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Item 2. Management’s Discussion and Analysis

2022-11-14 compared with 2022-08-15 · 75 added, 46 removed, 80 unchanged (60% of the section changed)

39 unchanged sentences

Results of Operations

Our results of operations for the three months ended June 30, 2022 and June 30, 2021 are as follows:

Three Months Ended September 30, 2022 and September 30, 2021

Our results of operations for the three months ended September 30, 2022 and September 30, 2021 are as follows:

For the three For the three

months ended months ended

September 30, September 30,

Revenue $ 19,574,953 $ 15,225,765

Cost of goods sold 14,948,461 10,091,415

Gross profit $ 4,626,492 $ 5,164,350

Net Loss $ (8,397,208 ) $ (10,378,473 )

Revenue and Cost of Goods Sold

We had revenue from sales of our product for the three months ended June 30, 2022 of $16,894,403 as compared to $14,113,578 for the three months ended June 30, 2021, an increase of 20%.

We had revenue from sales of our product for the three months ended September 30, 2022 of $19,874,953, as compared to $15,255,765 for the three months ended September 30, 2021, an increase of 28%.

The increase in sales is due to the expanded distribution of our products to additional retailers throughout the country.

1 unchanged sentence

We sell through large national distributors (UNFI, KeHE, C&S, and Core-Mark), which together represent over 150,000 retail outlets.

We also sell our product directly to retail clients, including convenience stores, natural food products stores, large ethnic markets and national retailers.

We also sell our product directly to retail clients, including drug store chains, warehouse clubs, convenience stores, natural food products stores, large ethnic markets and national retailers.

Some examples of retail clients are:

Walmart, CVS, Sam's Club, Family Dollar, Albertson/Safeway, Kroger companies, Schnucks, Smart & Final, Jewel-Osco, Sprouts, Bashas', Stater Bros.

Walmart, CVS, Rite Aid, Sam's Club, Family Dollar, Albertson/Safeway, Kroger companies, Schnucks, Smart & Final, Jewel-Osco, Sprouts, Bashas', Stater Bros.

Markets, Unified Grocers, Bristol Farms, Publix, Vallarta, Superior Foods, Ingles, Shaw's, Raley's, Harris Teeter, Festival Foods, HEB and Brookshire's.

Cost of goods sold is comprised of production costs, shipping and handling costs.

For the three months ended June 30, 2022, we had cost of goods sold of $13,399,774, or 79% of revenue, as compared to cost of goods sold of $9,311,011 or 66% of revenue, for the three months ended June 30, 2021.

The increase in cost of goods sold is due to increased raw material costs and increased freight costs to our co-packers.

Our operating expenses for the three months ended June 30, 2022 and June 30, 2021 are as follows:

For the three

For the three months ended September 30, 2022, we had cost of goods sold of $14,948,461 or 76% of revenue, as compared to cost of goods sold of $10,091,415 or 66% of revenue, for the three months ended September 30, 2021.

The increase in cost of goods sold is due to increased raw material cost from our suppliers.

Our operating expenses for the three months ended September 30, 2022 and September 30, 2021 are as follows:

For the three For the three

months ended months ended

September 30, September 30,

Sales and marketing expenses $ 7,120,133 $ 10,120,875

1 unchanged sentence

Total operating expenses $ 9,696,119 $ 15,372,626

For the three months ended June 30, 2022, our total operating expenses were $9,785,839 as compared to $12,120,774 for the three months ended June 30, 2021.

For the three months ended June 30, 2022, the total included $6,951,846 of sales and marketing expenses.

For the three months ended June 30, 2021 the total included $7,156,400 of sales and marketing expenses.

Compared to the three months ended June 30, 2021, sales and marketing expenses for the three months ended June 30, 2022 decreased due to lower advertising and promotion of approximately $0.2 million and lower professional fees of approximately $0.6 million offset by an increase of freight to our customers in the amount of $0.9 million.

For the three months ended June 30, 2022, general and administrative expenses of $2,863,993 consisted primarily of approximately $0.4 million of professional fees, media fees and legal fees, stock compensation expense of approximately $0.2 million and approximately $2.0 million of wages and wage related expenses.

For the three months ended June 30, 2021, general and administrative expenses of $4,964,374, consisted primarily of approximately $2.6 million of professional fees, media fees and legal fees, stock compensation expense of approximately $1.1 million and approximately $1.0 million of wages and wage related expenses.

For the three months ended September 30, 2022, our total operating expenses were $9,696,119 as compared to $15,372,626 for the three months ended September 30, 2021.

For the three months ended September 30, 2022, the total included $7,120,133 of sales and marketing expenses.

For the three months ended September 30, 2021, the total included $10,120,875 of sales and marketing expenses.

Sales and marketing expenses decreased as a result of decreased out-bound freight expenses (from approximately $4.8 million to $3.7 million) and decreased marketing expense of approximately $1.9 million, primarily relating to higher expense in the three months ended September 30, 2021 relating to our brand ambassador.

For the three months ended September 30, 2022, general and administrative expenses of $2,575,986, consisted primarily of approximately $0.2 million of professional fees, media fees and legal fees, non-cash stock award and option expense in the amount of approximately $0.4 million and approximately $1.7 million of wages and wage related expenses.

For the three months ended September 30, 2021, general and administrative expenses of $5,251,751, consisted primarily of approximately $2.8 million of professional fees, media fees and legal fees, non-cash stock award and option expense in the amount of approximately $0.7 million and approximately $1.1 million of wages and wage related expenses.

General and administrative expenses decreased as a result of lower professional fees, media fees and legal fees.

Six Months Ended September 30, 2022 and September 30, 2021

Our results of operations for the six months ended September 30, 2022 and September 30, 2021 are as follows:

For the six months For the six months

September 30, September 30,

Revenue $ 36,469,356 $ 29,369,343

Cost of goods sold 28,348,235 19,402,426

Gross profit 8,121,121 9,966,917

Net Loss $ (15,890,616 ) $ (17,804,099 )

Revenue and Cost of Goods Sold

We had revenue from sales of our product for the six months ended September 30, 2022 of $36,469,356 as compared to $29,369,343 for the six months ended September 30, 2021, an increase of 24%.

The increase in sales is due to the expanded distribution of our products to additional retailers throughout the country.

We distribute our product through several channels.

We sell through large national distributors (UNFI, KeHE, C&S, and Core-Mark), which together represent over 150,000 retail outlets.

We also sell our product directly to retail clients, including drug store chains, warehouse clubs, convenience stores, natural food products stores, large ethnic markets and national retailers.

Some examples of retail clients are:

Walmart, CVS, Rite Aid, Sam's Club, Family Dollar, Albertson/Safeway, Kroger companies, Schnucks, Smart & Final, Jewel-Osco, Sprouts, Bashas', Stater Bros.

Markets, Unified Grocers, Bristol Farms, Publix, Vallarta, Superior Foods, Ingles, Shaw's, Raley's, Harris Teeter, Festival Foods, HEB and Brookshire's.

Cost of goods sold is comprised of production costs, shipping and handling costs.

For the six months ended September 30, 2022, we had cost of goods sold of $28,348,235, or 78% of revenue, as compared to cost of goods sold of $19,402,426 or 66% of revenue, for the six months ended September 30, 2021.

The increase in cost of goods sold is due to increased raw material cost from our suppliers.

Our operating expenses for the six months ended September 30, 2022 and September 30, 2021 are as follows:

For the six For the six

months ended months ended

September 30, September 30,

Sales and marketing expenses $ 14,041,979 $ 17,277,275

General and administrative expenses 5,439,979 10,216,125

Total operating expenses $ 19,481,958 $ 27,493,400

For the six months ended September 30, 2022, our total operating expenses were $19,481,958, as compared to $27,493,400 for the six months ended September 30, 2021.

For the six months ended September 30, 2022, the total included $14,041,979 of sales and marketing expenses.

For the six months ended September 30, 2021, the total included $17,277,275 of sales and marketing expenses.

Sales and marketing expenses decreased as a result of decreased out-bound freight expense (from approximately $7.7 million to $7.5 million) and decreased marketing expenses of approximately $3.1, primarily relating to higher expense in the six months ended September 30, 2021 relating to our brand ambassador.

For the six months ended September 30, 2022, general and administrative expenses of $5,439,979, consisted primarily of approximately $0.6 million of professional fees, stock award and option expense in the amount of approximately $0.6 million and approximately $3.7 million of wage and wage related expenses.

For the six months ended September 30, 2021, general and administrative expenses of $10,216,125, consisted primarily of approximately $5.5 million of professional fees, stock award and option expense in the amount of approximately $1.4 million and approximately $2.1 million of wage and wage related expenses.

General and administrative expenses decreased as a result of lower professional fees, media fees and legal fees.

Liquidity and Capital Resources

Working Capital

June 30, 2022

March 31, 2022

At September 30, 2022 At March 31, 2022

Current assets $ 22,187,026 $ 21,157,421

2 unchanged sentences

Current Assets

Current assets as of June 30, 2022 and March 31, 2022 primarily include $2,945,924 and $1,531,062 in cash, $8,422,415 and $7,927,065 in accounts receivable and $10,678,339 and $8,583,664 in inventory, respectively.

Current assets as of September 30, 2022 and March 31, 2022 primarily relate to $2,257,502 and $1,531,062 in cash, $7,464,009 and $7,927,065 in accounts receivable and $9,873,998 and $8,853,664 in inventory, respectively.

Current Liabilities

Current liabilities as of June 30, 2022 and March 31, 2022 primarily include $11,934,494 and $10,441,879 in accounts payable, revolving financing of $6,539,787 and $7,043,870, and accrued expenses of $5,946,778 and $2,036,736, respectively.

The increase in accrued expenses during the three-month period ending June 30, 2022 is primarily due to approximately $3 million of proceeds received early by the Company as of June 30, 2022 for warrants exercised by third parties as part of the debt settlement transaction that did not close until July 25, 2022 as detailed below.

Our cash flows for the three months ended June 30, 2022 and June 30, 2021 are as follows:

For the three

Current liabilities as of September 30, 2022 and March 31, 2022 primarily relate to $10,902,488 and $10,441,879 in accounts payable, revolving financing of $7,531,935 and $7,043,870, and accrued expenses of $2,326,094 and $2,036,739, respectively.

Our cash flows for the six months ended September 30, 2022 and September 30, 2021 are as follows:

For the six For the six

months ended months ended

September 30, September 30,

Net Cash used in operating activities $ (9,450,507 ) $ (18,730,426 )

1 unchanged sentence

Net Cash provided by financing activities 11,410,201 20,333,943

Net increase (decrease) in cash

Net (decrease) in cash and cash equivalents $ 726,440 $ 1,288,109

Operating Activities

Net cash used in operating activities was $2,494,650 for the three months ended June 30, 2022, as compared to $6,055,313 used in operating activities for the three months ended June 30, 2021.

The decrease in net cash used in operating activities was primarily due to the receipt of approximately $3 million for the exercise of warrants that were not exercised until July 25, 2022 (see below Financing Activities Subsequent to June 30, 2022).

Net cash used in operating activities was $9,450,507 for the six months ended September 30, 2022, as compared to $18,730,426 used in operating activities for the six months ended September 30, 2021.

The decrease in net cash used in operating activities was primarily due to the decreased net loss after adjusting for non-cash activity of approximately $5.0 million.

Investing Activities

Net cash used in investing activities was $854,997 for the three months ended June 30, 2022, as compared to $61,444 used in investing activities for the three months ended June 30, 2021.

The increase in net cash used in investing activities was primarily due to the purchase of equipment for 2 new co-packing plants and the purchase of a new model for our 1-gallon bottle.

Net cash used in investing activities was $1,233,254 for the six months ended September 30, 2022, as compared to $315,408 used in investing activities for the six months ended September 30, 2021.

The increase in net cash used in investing activities was from an increase in purchases of fixed assets.

Financing Activities

Net cash provided by financing activities for the three months ended June 30, 2022 was $4,764,509, as compared to $1,483,706 for the three months ended June 30, 2020.

The increase in net cash provided by financing activities was primarily to due proceeds from the sale of common stock in the amount of $5.2 million in the three months ended June 30, 2022.

Financing Activities Subsequent to June 30, 2022

We entered into debt settlement and subscription agreements with four creditors, and we issued units to three creditors and special warrants to one creditor in settlement of debt in an aggregate of $3,869,962 (principal of $3,800,000 and accrued and unpaid interest of $69,962) owing the creditors in connection with certain convertible notes.

Effective as of July 25, 2022, we issued an aggregate of 9,633,616 units of our company at a deemed price of $0.37 per unit to three creditors.

Each unit was comprised of one share of common stock and one warrant.

Each warrant entitled the holder to purchase an additional share of our common stock at a price of $0.44 per share for a period of three years.

As a condition of the debt settlement, each of the creditors who has received the units has agreed to immediately exercise the creditor's respective warrants.

Accordingly, the creditors exercised warrants for an aggregate of $4,238,791 (of which approximately $3 million was received as of June 30, 2022 and recorded as an accrued liability of the Company pending the closing of this debt settlement transaction) resulting in an aggregate of an additional 9,633,616 shares of our common stock being issued to such creditors.

Effective as of July 25, 2022, we issued 825,738 special warrants at a deemed price of $0.37 per special warrant to one creditor.

Each special warrant is automatically exercisable (without payment of any further consideration and subject to customary anti-dilution adjustments) into units on the date that is the earlier of:

(i) the date that is three business days following the date on which our company obtains a receipt from the British Columbia Securities Commission for a (final) short form prospectus qualifying the distribution of the units issuable upon exercise of the special warrants, and (ii) the date that is four months and one day after the issuance of the special warrants.

Each unit will be comprised of one share of common stock and one warrant.

Each warrant will entitle the holder to purchase an additional share of our common stock at a price of $0.44 per share.

As consideration for the debt settlement and the issuance of the special warrants, the creditor agreed to exercise the warrants immediately upon automatic exercise of the special warrants by payment of $363,325, which amount is held in trust by the creditor's solicitors until the automatic exercise date, for an additional 825,735 shares of our common stock.

Net cash provided by financing activities for the six months ended September 30, 2022 was $11,410,201, as compared to $20,333,943 for the six months ended September 30, 2021.

The decrease in net cash provided by financing activities is primarily due to a decrease in the proceeds from the exercise of warrants of approximately $6.9 million.

Cash Requirements

Our ability to operating as a going concern is dependent on obtaining adequate capital to fund operating losses until we become profitable.

Our ability to continue operating as a going concern is dependent on obtaining adequate capital to fund operating losses until we become profitable.

We announced on July 9, 2022 that we have begun implementing a combination of cost-reduction measures and margin enhancements.

5 unchanged sentences

and d) decreases in freight costs due to an enhanced distribution network.

Our cash on hand, plus the implementation of our cost-reduction and margin enhancement strategy, anticipated warrant exercises, our line of credit and the sales agreement with Roth Capital Partners, LLC is planned to fund our current planned operations and capital needs.

Our cash on hand, plus the implementation of our cost-reduction and margin enhancement strategy, anticipated warrant exercises, our line of credit and the ATM sales agreement with Roth Capital Partners, LLC is planned to fund our current planned operations and capital needs.

However, if our current plans change or are accelerated or we choose to increase our production capacity, we may seek to sell additional equity or debt securities or obtain additional credit facilities, including seeking investments from strategic investors.

5 unchanged sentences

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our stockholders.

Quantitative and Qualitative Disclosures About Market Risk

Item 3 Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

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