(EDGAR Online via COMTEX) -- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following Management's Discussion and Analysis ("MD&A") of our Financial Condition and Results of Operations should be read in conjunction with the financial statements and notes thereto included as part of this interim report. Our MD&A is provided to assist readers in understanding our performance, as reflected in the results of our operations, our financial condition and our cash flows. The following discussion summarizes the significant factors affecting our operating results, financial condition, liquidity and cash flows as of and for the periods presented below. This MD&A should be read in conjunction with our financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Our future results could differ materially from our historical performance as a result of various factors such as those discussed in the section entitled "Risk Factors" in our registration statement on Form S-1, as amended, (File No. 333-260204, the "Registration Statement"), and "Forward-Looking Statements." Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of the management of the Company about future events and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. All statements other than statements of historical facts included herein, may be forward-looking statements. Without limitation, any statements preceded or followed by or that include the words "plans", "believes", "expects", "intends", "will", "should", "could", "would", "may", "anticipates", "might" or similar words or phrases, are forward-looking statements. These forward-looking statements are not guarantees of future financial performance. Such forward-looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions, which could cause actual results to differ materially from those projected or implied in any forward-looking statements. Overview of our Business We are a frozen food company that develops, markets, and manufactures foods that are designed to be high in protein, low in sugar, gluten and grain-free. We, along with our co-manufacturers produce breakfast sandwiches, entrees, and other products, which are primarily sold in the U.S. frozen food category, excluding frozen and refrigerated meat. Our customers include retailers, which primarily sell their products through natural and conventional grocery, drug, club, and mass merchandise stores throughout the United States. We also sell our
products through our
subsidiaries.
COVID-19
pandemic (the "Pandemic"). However, consumer spending may shift to the
food-away-from-home industry, as the impact of the Pandemic subsides. We believe
the trend in in-home consumption positively affected our sales, given the
increase in demand of our retail customers during 2021, which we expect to
continue into the next year. However, cost challenges have persisted due to
supply and recent supply chain disruptions, and an increase in costs for certain
ingredients in our products may continue into the next year.
In addition to the above, we believe that changes in work patterns, such as work
being performed outside of the traditional office setting, will continue to
contribute to
in-home
consumption. The pandemic also drove significant growth in eCommerce utilization
by grocery consumers, and we expect that trend to continue as well. However,
should such demand persist, there may be a significant increase in new market
entrants within the same space.
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THREE MONTHS ENDED
SEPTEMBER 30,
2021 2020 $ Change % Change
Net sales $ 23,014 $ 9,745 $ 13,269 136.2 %
Cost of sales 20,659 9,907 10,752 108.5 %
Gross profit 2,355 (162 ) 2,517 (1553.7 )%
Operating expenses:
Selling and distribution 4,323 1,754 2,569 146.5 %
Marketing 1,732 356 1,376 386.5 %
Administrative 1,875 682 1,193 174.9 %
Total operating expenses 7,930 2,792 5,138 184.0 %
Loss from operations (5,575 ) (2,954 ) (2,621 ) 88.7 %
Interest expense 839 1,262 (423 ) (33.5 )%
Other income (309 ) - (309 )
Change in fair value of convertible debt 5,730 - 5,730
Loss before income taxes (11,835 ) (4,216 ) (7,619 ) 180.7 %
Income tax expense - - -
Net Loss $ (11,835 ) $ (4,216 ) $ (7,619 ) 180.7 %
Preferred return on Series A preferred units 146 136 10 7.4 %
Net loss attributable to common unitholders $ (11,981 ) $ (4,352 ) $ (7,629 ) 175.3 %
Net Sales
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Operating Expenses
Selling and Distribution Expense
The following table sets forth our selling and distribution expense for the
periods indicated (dollar amounts in thousands):
THREE MONTHS ENDED
SEPTEMBER 30,
2021 2020 $ Change % Change
Selling and distribution $ 4,323 $ 1,754 $ 2,569 146.5 %
Percentage of net sales 18.8 % 18.0 % 0.8 %
Selling and distribution expense increased $2.6 million, or 146.5%, for the three months ended September 30, 2021, as compared to the prior year period. Selling and distribution expense increased primarily due to an increase in selling expenses related to the increase in sales, and, to a lesser extent, an increase in industry freight rates.
THREE MONTHS ENDED
SEPTEMBER 30,
2021 2020 $ Change % Change
Marketing $ 1,732 $ 356 $ 1,376 386.5 %
Percentage of net sales 7.5 % 3.7 % 3.9 %
Marketing expense increased $1.4 million, or 386.5%, during the three months ended September 30, 2021, as compared to the prior year period. Marketing expense increased primarily due to an increase in advertising to increase household awareness of our brand as well as support sales growth. Administrative Expense
THREE MONTHS ENDED
SEPTEMBER 30,
2021 2020 $ Change % Change
Administrative $ 1,875 $ 682 $ 1,193 174.9 %
Percentage of net sales 8.1 % 7.0 % 1.1 %
Administrative expense increased $1.2 million, or 174.9% during the three months ended September 30, 2021, as compared to the prior year period. This increase was primarily driven by expenses related to our IPO, as well as an increase of research and development costs, which resulted from higher levels of commercialization activity to support our growth. Loss from Operations
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NINE MONTHS ENDED
SEPTEMBER 30,
2021 2020 $ Change % Change
Net sales $ 58,477 $ 27,799 $ 30,678 110.4 %
Cost of sales 49,447 26,346 23,101 87.7 %
Gross profit 9,030 1,453 7,577 521.5 %
Operating expenses:
Selling and distribution 10,291 5,703 4,588 80.4 %
Marketing 3,119 1,936 1,183 61.1 %
Administrative 7,677 1,755 5,922 337.4 %
Total operating expenses 21,087 9,394 11,693 124.5 %
Loss from operations (12,057 ) (7,941 ) (4,116 ) 51.8 %
Interest expense 4,322 3,744 578 15.4 %
Other income (309 ) - (309 )
Change in fair value of convertible debt 6,100 - 6,100
Loss before income taxes (22,170 ) (11,685 ) (10,485 ) 89.7 %
Income tax expense - 13 (13 )
Net Loss $ (22,170 ) $ (11,698 ) $ (10,472 ) 89.5 %
Preferred return on Series A preferred units 438 409 29 7.1 %
Net loss attributable to common unitholders $ (22,608 ) $ (12,107 ) $ (10,501 ) 86.7 %
Net Sales
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Operating Expenses
Selling and Distribution Expense
The following table sets forth our selling and distribution expense for the
periods indicated (dollar amounts in thousands):
NINE MONTHS ENDED
SEPTEMBER 30,
2021 2020 $ Change % Change
Selling and distribution $ 10,291 $ 5,703 $ 4,588 80.4 %
Percentage of net sales 17.6 % 20.5 % -2.9 %
Selling and distribution expense increased $4.6 million, or 80.4%, for the nine months ended September 30, 2021, as compared to the prior year period. Selling and distribution expense increased primarily due to an increase in sales. Selling and distribution expense decreased as a percentage of sales primarily due to lower distribution costs experienced during the nine months ending September 30, 2021. The decrease in these costs was driven by the mix of products sold during the period, which generally had lower distribution costs associated with them relative to the mix of products sold during the prior year period.
NINE MONTHS ENDED
SEPTEMBER 30,
2021 2020 $ Change % Change
Marketing $ 3,119 $ 1,936 $ 1,183 61.1 %
Percentage of net sales 5.3 % 7.0 % -1.6 %
Marketing expense increased $1.2 million, or 61.1%, during the nine months ended September 30, 2021, as compared to the prior year period. Marketing expense increased primarily due to increases in advertising efforts to increase household awareness of our brand, as well as to support sales growth. Administrative Expense
NINE MONTHS ENDED
SEPTEMBER 30,
2021 2020 $ Change % Change
Administrative $ 7,677 $ 1,755 $ 5,922 337.4 %
Percentage of net sales 13.1 % 6.3 % 6.8 %
Administrative expense increased $5.9 million, or 337.4%, during the nine months ended September 30, 2021, as compared to the prior year period. This increase was primarily driven by an increase of research and development costs, which resulted from higher levels of commercialization activity to support our growth. In addition, included in administrative expense for the current year period were costs related to our IPO.
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Dec 17, 2021
COMTEX_399129135/2041/2021-12-17T16:39:17
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