REAL GOOD FOOD COMPANY, INC. Management’s Discussion and Analysis of Financial Position and Operating Results (Form 10-Q)

0
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, entrées, 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
e-commerce
channel, which includes
direct-to-consumer
sales through our website, as well as sales through our retail customers' online
platforms.
On November 4, 2021, Real Good Foods, LLC, the successor to The Real Good Food
Company LLC (the "Company"), underwent a reorganization whereby the Company
become a subsidiary of The Real Good Food Company, Inc. The Real Good Food
Company, Inc. completed an initial public offering ("IPO") on November 4, 2021,
in which it issued and sold shares of its class A common stock, $0.0001 par
value per share, at an offering price of $12.00 per share. As part of the
underwriting agreement the underwriters were granted an option for a period of
30 days to purchase up to an additional 800,000 shares of common stock. For
periods subsequent to November 4, 2021, any references to the Company shall
imply The Real Good Food
Company, Inc., and its

subsidiaries.

Trends and Other Factors Affecting our Business
Our results are impacted by economic and consumer trends, and changes in the
food industry market dynamics, such as sourcing and supply chain challenges.
Changes in trends in consumer buying patterns may impact the results of our
operations. In recent years, there has been an increased focus on healthy eating
and an increase in focus on natural, organic and specialty foods. This trend has
benefited the Company, as well as has the increase in
in-home
consumption as a result of the
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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Components of Our Results of Operations
Net Sales
Our net sales are primarily derived from the sale of our products directly to
our retail customers. Our products are sold to consumers through an increasing
number of locations in retail channels, primarily in natural and conventional
grocery, drug, club and mass merchandise stores. We sell a limited percentage of
our products to consumers through
"click-and-collect"
e-commerce
transactions, where consumers pick up their product at a retailer following an
online sale, and traditional
direct-to-consumer
"deliver-to-me"
e-commerce
transactions through our own website and third-party websites. We record net
sales as gross sales net of discounts, allowances, coupons, slotting fees, and
trade advertising that we offer our customers. Such amounts are estimated and
recorded as a reduction in total gross sales in order to arrive at reported net
sales.
Gross Profit
Gross profit consists of our net sales less cost of goods sold. Our cost of
goods sold primarily consists of the cost of ingredients for our products,
direct and indirect labor cost,
co-manufacturing
fees, plant and equipment cost, other manufacturing overhead expense, and
depreciation and amortization expense, as well as the cost of packaging our
products. Our gross profit margin is impacted by a number of factors, including
changes in the cost of ingredients, cost and availability of labor, and factors
impacting our ability to efficiently manufacture our products, including through
investments in production capacity and automation.
Operating Expense
Selling and Distribution Expense
Our products are shipped from our and our
co-manufacturers'
facilities directly to customers' or to third-party logistics providers by truck
and rail. Distribution expense includes third-party freight and warehousing
costs, as well as salaries and wages, bonuses, and incentives for our
distribution personnel. Selling expense includes salaries and wages,
commissions, bonuses, and incentives for our sales personnel, broker fees, and
sales-related travel and entertainment expenses.
Marketing Expense
Marketing expense includes salaries and wages for marketing personnel, website
costs, advertising costs, costs associated with consumer promotions, influencer
and promotional agreements, product samples and sales ads incurred to acquire
new customers and consumers, retain existing customers and consumers, and build
our brand awareness.
Administrative Expense
Administrative expense includes salaries, wages, and bonuses for our management
and general administrative personnel, research and development costs,
depreciation of
non-manufacturing
property and equipment, professional fees to service providers including
accounting and legal, costs associated with the implementation and utilization
of our new ERP system, insurance, and other operating expenses.
Segment Overview
Our chief operating decision maker, who is our Chief Executive Officer, reviews
financial information on an aggregate basis for purposes of allocating resources
and evaluating financial performance, as well as for strategic operational
decisions and managing the organization. For the periods presented, we have
determined that we have one operating segment and one reportable segment. In
addition, all of our assets are located within the U.S.
Seasonality
We experience mild seasonal earning characteristics, predominantly with products
that experience lower sales volume in warm-weather months. For example, our
bacon wrapped stuffed chicken experiences seasonal softness during months that
consumers prefer to grill outdoors instead of preparing microwaveable meals. In
addition, similar to other H&W brands, the highest percentage of our net sales
tends to occur in the first and second quarters of the calendar year, when
consumers are more likely to seek H&W brands. Further, certain of the
ingredients we process, such as cauliflower and artichoke hearts, are
agricultural crops with seasonal production cycles. These seasonal earning
characteristics have not historically had a material impact on our net sales
primarily due to the timing and strong growth of our total distribution points.
The bulk of our distribution point gains are a function of retailer
shelf-resets, which tend to occur during the third and fourth quarters of the
calendar year, which helps to support year-round performance across our product
offerings. As our business continues to grow, we expect the impact from
seasonality to increase over time, with net sales growth occurring predominantly
in the first and second quarters.

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Results of Operations
Comparison of the three months ended September 30, 2021 and 2020
The following table details the results of our operations for the three months
ended September 30, 2021 and 2020 (dollars in thousands):

                                                   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 ordinary unitholders $ (11,981) $ (4,352)

   $  (7,629 )         175.3 %



Net Sales
Net sales for the three months ended September 30, 2021 increased $13.3 million,
or 136.2% to $23.0 million compared to $9.7 million for the prior year period.
This increase was primarily due to strong growth in sales volumes of our core
products, driven by expansion in the club channel, and, to a lesser extent,
greater demand from our existing retail customers.
Cost of Sales
Cost of sales increased approximately $10.8 million, or 108.5%, to
$20.7 million, during the three months ended September 30, 2021, as compared to
$9.9 million for the prior year period, primarily due to an increase in the
sales volume of our products, as well as to an increase in labor and raw
material costs. The increase in labor and raw material costs increased primarily
due to labor shortages and supply chain pressures related to the impact of the
pandemic. The increases in costs were partially offset by the increase in sales
of our self-manufactured products. Self-manufactured products, which have a
lower cost than
co-packed
products, represented greater than 70% of our sales in the three months ended
September 30, 2021 compared to substantially all of our products being
co-packed
in the prior year period.
Gross Profit
Gross profit increased $2.5 million to $2.4 million for the three months ended
September 30, 2021, compared to ($0.2) million for the prior year period. This
increase is primarily due to the absence of $1.0 million of costs related to the
write-down of unrecoverable raw material inventory recognized in the prior year
period, as a result of financial hardship of a
co-manufacturer,
as well as $0.5 million of costs related to an inventory write-down during the
three months ended September 30, 2020. Also contributing to the increase in
gross profit during the current year period was the increase in net sales and
the greater proportion of goods sold being self-manufactured.

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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.
Marketing Expense
The following table sets forth our marketing expense for the periods indicated
(dollar amounts in thousands):

                            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
The following table sets forth our administrative expense for the periods
indicated (dollar amounts in thousands):

                            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
As a result of the foregoing, loss from operations increased $2.6 million, or
88.7% to $5.6 million for the three months ended September 30, 2021, compared to
a loss from operations of $3.0 million for the prior year period. Loss from
operations as a percentage of sales was (24%) for the current period, compared
to (30%) for the prior year period.
Interest Expense
Interest expense decreased $0.4 million, or 33.5%, to $0.8 million during the
three months ended September 30, 2021, as compared to $1.3 million for the prior
year period. The decrease in interest expense during the 2021 period, was
primarily due to lower cost of borrowing as a result of our convertible note
issuance in May 2021, which represented the majority of our outstanding debt
during the period. The convertible notes accrue interest at a considerably lower
interest rate than our bank debt.
Change in fair value of convertible debt
The Change in the fair value of our convertible debt of $5.7 million related to
the increase in fair value of our convertible notes issued during May 2021. The
increase in fair value of the notes was mainly attributable to the decrease in
the maturity date of the notes, among other unobservable inputs used in the
valuation. None of the increase in the value of the notes was attributable to
instrument specific or Company credit risk.

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Net Loss
As a result of the foregoing, our net loss increased $7.6 million, or 180.7%, to
$11.8 million during the three months ended September 30, 2021, compared to a
net loss of $4.2 million for the prior year period.
Comparison of the nine months ended September 30, 2021 and 2020
The following table details the results of our operations for the nine months
ended September 30, 2021 and 2020 (dollars in thousands):

                                                    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 holders of common units $ (22,608) $ (12,107)

    $ (10,501 )           86.7 %



Net Sales
Net sales for the nine months ended September 30, 2021, increased $30.7 million,
or 110.4% to $58.5 million compared to $27.8 million for the prior year period.
This increase was primarily due to strong growth in sales volumes of our core
products, driven by an expansion in our club channels.
Cost of Sales
Cost of sales increased approximately $23.1 million, or 87.7%, to $49.4 million,
during the nine months ended September 30, 2021, as compared to $26.3 million
for the prior year period, primarily due to an increase in the sales volume of
our products, as well as to an increase in labor and raw material costs. The
increase in labor and raw material costs increased primarily due to labor
shortages and supply chain pressures related to the impact of the pandemic. The
increases in costs were partially offset by the increase in sales of our
self-manufactured products. Self-manufactured products, which have lower cost
than
co-packed
products, represented greater than 70% of our sales in the nine months ended
September 30, 2021, compared to substantially all of our products being
co-packed
in the prior year period.
Gross Profit
Gross profit increased $7.6 million, or 521.5%, to $9.0 million for the nine
months ended September 30, 2021, compared to $1.5 million for the prior year
period. This increase is primarily due to the absence of $1.0 million of costs
related to the write-down of unrecoverable raw material inventory recognized in
the prior year period, as a result of financial hardship of a
co-manufacturer,
as well as $0.5 million of costs related to an inventory write-down during the
nine months ended September 30, 2020. Also contributing to the increase in gross
profit during the current year period was the increase in net sales as well as a
greater proportion of goods sold being self-manufactured.

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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

Sales and distribution $ 10,291 $ 5,703 $ 4,588 80.4% Percentage of 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.
Marketing Expense
The following table sets forth our marketing expense for the periods indicated
(dollar amounts in thousands):

                            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
The following table sets forth our administrative expense for the periods
indicated (dollar amounts in thousands):

                            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.
Loss from Operations
As a result of the foregoing, loss from operations increased $4.1 million, or
51.8% to $12.1 million for the nine months ended September 30, 2021, compared to
a loss from operations of $7.9 million for the prior year period. Loss from
operations as a percentage of sales was (21%) for the current period, compared
to (29%) for the prior year period, reflecting the increase sales and higher
gross margins, which were partially offset by increases in operating expenses.
Interest Expense
Interest expense increased $0.6 million, or 15.4%, to $4.3 million during the
nine months ended September 30, 2021, as compared to $3.7 million for the prior
year period. The increase in interest expense during the 2021 period, was
primarily due to a higher level of borrowing during the current year period,
offset in part, by a reduction in lending rates as a result of our convertible
note issuance in May 2021.
Change in fair value of convertible debt
The Change in the fair value of our convertible debt of $6.1 million related to
the increase in fair value of our convertible notes issued in May 2021. The
increase in fair value of the notes was mainly attributable to the decrease in
the maturity date of the notes, among other unobservable inputs used in the
valuation. None of the increase in the value of the notes was attributable to
any specific credit risk.

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Net Loss
As a result of the foregoing, our net loss increased $10.5 million, or 89.5%, to
$22.2 million during the nine months ended September 30, 2021, compared to a net
loss of $11.7 million for the prior year period.
Liquidity and Capital Resources
Our primary uses of cash are to fund working capital, operating expenses,
promotional activities, debt service and capital expenditures related to our
manufacturing facilities. Since our inception, we have dedicated substantially
all of our resources to the commercialization of our products, the development
of our brand and social media presence, and the growth of our operational
infrastructure. Historically, we have financed our operations primarily through
issuances of equity and debt securities and borrowings under our credit
agreements and, to a lesser extent, through cash flows from our operations.
As of September 30, 2021, the Company had $1.7 million in cash, current third
party and related party debt obligations of $0.3 million and $1.2 million,
respectively, convertible debt obligations of $41.1 million, and long-term debt
obligations of $21.0 million. Additionally, as of September 30, 2021, the
Company had current and long-term business acquisition liabilities (contingent
consideration) of $1.3 million and $13.5 million, respectively. As a result of
our IPO, which closed on November 9, 2021, we received approximately
$59.5 million in proceeds from the sale of our shares, after deducting
underwriting fees and commissions. The proceeds of the offering were retained
entirely by our company. In addition, in connection with the IPO, $35.0 million
of convertible notes, which were due by March 31, 2021, were converted into our
class A common stock, reliving the Company of the balance of that liability at
the close of the IPO. As a result of the IPO, we believe cash and cash
equivalents
on-hand
and cash from operations, together with borrowing capacity under our credit
facilities, will provide sufficient financial flexibility to meet working
capital requirements and to fund capital expenditures and debt service
requirements for at least the next 12 months and the foreseeable future. We
expect to make future capital expenditures of approximately $5.0 million to
$10.0 million in connection with the enhancement of our current production
capabilities.
Cash Flows
The following table summarizes our cash flows for the periods indicated (in
thousands):

                                                         Nine months ended
                                                           September 30,
                                                         2021          2020
Net cash used in operating activities                  $ (7,483 )    $ (4,078 )
Net cash used in investing activities                    (4,629 )        (125 )
Net cash provided by financing activities                13,734         

4 180

Net increase (decrease) in cash and cash equivalents 1,622 (23) Cash and cash equivalents at start of period

             28           

388

Cash and cash equivalents at end of period             $  1,650      $    

365



Net Cash Used in Operating Activities
Cash used in operating activities was $7.5 million and $4.1 million for the nine
months ended September 30, 2021 and 2020, respectively. The increase in cash
used in operating activities is primarily due to the increase in our net loss
during the 2021 period.
Net Cash Used in Investing Activities
During the nine months ended September 31, 2021 and 2020, net cash used in
investing activities was $4.6 million and $0.1 million, respectively. Included
in cash used in investing activities during the nine months ended September 30,
2021 was purchases of property, plant and equipment, of $2.5 million, primarily
for manufacturing facility improvement and manufacturing equipment for our newly
acquired City of Industry manufacturing facility, as well as $2.1 million of
expenditures related to our PMC asset acquisition during February 2021.

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Net Cash Provided by Financing Activities
Cash provided by financing activities totaled $13.7 million during the nine
months ended September 30, 2021, as compared to $4.2 million during the same
period last year. This increase was primarily due to an increase in our
borrowing under our revolving credit facility of $10.0 million during the nine
months ended September 30, 2021. These borrowings were primarily used to fund
operating activities as well as capital expenditures.
Contractual obligations
As of September 30, 2021, there were no material changes in payments due under
contractual obligations from those disclosed in our Registration Statement.
Off-Balance
Sheet Arrangements
We do not have any
off-balance
sheet arrangements.
New accounting standards
For discussion of new accounting standards, see Note 2 to the Financial
Statements of The Real Good Food Company LLC,
"Summary of Significant Accounting Policies and New Accounting Standards,"
in Part I, Item 1, of this Quarterly Report on
Form 10-Q.
Critical Accounting Policies
Critical accounting policies are those that require application of management's
most difficult, subjective and/or complex judgments, often as a result of the
need to make estimates about the effect of matters that are inherently uncertain
and may change in subsequent periods. Not all accounting policies require
management to make difficult, subjective or complex judgments or estimates. In
presenting our financial statements in accordance with generally accepted
accounting principles in the United States of America ("GAAP"), we are required
to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses. Actual results that differ from our
estimates and assumptions could have an unfavorable effect on our financial
position and results of operations.
The full extent to which the
COVID-19
pandemic will directly or indirectly impact our business, results of operations
and financial condition will depend on future developments that are uncertain.
The pandemic may affect our future sales, expenses, reserves and allowances,
manufacturing operations and employee-related costs. The pandemic may have
significant economic impacts on our customers, suppliers and markets where we
compete and operate. New information may continue to emerge concerning
COVID-19,
and the actions required to contain or treat it may affect the duration and
severity of the pandemic. Our financial statements include estimates of the
effects of
COVID-19
and there may be changes to those estimates in future periods.
Forward-Looking Statements
This Quarterly Report on Form
10-Q
contains forward-looking statements that are subject to risks and uncertainties.
All statements other than statements of historical or current fact included in
this report are forward-looking statements. Forward-looking statements discuss
our current expectations and projections relating to our financial condition,
results of operations, plans, objectives, future performance and business. You
can identify forward-looking statements by the fact that they do not relate
strictly to historical or current facts. These statements may include words such
as "aim," "anticipate," "believe," "estimate," "expect," "forecast," "outlook,"
"potential," "project," "projection," "plan," "intend," "seek," "may," "could,"
"would," "will," "should," "can," "can have," "likely," the negatives thereof
and other words and terms of similar meaning in connection with any discussion
of the timing or nature of future operating or financial performance or other
events. For example, all statements we make relating to our expected revenues,
costs, expenditures, cash flows, growth rates and financial results, our plans
and objectives for future operations, growth or initiatives, strategies, or the
expected outcome or impact of pending or threatened litigation are
forward-looking statements. All forward-looking statements are subject to risks
and uncertainties that may cause actual results to differ materially from those
that we expected.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Except for the continued broad effects of
COVID-19
on market risk, in particular its impact on commodity prices, such as certain
foods included in our products, there have been no material changes in our
market risk from the information provided in the Registration Statement as filed
on November 4, 2021.

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