What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-28 compared with 2024-04-01 · 107 added, 91 removed, 197 unchanged (50% of the section changed)

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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, legal and insurance settlements, 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.

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.

following discussion also includes the use of gross billing, a key performance indicator and metric.

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Trends – Market Conditions

economy continued to grow throughout 2023, the higher inflation, the actions by the Federal Reserve to address inflation, and

rising energy prices create uncertainty about the future economic environment which will continue to evolve and may impact our business

in future periods.

We have experienced supply chain challenges, including increased lead times, as well as inflation of raw materials,

logistics and labor costs due to availability constraints and high demand.

Although we regularly monitor companies in our supply chain,

and use alternative suppliers when necessary and available, supply chain constraints could cause a disruption in our ability to obtain

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

the year ended December 31, 2023, the Company experienced moderation from the elevated freight costs experienced in 2022.

cost of shipping and handling for year ended December 31, 2023, was $3.07 per case, as compared to $3.95 per case for the year ended

December 31, 2022.

Although the Company has experienced decreases in freight costs over the last three quarters, in the Company’s

economy continued to grow throughout 2024 and 2023, inflation, actions by the Federal Reserve to address inflation,

fluctuations in energy prices, and the potential impacts of tariffs and geopolitical events create uncertainty about the future

economic environment which will continue to evolve and may impact our business in future periods.

We have experienced supply chain

challenges, including increased lead times, as well as inflation of raw materials, logistics and labor costs due to availability

constraints and high demand.

Although we regularly monitor companies in our supply chain, and use alternative suppliers when

necessary and available, supply chain constraints could cause a disruption in our ability to obtain raw materials required to

manufacture our products and adversely affect our operations.

the year ended December 31, 2024, the average cost of shipping and handling was $2.75 per case, as compared to $3.07 per case for the

year ended December 31, 2023.

Although the Company has experienced decreases in freight costs, in the Company’s

opinion there remains a volatile environment and the Company will continue to monitor pricing and availability in transportation.

plans have been implemented to manage this risk.

The Company has been negatively impacted by supply chain challenges impacting our ability

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.

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

has experienced moderation in inflation and anticipates this to continue throughout 2024.

has experienced moderation in inflation and anticipates this continuing throughout 2025.

December 31, 2024, we continued to generate cash flows to meet our short-term liquidity needs, and we expected to maintain access to

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Ended December 31,

Promotional and other allowances (B)

of goods sold

Gross billing (A)

Promotional and

other allowances (B)

Cost of goods sold

% of Gross billing

Product quality hold write-down

% of Net sales

Product quality hold

% of Gross billing

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% of Gross billing

and marketing

and administrative

for receivable with former related party

Operating expenses

from operations

expense and other expense

% of Net sales

Delivery and handling

% of Net sales

Dollar per case ($)

Selling and marketing

% of Net sales

General and administrative

% of Net sales

Provision for receivable

with former related party

Total Operating expenses

Loss from operations

Interest expense and other

per share – basic and diluted

average shares outstanding – basic & diluted

Weighted average shares outstanding – basic & diluted

We define gross billing as the total sales for the Company unadjusted for costs related to generating those sales.

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Non-core products consist

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

2023, the Company licensed its candy business to Rootstock Trading, a company founded and owned by our former Chief Sales Officer, Neal

As part of this agreement, Rootstock agrees to pay a royalty on a percentage of its net sales of licensed products.

fees are 0% for 2023, 2% for 2024, 4% for 2025, and 5% thereafter.

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

beverage volume for the year ended December 31, 2024, represents 100% of all beverage volume.

brand gross billing decreased by 11% to $48,778 compared to $54,613 during the same period last year, driven by a Reed’s volume

decline of 3% and Virgil’s volume decline of 28%.

The result is a decrease in total gross billing of 15%, to $50,689 during the

year ended December 31, 2023, from $59,464 in the same period last year.

brand gross billing decreased by 9% to $44,161 compared to $48,778 during the same period last year, driven by Reed’s volume decline

of 10% and Virgil’s volume decline of 13%.

The result is a decrease in total gross billing of 13%, to $44,316 during the year ended

December 31, 2024, from $50,689 in the same period last year.

Price on our core brands increased 2% to $20.70 per case.

decrease 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.

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 were 14% compared to 12% in the same period last year.

As a result, net sales revenue decreased 16% for

the year ended December 31, 2023, to $44,711, compared to $53,041 in the same period last year.

December 2023, the Company made a one-time change in policy for discounts which resulted in an additional $756 of deductions in

Excluding this adjustment, discounts as a percentage of sales would have been 10%.

As a result, net sales revenue decreased 15% during

the year ended December 31, 2024, to $37,954, compared to $44,711 in the same period last year driven by lower sales and elevated trade

of Goods Sold

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was primarily driven by lower supply chain and input costs.

December 2023, the Company wrote off $1,848 of inventory comprised of $1,452 of packaging and ingredients related to major changes

in packaging and formulations, and $396 of candy as a result of exiting this line of business.

These write-offs represented 4% of

During the three months ended December 31,

2023, the Company was made aware of a closure failure in our seasonal swing-lid products which resulted in a product quality hold

The Company recorded expense of $1,267 related to costs associated with the product quality hold write-down.

December 2023, the Company wrote off $1,848 of inventory comprised of $1,452 of packaging and ingredients related to major changes in

packaging and formulations, and $396 of candy as a result of exiting this line of business.

These write-offs represented 4% of net sales.

2023 the Company discovered a closure failure in our seasonal swing-lid products which resulted in a product quality hold

The Company recorded expense of $1,267 related to costs associated with the product quality hold write-down for the year ended December 31, 2023.

insurance claim is pending.

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the same period last year.

Excluding the write-offs and provision for product quality hold write-down., total cost of goods sold per case would have been $12.96.

margin decreased to 22% for the year ended December 31, 2023, compared to 23% for the same period last year.

Excluding the one-time adjustments

related to discounts, inventory write-offs, and provision for product quality hold write-down.

discussed above, gross margin would have been 30% for the year ended December 31, 2023.

Excluding the write-offs and provision for product quality hold write-down, total cost of goods sold per case

during the year ended December 31, 2023, would have been $12.96.

margin increased to 30% for the year ended December 31, 2024, compared to 22% 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 $4,042 in the year ended December 31, 2023, to $7,561 from $11,603 in the same period last

Delivery and handling expenses decreased by $1,698 for the year ended December 31, 2024, to $5,863 from $7,561 in the same period last

year, driven by our efforts to mitigate inflationary costs.

Delivery costs in the year ended December 31, 2023, were 17% of net sales

Delivery costs for the year ended December 31, 2024, were 15% of net sales

and $2.75 per case, compared to 17% of net sales and $3.07 per case during the same period last year.

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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 $4,865 during the year ended December

31, 2023, compared to $7,316 during the same period last year.

As a percentage of net sales, selling and marketing were 11% of net sales

during the year ended December 31, 2023, as compared to 14% of net sales during the same period last year.

The decrease was driven by

lower marketing related expenditures, headcount, broker commissions, information technology charges, travel and entertainment expenses

partially offset by stock compensation and trade show expenses.

Selling expenses consist of all other

selling-related expenses including personnel and contractor support.

Total selling and marketing expenses were $4,405 during the

year ended December 31, 2024, compared to $4,865 during the same period last year.

As a percentage of net sales, selling and

marketing expenses were 12% of net sales during the year ended December 31, 2024, as compared to 11% of net sales during the same

period last year.

The decrease was driven by lower employee related costs, syndicated data fees, customer fees, and product sampling

expenses 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 decreased in the year ended December 31, 2023, to $6,118 from $7,489, a decrease of $1,371

General and administrative expenses increased in the year ended December 31, 2024, to $9,109 from $6,118, an increase of $2,991

over the same period last year.

The decrease was driven by lower stock compensation, bad debt expense, co-packer and customer penalties,

information technology charges, consulting fees, and investor relation charges partially offset by higher franchise tax expense.

The increase was driven by contract proceedings, impairment

of assets, professional fees, and quality assurance costs partially offset by lower bad debt and franchise tax expense.

from Operations

loss from operations was $8,116 for the year ended December 31, 2024, as compared to a loss of $9,417 in the same period last year driven

by decreased gross profit and decreases in operating expenses discussed above.

expense for the year ended December 31, 2023, consisted of $6,106 of interest expense.

During the same period last year, interest expense

consisted of $5,223 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, legal and insurance settlements, 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.

by increased gross profit and decreased operating expenses discussed above.

and Other Expense

and other expense was $5,036 for the year ended December 31, 2024, consisted of $5,481 of interest expense and $445 of other income

related to the reversal of accrued expense from prior years.

During the same period last year, interest and other expense consisted

of $6,106 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.

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

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Ended December 31,

EBITDA adjustments:

and amortization

option and other noncash compensation

for receivable with former related party

Modified EBITDA adjustments:

Depreciation and amortization

Interest expense

Stock option and other noncash compensation

Provision for receivable with former related

Product quality hold write-down

write-offs associated with exited categories and major packaging and formula changes

Inventory write-offs associated with exited

categories and major packaging and formula changes

Impairment of assets

One-time change in policy for discounts

Professional fees

Contract Proceedings

Severance costs

EBITDA adjustments

Modified EBITDA

present Modified EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on

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the year ended December 31, 2024, the Company recorded a net loss of $13,152 and used cash in operations of $6,124.

During 2024, the Company took significant steps to convert high interest debt to equity, raise additional equity,

and refinance its credit facility.

In accordance with

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As of the issuance date of these

financial statements, management expects that the Company’s existing cash of $603, plus $4,100 of additional cash received subsequent

to December 31, 2023, from investments with significant stockholders (See Note 15), will be sufficient to fund the Company’s current

operating plan for at least twelve months from the date of issuance of these financial statements.

The financial statements do not include

any adjustments that might be necessary if the Company is unable to continue as a going concern.

financial statements, management expects that the Company’s existing cash of $10,391 will be sufficient to fund the Company’s

current operating plan for at least twelve months from the date of issuance of these financial statements.

The financial statements do

not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

assessment whether there is sufficient cash on hand, together with expected capital raises, to assure operations for a period of at least

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stock instruments issued for services.

There were no changes to our critical accounting policies described in the consolidated financial

There were no changes to our critical accounting policies described in the financial

statements included in this Annual Report on Form 10-K for the fiscal year ended December 31, 2024, that impacted our condensed consolidated

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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-K

Item 7. Management’s Discussion and Analysis