as compared to $2.98 in the

three months ended September 30, 2023.

During the nine months ended September 30, 2024, the average cost of shipping and handling was

$2.66 per case, as compared to $3.17 per case for the nine months ended September 30, 2023.

Although the Company has experienced decreases

in freight costs over the last four quarters, in the Company’s opinion there remains a volatile environment and the Company will

continue to monitor pricing and availability in transportation.

Mitigation plans have been implemented to manage this risk.

has been negatively impacted by supply chain challenges affecting our ability to benefit from strong demand for, and increased sales

of our product.

The disruption caused by labor shortages, significant raw material cost inflation, logistics issues and increased freight

costs, and ongoing port congestion, resulted in suppressed margins.

The Company has experienced moderation in inflation and anticipates

this to continue throughout 2024.

of Operations – Three Months Ended September 30, 2024, as compared to Three Months Ended September 30, 2023

following table sets forth key statistics for the three months ended September 30, 2024 and 2023, respectively, in thousands.

Three Months Ended

September 30,

Gross billing (A)

51 unchanged sentences

Cost of Sales, and Gross Margins

following chart sets forth key statistics for the transition of the Company’s top line activity from the second quarter of 2023

through the second quarter of 2024.

following chart sets forth key statistics for the transition of the Company’s top line activity from the third quarter of 2023

through the third quarter of 2024.

Cost of Sales, and Gross Margins

4 unchanged sentences

primarily of Wellness Shots, candy and slower selling discontinued Reed’s and Virgil’s SKUs.

beverage volume for the three months ended June 30, 2024, represents 99% of all beverage volume.

brand gross billing increased by 22% to $13,584 compared to $11,095 during the same period last year, driven by a Reed’s volume

increase of 16% and Virgil’s volume increase of 21%.

The result is an increase in total gross billing of 22%, to $13,584 during the

three months ended June 30, 2023, from $11,164 in the same period last year.

Price on our core brands increased 4% to $20.84 per case.

beverage volume for the three months ended September 30, 2024, represents 100% of all beverage volume.

brand gross billing decreased by 33% to $8,901 compared to $13,197 during the same period last year, driven by a Reed’s volume

decrease of 37% and Virgil’s volume decrease of 26%.

The result is a decrease in total gross billing of 33%, to $8,901 during the

three months ended September 30, 2023, from $13,219 in the same period last year.

Prices on our core brands increased 1% to $20.79 per

The lower gross billings was a result of volume declines that have impacted the carbonated soft drink segment as a result of price increases

coupled with the Company’s inability to produce sufficient levels of inventory to meet current demand as a result of tighter credit

terms from suppliers.

as a percentage of gross sales was 24% compared to 10% in the same period last year.

As a result, net sales revenue increased 19% in

the three months ended June 30, 2024, to $11,874, compared to $10,005 in the same period last year.

As a result, net sales revenue decreased 43% in

the three months ended September 30, 2024, to $6,752, compared to $11,856 in the same period last year driven by lower sales and elevated

of Goods Sold

of goods sold increased $547 during the three months ended June 30, 2024, as compared to the same period last year.

As a percentage of

net sales, cost of goods sold for the three months ended June 30, 2024, was 68% as compared to 75% for the same period last year.

total cost of goods per case decreased to $12.34 per case in the three months ended June 30, 2024, from $13.58 per case for the same

period last year.

margin was 32% for the three months ended June 30, 2024, compared to 25% for the same period last year.

of goods sold decreased $2,286 during the three months ended September 30, 2024, as compared to the same period last year.

As a percentage

of net sales, cost of goods sold for the three months ended September 30, 2024, was 82% as compared to 66% for the same period last year.

The decline as a percentage of net sales, was driven by elevated trade spend, partially offset by lower supply chain and input costs.

total cost of goods per case increased to $12.91 per case in the three months ended September 30, 2024, from $12.22 per case for the

same period last year.

margin was 18% for the three months ended September 30, 2024, compared to 34% for the same period last year.

and Handling Expenses

and handling expenses consist of delivery costs to customers and warehousing costs incurred for handling our finished goods after production.

Delivery and handling expenses decreased by $263 in the three months ended June 30, 2024, to $1,423 from $1,686 in the same period last

year, driven by our efforts to mitigate inflationary costs.

Delivery costs in the three months ended June 30, 2024, were 12% of net sales

and $2.18 per case, compared to 17% of net sales and $3.05 per case during the same period last year.

Delivery and handling expenses decreased by $629 in the three months ended September 30, 2024, to $1,279 from $1,908 in the same period

last year, driven by our efforts to mitigate inflationary costs.

Delivery costs in the three months ended September 30, 2024, were 19%

of net sales and $2.99 per case, compared to 16% of net sales and $2.98 per case during the same period last year.

and Marketing Expenses

expenses consist of direct marketing, marketing labor, and marketing support costs.

Selling expenses consist of all other selling-related

expenses including personnel and contractor support.

Total selling and marketing expenses were $1,097 during the three months ended June

30, 2024, compared to $1,259 during the same period last year.

As a percentage of net sales, selling and marketing costs was 9% during

the three months ended June 30, 2024, as compared to 13% during the same period last year.

The decrease was primarily driven by lower

marketing costs, service fees and product sampling costs partially offset

by higher broker commissions.

Selling expenses consist of all other

selling-related expenses including personnel and contractor support.

Total selling and marketing expenses were $1,283 during the

three months ended September 30, 2024, compared to $861 during the same period last year, an increase of $422.

As a percentage of

net sales, selling and marketing costs was 19% during the three months ended September 30, 2024, as compared to 7% during the same

period last year.

The increase was primarily driven by higher employee related costs, marketing spend, and higher service fees

related to e-commerce sales.

and Administrative Expenses

and administrative expenses consist primarily of the cost of executive, administrative, and finance personnel, as well as professional

General and administrative expenses increased in the three months ended June 30, 2024, to $1,980 from $1,311, an increase of $669

over the same period last year.

As a percentage of net sales, general and administrative expenses were 17% during the three months ended

June 30, 2024, as compared to 13% during the same period last year.

The increase was driven by higher professional fees, legal settlements and higher stock compensation.

General and administrative expenses increased in the three months ended September 30, 2024 to $1,791 from $1,407, an increase

of $384 over the same period last year.

As a percentage of net sales, general and administrative expenses were 27% during the three months

ended September 30, 2024, as compared to 12% during the same period last year.

The increase was driven by higher professional fees, bad

debt expense, investor related costs and employee related costs.

from Operations

loss from operations was $669 for the three months ended June 30, 2024, as compared to a loss of $1,747 in the same period last year

driven by decreased gross profit offset by decreases in operating expenses discussed above.

loss from operations was $3,138 for the three months ended September 30, 2024, as compared to a loss of $143 in the same period last

year driven by decreased gross profit and an increase in operating expenses discussed above.

and Other Expense

and other expense for the three months ended June 30, 2024, consisted of $1,150 of interest expense and $1,393 of the change in fair value of our SAFE investments.

and other expense for the three months ended September 30, 2024, consisted of $1,012 of interest expense.

During the same period last

year, interest and other expense consisted solely of $1,387 of interest expense.

In addition to our GAAP results, we present Modified

EBITDA as a supplemental measure of our performance.

However, Modified EBITDA is not a recognized measurement under GAAP and should not

be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with GAAP,

or as an alternative to cash flow from operating activities as a measure of liquidity.

We define Modified EBITDA as net income (loss),

plus interest expense, tax expense, depreciation and amortization, stock-based compensation, changes in fair value of warrant expense,

change in fair value of SAFE agreements, legal and insurance settlements, non-recurring professional fees inventory write-offs associated

with exited categories and major packaging and formula changes, one-time changes in policy, impact of changes to accounting methodology

and one-time restructuring-related costs including employee severance and asset impairment.

year, interest and other expense consisted of $1,293 of interest expense.

addition to our GAAP results, we present Modified EBITDA as a supplemental measure of our performance.

However, Modified EBITDA is not

a recognized measurement under GAAP and should not be considered as an alternative to net income, income from operations or any other

performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of liquidity.

We define Modified EBITDA as net income (loss), plus interest expense, tax expense, depreciation and amortization, stock-based compensation,

changes in fair value of warrant expense, change in fair value of SAFE agreements, legal and insurance settlements, non-recurring professional

fees inventory write-offs associated with exited categories and major packaging and formula changes, one-time changes in policy, impact

of changes to accounting methodology and one-time restructuring-related costs including employee severance and asset impairment.

considers our core operating performance to be that which our managers can affect in any particular period through their management of

8 unchanged sentences

as an inference that our future results will be unaffected by unusual or non-recurring items.

forth below is a reconciliation of net loss to Modified EBITDA for the three months ended June 30, 2024 and 2023 (unaudited;

in thousands):

forth below is a reconciliation of net loss to Modified EBITDA for the three months ended September 30, 2024 and 2023 (unaudited;

Three Months Ended

3 unchanged sentences

Change in fair value of SAFE investments

Production quality hold write-down

Stock option and other noncash compensation

17 unchanged sentences

the future, and Modified EBITDA does not reflect any cash requirements for such replacements.

of Operations – Six months ended June 30, 2024, as compared to Six Months Ended June 30, 2023

following table sets forth key statistics for the six months ended June 30, 2024 and 2023, respectively, in thousands.

Six Months Ended June 30,

of Operations – Nine months ended September 30, 2024, as compared to Nine Months Ended September 30, 2023

following table sets forth key statistics for the nine months ended September 30, 2024 and 2023, respectively, in thousands.

Nine Months Ended September 30,

Gross billing (A)

56 unchanged sentences

primarily of Wellness Shots, candy and slower selling discontinued Reed’s and Virgil’s SKUs.

beverage volume for the six months ended June 30, 2023, represents 99% of all beverage volume.

brand gross billing increased by 2% to $23,962 compared to $23,429 during the same period last year, driven by Reed’s volume decline

of 5% and Virgil’s volume decline of 11%.

The result is an increase in total gross billing of 1%, to $23,963 during the six months

ended June 30, 2024, from $23,618 in the same period last year.

Price on our core brands increased 3% to $20.82 per case.

was a result of volume declines that have impacted the CSD segment as a result of price increases coupled with the Company’s inability

to produce sufficient levels of inventory to meet current demand as a result of tighter credit terms from suppliers.

beverage volume for the nine months ended September 30, 2024, represents 100% of all beverage volume.

brand gross billing decreased by 10% to $32,864 compared to $36,626 during the same period last year, driven by Reed’s volume

decline of 10% and Virgil’s volume decline of 16%.

The result is a decrease in total gross billing of 11%, to $32,864 during

the nine months ended September 30, 2024, from $36,837 in the same period last year.

Price on our core brands increased 1% to $20.81

The lower gross billings was a result of volume declines that have impacted the carbonated soft drink segment as a result of price increases

coupled with the Company’s inability to produce sufficient levels of inventory to meet current demand as a result of tighter

credit terms from suppliers.

as a percentage of gross sales was 14% compared to 10% in the same period last year.

As a result, net sales revenue increased 1% in the

six months ended June 30, 2024, to $21,469, compared to $21,162 in the same period last year.

As a result, net sales revenue decreased 15% in

the nine months ended September 30, 2024, to $28,221, compared to $33,018 in the same period last year driven by lower sales and elevated

of Goods Sold

of goods sold decreased $1,730 during the six months ended June 30, 2024, as compared to the same period last year.

As a percentage of

net sales, cost of goods sold for the six months ended June 30, 2024, was 66% as compared to 75% for the same period last year.

total cost of goods per case decreased to $12.36 per case in the six months ended June 30, 2024, from $13.70 per case for the same period

The cost of goods sold per case on core brands was $12.36 during the six months ended June 30, 2024, compared to $13.59 for

the same period last year.

margin increased to 34% for the six months ended June 30, 2023, compared to 25% for the same period last year.

of goods sold decreased $4,016 during the nine months ended September 30, 2024, as compared to the same period last year.

As a percentage

of net sales, cost of goods sold for the nine months ended September 30, 2024, was 70% as compared to 72% for the same period last year.

The decrease was driven by lower supply chain and input costs.

total cost of goods per case decreased to $12.52 per case in the nine months ended September 30, 2024, from $13.17 per case for the same

period last year.

The cost of goods sold per case on core brands was $12.51 during the nine months ended September 30, 2024, compared

to $13.11 for the same period last year.

margin increased to 30% for the nine months ended September 30, 2024, compared to 28% for the same period last year.

and Handling Expenses

and handling expenses consist of delivery costs to customers and warehousing costs incurred for handling our finished goods after production.

Delivery and handling expenses decreased by $881 in the six months ended June 30, 2024, to $2,925 from $3,806 in the same period last

year, driven by our efforts to mitigate inflationary costs.

Delivery costs in the six months ended June 30, 2024, were 14% of net sales

and $2.54 per case, compared to 18% of net sales and $3.27 per case during the same period last year.

Delivery and handling expenses decreased by $1,510 in the nine months ended September 30, 2024, to $4,204 from $5,714 in the same period

last year, driven by our efforts to mitigate inflationary costs.

Delivery costs in the nine months ended September 30, 2024, were 15%

of net sales and $2.66 per case, compared to 17% of net sales and $3.17 per case during the same period last year.

and Marketing Expenses

expenses consist of direct marketing, marketing labor, and marketing support costs.

Selling expenses consist of all other selling-related

expenses including personnel and contractor support.

Total selling and marketing expenses were $2,190 during the six months ended June

30, 2024, compared to $2,706 during the same period last year.

As a percentage of net sales, selling and marketing were 10% of net sales

during the six months ended June 30, 2024, as compared to 13% of net sales during the same period last year.

The decrease was driven

by lower service fees, and reduced sampling, trade show and marketing spend partially offset by higher broker fees.

Selling expenses consist of all other

selling-related expenses including personnel and contractor support.

Total selling and marketing expenses were $3,473 during the

nine months ended September 30, 2024, compared to $3,567 during the same period last year.

As a percentage of net sales, selling and

marketing expenses were 12% of net sales during the nine months ended September 30, 2024, as compared to 11% of net sales during the

same period last year.

The decrease was driven by lower co-op advertising fees, employee related costs and marketing spend partially

offset by higher broker fees and e-commerce delivery costs.

and Administrative Expenses

and administrative expenses consist primarily of the cost of executive, administrative, and finance personnel, as well as professional

General and administrative expenses increased in the six months ended June 30, 2024, to $3,448 from $3,020, an increase of $428

General and administrative expenses increased in the nine months ended September 30, 2024, to $5,239 from $4,427, an increase of

$812 over the same period last year.

The increase was driven by higher legal settlements costs and professional fees spending

partially offset by lower public company costs.

The increase was driven by higher employee related costs, legal settlement related costs, professional

fees, and quality assurance costs spending partially offset by lower public company costs.

from Operations

loss from operations was $1,319 for the six months ended June 30, 2024, as compared to a loss of $4,325 in the same period last year

driven by increased gross profit and decreased operating expenses discussed above.

loss from operations was $4,457 for the nine months ended September 30, 2024, as compared to a loss of $4,468 in the same period last

year driven by increased gross profit and decreased operating expenses discussed above.

and Other Expense

and other expense for the six months ended June 30, 2024, consisted of $2,173 of interest expense and $1,393 of the change in fair value of our SAFE investments.

and other expense for the nine months ended September 30, 2024, consisted of $4,578 of interest expense.

During the same period last

year, interest and other expense consisted solely of $3,166 of interest expense.

In addition to our GAAP results, we present Modified

EBITDA as a supplemental measure of our performance.

However, Modified EBITDA is not a recognized measurement under GAAP and should not

be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with GAAP,

or as an alternative to cash flow from operating activities as a measure of liquidity.

We define Modified EBITDA as net income (loss),

plus interest expense, tax expense, depreciation and amortization, stock-based compensation, changes in fair value of warrant expense,

change in fair value of SAFE agreements, legal and insurance settlements, non-recurring professional fees inventory write-offs associated

with exited categories and major packaging and formula changes, one-time changes in policy, impact of changes to accounting methodology

and one-time restructuring-related costs including employee severance and asset impairment.

year, interest and other expense consisted of $4,459 of interest expense.

addition to our GAAP results, we present Modified EBITDA as a supplemental measure of our performance.

However, Modified EBITDA is not

a recognized measurement under GAAP and should not be considered as an alternative to net income, income from operations or any other

performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of liquidity.

We define Modified EBITDA as net income (loss), plus interest expense, tax expense, depreciation and amortization, stock-based compensation,

changes in fair value of warrant expense, change in fair value of SAFE agreements, legal and insurance settlements, non-recurring professional

fees inventory write-offs associated with exited categories and major packaging and formula changes, one-time changes in policy, impact

of changes to accounting methodology and one-time restructuring-related costs including employee severance and asset impairment.

considers our core operating performance to be that which our managers can affect in any particular period through their management of

8 unchanged sentences

as an inference that our future results will be unaffected by unusual or non-recurring items.

forth below is a reconciliation of net loss to Modified EBITDA for the six months ended June 30, 2022 and 2021 (unaudited;

forth below is a reconciliation of net loss to Modified EBITDA for the nine months ended September 30, 2024 and 2023 (unaudited;

in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Modified EBITDA adjustments:

1 unchanged sentence

Interest expense

Change in fair value of SAFE investments

Product quality hold write-down

19 unchanged sentences

the future, and Modified EBITDA does not reflect any cash requirements for such replacements.

The accompanying financial statements have been prepared

on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal

course of business.

As reflected in the accompanying financial statements, for the six months ended June 30, 2024, the Company recorded

a net loss of $4,885, and utilized $3,307 of cash in operations and at June 30, 2024, had a working capital deficiency of $19,378 and

a stockholders’ deficit of $23,849.

As of June 30, 2024, the Company borrowed $9,124 on its line of credit and owed $18,821on its

Notes (See Note 5 and Note 6 for further detail).

These factors raise substantial doubt about the Company’s ability to

continue as a going concern within one year of the date that the financial statements are issued.

The financial statements do not include

any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities

that might be necessary should the Company be unable to continue as a going concern.

of June 30, 2024, we had a cash balance of $326, no availability under our line of credit and $3,876 of additional borrowing capacity

accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement

of liabilities and commitments in the normal course of business.

As reflected in the accompanying financial statements, for the nine

months ended September 30, 2024, the Company recorded a net loss of $9,035, and utilized $2,254 of cash in operations and at September

30, 2024, had a working capital deficiency of $22,923 and a stockholders’ deficit of $21,953.

As of September 30, 2024, the Company

borrowed $5,390 on its line of credit and owed $21,751 on its Notes (See Note 5 and Note 6 for further detail).

These factors raise substantial

doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are

The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts

or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

of September 30, 2024, we had a cash balance of $306, no availability under our line of credit and $7,529 of additional borrowing capacity

from the credit facility assuming there is availability under the terms.

On July 26, 2024, Norman E.

Snyder Jr, CEO of the

Company, provided a personal guaranty for a $500 over advance on our existing line of credit with ACS.

On August 1, 2024, the Company

funded $1,400 pursuant to an option exercise by Whitebox under the Option Notes.

July 26, 2024, Norman E.

Snyder Jr, CEO of the Company, provided a personal guaranty for a $500 over advance on our existing line of

credit with ACS.

On August 1, 2024, the Company funded $1,400 pursuant to an option exercise by Whitebox under the Option Notes.

Historically,

we have financed our operations through public and private sales of common stock, issuance of preferred and common stock,

convertible debt instruments, term loans and credit lines from financial institutions, and cash generated from operations.

alleviate these conditions, management is currently evaluating various funding alternatives and may seek to raise additional funds

through the issuance of equity, mezzanine or debt securities, through arrangements with strategic partners or through obtaining

credit from financial institutions.

The Company is continuing to discuss restructuring of debt with existing lenders and is

exploring new financing opportunities to address the line of credit which comes due in March 2025 (see Note 5) and the portion of

debt under the Notes that is due under on December 15, 2024 (see Note 6).

As we seek additional sources of financing, there can be

no assurance that such financing would be available to us on favorable terms or at all.

Our ability to obtain additional financing

in the debt and equity capital markets is subject to several factors, including market and economic conditions, our performance and

investor sentiment with respect to us and our industry.

we have financed our operations through public and private sales of common stock, issuance of preferred and common stock, convertible

debt instruments, term loans and credit lines from financial institutions, and cash generated from operations.

To alleviate these conditions,

management is currently evaluating various funding alternatives and may seek to raise additional funds through the issuance of equity,

mezzanine or debt securities, through arrangements with strategic partners or through obtaining credit from financial institutions.

Company is continuing to discuss the restructuring of debt with existing lenders and is exploring new financing opportunities to address

the line of credit which comes due in March 2025 (see Note 5) and the portion of debt under the Notes that is due on December 15, 2024

(see Note 6).

As we seek additional sources of financing, there can be no assurance that such financing would be available to us on favorable

terms or at all.

Our ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including

market and economic conditions, our performance and investor sentiment with respect to us and our industry.

have also taken decisive action to improve our margins, including fully outsourcing our manufacturing process, streamlining our product

28 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