~~Enhances Innovative Culture to Deliver on Shared Mission~~. This transaction will enable Simply Good Foods to benefit from Quest's effectiveness within e-commerce, social platforms as well as specialty and other non-tracked distribution channels, while Quest will benefit from Simply Good Foods' expertise in building distribution in food/drug/mass channels and growing brand awareness via broad reach media.

~~Achievable Synergies. The transaction delivers on key growth criteria while achieving an estimated $20 million in run-rate cost synergies over three years by leveraging efficiencies~~the second half of ~~scale.~~

~~Financial Overview. The strategic acquisition of~~fiscal year 2021. While our Quest ~~provides Simply Good Foods with additional scale and is complementary to the Company's long-term net sales and Adjusted EBITDA growth algorithm.~~

~~Financing of the Acquisition~~

On October 9, 2019, we completed an underwritten public offering of 13,379,205 shares of our common stock at a price per share of $26.16 (the “Offering”), resulting in net proceeds to us of approximately $350.0 million, after deducting underwriting discounts and commissions and our estimated fees and expenses for the Offering. We intend to use these net proceeds to pay abrand has outperformed its portion of the ~~purchase price and related fees and expenses for~~nutritious snacking segment, the ~~Acquisition, or for general corporate purposes if the acquisition~~performance of our Atkins brand, which is ~~not consummated.~~

~~We plan to fund the remainder~~part of the ~~Acquisition by using a significant~~weight management portion of the ~~approximately $265 million~~market, has improved at a slower rate. However, the Atkins brand performance for the fifty-two weeks ended August 28, 2021 has improved during the course of ~~cash~~fiscal year 2021, primarily due to increasing consumer mobility and improving shopper traffic in brick and mortar retailers. During fiscal year 2022, we expect our business performance will continue to be correlated primarily to the level of consumer mobility, which includes the rate at which consumers return to working outside the home.

Beginning in the third quarter of 2020, we actively engaged with the various elements of our value chain, including our retail customers, contract manufacturers, and logistics and transportation providers, to meet demand for our products and to remain informed of any challenges within our value chain. In the fourth quarter of 2020 and continuing into fiscal year 2021, consumer consumption habits became steadier, however inventory levels remain variable. Based on ~~hand~~information available to us as of the date of this Report, we believe we will be able to deliver our products to meet customer orders on a timely basis, and ~~committed financing pursuant~~therefore, we expect our products will continue to ~~debt commitments~~be available for purchase to meet consumer meal replacement and snacking needs for the foreseeable future. We continue to monitor customer and consumer demand along with our logistics capabilities to deliver products to our retail customers on a timely and consistent basis, and intend to adapt our plans as needed to continue to drive our business and meet our obligations during the continuing and evolving COVID-19 situation.

We remain uncertain of the ultimate effect COVID-19 could have on our business notwithstanding the distribution of several U.S. government approved vaccines and the easing of movement restrictions. This uncertainty stems from ~~Barclays, Credit Suisse~~the potential for, among other things, (i) the presence of current mutations of COVID-19 which have resulted in increased rates of reported cases for which currently approved vaccines are not as effective along with the possibility of future mutations occurring for which current approved vaccines are less effective, (ii) unexpected supply chain disruptions, including disruptions resulting from labor shortages or other human capital challenges, (iii) changes to customer operations, (iv) a reversal in recently improving consumer purchasing and ~~Goldman Sachs.~~consumption behavior, and (v) the closure of customer establishments.

Our Strengths

Powerful ~~brand~~brands with strong consumer awareness and loyalty. We are a ~~leading player~~leader in the fast growing nutritional snacking category, and both the Atkins ~~is one of the~~and Quest brands are leading brands with scale in protein bars, confections, and cookies for both ~~nutrition bars~~brands, RTD shakes for the Atkins brand, and ~~RTD shakes. The Atkins iconic brand has 83% aided brand awareness with U.S. consumers today, based on a study conducted by Atkins in July 2019.~~chips and pizza for the Quest brand. Our ~~highly-focused~~highly focused snacking portfolio provides us with a leading position within retailers’ nutrition and wellness aisles, resulting in meaningful shelf space. ~~Atkins’ ability~~Our brands are able to appeal to both consumers interested in an active lifestyle who are seeking protein-rich, low-carb snacking options as well as weight management program consumers, ~~and consumers focused on everyday nutritious eating~~which makes ~~it a~~our brands highly attractive and strategic ~~brand~~ for a diverse set of retailers across various distribution channels.

Aligned with consumer mega trends. Increasing global concern about growing rates of obesity and weight-related diseases and other health issues has resulted in increased scientific, media and consumer focus on nutrition. Over 100 independent, peer reviewed, clinical studies show the benefits of controlling carbohydrates. Management believes that this focus is prompting consumers to rebalance their nutritional breakdown away from carbohydrates. In fact, 73% of consumers are seeking to lower their carbohydrate intake according to Health Focus International. ~~Atkins~~Our brand attributes, ~~“low carb,~~“low-carb,” ~~“low sugar”~~“low-sugar” and ~~“protein rich”~~“protein-rich” nutrition, are well aligned with consumer mega trends. In addition, we believe consumers’ eating habits are gradually shifting towards increased convenience, snacking and meal replacement. ~~Our~~We also believe our portfolio of convenient and nutritious products ~~as well as~~and our ongoing effort to meet consumer demands for “cleaner labels,” which we define as products made with fewer, simpler and more recognizable ingredients, are strategically aligned with these trends.

Scalable snacking and food platform.~~With the highly-recognized Atkins brand as an anchor, we~~ We have been able to grow our product offerings for both of our nutritious snacking brands through our ~~brand~~line extensions and through ~~acquisitions, such as the December 2016 acquisition of Wellness Foods and the pending acquisition of Quest, a healthy lifestyle food brand.~~acquisitions. Our in-house product development experience, combined with our outsourced manufacturing model, allow us to bring new products to market quickly. We pride ourselves on knowing our consumers and mining insights that lead to new products and ideas. We believe ~~that~~ we ~~have the ability to~~can leverage our strong relationships with our retail customers and distributors, a strong brand building track record, and category management expertise to help new products, brands and brand extensions gain distribution and consumer recognition, allowing us to continue to successfully expand our snacking platform.

Asset-light business with strong cash generation. We retain core in-house capabilities including sales, marketing, brand management, customer relationships, product development, and supply-chain ~~know-how,~~expertise, while ~~partnering~~collaborating with a diversified pool of contract manufacturers and distributors to execute manufacturing and distribution. Outsourcing these competencies allows us to focus our efforts on innovation, marketing, and sales to ~~strive to~~ meet consumer demands. Our lean infrastructure allows for significant flexibility, ~~and~~ speed-to-market, and minimal capital investment, which translates into relatively consistent and robust free cash flow generation over time, driven by strong gross margins.

Experienced leadership team. Simply Good Foods has an experienced team of industry veterans with extensive experience across multiple branded consumer products, food and nutrition categories. For example, our President and Chief Executive Officer, Joseph

Scalzo, has significant experience operating packaged ~~foods~~goods businesses, having served in various leadership roles at Dean Foods, WhiteWave Foods, The Gillette Company, The Coca-Cola Company, and The Procter & Gamble Company. Our management ~~team's~~team’s extensive experience is complemented by the significant industry expertise of our directors James Kilts, the former Chief Executive Officer of The Gillette Company and Nabisco, and former President of Kraft USA and Oscar Mayer, and David West, the former Chief Executive Officer of Big Heart Pet

Brands and The Hershey Company. Our management team’s deep expertise and proven ~~track~~ record of accomplishment in managing brands and operating packaged food businesses is a key driver of our success and positions Simply Good Foods as an attractive vehicle for future long-term growth within the nutritional snacking ~~space and broader food category.~~space.

Our Strategies

~~Continue our advocacy, education and activation for core program consumers.~~ Consumers who purchase Atkins’ products have shown a strong affinity for the brand as evidenced by a relatively high level of servings per buyer, per year. Historically, our core target consumer base has consisted of individuals participating in branded weight management programs. These consumers are our most loyal, profitable and frequent purchasers. We use targeted television and print ads with a celebrity-based campaign that motivates the potential programmatic buyer to try the Atkins approach to weight loss. We retain these buyers with a value-added “tool-kit” of a resource-filled website and mobile app that contains all the content necessary to follow the Atkins approach successfully, including menu planners, shopping lists, carb counter, community support, inspirational success stories, and over 1,600 recipes. We have an active and growing digital and social presence, using a comprehensive approach of search, banner and search engine optimization efforts. We are a leader in social media, with a top-tier presence on Facebook, Instagram and Twitter. We also have a growing network of social influencers, who promote the Atkins philosophy in their targeted blogs. We believe that social media is a cost-effective way of continuing to attract and retain these core consumers. We expect our recently improved Atkins brand website and mobile application will continue to attract core consumers, including millennials, to our Atkins products. We believe that our ongoing efforts to educate consumers about the benefits of a lower carbohydrate lifestyle will further reinforce the brand to core consumers who are focused on a programmatic approach to weight management.

~~Further develop marketing strategy to reach self-directed low carbohydrate consumers~~. We intend to continue to make focused changes to our approach to consumer outreach. According to an Information Resources, Inc. (“IRI”) study, over 50% of our current consumers are self-directed low carbohydrate eaters (not on a program diet) who buy and consume our products, despite the fact that historically, Atkins’ marketing and advertising have not been targeted towards them. Management expects that the brand’s redesigned marketing and advertising, such as our food-focused television advertising, will continue to be effective at reaching the large addressable market of self-directed low carbohydrate consumers. Additionally, social media continues to be an important component of our marketing tools and we have an active and growing presence on key social channels such as Facebook, Instagram and Twitter. During the fifty-three week period ended August 31, 2019, we had approximately 9 million new visitors to our www.atkins.com website.

~~Innovate and expand the portfolio of product offerings to meet consumer demands for “cleaner labels,” higher protein products and new product forms.~~ Management expects that our ongoing efforts to meet consumer demands for “cleaner labels” will be effective at reaching self-directed low carbohydrate consumers, who are focused on weight management as part of overall health, wellness and “clean eating.” Management is committed to continually finding new and innovative formulations to reduce the number of product ingredients, as well as using “better for you” ingredients like nuts, fiber and whey protein in its existing products, while maintaining and improving taste and quality. In addition, we intend to continue to enhance, strengthen and expand our product offerings with new and innovative flavors and forms, simple ingredients and packaging alternatives, all while maintaining a commitment to delivering products that meet our nutritional profile and provide the convenience that consumers crave. Our in-house research and development laboratory allows us to develop new products internally and bring them to market quickly through our contract manufacturing network without diverging from high standards of taste, quality, safety and nutritional content. Additionally, we intend to satisfy developing consumer demands through the pursuit of merger and acquisition transactions, such as the December 2016 acquisition of Wellness Foods and our pending acquisition of Quest.

~~Expand distribution in white space opportunities.~~ In the fifty-three week period ended August 31, 2019, approximately 79% of Atkins’ gross sales in the U.S. were through the mass retailer and grocery distribution channels. Management team believes there is opportunity for the brand to further penetrate other distribution channels such as convenience and club stores. Management also believes that the development of the SimplyProtein^® brand will allow us to expand distribution into the natural and specialty channel. In addition, while shoppers have become heavy consumers of e-commerce purchases generally, only approximately 5% of Atkins’ gross sales for the fifty-three week period ended August 31, 2019 were through its e-commerce channel. We intend to leverage our brand recognition to further develop the distribution channels through which we reach consumers, including through the expansion of the e-commerce channel.

Leverage platform to expand in attractive food and snacking categories. Management believes the fragmented snacking category presents ~~a substantial~~an opportunity for consolidation and the opportunity to build, through disciplined acquisitions, a leading platform in the nutritional snacking ~~space and broader food category.~~space. As a leader in nutritious snacking, we believe we have the unique capability to leverage our operating platform, product innovation expertise and customer relationships to expand beyond the Atkins ~~brand.~~and Quest brands. In addition, we believe the nutritious snacking category will continue to grow given its relatively low household penetration and favorable consumer trends of snacking, health and wellness, convenience, and on-the-go consumption. Our experienced management team has deep expertise in brand building that we believe will help us to expand the business into additional brands and products in the snacking segment. Over time, we expect to continue seeking to identify and evaluate acquisition opportunities to complement our platform, and we see significant opportunity for growth and synergies in complementary adjacent snacking categories such as the “better-for-you” eating space.

Innovate and expand the portfolio of product offerings to meet consumer demand for higher protein products and new product forms. We intend to continue to enhance, strengthen and expand our product offerings with new and innovative flavors and forms and packaging alternatives, all while maintaining a commitment to delivering products that meet our nutritional profile and provide the convenience that consumers crave. Our in-house research and development laboratories allow us to develop new products internally and bring them to market quickly through our contract manufacturing network without diverging from high standards of taste, nutritional content, quality, and safety. Additionally, we intend to satisfy developing and changing consumer preferences through the pursuit of merger and acquisition transactions.

Expand distribution in white space opportunities. In the fifty-two weeks ended August 28, 2021, approximately 76% of Atkins’ gross sales in the U.S. and approximately 53% of Quest’s gross sales in the U.S. were through the mass retailer and grocery distribution channels. Our management believes there is opportunity for the brands to further penetrate those channels as well as other distribution channels such as convenience and club stores. In addition, while shoppers have increased e-commerce purchases generally, approximately 9% of Atkins’ gross sales for the fifty-two weeks ended August 28, 2021 were through its e-commerce channel as compared to approximately 24% of Quest’s gross sales for the same period were through its e-commerce channel. We intend to leverage our brand recognition to develop further the distribution channels through which we reach consumers, including through the continued expansion of the e-commerce channel.

~~Our Goals~~

~~Our goal for~~Continue our marketing efforts to increase household penetration. We intend to expand our marketing efforts to bring first-time buyers into the Atkins and ~~Simply Protein~~Quest brand franchises. Consumers who have tried our Atkins and Quest products have a relatively high repeat buying rate and long-term buying behavior, as evidenced by servings per buyer, per year. For our Atkins brand, our historic consumer base has been people interested in weight loss, and for the Quest brand it has been individuals pursuing a performance-based active and athletic lifestyle.

For both the Atkins and the Quest brands, we have an active and growing digital and social presence, using a comprehensive approach of search, banner, and search engine optimization efforts. We are a leader in social media, with a top-tier presence on Facebook, Instagram, Pinterest, Twitter and YouTube. We also have a growing network of social influencers, who promote our products in their targeted social media posts. We believe that social media is a cost-effective way of continuing to ~~improve global health by providing~~attract and retain our consumers. We believe that our ongoing efforts to educate consumers about the benefits of a lower carbohydrate lifestyle will further reinforce our brands. For our Atkins brand, we use targeted broadcast and streaming television and print ads with a celebrity-based campaign that attempts to motivate potential programmatic weight loss consumers to try the Atkins approach to healthier eating and weight loss as these Atkins consumers are our most loyal, profitable and frequent purchasers. For our Quest brand, we have recently launched a national, targeted broadcast ad campaign, and continue to leverage targeted streaming television ads and an extensive network of social media influencers who prompt our Quest brand products through their online posts to motivate new buyers and new product introductions.

Further develop our brand marketing strategies to reach consumers beyond our core historic buyers. We intend to continue to make focused changes to our approach to consumer outreach to attract consumers beyond our historic core buyers. For the Atkins brand, we intend to continue our marketing efforts to attract self-directed low-carbohydrate eaters (those individuals not on a program diet) who buy and consume our Atkins products. For our Quest brand, we intend to continue our marketing efforts to reach consumers who are seeking products that are ~~consistent~~aligned with ~~how~~their choice to pursue a ~~healthier world eats. To make this vision a reality, we strive to embed our~~healthy and active lifestyle. We also note the Atkins brand ~~as a part of everyday life through advocacy, education~~has

approximately 93% aided brand awareness with U.S. consumers and ~~innovation. For over 45 years, Atkins~~the Quest brand has ~~become an iconic American~~approximately 77% aided brand ~~that for many consumers stands for “low carb,” “low sugar”~~awareness with U.S. consumers.

Our Vision and ~~“protein rich” nutrition.~~Mission

Our vision ~~and mission, coupled~~is to lead the nutritional snacking movement with ~~our belief~~trusted brands that today’s consumer is looking for sustainable, healthy long-term habits, has inspired our focus on nutritional snacking. We believe that wellbeing is not just about weight loss or quick results, but also about a healthier approach to eating.

~~Our Approach to Healthy Living and Healthy Weight~~

Over 150 independent, peer reviewed, clinical studies support that eating the right foods can improve health, not only in terms of weight management, but also in terms of related chronic issues like Type 2 Diabetes and cardiovascular disease. We believe that we offer a ~~balanced approach~~variety of convenient, innovative, great-tasting, better-for-you snacks and meal replacements. Our mission is to ~~nutrition that can result in better health.~~empower healthy lives through smart and satisfying nutrition.

Dr. Robert Atkins, a well-known cardiologist, discovered the beneficial effects of a low carbohydrate nutritional regimen on his patients and helped refine the modern understanding of human nutrition and its link to health. More people are recognizing that Atkins is the foundation of the new convention of eating right, and that the old convention of eating excess carbohydrates and sugar has actually contributed to global obesity. Dr. Atkins limited his patients’ intake of sugar and carbohydrates not only for the weight management benefits, but also because of the numerous other health benefits to his patients. While calorie control plays some role in wellness, studies show that it can be far more important to know what the body does with food and its components. We believe that controlling consumption of carbohydrates that the human body quickly turns into sugar is the single biggest factor in eating right. When there is too much sugar and too many carbohydrates in the bloodstream, the body stores them as fat. Many people do not know that starchy carbohydrates such as breads, pasta, cereal, rice and potatoes are really just complex chains of sugars. We believe that eating proteins and healthy fat, while controlling carbohydrate consumption are the foundation of eating right. In our opinion, the old conventional wisdom of “all calories are created equal,” no matter how many of them are sugars, is simply wrong—eating sugar floods the body with the wrong kind of fuel and sends the wrong metabolic signals. Our approach aims to satisfy appetite while creating more stable energy, a higher metabolism and less stored fat. The human body works better with the right fuel.

Our Products

Core Atkins Products

Our core Atkins brand products consist of ~~nutrition~~protein bars, RTD shakes, cookies and ~~confections under the Atkins and SimplyProtein brands.~~confections.

~~Nutrition~~Protein Bars.To keep on-the-go consumers energized and fueled, our ~~nutrition~~Atkins bars offer a convenient and effective solution, providing consumers with protein, fiber and a delicious taste. Atkins offers two main types of ~~nutrition~~ bars: Atkins Meal Bars and Atkins Snack Bars. Atkins Meal Bars contain 13 to 17 grams of protein and are available in 11more than 10 different flavors. ~~With 2 to 4 grams of net carbs,~~ Atkins Snack Bars contain 7 to 13 grams of ~~protein. Atkins offers 15 varieties of Atkins Snack Bars.~~

~~To add~~protein, with 2 to ~~Atkins’ portfolio of nutrition bars and snacks, in December 2016 we acquired Wellness Foods, a Canada-based company which owns the SimplyProtein~~^® brand. Beginning in October 2018, we began selling SimplyProtein products in select U.S. stores and online. SimplyProtein products offer snacking solutions with simple, recognizable ingredients that contain satisfying protein and 34 grams of ~~sugar or less. SimplyProtein crispy bars, baked bars~~net carbs, and ~~crunchy bites offer on-the-go snacks that~~ are ~~Non-GMO Project Verified and gluten free, with no artificial sweeteners, colors, flavors or preservatives.~~ available in 15 different varieties.

RTD Shakes.Our rich and creamy Atkins RTD shakes contain 10 to 15 grams of protein, as well as other important vitamins and minerals. Available in a variety of flavors, including cookies and crème, café caramel and creamy chocolate, Atkins’ RTD shakes are made with high quality ingredients and are designed to provide energy balance through the day. Our Atkins’ Plus RTD shakes contain 30 grams of protein, for our consumers seeking higher protein content.

Confections.~~We believe our~~ Our Atkins Endulge^® line, which is designed to satisfy consumers’ sweet cravings, and which we call Treats, consists of delicious desserts without all of the added sugar. Atkins offers a variety of different Treats, such as peanut butter cups and pecan caramel clusters, each with only 1 gram of sugar or less and low net carbs, providing consumers with the option to indulge.

~~Other Products~~Cookies. First launched in fiscal year 2021, Atkins’ soft and chewy cookie products are a convenient source of high-protein combined with low net carbs and low-sugar. These sweet tasting cookies are available in double chocolate chip, peanut butter and chocolate chip. Atkins’ cookies contain approximately 10 grams of protein, 3 grams of net carbs and approximately 1 gram of sugar or less depending on the flavor.

~~Through third-party partnerships, we offer complementary Atkins branded frozen meals.~~

Licensed Frozen Meals.Atkins signed a ~~renewable seven-year~~ license agreement with Bellisio Foods, Inc., or ~~“Bellisio”, effective September 1, 2016,~~“Bellisio,” to license its frozen meals business. Bellisio manufactures, distributes, markets, promotes and sells Atkins frozen food

products under the Atkins licensed marks. These products include Atkins branded frozen breakfasts, lunches and dinners. With a large selection of meal types, including pizzas, breakfast bowls and more, we believe our frozen meals offer a great way to learn the basics of ~~protein rich,~~protein-rich, low-carbohydrate and low-sugar eating in a simple, convenient and delicious way. The scope of the license includes all frozen meals across all retail channels (excluding online), in the U.S., Canada and Mexico.

Recipes.We While provided free of charge, we also offer over 1,600 ~~protein rich,~~protein-rich, low-carbohydrate and low-sugar recipes designed to help consumers achieve and maintain a healthy lifestyle, while still enjoying delicious food.

Core Quest Products

Our core Quest brand products consist of protein bars, cookies, chips, confections and thin crust pizza.

Protein Bars. To keep on-the-go consumers energized and fueled, our Quest bars offer a convenient and effective solution, providing consumers with protein, fiber and a delicious taste. The typical Quest bar profile contains about 20 grams of protein, 5 grams or less of net carbs and about 1 gram of sugar. Quest offers more than 25 different flavors of protein bars.

Cookies. First launched in 2018, Quest’s cookie products are a convenient source of high-protein combined with low net carbs and low-sugar. Available in a variety of flavors including Chocolate Chip, Peanut Butter, Oatmeal Raisin and Snickerdoodle, Quest’s cookies typically contain about 15 grams of protein, 4 grams or less of net carbs and less than 1 gram of sugar.

Chips. Quest’s protein chips, including the tortilla-style chips launched in spring 2018, quickly became a high-selling product offering an attractive nutrition profile when compared to conventional chip products. Offered in flavors including nacho cheese, ranch, chili lime, BBQ, sour cream & onion, and cheddar & sour cream, Quest’s chips typically contain about 18 grams of protein, about 4 grams of net carbs, and around 6 grams of fat compared to 2 grams of protein, 15 grams of net carbs and 8 grams of fat for a well-known leading conventional brand.

Confections. Launched in fiscal year 2021, confections include peanut butter cups and “fudgey” brownie and “gooey” caramel candy bites sold in a variety of packaging. The peanut butter cups feature a nutrition profile for two cups of 11 grams of protein, 1 gram of net carbs, less than 1 gram of sugar and 4 grams of fiber. The candy bites feature a nutrition profile of 5 grams of protein, 1 gram of net carbs, less than 1 gram of sugar, and candy bars feature 4 grams of fiber to 12 grams of protein, 3 grams of net carbs, 1 gram of sugar and 9 grams of fiber.

Pizza. Launched in summer 2018, Quest’s thin crust frozen pizza offers consumers a pizza experience with an improved nutritional profile versus other leading frozen pizza brands. Sold in a variety of topping combinations including 4-cheese, uncured pepperoni, and supreme, Quest’s pizzas feature a nutrition profile that generally supplies about 29 grams of protein, 6 grams of net carbs or less, around 3 grams of sugar and about 18 grams of fiber compared to 12 grams of protein, 32 grams of net carbs, 2 grams of sugar and 1 gram of fiber for a well-known leading frozen pizza brand.

Marketing, Advertising and Consumer Outreach

~~Simply Good Foods believes advocacy~~ Our marketing efforts are designed to increase consumer awareness of and ~~education~~demand for our products. We employ a broad mix of marketing, including coupons, in-store product sampling, consumer and trade events, advertising (television, online and print) and recipe and food plans, to target our consumers. We also use online resources, including social media sites, to communicate with consumers and build interest in our brands. Our advertising and use of online resources are ~~key foundations~~aimed at increasing consumer preference and usage of our ~~approach~~brands. Our trade promotions focus on obtaining retail feature and display support, achieving optimum retail product prices and securing retail shelf space. We use coupons (freestanding insert newspaper, store register, on-pack and online mail coupons) to ~~growth. By increasing~~help stimulate product trial and repeat purchases by providing consumers with economic incentives. The mix of these marketing activities varies between the Atkins and Quest brands.

We have devoted portions of our respective brand websites to interactive communities designed to promote consumer ~~awareness~~dialogue about the nutritional values and benefits of adopting a low-carbohydrate approach to healthy eating, we are able to capture a larger audience and spread our message about the benefits of a low-carbohydrate approach to healthy living. Accordingly, we have structured our marketing and advertising not only to promote our products, but also to educate consumers.

~~Target Demographics~~

Atkins has built a large consumer following, with its weight management consumer forming the core of a much larger group of consumers looking for a more nutritious lifestyle. These consumers are an important foundation for our business. They are loyal, profitable and frequent purchasers of Atkins’ products. Beyond this group, we believe that there is significant opportunity to expand Atkins’ marketing, education and products to consumers who are not necessarily looking for a weight loss plan, but rather are focused more generally on long-term low-carbohydrate healthy living. We refer to these consumers as self-directed low-carb consumers. We believe our brand is uniquely positioned to capture both branded program consumers and self-directed low-carb consumers, and as part of our growth initiatives, we direct our marketing and advertising efforts to capitalize on this significant incremental opportunity.

~~Branded Program Consumers.~~ We identify branded program consumers as those consumers open to a weight-management program. These consumers are typically of the belief that Atkins’ nutritional approach is effective, that Atkins’ food products generally make them less hungry than other approaches and that Atkins’ snacks are an effective way to facilitate weight management. Our primary message to these consumers is that our products and ~~snacks~~suggestions for their use. Our sales and marketing team gathers information and feedback from consumers and retailers to enable ~~weight management while still allowing consumers~~us to ~~maintain a sustainable and satisfying lifestyle. Atkins emphasizes~~better meet changing consumer needs. We also believe that an effective marketing tool is to ~~these consumers the emotional benefits of healthy living - increased energy, strength and self-esteem - and the simplicity and healthiness of its program.~~

~~Self-Directed Low-Carb Consumers.~~ ~~We identify self-directed low-carb consumers as those consumers not interested in a directed, programmatic~~share educational information through our brand websites to explain each brand’s approach to ~~weight management, but who rather are interested in low-carbohydrate and low-sugar principles. These~~nutrition, teaching consumers are generally of the view that lowering carbohydrate and sugar intake is a better, healthier way to eat and should result in weight loss and maintenance. Our primary message to these consumers is that we offer delicious low-carbohydrate food options to provide better choices for snacking and meals. Atkins emphasizes appetite appeal and a more generalized theme of controlling carbohydrate and sugar consumption rather than weight management.

~~Education and Consumer Knowledge~~

~~We believe the first step in expanding our consumer base and growing our business is educating consumers on the benefits of the Atkins approach to eating and teaching them~~ how to make smarter food ~~choices. In~~choices and the nutritional qualities of our products. We also provide access to consumer service representatives to answer questions and educate consumers on nutrition, new products and developments.

For both brands, in order to facilitate awareness and knowledge of the health benefits of a low-carbohydrate, low-sugar and ~~protein rich~~protein-rich eating approach, ~~and spread knowledge of what we believe are the dangers of a carbohydrate rich diet,~~ we have established a variety of marketing and advertising strategies to connect with consumers, including digital marketing and social media platforms, television broadcast and streaming advertising celebrity endorsements and free online consumer tracking, management and facilitation tools. We find that the more consumers know about the science behind the Atkins approach to nutritious eating, the more likely they are to rebalance their nutrition away from carbohydrates.

~~Celebrity Endorsements~~

~~We utilize celebrity partnerships to increase consumer awareness of our products and serve~~ as ~~real-life motivational and inspirational success stories. Rob Lowe is currently our official brand spokesperson,~~well as a follower of the Atkins nutritional approach for many years. Atkins has also partnered with other celebrities, such as Lauren Alaina and Alyssa Milano, who publicly attribute their weight loss to Atkins’ products and programs. By actively supporting Atkins’ products and nutritional approach, these celebrities serve as a valuable resource contemporizing the Atkins brand, educating consumers, encouraging them to learn more about Atkins and building brand awareness.

~~Television Advertising~~

~~In addition to digital marketing~~celebrity and social media influencer endorsements.

For both brands, we ~~also engage in television advertising. Atkins specifically uses television as a means~~have built large consumer followings. Beyond the core historic consumers for each of our brands, we believe there is significant opportunity to ~~encourage~~increase household penetration for our products by expanding our marketing, product offerings and educational efforts to consumers who are focused more ~~consumers to learn about Atkins, share success stories and increase consumer awareness regarding the benefits of low-carbohydrate and low-sugar eating approaches.~~generally on long-term healthy living.

In the ~~fifty-three week period~~fifty-two weeks ended August ~~31, 2019,~~28, 2021, approximately ~~39%~~66% of ~~Atkins’ U.S.~~ Selling and marketing expenses were spent on ~~television advertising.~~advertising costs.

~~Atkins’ Tools~~

We maintain a dynamic arsenal of complimentary educational, nutritional and weight management tools, including a mobile app and tracker, carb counter, meal plans and shopping lists. We also maintain discussion boards and groups on the Atkins website and social media platforms to keep our consumers inspired, motivated, connected and informed.

~~Mobile App.~~ The Atkins mobile app allows consumers to search, track and plan their meals on their mobile phone or tablet. The app includes a comprehensive food search, which helps consumers find nutritional information for grocery items, restaurant meals, and Atkins-friendly recipes and products. The recently upgraded meal tracker allows consumers to track net carbs consumed based on their specific program. The progress tracker allows consumers to record their weight, body measurements and exercise to track weight loss to date and proximity to their goal weight. In addition, the mobile app includes over 1,000 recipes, making it simple to find and prepare low-carbohydrate and low-sugar meals.

~~Carb Counter~~. On Atkins’ website, Atkins offers a user-friendly guide to count carbohydrates. The Carb Counter tracks hundreds of different foods to assist consumers in tracking their daily carb intake. Specifically, the Carb Counter focuses on net carbs that effect blood sugar.

~~Meal Plans & Shopping Lists~~. Whether looking to cook or preferring grab-and-go, Atkins offers meal plans that fit a plethora of lifestyles. These meal plans are easily downloaded from Atkins’ website. These meal plans outline what consumers should eat throughout the day, including snacks.

~~Discussion Boards and Groups~~. Atkins maintains discussion boards on its website so that its consumers can connect with Atkins professionals and other members of the Atkins community. The discussion boards allow consumers to engage with Atkins nutrition professionals to receive advice and encouragement. Groups, also available on the website, facilitate support and encouragement among consumers and allow them to connect with one another and share their interests and goals. There are over 100 groups that a consumer may join, such as “Vegetarians on Atkins,” “Atkins Newbies” and “Continuing to Lose Weight”. A consumer may even start his or her own group.

~~Digital Marketing and Social Media~~

~~We dedicate a sizeable portion of our marketing and advertising spend to digital marketing channels. We maintain a registered domain at~~ ~~www.atkins.com~~, which serves as the primary source of information regarding Atkins’ products. In fiscal 2019, Atkins had approximately 9 million new visitors to its website, based on internal tracking. The Atkins website is used as a platform for consumer testimonials and success stories, and as a means to communicate simple nutrition choices that we believe can deliver a healthy holistic lifestyle and sustainable weight management.

We use social media platforms extensively for online collaboration like iPhone and Android smartphone apps, Facebook, Instagram and Twitter. These platforms are fundamentally changing the way we engage with our consumers and allow Atkins to directly reach desirable target demographics, such as millennials.

~~Facebook.~~ We maintain an Atkins Facebook page, which we use to facilitate consumer services, distribute brand information and news, and publish videos and pictures promoting the brand. We also conduct regular contests and giveaways. As of October 2019, Atkins had approximately 829,000 Facebook followers.

~~Instagram~~. We maintain an Atkins Instagram account, @atkinsnutritionals, which we use as motivational, inspirational and aspirational publishing, and as an authentic representation of low-carb lifestyles. We frequently publish consumer success stories, and conduct regular contests for our consumers. As of October 2019, Atkins had approximately 75,000 Instagram followers.

~~Twitter~~. We maintain an active Atkins Twitter account, @atkinsinsider, which we use to disseminate trending news and information, as well as to publish short format tips, tricks and hacks. We also engage in chats with success stories, and conduct regular contests for our consumers. As of October 2019, Atkins had approximately 41,000 Twitter followers.

Product Innovation

A portion of our sales is driven by new products, and as a result, we believe innovation is, and will continue to be, an important component of our business. We take a deliberate approach to new product development, focusing on enhancing existing products, innovating flavor and form varieties, and expanding into adjacent snacking products. Our innovation model is designed to respond to competitive demands, with a primary focus on enhancing the quality and flavor of our products while simplifying composition and reducing the number of ingredients to meet consumer demands for cleaner labels.

Our innovation strategy is based on ongoing research into consumers’ healthy lifestyle and nutritional needs. We pride ourselves on knowing our consumers and developing products that meet their needs. ~~The average Atkins consumers purchases about 45 servings per year with multi-year consumers purchasing nearly 95 servings annually.~~ Providing variety in snacking options to our consumers is an important strategy in our product innovation. New flavors, textures and snacking formats ~~like our new peppermint patties,~~ are important to meeting consumer needs.

Management believes that an important component of meeting ~~consumers'~~consumers’ nutritional needs is a focus on evolving current products and creating new products with cleaner and fewer ingredients. Accordingly, we are committed to continually finding new and innovative formulations to reduce the number of ingredients in our products, as well as using “better-for-you” ingredients like nuts, fiber and whey protein, while continually improving taste and quality.

We maintain an in-house research and development team as well as market research and consumer insight capabilities. Through our research and development ~~lab~~labs in El Segundo, California and Louisville, Colorado, we control ~~the brand’s~~our brands’ innovations and product formulations from the ground up. By developing new products, prototypes and adjacencies in-house, we facilitate our core competencies in product innovation, and enhance our speed to market.

In addition, as part of our innovation process, we collaborate with nationally recognized third-party flavor ~~houses~~providers and product development firms for new product development and then conduct our own proprietary consumer research to identify and improve upon new product concepts. We plan to continue ~~to conduct~~conducting extensive consumer research ~~in order~~ to develop successful new products including product flavor and concept testing, marketing and trend analysis, and consumer prototype testing.

Management also believes the fragmented snacking category presents ~~a substantial~~an opportunity for consolidation and the opportunity to build, through disciplined acquisitions, a leading platform in the nutritional snacking ~~space and broader food category.~~space. As a leader in nutritious snacking, management believes we have the unique capability to leverage our operating platform and customer relationships to expand beyond ~~the Atkins brand.~~our current brands. Our experienced management team has deep expertise in brand building to expand the business into additional brands and products in the nutritional snacking segment. Simply Good Foods is actively seeking to identify and evaluate new acquisition opportunities to complement ~~the Atkins platform, as evidenced by~~ our ~~pending acquisition of Quest,~~existing portfolio, and sees significant opportunity for growth and synergies in complementary adjacent snacking categories such as sports/active and adult nutritional snacks, salty snacks and protein snacks, as well as in the “better-for-you” eating space.

Intellectual Property

We own numerous domestic and international trademarks and other proprietary rights that are important to our business. Depending upon the jurisdiction, trademarks are valid ~~as long as~~if they are used in the regular course of trade and/or their registrations are properly maintained. We believe the protection of our trademarks, copyrights, patents, domain names, trade dress and trade secrets are important to our success. We aggressively protect our intellectual property rights by relying on a combination of watch services and trademark, copyright, patent, trade dress and trade secret laws, and through the domain name dispute resolution system. ~~Atkins domain name is~~ ~~www.atkins.com, which has traffic of approximately 9 million new visitors in 2019 based on internal estimates.~~ We also own virtually all of the recipes and specifications to our products.

Competition

We compete primarily with nutritional snacking brands in large retail and e-commerce environments. The nutritional snacking industry is fragmented and highly competitive and includes a number of diverse competitors.

Our identified branded competitors include, but are not limited to, CLIF Bar, KIND bars, Special K, Boost, Slimfast, Muscle Milk, ONE bar, Pure Protein, Premier Nutrition and thinkThin. On August 21, 2019, we announced that we entered into a definitive agreement to acquire Quest, a healthy, lifestyle food brand. See “Recent Developments” for additional information on the Acquisition.

think!. We believe that the principal competitive factors in the nutritional snacking and weight management industries are:

~~ingredients;~~

~~taste;~~

~~low-carbohydrate, low-sugar, protein rich versus other nutritional approaches;~~

~~convenience;~~

•brand awareness and loyalty among consumers;

•ingredients;

•taste;

•low-carbohydrate, low-sugar, protein-rich versus other nutritional approaches;

•convenience;

•media spending;

•product variety and packaging; and

•access to retailer shelf space.

We believe that we currently compete effectively with respect to each of these factors. However, a number of companies in the nutritional snacking and weight management industry have greater financial resources, more comprehensive product lines, broader market presence, longer standing relationships with distributors and suppliers, longer operating histories, greater distribution capabilities, stronger brand recognition, and greater marketing resources than we have.

Supply Chain

We operate an asset-light business model. For the manufacture of our products, we subcontract with contract manufacturers, and as a result, our operations are highly flexible and require minimal capital expenditure. The supply chain for our international business also uses exclusively contract ~~manufacturers, and is completely separate from our North American supply chain, which is described below.~~manufacturers.

U.S. Supply Chain. The majority of our products are shipped directly to one central warehouse for the Atkins brand and one for the Quest brand, each of which is a leased warehouse managed by athe same third-party logistics ~~provider who then distributes products~~provider. We are in the process of combining most of our warehouse operations into a newly constructed larger warehouse facility. We intend to ~~customers.~~keep one of our original warehouses for a portion of our distribution needs. A substantial portion of our inventory is shipped directly to our retailers from these centers by the same third-party logistics provider. Most of our remaining customers pick-up their orders at our distribution centers and make their own arrangements for delivery to their fulfillment network. For certain customers, RTD shakes are shipped directly from the

contract manufacturer to the ~~customer's location. In addition,~~customers’ locations. We believe our use of demand forecasting and vendor-managed inventory systems ~~enable~~enables us to meet shipping demands, ensure timely delivery of orders and offer service levels to our customers.

Sourcing. The principal ingredients to manufacture our products include chocolate and other coatings, dairy, proteins, soy, and nuts. Our packaging supplies consist of flexible film, cartons, tetra paper, and corrugate. All of our core ingredients are purchased according to rigorous standards to assure food quality and safety. These core ingredients are generally available in adequate quantities from ~~suppliers.~~several suppliers, and to date, core ingredient supplies have largely not been affected by the supply chain challenges related to the COVID-19 pandemic. We ~~visit~~competitively bid with major suppliers to source competitively priced, quality ingredients and packaging that meet our standards. ~~We manage actively the cost of some~~For certain ingredients ~~including~~such as milk protein concentrate, whey proteins, chocolate coatings, some nuts, soy crisps, and liquid soy, we establish direct purchasing agreements with suppliers, under which our contract manufacturers source ingredients to produce finished products. We also actively manage the cost of our packaging needs, such as ~~well as packaging—~~corrugated, film, printed boxes, and tetra ~~paper.~~cartons.

Manufacturing. We rely on contract manufacturers to manufacture our products. The contract manufacturers schedule and ~~purchase~~receive ingredient and packaging inventory ~~independently,~~ according to parameters set in their contracts and forecasts we provide. As noted above, some ingredients and packaging are purchased by our contract manufacturers pursuant to framework contracts we have with the applicable suppliers. Our contract manufacturers are regularly audited by third parties and are required to follow rigorous food safety guidelines. We believe our contract manufacturers have capacity to meet our anticipated supply needs, although ~~short term~~short-term high demand can cause disruptions. We monitor both near-term and long-term capacity as well as fulfillment rates and overall performance of our manufacturing partners and qualify alternate suppliers as needed. ~~We receive~~In general, we purchase finished products from our contract manufacturers, which includes all packaging and ingredients used, as well as an agreed-upon tolling charge for each item produced. These finished products are then shipped directly to our distribution ~~center in Greenfield, Indiana,~~centers, or shipped directly from the contract manufacturer to the customer, in the case of RTDs to select customers.

U.S. Storage. We ~~have one leased~~lease three distribution ~~center~~centers, all in Greenfield, Indiana, referred to collectively as the Distribution ~~Center,~~Centers, where we store finished goods. ~~The Distribution Center has approximately 423,000~~We utilize over 1.35 million square feet of floor ~~space.~~space among our Distribution Centers. Over time, we expect to exit one of the currently operating Distribution Centers once the new facility is fully operational.

Distribution. For the majority of our customers, our logistics provider distributes the finished goods via truckloads from our Distribution ~~Center,~~Centers, which first flow through regional terminals. At the terminals, our orders are consolidated with other ~~customer orders.~~companies’ products being shipped to the customer. The finished goods are then distributed to retailer distribution centers. The regular weekly shipments and consolidation have ~~diminished~~reduced our costs. ~~We manage approximately 44% of outgoing volume by writing~~For some products, we ship directly to customers from our ~~own orders~~contract manufacturer through a third-party logistics provider. In some instances, the customer will arrange to ~~retailer distribution centers and maintaining agreed~~pick-up directly finished ~~goods inventory levels at their warehouse(s). For direct to customer shipments, a third party logistic provider ships~~ products ~~directly~~ from ~~a contract manufacturer's warehouse to the customer.~~our Distribution Centers.

Retailers. We have a wide variety of customers across the mass, food, club, drug, and e-commerce channels. ~~Walmart Stores, Inc. (“Walmart”),~~A substantial majority of our sales are generated from a limited number of retailers. Sales to our largest ~~customer represents~~retailer, Walmart, represented approximately ~~44%~~31% of consolidated sales ~~of Simply Good Foods~~ in fiscal year ~~2019,~~2021, of which approximately ~~36%~~23% is through their mass retail channel and approximately 8% is through their Sam’s club ~~channel.~~and e-commerce channels. Sales to our next largest retailer, Amazon, represented approximately 12% of consolidated sales in fiscal year 2021. No other customer represents more than 10% of sales. For additional information, please see the risk factor “We rely on sales to a limited number of retailers for a substantial majority of our net sales, and losing one or more such retailers may materially harm our business. In addition, we maintain “at will” contracts with these retailers, which do not require recurring or minimum purchase amounts of our products.”

E-Commerce. We aim to ensure that our consumers may access our brand in the way that best suits their lifestyles by offering ~~home delivery~~online ordering of ~~Atkins’ snacking~~our products. We sell our products on Atkins.com, questnutrition.com as well as ~~Amazon.com.~~Amazon.com, which all deliver our products directly to the location designated by the consumer.

Food Safety and Quality. Food safety and quality is a top priority, and we dedicate substantial resources to ensure that consumers receive safe, high quality food products. Our products are manufactured in facilities that have programs and controls in place regarding

consistent quality and food safety. Product attributes such as taste, aroma, texture, and appearance are regularly monitored. Good Manufacturing Practices and comprehensive food safety programs are designed to produce a safe, wholesome product. Our suppliers are required to have equally robust processes in place and confirm their compliance with product specifications with Letters of Guaranty and Certificates of Analysis for shipments of core ingredients to be used in our products. Finally, random samples of finished goods are regularly sent to a third-party laboratory for testing.

International. Our products are also sold outside North America. Our top international sales are in ~~Australia/~~Australia and New ~~Zealand and the Netherlands.~~Zealand. For the ~~fifty-three week period~~fifty-two weeks ended August ~~31, 2019,~~28, 2021, international net sales represented approximately 5%4.5% of total net sales. Our international supply chain is ~~self-sufficient and~~ run by a lean team solely focused on international operations. Similar to U.S. operations, international operations utilize contract manufacturers for products, and distributors for ~~distributions~~distribution and sales.

~~Atkins’ History~~

Information Technology

~~Dr. Robert Atkins was a cardiologist who discovered that by controlling carbohydrate consumption in his patients, he could improve their health~~

We rely heavily on information systems for management of our supply chain, inventory, payment of obligations, collection of cash, human capital management, financial tools and ~~lower their weight. In 1972, Dr. Robert Atkins published a book, Dr. Atkins’ Diet Revolution,~~other business processes and ~~became famous as a diet doctor. He also founded a company, Atkins Nutritionals,~~procedures. Our ability to ~~make food products that were consistent with his approach to nutrition. In the 1980s~~manage our business functions efficiently and 1990s, Atkins was a doctor-founded diet brand. In 2003, Atkins was acquired from its founders by Parthenon and Goldman Sachs Capital Partners. In the early 2000s, in the midst of the low carb diet craze, the Atkins diet was the most popular diet in the U.S., with one in two adults claiming they were using Atkins for weight loss. The strategy pursued by management at that time was to proliferate the brand into numerous categories within the grocery store. Atkins launched over 1,100 SKUs in categories such as bread, macaroni and cheese, ice cream, barbecue sauce, vitamin pills and supplements—categories well beyond Atkins’ core snacking business. As the low carb diet craze faded, those new products did not sell well and Atkins filed for bankruptcy in 2005. Atkins re-emerged from bankruptcy in 2006, and was subsequently acquired by North Castle Partners in 2007. Atkins repositioned the business based on two strategies: a focus on core, programmatic weight loss consumers, and a focus on healthy snacking. Roark Capital Group (“Roark“) acquired Atkins in 2010. Atkins positioned the brand to consumers as a balanced approach to weight loss and upgraded the snacking products to improve taste and expand flavor variety. Supported by increased levels of marketing spending, those strategies resulted in eight consecutive years of U.S. Multi-Outlet Retail Sales growth. In 2016, Atkins evolved its strategy to continue to target consumers focused on a programmatic approach to weight loss, while adding a new target consumer: self-directed low carbohydrate consumers, who prefer a self-directed, rather than programmatic, approach to nutrition. Since 2016, Atkins has purposefully and thoughtfully broadened the brand, positioning toward a healthier approach to eating, while focusingeffectively depends significantly on the ~~core snacking business.~~reliability and capacity of these systems. We have instituted controls, including information technology governance controls that are intended to protect our computer systems and our information technology systems and networks. We also have business continuity plans that attempt to anticipate and mitigate failures. However, we cannot control or prevent every potential technology failure, adverse environmental event, third-party service interruption or cybersecurity risk.

We increasingly rely on cloud computing and other technologies that result in third parties holding significant amounts of customer, consumer or employee information on our behalf.

Except for limited information voluntarily submitted by users of our website, we typically do not collect or store consumer data or personal information. However, third-party providers, including our licensees, contract manufacturers, e-commerce contractors and third-party sellers may do so. The website operations of such third parties may be affected by reliance on other third-party hardware and software providers, technology changes, risks related to the failure of computer systems through which these website operations are conducted, telecommunications failures, data security breaches and similar disruptions.

Segments

Our ~~business is~~operations are organized ~~around~~into two operating segments, Atkins and Quest, which are aggregated into one ~~reportable~~reporting segment ~~that sells its branded nutritional foods~~due to similar financial, economic and ~~snacking products designed around~~operating characteristics. The operating segments are also similar in the ~~nutrition principles~~following areas: (a) the nature of the ~~Atkins eating approach, which is based on our go-to-market strategies,~~products; (b) the ~~objectives~~nature of the ~~business~~production processes; (c) the methods used to distribute products to customers, (d) the type of customer for the products, and ~~how our chief decision maker,~~(e) the ~~CEO, monitors operating performance and allocates resources.~~

~~Employees~~

~~As of August 31, 2019, we had approximately 150 employees, including international employees. None~~nature of the ~~U.S. employees are represented by a labor union or are covered by a collective bargaining agreement. We believe that we have good relations with our employees.~~regulatory environment.

Regulation and Compliance

Along with contract manufacturers, brokers, distributors, ingredients and packaging suppliers, Simply Good Foods is primarily subject to laws and regulations in the United States promulgated by federal, state and local government authorities. In the United States, the federal agencies governing the manufacture, distribution and advertising of products ~~including,~~include, among others, the U.S. Federal Trade Commission (“FTC”), the U.S. Food and Drug Administration (“FDA”), the United States Department of Agriculture (“USDA”), the U.S. Environmental Protection Agency, and the Occupational Safety and Health Administration, ~~and~~in addition to similar state and local agencies. Under various statutes, these agencies ~~among other things,~~ prescribe the requirements and establish the standards for quality and safety and regulate marketing and advertising to consumers. ~~Certain of~~In certain circumstances, these agencies ~~in certain circumstances,~~ must not only approve products, but also review the manufacturing processes and facilities used to produce these products before they can be marketed in the United States.

Simply Good Foods is subject to labor and employment laws, laws governing advertising, privacy laws, safety regulations and other laws, including consumer protection regulations that regulate retailers or govern the promotion and sale of merchandise. Our operations, and those of our contract manufacturers, distributors, and suppliers, also are subject to various laws and regulations relating to environmental protection and worker health and safety matters. We continue to monitor their development and our compliance.

Food-Related Regulations

As a manufacturer and distributor of food products, we are subject to ~~a number of~~several food-related regulations, including the Federal Food, Drug and Cosmetic Act and regulations promulgated thereunder by the FDA. This comprehensive regulatory framework governs the manufacture (including composition and ingredients), labeling, packaging and safety of food in the United States. The FDA:

•regulates manufacturing practices for foods through its current good manufacturing practices regulations;

•specifies the standards of identity for certain foods, including many of the products we sell; and

•prescribes the format and content of certain information required to appear on food product ~~labels~~labels.

We are subject to the Food Safety Modernization Act of 2011, which, among other things, mandates that the FDA adopt preventative controls to be implemented by food facilities in order to minimize or prevent hazards to food safety. We are subject to numerous other federal, state and local regulations involving such matters as the licensing and registration of manufacturing facilities, enforcement by government health agencies of standards for our products, inspection of our facilities and regulation of our trade practices in connection with the sale of food products.

Additionally, because of the ingredients in our Quest pizza products we are subject to the rules and regulations promulgated by the USDA, including the Federal Meat Inspection Act. The USDA regulates certain aspects of food safety, quality, and nutritional labeling of most meat, poultry, and egg products.

Environmental Regulations

We are subject to various state and federal environmental laws, regulations and directives, including the Food Quality Protection Act of 1996, the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Federal Insecticide, Fungicide and Rodenticide Act and the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended. Governments may in the future implement new laws, regulations and directives aimed to meet certain climate change goals and objectives which could affect our business operations as they relate to ingredient and packaging procurement.

We believe that we are in material compliance with ~~the~~existing environmental regulations applicable to our business. We do not expect the cost of our continued compliance with existing environmental regulations to have a material effect on our capital expenditures, earnings, cash flows or competitive position in the foreseeable future. In addition, any asset retirement obligations are not material.

Labeling Regulations

We are subject to various labeling requirements with respect to our products at the federal, state and local levels. At the federal level, the FDA ~~has~~and USDA have authority to review product labeling, and the FTC may review labeling and advertising materials, including online and television advertisements, to determine if advertising materials are misleading. We are also subject to various state and local consumer protection laws. We believe we are in material compliance with all labeling laws and regulations applicable to our business.

Human Capital Resources

As of August 28, 2021, our workforce consisted of 263 employees who are largely based in an office or in research and development (“R&D”) lab locations. Of that total, approximately 91% of our employees were located in the United States, and the rest were located in Canada, Europe, Australia and New Zealand. Of our total employees, 118 employees were engaged in marketing and sales, 76 were engaged in R&D, operations and quality, and 69 were engaged in administration. Of our total employees, 18 employees were hourly and 245 were salaried. No employees were covered by a collective bargaining agreement.

Mission, Vision and Values. Our vision is to lead the nutritious snacking movement with trusted brands that offer a variety of convenient, innovative, great-tasting, better-for-you snacks and meal replacements. Our mission is to empower healthy lives through smart and satisfying nutrition. Our values, Act with Integrity, Lead with Innovation, Succeed through Interdependence, Be Empowered, and Bring Passion Every Day, are critical to our success in fulfilling our mission and vision.

Training & Development. Training and development is critical to our mission’s success, helps our employees grow their career, and is one way we attract, motivate and retain our employees. We regularly host “Be Empowered” sessions for employees, which are educational classes and networking opportunities that teach our nutrition philosophy and our different business functions. To develop effective and empowered leaders, we host a series of trainings and informational sessions through our program called the Leadership Playbook.

Our Commitment to Diversity, Equity & Inclusion (“DE&I”). We recognize the importance of a diverse, equitable and inclusive culture for our employees and its effect on our ability to achieve our mission, so we have made commitments to track and improve our performance in each of these areas. In July 2021, our Board of Directors formed a Corporate Responsibility & Sustainability committee that has been tasked, among other things, with overseeing human capital resources and DE&I initiatives.

As of August 28, 2021, approximately 53% of our employees globally were women and approximately 35% of U.S. employees were minorities. Approximately 17% of our Board of Directors were female, and approximately 8% were minorities.

To improve diversity, equity and inclusion, we committed to interviewing diverse candidates for open corporate leadership positions and require every employee to attend preventing discrimination and harassment training.

In January 2021 we completed a pay equity audit to confirm equity in our pay practices. We have committed to complete a pay equity audit every year to ensure no inequities arise. Further, we post every open position or promotional opportunity in the United States that is not confidential and include the job’s pay range to provide pay transparency. This practice provides every qualified candidate an opportunity to apply while also knowing the range of pay for the role.

We regularly ask our employees to respond to pulse surveys to gather feedback on topics ranging from organization changes to overall engagement and inclusion. This allows us to keep track of employee engagement and sentiment over time and use this information to inform our strategy and actions to continue to grow and improve. We have also committed to summarizing results for each survey and providing responses quickly after surveys close.

In August 2021, management hired a third-party DE&I consultant to provide guidance and best practice inputs to our management and the Corporate Responsibility & Sustainability Committee of the Board of Directors, as we continue to make progress on our DE&I efforts.

Total Rewards. The health, satisfaction and security of our employees and their families are important to us and an important part of reaching our organization's goals. We offer total rewards packages that include valuable and competitive compensation and benefit plans. These programs reflect our commitment to attracting and retaining top talent and keeping our staff healthy and secure. Our compensation philosophy is to pay for performance, and we do so through a mix of base salary, annual short-term incentive and long-term incentive.

We understand that each employee's situation is unique, so we offer benefits that can be shaped and molded by each employee to fit their family's needs. Our current benefits vary by region, but generally include medical, dental and vision insurance, 401(k) retirement plan, savings accounts, life and disability coverage, and other voluntary benefits. We also offer time-off benefits including vacation time, flexible vacation for exempt positions, sick leave, and parental leave.

Volunteering and Philanthropy. For decades, we have had a compelling social purpose – to help ensure all Americans have access to sound nutritional guidance to positively affect overall health outcomes. This began with the book Dr. Atkins’ Diet Revolution published in 1972 and continues today with our advocacy for improved dietary guidelines and initiatives to educate consumers and empower them to make the right nutritional choices for themselves and their families.

Further, we do our part to stem food insecurity through volunteering opportunities and company philanthropy, including cash and product donations. We encourage our employees to volunteer, and as such have organized days of volunteering in the cities where our largest workforces reside. In Denver, Colorado our team volunteered for the Food Bank of the Rockies, and in El Segundo, California our team volunteered for the Los Angeles Mission.

Also this year, we announced participation in Walmart’s “Fight Hunger. Spark Change.” campaign. For each purchase of participating Simply Good Foods products at Walmart from April 5 – May 3, 2021, we donated the monetary equivalent of at least one meal to Feeding America. Through this program, Simply Good Foods secured at least 500,000 meals for Feeding America.

Employee Safety and Wellbeing Measures. In response to the COVID-19 pandemic, as of August 28, 2021, we have implemented a number of measures to keep our employees safe:

•All office positions have been encouraged to work from home, and we will not require employees to return to the office until January 2022, at the earliest.

•In our offices and R&D labs where employees are required to physically access special tools or resources to work, we follow local, state and federal guidance by:

◦Requiring face coverings

◦Instituting social distancing guidelines

◦Requiring all employees to complete an online health screening daily

◦Increasing our deep-cleaning schedule

◦Making hand sanitizer readily available.

•We limit travel to only business-essential travel.

Further, we also strongly encourage employees to receive a COVID-19 vaccine, so we offered an incentive and lottery once the vaccines were widely available to all adults in the United States. The portion of our employees who got the vaccine exceeded each of the local and state-level vaccination rates of the general population.

We acknowledge the importance of balance in our employees’ lives to their overall wellbeing, so we offer our employees time off benefits described above to recharge. We also had two company-wide mental health days and encourage employees to take extra time away from work to recharge late December 2020. We adopted an employee-friendly parental leave policy in 2020.

To address the fatigue that results from working on a computer from home all day, we implemented “Zoom-free” Wednesday afternoons so employees can step away from their computers to focus on other responsibilities. When we do return to our offices regularly, it is our current intention that Mondays and Fridays will be flexible remote workdays.

Available Information

We file annual, quarterly and current reports, proxy statements and other information with the SEC.

We file our reports with the SEC electronically through the SEC’s Electronic Data Gathering, Analysis and Retrieval (“EDGAR”) system. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding companies that file electronically with the SEC through EDGAR. The address of this Internet site is www.sec.gov.

We also make available free of charge through our website at www.thesimplygoodfoodscompany.com our Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. We are not, however, including the information contained on our website, or information that may be accessed through links on our website, as part of, or incorporating such information by reference into, this Report.

Item 1A. Risk ~~Factors~~Factors.

An investment in our securities involves a high degree of risk. You should carefully consider the risks described below before making an investment decision. Our business, prospects, financial condition or operating results could be harmed by any of these risks, ~~as well as~~and other risks not currently known to us or that we currently consider immaterial. The trading price of our securities could decline due to any of these risks, and, as a result, you may lose all or part of your investment.

Risks Related to our Business

Pandemics, epidemics or disease outbreaks, such as the novel coronavirus (“COVID-19”), may disrupt our business, including, among other things, consumption and trade patterns, our supply chain and production processes, each of which could materially affect our operations, liquidity, financial condition and results of operations.

The actual or perceived effects of a disease outbreak, epidemic, pandemic or similar widespread public health concern, such as COVID-19, could negatively affect our operations, liquidity, financial condition and results of operations. The COVID-19 outbreak situation continues to remain dynamic and subject to rapid and possibly material change, including but not limited to changes that may materially affect the operations of our customers and supply chain partners, which ultimately could cause material negative effects on our business and results of operations.

Pandemics, epidemics or disease outbreaks may affect demand for our products because quarantines or other government restrictions on movement may cause erratic consumer purchase behavior. Governmental or societal impositions of restrictions on public gatherings, especially if prolonged, may have adverse effects on in-person traffic to retail stores and, in turn, our business. Even the perceived risk of infection or health risk may adversely affect traffic to our store-based retail customers and, in turn, our business, liquidity, financial condition and results of operations, particularly if any self-imposed or government-imposed restrictions are in place for significant time.

The spread of pandemics, epidemics or disease outbreaks such as COVID-19 may also disrupt our third-party business partners’ ability to meet their obligations to us, which may negatively affect our operations. These third parties include those who supply our ingredients, packaging, and other necessary operating materials, contract manufacturers, distributors, and logistics and transportation services providers. Ports and other channels of entry may be closed or operate at only a portion of capacity, as workers may be prohibited or otherwise unable to report to work and means of transporting products within regions or countries may be limited for the same reason. Because of the COVID-19 outbreak, transport restrictions related to quarantines or travel bans have been put in place and global supply may become constrained, each of which may cause price increases or shortages of certain ingredients and raw materials used in our products and/or we may experience disruptions to our operations. Further, our contract manufacturers’ ability to manufacture our products may be impaired by any material disruption to their employee staffing, procurement, manufacturing, or warehousing capabilities because of COVID-19 or similar outbreaks.

Our results of operations depend on, among other things, our ability to maintain and increase sales volume with our existing customers, to attract new consumers and to provide products that appeal to consumers at prices they are willing and able to pay. Our ability to implement our innovation, advertising, display and promotion activities designed to maintain and increase our sales volumes on a timely basis may be negatively affected because of modifications to retailer shelf reset timing or retailer pullback on in-store display and promotional activities during the COVID-19 outbreak or similar situations. Retailers may also alter their normal inventory receiving and product restocking practices during pandemics, epidemics or disease outbreaks such as COVID-19, which may negatively affect our business.

Workforce limitations and travel restrictions resulting from pandemics, epidemics or disease outbreaks such as COVID-19 and related government actions may affect many aspects of our business. If a significant percentage of our workforce cannot work or we are not able to visit our contract manufacturers’ locations, including because of illness, travel or government restrictions in connection with pandemics or disease outbreaks, our operations may be negatively affected. In addition, pandemics or disease outbreaks could cause a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect customers’ and consumers’ demand for our products.

Adverse and uncertain economic conditions, such as decreases in per capita income and level of disposable income, increased unemployment or a decline in consumer confidence because of the COVID-19 outbreak or similar situations, could have an adverse effect on distributor, retailer and consumer demand for our products. Consumers may shift purchases to lower-priced or other perceived value offerings during economic downturns. Prolonged unfavorable economic conditions, including because of COVID-19 or similar outbreaks, and any resulting recession or slowed economic growth, may have an adverse effect on our sales and profitability.

Our consolidated results of operations for the full fiscal year ended August 28, 2021 were affected by changes in consumer shopping and consumption behavior due to COVID-19. After the brief pantry loading period in mid-March 2020, the nutritional snacking

category saw a marked decrease in shopping trips (particularly in the mass channel) and fewer usage occasions. This affected our portable and convenient on-the-go products, especially the protein bar portion of our business for both our Atkins and Quest brands. As home confinement restrictions began to ease, shopping trips steadily improved from their lowest point and consumer interest in weight management and active nutrition began to improve.

While our Quest brand has outperformed its portion of the nutritious snaking segment, the performance of our Atkins brand, which is part of the weight management portion of the market, has remained slower due to the temporary softer interest in weight management for consumers, fewer on-the-go usage occasions and weakness in the mass channel that has experienced reduced shopper traffic during the pandemic.

We believe these effects on consumer demand and shopping behavior as a result of the COVID-19 outbreak may continue in the future, including as a result of new virus variants and the effect these variants have on consumer shopping patterns, until a more consistent return of shopping behavior to more normal patterns and our brand benefits of active nutrition and weight management drive more better-for-you snacking and meal replacement usage occasions.

Our efforts to manage and mitigate these factors may be unsuccessful, and the effectiveness of these efforts depends on factors beyond our control, including the duration and severity of any pandemic, epidemic or disease outbreak, and third party actions taken to contain its spread and mitigate public health effects.

We may not be able to compete successfully in the highly competitive nutritional snacking industry.

The nutritious snacking industry is large and intensely competitive because consumers are seeking simpler, “cleaner” and more sustainable eating habits. Our business is committed to providing people a more nutritious way to eat. As a result, we compete in the nutritional snacking industry, which is included in the general snack foods industry. Competitive factors in the nutritional snacking industry include product quality, taste, brand awareness among consumers, nutritional content, simpler and less processed ingredients, innovation of “on-trend” snacks, variety of snacks offered, grocery aisle placement, access to retailer shelf space, price, advertising and promotion, product packaging and package design. We compete in this market against numerous multinational, regional and local companies principally based on ~~the basis of~~ our low-carb, low-sugar and protein-rich nutritional content, product taste and quality, our brand recognition and loyalty, marketing, advertising, price and the ability to satisfy specific consumer dietary needs. An increasing focus on healthy and simpler products in the marketplace will likely increase these competitive pressures within the category in future periods.

Our competitors in the nutritional snacking industry include companies selling branded weight loss programs who support these programs by offering a wide variety of diet foods, meal replacement bars, shakes and nutritional supplements, and through the promotion of weight loss and weight management approaches such as keto, paleo, vegan, gluten free, vegetarian and others. Views towards nutritional snacking, weight loss and management, and other nutritional approaches, are cyclical and trendy, ~~in nature,~~ with constantly changing consumer perceptions. ~~In addition to~~Besides remaining competitive through the quality of our products, consumer perceptions of the Atkins’ weight management approach and the effectiveness of a low-carb, low-sugar and protein-rich eating approach for both our Atkins and Quest brands must continue to be viewed favorably, or our business and reputation may be materially and adversely affected. IfFor the Atkins brand, if other weight management approaches become more popular, or are generally perceived to be more effective, ~~than Atkins,~~ we may not be able to compete effectively.

Some of our competitors have resources substantially greater ~~resources~~ than uswe have and sell brands that may be more widely recognized than ~~Atkins’~~our brands. Our current and potential competitors may offer products similar to our products, a wider range of products than we offer, and may offer such products at more competitive prices than we do. Local or regional markets often have significant additional competitors, many of whom offer products similar to ours and may have unique ties to regional or national retail chains. Any increased competition from new entrants into the nutritional snacking industry or any increased success by existing competition could ~~result in~~cause reductions in our sales, require us to reduce our prices, or both, which could materially and adversely affect our business, financial condition and results of operations.

If we fail to ~~successfully~~ implement our growth strategies ~~on a~~successfully, timely, ~~basis,~~ or at all, our ability to increase our revenue and operating profits could be materially and adversely affected.

Our future success depends, ~~in large part,~~largely, on our ability to implement our growth strategies ~~effectively, including expanding on a low-carb, low-sugar and protein-rich healthy lifestyle while maintaining the traditional identity of our brands and the loyalty of our consumers.~~effectively. However, we may ~~not succeed~~fail in implementing our growth strategies effectively. In December 2016, we transitioned from a single- to multibrand portfolio with the acquisition of Wellness Foods and the addition of the SimplyProtein® brand. On August 21, 2019, we announced our pending acquisition of Quest, a healthy lifestyle food company. We expect to ~~focus~~continue focusing on nutritional snacking ~~in the future~~ and intend to add additional brands to our product portfolio. As a multi-brand business, we face increased complexities and greater uncertainty ~~with respect to~~regarding consumer trends and demands than as a single-brand business. Our ability to expand successfully ~~expand~~ our nutritional snacking brands and other growth strategies depends on, among other things, our ability to identify, and successfully cater to, new demographics and consumer trends, develop new and innovative products, identify and acquire additional product lines and businesses, secure shelf space in grocery stores, wholesale clubs and other retailers, increase consumer awareness of our brands, enter into distribution and other strategic arrangements with third-party retailers and other potential distributors of our products, and compete with numerous other companies and products.

In addition, regarding our Atkins brand, self-directed lifestyle consumers of products may have different preferences and spending habits than the consumers of traditional weight loss products. We may not ~~be successful~~succeed in reaching and maintaining the loyalty of new Atkins consumers to the same extent, or at all, as we have with our historical Atkins consumers. We ~~believe traditional weight management consumers actively on the Atkins program represent approximately 15% of our current consumer base whereas the remaining approximate 85% of our consumers are~~may also not ~~currently on a program diet. We may not be successful~~succeed in evolving our advertising and other efforts to appeal to our target consumers for both ~~our branded weight loss consumers~~Atkins and ~~self-directed healthy lifestyle consumers.~~Quest.

If we ~~are unable to~~cannot identify and capture new audiences and demographics for all our brands, our ability to ~~successfully~~ integrate additional brands successfully will be adversely affected. Accordingly, we may not be able to successfully implement our growth strategies, expand the number of our brands, or continue to maintain growth in our sales at our current rate, or at all. If we fail to implement our growth strategies or if we invest resources in growth strategies that ultimately prove unsuccessful, our sales and profitability may be negatively affected, which would materially and adversely affect our business, financial condition and results of operations.

If we do not continually enhance our brand recognition, increase distribution of our products, attract new consumers to our brands and introduce new and innovative products, either on a timely basis or at all, our business may suffer.

The nutritional snacking industry is subject to rapid and frequent changes in consumer demands. Because consumers are constantly seeking new products and strategies to achieve their healthy eating goals, our success relies heavily on our ability to continue to develop and market new and innovative products and extensions. New product sales represent a growing and important portion of our net sales. ~~In order to~~To respond to new and evolving consumer demands, achieve market acceptance and keep pace with new nutritional, weight management, technological and other developments, we must constantly introduce new and innovative products into the market, some of which may not be accepted by consumers, may be sent to market prematurely or may not be consistent with our quality and taste standards. Accordingly, we may not ~~be successful~~succeed in timely developing, introducing ~~on a timely basis~~ or marketing any new or enhanced products. If we ~~are unable to~~cannot commercialize new products, our revenue may not grow as expected, which would materially and adversely affect our business, financial condition and results of operations.

We rely on sales to a limited number of retailers for a substantial majority of our net sales, and the loss of one or more such retailers may materially harm our business. In addition, we maintain “at will” contracts with these retailers, which do not require recurring or minimum purchase amounts of our products.

A substantial majority of our sales are generated from a limited number of retailers. Sales to our largest retailer, Walmart, represented approximately 44% of sales in fiscal year 2019, of which approximately 36% is through their mass retail channel and approximately 8% is through their club channel. Although the composition of our significant retailers may vary from period-to-period, we expect that most of our net sales will continue to come from a relatively small number of retailers for the foreseeable future. These retailers may take actions that affect us for reasons that we cannot anticipate or control, such as their financial condition, changes in their business strategy, operations, the perceived quality of their products and the introduction of competing products. There can be no assurance that Walmart or our other significant retailers will continue to purchase our products in the same quantities or on the same terms as in the past, particularly as increasingly powerful retailers continue to demand lower pricing.

Our retailers typically do not provide us with firm, long- or short-term volume purchase commitments. As a result, we could have periods with little to no orders for our products while still incurring costs related to workforce maintenance, marketing, general corporate and debt service. Furthermore, despite operating in different channels, our retailers sometimes compete for the same consumers. As a result of actual or perceived conflicts resulting from competition, retailers may take actions that negatively affect us. We may not be able to find new retailers to supplement our revenue in periods when we experience reduced purchase orders, or recover fixed costs as a result of experiencing reduced purchase orders. Periods of reduced purchase orders could materially and adversely affect our business, financial condition and results of operations.

Conversely, from time to time, we may experience unanticipated increases in orders of our products from these retailers that can create supply chain problems and may result in unfilled orders. If we are unable to meet increased demand for our products, our reputation with these retailers may be harmed. Unanticipated fluctuations in product requirements could result in fluctuations in our results from quarter-to-quarter. Consolidation among retailers may also materially and adversely affect our results. An increase in the concentration of our sales to large customers may negatively affect our profitability due to the effect of higher shelving fees and reduced volumes of product sold. Furthermore, as retailers consolidate or account for a larger percentage of our sales, they may reduce the number of branded products they offer in order to accommodate private label products and pressure us to lower the prices of our products.

Our growth may be limited if we ~~are unable to add~~cannot maintain or secure additional shelf or retail space for our products.

Our results depend on our ability to drive revenue growth, in part, by expanding the distribution channels for our products. Our ability to do so may be limited by an inability to secure new retailers, or ~~additional~~maintain or add shelf and retail space for our products. Shelf and retail space for nutritional snacks is limited and subject to competitive and other pressures. There can be no assurance that retailers will provide sufficient, or any, shelf space, nor that online retailers will provide online access to their platform to enable us to meet our growth objectives.

Consumers generally shop for the Atkins brand first, then choose a product form or flavor second. Our ability to shelf all of Atkins' products together in one area at retail enables consumers to easily find all Atkins products when shopping. Any customer decision to separate Atkins products by form (bars, RTDs or confections) could negatively affect our business.

Unattractive shelf placement ~~and~~or pricing may put our products at a disadvantage compared to those of our competitors. Even if we obtain shelf space or preferable shelf placement, our new and existing products may fail to achieve the sales expectations set by our retailers, potentially causing these retailers to remove our products from their shelves. Additionally, an increase in the quantity and quality of ~~private-label~~private label products in the product categories in which we compete could create more pressure for shelf space and placement for branded products within each such category, which could materially and adversely affect our sales.

Changes in consumer preferences, perceptions of ~~healthy food~~certain nutritional snacking products and discretionary spending may negatively affect our brand loyalty and net sales, and materially and adversely affect our business, financial condition and results of operations.

We focus on products that are, or that we believe are, perceived to have positive effects on health, and compete in a market that relies on innovation and evolving consumer preferences. The ~~processed~~packaged food industry in general, and the nutritional snacking industry in particular, is subject to changing consumer trends, demands and preferences. Emerging science, ~~Atkins’~~and our nutritional approach and theories regarding health are constantly evolving. Products or methods of eating once considered healthy may become disfavored by consumers, scientifically disproven or no longer be perceived as healthy.

Trends within the food industry change often and our failure to anticipate, identify or react to changes in these trends could, among other things, lead to reduced consumer demand, shelf or retail space and price reductions, and could materially and adversely affect our business, financial condition and results of operations. Additionally, certain ingredients used in our products may become negatively perceived by consumers, resulting in reformulation of existing products to remove such ingredients, which may negatively affect the taste or other qualities of our products. Factors that may affect consumer perception of healthy products include dietary trends and attention to different nutritional aspects of foods, concerns regarding the health effects of specific ingredients and nutrients, trends away from specific ingredients in products and increasing awareness of the environmental and social effects of product production.

Consumer perceptions of the nutritional profile of ~~low-carb, low-sugar~~our products and ~~protein-rich~~related eating practices ~~and products~~ may shift, and consumers may no longer perceive products with fewer carbohydrates, higher levels of protein, higher levels of fat and additional fiber as ~~healthy.~~healthy or needed to achieve personal weight management, wellness, or fitness goals. Adverse messaging in the media, including social media, or within certain influencer communities, relating to the marketing of weight management products or programs may adversely affect the overall consumer

impression of certain of our products, programs or brands, which may materially and adversely affect our business. Approaches regarding weight management and healthy lifestyles are the subject of numerous studies and publications, often with differentiating views and opinions, some of which may be adverse to us. Conflicting scientific information on what constitutes good nutrition, diet fads ~~and~~or other weight loss trends may also materially and adversely affect our ~~business from time to time.~~business. Our success depends, in part, on our ability to anticipate the tastes and dietary habits of consumers and other consumer trends and to offer products with marketing messaging that appeal to their needs and preferences on a timely and affordable basis. A change in consumer discretionary spending, due to economic downturn or other reasons may also materially and adversely affect our sales, and our business, financial condition and results of operations.

If the perception of our brands or organizational reputation are damaged, our consumers, distributors and retailers may react negatively, which could materially and adversely affect our business, financial condition and results of operations.

We believe we have built our reputation on the efficacy of our nutritional approach, and the high-quality flavor and nutritional content of our food. We must protect and expand on the value of our brands to continue to be successful in the future. Any incident that erodes consumer affinity for our brands could significantly reduce our value and damage our business. For example, negative third-party reports regarding the Atkins or Quest nutritional approach or the quality of our food, whether accurate or not, may adversely affect consumer perceptions, which could cause the brand’s value to suffer and adversely affect our business. In addition, if we are forced, or voluntarily elect, to recall certain products, including frozen foods or licensed products over which we may not have full quality control, the public perception of the quality of our food may be diminished. We may also be adversely affected by news or other negative publicity, regardless of accuracy, regarding other aspects of our business, such as public health concerns, illness, safety, security breaches of confidential consumer or employee information, employee related claims relating to alleged employment discrimination, health care and benefit issues or government or industry findings about our retailers, distributors, manufacturers or others across the industry supply chain.

As part of our marketing initiatives, we have contracted with certain public figures to market and endorse our products. While we maintain specific selection criteria and are diligent in our efforts to seek out public figures that resonate genuinely and effectively with our consumer audience, the individuals we choose to market and endorse our products may fall into negative favor with the general public. Because our consumers may associate the public figures that market and endorse our products with us, any negative publicity on behalf of such individuals may cause negative publicity about us and our products. This negative publicity could materially and adversely affect our brands and reputation and our revenue and profits.

Negative information, including inaccurate information, about us on social media may harm our reputation and brand, which could have a material and adverse effect on our business, financial condition and results of operations.

There has been a marked increase in the use of social media platforms and similar channels that provide individuals with access to a broad audience of consumers and other interested persons. The availability of information on social media platforms is virtually immediate, as is its effect. Many social media platforms immediately publish the content their subscribers and participants post, often without filters or checks on accuracy of the content posted. The opportunity for dissemination of information, including inaccurate information, is potentially limitless. Information about our business and/or products may be posted on such platforms at any time. Negative views regarding our products and the efficacy of the Atkins or Quest eating approaches have been posted on various social media platforms, may continue to be posted in the future, and are out of our control. Regardless of their accuracy or authenticity, such information and views may be adverse to our interests and may harm our reputation and brand. The harm may be immediate without affording an opportunity for redress or correction. Ultimately, the risks associated with any such negative publicity cannot be eliminated or completely mitigated and may materially and adversely affect our business, financial condition and results of operations.

We must expend resources to maintain consumer awareness of our brands, build brand loyalty and generate interest in our products. Our marketing strategies and channels will evolve, and our programs may or may not be successful.

To remain competitive and expand and keep shelf placement for our products, we may need to increase our marketing and advertising spending to maintain and increase consumer awareness, protect and grow our existing market share or promote new products, which could affect our operating results. Substantial advertising and promotional expenditures may be required to maintain or improve our brand’s market position or to introduce new products to the market, and participants in our industry are increasingly engaging with non-traditional media, including consumer outreach through social media and web-based communications, which may not prove successful. An increase in our marketing and advertising efforts may not maintain our current reputation or lead to increased brand awareness. Moreover, we may not maintain current awareness of our brand due to any potential fragmentation of our marketing efforts as we continue to focus on a low-carb, low-sugar and protein-rich nutritional approach for everyday snacking consumers. In addition, as media becomes increasingly fragmented, with consumers viewing media more and more through a variety of different vehicles and devices such as mobile devices and online streaming and less from traditional broadcast and cable television outlets, our costs to reach a comparable number of target consumers for our advertising activities has increased. We also consistently evaluate our product lines to determine whether to discontinue certain products. Discontinuing product lines may increase our profitability but could reduce our sales and hurt our brands, and a reduction in sales of certain products could cause a reduction in sales of other products. The discontinuation of product lines may have an adverse effect on our business, financial condition and results of operations.

If we cannot maintain or increase prices, our margins may decrease.

We rely in part on price increases to offset cost increases and improve the profitability of our business. Our ability to maintain prices or effectively implement price increases, including our price increase effective in September 2021, may be affected by several factors, including competition, effectiveness of our marketing programs, the continuing strength of our brand, market demand and general economic conditions, including inflationary pressures. During challenging economic times, consumers may be less willing or able to pay a price premium for our branded products and may shift purchases to lower-priced or other value offerings, making it more difficult for us to maintain prices and/or effectively implement price increases. In addition, our retail partners and distributors may pressure us to rescind price increases we have announced or already implemented, whether through a change in list price or increased promotional activity. Moreover, we do not yet know how consumers will react to the increase in retail prices for our products resulting from the price increase effective in September 2021. If we cannot maintain or increase prices for our products or must increase promotional activity, our margins may be adversely affected. Furthermore, price increases generally result in volume losses, as consumers purchase fewer units. If such losses are greater than expected or if we lose distribution due to a price increase, our business, financial condition and results of operations may be materially and adversely affected.

Our geographic focus makes us particularly vulnerable to economic and other events and trends in North America.

We operate mainly in North America and, therefore, are particularly susceptible to adverse regulations, economic climate, consumer trends, market fluctuations, including commodity price fluctuations or supply shortages of key ingredients, and other adverse events in North America. The concentration of our businesses in North America could present challenges and may increase the likelihood that an adverse event in North America would disproportionately materially and adversely affect product sales, financial condition and operating results.

Risks Related to our Operating Model

Ingredient and packaging costs are volatile and may rise significantly, which may negatively affect the profitability of our business.

We negotiate the prices for large quantities of core ingredients, such as soy, nuts, dairy, protein, fiber and cocoa, and packaging materials. Several ingredients are manufactured outside of the United States. Costs of ingredients and packaging are volatile and can fluctuate due to conditions difficult to predict, including global competition for resources, fluctuations in currency and exchange rates, weather conditions, natural or man-made disasters, consumer demand and changes in governmental trade and agricultural programs. Continued volatility in the prices of the core ingredients and other supplies we purchase could increase our cost of goods sold and reduce our profitability.

We do not use hedges for availability of any core ingredients. Any material upward movement in core ingredient pricing could negatively affect our margins if we cannot pass these costs on to our consumers, or our sales if we are forced to increase our prices. If we are unsuccessful in managing our ingredient and packaging costs, if we cannot increase our prices to cover increased costs or if such price increases reduce our sales volumes, then such increases in costs will materially and adversely affect our business, financial condition and results of operations.

Certain of our core ingredient contracts have minimum volume commitments that could require purchases without matching revenue during weaker sales periods. Future core ingredient prices may be affected by new laws or regulations, tariffs, suppliers’ allocations to other purchasers, interruptions in production by suppliers, natural disasters, volatility in the price of crude oil and related petrochemical products and changes in exchange rates.

We rely on sales to a limited number of retailers for a substantial portion of our net sales and losing one or more such retailers may materially harm our business. In addition, we maintain “at will” contracts with these retailers, which do not require recurring or minimum purchase amounts of our products.

A substantial majority of our sales are generated from a limited number of retailers. Sales to our largest retailer, Walmart, represented approximately 31% of consolidated sales in fiscal year 2021, of which approximately 23% is through their mass retail channel and approximately 8% is through their Sam’s club and e-commerce channels. Sales to our next largest retailer, Amazon, represented approximately 12% of consolidated sales in fiscal year 2021. Although the composition of our significant retailers may vary from period-to-period, we expect that most of our net sales will continue to come from a relatively small number of retailers for the foreseeable future. These retailers may take actions that affect us for reasons we cannot anticipate or control, such as their financial condition, changes in their business strategy or operations, including their inability to meet their labor or other human capital needs, the perceived quality of their products and introducing competing products. There can be no assurance that Walmart, Amazon or our other significant customers will continue to purchase our products in the same quantities or on the same terms as in the past, particularly as increasingly powerful retailers continue to demand lower pricing.

Our retailers rarely provide us with firm, long- or short-term volume purchase commitments. As a result, we could have periods with little to no orders for our products while still incurring costs related to workforce maintenance, marketing, general corporate and debt service. Furthermore, despite operating in different channels, our retailers sometimes compete for the same consumers. Because of actual or perceived conflicts resulting from competition, retailers may take actions that negatively affect us. We may not find new retailers to supplement our revenue in periods when we experience reduced purchase orders or recover fixed costs because of experiencing reduced purchase orders. Periods of reduced purchase orders could materially and adversely affect our business, financial condition and results of operations.

Conversely, occasionally, we may experience unanticipated increases in orders of our products from these retailers that can create supply chain problems and may cause unfilled orders. If we cannot meet increased demand for our products, our reputation with these retailers, and ultimately our consumers, may be harmed. Unanticipated fluctuations in product requirements could cause fluctuations in our results from quarter-to-quarter. Consolidation among retailers may also materially and adversely affect our results. An increase in the concentration of our sales to large customers may negatively affect our profitability due to the effect of higher shelving fees and reduced volumes of product sold. Furthermore, as retailers consolidate or account for a larger percentage of our sales, they may reduce the number of branded products they offer to accommodate private label products and pressure us to lower the prices of our products.

The loss of, a disruption in or an inability to efficiently operate our fulfillment network could materially and adversely affect our business, financial condition and results of operations.

For our U.S. operations, we utilize ~~a single~~ distribution ~~center~~centers in Greenfield, Indiana. ~~Substantially all~~A substantial portion of our inventory is shipped directly to our retailers from ~~this center~~these centers by a third-party ~~operator.~~logistics provider. Most of our other customers pick-up their orders at our distribution centers and make their own arrangements for delivery to their fulfillment network. A small percentage of our customers are shipped certain products directly from a co-manufacturing location. We rely significantly on the orderly operation of ~~this center.~~our distribution centers. If complications arise, ~~or if the~~a particular facility is damaged or destroyed or if either our third-party logistics partners or our customers who transport their own orders to their fulfillment network are not able to meet their labor or other human capital needs for delivery drivers or other warehouse personnel, our ability to deliver inventory ~~on a~~ timely ~~basis~~ will be significantly impaired, which could materially and adversely affect our ~~business.~~business as a result of lost consumer purchases at retail thereby negatively affecting our results of operations.

We rely on a single-sourced logistics provider for distribution and product shipments in the United ~~States.~~States from our distribution centers. Our utilization of delivery services for shipments is subject to risks that may affect the ability to provide delivery services that adequately meet our shipping needs including increases in fuel prices, labor shortages, employee strikes and inclement weather. ~~From time to time,~~Occasionally, we may change third-party transportation providers and we could face logistical difficulties that could adversely affect deliveries. In addition, we could incur costs and expend resources in connection with such change and fail to obtain terms as favorable as those we currently receive.

Disruptions at our distribution ~~facility~~facilities or in our operations due to natural or man-made disasters, pandemics (such as COVID-19) or other disease outbreaks, fire, flooding, terrorism or other catastrophic events, system failure, labor shortages or disagreements or shipping problems may ~~result in~~cause delays in the delivery of products to ~~retailers.~~retailers and could materially and adversely affect our results of operations.

Shortages or interruptions in the supply or delivery of our core ingredients, packaging and products could materially and adversely affect our operating results as we rely on a limited number of third-party suppliers to supply our core ingredients and a limited number of contract manufacturers to manufacture our products.

The core ingredients used in manufacturing our products include soy, nuts, dairy, protein, fiber and cocoa. We rely on a limited number of ~~third party~~third-party suppliers to provide these core ingredients, a portion of which are international companies. There may be a limited market supply of any of these core ingredients. Any disruption in supply could materially and adversely affect our business, particularly our profitability and margins. Events that adversely affect our suppliers could impair our ability to obtain core ingredient inventories in the quantities desired. Such events include problems with our suppliers’ businesses, finances, labor relations, ability to import core ingredients, delays in imported core ingredients being processed through local customs, costs, production, insurance, reputation and weather conditions during growing, harvesting or shipping, including flood, drought, frost and earthquakes, ~~as well as~~and man-made disasters or other catastrophic occurrences.

Our financial performance depends ~~in large part~~largely on our ability to purchase core ingredients and packaging in sufficient quantities at competitive prices. We may not have continued supply, pricing or exclusive access to core ingredients and packaging from these sources. Any of our suppliers could discontinue or seek to alter their relationships with us. We may be adversely affected by increased demand for our specific core ingredients, a reduction in overall supply of required core ingredients, suppliers raising their prices, and increases in the cost of packaging and distributing core ingredients. Additionally, we may be adversely affected if suppliers stop selling to us or enter into arrangements that impair their abilities to provide us with core ingredients.

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We rely on a limited number of contract manufacturers to manufacture our products. If any of these manufacturers experience adverse effects on their businesses, including an inability to fulfill their labor or ~~are unable to~~other human capital needs, or cannot continue manufacturing our products at required levels, on a timely basis, or at all, we may be forced to seek other manufacturers. In addition, our contract manufacturers independently contract for and obtain some of the core ingredients in our products. If contract manufactures are unable to obtain these core ingredients in the required amounts or at all, their ability to manufacture our products would be adversely affected. It could take a significant period of time to locate and qualify such alternative production sources. We may not be able to identify and qualify new manufacturers ~~in a timely manner~~promptly that could allocate sufficient capacity to meet our requirements, which could adversely affect our ability to make timely deliveries of products. Furthermore, we may be unable to negotiate pricing or other terms with existing or new manufacturers as favorable as what we currently enjoy. In addition, there is no guarantee a new manufacturing partner could accurately replicate the production process and taste profile of the existing products. In addition, from time to time we determine to select new contract manufacturers to replace existing manufacturers to produce our products. If the transition to a new manufacturer is delayed or we experience product quality or other production issues during the transition to the new manufacturer, our business may be negatively affected until these issues are resolved.

Our contract manufacturers also independently contract for and obtain certain ingredients and packaging for our products. If we or our contract manufactures cannot obtain certain ingredients or packaging in the required amounts or at all, their ability to manufacture our products could be adversely affected. It could take a significant period of time to locate and qualify such alternative production sources or alternative ingredients or packaging, which could materially and adversely affect our business.

If having our products available for consumer purchase through our retail customers is disrupted as a result of an inability to obtain ingredients or packaging, labor challenges at our logistics providers or our contract manufacturers, or if our customers experience delays in stocking our products in their locations, we will experience a reduction in sales at retail and our results of operations could be material and adversely affected.

We are subject to risks associated with protection of our trade secrets by our ~~third party~~third-party contract manufacturers. If our contract manufacturers fail to protect our trade secrets, either intentionally or unintentionally, our business, financial condition and results of operations could be materially and adversely affected. If we experience significant increased demand for our products, or need to replace an existing supplier or manufacturer, additional supplies of core ingredients or manufacturers may not be available when required, on acceptable terms, or at all. Suppliers may not allocate sufficient capacity to meet our requirements, fill our orders ~~in a timely manner~~promptly or meet our strict quality standards. Even if our existing suppliers and manufacturers ~~are able to~~can expand their capacities to meet our needs, or we ~~are able to~~can find new sources of core ingredients or new contract manufacturers, we may encounter delays in production, inconsistencies in quality and added costs. We may not be able to pass increased costs onto the consumer immediately, if at all, which may decrease or eliminate our profitability. Any manufacturing and/or supply disruptions or cost increases could have an adverse effect on our ability to meet consumer demand for our products and result in lower net sales and profitability, both in the short and ~~long term.~~long-term.

We rely in part on our third-party contract manufacturers to maintain the quality of our products. The failure or inability of contract manufacturers to comply with the specifications and requirements of our products could ~~result in~~cause product recall, which could materially and adversely affect our reputation and subject us to significant liability should the consumption of any of our products cause or be claimed to cause illness or physical harm. Our products implicate risks such as product contamination, spoilage, product tampering, other adulteration, mislabeling and misbranding. We also license certain products that contain our brand and logo, but which are produced and distributed exclusively by third parties of whom we have limited control. In addition, we do not own our warehouse ~~facility,~~facilities, but ~~it is~~they are managed for us by a third party.

Under certain circumstances, we may be required to, or may voluntarily, recall or withdraw products. For example, in 2016, as part of a larger national recall by several other food companies, we incurred losses, including recalled product ~~as a result~~because of potential contamination from an ingredient supplied to one of our third-party manufacturers at their manufacturing center. While the contamination did not result in any consumer illness, and we were indemnified for a substantial portion of our direct product loss, the recall may have damaged the reputation for our ~~reputation.~~Atkins brand. A widespread recall or withdrawal of any of ours or ~~Atkins’~~ licensed products may negatively and significantly affect our sales and profitability and could ~~result in~~cause significant losses depending on the costs of the recall, destruction of product inventory, reduction in product availability, and reaction of competitors and consumers.

We may be subject to claims or lawsuits, including class actions lawsuits (which could significantly increase any adverse settlements or rulings) or judgments, resulting in liability for actual or claimed injuries, illness or death. Any of these events could materially and adversely affect our business, financial condition and results of operations. Whether or not a product liability claim or lawsuit is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused illness or physical harm could adversely affect our reputation with existing and potential consumers and our corporate and brand image. Moreover, claims or liabilities of this sort might not be covered by our insurance or by any rights of indemnity or contribution ~~that~~ we may have against others. We maintain product liability insurance in an amount ~~that~~ we believe to be adequate. However, we may incur claims or liabilities for which we are not insured or that exceed ~~the amount of~~ our insurance coverage. A product liability judgment against us or a product recall could materially and adversely affect our business, financial condition and results of operations.

~~Ingredient and packaging costs are volatile and may rise significantly, which may negatively affect the profitability of our business.~~

We negotiate the prices for large quantities of core ingredients, such as soy, nuts, dairy and cocoa, as well as packaging materials. A number of these ingredients are manufactured and packaged in Canada. Costs of ingredients and packaging are volatile and can fluctuate due to conditions that are difficult to predict, including global competition for resources, fluctuations in currency and exchange rates, weather conditions, natural or man-made disasters, consumer demand and changes in governmental trade and agricultural programs. Continued volatility in the prices of the core ingredients and other supplies we purchase could increase our cost of goods sold and reduce our profitability.

We do not use hedges or forward pricing for availability of any core ingredients. As such, any material upward movement in core ingredient pricing could negatively affect our margins if we are not able to pass these costs on to our consumers, or our sales if we are forced to increase our prices. If we are not successful in managing our ingredient and packaging costs, if we are unable to increase our prices to cover increased costs or if such price increases reduce our sales volumes, then such increases in costs will materially and adversely affect our business, financial condition and results of operations.

Certain of our core ingredient contracts have minimum volume commitments that could require purchases without matching revenue during weaker sales periods. Future core ingredient prices may be effected by new laws or regulations, tariffs, suppliers’ allocations to other purchasers, interruptions in production by suppliers, natural disasters, volatility in the price of crude oil and related petrochemical products and changes in exchange rates.

Severe weather conditions and natural disasters such as fires, floods, droughts, hurricanes, earthquakes and tornadoes can affect crop supplies, manufacturing facilities and distribution activities, and negatively affect the operating results of our business.

Severe weather conditions and natural disasters, such as fires, floods, droughts, frosts, hurricanes, earthquakes, tornadoes, insect infestations and plant disease, may affect the supply of core ingredients used to make food products, or may prevent the manufacturing or distribution of food products by third parties. In addition, a number of these weather conditions could become even more severe over time as a result of the effects of climate change. Competing manufacturers might be affected differently by weather conditions and natural disasters, depending on the location of their sources of supplies and manufacturing or distribution facilities. If supplies of core ingredients available to us are reduced, we may not be able to find enough supplemental supply sources on favorable terms, which could materially and adversely affect our business, financial condition and results of operations. In addition, because we rely on few contract manufacturers for a majority of our manufacturing needs and because our distribution warehouses are all in a ~~single distribution warehouse,~~similar geographic location, adverse weather conditions could affect the ability for those third-party operators to manufacture and store our products.

If our brands or reputation are damaged, the perception of our brand by our consumers, distributors and retailers may diminish, which could materially and adversely affect our business, financial condition and results of operations.

We believe we have built our reputation on the efficacy of our nutritional approach, as well as the high quality flavor and nutritional content of our food. We must protect and expand on the value of our brands to continue to be successful in the future. Any incident that erodes consumer affinity for our brands could significantly reduce our value and damage our business. For example, negative third-party reports regarding the Atkins nutritional approach or the quality of our food, whether accurate or not, may adversely affect consumer perceptions, which could in turn cause the Atkins’ brand value to suffer and adversely affect our business. In addition, if we are forced, or voluntarily elect, to recall certain products, including frozen foods or licensed products over which we may not have full quality control, the public perception of the quality of our food may be diminished. We may also be adversely affected by news or other negative publicity, regardless of accuracy, regarding other aspects of our business, such as public health concerns, illness, safety, security breaches of confidential consumer or employee information, employee related claims relating to alleged employment discrimination, health care and benefit issues or government or industry findings concerning our retailers, distributors, manufacturers or others across the industry supply chain.

As part of our marketing initiatives, we have entered into agreements with certain public figures to market and endorse our products. While we maintain specific selection criteria and are diligent in our efforts to seek out public figures that resonate genuinely and effectively with our consumer audience, the individuals we choose to market and endorse our products may fall into negative favor with the general public. Because our consumers may associate the public figures that market and endorse our products with us, any negative publicity on behalf of such individuals may result in negative publicity about us and our products. This negative publicity could materially and adversely affect our brand and reputation as well as our revenue and profits.

There has been a marked increase in the use of social media platforms and similar channels that provide individuals with access to a broad audience of consumers and other interested persons. The availability of information on social media platforms is virtually immediate, as is its effect. Many social media platforms immediately publish the content their subscribers and participants post, often without filters or checks on accuracy of the content posted. The opportunity for dissemination of information, including inaccurate information, is potentially limitless. Information concerning our business and/or products may be posted on such platforms at any time. Negative views regarding our products and the efficacy of the Atkins eating approach have been posted on various social media platforms, may continue to be posted in the future, and are out of our control. Regardless of their accuracy or authenticity, such information and views may be adverse to our interests and may harm our reputation and brand. The harm may be immediate without affording an opportunity for redress or correction. Ultimately, the risks associated with any such negative publicity cannot be eliminated or completely mitigated and may materially and adversely affect our business, financial condition and results of operations.

We believe that the Atkins nutritional approach is broadly known and followed in the United States and many other countries in which we operate. In order to remain competitive and expand and keep shelf placement for our products, we may need to increase our marketing and advertising spending to maintain and increase consumer awareness, protect and grow our existing market share or promote new products, which could affect our operating results. Substantial advertising and promotional expenditures may be required to maintain or improve our brand’s market position or to introduce new products to the market, and participants in our industry are increasingly engaging with non-traditional media, including consumer outreach through social media and web-based channels, which may not prove successful. An increase

in our marketing and advertising efforts may not maintain our current reputation, or lead to increased brand awareness. Moreover, we may be unable to maintain current awareness of our brand due to any potential fragmentation of our marketing efforts as we continue to focus on a low-carb, low-sugar and protein-rich nutritional approach for everyday snacking consumers. In addition, we consistently evaluate our product lines to determine whether or not to discontinue certain products. Discontinuing product lines may increase our profitability but could reduce our sales and hurt our brands, and a reduction in sales of certain products could result in a reduction in sales of other products. The discontinuation of product lines may have an adverse effect on our business, financial condition and results of operations.

~~If we are unable to maintain or increase prices, our margins may decrease.~~

We rely in part on price increases to offset cost increases and improve the profitability of our business. Our ability to maintain prices or effectively implement price increases may be affected by a number of factors, including competition, effectiveness of our marketing programs, the continuing strength of our brand, market demand and general economic conditions, including inflationary pressures. During challenging economic times, consumers may be less willing or able to pay a price premium for our branded products and may shift purchases to lower-priced or other value offerings, making it more difficult for us to maintain prices and/or effectively implement price increases. In addition, our retail partners and distributors may pressure us to rescind price increases that we have announced or already implemented, whether through a change in list price or increased promotional activity. If we are unable to maintain or increase prices for our products or must increase promotional activity, our margins may be adversely affected. Furthermore, price increases generally result in volume losses, as consumers purchase fewer units. If such losses are greater than expected or if we lose distribution due to a price increase, our business, financial condition and results of operations may be materially and adversely affected.

We intend to grow through acquisitions or joint ventures, and we may not successfully integrate, operate or realize the anticipated benefits of such business combinations.

As part of our strategic initiatives, we intend to pursue acquisitions or joint ~~ventures, such as our acquisition of Wellness Foods and the pending Acquisition of Quest, a healthy lifestyle food company.~~ventures. Our acquisition strategy is based on identifying and acquiring brands with products that complement our existing products and identifying and acquiring brands in new categories and new geographies ~~for the purpose of expanding~~to expand our platform of nutritional snacks and potentially other food products. Although we regularly evaluate multiple acquisition candidates, we cannot be certain that we ~~will be able to~~can successfully identify suitable acquisition candidates, negotiate acquisitions of identified candidates on favorable terms, or integrate acquisitions ~~that~~ we complete.

Acquisitions involve numerous risks and uncertainties, including intense competition for suitable acquisition targets, which could increase target prices and/or materially and adversely affect our ability to consummate deals on favorable terms, the potential unavailability of financial resources necessary to consummate acquisitions, the risk ~~that~~ we improperly value and price a target, the potential inability to identify all of the risks and liabilities inherent in a target company or assets notwithstanding our diligence efforts, the diversion of management’s attention from the day-to-day operations of our business and additional strain on our existing personnel, increased leverage resulting from the additional debt financing that may be required to complete an acquisition, dilution of our net current book value per share if we issue additional equity securities to finance an acquisition, difficulties in identifying suitable acquisition targets or in completing any transactions identified on sufficiently favorable terms and the need to obtain regulatory or other governmental approvals that may be necessary to complete acquisitions.

Any future acquisitions may pose risks associated with entry into new geographic markets, including outside the United States and our current international markets, distribution channels, lines of business or product categories, where we may not have significant prior experience and where we may not be as successful or profitable as we are in businesses and geographic regions where we have greater familiarity and brand recognition. Potential acquisitions may entail significant transaction costs and require a significant ~~amount of~~ management time and distraction from our core business, even where we ~~are unable to~~cannot consummate or decide not to pursue a particular transaction.

~~In addition to~~ Besides the risks above, even when acquisitions are completed, integration of acquired entities can involve significant difficulties. These include failure to achieve financial or operating objectives ~~with respect to~~regarding an acquisition, systems, operational and managerial controls and procedures, the need to modify systems or to add management resources, difficulties in the integration and retention of consumers or personnel and the integration and effective deployment of operations or technologies, amortization of acquired assets (which would reduce future reported earnings), possible adverse short-term effects on cash flows or operating results, integrating personnel with diverse backgrounds and organizational cultures, coordinating sales and marketing functions and failure to obtain and retain key personnel of an acquired business. Failure to manage these acquisition growth risks could have an adverse effect on our business.

Our insurance may not provide adequate levels of coverage against claims.

We believe that we maintain insurance customary for businesses of our size and type. However, there are losses we may incur that cannot be insured against or that we believe are not economically reasonable to insure. Such losses could have a material adverse effect on our business, financial condition and results of operations.

Loss of our key executive officers or other personnel, or an inability to attract and retain such management and other personnel, could negatively affect our business.

Our future success depends to a significant degree on the skills, experience and efforts of our key executive officers. The sudden loss of any of these executives’ services or our failure to appropriately plan for any expected key executive succession could materially and adversely affect our business and prospects, as we may not be able to find suitable individuals to replace them on a timely basis, if at all. Additionally, we also depend on our ability to attract and retain qualified personnel to operate and expand our business. If we fail to attract talented new employees, our business and results of operations could be negatively affected.

We may not be able to adequately protect our intellectual property and other proprietary rights that are material to our business.

Our ability to compete effectively depends in part upon protection of our rights in trademarks, trade dress, copyrights and other intellectual property rights we own or license. Our use of contractual provisions, confidentiality procedures and agreements, and trademark, copyright, unfair competition, trade secret and other laws to protect our intellectual property and other proprietary rights may not be adequate. We may not be able to preclude third parties from using our intellectual property regarding food or beverage products and may not be able to leverage our branding beyond our current product offerings. In addition, our trademark or other intellectual property applications may not always be granted. Third parties may oppose our intellectual property applications, or otherwise challenge our use of trademarks or other intellectual property. Third parties may infringe, misappropriate, or otherwise violate our intellectual property. Changes in applicable laws could lessen or remove the current legal protections available for intellectual property. Any legal action we may bring to protect our brand and other intellectual property could be unsuccessful, result in substantial costs and could divert management’s attention from other business concerns. A successful claim of trademark, copyright or other intellectual property infringement, misappropriation, or other violation against us could prevent us from providing our products or services or could require us to redesign or rebrand our products or packaging if we cannot license such third-party intellectual property on reasonable terms. Certain of our intellectual property licenses have fixed terms, and even for those that do not, we cannot guarantee all our intellectual property licenses will remain in effect indefinitely. Termination of intellectual property licenses granted by or to us could cause the loss of profits generated under such licenses. Any of the foregoing outcomes could materially and adversely harm our business, financial condition or results of our operations.

Any inadequacy, failure or interruption of our information technology systems may harm our ability to effectively operate our business, and our business is subject to online security risks, including security breaches and identity theft.

We rely heavily on information systems for management of our supply chain, inventory, payment of obligations, collection of cash, human capital management, financial tools and other business processes and procedures. Our ability to efficiently and effectively manage our business functions depends significantly on the reliability and capacity of these systems. Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss and outages, telecommunications failure or other catastrophic events and from internal and external security breaches, viruses and other disruptive problems. The failure of these systems to operate effectively, whether from maintenance problems, upgrading or transitioning to new platforms, or a breach in security of these systems, could result in interruptions or delays in our operations, reduce efficiency or negatively affect our operations. If our information technology systems fail and our redundant systems or disaster recovery plans are not adequate to address such failures, or if our business interruption or cyber-security insurance does not sufficiently compensate us for any losses that we may incur, our revenue and profits could be reduced, and the reputation of our brand and our business could be materially adversely affected. In addition, remediation of any problems with our systems could result in significant, unplanned expenses.

We have instituted controls, including information system governance controls that are intended to protect our computer systems and our information technology systems and networks. We also have business continuity plans that attempt to anticipate and mitigate failures. However, we cannot control or prevent every potential technology failure, adverse environmental event, third-party service interruption or cybersecurity risk.

Unauthorized users who penetrate our information security systems could misappropriate proprietary, employee, or consumer information. As a result, it may become necessary to expend additional amounts of capital and resources to protect against, or to alleviate, problems caused by unauthorized access. Data security breaches could cause damaged reputation with consumers and reduced demand for our products. Additional expenditures may not prove to be a timely remedy against breaches by unauthorized users who are able to penetrate our information security. Besides purposeful security breaches, the inadvertent transmission of computer viruses could adversely affect our computer systems and, in turn, harm our business.

We increasingly rely on cloud computing and other technologies that result in third parties holding significant amounts of customer, consumer or employee information on our behalf. There has been an increase over the past several years in the frequency and sophistication of attempts to compromise the security of these types of systems. If the security and information systems that we or our outsourced third-party providers use to store or process such information are compromised or if we, or such third parties, otherwise fail to comply with applicable laws and regulations, we could face litigation and the imposition of penalties that could adversely affect our financial performance. Our reputation as a brand or as an employer could also be adversely affected by these types of security breaches or regulatory violations, which could impair our ability to attract and retain qualified employees.

A significant number of states require that consumers be notified if a security breach results in disclosing their personal financial account or other information. Additional states and governmental entities are considering such “notice” laws. In addition, other public disclosure laws may require that material security breaches be reported. If we experience a security breach, and such notice or public disclosure is required in the future, our reputation and our business may be harmed.

If we or our third-party providers fail to maintain or protect our respective information technology systems and data integrity effectively, fail to implement new systems, update or expand existing systems, or fail to anticipate, plan for or manage significant disruptions to or compromises of systems involved in our operations, we could:

•lose existing customers;

•have difficulty preventing, detecting, and controlling fraud;

•have disputes with customers, suppliers, distributors or others;

•be subject to regulatory sanctions, including sanctions stemming from violations of the Health Insurance Portability and Accountability Act of 1996;

•suffer reputational harm, and

•incur unexpected costs to remediate any unauthorized access of our systems and implement protective measures against future attacks.

As a result of these possible outcomes we could incur increases in operating expenses and our results of operations could be materially and adversely affected. While we maintain insurance against losses related to unauthorized access to our systems, there can be no assurance our level of coverage will be sufficient to address the losses we sustain.

Regulatory Risks and Litigation Risks

All of our products must comply with federal, state and local regulations. Any non-compliance with the FDA, USDA or other applicable regulations could harm our business.

Our products must comply with various rules and regulations, including those regarding product manufacturing, food safety, required testing and appropriate labeling of our products. The FDA has not defined nutrient content claims regarding low-carbohydrates, but has not objected to using net carbohydrate information on food labels if the label adequately explains how the term is used so it would not be false or misleading to consumers. The FDA requires all carbohydrates per serving to be listed on the Nutrition Facts Panel (“NFP”) of a package. Besides the information on the NFP, we use the term “net carbohydrate” (or “net carbs”) on our existing product packaging to assist consumers in tracking the carbohydrates in that serving of food that effect their blood sugar (glucose) levels. We determine the number of net carbs in a serving by subtracting fiber, and sugar alcohols if any, from the actual number of carbohydrates listed on the NFP. Fiber and sugar alcohols can be subtracted from the carbohydrates because they minimally effect blood sugar levels. It is possible that FDA regulations and/or their interpretations may change related to, for example, definitions of certain of our core ingredients, such as fiber, labeling requirements for describing other ingredients or nutrients, such as sugar alcohols or protein, or disclosures of any ingredient labeled as genetically modified (“GMO”). As such, there is a risk that our products could become non-compliant with the FDA’s regulations, and any such non-compliance could harm our business.

In addition, if FDA or other regulations restrict us from labeling and marketing certain ingredients or product attributes, such as fiber or “net carb” count, we may not effectively reach our target demographics, promote what we believe to be the benefits of our products or communicate that our products are composed of what we consider to be low-carb, low-sugar and protein-rich ingredients.

We must rely on the contract manufacturers we engage to produce our products to maintain compliance with applicable regulatory requirements. Although we require our contract manufacturers to be compliant with regulatory requirements, we do not have direct control over such facilities. Failure of our contract manufacturers to comply with applicable regulation could have a material and adverse effect on our ability to sell our products to our customers and our results of operations.

Conflicts between state and federal law regarding definitions of our core ingredients, and labeling requirements, may lead to non-compliance with state and local regulations. For example, certain states may maintain narrower definitions of certain ingredients, and more stringent labeling requirements, of which we are unaware. Any non-compliance at the state or local level could materially and adversely affect our business, financial condition and results of operations.

Our advertising is regulated for accuracy, and if our advertising is determined to be false or misleading, we may face fines or sanctions.

Our advertising is subject to regulation by the FTC under the Federal Trade Commission Act, which prohibits dissemination of false or misleading advertising. In addition, the National Advertising Division of the Council of Better Business Bureaus, Inc., which we refer to as NAD, administers a self-regulatory program of the advertising industry to ensure truth and accuracy in national advertising.

NAD both monitors national advertising and entertains inquiries and challenges from competing companies and consumers. Should our advertising be determined to be false or misleading, we may have to pay damages, withdraw our campaign and possibly face fines or sanctions, which could have a material adverse effect on our sales and operating results.

Changes in the legal and regulatory environment could limit our business activities, increase our operating costs, reduce demand for our products or result in litigation.

Elements of our business, including the production, storage, distribution, sale, display, advertising, marketing, labeling, health and safety practices, transportation and use of many of our products, are subject to various laws and regulations administered by federal, state and local governmental agencies in the United States, and the laws and regulations administered by government entities and agencies outside the United States in markets in which our products or components thereof, such as core ingredients and packaging, may be made, manufactured or sold. These laws, regulations and interpretations thereof may change, sometimes dramatically, because of a variety of factors, including political, economic or social events. Such factors may include changes in:

•food and drug laws (including FDA regulations);

•laws related to product labeling, advertising and marketing practices;

•laws and programs restricting the sale and advertising of certain of our products;

•laws and programs aimed at reducing, restricting or eliminating ingredients present in certain of our products;

•laws and programs aimed at reducing, restricting or eliminating ingredients or packaging present in certain of our products to meet government objectives to combat climate change or certain labor practices;

•laws and programs aimed at discouraging the consumption of products or ingredients or altering the package or portion size of certain of our products;

•state consumer protection and disclosure laws;

•taxation requirements, including the imposition or proposed imposition of new or increased taxes or other limitations on the sale of our products; competition laws;

•anti-corruption laws, including the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), and the UK Bribery Act of 2010 (the “Bribery Act”);

•economic sanctions and anti-boycott laws, including laws administered by the U.S. Department of Treasury, Office of Foreign Assets Control (“OFAC”) and the European Union (“EU”);

•laws relating to export, re-export, transfer, tariffs and import controls, including the Export Administration Regulations, the EU Dual Use Regulation and the customs and import laws administered by the U.S. Customs and Border Protection and other local governments where are contract manufacturers are located;

•employment laws;

•privacy laws;

•laws regulating the price we may charge for our products; and

•farming and environmental laws.

New laws, regulations or governmental policies and their related interpretations, or changes in any of the foregoing, including taxes, tariffs or other limitations on the sale of our products, ingredients in our products or commodities used in the production of our products, may alter the environment in which we do business and, therefore, may affect our operating results or increase our costs or liabilities. In addition, if we fail to adhere to such laws and regulations, we could be subject to regulatory investigations, civil or criminal sanctions, and class action litigation, which has increased in the industry in recent years.

Litigation or legal proceedings could expose us to significant liabilities and have a negative effect on our reputation.

Occasionally, we may be party to various claims and litigation. We evaluate these claims and litigation, assess the likelihood of unfavorable outcomes, and estimate, if possible, potential losses when appropriate. We may establish reserves, as appropriate based on the information ~~please see “Risks~~available to management at the time. These assessments and estimates involve a significant amount of management judgment and may differ materially from actual outcomes.

There is an additional risk that potential litigation may lead to adverse publicity, consumer confusion, distrust and additional legal challenges for us. Should we become subject to related or additional unforeseen lawsuits, including claims related to our products, labeling or advertising, which may vary under state and federal rules and regulations, consumers may avoid purchasing our products or seek alternative products, even if the basis for the claims against us is unfounded.

Risks Related to ~~the Acquisition” below.~~our Capital Structure

Our indebtedness could materially and adversely affect our financial condition and ability to operate our company, and we may incur additional debt.

As of August ~~31, 2019,~~28, 2021, we had approximately ~~$196.5~~$456.5 million in outstanding indebtedness and a revolving credit facility with availability of up to $75 million. ~~We also intend to fund a portion of the purchase price of the Acquisition with committed financing pursuant to~~

~~additional debt commitments from Barclays, Credit Suisse and Goldman Sachs.~~ Our current and future debt level and the terms of our debt arrangements could materially and adversely affect our financial condition and limit our ability to successfully implement our growth strategies. In addition, under the credit facilities governing our indebtedness, we have granted the lenders a security interest in substantially all of our assets, including the assets of our subsidiaries and an affiliate.

Our ability to meet our debt service obligations will depend on our future performance, which will be affected by the other risk factors described herein. If we do not generate enough cash flow to pay our debt service obligations, we may ~~be required~~have to refinance all or part of our existing debt, sell our assets, borrow more money or raise equity. We may not be able to take any of these actions ~~on a~~ timely, ~~basis,~~ on terms satisfactory to us, or at all.

The credit facilities governing our debt arrangements contain financial and other covenants.

The credit facilities governing our existing debt arrangements contain certain financial and other covenants. Our revolving credit facility has a maximum total net leverage ratio equal to or less than ~~6.25:1.00 (with a reduction to~~ 6.00:1.00 ~~on and after the third anniversary of the closing date of the credit facilities)~~ contingent on credit extensions in excess of 30% of the total amount of commitments available under the revolving credit facility, and limitations on our ability to, among other things, incur and/or undertake asset sales and other dispositions, liens, indebtedness, certain acquisitions and investments, consolidations, mergers, reorganizations and other fundamental changes, payment of dividends and other distributions to equity and warrant holders, and prepayments of material subordinated debt, in each case, subject to customary exceptions materially consistent with credit facilities of such type and size. Any failure to comply with the restrictions of the credit facilities may ~~result in~~cause an event of default. The credit facilities governing our existing debt arrangements bear interest at variable rates. If market interest rates increase, variable rate debt will create higher debt service requirements, which could materially and adversely affect our cash flow.

Changes in interest rates may adversely affect our earnings and/or cash flows.

Our indebtedness under our revolving credit facility bears interest at variable interest rates that use the London Inter-Bank Offered Rate (“LIBOR”) as a benchmark rate. On July 27, 2017, the United Kingdom’s Financial Conduct Authority (“FCA”), which regulates LIBOR, announced that it intends to stop persuading or compelling banks to submit LIBOR quotations after 2021 (the “FCA Announcement”). The FCA announcement indicates that the continuation of LIBOR on the current basis cannot and will not be assured after 2021, and LIBOR may cease to exist or otherwise be unsuitable for use as a benchmark. Recent proposals for LIBOR reforms may ~~result in~~cause the establishment of new methods of calculating LIBOR or the establishment of one or more alternative benchmark rates. Although our revolving credit facility provides for successor base rates, the successor base rates may be related to LIBOR, and the consequences of any potential cessation, modification or other reform of LIBOR cannot be predicted at this time. If LIBOR ceases to exist, we may need to amend our revolving credit facility, and we cannot predict what alternative interest rate(s) will be negotiated with our counterparties. As a result, our interest expense may increase, our ability to refinance some or all of our existing indebtedness may be ~~effected~~affected and our available cash flow may be adversely affected.

~~All~~We may need additional capital in the future, and it may not be available on acceptable terms or at all.

We have historically relied upon cash generated by our operations to fund our operations and strategy. We may also need to access the debt and equity capital markets, however, these sources of financing may not be available on acceptable terms, or at all. Our ability to obtain additional financing will be subject to several factors, including market conditions, our ~~products must comply~~operating performance, investor sentiment and our ability to incur additional debt in compliance with ~~regulations~~agreements governing our outstanding debt. These factors may make the timing, amount, terms or conditions of additional financing unattractive to us. If we cannot generate sufficient funds from operations or raise additional capital, our growth could be impeded.

We have incurred and will continue to incur significantly increased costs because of operating as a public company, and our management has been and will continue to be required to devote substantial time to compliance efforts.

We have incurred and expect to continue to incur significant legal, accounting, insurance and other expenses because of being a public company. The Dodd-Frank Wall Street Reform and Customer Protection Act (the “Dodd-Frank Act”) and the ~~FDA as well as state~~Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), and ~~local regulations. Any non-compliance~~related rules implemented by the SEC, have required changes in corporate governance practices of public companies. In addition, rules that the SEC is implementing or is required to implement pursuant to the Dodd-Frank Act are expected to require additional changes. Compliance with ~~the FDA or~~these and other ~~applicable regulations could harm our business.~~

~~Our products must comply with various FDA~~similar laws, rules and regulations, including ~~those regarding product manufacturing, food safety, required testing~~compliance with Section 404 of the Sarbanes-Oxley Act (“Section 404”), has and ~~appropriate labeling of~~will continue to substantially increase expense, including our products. The FDA has not defined nutrient content claims with respect to carbohydrates, but has not objected to the use of net carbohydrate information on food labels if the label adequately explains how the term is used so that it wouldlegal and

accounting costs, and make some activities more time-consuming and costly. Our internal infrastructure may not be ~~false or misleading~~adequate to consumers. The FDA requires all carbohydrates per serving to be listed on the Nutrition Facts Panel (“NFP”) of a package. In addition to the information on the NFP, we use the term “net carbohydrate” (or “net carbs”) onsupport our Atkins' packaging to assist consumers in tracking the carbohydrates in that serving of food that effect their blood sugar (glucose) levels. We determine the number of net carbs in a serving by subtracting fiber,increased reporting obligations, and sugar alcohols if any, from the actual number of carbohydrates listed on the NFP. Fiber and sugar alcohols can be subtracted from the carbohydrates because they minimally effect blood sugar. It is possible that FDA regulations and/or their interpretations may change related to, for example, definitions of certain of our core ingredients, such as fiber, labeling requirements for describing other ingredients or nutrients, such as sugar alcohols or protein, or disclosures of any ingredient labeled as genetically modified (“GMO”). As such, there is a risk that our products could become non-compliant with the FDA’s regulations, and any such non-compliance could harm our business.

~~In addition, if FDA or other regulations restrict us from labeling and marketing certain ingredients or product attributes, such as fiber or “net carb” count,~~ we may be unable to ~~effectively reach~~hire, train or retain necessary staff and may be reliant on engaging outside consultants or professionals to overcome our ~~target demographics, promote what~~limited experience or employees which could adversely affect our business if our internal infrastructure is inadequate to fulfill our public company obligations. These laws, rules and regulations could also make it more expensive for us to obtain director and officer liability insurance and we ~~believe~~may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as our executive officers.

If we cannot implement appropriate systems, procedures and controls, we may not be ~~the benefits of~~able to successfully offer our products, ~~or communicate that~~grow our business and account for transactions in an appropriate and timely manner.

Our ability to successfully offer our products, ~~are composed of what~~grow our business and account for transactions in an appropriate and timely manner requires an effective planning and management process and certain other automated management and accounting systems. We recently implemented an integrated enterprise resource planning system and certain other automated management and accounting systems. We periodically update our operations and financial systems, procedures and controls; however; we ~~consider to be low-carb, low-sugar and protein-rich ingredients.~~

~~We must~~still rely on ~~the contract manufacturers we engage~~certain manual processes and procedures that may not scale proportionately with our business growth. Our systems will continue to ~~produce~~require automation, modifications and improvements to respond to current and future changes in our ~~products~~business. Failure to maintain compliance with applicable regulatory requirements. Although we require our contract manufacturers to be compliant with regulatory requirements, we do not have direct control over such facilities. Failure of our contract manufacturers to comply with applicable regulation could have a materialimplement promptly appropriate internal systems, procedures and ~~adverse effect on our business.~~

Conflicts between state and federal law regarding definitions of our core ingredients, as well as labeling requirements, may lead to non-compliance with state and local regulations. For example, certain states may maintain narrower definitions of certain ingredients, as well as more stringent labeling requirements, of which we are unaware. Any non-compliance at the state or local levelcontrols could materially and adversely affect our business, financial condition and results of operations.

~~Our advertising~~If we do not maintain effective internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner or prevent fraud, which may adversely affect investor confidence in our financial reporting and adversely affect our business and operating results and the market price for our common stock. In May 2021 we identified a material weakness in our internal control over financial reporting.

Effective internal control over financial reporting is ~~regulated~~necessary for ~~accuracy,~~us to provide reliable financial reports. In the future, we may discover areas of our internal control over financial reporting that need improvement. In addition, our internal financial and ifaccounting team is leanly staffed, which can lead to inefficiencies regarding segregation of duties. If we fail to properly and efficiently maintain an effective internal control over financial reporting, we could fail to report our ~~advertising is~~financial results accurately.

On April 12, 2021, the staff of the SEC issued a staff statement (the “SEC Statement”) on the accounting and reporting considerations for warrants issued by special purpose acquisition companies (“SPACs”). Specifically, the SEC Statement focused in part on provisions in warrant agreements that provide for potential changes to the settlement amounts dependent upon the characteristics of the warrant holder. Following consideration of the guidance in the SEC Statement, we concluded that our warrants issued through private placement (the “Private Warrants”) should be classified as a liability and measured at fair value, with changes in fair value each period reported in earnings. As a result, on May 13, 2021, management and the audit committee of our board of directors determined that our previously issued fiscal quarterly and year-to-date unaudited consolidated financial statements for November 28, 2020 and February 27, 2021 included and our audited consolidated financial statements for the fiscal years ending August 29, 2020, August 31, 2019 and August 25, 2018 should no longer be relied upon and would need to be ~~false~~restated. As part of the restatement process, we have identified a material weakness in our internal control over financial reporting related to the determination of the appropriate accounting and classification of our Private Warrants.

A material weakness is a deficiency, or ~~misleading,~~a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. We developed and implemented a remediation plan to address the material weakness related to the accounting for warrants. These remediation measures may from time to time be time consuming and costly and there is no assurance that the remedial measures we have taken to date, or any remedial measures we may ~~face fines~~take in the future, will be sufficient to avoid potential future material weaknesses. The material weakness will not be considered remediated until a sustained period of time has passed to allow management to test the design and operational effectiveness of the corrective actions.

We may identify new material weaknesses in the future, which could limit our ability to prevent or ~~sanctions.~~detect a material misstatement of our annual or interim financial statements. The occurrence of, or failure to remediate, the material weakness we have identified or any other material weakness could result in our failure to maintain compliance with legal requirements, including Section 404 of the Sarbanes-Oxley Act and rules regarding timely filing of periodic reports, in addition to applicable stock exchange listing requirements, could cause investors to lose confidence in our financial reporting and could have an adverse effect on our the market price of our common stock.

~~Our advertising is~~

The restatement of certain of our financial statements subjected us to increased costs and may subject us to additional risks and uncertainties, including the increased possibility of legal proceedings.

On April 12, 2021, the staff of the SEC issued the SEC Statement on the accounting and reporting considerations for warrants issued by SPACs. Specifically, the SEC Statement focused in part on provisions in warrant agreements that provide for potential changes to the settlement amounts dependent upon the characteristics of the warrant holder. Following consideration of the guidance in the SEC Statement, we concluded that our Private Warrants should be classified as a liability and measured at fair value, with changes in fair value each period reported in earnings. As a result, on May 13, 2021, management and the audit committee of our board of directors determined that our previously issued fiscal quarterly and year-to-date unaudited consolidated financial statements for November 28, 2020 and February 27, 2021 and our audited consolidated financial statements for the fiscal years ending August 29, 2020, August 31, 2019 and August 25, 2018 should no longer be relied upon and would need to be restated. In addition, we determined that related press releases, earnings releases, and investor communications describing our financial statements for these periods should no longer be relied upon. The errors identified are non-cash and related to our classification of our Private Warrants. Accordingly, we restated the annual, quarterly and year-to-date audited and unaudited consolidated financial statements for these periods.

In connection with the restatement, we identified a material weakness in our internal controls over financial reporting related to the determination of the appropriate accounting and classification of our Private Warrants. As a result of that material weakness, the restatement, the change in accounting for our Private Warrants, and other matters raised or that may in the future be raised by the SEC, we incurred increased accounting and legal costs and may become subject to ~~regulation~~additional risks and uncertainties, including, among others, the increased possibility of legal proceedings or a review by the ~~FTC under the Federal Trade Commission Act, which prohibits dissemination~~SEC and other regulatory bodies. The costs of ~~false~~defending against such legal proceedings or ~~misleading advertising.~~administrative actions could be significant. In addition, ~~the National Advertising Division of the Council of Better Business Bureaus, Inc., which~~ we refer to as NAD, administers a self-regulatory program of the advertising industry to ensure truth and accuracy in national advertising. NAD both monitors national advertising and entertains inquiries and challenges from competing companies and consumers. Should our advertising be determined to be falsecould face monetary judgments, penalties or ~~misleading, we may have to pay damages, withdraw our campaign and possibly face fines or~~other sanctions ~~which~~that could have a material adverse effect on our ~~sales~~business, results of operations and financial condition and could have an adverse effect on the market price of our common stock.

Our only significant asset is ownership of 100% of Atkins Intermediate Holdings, LLC and such ownership may not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our common stock or satisfy our other financial obligations.

We have no direct operations and no significant assets other than the direct ownership of 100% of Atkins Intermediate Holdings, LLC. We currently depend on Atkins Intermediate Holdings, LLC for distributions, loans and other payments to generate the funds necessary to meet our financial obligations and to pay any dividends regarding our common stock. Legal and contractual restrictions in agreements governing our debt arrangements and future indebtedness of Atkins Intermediate Holdings, LLC, and the financial condition and operating ~~results.~~requirements of Atkins Intermediate Holdings, LLC, may limit our ability to obtain funds in a timely manner from Atkins Intermediate Holdings, LLC. The earnings from, or other available assets of, Atkins Intermediate Holdings, LLC may not be sufficient to pay dividends, make distributions or loans to enable us to pay any dividends on our common stock, or satisfy our other financial obligations.

Risks Related to our Common Stock

Our stock price may be volatile.

Our common stock is traded on the Nasdaq Capital Market (“Nasdaq”). The market price of our common stock has fluctuated in the past and could fluctuate substantially in the future, based on a variety of factors, including future announcements covering us or our key customers or competitors, government regulations, litigation, changes in earnings estimates by analysts, fluctuations in quarterly operating results or general conditions in our industry and may be exacerbated by there having historically been limited trading volume in our common stock. Furthermore, stock prices for many companies fluctuate widely for reasons that may be unrelated to their operating results. Those fluctuations and general economic, political and market conditions, such as recessions or international currency fluctuations and demand for our services, may adversely affect the market price of our common stock.

Changes in the value of our private placement warrants may have an adverse effect on our financial results and the market price for our common stock.

On April 12, 2021, the staff of the SEC released the SEC Statement on the accounting and reporting considerations for warrants issued by SPACs. Specifically, the SEC Statement focused in part on provisions in warrant agreements that provide for potential changes to the settlement amounts dependent upon the characteristics of the warrant holder and informed market participants that warrants issued by SPACs may require classification as a liability of the issuer measured at fair value, with changes in fair value each period reported in earnings. Following consideration of the guidance in the SEC Statement, we reevaluated the accounting treatment of our warrants, which had been classified as equity, and determined to reclassify our Private Warrants as a liability measured at fair value, with changes in fair value each period reported in earnings. Due to the recurring fair value measurement, we expect to recognize non-cash gains or losses on the Private Warrants each reporting period. The amount of these quarterly gains or losses could be material, which may cause quarterly

fluctuations in our consolidated financial statements and results of operations that may have an adverse effect on the market price of our common stock.

We do not expect to declare any dividends in the foreseeable future.

We do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future. Consequently, investors may need to rely on sales of their shares of common stock after the price has appreciated, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not purchase our common stock.

There may be future sales or other dilution of the Company’s equity, which may adversely affect the market price of our common stock.

We are not generally restricted from issuing additional shares of common stock, or any securities convertible into or exchangeable for, or that represent the right to receive, shares of common stock. Issuing any additional shares of common stock or preferred shares or securities convertible into, exchangeable for or that represent the right to receive shares of common stock or the exercise of such securities could be substantially dilutive to holders of our common stock. Additionally, 6,700,000 warrants to purchase our common stock on a one-for-one basis for an exercise price of $11.50 per share are outstanding. To the extent such warrants are exercised, additional shares of our common stock will be issued, which will cause dilution to our existing stockholders and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our common stock.

The market price of our common stock could decline because of sales of our common stock made in the future or the perception that such sales could occur. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of future offerings, if any. Thus, our stockholders bear the risk of future offerings reducing the market price of our common stock and diluting their holdings in the Company.

Anti-takeover provisions in our amended and restated certificate of incorporation and second amended and restated bylaws, and provisions of Delaware law, could impair a takeover attempt.

Our amended and restated certificate of incorporation and second amended and restated bylaws contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions include:

•no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

•the right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death, or removal of a director in certain circumstances, which prevents stockholders from filling vacancies on our board of directors;

•the ability of our board of directors to determine whether to issue shares of our preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;

•a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

•a prohibition on stockholders calling a special meeting, which forces stockholder action to be taken at an annual meeting of our stockholders or at a special meeting of our stockholders called by the chairman of the board or the chief executive officer pursuant to a resolution adopted by a majority of the board of directors;

•the requirement that a meeting of stockholders may be called only by the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;

•providing that directors may be removed prior to the expiration of their terms by stockholders only for cause and upon the affirmative vote of a majority of the voting power of all outstanding shares of the combined company; and,

•advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.

Other Risks

Disruptions in the worldwide economy may materially and adversely affect our business, financial condition and results of operations.

Adverse and uncertain economic conditions, such as those caused by COVID-19, may affect distributor, retailer and consumer demand for our products. In addition, our ability to manage normal commercial relationships with our suppliers, contract manufacturers,

distributors, retailers, consumers and creditors may suffer. Consumers may shift purchases to lower-priced or other perceived value offerings during economic downturns, making it more difficult to sell our premium products. Due to the relative costs of our products, during economic downturns, it may be more difficult to convince consumers to switch to or continue to use our brands or convince new users to choose our brands without expensive sampling programs and price promotions. In particular, consumers may reduce their purchases of products without GMOs, gluten or preservatives when there are conventional offerings of similar products, which generally have lower retail prices. In addition, consumers may choose to purchase private-label products rather than branded products because they are generally less expensive. Distributors and retailers may become more conservative in their ordering in response to these conditions and seek to reduce their inventories. Our results of operations depend on, among other things, our ability to maintain and increase sales volume with our existing distributors and retailers, to attract new consumers and to provide products that appeal to consumers at prices they are willing and able to pay. Prolonged unfavorable economic conditions may have an adverse effect on our sales and profitability.

~~Changes in the legal and regulatory environment could limit our business activities, increase our operating costs, reduce demand for our products or result in litigation.~~

Elements of our business, including the production, storage, distribution, sale, display, advertising, marketing, labeling, health and safety practices, transportation and use of many of our products, are subject to various laws and regulations administered by federal, state and local governmental agencies in the United States, as well as the laws and regulations administered by government entities and agencies outside the United States in markets in which our products or components thereof, such as packaging, may be made, manufactured or sold. These laws, regulations and interpretations thereof may change, sometimes dramatically, as a result of a variety of factors, including political, economic or social events. Such factors may include changes in:

~~food and drug laws (including FDA regulations);~~

~~laws related to product labeling;~~

~~advertising and marketing laws and practices;~~

~~laws and programs restricting the sale and advertising of certain of our products;~~

~~laws and programs aimed at reducing, restricting or eliminating ingredients present in certain of our products;~~

~~laws and programs aimed at discouraging the consumption of products or ingredients or altering the package or portion size of certain of our products;~~

~~state consumer protection and disclosure laws;~~

~~taxation requirements, including the imposition or proposed imposition of new or increased taxes or other limitations on the sale of our products; competition laws;~~

~~anti-corruption laws, including the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), and the UK Bribery Act of 2010 (the “Bribery Act”);~~

~~economic sanctions and anti-boycott laws, including laws administered by the U.S. Department of Treasury, Office of Foreign Assets Control (“OFAC”) and the European Union (“EU”);~~

laws relating to export, re-export, transfer, tariffs and import controls, including the Export Administration Regulations, the EU Dual Use Regulation and the customs and import laws administered by the U.S. Customs and Border Protection;

~~employment laws;~~

~~privacy laws;~~

~~laws regulating the price we may charge for our products; and~~

~~farming and environmental laws.~~

New laws, regulations or governmental policies and their related interpretations, or changes in any of the foregoing, including taxes, tariffs or other limitations on the sale of our products, ingredients contained in our products or commodities used in the production of our products, may alter the environment in which we do business and, therefore, may affect our operating results or increase our costs or liabilities. In addition, if we fail to adhere to such laws and regulations, we could be subject to regulatory investigations, civil or criminal sanctions, as well as class action litigation, which has increased in the industry in recent years.

~~Our geographic focus makes us particularly vulnerable to economic and other events and trends in North America.~~

We operate mainly in North America and, therefore, are particularly susceptible to adverse regulations, economic climate, consumer trends, market fluctuations, including commodity price fluctuations or supply shortages of key ingredients, and other adverse events in North America, including the U.S. and Canada. The concentration of our businesses in North America could present challenges and may increase the likelihood that an adverse event in North America would disproportionately materially and adversely affect product sales, financial condition and operating results.

~~Litigation or legal proceedings could expose us to significant liabilities and have a negative effect on our reputation.~~

From time to time, we may be party to various claims and litigation proceedings. We evaluate these claims and litigation proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, potential losses. We may establish reserves, as appropriate based on the information available to management at the time. These assessments and estimates involve a significant amount of management judgment and may differ materially from actual outcomes.

There is an additional risk that potential litigation may lead to adverse publicity, consumer confusion, distrust and additional legal challenges for us. Should we become subject to related or additional unforeseen lawsuits, including claims related to our products, labeling or advertising, which may vary in accordance with state and federal rules and regulations, consumers may avoid purchasing our products or seek alternative products, even if the basis for the claims against us is unfounded.

Any consumer loss of confidence in the truthfulness of our labeling or ingredient claims would be difficult and costly to overcome and may significantly reduce our brand value. For example, publications and other third-party commentary may vary in opinion with respect to calculations of net carbs and vary on approach to calculations of net carbs, which may lead to reports questioning the accuracy of our calculations and reporting the amount of net carbs contained in certain of our products. Uncertainty among consumers as to the nutritional content or the ingredients used in our products, regardless of the cause, may have an adverse effect on our brands, business, results of operations and financial condition.

~~We may not be able to adequately protect our intellectual property and other proprietary rights that are material to our business.~~

Our ability to compete effectively depends in part upon protection of our rights in trademarks, trade dress, copyrights and other intellectual property rights we own or license. Our use of contractual provisions, confidentiality procedures and agreements, and trademark, copyright, unfair competition, trade secret and other laws to protect our intellectual property and other proprietary rights may not be adequate. We may not be able to preclude third parties from using our intellectual property with respect to food or beverage products, and may not be able to leverage our branding beyond our current product offerings. In addition, our trademark or other intellectual property applications may not always be granted. Third parties may oppose our intellectual property applications, or otherwise challenge our use of trademarks or other intellectual property. Third parties may infringe, misappropriate, or otherwise violate our intellectual property. Changes in applicable laws could serve to lessen or remove the current legal protections available for intellectual property. Any legal action that we may bring to protect our brand and other intellectual property could be unsuccessful, result is substantial costs and could divert management’s attention from other business concerns. A successful claim of trademark, copyright or other intellectual property infringement, misappropriation, or other violation against us could prevent us from providing our products or services, or could require us to redesign or rebrand our products or packaging if we are unable to license such third-party intellectual property on reasonable terms. Certain of our intellectual property licenses have fixed terms, and even for those that do not, we cannot guarantee that all of our intellectual property licenses will remain in effect indefinitely. Termination of intellectual property licenses granted by or to us could result in the loss of profits generated pursuant to such licenses. Any of the foregoing outcomes could materially and adversely harm our business, financial condition or results of our operations.

We are dependent on various information technology systems. A failure of our information technology systems to perform as we anticipate could disrupt our business. Our information technology systems may be vulnerable to damage or interruption from circumstances beyond our control, including natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers and other security

issues. Despite safeguards that we have implemented that are designed to prevent unauthorized access to our information technology systems, we cannot be certain that our information technology systems are free from vulnerability to security breaches (especially as the sophistication of cyber-security threats continues to increase), or from vulnerability to inadvertent disclosures of sensitive data by third parties or by us.

Unauthorized users who penetrate our information security systems could misappropriate proprietary, employee, or consumer information. As a result, it may become necessary to expend additional amounts of capital and resources to protect against, or to alleviate, problems caused by unauthorized access. Data security breaches could result in damaged reputation with consumers and reduced demand for our products. Additional expenditures may not prove to be a timely remedy against breaches by unauthorized users who are able to penetrate our information security. In addition to purposeful security breaches, the inadvertent transmission of computer viruses could adversely affect our computer systems and, in turn, harm our business.

A significant number of states require that consumers be notified if a security breach results in the disclosure of their personal financial account or other information. Additional states and governmental entities are considering such “notice” laws. In addition, other public disclosure laws may require that material security breaches be reported. If we experience a security breach, and such notice or public disclosure is required in the future, our reputation and our business may be harmed.

With the exception of limited information voluntarily submitted by users of our website, we typically do not collect or store consumer data or personal information. However, third-party providers, including our licensees, contract manufacturers, e-commerce contractors and third-party sellers may do so. The website operations of such third parties may be affected by reliance on other third-party hardware and software providers, technology changes, risks related to the failure of computer systems through which these website operations are conducted, telecommunications failures, data security breaches and similar disruptions. If we or our third-party providers fail to maintain or protect our respective information technology systems and data integrity effectively, fail to implement new systems, and/or update or expand existing systems or fail to anticipate, plan for or manage significant disruptions to systems involved in our operations, we could lose existing customers, have difficulty preventing, detecting, and controlling fraud, have disputes with customers, suppliers, distributors or others, and be subject to regulatory sanctions, including sanctions stemming from violations of the Health Insurance Portability and Accountability Act of 1996, and as a result, have increases in operating expenses.

If we are unable to implement appropriate systems, procedures and controls, we may not be able to successfully offer our products, grow our business and account for transactions in an appropriate and timely manner.

Our ability to successfully offer our products, grow our business and account for transactions in an appropriate and timely manner requires an effective planning and management process and certain other automated management and accounting systems. We currently do not have an integrated enterprise resource planning system and certain other automated management and accounting systems. We periodically update our operations and financial systems, procedures and controls; however; we still rely on manual processes and procedures that may not scale proportionately with our business growth. Our systems will continue to require automation, modifications and improvements to respond to current and future changes in our business. Failure to implement in a timely manner appropriate internal systems, procedures and controls could materially and adversely affect our business, financial condition and results of operations.

~~Our insurance may not provide adequate levels of coverage against claims.~~

We believe that we maintain insurance customary for businesses of our size and type. However, there are types of losses we may incur that cannot be insured against or that we believe are not economically reasonable to insure. Such losses could have a material adverse effect on our business, financial condition and results of operations.

~~Loss of our key executive officers or other personnel, or an inability to attract and retain such management and other personnel, could negatively affect our business.~~

Our future success depends to a significant degree on the skills, experience and efforts of our key executive officers. The loss of the services of any of these executives could materially and adversely affect our business and prospects, as we may not be able to find suitable individuals to replace them on a timely basis, if at all. Additionally, we also depend on our ability to attract and retain qualified personnel to operate and expand our business. If we fail to attract talented new employees, our business and results of operations could be negatively affected.

~~We may need additional capital in the future, and it may not be available on acceptable terms or at all.~~

We have historically relied upon cash generated by our operations to fund our operations and strategy. We may also need to access the debt and equity capital markets, however, these sources of financing may not be available on acceptable terms, or at all. Our ability to obtain additional financing will be subject to a number of factors, including market conditions, our operating performance, investor sentiment and our ability to incur additional debt in compliance with agreements governing our outstanding debt. These factors may make the timing, amount, terms or conditions of additional financing unattractive to us. If we are unable to generate sufficient funds from operations or raise additional capital, our growth could be impeded.

We have incurred and will continue to incur significantly increased costs as a result of operating as a public company, and our management has been and will continue to be required to devote substantial time to compliance efforts.

We have incurred and expect to continue to incur significant legal, accounting, insurance and other expenses as a result of being a public company. The Dodd-Frank Wall Street Reform and Customer Protection Act (the “Dodd-Frank Act”) and the Sarbanes-Oxley Act of 2002 (the “~~Sarbanes-Oxley Act~~”), as well as related rules implemented by the SEC, have required changes in corporate governance practices of public companies. In addition, rules that the SEC is implementing or is required to implement pursuant to the Dodd-Frank Act are expected to require additional changes. Compliance with these and other similar laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act (“Section 404”), has and will continue to substantially increase expense, including our legal and accounting costs, and make some activities more time-consuming and costly. Our internal infrastructure may not be adequate to support our increased reporting obligations, and we may be unable to hire, train or retain necessary staff and may be reliant on engaging outside consultants or professionals to overcome our limited experience or employees which could adversely affect our business if our internal infrastructure is inadequate to fulfill our public company obligations. These laws, rules and regulations could also make it more expensive for us to obtain director and officer liability insurance and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as our executive officers.

~~If we do not maintain effective internal control over financial reporting, we could fail to report our financial results accurately.~~

Effective internal control over financial reporting is necessary for us to provide reliable financial reports. In the future, we may discover areas of our internal control over financial reporting that need improvement. Prior to the Business Combination, we had not historically documented our internal controls. If we identify a control deficiency that rises to the level of a material weakness in internal controls over financial reporting, our ability to record, process, summarize and report financial information timely and accurately may be adversely affected and, as a result, our financial statements may contain material misstatements or omissions. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. In addition, our internal financial and accounting team is leanly staffed, which can lead to inefficiencies with respect to segregation of duties. If we fail to properly and efficiently maintain an effective internal control over financial reporting, we could fail to report our financial results accurately.

We have no direct operations and no significant assets other than the direct ownership of 100% of Atkins Intermediate Holdings, LLC. We currently depend on Atkins Intermediate Holdings, LLC for distributions, loans and other payments to generate the funds necessary to meet our financial obligations and to pay any dividends with respect to our common stock. Legal and contractual restrictions in agreements governing our debt arrangements and future indebtedness of Atkins Intermediate Holdings, LLC, as well as the financial condition and operating requirements of Atkins Intermediate Holdings, LLC, may limit our ability to obtain funds in a timely manner from Atkins Intermediate Holdings, LLC. The earnings from, or other available assets of, Atkins Intermediate Holdings, LLC may not be sufficient to pay dividends, make distributions or loans to enable us to pay any dividends on our common stock, or satisfy our other financial obligations.

Our international operations expose us to regulatory, economic, political and social risks in the countries in which we operate.

The international nature of our operations involves ~~a number of~~several risks, including changes in U.S. and foreign regulations, tariffs, taxes and exchange controls, economic downturns, inflation and political and social instability in the countries in which we operate and our dependence on foreign personnel. Moreover, although our products in our foreign operations typically mirror those in the United States, consumers outside the United States may have different tastes, preferences and nutritional approaches than U.S. consumers. Our international business is small ~~in comparison~~compared to our U.S. business, and as a result, our operations are more spread out which can add to our costs and limit our ability to react effectively and timely ~~react~~ to adverse events. We cannot be certain that we ~~will be able to~~can enter and successfully compete in additional foreign markets or that we ~~will be able to~~can continue to compete in the foreign markets in which we currently operate.

Doing business outside the United States requires us to comply with the laws and regulations of the U.S. government and various foreign jurisdictions, which place restrictions on our operations, trade practices, partners and investment decisions. In particular, our operations are subject to U.S. and foreign anti-corruption and trade control laws and regulations, such as the FCPA or the Bribery Act, export controls and economic sanctions programs, including those administered by the OFAC and the EU. ~~As a result~~Because of doing business in foreign countries and with foreign partners, we are exposed to a heightened risk of violating anti-corruption and trade control laws and sanctions regulations. The FCPA prohibits us from providing anything of value to foreign officials for the purposes of obtaining or retaining business or securing any improper business advantage. In addition, the Bribery Act extends beyond bribery of foreign public officials and also applies to transactions with private persons. The provisions of the Bribery Act are also more onerous than the FCPA in ~~a number of~~several other respects, including jurisdictional reach, non-exemption of facilitation payments and, potentially, penalties.

Our continued expansion outside the United States, including in developing countries, and our development of new partnerships and joint venture relationships worldwide, could increase the risk of FCPA, OFAC, Bribery Act or EU sanctions violations in the future. Violations of anti-corruption and trade control laws and sanctions regulations may cause reputational damage and are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts and revocations or restrictions of licenses, ~~as well as~~and criminal fines and imprisonment.

Finally, our business could be negatively affected by changes in the U.S. and Canadian political environments, in particular. We operate primarily in the U.S. and Canada and we ship a large number of products between the U.S. and Canada. Adverse changes to trade agreements, import or export regulations, customs duties or tariffs by either or both governments may have a negative effect on our business, financial conditions and results of operations.

Our international operations expose us to fluctuations in exchange rates, which may materially and adversely affect our operating results.

We source large quantities of our core ingredients from foreign suppliers, and as a result, any material upward movement in foreign exchange rates relative to the U.S. dollar will adversely affect our profitability. Furthermore, the substantial majority of our revenue is generated domestically, while a substantial portion of our ~~third party~~third-party manufacturing is completed in Canada. Any U.S. dollar weakness may therefore materially and adversely affect revenue and cash flows while also increasing supply and manufacturing costs.

~~Risks Related to the Company's Common Stock~~

~~Our stock price may be volatile.~~

Our common stock is traded on the Nasdaq Capital Market (“Nasdaq”). The market price of our common stock has fluctuated in the past and could fluctuate substantially in the future, based on a variety of factors, including future announcements covering us or our key customers or competitors, government regulations, litigation, changes in earnings estimates by analysts, fluctuations in quarterly operating results or general conditions in our industry and may be exacerbated by the fact that there has historically been limited trading volume in our common stock. Furthermore, stock prices for many companies fluctuate widely for reasons that may be unrelated to their operating results. Those fluctuations and general economic, political and market conditions, such as recessions or international currency fluctuations and demand for our services, may adversely affect the market price of our common stock.

~~We do not expect to declare any dividends in the foreseeable future.~~

Our amended and restated certificate of incorporation provides that, to the extent allowed by law, the doctrine of “corporate opportunity” does not apply with respect to the directors, officers, employees or representatives of Conyers Park Sponsor, LLC (“Conyers Park Sponsor”) Centerview Capital Holdings LLC (“Centerview Capital”) and Centerview Partners and their respective affiliates, excepted as provided below.

The doctrine of corporate opportunity generally provides that a corporate fiduciary may not develop an opportunity using corporate resources, acquire an interest adverse to that of the corporation or acquire property that is reasonably incident to the present or prospective business of the corporation or in which the corporation has a present or expectancy interest, unless that opportunity is first presented to the corporation and the corporation chooses not to pursue that opportunity. The doctrine of corporate opportunity is intended to preclude officers, directors or other fiduciaries from personally benefiting from opportunities that belong to the corporation. Our

amended and restated certificate of incorporation provides that, to the extent allowed by law, the doctrine of “corporate opportunity” does not apply with respect to the directors, officers, employees or representatives of Conyers Park Sponsor, Centerview Capital and Centerview Partners and their respective affiliates. The doctrine of corporate opportunity shall apply with respect to any of our directors or officers with respect to a corporate opportunity that was offered in writing to such person solely in his or her capacity as our director or officer and such opportunity is one which they are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue. Therefore, except as provided above, these parties have no duty to communicate or present corporate opportunities to us, and have the right to either hold any corporate opportunity for their (and their affiliates’) own account and benefit or to recommend, assign or otherwise transfer such corporate opportunity to persons other than us.

As a result, certain of our stockholders, directors and their respective affiliates are not prohibited from operating or investing in competing businesses. We therefore may find ourselves in competition with certain of our stockholders, directors or their respective affiliates, and we may not ~~have knowledge~~know of, or be able to pursue, transactions that could potentially be beneficial to us. Accordingly, we may lose a corporate opportunity or suffer competitive harm, which could negatively affect our business or prospects.

If securities or industry analysts do not publish or cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding our common stock adversely, the price and trading volume of our common stock could decline.

The trading market for our common stock is influenced by the research and reports that industry or securities analysts publish about us, our business, our market or our competitors. Securities and industry analysts may not publish or may cease publishing research on us. If securities or industry analysts cease coverage, our stock price and trading volume may be negatively affected. If any of the analysts who cover us change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, the price of our common stock may decline. If any analysts were to cease coverage, or fail to regularly publish reports on our business, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.

~~There may be future sales or other dilution of the Company's equity, which may adversely affect the market price of our common stock.~~

We are not generally restricted from issuing additional shares of common stock, or any securities that are convertible into or exchangeable for, or that represent the right to receive, shares of common stock. The issuance of any additional shares of common stock or preferred shares or securities convertible into, exchangeable for or that represent the right to receive shares of common stock or the exercise of such securities could be substantially dilutive to holders of our common stock. Additionally, 6,700,000 warrants to purchase our common stock on a one-for-one basis for an exercise price of $11.50 per share are outstanding. To the extent such warrants are exercised, additional shares of our common stock will be issued, which will result in dilution to our existing stockholders and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our common stock.

The market price of our common stock could decline as a result of sales of our common stock made in the future or the perception that such sales could occur. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of future offerings, if any. Thus, our stockholders bear the risk of future offerings reducing the market price of our common stock and diluting their holdings in the Company.

~~The Company's board of directors may issue, without stockholder approval, preferred stock with rights and preferences superior to those applicable to our common stock.~~

Our amended and restated certificate of incorporation includes a provision for the issuance of preferred stock, which may be issued in one or more series, with each series containing such rights and preferences as the board of directors may determine from time to time, without prior notice to or approval of stockholders. Among others, such rights and preferences might include the rights to dividends, liquidation preferences and rights to convert into common stock. The rights and preferences of any such series of preferred stock, if issued, may be superior to the rights and preferences applicable to the common stock and might result in a decrease in the price of our common stock.

Anti-takeover provisions contained in our amended and restated certificate of incorporation and second amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

~~a staggered board providing for three classes of directors, which limits the ability of a stockholder or group to gain control of our board;~~

~~no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;~~

the right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death, or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies on our board of directors;

the ability of our board of directors to determine whether to issue shares of our preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;

~~a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;~~

a prohibition on stockholders calling a special meeting, which forces stockholder action to be taken at an annual of our stockholders or at a special meeting of our stockholders called by the chairman of the board, the chief executive officer of the board of directors pursuant to a resolution adopted by a majority of the board of directors;

the requirement that a meeting of stockholders may be called only by the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;

providing that directors may be removed prior to the expiration of their terms by stockholders only for cause and upon the affirmative vote of a majority of the voting power of all outstanding shares of the combined company;

a requirement that changes or amends the amended and restated certificate of incorporation or the second amended and restated bylaws must be approved by at least 66⅔% of the voting power of our outstanding common stock; and

advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.

~~Risks Related to the Acquisition~~

~~If we fail to complete the Acquisition, we will not recognize the benefits we describe in this Report.~~

Although we have entered into the Purchase Agreement with respect to the Acquisition of Quest and its affiliated companies, we cannot guarantee when, or whether the Acquisition will be completed. The closing of the Acquisition is subject to customary conditions, and the Acquisition may not be completed as contemplated, or at all. If we are unable to complete the Acquisition, we will not realize many of the Acquisition benefits that are described in this Report, and the value of our common stock could be impaired.

~~We may not realize the expected benefits of the Acquisition because of integration difficulties and other challenges.~~

The success of the Acquisition will depend, in part, on our ability to realize all or some of the anticipated benefits from integrating Quest's business with our existing businesses. The integration process may be complex, costly and time-consuming. The difficulties of integrating the operations of Quest's business include, among others:

~~failure to implement our business plan for the combined business;~~

~~unanticipated issues in integrating co-manufacturing, logistics, information, communications and other systems;~~

~~possible inconsistencies in standards, controls, procedures and policies, and compensation structures between Quest's structure and our structure;~~

~~failure to retain key customers and suppliers;~~

~~unanticipated changes in applicable laws and regulations;~~

~~failure to retain key employees, and the complexities associated with integrating personnel from another company;~~

~~operating risks inherent in Quest's business and our business;~~

~~diversion of management's attention from other business concerns;~~

~~increasing the scope, geographic diversity and complexity of our operations; and~~

~~unanticipated issues, expenses and liabilities.~~

We may not be able to maintain the levels of revenue, earnings or operating efficiency that each of Simply Good Foods and Quest had achieved or might achieve separately. In addition, we may not accomplish the integration of Quest's business smoothly, successfully or within the anticipated costs or timeframe. If we experience difficulties with the integration process, the anticipated benefits of the Acquisition may not be realized fully, or at all, or may take longer to realize than expected.

~~We face risks associated with the Purchase Agreement in connection with the Acquisition.~~

In connection with the Acquisition, we will be subject to substantially all the liabilities of Quest that are not satisfied on or prior to the closing date. There may be liabilities that we underestimated or did not discover in the course of performing our due diligence investigation of Quest. Under the Purchase Agreement, the sellers have agreed to provide us with a limited set of representations and warranties. Our sole remedy from the sellers for any breach of those representations and warranties is an action for indemnification. Damages resulting from a breach of a representation or warranty could have a material and adverse effect on our financial condition and results of operations.

~~As a private company, Quest may not have in place an adequate system of internal control over financial reporting that we will need to manage that business effectively as part of a public company.~~

None of Quest and its affiliated companies have previously been subject to periodic reporting as a public company. There can be no assurance that Quest has in place a system of internal control over financial reporting that is required for public companies, and that will be required of us with respect to Quest when the Acquisition is completed. Establishing, testing and maintaining an effective system of internal control over financial reporting requires significant resources and time commitments on the part of our management and our finance and accounting staff, may require additional staffing and infrastructure investments, and would increase our costs of doing business. Moreover, if we discover aspects of Quest's internal controls that need improvement, we cannot be certain that our remedial measures will be effective. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could harm our operating results or increase our risk of material weaknesses in internal controls over financial reporting.

~~We will incur substantial indebtedness in order to finance the Acquisition, which could adversely affect our business and limit our ability to plan for or respond to changes in our business.~~

In connection with the Acquisition, we have debt commitments with certain lenders. These debt commitments are subject to certain conditions, and we cannot assure you that those conditions will be satisfied. Upon consummation of the Acquisition, we will have substantially more indebtedness than has been the case for us historically. Our ability to make payments on and to refinance our debt obligations and to fund planned capital expenditures depends on our ability to generate cash from our future operations. This, to a certain extent, is subject to financial, competitive, legislative, regulatory and other factors that are beyond our control. In addition, if we cannot service our indebtedness, we may have to take actions such as selling assets, seeking additional equity or reducing or delaying capital expenditures, strategic acquisitions, investments and alliances, any of which could impede the implementation of our business strategy, prevent us from entering into transactions that would otherwise benefit our business and/or have a material adverse effect on our financial condition and results of operations. We may not be able to refinance our indebtedness or take such other actions, if necessary, on commercially reasonable terms, or at all. We cannot guarantee the lenders will provide sufficient financing under the debt commitments to finance the Acquisition.

In connection with the Acquisition, we have debt commitments with certain lenders. These debt commitments are subject to certain conditions and we cannot assure you that those conditions will be satisfied. There can also be no assurance that sufficient financing will be available at the time of the closing of the Acquisition, or that the lender counterparties in any such commitments will honor their contractual commitments. If we need additional capital and cannot raise it on acceptable terms, or at all, we may not be able to complete the Acquisition.

~~We will incur significant transaction and acquisition-related costs in connection with the Acquisition, whether or not it is completed.~~

We have already incurred significant costs, and expect to incur significant additional costs associated with the Acquisition. The substantial majority of these costs will be non-recurring transaction expenses and costs. These non-recurring costs and expenses are not reflected in the financial information included in this Report. These costs will reduce the amount of cash otherwise available for the payment of our debt and other corporate purposes.

Item 1B. Unresolved Staff Comments.

None.

Item 2. ~~Properties~~Properties.

Our corporate headquarters is located at 1225 17^th Street, Suite 1000, Denver, CO 80202. ~~The Company leases~~We lease this property, which occupies approximately ~~20,700~~27,600 square feet. In addition, we lease or otherwise have rights to use office space and storage space in El Segundo, California, Louisville, Colorado, Bentonville metro-area, Arkansas, and ~~foreign countries, including the Netherlands, United Kingdom and Canada to support key international operations. The Company~~Naples, Florida. We also ~~leases the Distribution Center~~lease three distribution centers, all in Greenfield, ~~Indiana, which has approximately 423,000~~Indiana. We utilize over 1.35 million square feet of floor ~~space.~~space among our distribution centers.

~~The following table summarizes our leased properties as of the date of this Report:~~



~~Location~~	~~Principal Use~~	~~Type~~	~~Lease Expiration Date~~
~~Denver, CO~~	~~Headquarters~~	~~Office~~	~~July 31, 2023~~
~~Louisville, CO~~	~~Research and Development~~	~~Office~~	~~May 31, 2020~~
~~Greenfield, IN~~	~~Distribution Center~~	~~Warehouse~~	~~December 31, 2022~~
~~Rogers, AR~~	~~Sales Operations~~	~~Office~~	~~September 30, 2022~~
~~Netherlands~~	~~International Operations~~	~~Office~~	~~February 2, 2021~~
~~Toronto, Ontario~~	~~Wellness Foods Operations~~	~~Office~~	~~February 29, 2024~~

Item 3. Legal ~~Proceedings~~Proceedings.

From time to time, we have been and may again become involved in legal proceedings arising in the ordinary course of our business. We are not presently a party to any litigation that we believe to be material and we are not aware of any pending or threatened litigation against us that we believe could have a material adverse effect ofon our business, operating ~~result,~~results, financial condition or cash flows.

Item 4. Mine Safety ~~Disclosures~~Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity ~~Securities~~Securities.

Market Information and Holders

Our common stock is currently quoted on the Nasdaq Capital Market under the symbol “SMPL.”

As of October ~~25, 2019,~~20, 2021, there were ~~95,294,519~~95,834,960 shares outstanding and 1915 record holders of our common stock.

Dividends

We currently do not pay dividends and have not paid any cash dividends on our common stock to date. We currently intend to retain our future earnings to finance the ~~future~~ development and expansion of our business and as such, we do not expect to pay any cash dividends on our common stock in the foreseeable future. The payment of future dividends, if any, will be at the discretion of our ~~board~~Board of ~~directors~~Directors and will depend on our financial condition, results of operations, capital requirements, restrictions contained in current and/or future financing instruments, provisions of applicable law, and any other factors our ~~board~~Board of ~~directors~~Directors deems relevant.

Issuer Purchases of Equity Securities

Period
Total Number of
Shares Purchased

Average Price
Paid per Share

Total Number of Shares Purchase as Part of Publicly Announced Plans or Programs⁽¹⁾
Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
May 26, 2019 -
June 22, 2019
22,245
$ 21.61
22,245
$ 47,853,462
June 23, 2019 -
July 20, 2019
—
—
—
47,853,462
July 21, 2019 -
August 31, 2019
—
—
—
47,853,462
Total 22,245
$ 21.61
22,245
$ 47,853,462

⁽¹⁾

~~On November 13, 2018, the Company announced that its Board of Directors had approved and authorized a $50.0 million stock repurchase program. As of August 31, 2019,~~ On November 13, 2018, the Company announced that its Board of Directors had adopted a $50.0 million stock repurchase program. Under the stock repurchase program, the Company may repurchase shares from time to time in the open market or in privately negotiated transactions. The stock repurchase program does not obligate the Company to acquire any specific number of shares or acquire shares over any specific period of time. The stock repurchase program may be suspended or discontinued at any time by the Company, and does not have an expiration date. During the fifty-two weeks ended August 28, 2021, the Company did not repurchase any shares of common stock. As of August 28, 2021, approximately $47.9 million remained available ~~for repurchase~~ under the stock repurchase program. Under the stock repurchase program, the Company may repurchase shares from time to time in the open market or in privately negotiated transactions. The stock repurchase program does not obligate the Company to acquire any specific number of shares or acquire shares over any specific period of time. The stock repurchase program may be suspended or discontinued at any time by the Company, and does not have an expiration date.

Performance Graph

The following stock performance graph compares the outstanding stock from issuance of SMPL, July 10, 2017, through August ~~30, 2019~~27, 2021 (the last trading day of our fiscal year ended August ~~31, 2019)~~28, 2021), and the cumulative total stockholder return for ~~(1)~~(i) Company’s common stock, ~~(2)~~(ii) the Standard & Poor’s 500 Index, and ~~(3)~~(iii) the Standard & Poor’s 500 Packaged Foods & Meats Index. The graph assumes the value of the investment in our common stock and each index was $100.00 on July 10, 2017 and assumes reinvestment of any dividends.

The stock price performance below is not necessarily indicative of future stock price performance.


	Annual Return Percentage
	Fiscal Years Ending
Company Name / Index	July 10, 2017		August 26, 2017		August 25, 2018		August 31, 2019		August 29, 2020		August 28, 2021
The Simply Good Foods Company	$	100.0	$	99.0	$	149.8	$	246.9	$	211.6	$	294.6
S&P 500 Index	$	100.0	$	100.6	$	118.4	$	120.6	$	144.5	$	185.8
S&P 500 Packaged Foods & Meats Index	$	100.0	$	99.5	$	94.3	$	101.4	$	109.8	$	109.5

Annual Return Percentage
Quarters Ending
Company Name / Index July 10, 2017 August 26, 2017 November 25, 2017 February 24, 2018 May 26, 2018 August 25, 2018 November 24, 2018 February 25, 2019 May 25, 2019 August 31, 2019
The Simply Good Foods Company $ 100.0
$ 99.0
$ 105.6
$ 114.1
$ 114.8
$ 149.8
$ 163.8
$ 172.8
$ 184.3
$ 246.9
S&P 500 Index 100.0
100.6
107.2
113.2
112.1
118.4
108.5
115.1
116.4
120.6
S&P 500 Packaged Foods & Meats Index 100.0
99.5
101.5
99.6
89.8
94.3
92.8
88.4
96.9
101.4

Item 6. ~~Selected Financial Data~~Reserved.

As a result of the Business Combination that occurred in July of 2017, Simply Good Foods is the acquirer, and for accounting purposes the successor. Atkins is the acquiree and accounting predecessor. Our financial statement presentation includes the financial statements of Atkins as “Predecessor” for periods prior to the Closing Date and of Simply Good Foods for periods after the Closing Date, including the consolidation of Atkins. Not applicable.

The following table sets forth selected historical financial information derived from the audited financial statements. You should read the following selected financial information in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and the related notes in “Item 8. Financial Statements and Supplementary Data”.

2019 2018 2017 2016 2015 2014
53-weeks ended 52-weeks ended From July 7, 2017
through August 26, 2017 From August 28, 2016
through July 6, 2017 52-weeks ended 35-weeks ended 52-weeks ended
August 31, 2019 August 25, 2018 August 27, 2016 August 29, 2015 December 27, 2014
(audited) (audited) (audited) (audited) (audited) (audited) (audited)
(In thousands) (Successor) (Successor) (Successor) (Predecessor) (Predecessor) (Predecessor) (Predecessor)
Net sales $ 523,383
$ 431,429
$ 56,334
$ 339,837
$ 427,858
$ 252,898
$ 429,858
Cost of goods sold⁽¹⁾
305,978
251,063
39,584
200,026
248,464
151,978
249,832
Gross profit 217,405
180,366
16,750
139,811
179,394
100,920
180,026

Operating Expenses:
Distribution ⁽¹⁾
—
—
—
—
18,489
11,429
19,481
Selling and marketing ⁽²⁾
67,488
59,092
6,937
47,494
56,264
45,147
55,830
General and administrative ⁽¹⁾
61,972
49,635
6,969
34,567
48,503
29,093
41,146
Depreciation and amortization ⁽¹⁾
7,496
7,498
985
8,409
10,179
7,267
11,195
Business combination transaction costs 7,107
2,259
—
25,608
—
—
—
Loss (gain) in fair value change of contingent consideration - TRA liability 533
(2,848 ) —
—
—
—
—
Total operating expenses 144,596
115,636
14,891
116,078
133,435
92,936
127,652

Income from operations 72,809
64,730
1,859
23,733
45,959
7,984
52,374

Other income (expense):
Change in warrant liabilities —
—
—
722
(722 ) 1,689
143
Interest income 3,826
—
—
—
—
—
—
Interest expense (13,627 ) (12,551 ) (1,662 ) (22,724 ) (27,195 ) (18,331 ) (27,823 )
Gain on settlement of TRA liability 1,534
—
—
—
—
—
—
Loss (gain) on foreign currency transactions (452 ) 97
513
133
(619 ) (1,045 ) (1,211 )
Other income 196
815
30
221
118
55
96
Total other expense (8,523 ) (11,639 ) (1,119 ) (21,648 ) (28,418 ) (17,632 ) (28,795 )

Income before income taxes 64,286
53,091
740
2,085
17,541
(9,648 ) 23,579
Income tax (benefit) expense 16,750
(17,364 ) 290
4,570
7,507
(4,334 ) 9,623
Net income (loss) $ 47,536
$ 70,455
$ 450
$ (2,485 ) $ 10,034
$ (5,314 ) $ 13,956

Earnings per share from net income:
Basic $ 0.59
$ 1.00
$ 0.01

Diluted $ 0.56
$ 0.96
$ 0.01

Balance Sheet Data (at end of periods)
Total assets $ 1,141,650
$ 974,605
$ 922,488
$ 344,867
$ 389,512
$ 366,953
$ 385,215
Long-term debt, less current maturities 190,259
190,935
191,856
281,445
321,638
331,565
330,758
Warrant liabilities —
—
—
15,000
15,722
15,000
16,689
Stockholders’ equity (deficit) 837,444
672,601
598,702
(28,027 ) (27,834 ) (41,322 ) (36,217 )



~~(1)~~		During the fifty-three weeks ended August 31, 2019, certain reclassifications were made to previously reported amount to conform to the current presentation. On the consolidated statement of operations, outbound freight previously included in distribution, distribution center expenses previously included in ~~General and administrative, and depreciation for equipment used in warehouse operations were reclassified to~~ ~~Cost of goods sold~~. 2019, 2018 and 2017 reflect adjusted amounts in accordance with this accounting principle change. See Note 2 to the Consolidated Financial Statements included herein for additional information on the accounting principle change.
~~(2)~~		~~During the fifty-three weeks ended August 31, 2019, the Company combined Selling and Marketing within one financial statement line. All periods presented reflect this change.~~

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations~~Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and related notes included in Item 8 of this Report. In addition to historical information, the following discussion contains forward-looking statements, including, but not limited to, statements regarding the Company’s expectation for future performance, liquidity and capital resources that involve risks, uncertainties and assumptions that could cause actual results to differ materially from the ~~Company's~~Company’s expectations. The ~~Company's~~Company’s actual results may differ materially from those contained in or implied by any forward-looking statements. Factors that could cause such differences include those identified below and those described in “Cautionary Note Regarding Forward-Looking Statements,” and in Item 1A “Risk Factors” of this Report. The Company assumes no obligation to update any of these forward-looking statements.

Our fiscal year ends the last Saturday in August. Our fiscal years ~~2018~~2021 and ~~2017~~2020 ended August ~~25, 2018~~ 28, 2021and August ~~26, 2017,~~29, 2020, respectively, and were each fifty-two week periods. Our fiscal year 2019 ended August 31, 2019 was a fifty-three week period. ~~Atkins’~~Our fiscal quarters are comprised of thirteen weeks each, except for fifty-three week fiscal periods for the which the fourth quarter is comprised of fourteen weeks, and end on the thirteenth Saturday of each quarter (fourteenth Saturday of the fourth quarter, when applicable). ~~Atkins’~~Our fiscal quarters for fiscal ~~2019~~2021 ended on November ~~24, 2018,~~28, 2020, February ~~23, 2019,~~27, 2021, May ~~25, 2019~~29, 2021 and August ~~31, 2019.~~28, 2021.

~~As a result of~~Unless the ~~Business Combination, information is presented for~~context requires otherwise in this Report, the ~~successor fifty-three week period ended August 31, 2019,~~terms “we,” “us,” “our,” the ~~successor period for the fifty-two week period ended August 25, 2018, the successor period from July 7, 2017 through August 26, 2017,~~“Company” and ~~the predecessor period from August 28, 2016 through July 6, 2017, are derived from Atkins’ audited consolidated financial statements and the notes thereto.~~

~~Overview~~

“Simply Good Foods” refer to The Simply Good Foods Company and its subsidiaries.

Overview

The Simply Good Foods Company is a ~~developer, marketer~~consumer packaged food and seller of branded nutritional foods and snacking products. Our highly-focused product portfolio consists primarily of nutrition bars, RTD shakes, snacks and confectionery products marketed under the Atkins®, SimplyProtein®, and Atkins Endulge® brand names. Our goal isbeverage company that aims to lead the nutritious snacking movement with trusted brands that offer a variety of convenient, innovative, great-tasting, ~~“better-for-you”~~better-for-you snacks and meal replacements. ~~Over~~The product portfolio we develop, market and sell consists primarily of protein bars, ready-to-drink (“RTD”) shakes, sweet and salty snacks and confectionery products marketed under the ~~past 45 years,~~Atkins®, Atkins ~~has become an iconic American~~Endulge®, and Quest® brand names. We believe Simply Good Foods is poised to expand its wellness platform through innovation and organic growth along with acquisition opportunities in the nutritional snacking space.

Our nutritious snacking platform consists of brands that specialize in providing products for ~~many~~ consumers ~~stands~~that follow certain nutritional philosophies and health-and-wellness trends: Atkins® for ~~“low carb,” “low sugar”~~those following a low-carb lifestyle and ~~“protein rich” nutrition. The Atkins philosophy focuses on~~Quest® for consumers seeking a ~~healthy nutritional approach with reduced levels~~variety of ~~refined carbohydrates~~protein-rich foods and beverages that also limit sugars and ~~encourages the consumption~~simple carbs. We distribute our products in major retail channels, primarily in North America, including grocery, club, and mass merchandise, as well as through e-commerce, convenience, specialty, and other channels. Our portfolio of ~~lean protein, fiber, fruits, vegetables,~~nutritious snacking brands gives us a strong platform with which to introduce new products, expand distribution, and ~~healthy fats.~~attract new consumers to our products.

In ~~our core Atkins snacking business,~~November 2019, we strive to offer a complete line of nutrition bars, ready-to-drink shakes and confections that satisfy hunger while providing consumers with a convenient, “better-for-you” snacking alternative. Our sales, marketing and R&D capabilities enable us to distribute products into a national customer base across the mass merchandiser, grocery and drug channels. We believe that Atkins’ broad brand recognition, our depth of management talent and strong cash generation position us to continue to innovate in the Atkins brand and acquire other brands, and thereby become an industry leading snacking platform. To that end, in December 2016, Atkins completed the acquisition of ~~Wellness Foods, a Canada-based developer, marketer and seller of the SimplyProtein® brand that is focused on protein-rich and low-sugar products.~~

~~Quest Acquisition and Related Financing~~

~~On August 21, 2019, we entered into a stock purchase agreement (the “Purchase Agreement”) to acquire~~ Quest Nutrition, LLC (“Quest”), a healthy lifestyle food company, for a cash purchase price of approximately $1.0 billion (subject to customary adjustments) (the ~~“Acquisition”~~“Quest Acquisition”). ~~The Acquisition is expected~~For more information, please see “Liquidity and Capital Resources—Quest Acquisition.”

Effects of COVID-19

Our consolidated results of operations for the fiscal year ended August 28, 2021 continued to ~~close~~be affected by the ~~end~~significant changes in consumer shopping and consumption behavior patterns due to COVID-19 which had begun during our third quarter in fiscal 2020. Our business did improve during the course of fiscal year 2021, driven by increasing consumer mobility and improving shopper traffic in brick and mortar retailers versus the ~~2019 calendar year, subject~~prior periods that were pressured by COVID-19 movement restrictions. We believe there is a high correlation of consumer mobility to ~~satisfaction~~the consumption of ~~customary closing conditions.~~our products. As shopper traffic within brick and mortar retailers improves, particularly in the mass and convenience store channels, and as consumers spend more time away from home, our business, particularly bars, performs well. There is ~~no financing condition for~~still uncertainty related to the ~~Acquisition.~~

~~On October 9, 2019, we completed an underwritten public offering~~sustainability of ~~13,379,205 shares~~improving consumer mobility and shopping trips observed in the second half of fiscal year 2021. While our common stock at a price per share of $26.16 (the “Offering”), resulting in net proceeds to us of approximately $350.0 million, after deducting underwriting discounts and commissions and our estimated fees and expenses for the Offering. We intend to use these net proceeds to pay aQuest brand has outperformed its portion of the ~~purchase price and related fees and expenses for~~nutritious snacking segment, the ~~Acquisition, or for general corporate purposes if the acquisition~~performance of our Atkins brand, which is ~~not consummated.~~

~~We plan to fund the remainder~~part of the ~~Acquisition by using a significant~~weight management portion of the ~~approximately $265 million of cash on hand and committed financing pursuant to debt commitments from Barclays, Credit Suisse and Goldman Sachs.~~

~~Matters Affecting Comparability~~

~~The Simply Good Foods Company was formed on March 30, 2017 to consummate~~market, has improved at a ~~business combination with~~slower rate. However, the Atkins ~~and Conyers Park. Conyers Park, a special purpose acquisition company, was formed on April 20, 2016~~brand performance for the ~~purpose~~fifty-two weeks ended August 28, 2021 has improved during the course of ~~effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar~~fiscal year 2021, primarily due to increasing consumer mobility and improving shopper traffic in brick and mortar retailers. During fiscal year 2022, we expect our business ~~combination with one or more businesses.~~

~~On April 10, 2017, Conyers Park and Atkins entered into a definitive merger agreement (the “Merger Agreement”). Under~~performance will continue to be correlated primarily to the ~~terms~~level of ~~the agreement, Conyers Park and Atkins combined under a new holding company, Simply Good Foods,~~consumer mobility, which ~~was listed on the Nasdaq Capital Market under the symbol “SMPL” as of closing of the Business Combination.~~

On July 7, 2017 (the “Closing Date”) Simply Good Foods completed the business combination with Conyers Park and Atkins (the “Business Combination”). As a result, Simply Good Foods owns all of the equity in Atkins.

As a result of the Business Combination, Simply Good Foods is the acquirer for accounting purposes and the successor while Atkins is the acquiree and accounting predecessor. Our financial statement presentation includes the ~~financial statements~~rate at which consumers return to working outside the home.

Beginning in the third quarter of ~~Atkins as “Predecessor”~~2020, we actively engaged with the various elements of our value chain, including our retail customers, contract manufacturers, and logistics and transportation providers, to meet demand for ~~periods prior~~our products and to ~~the Closing Date and~~remain informed of ~~Simply Good Foods for periods after the Closing Date, including the consolidation of Atkins.~~

~~Change in Accounting Principle~~

~~During~~any challenges within our value chain. In the fourth quarter of 2020 and continuing into fiscal ~~2019,~~year 2021, consumer consumption habits became steadier, however inventory levels remain variable. Based on information available to us as of the date of this Report, we ~~changed~~believe

we will be able to deliver our ~~accounting principle related~~products to meet customer orders on a timely basis, and therefore, we expect our products will continue to be available for purchase to meet consumer meal replacement and snacking needs for the ~~presentation~~foreseeable future. We continue to monitor customer and consumer demand along with our logistics capabilities to deliver products to our retail customers on a timely and consistent basis, and intend to adapt our plans as needed to continue to drive our business and meet our obligations during the continuing and evolving COVID-19 situation.

We remain uncertain of ~~third party delivery~~the ultimate effect COVID-19 could have on our business notwithstanding the distribution of several U.S. government approved vaccines and the easing of movement restrictions. This uncertainty stems from the potential for, among other things, (i) the presence of current mutations of COVID-19 which have resulted in increased rates of reported cases for which currently approved vaccines are not as effective along with the possibility of future mutations occurring for which current approved vaccines are less effective, (ii) unexpected supply chain disruptions, including disruptions resulting from labor shortages or other human capital challenges, (iii) changes to customer operations, (iv) a reversal in recently improving consumer purchasing and consumption behavior, and (v) the closure of customer establishments.

Please also see the information under Item 1A. “Risk Factors” for additional information regarding the risks of pandemics, such as COVID-19.

Restructuring and Related Charges

In May 2020, we announced certain restructuring activities in conjunction with the implementation of our future-state organization design, which created a fully integrated organization with our completed Quest Acquisition. The new organization design became effective on August 31, 2020. These restructuring plans primarily include workforce reductions, changes in management structure, and the relocation of business activities from one location to another.

For the fifty-two weeks ended August 28, 2021 and August 29, 2020, we incurred a total of $4.3 million and $5.5 million in restructuring and restructuring-related costs, ~~associated with shipping~~respectively, which have been included within General and ~~handling activities previously included as operating expenses in Distribution in~~administrative on the Consolidated Statements of Operations and Comprehensive Income (Loss). InSince the ~~new accounting principle,~~restructuring activities were announced in May 2020, we have incurred aggregate restructuring and restructuring-related costs of $9.8 million. Overall, we expect to incur a total of approximately $10.1 million in restructuring and restructuring-related costs, including the ~~Company is presenting these expenses within cost of goods sold (“COGS”) in the Consolidated Statements of Operations and Comprehensive Income (Loss).~~

In connection with the change in accounting principle, the Company also changed its definition of shipping and handling costs to include costs paid to third-party warehouse operators associated with delivering product to a customer,$9.8 million previously included in General and administrative and depreciation and amortization of the assets at the third-party warehouse, previously included in Depreciation and amortization. Under the previous definition of shipping and handling costs, the Company only included third-party delivery costs in Distribution.

~~Amounts presented for the successor fifty-two week period ended August 25, 2018, the successor period from July 7, 2017 through August 26, 2017,~~incurred, and the ~~predecessor period from~~balance of which will be paid through the second quarter of fiscal year 2022. As of August 28, ~~2016 through July 6, 2017 have been adjusted in accordance with this accounting principle change. See~~2021, the outstanding restructuring liability was $0.9 million. Refer to Note ~~2 to the~~17, Restructuring and Related Charges, of our Consolidated Financial Statements included herein for additional information regarding restructuring activities.

SimplyProtein Sale

Effective September 24, 2020, we sold the assets exclusively related to our SimplyProtein® brand of products for approximately $8.8 million of consideration, including cash of $5.8 million and a note receivable for $3.0 million, to a newly formed entity led by the Company’s former Canadian-based management team who had been responsible for this brand prior to the sale transaction (the “SimplyProtein Sale”). In addition to purchasing these assets, the buyer assumed certain liabilities related to the SimplyProtein® brand’s business. There was no gain or loss recognized as a result of the SimplyProtein Sale. The transaction has enabled our management to focus its full time and resources on our core Atkins® and Quest® branded businesses and other strategic initiatives.

Supply Chain

We expect higher raw material and freight costs in fiscal year 2022. In June 2021, management notified our customers of our plans to institute a price increase effective in September 2021, the ~~accounting principle change.~~first month of our fiscal year 2022. Management believes the price increase and productivity initiatives will enable us to continue to invest in projects that drive growth.

We have begun to see logistics challenges, which we believe have contributed to lower retail and e-commerce sales of our products due to out-of-stock situations, delayed recognition of sales and higher than historical inventory levels. In addition, we could experience additional lost sale opportunities at our retail and e-commerce customers if our products are not available for purchase as a result of disruptions in our supply chain relating to an inability to obtain ingredients or packaging, labor challenges at our logistics providers or our contract manufacturers, or if our customers experience delays in stocking our products.

Our Reportable Segment

~~Our business is~~ Following the Quest Acquisition, our operations are organized ~~around~~into two operating segments, Atkins and Quest, which are aggregated into one ~~reportable~~reporting segment, ~~based on our go-to-market strategies,~~due to similar financial, economic and operating characteristics. The operating segments are also similar in the ~~objectives~~following areas: (a) the nature of the ~~business~~products; (b) the nature of the production processes; (c) the methods used to distribute products to customers, (d) the type of customer for the products, and ~~how our chief decision maker, our President and Chief Executive Officer, monitors operating performance and allocates resources.~~(e) the nature of the regulatory environment.

Key Financial Definitions

Net sales. Net sales ~~consists~~consist primarily of product sales less the cost of promotional activities, slotting fees and other sales credits and adjustments, including product returns. ~~The Company also includes licensing revenue from the frozen meals business in net sales.~~

Cost of goods sold. Cost of goods sold consists primarily of the costs we pay to our contract manufacturing partners to produce the products sold. These costs include the purchase of raw ingredients, packaging, shipping and handling, warehousing, depreciation of warehouse equipment, and a tolling charge for the contract manufacturer. Cost of goods sold includes products provided at no charge as part of promotions and the non-food materials provided with customer orders.

Operating expenses. Operating expenses consist primarily of selling and marketing, general and administrative, depreciation and amortization, and ~~other expenses.~~business transaction costs. The following is a brief description of the components of operating expenses:

•Selling and marketing. Selling and marketing expenses ~~are comprised of~~comprise broker commissions, customer marketing, media and other marketing costs.

•General and administrative. General and administrative expenses ~~are comprised of~~comprise expenses associated with corporate and administrative functions that support our business, including ~~fees for~~ employee ~~salaries,~~compensation, stock-based compensation, professional services, integration costs, restructuring costs, insurance and other general corporate expenses.

•Depreciation and amortization. Depreciation and amortization costs consist of costs associated with the depreciation of fixed assets and capitalized leasehold improvements and amortization of intangible assets. ~~Depreciation and amortization excludes depreciation of warehouse equipment, which is included in cost of goods sold.~~

•Business transaction costs. Business transaction costs ~~are comprised of~~comprise legal, due diligence, consulting and accounting firm expenses associated with the process of actively pursuing potential and completed business ~~combinations.~~

combinations, including the Quest Acquisition.

•Loss ~~(gain) in fair value change~~on impairment. Loss on impairment consists of ~~contingent consideration - TRA liability. Gain in fair value change of contingent consideration - TRA liability~~impairment charges ~~relate~~related to ~~fair value adjustments of the Tax Receivable Agreement (the “TRA”) liability.~~

our brand intangible asset.

Results of Operations

Sales and earnings growth improved during fiscal year 2021 as compared to fiscal year 2020 primarily as a result of increased consumer mobility in fiscal year 2021 as compared to the prior fiscal year, which experienced stricter COVID-19 movement restrictions, performance of new products and product forms released during fiscal year 2021 as well as Quest’s full-year inclusion in our results of operations in fiscal year 2021 as compared to Quest’s partial inclusion in our results of operations in the prior fiscal year due to the timing of the Quest Acquisition closing. As consumer foot traffic within brick and mortar retailers improved during fiscal year 2021, particularly in the mass and convenience store channels, our business did well. Strong sales growth and cost controls around general and administrative costs more than offset higher marketing and employee-related costs.

In assessing the performance of our business, we consider a number of key performance indicators used by management and typically used by our competitors, including the non-GAAP ~~measures~~measure of Adjusted EBITDA. Because not all companies use identical calculations, this presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. See “Reconciliation of EBITDA and Adjusted EBITDA” below for a reconciliation of ~~EBITDA and~~ Adjusted EBITDA to net income for each applicable period.

A discussion regarding our financial condition and results of operations for the fifty-two weeks ended August 28, 2021 compared to the fifty-two weeks ended August 29, 2020 is presented below. A discussion regarding our financial condition and results of operations for the fifty-two weeks ended August 29, 2020 compared to the fifty-three weeks ended August 31, 2019 can be found under Item 7 of our Annual Report on Form 10-K/A for the fiscal year ended August 29, 2020, filed with the SEC on June 30, 2021.

Comparison of Results for the ~~Fifty-Three~~Fifty-Two Weeks Ended August ~~31, 2019~~28, 2021 and the Fifty-Two Weeks Ended August ~~25, 2018~~29, 2020

The following table presents, for the periods indicated, selected information from our consolidated financial results, including information presented as a percentage of net sales:


	52-Weeks Ended		% of Net Sales		52-Weeks Ended		% of Net Sales
(In thousands)	August 28, 2021				August 29, 2020
Net sales	$	1,005,613	100.0	%	$	816,641	100.0	%
Cost of goods sold	595,847		59.3	%	492,313		60.3	%
Gross profit	409,766		40.7	%	324,328		39.7	%

Operating expenses:
Selling and marketing	112,928		11.2	%	94,469		11.6	%
General and administrative	106,181		10.6	%	106,251		13.0	%
Depreciation and amortization	16,982		1.7	%	15,259		1.9	%
Business transaction costs	—		—	%	27,125		3.3	%
Loss on impairment	—		—	%	3,000		0.4	%
Total operating expenses	236,091		23.5	%	246,104		30.1	%

Income from operations	173,675		17.3	%	78,224		9.6	%

Other income (expense):
Interest income	84		—	%	1,516		0.2	%
Interest expense	(31,557)		(3.1)	%	(32,813)		(4.0)	%
(Loss) gain in fair value change of warrant liability	(66,197)		(6.6)	%	30,938		3.8	%
Gain on legal settlement	5,000		0.5	%	—		—	%

(Loss) gain on foreign currency transactions	(5)		—	%	658		0.1	%
Other (expense) income	(140)		—	%	441		0.1	%
Total other (expense) income	(92,815)		(9.2)	%	740		0.1	%

Income before income taxes	80,860		8.0	%	78,964		9.7	%
Income tax expense	39,980		4.0	%	13,326		1.6	%
Net income	$	40,880	4.1	%	$	65,638	8.0	%

Other financial data:
Adjusted EBITDA (1)	$	207,273	20.6	%	$	153,912	18.8	%

53-Weeks Ended % of Sales 52-Weeks Ended % of Sales
(In thousands) August 31, 2019 August 25, 2018
(Successor) (Successor)
Net sales $ 523,383
100.0 % $ 431,429
100.0 %
Cost of goods sold ⁽¹⁾
305,978
58.5 % 251,063
58.2 %
Gross profit 217,405
41.5 % 180,366
41.8 %

Operating expenses:
Selling and marketing ⁽²⁾
67,488
12.9 % 59,092
13.7 %
General and administrative ⁽¹⁾
61,972
11.8 % 49,635
11.5 %
Depreciation and amortization ⁽¹⁾
7,496
1.4 % 7,498
1.7 %
Business transaction costs 7,107
1.4 % 2,259
0.5 %
Gain in fair value change of contingent consideration - TRA liability 533
0.1 % (2,848 ) (0.7 )%
Total operating expenses 144,596
27.6 % 115,636
26.8 %

Income from operations 72,809
13.9 % 64,730
15.0 %

Other income (expense):
Interest income 3,826
0.7 % —
— %
Interest expense (13,627 ) (2.6 )% (12,551 ) (2.9 )%
Gain on settlement of TRA liability 1,534
0.3 % —
— %
Gain (loss) on foreign currency transactions (452 ) (0.1 )% 97
— %
Other income 196
— % 815
0.2 %
Total other expense (8,523 ) (1.6 )% (11,639 ) (2.7 )%

Income before income taxes 64,286
12.3 % 53,091
12.3 %
Income tax (benefit) expense 16,750
3.2 % (17,364 ) (4.0 )%
Net income (loss) $ 47,536
9.1 % $ 70,455
16.3 %

Other financial data:
Adjusted EBITDA $ 98,719
18.9 % $ 78,602
18.2 %
(1) Adjusted EBITDA is a non-GAAP financial metric. See “Reconciliation of EBITDA and Adjusted EBITDA” below for a reconciliation of Adjusted EBITDA to net income for each applicable period.



~~(1)~~		During the fifty-three weeks ended August 31, 2019, certain reclassifications were made to previously reported amounts to conform to the current presentation. On the consolidated statement of operations, outbound freight previously included in Distribution, distribution center expenses previously included in ~~General and administrative, and depreciation for equipment used in warehouse operations were reclassified to~~ ~~Cost of goods sold~~. 2018 reflects adjusted amounts in accordance with this accounting principle change. See Note 2 to the consolidated financial statements included herein for additional information on the accounting principle change.
~~(2)~~		~~During the fifty-three weeks ended August 31, 2019, the Company combined Selling and Marketing within one financial statement line. 2018 reflects adjusted amounts.~~

Net sales. Net sales ~~for the successor fifty-three week period ended August 31, 2019 were $523.4~~of $1,005.6 million ~~compared to $431.4 million for the successor fifty-two week period ended August 25, 2018. The net sales~~ represented an increase of ~~21.3%~~ was driven by volume growth. Net price realization was a slight benefit, partially offset by a shift in non-price related customer activity. The fifty-third week of fiscal 2019 was a 1.8% contribution to full year sales growth.

~~Cost of goods sold.~~ Cost of goods sold for the successor fifty-three week period ended August 31, 2019 were $306.0 million compared to $251.1 million for the successor fifty-two week period ended August 25, 2018. The cost of goods sold increase is driven by sales volume growth and increased distribution center expenses. These increases are partially offset by logistics efficiencies.

~~Gross profit.~~ ~~Gross profit for the successor fifty-three week period ended August 31, 2019 was $217.4~~$189.0 million, or ~~41.5% of net sales compared to $180.4 million, or 41.8% of net sales, for the successor fifty-two week period ended August 25, 2018, a~~ ~~decrease~~ of 30 ~~basis point. Gross margin is effected by non-price related customer activity that is a shift from selling and marketing expense.~~

~~Operating expenses.~~ Operating expenses for the successor fifty-three week period ended August 31, 2019 were $144.6 million, or 27.6% of net sales, compared to $115.6 million, or 26.8% of net sales, for the successor fifty-two week period ended August 25, 2018 due to the following:

~~Selling and marketing. Selling and marketing expenses~~ ~~increase~~d ~~$8.4 million, or~~ ~~14.2%~~23.1%, for the ~~successor fifty-three week period~~fifty-two weeks ended August ~~31, 2019~~28, 2021 compared to the ~~successor~~ fifty-two ~~week period~~weeks ended August ~~25, 2018. The~~ 29, 2020. This increase is was primarily attributable to the Quest brand, which increased our North America net sales by 20.4% due to ~~an increase~~Quest’s full-year inclusion in ~~television media and e-commerce investments, offset by a shift~~our results of operations in ~~non-price related customer activity.~~

~~General and administrative. General and administrative expenses~~ ~~increase~~d ~~$12.3 million, or~~ ~~24.9%, for the successor fifty-three week period ended August 31, 2019~~fiscal year 2021 as compared to ~~the successor fifty-two week period ended August 25, 2018. The increase is due to higher incentive compensation~~Quest’s partial inclusion in our results of ~~$5.3 million, internal resource investments of $3.3 million, and a legal settlement of $3.5 million.~~

~~Depreciation and amortization. Depreciation and amortization expenses for the successor fifty-three week period ended August 31, 2019 were flat compared to the successor fifty-two week period ended August 25, 2018.~~

~~Business transaction costs. Business transaction costs~~ ~~increase~~d ~~$4.8 million~~ for the successor fifty-three week period ended August 31, 2019 compared to the successor fifty-two week period ended August 25, 2018. The increase is primarily due to the pending acquisition of Quest, as announced August 21, 2019 and discussed in “Recent Developments” in Item 1. Business. The ~~$2.3 million~~ ~~recorded~~operations in the ~~successor fifty-two week period ended August 25, 2018 is comprised of expenses relating to business development activities.~~

~~Loss (gain) in fair value change of contingent consideration - TRA liability. The successor fifty-three week period ended August 31, 2019 included a loss in fair value change of contingent consideration of~~ ~~$0.5 million. The increase is~~prior fiscal year due to the timing of the ~~settlement~~Quest Acquisition closing as well as post-acquisition Quest brand sales volume growth. The remaining increase in net sales was attributed to sales volume growth in our Atkins brand, which was driven by increased consumer mobility in fiscal year 2021 as compared to the prior fiscal year 2020 related to COVID-19 movement restrictions, and international sales. The increase in net sales was partially offset by decreased sales volume of approximately 1.5% related to the ~~TRA liability during~~SimplyProtein Sale and the ~~successor fifty-three week period~~restructuring-related business activities in Europe in fiscal year 2021.

Cost of goods sold. Cost of goods sold increased $103.5 million, or 21.0%, for the fifty-two weeks ended August ~~31, 2019. The gain in~~28, 2021 compared to the ~~successor~~ fifty-two ~~week period~~weeks ended August ~~25, 2018 reflects~~29, 2020. The increase in cost of goods sold was driven by sales volume growth primarily attributable to the Quest brand as discussed above, partially offset by the effect of the ~~change~~$7.5 million non-cash inventory step-up related to the Quest Acquisition recorded in ~~tax law~~fiscal year 2020. As previously discussed above in “Supply Chain,” we expect to have higher raw material and freight costs in fiscal year 2022, and as such management notified our customers in June 2021 of our plans to institute a price increase effective in September 2021, the first month of our fiscal year 2022. Management believes the price increase and productivity initiatives will enable us to continue to invest in projects that drive growth.

Gross profit. Gross profit increased $85.4 million, or 26.3%, for the fifty-two weeks ended August 28, 2021 compared to the fifty-two weeks ended August 29, 2020, which was primarily driven by the sales volume growth attributable to the Quest brand as discussed above and the $7.5 million non-cash inventory step-up related to the Quest Acquisition in fiscal year 2020. Gross profit of $409.8 million, or 40.7% of net sales, for fiscal year 2021 increased 100 basis points from gross profit of $324.3 million, or 39.7% of net sales, for fiscal year 2020. The increase in gross profit as a percentage of net sales was primarily the result of the $7.5 million non-cash inventory step-up related to the Quest Acquisition in fiscal year 2020.

Operating expenses. Operating expenses decreased $10.0 million, or 4.1%, for the fifty-two weeks ended August 28, 2021 compared to the fifty-two weeks ended August 29, 2020 due to the following:

•Selling and marketing. Selling and marketing expenses increased $18.5 million, or 19.5%, for the fifty-two weeks ended August 28, 2021 compared to the fifty-two weeks ended August 29, 2020. The increase was primarily related to Quest’s full-year inclusion in our results of operations in fiscal year 2021 as compared to Quest’s partial inclusion in the prior ~~year.~~

fiscal year due to the timing of the Quest Acquisition closing. Furthermore, there was higher selling and marketing spend related to additional brand building initiatives which occurred in fiscal year 2021 as compared to fiscal year 2020. These increases were partially offset by decreased selling and marketing expenses related to the SimplyProtein Sale and the restructuring-related business activities in Europe.

~~Interest income.~~ ~~Interest income increased~~ ~~$3.8~~•General and administrative. General and administrative expenses decreased $0.1 million, or 0.1%, for the ~~successor fifty-three week period~~fifty-two weeks ended August ~~31, 2019~~28, 2021 compared to the ~~successor fifty-three week period~~fifty-two weeks ended August ~~31, 2019,~~29, 2020. The decrease was primarily attributable to reductions in costs related to the integration of Quest of $7.8 million and restructuring charges of $1.2 million. These decreases were offset by increased general and administrative expenses primarily related to Quest’s full-year inclusion in our results of operations in fiscal year 2021 as compared to Quest’s partial inclusion in the prior fiscal year due to the ~~Company’s~~timing of the Quest Acquisition closing as well as increased ~~cash balance resulting from warrant exercises during~~stock-based compensation expense of $0.6 million.

•Depreciation and amortization. Depreciation and amortization expenses increased $1.7 million, or 11.3%, for the ~~successor fifty-three week period~~fifty-two weeks ended August ~~31, 2019 and an~~28, 2021 compared to the fifty-two weeks ended August 29, 2020. The increase was primarily due to Quest’s full-year inclusion of amortization expense in ~~market interest rates.~~fiscal year 2021 related to intangible assets recognized as part of the Quest Acquisition as compared to its partial inclusion in the prior fiscal year 2020.

~~Interest expense.~~ ~~Interest expense~~•Business transaction costs. There were no business transaction costs for the ~~successor fifty-three week period~~fifty-two weeks ended August ~~31, 2019 was $13.6 million compared to $12.6~~28, 2021. Business transaction costs were $27.1 million for the ~~successor~~ fifty-two ~~week period~~weeks ended August ~~25, 2018, an~~29, 2020 and comprised expenses related to the Quest Acquisition.

•Loss on impairment. There was no loss on impairment for the fifty-two weeks ended August 28, 2021. Loss on impairment was $3.0 million in the fifty-two weeks ended August 29, 2020 and related to the impairment of the SimplyProtein brand intangible asset.

Interest income. Interest income decreased $1.4 million for the fifty-two weeks ended August 28, 2021 compared to the fifty-two weeks ended August 29, 2020 primarily due to $195.3 million of cash on hand being utilized for the Quest Acquisition in the first quarter of fiscal year 2020 and lower market rates.

Interest expense. Interest expense decreased $1.3 million for the fifty-two weeks ended August 28, 2021 compared to the fifty-two weeks ended August 29, 2020 primarily due to principal payments reducing the outstanding balance of the Term Facility (as defined below). We funded the Term Facility in the amount of $460.0 million to partially finance the Quest Acquisition in the first quarter of fiscal 2020, and we made principal repayments of $50.0 million during fiscal year 2020. In fiscal year 2021, we made additional principal payments of $150.0 million. The decrease in interest expense was partially offset by a $1.1 million increase ~~due~~in amortization of deferred financing costs and debt discount, which was $4.6 million for the fifty-two weeks ended August 28, 2021 compared to $3.5 million for the fifty-two weeks ended August 29, 2020.

(Loss) gain in fair value change of warrant liability. During the fifty-two weeks ended August 28, 2021 and the fifty-two weeks ended August 29, 2020, we recorded a non-cash loss of $66.2 million and a non-cash gain of $30.9 million, respectively, related to changes in ~~market interest rates.~~valuation of our liability-classified warrants issued through a private placement (“Private Warrants”), which is primarily driven by movements in our stock price and volatility measurements.

Gain on ~~settlement of TRA liability.~~legal settlement. The Company recorded a ~~$1.5~~$5.0 million gain ~~in connection with~~on a legal settlement during the ~~settlement of the TRA liability in the fifty-three week period~~fifty-two weeks ended August ~~31, 2019. The TRA settlement is discussed in~~ ~~Note 10~~ ~~of the Consolidated Statements of Operations and Comprehensive Income (Loss) included in this Report.~~28, 2021.

(Loss) gain on foreign currency transactions. A An immaterial loss of ~~$0.5 million~~ inon foreign currency transactions was recorded for the ~~fifty-three week period~~fifty-two weeks ended August ~~31, 2019~~28, 2021 compared to a foreign currency gain of ~~$0.1~~$0.7 million for the fifty-two ~~week period~~weeks ended August ~~25, 2018.~~29, 2020. The ~~change~~variance primarily relates to changes in foreign currency rates related to our international operations.

Income tax ~~(benefit)~~ expense. Income tax expense ~~for the successor fifty-three week period ended August 31, 2019 was $16.8 million compared to income tax benefit of $17.4~~increased $26.7 million for the ~~successor~~ fifty-two ~~week period~~weeks ended August ~~25, 2018.~~28, 2021 compared to the fifty-two weeks ended August 29, 2020. The increase in our income tax expense is primarily ~~attributed~~driven by higher income from operations, partially offset by changes in permanent differences.

Net income (loss). Net income was $40.9 million for the fifty-two weeks ended August 28, 2021, a decrease of $24.8 million, compared to net income of $65.6 million for the ~~one-time benefit of $29.0 million~~fifty-two weeks ended August 29, 2020. The decrease in net income was primarily driven by the non-cash fair value loss in the current period compared to a fair value gain in the prior period related to the measurement of our liability-classified Private Warrants, and also the increase to our income tax ~~law change and remeasurement of deferred tax liabilities recorded in~~expense for the fiscal year 2021 as compared to the fiscal year 2020, which was partially offset by increased income from operations as discussed above.

Adjusted EBITDA. Adjusted EBITDA increased $53.4 million, or 34.7%, for the fifty-two ~~week period~~weeks ended August ~~25, 2018, which did not apply for~~28, 2021 compared to the ~~fifty-three week period~~fifty-two weeks ended August ~~31, 2019.~~

~~Adjusted EBITDA.~~ ~~Adjusted EBITDA~~29, 2020, driven primarily by sales volume growth for ~~the successor fifty-three week period ended August 31, 2019 was $98.7 million~~both brands and Quest’s full-year inclusion in our results of operations in fiscal year 2021 as compared to ~~$78.6 million for the successor fifty-two week period ended August 25, 2018.~~Quest’s partial inclusion in fiscal year 2020 as discussed above. For a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, see “Reconciliation of EBITDA and Adjusted EBITDA” below.

37Reconciliation of EBITDA and Adjusted EBITDA

~~Comparison of Results for the Successor Fifty-Two Weeks Ended August 25, 2018, the Successor Period from July 7, 2017 through August 26, 2017~~ EBITDA and ~~the Predecessor Period from August 28, 2016 through July 6, 2017~~

~~The following table presents, for the periods indicated, selected information from our consolidated financial results, including information presented as a percentage of net sales:~~

Successor Successor Predecessor
52-Weeks Ended % of Sales From July 7, 2017
through August 26, 2017 % of Sales From August 28, 2016 through July 6, 2017 % of Sales
(In thousands) August 25, 2018
Net sales $ 431,429
100.0 % $ 56,334
100.0 % $ 339,837
100.0 %
Cost of goods sold ⁽¹⁾
251,063
58.2 % 39,584
70.3 % 200,026
58.9 %
Gross profit 180,366
41.8 % 16,750
29.7 % 139,811
41.1 %

Operating expenses:
Selling and marketing ⁽²⁾
59,092
13.7 % 6,937
12.3 % 47,494
14.0 %
General and administrative ⁽¹⁾
49,635
11.5 % 6,969
12.4 % 34,567
10.2 %
Depreciation and amortization ⁽¹⁾
7,498
1.7 % 985
1.7 % 8,409
2.5 %
Business transaction costs 2,259
0.5 % —
— % 25,608
7.5 %
Gain in fair value change of contingent consideration - TRA liability (2,848 ) (0.7 )% —
— % —
— %
Total operating expenses 115,636
26.8 % 14,891
26.4 % 116,078
34.2 %

Income from operations 64,730
15.0 % 1,859
3.3 % 23,733
7.0 %

Other income (expense):
Change in warrant liabilities —
— % —
— % 722
0.2 %
Interest expense (12,551 ) (2.9 )% (1,662 ) (3.0 )% (22,724 ) (6.7 )%
Gain (loss) on foreign currency transactions 97
— % 513
0.9 % 133
— %
Other income 815
0.2 % 30
0.1 % 221
0.1 %
Total other expense (11,639 ) (2.7 )% (1,119 ) (2.0 )% (21,648 ) (6.4 )%

Income before income taxes 53,091
12.3 % 740
1.3 % 2,085
0.6 %
Income tax (benefit) expense (17,364 ) (4.0 )% 290
0.5 % 4,570
1.3 %
Net income (loss) $ 70,455
16.3 % $ 450
0.8 % $ (2,485 ) (0.7 )%

Other financial data:
Adjusted EBITDA $ 78,602
18.2 % $ 8,654
15.4 % $ 63,889
18.8 %



~~(1)~~		During the fifty-three weeks ended August 31, 2019, certain reclassifications were made to previously reported amounts to conform to the current presentation. On the consolidated statement of operations, outbound freight previously included in Distribution, distribution center expenses previously included in ~~General and administrative, and depreciation for equipment used in warehouse operations were reclassified to~~ ~~Cost of goods sold~~. 2018 and 2017 reflect adjusted amounts in accordance with this accounting principle change. See Note 2 to the consolidated financial statements included herein for additional information on the accounting principle change.
~~(2)~~		~~During the fifty-three weeks ended August 31, 2019, the Company combined Selling and Marketing within one financial statement line. 2018 and 2017 reflect adjusted amounts.~~

~~Comparison of Results for the Successor Fifty-Two Weeks Ended August 25, 2018 and the Successor Period from July 7, 2017 through August 26, 2017~~

~~Net sales.~~ ~~Net sales for the successor fifty-two week period ended August 25, 2018 were $431.4 million compared to $56.3 million for the successor period from July 7, 2017 through August 26, 2017.~~

~~Cost of goods sold.~~ ~~Cost of goods sold for the successor fifty-two week period ended August 25, 2018 were $251.1 million compared to $39.6 million for the successor period from July 7, 2017 through August 26, 2017.~~

~~Gross profit.~~ Gross profit for the successor fifty-two week period ended August 25, 2018 was $180.4 million, or 41.8% of net sales compared to $16.8 million, or 29.7% of net sales, for the successor period from July 7, 2017 through August 26, 2017.

~~Operating expenses.~~ Operating expenses for the successor fifty-two week period ended August 25, 2018 were $115.6 million, or 26.8% of net sales, compared to $14.9 million, or 26.4% of net sales, for the successor period from July 7, 2017 through August 26, 2017.

~~Interest expense.~~ Interest expense for the successor fifty-two week period ended August 25, 2018 was $12.6 million, or 2.9% of net sales, compared to $1.7 million, or 3.0% of net sales, for the successor period from July 7, 2017 through August 26, 2017.

~~Income tax (benefit) expense.~~ Income tax benefit for the successor fifty-two week period ended August 25, 2018 was $17.4 million compared to income tax expense of $0.3 million for the successor period from July 7, 2017 through August 26, 2017.

~~Adjusted EBITDA.~~ Adjusted EBITDA ~~for the successor fifty-two week period ended August 25, 2018 was $78.6 million compared to $8.7 million for the successor period from July 7, 2017 through August 26, 2017.~~

~~Comparison of Results for the Successor Period from July 7, 2017 through August 26, 2017 and the Predecessor Period from August 28, 2016 through July 6, 2017.~~

~~Net sales~~. Net sales for the successor period from July 7, 2017 through August 26, 2017 were $56.3 million compared to $339.8 million for the predecessor period from August 28, 2016 through July 6, 2017. There was no effect to net sales as a result of the Business Combination.

~~Cost of goods sold.~~ Cost of goods sold for the successor period from July 7, 2017 through August 26, 2017 were $39.6 million compared to $200.0 million for the predecessor period from August 28, 2016 through July 6, 2017. As a result of the Business Combination, there was a one-time inventory fair value step-up of $6.0 million that was charged to cost of goods sold in the successor period from July 7, 2017 through August 26, 2017.

~~Gross profit.~~ Gross profit for the successor period from July 7, 2017 through August 26, 2017, including the effect of the one-time inventory fair value step-up, were $16.8 million, or 29.7% of net sales, compared to the predecessor period from August 28, 2016 through July 6, 2017, gross profit was $139.8 million, or 41.1% of net sales.

~~Operating expenses.~~ Operating expenses for the successor period from July 7, 2017 through August 26, 2017 were $14.9 million or 26.4% of net sales compared to $116.1 million or 34.2% of net sales the predecessor period from August 28, 2016 through July 6, 2017.

~~Interest expense.~~ Interest expense for the successor period from July 7, 2017 through August 26, 2017 was $1.7 million or 3.0% of net sales compared to $22.7 million or 6.7% of net sales for the predecessor period from August 28, 2016 through July 6, 2017. The lower interest expense in the successor period from July 7, 2017 through August 26, 2017 is the result of the reduced principal balance of the debt as well as a reduction in the rate of interest being incurred on the debt.

~~Income tax expense.~~ Income tax expense for the successor period from July 7, 2017 through August 26, 2017 was $0.3 million compared to $4.6 million for the predecessor period from August 28, 2016 through July 6, 2017. Higher taxes in the predecessor period relate to the effects of the nondeductible business combination transaction costs.

~~Adjusted EBITDA.~~ Adjusted EBITDA decreased $55.2 million or 86.5% for the successor period from July 7, 2017 through August 26, 2017 compared to the predecessor period from August 28, 2016 through July 6, 2017. For a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, see “Reconciliation of Adjusted EBITDA”.

~~Reconciliation of Adjusted EBITDA~~

~~Adjusted EBITDA~~. ~~Adjusted EBITDA is a~~are non-GAAP financial ~~measure~~measures commonly used in our industry and should not be construed as ~~an alternative~~alternatives to net income as an indicator of operating performance or as ~~an alternative~~alternatives to cash flow provided by operating activities as a measure of liquidity (each as determined in accordance with GAAP). Simply Good Foods defines ~~Adjusted~~ EBITDA ~~(earnings before interest, tax, depreciation and amortization)~~ as net income or loss before interest income, interest expense, income tax expense, depreciation and amortization, ~~with~~and Adjusted EBITDA as further ~~adjustments~~adjusted to exclude the following items: business transaction costs, stock-based compensation ~~and warrant~~ expense, ~~transaction and IPO readiness~~inventory step-up, integration costs, restructuring costs, ~~management fees, frozen media licensing fees,~~ non-core legal costs, ~~transactional exchange impact, change~~gain or loss in fair value change of ~~contingent consideration - TRA~~warrant liability, ~~business transaction costs~~gain or loss due to legal settlements, and other non-core ~~expenses~~. expenses. The Company believes that EBITDA and Adjusted EBITDA, when used in conjunction with net income, are useful to provide additional information to investors. Management of the Company uses EBITDA and Adjusted EBITDA to ~~evaluate~~supplement net income because these measures reflect operating results of the on-going operations, eliminate items that are not directly attributable to the Company’s underlying operating performance, enhance the overall understanding of past financial performance and ~~this~~future prospects, and allow for greater transparency with respect to the key metrics the Company’s management uses in its financial ~~measure is among the primary measures used by management for planning~~ and ~~forecasting of future periods.~~operational decision making. The Company also believes that Adjusted EBITDA is ~~also~~ frequently used by securities analysts, investors and other interested parties ~~to evaluate~~in the evaluation of companies in ~~our~~its industry. The Company believes that the inclusion of these supplementary adjustments in presenting Adjusted EBITDA is relevant and useful for investors because it provides additional information to investors, reflects operating results more accurately of the on-going operations,

allows investors to view results in a manner similar to the method used by management and facilitates comparison of the Company’s results with the results of other companies that have different financing and capital structures.

~~The components of the Company’s computation of~~ Adjusted EBITDA may not be comparable to other similarly titled captions of other companies due to differences in the non-GAAP calculation.

The following unaudited ~~tables below provide~~table provides a reconciliation of EBITDA and Adjusted EBITDA to its most directly comparable GAAP measure, which is net income, ~~(loss).~~for the fifty-two weeks ended August 28, 2021 and the fifty-two weeks ended August 29, 2020:


	52-Weeks Ended		52-Weeks Ended
(In thousands)	August 28, 2021		August 29, 2020
Net income	$	40,880	$	65,638
Interest income	(84)		(1,516)
Interest expense	31,557		32,813
Income tax expense	39,980		13,326
Depreciation and amortization	18,174		16,007
EBITDA	130,507		126,268
Business transaction costs	—		27,125
Stock-based compensation expense	8,265		7,636
Inventory step-up	—		7,522
Integration of Quest	2,928		10,742
Restructuring	4,324		5,527
Non-core legal costs	—		718

Loss (gain) in fair value change of warrant liability	66,197		(30,938)
Gain on legal settlement	(5,000)		—

Other (1)	52		(688)
Adjusted EBITDA	$	207,273	$	153,912

(1) Other items consist principally of exchange impact of foreign currency transactions and other expenses.

Adjusted EBITDA Reconciliation: 53-Weeks Ended 52-Weeks Ended From July 7, 2017
through August 26, 2017 From August 28, 2016 through July 6, 2017
August 31, 2019 August 25, 2018
(In thousands) (Successor) (Successor) (Successor) (Predecessor)
Net income (loss) $ 47,536
$ 70,455
$ 450
$ (2,485 )
Interest expense 13,627
12,551
1,662
22,724
Interest income (3,826 ) (301 ) —
—
Income tax expense (benefit) 16,750
(17,364 ) 290
4,570
Depreciation and amortization 7,644
7,672
1,000
8,617
EBITDA 81,731
73,013
3,402
33,426
Business transaction costs 7,107
2,259
—
25,608
Stock-based compensation and warrant expense 5,501
4,029
412
1,719
Transaction fees / IPO readiness —
—
—
371
Restructuring 22
631
—
�� 167
Roark management fee —
—
—
1,200
Recall receivable reserve —
—
(1,195 ) —
Gain on settlement of TRA (1,534 ) —
—
—
Frozen licensing media —
250
456
794
Non-core legal costs 4,851
1,314
96
723
Loss (gain) in fair value change of contingent consideration - TRA liability 533
(2,848 ) —
—
Purchase accounting inventory step-up —
—
5,989
—
Other (1) 508
(46 ) (506 ) (119 )
Adjusted EBITDA $ 98,719
$ 78,602
$ 8,654
$ 63,889

~~_______________~~


~~(1)~~	~~Other items consist principally of exchange impact of foreign currency transactions and other expenses.~~

Liquidity and Capital Resources

Overview

We have historically funded our operations with cash flow from operations and, when needed, with borrowings under our credit facilities. Our principal uses ~~for liquidity~~of cash have been working capital, debt service, and ~~working capital.~~the Quest Acquisition.

We had $75.3 million in cash as of August 28, 2021. We believe our sources of liquidity and capital will be sufficient to finance our continued operations, growth strategy and additional expenses we expect to incur ~~including the pending acquisition of Quest~~ for at least the next twelve months. As circumstances warrant, we may issue debt and/or equity securities from time to time on an opportunistic basis, dependent upon market conditions and available pricing. We make no assurance that we can issue and sell such securities on acceptable terms or at all.

Our material future cash requirements from contractual and other obligations relate primarily to our principal and interest payments for our Term Facility, as discussed below, and our operating and finance leases. Refer to Note 7, Long-Term Debt and Line of Credit, and Note 10, Leases, of the Consolidated Financial Statements included in Item 8 of this Report for additional information related to the expected timing and amount of payments related to our contractual and other obligations.

Debt and Credit Facilities

On July 7, 2017, ~~the Company~~we entered into a credit agreement with Barclays Bank PLC and other ~~parties.~~parties (as amended to date, the “Credit Agreement”). The ~~credit agreement provides~~Credit Agreement at that time provided for (i) a term facility of $200.0 million (“Term Facility”) with a ~~seven year~~seven-year maturity and (ii) a revolving credit facility of up to $75.0 million (the “Revolving Credit Facility”) with a ~~five year maturity, under the first lien senior secured loan facilities (the “First Lien”).~~five-year maturity. Substantially concurrent with the consummation of the Business Combination, the full $200.0 million of the ~~First Lien term loan~~Term Facility (the “Term Loan”) was drawn. ~~No amounts were originally drawn on the Revolving Credit Facility.~~ The interest rate per annum is based on ~~either~~either: (i) a base rate equaling the higher of (a) the “prime ~~rate”,~~rate,” (b) the federal funds effective rate plus 0.50% ~~and~~, or (c) the Euro-currency rate applicable for an interest period of one month plus 1.00% plus (x) 3.00% margin for the Term Loan or (y) 2.00% margin for the Revolving Credit Facility, or (ii) London Interbank Offered Rate (“LIBOR”) adjusted for statutory reserve requirements plus (x) 4.00% margin for the Term Loan subject to a floor of 1.00% or (y) 3.00% margin for the Revolving Credit Facility. The ~~applicable margin for Revolving~~Simply Good Foods Company is not a borrower under the Credit ~~Facility was adjusted after the completion~~Agreement and has not provided a guarantee of the ~~Company’s first full fiscal quarter after~~Credit Agreement. Simply Good Foods USA, Inc., is the ~~closing~~administrative borrower and certain other subsidiary holding companies are co-borrowers under the Credit Agreement. Each of our domestic subsidiaries that is not a named borrower under the ~~Business Combination based upon the Company’s consolidated First Lien net leverage ratio.~~Credit Agreement has provided a guarantee on a secured basis. As security for the payment or performance of ~~its~~the debt under the ~~Company has~~Credit Agreement, the borrowers and the guarantors have pledged certain equity interests in ~~its~~their respective subsidiaries and granted the lenders a security interest in substantially all of their domestic assets. All guarantors other than Quest Nutrition, LLC are holding companies with no assets other than their investments in their respective subsidiaries.

On March 16, 2018 (the “Amendment Date”), ~~the Company~~we entered into an amendment (the “Repricing Amendment”) to the ~~First Lien.~~Credit Agreement. As a result of the Repricing Amendment, the interest rate on the Term Loan was reduced and, as of the Amendment Date, such loans ~~bear~~had an interest ~~at a~~ rate equal to, at ~~the Company's~~our option, either LIBOR plus an applicable margin of 3.50% or a base rate plus an applicable margin of 2.50%. The Repricing Amendment did not change the interest rate on the Revolving Credit Facility. The Revolving Credit Facility ~~will continue~~continued to bear interest based upon ~~the Company's~~our consolidated ~~First Lien~~ net leverage ratio as of the last financial statements delivered to the administrative agent. No additional debt was incurred or any proceeds received by ~~the Company~~us in connection with the Repricing Amendment. The incremental fees paid to the administrative agent are reflected as additional debt discount and are amortized over the terms of the long-term financing agreements using the effective-interest method.

On November 7, 2019, we entered into a second amendment (the “Incremental Facility Amendment”) to the Credit Agreement to increase the principal borrowed on the Term Facility by $460.0 million. The ~~credit facilities governing~~Term Facility together with the incremental borrowing make up the Initial Term Loans (as defined in the Incremental Facility Amendment) and as of the Amendment No. 2 Effective Date (as defined in the Incremental Facility Amendment), the Initial Term Loans bear interest at a rate equal to, at our ~~debt arrangements contain~~option, either LIBOR plus an applicable margin of 3.75% or a base rate plus an applicable margin of 2.75%. The Incremental Facility Amendment was executed to partially finance the Quest Acquisition. No amounts under the Term Facility were repaid as a result of the execution of the Incremental Facility Amendment.

The Applicable Rate per annum applicable to the loans under the Credit Agreement Amendment is, with respect to any Initial Term Loan that is an ABR Loan (as defined in the Credit Agreement), 2.75% per annum, and with respect to any Initial Term Loan that is a Eurodollar Loan, 3.75% per annum. The incremental term loans will mature on the maturity date applicable to the Initial Term Loans, which is July 7, 2024.

The Credit Agreement contains certain financial and other covenants. The Revolving Credit Facility has a maximum total net leverage ratio equal to or less than 6.25:1.00 (with a reduction to 6.00:1.00 on and after the third anniversary of the closing date of the credit facilities) contingent on credit extensions in excess of 30% of the total amount of commitments available under the revolving credit facility, and limitations oncovenants that limit our ability to, among other things, incur and/or undertake asset sales and other dispositions, liens, indebtedness, certain acquisitions and investments, consolidations, mergers, reorganizations and other fundamental changes, payment of dividends and other distributions to equity and warrant holders, and

prepayments of material subordinated debt, in each case, subject to customary exceptions materially consistent with credit facilities of such type and size. The Revolving Credit Facility has a maximum total net leverage ratio equal to or less than 6.00:1.00 contingent on credit extensions in excess of 30% of the total amount of commitments available under the Revolving Credit Facility. Any failure to comply with the restrictions of the credit facilities may result in an event of default. We were in compliance with all financial covenants as of August 28, 2021 and August 29, 2020, respectively.

As of August 28, 2021, the outstanding balance of the Term Facility was $456.5 million. We are not required to make principal payments on the Term Facility over the twelve months following the period ended August 28, 2021. The credit facilities governing our debt arrangements bear interest at variable rates. If market interest rates increase, variable rate debt will create higher debt service requirements, which could adversely affect our cash flow.outstanding balance of the Term Facility is due upon its maturity in July 2024. As ~~the Company has not~~of August 28, 2021, there were no amounts drawn onagainst the Revolving Credit ~~Facility as of August 31, 2019 and August 25, 2018, no debt covenants were applicable as of the period then ended.~~

~~As of August 31, 2019, the outstanding principal balances of the Term Loan was $196.5 million, and no amounts were drawn under the $75.0 million Revolving Credit~~ Facility.

~~Acquisition Financing~~Public Equity Offering

On August 21, 2019, we entered into a stock purchase agreement (the “Purchase Agreement”) to acquire Quest Nutrition, LLC (“Quest”), a healthy lifestyle food company (the “Acquisition”), for approximately $1.0 billion. The Acquisition is expected to close by the end of the 2019 calendar year, subject to satisfaction of customary closing conditions. There is no financing condition for the Acquisition.

On October 9, 2019, we completed an underwritten public offering of 13,379,205 shares of our common stock at a price to the public of $26.35 per share. We paid underwriting discounts and commissions of $0.19 per share ~~of $26.16 (the “Offering”),~~ resulting in net proceeds to us of $26.16 per share, or approximately $350.0 million ~~after deducting underwriting discounts~~(the “Offering”). We paid $0.8 million for legal, accounting and ~~commissions and our estimated~~registrations fees ~~and expenses for~~related to the Offering. ~~We intend to use these~~The net proceeds were used to pay a portion of the purchase price and related fees and expenses for the Quest Acquisition.

Quest Acquisition

On August 21, 2019, our wholly-owned subsidiary Simply Good Foods USA, Inc., formerly known as Atkins Nutritionals, Inc. (“Simply Good USA”) entered into a Stock and Unit Purchase Agreement (the “Purchase Agreement”) with VMG Voyage Holdings, LLC, VMG Tax-Exempt II, L.P., Voyage Employee Holdings, LLC, and other sellers, as defined in the Purchase Agreement, to acquire Quest, a healthy lifestyle food company. On November 7, 2019, pursuant to the Purchase Agreement, Simply Good USA completed the Quest Acquisition, or for ~~general corporate purposes if~~a cash purchase price of approximately $1.0 billion, subject to customary post-closing adjustments.

The Quest Acquisition was funded through a combination of cash, equity and debt financing. Total consideration paid on the ~~acquisition is not consummated.~~

~~We plan to fund the remainder~~closing date was $988.9 million. Cash sources of ~~the Acquisition by using a significant portion of the approximately $265~~funding included $195.3 million of cash on hand, net proceeds of approximately $350.0 million from an underwritten public offering of common stock, and ~~committed financing pursuant~~$443.6 million in new term loan debt. In the third fiscal quarter of 2020, we received a post-closing release from escrow of approximately $2.1 million related to net working capital adjustments, resulting in a total net consideration paid of $986.8 million. Business transaction costs within the Consolidated Statements of Operations and Comprehensive Income (Loss) for the fifty-two weeks ended August 29, 2020 was $27.1 million, which included $14.5 million of transaction advisory fees related to the Quest Acquisition, $3.2 million of banker commitment fees, $6.1 million of non-deferrable debt ~~commitments from Barclays, Credit Suisse~~issuance costs related to the incremental term loan, and ~~Goldman Sachs.~~$3.3 million of other costs, including legal, due diligence, and accounting fees.

Warrants to Purchase Common Stock

As a result of the Business Combination with Conyers Park Sponsor, LLC, we assumed 13,416,667 public warrants and 6,700,000 Private Warrants, exercisable for common stock of Simply Good Foods. Refer to Note 12, Stockholders’ Equity ~~Warrants~~of the Consolidated Financial Statements included in Item 8 of this Report for additional details regarding our public and Private Warrants.

As of August 28, 2021, our Private Warrants to purchase 6,700,000 shares of common stock remain outstanding, are held by Conyers Park Sponsor, LLC, a related party, and remain liability-classified. If all Private Warrants are exercised at the $11.50 exercise price per warrant, our cash would increase by $77.1 million.

From August 26, 2018 through October 5, 2018, public warrants to purchase an aggregate of 9,866,451 shares of ~~the Company’s~~ common stock were exercised for cash at an exercise price of $11.50 per share, resulting in aggregate gross proceeds ~~to the Company~~ of $113.5 million.

On October 4, 2018, ~~the Company~~we delivered a notice for the redemption (the “Redemption Notice”) of all of ~~its~~our public warrants that remained unexercised immediately after November 5, 2018. ~~Holders who exercised~~Exercises of public warrants following the Redemption Notice were required to ~~do so~~be done on a cashless basis. Accordingly, holders were no longer permitted to exercise public warrants in exchange for payment in cash of $11.50 per share. Instead, a holder exercising a public warrant was deemed to have paid the $11.50 per share exercise price by the surrender of 0.61885 of a share of common stock that the holder would have been entitled to receive upon a cash exercise of each public warrant. Exercising holders received 0.38115 of a share of the Company’s common stock for each public warrant surrendered for exercise. Following the Redemption Notice, 3,499,639 public warrants were exercised on a cashless basis. An aggregate of 1,333,848 shares of ~~the Company’s~~ common stock were issued in connection with these exercises of the public warrants. All remaining public warrants were redeemed as of November 5, 2018 for an immaterial amount.

~~The Company’s private warrants to purchase 6,700,000 shares of the Company’s common stock remain outstanding as of the date of this Report.~~

Cash Flows

The following table sets forth the major sources and uses of cash for ~~each~~the fifty-two weeks ended August 28, 2021 and the fifty-two weeks ended August 29, 2020. A discussion regarding the major sources and uses of cash for the ~~periods set forth below (in thousands):~~fifty-three weeks ended August 31, 2019 can be found under Item 7 of our Annual Report on Form 10-K/A for the fiscal year ended August 29, 2020, filed with the SEC on June 30, 2021.


	52-Weeks Ended		52-Weeks Ended
(In thousands)	August 28, 2021		August 29, 2020
Net cash provided by operating activities	$	132,089	$	58,921
Net cash used in investing activities	$	(2,506)	$	(983,994)
Net cash (used in) provided by financing activities	$	(150,049)	$	754,652

53-Weeks Ended 52-Weeks Ended From July 7, 2017 through August 26, 2017 From August 28, 2016 through July 6, 2017
August 31, 2019 August 25, 2018
(Successor) (Successor) (Successor) (Predecessor)
Net cash provided by (used in) operating activities $ 73,042
$ 61,038
$ (27,356 ) $ 21,939
Net cash used in investing activities $ (1,787 ) $ (3,513 ) $ (197,304 ) $ (20,458 )
Net cash provided by (used in) financing activities $ 83,376
$ (1,587 ) $ 280,799
$ (53,536 )

Operating activities. Our net cash provided by operating activities ~~was $73.0~~increased $73.2 million to $132.1 million for the ~~successor period~~fifty-two weeks ended August ~~31, 2019, an increase of $12.0 million~~28, 2021 compared to ~~net cash provided by operating activities of $61.0~~$58.9 million for the ~~successor period~~fifty-two weeks ended August ~~25, 2018.~~29, 2020. The increase ~~was primarily driven by higher income before taxes.~~

~~Our net~~in cash provided by operating activities was ~~$61.0~~primarily attributable to higher operating income driven by (i) the Quest® brand sales volume growth, which increased our North America net sales by 20.4% due to Quest’s full-year inclusion in our results of operations in fiscal year 2021 as compared to Quest’s partial inclusion in our results of operations in the prior fiscal year due to the timing of the Quest Acquisition as well as post-acquisition Quest brand sales volume growth and (ii) significant reductions in cash outlays and changes in working capital related to the Quest Acquisition, including decreased business transaction costs of $27.1 million ~~for~~and decreased integration costs of $7.8 million in the ~~successor period~~fifty-two weeks ended August ~~25, 2018,~~28, 2021 as compared to the fifty-two weeks ended August 29, 2020. Additionally, in the fifty-two weeks ended August 28, 2021 we received $5.0 million related to a gain on legal settlement and reduced our cash paid for interest by $2.2 million as compared to the fifty-two weeks ended August 29, 2020 due to significant principal payments made to reduce the outstanding balance of the Term Facility, as discussed in Financing Activities below. These increases in cash provided by operating activities were partially offset by (i) increased cash paid for taxes of $27.7 million in the fifty-two weeks ended August 28, 2021 as compared to the fifty-two weeks ended August 29, 2020 and (ii) an increase in $5.7 million cash payments made for restructuring-related costs, predominately composed of ~~$88.4 million~~termination benefits and severance payments, in the fifty-two weeks ended August 28, 2021 as compared to ~~net cash used in operating activities of $27.4 million for~~ the ~~successor period~~fifty-two weeks ended August ~~26, 2017. The increase was primarily driven by higher income before taxes.~~29, 2020.

Investing activities. Our net cash used in investing activities ~~was $1.8~~decreased to $2.5 million for the ~~successor period~~fifty-two weeks ended August ~~31, 2019, which was a decrease of $1.7 million~~28, 2021 compared to ~~the~~$984.0 million of net cash used in investing activities for the ~~successor period~~fifty-two weeks ended August ~~25, 2018.~~ ~~The decrease is primarily the result of a payment for a working capital adjustment of $1.8 million to the former owners of Atkins in the prior period.~~

29, 2020. Our net cash used in investing activities ~~was $3.5 million~~ for the ~~successor period~~fifty-two weeks ended August ~~25, 2018,~~28, 2021 primarily comprised $5.9 million of purchases of property and equipment and the issuance of a $1.6 million note receivable, which was ~~a decrease~~partially offset by the $5.8 million of ~~$193.8~~cash proceeds received from the SimplyProtein Sale. The $984.0 million ~~compared to the~~of net cash used in investing activities for the ~~successor period~~fifty-two weeks ended August ~~26, 2017. The change was due to~~29, 2020 primarily comprised the ~~Business Combination in~~cash paid for the ~~successor period ended August 26, 2017, offset by minor increases in purchases~~Quest Acquisition of ~~property and equipment.~~$982.1 million, net of cash acquired.

Financing activities. Our net cash provided by financing activities was $83.4 million for the successor period ended August 31, 2019, compared to net cash used in financing activities of $1.6 million for the successor period ended August 25, 2018. Net cash provided by financing activities for the successor period ended August 31, 2019 includes $113.5 million of cash received from warrant exercises, and is partially offset by the payment of the TRA liability of $26.5 million, repurchases of common stock of $2.1 million and debt principal payments of $2.0 million.

Our net cash used in financing activities was ~~$1.6~~$150.0 million for the ~~successor period~~fifty-two weeks ended August ~~25, 2018,~~28, 2021 compared to net cash provided by financing activities of ~~$280.8~~$754.7 million for the ~~successor period~~fifty-two weeks ended August ~~26, 2017. The decrease is due~~29, 2020. Net cash used in financing activities for the fifty-two weeks ended August 28, 2021 primarily consisted of $150.0 million in principal payments on the Term Facility, an increase of $100.0 million compared to the ~~procee ds~~prior year. Our net cash provided by financing activities for the fifty-two weeks ended August 29, 2020 included gross proceeds of $352.5 million from the Offering offset by issuance costs of ~~long term debt~~$3.3 million, proceeds of ~~$191.9~~$460.0 million from the Term Facility borrowing related to the Incremental Facility Amendment offset by issuance costs of $8.2 million, and $25.0 million of proceeds from the ~~issuance of equity of $97.0 million related to~~borrowing under the ~~Business Combination in~~Revolving Credit Facility. The cash provided by financing activities for the ~~successor period~~fifty-two weeks ended August ~~26, 2017.~~

~~The Company had $266.3~~29, 2020 was offset by $50.0 million ~~in cash~~of principal payments on the Term Facility and ~~cash equivalents as~~$25.0 million of ~~August 31, 2019, which is sufficient to satisfy a portion~~repayments of the ~~pending acquisition of Quest, current liabilities, current maturities of long-term debt and the interest payments associated with them.~~Revolving Credit Facility.

~~Off-Balance Sheet Arrangements~~

As of August 31, 2019, we had no material off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on its financial condition, changes in financial condition, income or expenses, results of operations, liquidity, capital expenditures or capital resources.

~~Contractual Obligations~~

The following table summarizes our expected material contractual payment obligations as of August 31, 2019. This table does not include any obligations related to the financing or any other aspect of the Acquisition.

Payments due by period
(In thousands) Total Year 1 Years 2-3 Years 4-5 Thereafter
Long-term debt obligations $ 196,500
$ 2,000
$ 4,000
$ 190,500
$ —
Operating leases (1) 7,406
2,546
3,624
1,180
56
Interest payments 55,245
11,648
22,836
20,761
—
Total $ 259,151
$ 16,194
$ 30,460
$ 212,441
$ 56

~~_______________~~

~~(1)~~

As of August 31, 2019, the Company is obligated under multiple non-cancellable operating leases, which continue through 2024. Rent expenses, inclusive of real estate taxes, utilities and maintenance incurred under operating leases, are included in general and administrative expenses in the Company’s consolidated statements of operations. Rent expenses were $2.2 million for fifty-three week period ended August 31, 2019, $2.4 million for the fifty-two week period ended August 25, 2018, $0.3 million for ~~the successor period from July 7, 2017 through August 26, 2017, and $1.7 million for~~ ~~the predecessor period from August 28, 2016 through July 6, 2017, respectively.~~

Critical Accounting Policies, Judgments and Estimates

General

~~The~~ Our consolidated financial statements ~~of the Company~~ have been prepared in accordance with accounting principles generally accepted in the U.S. While the majority of ~~the Company’s~~our revenue, expenses, assets and liabilities are not based on estimates, there are certain accounting principles that require management to make estimates regarding matters that are uncertain and susceptible to change. Critical accounting policies are defined as those policies that are reflective of significant judgments, estimates and uncertainties, which could potentially result in materially different results under different assumptions and conditions. Management regularly reviews the estimates and assumptions used in the preparation of the ~~Company’s~~ financial statements for reasonableness and adequacy. Our significant accounting policies are discussed in Note 3, 2, Summary of Significant Accounting Policies,, of our Consolidated Financial Statements in this filing; however, the following discussion pertains to accounting policies ~~the Company believes~~we believe are most critical to the portrayal of its financial condition and results of operations and that require significant, difficult, subjective or complex judgments. Other companies in similar businesses may use different estimation policies and methodologies, which may affect the comparability of ~~the Company’s~~our financial condition, results of operations and cash flows to those of other companies.

Revenue Recognition

~~The Company recognizes~~ We recognize revenue when performance obligations under the terms of a contract with its customer are satisfied. ~~The Company has~~We have determined that fulfilling and delivering products is a single performance obligation. Revenue is recognized at the point in time when ~~the Company has~~we have satisfied ~~its~~our performance obligation and the customer has obtained control of the products. This generally occurs atwhen the ~~time of delivery~~product is delivered to ~~the customer's location.~~or picked up by our customer based on applicable shipping terms, which is typically within 30 days.

Revenue is measured as the amount of consideration expected to be received in exchange for ~~transferring products,~~fulfilled product orders, including estimates of variable consideration. The most common forms of variable consideration include trade ~~programs,~~promotions, such as consumer incentives, coupon redemptions and other marketing activities, allowances for unsaleable product, and any additional amounts where a distinct good or service cannot be identified or the value cannot be reasonably estimated. Estimates of variable consideration are made using various information including historical data on performance of similar trade promotional activities, ~~and~~ market data from IRI, and ~~the Company's~~our best ~~estimates~~estimate of current activity. ~~The Company reviews~~Revisions can include changes for consideration paid to customers that lack sufficient evidence to support a distinct good or service assertion, or for which a reasonably estimable fair value cannot be determined, primarily related to our assessments of cooperative advertising programs. We review these estimates regularly and makes revisions as necessary. ~~The Company does~~Uncertainties related to the estimate of variable consideration are resolved in a short time frame and do not require any additional constraint on variable consideration. Adjustments to variable consideration have historically been insignificant.

Although some payment terms may be longer, the majority of our payment terms are less than 60 days. As a result, we do not have any material significant payments terms as payment is received shortly after the time of sale.

While our revenue recognition does not involve significant judgment, it represents a key accounting policy.

Trade Promotions

~~The Company offers~~ We offer trade promotions through various programs to customers and consumers. Trade promotions include discounts, rebates, slotting and other marketing activities. Trade promotions are recorded as a reduction to net sales with a corresponding reduction to accounts receivable at the time of revenue recognition for the underlying sale. The recognition of trade promotions requires management to make estimates regarding the volume of incentive that will be redeemed and their total cost. These estimates are made using various information including historical data on performance of similar trade promotional activities, market data from IRI, and the ~~Company's~~Company’s best estimates of current activity. Our consolidated financial statements could be materially affected if the actual promotion rates are different from the estimated rates.

At As of August ~~31, 2019~~28, 2021 and August ~~25, 2018,~~29, 2020, the allowance for trade promotions was ~~$10.3~~$22.3 million and ~~$7.4~~$25.2 million, respectively. Differences between estimated expense and actual redemptions are recognized as a change in management estimate in a subsequent period. These differences have historically been insignificant.

Business Combination

On November 7, 2019, pursuant to the Purchase Agreement, we completed the Quest Acquisition for a cash purchase price of approximately $1.0 billion, subject to customary post-closing adjustments. The Quest Acquisition was accounted for using the acquisition method of accounting prescribed by Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”), whereby the results of operations, including the revenues and earnings of Quest, are included in the financial statements from the date of acquisition. Additionally, assets acquired and liabilities assumed were recognized at their fair values based on widely accepted valuation

techniques in accordance with ASC Topic 820, Fair Value Measurements, as of the closing date. Significant judgment is required to determine the fair value of certain tangible and intangible assets. The process for estimating fair values requires the use of significant estimates, assumptions and judgments, including determining the timing and estimates of future cash flows and developing appropriate discount rates. ASC 805 establishes a measurement period to provide companies with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date. We completed our final fair value determination of the assets acquired and liabilities assumed in the Quest Acquisition during the first quarter of fiscal 2021. Measurement period adjustments were recognized in the reporting period in which the adjustments were determined and calculated as if the accounting had been completed at the acquisition date.

Goodwill and Other Intangible Assets

Goodwill and indefinite-lived intangible assets are not amortized, but instead are ~~evaluated~~tested for impairment at least annually, or more ~~often~~frequently if ~~events or circumstances indicated~~indicators of impairment exist. We perform our goodwill impairment assessment for each reporting unit that ~~potential impairment may be present.~~has goodwill, which for fiscal years 2021 and 2020 consists of both of our operating segments, Atkins and Quest. In fiscal year 2019, we had one operating segment, Atkins. Our brands and trademarks comprise our indefinite-lived intangibles. We conduct our annual impairment tests ~~are conducted~~ at the beginning of the fourth fiscal quarter. The process of evaluating goodwill and indefinite-lived intangibles for impairment is subjective and requires significant judgment at many points during the analysis.

We ~~test~~assess goodwill and indefinite-lived intangible assets ~~by performing~~using either a qualitative or quantitative ~~assessments. In~~approach to determine whether it is more likely than not that the fair values of the reporting units or indefinite-lived intangible assets are less than their carrying amounts. The qualitative assessment evaluates factors including macro-economic conditions, ~~industry~~industry-specific and company-specific ~~factors,~~considerations, legal and regulatory environments, and historical ~~company performance are evaluated in assessing fair value.~~performance. If we determine that it is more likely than not that the fair value of ~~the~~a reporting unit or an indefinite-lived intangible asset is less than its carrying value, a quantitative ~~test~~assessment is ~~then~~ performed. Otherwise, no further ~~testing~~assessment is required. ~~When using a~~The quantitative approach ~~we compare the fair value of the reporting unit to its carrying amount, including goodwill. If~~compares the estimated fair value of the reporting unit, including goodwill, or the indefinite-lived intangible asset to its carrying amount. The material inputs and assumptions underlying the quantitative assessments of goodwill and intangible impairment are based on operational forecasts derived from expectations of future operating performance, which require considerable management judgment regarding matters that are uncertain and susceptible to change. Impairment is indicated if the estimated fair value of the reporting unit or indefinite-lived intangible asset is less than the carrying amount, ~~of the reporting unit,~~and an impairment charge is ~~indicated, requiring recognition of a impairment charge~~recognized for the differential.

~~During~~ For fiscal ~~2019,~~year 2021, we ~~elected to perform quantitative~~performed qualitative assessments of goodwill and indefinite-lived intangible assets. The ~~inputs~~qualitative assessments did not identify indicators of impairment, and ~~assumptions used require considerable management judgment and are based on expectations of future operating performance. Based on the results of the assessments,~~ it was determined that ~~the fair value of goodwill~~it was more likely than not each reporting unit and indefinite-lived ~~assets exceeded~~intangible had fair values in excess of their carrying values. Accordingly, no further impairment ~~testing~~assessment was ~~completed~~necessary, and no impairment charges related to goodwill or indefinite-lived intangibles were recognized ~~during~~in the fifty-two weeks ended August 28, 2021. Additionally, we determined there was not a material risk for future possible impairments as of the date of the assessment.

For fiscal ~~period~~year 2020, we elected to bypass the qualitative assessment and proceed directly to performing the first step of the quantitative goodwill impairment assessment for each reporting unit. We performed the first step of the quantitative goodwill impairment assessment by comparing the fair value of each of our reporting units, Atkins and Quest, to its carrying amount, including goodwill. The estimated fair values of the Atkins and Quest reporting units substantially exceeded their carrying values. We determined neither reporting unit was impaired, therefore, no impairment charges related to goodwill were recorded in the fifty-two weeks ended August ~~31, 2019~~.29, 2020.

~~Qualitative assessments of goodwill and~~ Additionally, for fiscal year 2020, we elected to qualitatively assess for impairment the indefinite-lived intangible ~~assets were performed in 2018~~related to our Quest brand and ~~2017. Based on the results of~~trademark. The qualitative assessment ~~it was determined~~indicated that it iswas more likely than not that the Quest brand and trademark indefinite-lived intangible’s fair value exceeded its carrying amount, and as a result we did not perform a quantitative assessment. For our indefinite-lived brand and trademark intangible related to our Atkins brand, we elected to bypass the qualitative assessment and proceed directly to performing the quantitative impairment assessment. The estimated fair value of the Atkins brand and trademark indefinite-lived intangible substantially exceeded its carrying value. During the fourth quarter of fiscal 2020, we determined there were indicators of impairment related to the SimplyProtein brand intangible asset, including but not limited to an offer to sell the SimplyProtein brand. Therefore, we performed a quantitative assessment of our brand intangible asset, which indicated the fair value did not exceed the carrying value, resulting in a loss on impairment of $3.0 million in the fifty-two weeks ended August 29, 2020.

For fiscal year 2019, we elected to perform quantitative assessments of goodwill for the Atkins reporting unit ~~had a~~and our indefinite-lived intangible assets, and the estimated fair ~~value in excess of~~values substantially exceeded their carrying ~~value. Accordingly, no further impairment testing~~values. We determined neither reporting unit was ~~completed and~~impaired, therefore, no impairment charges related to goodwill or indefinite-lived intangibles were recognized ~~during~~in the ~~fiscal periods~~fifty-three weeks ended August ~~25, 2018~~ or ~~August 26, 2017~~.31, 2019.

~~The Company~~ We also ~~has~~have intangible assets that ~~are expected to~~ have determinable useful lives, consisting primarily of ~~trademarks,~~ customer relationships, proprietary recipes and formulas, licensing ~~agreements.~~agreements, and software and website development costs. Costs of these finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. Finite-lived intangible assets are tested for impairment when events or

circumstances indicated that the carrying amount may not be recoverable. For the fiscal ~~periods~~years ended August 28, 2021, August 29, 2020 and August 31, 2019,, ~~August 25, 2018~~ or ~~August 26, 2017~~ we did not identify indicators of impairment related to our finite-lived intangible assets, and as such there were no impairments recorded related to finite-lived intangible assets. We also determined that there was no material risk for future possible intangible impairments related to our finite-lived intangible assets as of the dates of the assessments.

Income Taxes

We are subject ~~to income~~ to income taxes in the United States and numerous other jurisdictions. Significant judgment is required in determining our provision for income tax, including evaluating uncertainties in the application of accounting principles and complex tax laws.

Income taxes include federal, state and foreign taxes currently payable and deferred taxes arising from temporary differences between income for financial reporting and income tax purposes. Deferred tax assets and liabilities are determined based on the differences between the financial statement balances and the tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to amounts expected to be realized. Significant management judgment is required in determining the effective tax rate, evaluating tax positions and determining the net realizable value of deferred tax assets.

Warrant Liability

We account for our Private Warrants as a derivative warrant liability in accordance with ASC Topic 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity. Accordingly, we recognize the Private Warrants as a liability at fair value and adjust the Private Warrants to fair value at each reporting period through other income. We utilize the Black-Scholes option-pricing valuation model (“Black-Scholes model”) to estimate the fair value of the Private Warrants at each reporting date.

The application of the Black-Scholes model utilizes significant assumptions, including expected volatility, the determination of which requires significant judgment. In order to determine the most accurate measure of this volatility, we measured expected volatility based on several inputs, including considering a peer group of publicly traded companies, Simply Good Foods’ implied volatility based on traded options, the implied volatility of comparable warrants, and the implied volatility of any outstanding public warrants during the periods they were outstanding. As a result of the unobservable inputs that were used to determine the expected volatility of the Private Warrants, the fair value measurement of these warrants reflects a Level 3 measurement within the fair value measurement hierarchy. Historically, expected volatility has been a key assumption or input to the valuation of the Private Warrants. However, as the Private Warrants approach their expiration, changes in the expected volatility assumption have less impact on the Black-Scholes model valuation. As of August 28, 2021, changes in the expected volatility assumption of 10% insignificantly affected the estimated fair value of the Private Warrants.

New Accounting Pronouncements

Refer to Note 3, 2, Summary of Significant Accounting Policies,, of our Consolidated Financial Statements in this ~~filing~~Report for ~~further~~ information regarding recently issued accounting standards.

Item 7A. Quantitative and Qualitative Disclosures About Market ~~Risk~~Risk.

~~Simply Good Foods'~~ Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevalent market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates.

COVID-19. The current COVID-19 outbreak situation remains dynamic and subject to rapid and possibly material change including, but not limited to, changes that may materially affect the operations of our customers and supply chain partners, which ultimately could result in material negative effects on our business and results of operations. Refer to Item 1A, Risk Factors, for additional discussion of our risks associated with pandemics, epidemics or disease outbreaks, such as COVID-19.

Interest rate risk. We are subject to interest rate risk in connection with borrowing based on a variable interest rate. Derivative financial instruments, such as interest rate swap agreements and interest rate cap agreements, may be used for the purpose of managing fluctuating interest rate exposures that exist from our variable rate debt obligations that are expected to remain outstanding. Interest rate changes do not affect the market value of such debt, but could affect the amount of our interest payments, and accordingly, our future earnings

and cash flows, assuming other factors are held constant. Assuming average variable rate debt levels during the year, a 1% increase in interest rates would have increased interest expense by approximately ~~$2.0~~$5.3 million for the ~~fifty-three week period~~fifty-two weeks ended August ~~31, 2019.~~28, 2021.

Foreign currency risk. We are exposed to changes in currency rates as a result of investments in foreign operations and revenue generated in currencies other than the U.S. ~~dollar.~~Dollar. Revenue and profit generated by international operations will increase or decrease compared to prior periods as a result of changes in foreign currency exchange rates. ~~Foreign~~Historically, our foreign currency risk ishas primarily related to our operations in ~~Canada. A 10% increase or decrease~~Canada, which were largely related to the SimplyProtein brand. With the SimplyProtein Sale in September 2020 as well as the ~~Canadian Dollar against the U.S. Dollar would result~~restructuring-related business activities in ~~less than a 1% change~~Europe, we have mitigated some of our risk of exposure to changes in ~~our net income for the fifty-three week period ended August 31, 2019.~~foreign currency rates.

Inflation. While inflation may affect ~~Simply Good Foods’~~our revenue and cost of services and products, we believe the effects of inflation, if any, on ~~its~~our results of operations and financial condition during the fifty-two weeks ended August 28, 2021 have not been significant. However, there can be no assurance that results of operations and financial condition will not be materially ~~impacted~~affected by inflation in the future.

Supply chain. We are exposed to risks associated with changes in the costs of our raw materials as well as changes to our supply and distribution costs. We expect higher raw material and freight costs in fiscal year 2022. As a result, in June 2021, management notified our customers of our plans to institute a price increase effective in September 2021, the first month of our fiscal year 2022. Management believes the price increase and productivity initiatives will enable us to continue to invest in projects that drive growth. However, there can be no assurance that the price increase will fully offset the effects of higher raw material and freight costs on our results of operations and financial condition. We have also begun to see logistics challenges, which we believe have contributed to lower retail and e-commerce sales of our products due to out-of-stock situations, delayed recognition of sales and higher than historical inventory levels. In addition, we could experience additional lost sale opportunities at our retail and e-commerce customers if our products are not available for purchase as a result of disruptions in our supply chain relating to an inability to obtain ingredients or packaging, labor challenges at our logistics providers or our contract manufacturers, or if our customers experience delays in stocking our products. Refer to Item 1A, Risk Factors, for additional discussion of our risks associated with the costs of our raw materials, such as our core ingredients and packaging, and our supply chain.

Item 8. Financial Statements and Supplementary ~~Data~~Data.

TABLE OF CONTENTS



		Page
Index to the Financial Statements
			Reports of Independent Registered Public Accounting Firms	4751
			Consolidated Balance Sheets	5053
			Consolidated Statements of Operations and Comprehensive Income (Loss)	5154
			Consolidated Statements of Cash Flows	5255
			Consolidated Statements of ~~Stockholders'~~Stockholders’ Equity	5457

Notes to Consolidated Financial Statements
Note 1.			Nature of Operations and Principles of Consolidation	5558
Note 2.			~~Change in Accounting Principle~~	56
~~Note 3.~~	Summary of Significant Accounting Policies	5659
Note 4.3.			~~Revenue Recognition~~Business Combination	6064
Note 5.4.			Property and Equipment, Net	6166
Note 6.5.			Goodwill and Intangibles	6267
Note 7.6.			Accrued Expenses and Other Current Liabilities	6369
Note 8.7.			Long-Term Debt and Line of Credit	6369
Note 9.8.			Fair Value of Financial Instruments	6470
Note ~~10.~~9.			Income Taxes	6571
Note 10.			Leases	74
Note 11.			Commitments and Contingencies	6876
Note 12.			Stockholder’s Equity	6976
Note 13.			Earnings Per Share	6977
Note 14.			~~Stock Option~~Omnibus Incentive Plan	7078
Note 15.			Related Party Transactions	7381
Note 16.			Segment and Customer Information	7481
Note 17.			~~Unaudited Quarterly Financial Data~~Restructuring and Related Charges	7582
~~Note 18.~~			~~Subsequent Events~~	75

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of

The Simply Good Foods ~~Company:~~Company

Opinion on the Financial Statements

We have audited the accompanying consolidated balance ~~sheet~~sheets of The Simply Good Foods Company and subsidiaries (the "Company") as of August ~~31, 2019,~~28, 2021 and August 29, 2020, the related consolidated statements of operations and comprehensive income, ~~(loss), stockholders'~~stockholders’ equity, ~~(deficit),~~ and cash flows, for the fifty-two week periods ended August 28, 2021 and August 29, 2020, and the fifty-three week period ended August 31, 2019, and the related notes (collectively referred to as the ~~“financial statements”~~"financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August ~~31, 2019,~~28, 2021 and August 29, 2020, and the results of its operations and its cash flows for each of the three years in the period ended August ~~31, 2019,~~28, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the ~~Company’s~~Company's internal control over financial reporting as of August ~~31, 2019,~~28, 2021, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated October ~~30, 2019,~~26, 2021, expressed an unqualified opinion on the ~~Company’s~~Company's internal control over financial reporting.

~~Change in Accounting Principle~~

As discussed in Note 2 to the financial statements, the Company has elected to change its method of accounting to reclassify shipping and handling costs relating to the delivery of products to customers from distribution expense to cost of goods sold in the year ended August 31, 2019. This change in accounting principle has been retrospectively applied to all periods presented.

Basis for Opinion

These financial statements are the responsibility of the ~~Company’s~~Company's management. Our responsibility is to express an opinion on the ~~Company’s~~Company's financial statements based on our ~~audit.~~audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our ~~audit~~audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our ~~audit~~audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our ~~audit~~audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our ~~audit provides~~audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the ~~Audit Committee~~audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Trade Promotions -— Refer to Note 42 to the ~~Financial Statements~~financial statements

Critical Audit Matter Description

The Company offers trade promotions through various programs to customers and consumers. Trade promotions include discounts, rebates, slotting, and other marketing activities. Trade promotions are recorded as a reduction to net sales with a corresponding reduction to accounts receivable at the time of revenue recognition for the underlying sale. The recognition of trade promotions requires the Company to make estimates regarding the volume of incentives that will be redeemed and their total costs. These estimates are made using various information including historical data on performance of similar trade promotional activities, ~~as well~~current market data, and the ~~Company’s~~Company's best estimates of current activity. As of August ~~31, 2019,~~28, 2021, the allowance for trade promotions balance, which is recorded as a reduction to accounts receivable, was approximately ~~$10.3~~$22.3 million.

Given the subjectivity of estimating the expected promotional claims and the volume of trade promotions, performing audit procedures to evaluate whether the allowance for trade promotion balance is appropriately recorded as of August ~~31, 2019,~~28, 2021, required a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our auditing procedures related to the allowance for trade promotion balance included the following, among others:

•For a selection of allowances for trade promotion balances recorded as of August ~~31, 2019,~~28, 2021, we:


–	~~Confirmed contract terms directly with the customer.~~


–	~~Agreed contract terms from the accounting records to the promotion agreement with the customer and verified that the promotion period was prior to September 1, 2019.~~

◦Confirmed contract terms directly with the customer.

◦Agreed contract terms from the accounting records to the promotion agreement with the customer and verified the promotion period was prior to August 29, 2021.

◦For a selection of those allowances for trade promotion balances based on volume estimates, we evaluated the appropriateness of those estimates using historical data on performance of similar trade promotional activities, third-party data, and subsequent customer activity.

•We evaluated management’s ability to estimate promotional claims incurred, but not yet received for potential management bias by comparing historical promotional claims received to management’s estimates of the claims to be received.

•For a selection of customer promotional claims presented or resolved after August ~~31, 2019,~~28, 2021, we compared that amount to the August ~~31, 2019~~28, 2021 allowance for promotion balance and traced presented or resolved deduction to a properly recorded sale.

/s/ Deloitte & Touche LLP

Denver, Colorado

October ~~30, 2019~~26, 2021

We have served as the Company’s auditor since 2019.

~~Report of Independent Registered Public Accounting Firm~~

~~The Board of Directors and Shareholders of~~

~~The Simply Good Foods Company and subsidiaries~~

~~Opinion on the Financial Statements~~

We have audited the accompanying consolidated balance sheets of The Simply Good Foods Company and subsidiaries (successor) as of August 25, 2018, and the related successor consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for the 52-weeks ended August 25, 2018 and from July 7, 2017 through August 26, 2017. We have also audited the accompanying consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity (deficit), and cash flows of NCP-ATK Holdings, Inc. and subsidiaries (predecessor) for the period from August 28, 2016 through July 6, 2017, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at August 25, 2018 and the results of its operations and its cash flows for the 52-weeks ended August 25, 2018 and from July 7, 2017 through August 26, 2017 as well as the predecessor results for the period from August 28, 2016 through July 6, 2017, in conformity with U.S. generally accepted accounting principles.

~~Change in Accounting Principle~~

As discussed in Note 2 to the consolidated financial statements, the Company has elected to change its principle of accounting for the classification of shipping & handling costs relating to the delivery of products to customers from operating expenses to cost of sales in the 52-week period ended August 31, 2019. This change in accounting principle has been retrospectively applied to all periods presented.

~~Basis for Opinion~~

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

~~/s/ Ernst & Young LLP~~

~~We served as the Company’s auditor from 2011 to February 25, 2019.~~

~~Denver, Colorado~~

~~October 24, 2018~~

~~except with respect to our opinion on the consolidated financial statements insofar as it relates to the effects of the accounting principle change discussed in Note 2, as to which the date is~~

~~October 30, 2019~~

Table of Contents

The Simply Good Foods Company and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share data)


	August 31, 2019			August 25, 2018
	(Successor)			(Successor)			August 28, 2021		August 29, 2020
Assets						Assets
Current assets:						Current assets:
Cash and cash equivalents	$	266,341		$	111,971
Cash						Cash	$	75,345	$	95,847
Accounts receivable, net	44,240			36,622		Accounts receivable, net	111,456		89,740
Inventories	38,085			30,001		Inventories	97,269		59,085
Prepaid expenses	2,882			2,069		Prepaid expenses	4,902		3,644
Other current assets	6,059			5,077		Other current assets	9,694		11,947
Total current assets	357,607			185,740		Total current assets	298,666		260,263

Long-term assets:						Long-term assets:
Property and equipment, net	2,456			2,565		Property and equipment, net	16,584		11,850
Intangible assets, net	306,139			312,643		Intangible assets, net	1,139,041		1,158,768
Goodwill	471,427			471,427		Goodwill	543,134		544,774
Other long-term assets	4,021			2,230		Other long-term assets	54,792		32,790
Total assets	$	1,141,650		$	974,605	Total assets	$	2,052,217	$	2,008,445

Liabilities and stockholders' equity
Liabilities and stockholders’ equity						Liabilities and stockholders’ equity
Current liabilities:						Current liabilities:
Accounts payable	$	15,730		$	11,158	Accounts payable	$	59,713	$	32,240
Accrued interest	1,693			582		Accrued interest	60		960
Accrued expenses and other current liabilities	29,933			15,875		Accrued expenses and other current liabilities	53,606		38,007
Current portion of TRA liability	—			2,320
Current maturities of long-term debt	676			648		Current maturities of long-term debt	285		271
Total current liabilities	48,032			30,583		Total current liabilities	113,664		71,478

Long-term liabilities:						Long-term liabilities:
Long-term debt, less current maturities	190,259			190,935		Long-term debt, less current maturities	451,269		596,879
Long-term portion of TRA liability	—			25,148
Deferred income taxes	65,383			54,475		Deferred income taxes	93,755		84,352
Warrant liability						Warrant liability	159,835		93,638
Other long-term liabilities	532			863		Other long-term liabilities	44,890		22,765
Total liabilities	304,206			302,004		Total liabilities	863,413		869,112
See commitments and contingencies (Note 11)						See commitments and contingencies (Note 11)

Stockholders' equity:
Stockholders’ equity:						Stockholders’ equity:
Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued	—			—		Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued	—		—
Common stock, $0.01 par value, 600,000,000 shares authorized, 81,973,284 and 70,605,675 issued at August 31, 2019 and August 25, 2018, respectively	820			706
Treasury stock, 98,234 and 0 shares at cost at August 31, 2019 and August 25, 2018, respectively	(2,145		)	—
Common stock, $0.01 par value, 600,000,000 shares authorized, 95,882,908 and 95,751,845 issued at August 28, 2021 and August 29, 2020, respectively						Common stock, $0.01 par value, 600,000,000 shares authorized, 95,882,908 and 95,751,845 issued at August 28, 2021 and August 29, 2020, respectively	959		958
Treasury stock, 98,234 shares at cost at August 28, 2021 and August 29, 2020						Treasury stock, 98,234 shares at cost at August 28, 2021 and August 29, 2020	(2,145)		(2,145)
Additional paid-in-capital	733,775			614,399		Additional paid-in-capital	1,085,001		1,076,472
Retained earnings	105,830			58,294		Retained earnings	105,807		64,927
Accumulated other comprehensive loss	(836		)	(798)		Accumulated other comprehensive loss	(818)		(879)
Total stockholders' equity	837,444			672,601
Total liabilities and stockholders' equity	$	1,141,650		$	974,605
Total stockholders’ equity						Total stockholders’ equity	1,188,804		1,139,333
Total liabilities and stockholders’ equity						Total liabilities and stockholders’ equity	$	2,052,217	$	2,008,445

See accompanying Notes to the Consolidated Financial Statements

Table of Contents

The Simply Good Foods Company and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except share and per share data)


	52-Weeks Ended		52-Weeks Ended		53-Weeks Ended
	August 28, 2021		August 29, 2020		August 31, 2019
Net sales	$	1,005,613	$	816,641	$	523,758
Cost of goods sold	595,847		492,313		306,075
Gross profit	409,766		324,328		217,683

Operating expenses:
Selling and marketing	112,928		94,469		67,694
General and administrative	106,181		106,251		62,180
Depreciation and amortization	16,982		15,259		7,496
Business transaction costs	—		27,125		7,107
Loss on impairment	—		3,000		—
Loss in fair value change of contingent consideration – TRA liability	—		—		533
Total operating expenses	236,091		246,104		145,010

Income from operations	173,675		78,224		72,673

Other income (expense):
Interest income	84		1,516		3,826
Interest expense	(31,557)		(32,813)		(13,627)
(Loss) gain in fair value change of warrant liability	(66,197)		30,938		(72,673)
Gain on legal settlement	5,000		—		—
Gain on settlement of TRA liability	—		—		1,534
(Loss) gain on foreign currency transactions	(5)		658		(452)
Other (expense) income	(140)		441		196
Total other (expense) income	(92,815)		740		(81,196)

Income (loss) before income taxes	80,860		78,964		(8,523)
Income tax expense	39,980		13,326		16,711
Net income (loss)	$	40,880	$	65,638	$	(25,234)

Other comprehensive income (loss):
Foreign currency translation adjustments	61		(43)		(38)
Comprehensive income (loss)	$	40,941	$	65,595	$	(25,272)

Earnings (loss) per share:
Basic	$	0.43	$	0.70	$	(0.31)
Diluted	$	0.42	$	0.35	$	(0.31)
Weighted average shares outstanding:
Basic	95,743,413		93,968,953		80,734,091
Diluted	97,365,598		98,343,722		80,734,091

53-Weeks Ended 52-Weeks Ended From July 7, 2017
through August 26, 2017 From August 28, 2016 through July 6, 2017
August 31, 2019 August 25, 2018
(Successor) (Successor) (Successor) (Predecessor)
Net sales $ 523,383
$ 431,429
$ 56,334
$ 339,837
Cost of goods sold 305,978
251,063
39,584
200,026
Gross profit 217,405
180,366
16,750
139,811

Operating expenses:
Selling and marketing 67,488
59,092
6,937
47,494
General and administrative 61,972
49,635
6,969
34,567
Depreciation and amortization 7,496
7,498
985
8,409
Business transaction costs 7,107
2,259
—
25,608
Loss (gain) in fair value change of contingent consideration - TRA liability 533
(2,848 ) —
—
Total operating expenses 144,596
115,636
14,891
116,078

Income from operations 72,809
64,730
1,859
23,733

Other income (expense):
Change in warrant liabilities —
—
—
722
Interest income 3,826
—
—
—
Interest expense (13,627 ) (12,551 ) (1,662 ) (22,724 )
Gain on settlement of TRA liability 1,534
—
—
—
Gain (loss) on foreign currency transactions (452 ) 97
513
133
Other income 196
815
30
221
Total other expense (8,523 ) (11,639 ) (1,119 ) (21,648 )

Income before income taxes 64,286
53,091
740
2,085
Income tax expense (benefit) 16,750
(17,364 ) 290
4,570
Net income (loss) $ 47,536
$ 70,455
$ 450
$ (2,485 )

Other comprehensive income:
Foreign currency translation adjustments (38 ) (817 ) 19
(199 )
Comprehensive income (loss) $ 47,498
$ 69,638
$ 469
$ (2,684 )

Earnings per share from net income:
Basic $ 0.59
$ 1.00
$ 0.01

Diluted $ 0.56
$ 0.96
$ 0.01

Weighted average shares outstanding:
Basic 80,734,091
70,582,149
70,562,477

Diluted 85,243,909
73,681,355
71,254,770

See accompanying Notes to the Consolidated Financial Statements

Table of Contents

The Simply Good Foods Company and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)


	53-Weeks Ended			52-Weeks Ended			From July 7, 2017 through August 26, 2017			From August 28, 2016 through July 6, 2017
	August 31, 2019			August 25, 2018										52-Weeks Ended		52-Weeks Ended		53-Weeks Ended
	(Successor)			(Successor)			(Successor)			(Predecessor)				August 28, 2021		August 29, 2020		August 31, 2019
Operating activities													Operating activities
Net income	$	47,536		$	70,455		$	450		$	(2,485	)
Adjustments to reconcile net income to net cash provided by operating activities:
Net income (loss)													Net income (loss)	$	40,880	$	65,638	$	(25,234)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:													Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	7,644			7,672			1,000			8,617			Depreciation and amortization	18,174		16,007		7,644
Amortization of deferred financing costs and debt discount	1,352			1,312			192			1,950			Amortization of deferred financing costs and debt discount	4,636		3,508		1,352
Stock compensation expense	5,501			4,029			412			2,441			Stock compensation expense	8,265		7,636		5,501
Change in warrant liabilities	—			—			—			(722		)
Loss (gain) in fair value change of contingent consideration - TRA liability	533			(2,848		)	—			—
Loss on impairment													Loss on impairment	—		3,000		—
Loss (gain) in fair value change of warrant liability													Loss (gain) in fair value change of warrant liability	66,197		(30,938)		72,673
Estimated credit losses													Estimated credit losses	1,114		—		—
Loss in fair value change of contingent consideration – TRA liability													Loss in fair value change of contingent consideration – TRA liability	—		—		533
Gain on settlement of TRA liability	(1,534		)	—			—			—			Gain on settlement of TRA liability	—		—		(1,534)
Unrealized (gain) loss on foreign currency transactions	452			(97		)	(513		)	(133		)
Unrealized loss (gain) on foreign currency transactions													Unrealized loss (gain) on foreign currency transactions	5		(658)		452
Deferred income taxes	10,908			(21,108		)	(382		)	(3,880		)	Deferred income taxes	9,403		8,216		10,869
Loss on disposal of property and equipment	6			128			—			—			Loss on disposal of property and equipment	—		—		6
Changes in operating assets and liabilities:
Amortization of operating lease right-of-use asset													Amortization of operating lease right-of-use asset	5,051		3,848		—
Loss on operating lease right-of-use asset impairment													Loss on operating lease right-of-use asset impairment	686		—		—
Gain on lease termination													Gain on lease termination	(156)		—		—
Other													Other	(16)		(389)		—
Changes in operating assets and liabilities, net of acquisition:													Changes in operating assets and liabilities, net of acquisition:
Accounts receivable, net	(7,985		)	267			(5,556		)	14,447			Accounts receivable, net	(22,284)		(18,288)		(8,360)
Inventories	(8,272		)	(1,081		)	4,130			1,912			Inventories	(39,349)		23,880		(8,178)
Prepaid expenses	(824		)	847			(1,107		)	36			Prepaid expenses	(1,202)		680		(824)
Other current assets	(2,155		)	3,094			5,340			(10,548		)	Other current assets	2,322		(5,022)		(2,155)
Accounts payable	4,734			(3,603		)	2,089			(7,246		)	Accounts payable	25,923		(8,736)		4,734
Accrued interest	1,111			21			561			(3,615		)	Accrued interest	(900)		(733)		1,111
Accrued expenses and other current liabilities	13,961			1,962			(34,096		)	21,459			Accrued expenses and other current liabilities	15,423		(5,572)		14,378
Other	74			(12		)	124			(294		)	Other	(2,083)		(3,156)		74
Net cash provided by (used in) operating activities	73,042			61,038			(27,356		)	21,939

Net cash provided by operating activities													Net cash provided by operating activities	132,089		58,921		73,042
Investing activities													Investing activities
Purchases of property and equipment	(1,037		)	(1,770		)	(458		)	(498		)	Purchases of property and equipment	(5,911)		(1,736)		(1,037)
Proceeds from sale of property and equipment	—			14			—			—

Issuance of note receivable	(750		)	—			—			—			Issuance of note receivable	(1,600)		(500)		(750)
Proceeds from note receivable													Proceeds from note receivable	—		1,250		—
Acquisition of business, net of cash acquired	—			(1,757		)	(600,825		)	(19,960		)	Acquisition of business, net of cash acquired	—		(982,075)		—
Cash withdrawn from trust account	—			—			403,979			—
Proceeds from sale of business													Proceeds from sale of business	5,800		—		—
Investments in intangible assets and other assets													Investments in intangible assets and other assets	(795)		(933)		—
Net cash used in investing activities	(1,787		)	(3,513		)	(197,304		)	(20,458		)	Net cash used in investing activities	(2,506)		(983,994)		(1,787)

Financing activities													Financing activities
Proceeds from option exercises	706			120			—			109			Proceeds from option exercises	700		4,206		706
Cash received from warrant exercises	113,464			232			—			—			Cash received from warrant exercises	—		—		113,464
Tax payments related to issuance of restricted stock units	(181		)	(120		)	—			—			Tax payments related to issuance of restricted stock units	(435)		(191)		(181)
Proceeds from issuance of common stock													Proceeds from issuance of common stock	—		352,542		—
Equity issuance costs													Equity issuance costs	—		(3,323)		—
Repurchase of common stock	(2,145		)	—			—			—			Repurchase of common stock	—		—		(2,145)
Excess tax benefits of stock-based compensation	—			—			—			(59		)
Payments on finance lease obligations													Payments on finance lease obligations	(314)		(374)		—
Principal payments of long-term debt													Principal payments of long-term debt	(150,000)		(50,000)		(2,000)
Repayments of Revolving Credit Facility													Repayments of Revolving Credit Facility	—		(25,000)		—
Proceeds from issuance of long-term debt													Proceeds from issuance of long-term debt	—		460,000		—
Proceeds from Revolving Credit Facility													Proceeds from Revolving Credit Facility	—		25,000		—
Deferred financing costs	—			(319		)	—			—			Deferred financing costs	—		(8,208)		—
Settlement of TRA liability	(26,468		)	—			—			—			Settlement of TRA liability	—		—		(26,468)
Principal payments of long-term debt	(2,000		)	(1,500		)	—			(53,586		)
Proceeds from issuance of private placement equity, net of issuance costs	—			—			97,000			—
Proceeds from issuance of long term debt, net of issuance costs	—			—			191,899			—
Payment of Conyers Park deferred equity issuance costs	—			—			(8,100		)	—
Net cash provided by (used in) financing activities	83,376			(1,587		)	280,799			(53,536		)
Net cash (used in) provided by financing activities													Net cash (used in) provided by financing activities	(150,049)		754,652		83,376

Cash and cash equivalents
Net increase in cash	154,631			55,938			56,139			(52,055		)

Net (decrease) increase in cash													Net (decrease) increase in cash	(20,466)		(170,421)		154,631
Effect of exchange rate on cash	(261		)	(468		)	159			(10		)	Effect of exchange rate on cash	(36)		(73)		(261)
Cash at beginning of period	111,971			56,501			203			78,492			Cash at beginning of period	95,847		266,341		111,971
Cash and cash equivalents at end of period	$	266,341		$	111,971		$	56,501		$	26,427
Cash at end of period													Cash at end of period	$	75,345	$	95,847	$	266,341

Table of Contents


	52-Weeks Ended		52-Weeks Ended		53-Weeks Ended
	August 28, 2021		August 29, 2020		August 31, 2019
Supplemental disclosures of cash flow information
Cash paid for interest	$	27,821	$	30,038	$	11,164
Cash paid for taxes	$	32,190	$	4,530	$	7,451

Non-cash investing and financing transactions
Non-cash proceeds from sale of business	$	3,000	$	—	$	—
Operating lease right-of-use assets recognized at ASU No 2016-02 transition	$	—	$	5,102	$	—
Finance lease right-of-use assets recognized at ASU No 2016-02 transition	$	—	$	1,185	$	—
Operating lease right-of-use assets recognized after ASU No 2016-02 transition	$	26,222	$	3,554	$	—
Non-cash additions to property and equipment	$	1,203	$	—	$	—
Non-cash additions to intangible assets and other assets	$	218	$	—	$	—

53-Weeks Ended 52-Weeks Ended From July 7, 2017
through August 26, 2017 From August 28, 2016 through July 6, 2017
August 31, 2019 August 25, 2018
(Successor) (Successor) (Successor) (Predecessor)
Supplemental disclosures of cash flow information
Cash paid for interest $ 11,164
$ 11,218
$ 909
$ 24,334
Cash paid for taxes $ 7,451
$ 4,577
$ —
$ 12,711

See accompanying Notes to the Consolidated Financial Statements

Table of Contents

The Simply Good Foods Company and Subsidiaries

Consolidated Statements of ~~Stockholders'~~Stockholders’ Equity ~~(Deficit)~~

(In thousands, except share data)


	Common Stock			Treasury Stock			Additional Paid in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income (Loss)		Total
	Shares	Amount		Shares	Amount
Balance, August 25, 2018	70,605,675	$	706	—	$	—	$	596,364	$	24,523	$	(798)	$	620,795
Net income	—	—		—	—		—		(25,234)		—		(25,234)
Stock-based compensation	—	—		—	—		5,501		—		—		5,501
Foreign currency translation adjustments	—	—		—	—		—		—		(38)		(38)
Repurchase of common stock	—	—		98,234	(2,145)		—		—		—		(2,145)

Shares issued upon vesting of restricted stock units	80,293	1		—	—		(182)		—		—		(181)
Exercise of options to purchase common stock	87,017	1		—	—		705		—		—		706
Warrant conversion	11,200,299	112		—	—		113,352		—		—		113,464
Balance, August 31, 2019	81,973,284	$	820	98,234	$	(2,145)	$	715,740	$	(711)	$	(836)	$	712,868
Net loss	—	—		—	—		—		65,638		—		65,638
Stock-based compensation	—	—		—	—		7,636		—		—		7,636
Foreign currency translation adjustments	—	—		—	—		—		—		(43)		(43)

Public equity offering	13,379,205	134		—	—		349,085		—		—		349,219
Shares issued upon vesting of restricted stock units	58,974	1		—	—		(192)		—		—		(191)
Exercise of options to purchase common stock	340,382	3		—	—		4,203		—		—		4,206
Balance, August 29, 2020	95,751,845	$	958	98,234	$	(2,145)	$	1,076,472	$	64,927	$	(879)	$	1,139,333
Net income	—	—		—	—		—		40,880		—		40,880
Stock-based compensation	—	—		—	—		8,265		—		—		8,265
Foreign currency translation adjustments	—	—		—	—		—		—		61		61

Shares issued upon vesting of restricted stock units	72,755	1		—	—		(436)		—		—		(435)
Exercise of options to purchase common stock	58,308	—		—	—		700		—		—		700
Balance, August 28, 2021	95,882,908	$	959	98,234	$	(2,145)	$	1,085,001	$	105,807	$	(818)	$	1,188,804

See accompanying Notes to the Consolidated Financial Statements

NCP - ATK Holdings, Inc. and Subsidiaries
Predecessor Common Stock Treasury Stock Additional Paid in Capital
Retained Earnings
(Accumulated Deficit)
Accumulated Other Comprehensive Income (Loss) Total
Shares Amount Shares Amount
Balance, August 26, 2016 508,132
$ 5
$ —
$ —
$ (43,551 ) $ 16,155
$ (443 ) $ (27,834 )
Net income —
—
—
—
—
(2,485 ) —
(2,485 )
Stock-based compensation —
—
—
—
2,441
—
—
2,441
Foreign currency translation adjustments —
—
—
—
—
—
(199 ) (199 )
Excess tax benefit from stock-based compensation —
—
—
—
(59 ) —
—
(59 )
Exercise of options to purchase common stock 387
—
—
—
109
—
—
109
Balance, July 6, 2017 508,519
$ 5
$ —
$ —
$ (41,060 ) $ 13,670
$ (642 ) $ (28,027 )

The Simply Good Foods Company and Subsidiaries
Successor Common Stock Treasury Stock Additional Paid in Capital Retained Earnings
(Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Total
Shares Amount Shares Amount
Balance, July 7, 2016 70,562,477
$ 706
—
$ —
$ 609,726
$ (12,611 ) $ —
$ 597,821
Net income —
—
—
—
—
450
—
450
Stock-based compensation —
—
—
—
412
—
—
412
Foreign currency translation adjustments —
—
—
—
—
—
19
19
Balance, August 26, 2017 70,562,477
$ 706
—
—
$ 610,138
$ (12,161 ) $ 19
$ 598,702
Net income —
—
—
—
—
70,455
—
70,455
Stock-based compensation —
—
—
—
4,029
—
—
4,029
Foreign currency translation adjustments —
—
—
—
—
—
(817 ) (817 )
Shares issued upon vesting of Restricted Stock Units 12,986
—
—
—
(120 ) —
—
(120 )
Exercise of options to purchase common stock 10,000
—
—
—
120
—
—
120
Warrant conversion 20,212
—
—
—
232
—
—
232
Balance, August 25, 2018 70,605,675
$ 706
—
—
$ 614,399
$ 58,294
$ (798 ) $ 672,601
Net income —
—
—
—
—
47,536
—
47,536
Stock-based compensation —
—
—
—
5,501
—
—
5,501
Foreign currency translation adjustments —
—
—
—
—
—
(38 ) (38 )
Repurchase of common stock —
—
98,234
(2,145 ) —
—
—
(2,145 )
Shares issued upon vesting of Restricted Stock Units 80,293
1
—
—
(182 ) —
—
(181 )
Exercise of options to purchase common stock 87,017
1
—
—
705
—
—
706
Warrant conversion 11,200,299
112
—
—
113,352
—
—
113,464
Balance, August 31, 2019 81,973,284
$ 820
98,234
(2,145 ) $ 733,775
$ 105,830
$ (836 ) $ 837,444

Table of Contents

Notes to Consolidated Financial Statements

(In thousands, except for share and per share data)

1. Nature of Operations and Principles of Consolidation

Description of Business

Conyers Park Acquisition Corp (“Conyers Park”) was formed on April 20, 2016, as a special purpose acquisition company for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

The Simply Good Foods Company (“Simply Good Foods” or the “Company”) was formed by Conyers Park Acquisition Corp. (“Conyers Park”) on March 30, 2017. On April 10, 2017, Conyers Park and NCP-ATK Holdings, Inc. ~~(“Atkins”) announced that they~~, among others, entered into a definitive merger agreement (the “Merger Agreement”)~~. On~~, pursuant to which on July 7, 2017, ~~(the “Closing Date”), pursuant to the Merger Agreement,~~ Conyers Park merged into Simply Good Foods ~~which acquired Atkins. As~~and as a result ~~Atkins became a wholly-owned subsidiary~~acquired the companies which conducted the Atkins® brand business (the “Business Combination”). The common stock of Simply Good Foods ~~(the “Business Combination”). Simply Good Foods was~~is listed on the Nasdaq Capital Market under the symbol ~~“SMPL” upon consummation~~“SMPL.”

On August 21, 2019, the Company’s wholly-owned subsidiary Simply Good Foods USA, Inc., formerly known as Atkins Nutritionals, Inc., (“Simply Good USA”) entered into a Stock and Unit Purchase Agreement (the “Purchase Agreement”) to acquire Quest Nutrition, LLC (“Quest”), a healthy lifestyle food company (the “Quest Acquisition”). On November 7, 2019, Simply Good USA completed the Quest Acquisition via Simply Good USA’s acquisition of 100% of the ~~Business Combination. Atkins was formerly owned by Roark Capital Management,~~equity interests of Voyage Holdings, LLC, ~~(“Roark”~~and VMG Quest Blocker, Inc. (the “Target Companies”).

~~The Business Combination resulted in Conyers Park controlling~~ for a cash purchase price of approximately $1.0 billion subject to customary post-closing adjustments for the ~~Board~~Target Companies’ levels of ~~Directors~~cash, indebtedness, net working capital and transaction expenses as of the ~~combined entity. For accounting purposes,~~closing date.

The Simply Good Foods Company is a consumer packaged food and beverage company that aims to lead the nutritious snacking movement with trusted brands that offer a variety of convenient, innovative, great-tasting, better-for-you snacks and meal replacements. The product portfolio the Company develops, markets and sells consists primarily of protein bars, ready-to-drink (“RTD”) shakes, sweet and salty snacks and confectionery products marketed under the Atkins®, Atkins Endulge®, and Quest® brand names. Simply Good Foods is ~~the acquirer~~poised to expand its wellness platform through innovation and ~~the accounting “Successor”~~organic growth along with acquisition opportunities in the ~~Business Combination while Atkins is the acquiree~~nutritional snacking space.

The Company’s nutritious snacking platform consists of brands that specialize in providing products for consumers that follow certain nutritional philosophies and ~~accounting “Predecessor”. Our financial statement presentation includes the financial statements of Atkins as “Predecessor”~~health-and-wellness trends: Atkins® for ~~all periods prior to the Closing Date~~those following a low-carb lifestyle and ~~of Simply Good Foods, including the consolidation of Atkins,~~Quest® for ~~periods after the Closing Date.~~

Simply Good Foods operates in the healthy snacking category. The Atkins brand approach focuses on a healthy eating approach with reduced levels of refined carbohydrates and sugars and encourages the consumption of lean protein, fiber, fruits, vegetables and healthy fats. The Company sellsconsumers seeking a variety of ~~nutrition bars, shakes~~protein-rich foods and ~~frozen meals designed around the nutrition principles~~beverages that also limit sugars and simple carbs. The Company distributes its products in major retail channels, primarily in North America, including grocery, club, and mass merchandise, as well as through e-commerce, convenience, specialty, and other channels. The Company’s portfolio of nutritious snacking brands gives it a strong platform with which to introduce new products, expand distribution, and attract new consumers to its products.

The Company remains uncertain of the ~~Atkins eating approach.~~ultimate effect COVID-19 could have on its business notwithstanding the distribution of several U.S. government approved vaccines and the easing of movement restrictions. This uncertainty stems from the potential for, among other things, (i) the presence of current mutations of COVID-19 which have resulted in increased rates of reported cases for which currently approved vaccines are not as effective along with the possibility of future mutations occurring for which current approved vaccines are less effective, (ii) unexpected supply chain disruptions, including disruptions resulting from labor shortages or other human capital challenges, (iii) changes to customer operations, (iv) a reversal in recently improving consumer purchasing and consumption behavior, and (v) the closure of customer establishments.

Basis of Presentation

The consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). The Company maintains its accounting records on a 52/53-week fiscal year, ending on the last Saturday in August.

The financial information presented within ~~our~~the Company’s consolidated financial statements has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The accompanying financial statements include Consolidated Balance Sheets for the ~~successor entity for the~~ periods ended August ~~31, 2019~~28, 2021 and August ~~25, 2018.~~29, 2020. The remaining financial statements include the ~~successor~~fifty-two weeks ended August 28, 2021, the fifty-two weeks ended August 29, 2020, and the fifty-three ~~week period~~weeks ended August 31, ~~2019, the successor fifty-two week period ended August 25, 2018, the successor period from July 7, 2017 through August 26, 2017, and the predecessor period from August 28, 2016 through July 6, 2017.~~2019.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. Unless the context otherwise requires, “we,” “us,” “our” and the “Company” refer to ~~Atkins and its subsidiaries for periods prior to the completion of the Business Combination, and~~ Simply Good Foods and its subsidiaries ~~for periods upon or after the completion of the Business Combination.~~on a consolidated basis.

~~Reclassification of Prior Year Amounts~~

~~Certain prior year amounts have been reclassified to conform to the current year presentation including Selling and Marketing expenses, which have been combined as~~ ~~Selling and marketing~~ ~~on the Consolidated Statements of Operations and Comprehensive Income (Loss) and other operating expense, which has been combined with~~ ~~General and administrative~~ ~~expense on the Consolidated Statements of Operations and Comprehensive Income (Loss).~~

~~Licensing of Frozen Meals~~

On September 1, 2016, the agreement with Bellisio Foods to license Atkins’ frozen meals resulting in royalty income became effective. Royalty income is recorded in net sales for the successor fifty-three week period ended August 31, 2019, the successor fifty-two week period ended August 25, 2018, the successor period from July 7, 2017 through August 26, 2017 and for the predecessor period from August 28, 2016 through July 6, 2017.

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2. ~~Change in Accounting Principle~~

During the fourth quarter ended August 31, 2019, the Company changed its accounting principle related to the presentation of third party delivery costs associated with shipping and handling activities previously included as operating expenses in Distribution in the Consolidated Statements of Operations and Comprehensive Income (Loss). The Company is now presenting these expenses within cost of goods sold in the Consolidated Statements of Operations and Comprehensive Income (Loss). In connection with the change in accounting principle, the Company also changed its definition of shipping and handling costs to include costs paid to third-party warehouse operators associated with delivering product to a customer, previously included in General and administrative and Depreciation and amortization of the assets at the third-party warehouse, previously included in Depreciation and amortization. Under the previous definition of shipping and handling costs, the Company only included third-party delivery costs in Distribution.

The Company believes that this change is preferable as outbound freight and distribution center expenses represent direct costs associated with the sale of our products, it better aligns these costs with the related revenue in the gross profit calculation and it improves comparability with the Company’s peers. The accounting policy change was applied retrospectively to all periods presented and the Consolidated Statements of Operations and Comprehensive Income (Loss) reflect the effect of this accounting principle change for all periods presented. This reclassification had no effect on income from operations, net income (loss) or earnings per share. The Consolidated Balance Sheets, Consolidated Statements of Stockholders’ Equity (Deficit), and the Consolidated Statements of Cash Flows are not affected by this change in accounting principle. The effect of the adjustment is as follows:

Fifty-Three Weeks Ended August 31, 2019 Under Previous Method Change in Accounting Principle and Presentation
Other Operating Expense⁽¹⁾
As Reported
Cost of goods sold 273,682
32,296
—
305,978
Distribution 23,387
(23,387 ) —
—
General and administrative 70,712
(8,761 ) 21
61,972
Depreciation and amortization 7,644
(148 ) —
7,496

Fifty-Two Weeks Ended August 25, 2018 As Reported Change in Accounting Principle and Presentation
Other Operating Expense⁽¹⁾
As Adjusted
Cost of goods sold 223,873
27,190
—
251,063
Distribution 19,685
(19,685 ) —
—
General and administrative 56,333
(7,331 ) 633
49,635
Depreciation and amortization 7,672
(174 ) —
7,498

From July 7, 2017 through August 26, 2017 As Reported Change in Accounting Principle and Presentation
Other Operating Expense⁽¹⁾
As Adjusted
Cost of goods sold 35,941
3,643
—
39,584
Distribution 2,784
(2,784 ) —
—
General and administrative 7,813
(844 ) —
6,969
Depreciation and amortization 1,000
(15 ) —
985

From August 28, 2016 through July 6, 2017 As Reported Change in Accounting Principle and Presentation
Other Operating Expense⁽¹⁾
As Adjusted
Cost of goods sold 179,998
20,028
—
200,026
Distribution 14,970
(14,970 ) —
—
General and administrative 39,276
(4,850 ) 141
34,567
Depreciation and amortization 8,617
(208 ) —
8,409



(1	)	~~Other operating expense has been combined with~~ ~~General and administrative~~ ~~expense on the Consolidated Statements of Operations and Comprehensive Income (Loss).~~

3. Summary of Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Estimates also affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Business Combination

~~Table~~ On November 7, 2019, pursuant to the Purchase Agreement, the Company completed the Quest Acquisition for a cash purchase price of ~~Contents~~

approximately $1.0 billion, subject to customary post-closing adjustments. The Quest Acquisition was accounted for using the acquisition method of accounting prescribed by ASC Topic 805, Business Combinations (“ASC 805”), whereby the results of operations, including the revenues and earnings of Quest, are included in the financial statements from the date of acquisition. Additionally, assets acquired and liabilities assumed were recognized at their fair values based on widely accepted valuation techniques in accordance with ASC Topic 820, Fair Value Measurements, as of the closing date. The process for estimating fair values requires the use of significant estimates, assumptions and judgments, including determining the timing and estimates of future cash flows and developing appropriate discount rates. ASC 805 establishes a measurement period to provide companies with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date. The Company completed its final assessment of purchase price allocation for the Quest Acquisition to the estimated fair value of the net assets acquired at the date of acquisition during the first quarter of fiscal year 2021. Measurement period adjustments were recognized in the reporting period in which the adjustments were determined and calculated as if the accounting had been completed at the acquisition date.

Fair Value Measurements

Fair value represents the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Assets and liabilities are valued based upon observable and non-observable inputs. Valuations using Level 1 inputs are based on unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date. Level 2 inputs utilize significant other observable inputs available at the measurement date, other than quoted prices included in Level 1. Valuations using Level 3 inputs are based on significant unobservable inputs that cannot be corroborated by observable market data and require significant judgment. There were no significant transfers between levels during any period presented.

Cash ~~and Cash Equivalents~~

Cash ~~and cash equivalents~~ ~~consist~~ consists of cash on hand, deposits available on demand and other short-term, highly liquid investments with original maturities of three months or less. ~~Cash equivalents are carried at cost, which approximates fair value.~~

Accounts Receivable, Net and Expected Credit Losses

Accounts receivable, net consists primarily of trade receivables, net of allowances for doubtful accounts, returns, and trade promotions. ~~Our~~The Company sells its products ~~are sold~~ for cash or on ~~credit terms. Our~~ credit terms, which are established in accordance with local and industry practices and typically require payment within 30 days of delivery and may allow discounts for early payment. The Company estimates anits allowance for doubtful accounts and the related expected credit loss based upon ~~a review of outstanding receivables,~~the Company’s historical ~~collection information~~credit loss experience, adjusted for asset-specific risk characteristics, current economic conditions, and ~~our analysis of customer data.~~reasonable forecasts. Accounts receivable are written off when determined to be uncollectible. At

Charges related to credit loss on accounts receivables from transactions with external customers were approximately $0.6 million, $0.5 million, and $0.1 million for the fifty-two weeks ended August 28, 2021, fifty-two weeks ended August 29, 2020, and fifty-three weeks ended August 31, 2019, respectively. At August 28, 2021 and August ~~25, 2018,~~29, 2020, the allowance for doubtful accounts was ~~$0.6~~$1.1 million and ~~$0.7~~$0.5 million, respectively. Additionally, during the fifty-two weeks ended August 28, 2021 the Company recorded a $0.5 million expected credit loss reserve on its $3.0 million note receivable related to the SimplyProtein Sale, which is defined in Note 5, Goodwill and Intangibles.

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Inventories

Inventories are valued at the lower of cost or net realizable value on a first-in, first-out basis, adjusted for the value of inventory that is determined to be excess, obsolete, expired or unsaleable. Obsolete inventory is reserved at 50% for inventory four to six months from expiration, and 100% for items within three months of expiration. Reserves are also taken for certain products or packaging materials when it is determined their cost may not be recoverable. ~~At August 31, 2019 and August 25, 2018,~~

Inventories, as presented with the ~~provision for obsolete inventory was $0.4 million and $0.5 million, respectively.~~Consolidated Balance Sheets, is summarized as follows:


(In thousands)	August 28, 2021		August 29, 2020
Finished goods	$	91,893	$	56,117
Raw materials	6,007		3,457
Reserve for obsolete inventory	(631)		(489)
Total inventories	$	97,269	$	59,085

Property and Equipment, Net

Property and equipment, net is stated at the allocated fair ~~value.~~value for acquired assets. Additions to property and equipment are recorded at cost and depreciated on a straight-line basis over their estimated useful lives. The general ranges of estimated useful lives are:

Furniture and fixtures

7 years

Computer equipment, software and website development costs

5 years

Machinery and equipment

7 years

Office equipment

5 years

Leasehold improvements are amortized over the shorter of the remaining term of the lease or the useful life of the improvement utilizing the straight-line method.

The Company performs impairment tests for Property and equipment, net when circumstances indicate that the carrying value of the asset may not be recoverable. There were no indicators of impairment in the ~~fiscal period ending~~fifty-two weeks ended August 28, 2021, the fifty-two weeks ended August 29, 2020, or the fifty-three weeks ended August 31, ~~2019, the fiscal period ending August 25, 2018, the successor period from July 7, 2017 through August 26, 2017, and the predecessor period from August 28, 2016 through July 6, 2017.~~2019.

Goodwill and Intangible Assets, Net

Goodwill and Intangible assets, net result primarily from the Business Combination and other acquisitions. Intangible assets primarily ~~include~~includes brands and trademarks with indefinite lives and customer-related relationships with finite lives. Upon acquisition, the purchase price is first allocated to identifiable assets and liabilities, including customer-related intangible assets and trademarks, with any remaining purchase price recorded as Goodwill.

Goodwill and indefinite-lived intangible assets are not amortized but instead are tested for impairment ~~on an annual basis,~~at least annually, or more frequently if indicators of impairment ~~are present. Our~~exist. The Company conducts its annual impairment tests ~~are conducted~~ at the beginning of the fourth fiscal quarter. Goodwill and indefinite-lived intangible assets are assessed using either a qualitative or a quantitative ~~approach.~~approach to determine whether it is more likely than not that the fair values of the reporting units or indefinite-lived intangible assets are less than their carrying amounts. The qualitative assessment evaluates factors including macro-economic conditions, ~~industry~~industry-specific and company-specific ~~factors,~~considerations, legal and regulatory environments, and historical ~~company performance in assessing fair value.~~performance. If ~~we determine~~the Company determines that it is more likely than not that the fair value of ~~the~~a reporting unit or an indefinite-lived intangible asset is less than its carrying value, a quantitative ~~test~~assessment is ~~then~~ performed. Otherwise, no further ~~testing~~assessment is required. ~~When using a~~The quantitative approach ~~we compare the fair value of the reporting unit to its carrying amount, including goodwill. If~~compares the estimated fair value of the reporting unit, including goodwill, or the indefinite-lived intangible asset to its carrying amount. Impairment is indicated if the estimated fair value of the reporting unit or indefinite-lived intangible asset is less than the carrying amount, ~~of the reporting unit, impairment is indicated, requiring recognition of~~and an impairment charge is recognized for the differential.

~~During~~ For fiscal ~~2019, we elected to perform quantitative~~year 2021, the Company performed qualitative goodwill impairment assessments for each reporting unit that had goodwill, which consisted of ~~goodwill~~both of the Company’s operating segments, Atkins and Quest, and its indefinite-lived intangible assets. ~~Based on the results~~The qualitative assessments did not identify indicators of ~~the assessments,~~impairment, and it was determined that ~~the fair value of goodwill~~it was more likely than not each reporting unit and indefinite-lived intangible ~~assets exceeded~~had fair values in excess of their carrying values. Accordingly, no further impairment ~~testing~~assessment was ~~completed~~necessary, and the Company determined neither reporting unit or any indefinite-lived intangibles were impaired. There were no

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impairment charges related to goodwill in the fifty-two weeks ended August 28, 2021 or since the inception of the Company. There were no impairment charges related to ~~goodwill or~~ indefinite-lived intangibles ~~were~~ recognized ~~during~~in the ~~fiscal period~~fifty-two weeks ended August 28, 2021 or the fifty-three weeks ended August 31, ~~2019~~.

~~Table~~2019. There was a $3.0 million loss on impairment of ~~Contents~~

~~Qualitative assessments of goodwill and~~an indefinite-lived intangible ~~assets were performed~~ in ~~2018~~the fifty-two weeks ended August 29, 2020, as discussed in Note 5, Goodwill and 2017. Based on the results of assessment, it was determined that it is more likely than not the reporting unit, brands and trademarks had a fair value in excess of carrying value. Accordingly, no further impairment testing was completed and no impairment charges related to goodwill or indefinite-lived intangibles were recognized during the fiscal periods ended ~~August 25, 2018~~ or ~~August 26, 2017~~.Intangibles.

Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. The Company reviews for impairment indicators of finite-lived intangibles and other long-lived assets as described in the “Property and ~~Equipment”~~Equipment, Net” significant accounting policy.

Deferred Financing Costs and Debt Discounts

Costs incurred in obtaining long-term financing paid to parties other than creditors are considered a ~~debt discount~~deferred financing cost and are amortized over the terms of the long-term financing agreements using the effective-interest method. Amounts paid to creditors are recorded as a reduction in the proceeds received by the creditor and are considered a discount on the issuance of debt.

Income Taxes

Income taxes include federal, state and foreign taxes currently payable, and deferred taxes arising from temporary differences between income for financial reporting and income tax purposes. Deferred tax assets and liabilities are determined based on the differences between the financial statement balances and the tax ~~bases~~basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the fiscal year that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to amounts expected to be realized.

Leases

Contracts are evaluated to determine whether they contain a lease at inception. Leases are classified as either finance leases or operating leases based on criteria in ASC Topic 842, Leases. The Company’s operating leases are generally comprised of real estate and certain equipment used in warehousing products. The Company’s finance leases are generally comprised of warehouse equipment.

Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The majority of the Company’s leases do not provide an implicit rate; therefore, the Company uses its secured incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments for those leases. The Company’s incremental borrowing rate for a lease is the rate of interest it would pay to borrow on a collateralized basis over a similar term to the lease in a similar economic environment. The Company applied incremental borrowing rates using a portfolio approach. Right-of-use assets also include any lease payments made and exclude lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company has elected not to recognize right-of-use assets and lease liabilities for short-term operating leases that have a term of one year or less.

The Company monitors for triggering events or conditions that require a reassessment of its leases. When the reassessment requires a re-measurement of the lease liability, a corresponding adjustment is made to the carrying amount of the right-of-use asset. Additionally, the Company reviewed for impairment indicators of its right-of-use assets and other long-lived assets as described in the “Property and Equipment, Net” significant accounting policy.

Warrant Accounting

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued private placement stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC Topic 480, Distinguishing Liabilities from Equity, and ASC Topic 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity (“ASC 815-40”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is assessed as part of this evaluation.

Prior to the Business Combination, Conyers Park issued 13,416,667 public warrants and 6,700,000 private warrants (the “Private Warrants”). The Company assumed the Conyers Park warrants to purchase common stock in connection with the Business Combination. As a result of the Business Combination, the warrants issued by Conyers Park were no longer exercisable for shares of Conyers Park common stock, but were instead exercisable for common stock of the Company. All other features of the warrants were unchanged.

Each whole warrant entitles the holder to purchase one share of the Company’s common stock at a price of $11.50 per share. The warrants became exercisable 30 days after the completion of the Business Combination and expire five years after that date, or earlier upon redemption or liquidation, as applicable.

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The assumed 13,416,667 public warrants qualified for equity classification until the warrants were fully redeemed in fiscal 2019. As of August 28, 2021, the 6,700,000 Private Warrants remain outstanding and are precluded from equity classification, being liability-classified. The Company accounts for these Private Warrants as a derivative warrant liability in accordance with ASC 815-40. Accordingly, the Company recognizes the Private Warrants as a liability at fair value and adjusts the Private Warrants to fair value at each reporting period through other income. The fair value adjustments are determined by using a Black-Scholes option-pricing methodology (“Black-Scholes model”). The valuation is primarily based on observable market data while the related theoretical private warrant volatility assumption within the Black-Scholes model represents a Level 3 measurement within the fair value measurement hierarchy. The periodic remeasurement of the Private Warrants is reflected in (Loss) gain in fair value change of warrant liability within the Consolidated Statements of Operations and Comprehensive Income (Loss).

Revenue Recognition

The Company recognizes revenue when performance obligations under the terms of a contract with its customer are satisfied. The Company has determined that fulfilling and delivering products is a single performance obligation. Revenue is recognized at the point in time when the Company has satisfied its performance obligation and the customer has obtained control of the products. This generally occurs when the product is delivered to or picked up by the customer based on applicable shipping terms, which is typically within 30 days.

Revenue is measured as the amount of consideration expected to be received in exchange for fulfilled product orders, including estimates of variable consideration. The most common forms of variable consideration include trade promotions, such as consumer incentives, coupon redemptions and other marketing activities, allowances for unsaleable product, and any additional amounts where a distinct good or service cannot be identified or the value cannot be reasonably estimated. Trade promotions are recorded as a reduction to net sales with a corresponding reduction to accounts receivable at the time of revenue recognition for the underlying sale. The recognition of trade promotions requires management to make estimates regarding the volume of incentive that will be redeemed and their total cost. At August 28, 2021 and August 29, 2020, the allowance for trade promotions was $22.3 million and $25.2 million, respectively.

Estimates of variable consideration are made using various information including historical data on performance of similar trade promotional activities, market data from IRI, and the Company’s best estimate of current activity. The Company reviews these estimates regularly and makes revisions as necessary. Revisions can include changes for consideration paid to customers that lack sufficient evidence to support a distinct good or service assertion, or for which a reasonably estimable fair value cannot be determined, primarily related to the Company’s assessments of cooperative advertising programs. Uncertainties related to the estimate of variable consideration are resolved in a short time frame and do not require any additional constraint on variable consideration. Adjustments to variable consideration are recognized in the period the adjustments are identified and have historically been insignificant. Revenue is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities.

The Company provides standard assurance type warranties that its products will comply with all agreed-upon specifications. No services beyond an assurance type warranty are provided to customers. While customers generally have a right to return defective or non-conforming products, past experience has demonstrated that product returns have been immaterial. Customer remedies for defective or non-conforming products may include a refund or exchange. As a result, the right of return is estimated and recorded as a reduction in revenue at the time of sale, if necessary.

The Company’s customer contracts identify product quantity, price and payment terms. Payment terms are granted consistent with industry standards. Although some payment terms may be more extended, the majority of the Company’s payment terms are less than 60 days. As a result, revenue is not adjusted for the effects of a significant financing component. Amounts billed and due from customers are classified as Accounts receivable, net on the Consolidated Balance Sheets.

The Company utilizes third-party contract manufacturers for the manufacture of its products. The Company has evaluated whether it is the principal or agent in these relationships. The Company has determined that it is the principal in all cases, as it retains the responsibility for fulfillment and risk of loss, as well as establishes the price.

In accordance with ASC Topic 606, Revenue from Contracts with Customers, the Company has elected the practical expedient to expense the incremental costs to obtain a contract, because the amortization period would be less than one year, and the practical expedient for shipping and handling costs. Shipping and handling costs incurred to deliver products to customers are accounted for as fulfillment activities, rather than a promised service, and as such are included in Cost of goods sold in the Consolidated Statements of Operations and Comprehensive Income (Loss).

Revenues from transactions with external customers for each of the Company’s products would be impracticable to disclose and management does not view its business by product line. For revenue disaggregated by geographic area and brand refer to Note 16, Segment and Customer Information.

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Cost of Goods Sold

Costs of goods sold represent costs directly related to the manufacture and distribution of the Company’s products. Such costs include raw materials, co-manufacturing costs, packaging, shipping and handling, third-party distribution, and depreciation of distribution center equipment and leasehold improvements.

Shipping and Handling Costs

Shipping and handling costs include costs paid to third-party warehouse operators associated with delivering product to customers and depreciation and amortization of assets at the third-party warehouse. Shipping and handling costs are recognized in Cost of goods sold. Costs of $66.5 million for the fifty-two weeks ended August 28, 2021, $49.8 million for the fifty-two weeks ended August 29, 2020, and $32.3 million for the fifty-three weeks ended August 31, 2019 were recorded relating to products shipped to customers.

Advertising Costs

Production costs related to television commercials are expensed when first aired. All other advertising costs are expensed when incurred or when the advertising service is received through Selling and marketing. Total advertising costs were $74.9 million for the fifty-two weeks ended August 28, 2021, $55.3 million for the fifty-two weeks ended August 29, 2020, and $35.4 million for the fifty-three weeks ended August 31, 2019.

Production costs related to television commercials not yet aired and prepaid advertising services not yet received are included in Prepaid expenses in the accompanying Consolidated Balance Sheets. Total prepaid advertising expenses were $1.6 million and $0.2 million at August 28, 2021 and August 29, 2020.

Research and Development Activities

The Company’s research and development activities primarily consist of generating and testing new product concepts, new flavors and packaging. The Company expenses research and development costs as incurred related to compensation, facility costs, consulting, and supplies. Research and development activities are primarily internal and associated costs are included in General and administrative. The Company’s total research and development expenses were $3.5 million for the fifty-two weeks ended August 28, 2021, $4.0 million for the fifty-two weeks ended August 29, 2020, and $2.2 million for the fifty-three weeks ended August 31, 2019.

Share-Based Compensation

The Company uses share-based compensation, including stock options, restricted stock units and performance stock units, to provide long-term performance incentives for its employees and directors. Share-based compensation is recognized on a straight-line basis over the requisite service period of the award based on their grant-date fair value. Forfeitures are recognized as they occur. Share-based compensation expense is included in General and administrative.

Defined Contribution Plan

The Company sponsors defined contribution plans to provide retirement benefits to its employees. The Company’s 401(k) plan and similar plans for non-domestic employees are based on a portion of eligible pay up to a defined maximum. All matching contributions are made in cash. Expense associated with defined contribution plans was $1.4 million for the fifty-two weeks ended August 28, 2021, $1.3 million for the fifty-two weeks ended August 29, 2020, and $0.6 million for the fifty-three weeks ended August 31, 2019.

Foreign Currency Translation

For all foreign operations, the functional currency is the local currency. Assets and liabilities of these operations are translated into U.S. dollars using the exchange rate in effect at the end of each reporting period. Income statement accounts are translated at the average exchange rate prevailing during each reporting period. Translation adjustments are recorded as a component of Other comprehensive income (loss). Gains or losses resulting from transactions in foreign currencies are included in Other income (expense).

~~Advertising Costs~~

~~Production costs related to television commercials are expensed when first aired. All other advertising costs are expensed when incurred through~~ ~~Selling and marketing~~. Total advertising costs were $35.4 million for the fifty-three week period ended August 31, 2019, $34.0 million for the fifty-two week period ended August 25, 2018, $3.8 million for the successor period from July 7, 2017 through August 26, 2017, and $26.6 million for the predecessor period from August 28, 2016 through July 6, 2017.

~~Production costs related to television commercials not yet aired are included in~~ ~~Prepaid expenses~~ ~~in the accompanying Consolidated Balance Sheets. There were no productions costs related to television commercials not yet aired at August 31, 2019 or August 25, 2018.~~

~~Research and Development Activities~~

The Company’s research and development activities primarily consist of generating and testing new product concepts, new flavors and packaging. The Company expenses research and development costs as incurred related to compensation, facility costs, consulting and supplies. Research and development activities are primarily internal and associated costs are included in ~~General and administrative~~. The Company’s total research and development expenses were $2.2 million for the fifty-three week period ended August 31, 2019, $2.5 million for the fifty-two week period ended August 25, 2018, $0.4 million for the successor period from July 7, 2017 through August 26, 2017, and $1.9 million for the predecessor period from August 28, 2016 through July 6, 2017.

~~Share-Based Compensation~~

The Company uses share-based compensation, including stock options and restricted stock units, to provide long-term performance incentives for its employees and directors. Share-based compensation is recognized on a straight-line basis over the requisite service period of the award based on their grant-date fair value. Forfeitures are recognized as they occur. Share based compensation expense is included within the same financial statement caption where the recipient’s other compensation is reported.

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~~Defined Contribution Plan~~

The Company sponsors defined contribution plans to provide retirement benefits to its employees. The Company's 401(k) plan and similar plans for non-domestic employees are based on a portion of eligible pay up to a defined maximum. All matching contributions are made in cash. Expense associated with defined contribution plans was $0.6 million for the fifty-three week period ended August 31, 2019, $0.4 million for the fifty-two week period ended August 25, 2018, $0.0 million for the successor period from July 7, 2017 through August 26, 2017, and $0.3 million for the predecessor period from August 28, 2016 through July 6, 2017.

~~Cost of Goods Sold~~

Costs of goods sold represent costs directly related to the manufacture and distribution of our products. Such costs include raw materials, co-manufacturing costs, packaging, shipping and handling, third-party distribution and depreciation of distribution center equipment and leasehold improvements.

~~Shipping and Handling Costs~~

Shipping and handling costs include costs paid to third-party warehouse operators associated with delivering product to customers, and depreciation and amortization of assets at the third-party warehouse. Shipping and handling costs are recognized in ~~Cost of goods sold~~. Costs of $32.3 million for the fifty-three week period ended August 31, 2019, $27.2 million for the fifty-two week period ended August 25, 2018, $3.6 million for the successor period from July 7, 2017 through August 26, 2017, and $20.0 million for the predecessor period from August 28, 2016 through July 6, 2017 were recorded relating to products shipped to customers.

Recently Issued and Adopted Accounting Pronouncements

Recently Issued Accounting Pronouncements Not Yet Adopted

In ~~February 2016,~~December 2019, the ~~FASB~~Financial Accounting Standards Board (the “FASB”) issued ~~ASU No. 2016-02,~~ ~~Leases~~Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic ~~842). The standard requires lessees~~740): Simplifying the Accounting for Income Taxes, which amends existing guidance related to ~~recognize~~ the ~~assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement~~

Table of ~~financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset~~Contents

accounting for ~~the lease term. In July 2018, the FASB issued ASU 2018-11,~~ ~~Leases (Topic 842): Targeted Improvements~~. ASU 2018-11 provides entities another option for transition, allowing entities to not apply the new standard in the comparative periods they present in their financial statements in the year of adoption. The amendments provide the option for the ASU to be applied at the beginning of the period adopted using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The new guidance is effective for the Company beginning in fiscal 2020. The Company has completed the initial review of its material lease contracts and has been collecting the required information from lease contracts for adoption. The adoption of this ASU will result in a material increase to lease-related assets and liabilities on the Company's Consolidated Balance Sheets. The Company is currently assessing the impact that this standard will have on its accounting policies, processes, system requirements, internal controls, and disclosures. The Company does not anticipate that the adoption of this ASU will have a significant effect on the Company’s Consolidated Statements of Operations or Cash Flows.

~~In June 2016, the FASB issued ASU No. 2016-13,~~ ~~Financial Instruments—Credit Losses (Topic 326), which modifies disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures.~~income taxes. This ASU is ~~effective~~intended to simplify the accounting for ~~annual periods beginning after December 15, 2020, with early adoption permitted. The amendments~~income taxes by removing certain exceptions to the general principles of ~~this ASU should be applied on a retrospective basis~~accounting for income taxes and to ~~all periods presented. The Company is currently evaluating~~improve the ~~effects adoption~~consistent application of ~~this guidance will have on the consolidated financial statements.~~

~~In August 2018, the FASB issued ASU No. 2018-13,~~ ~~Fair Value Measurement (Topic 820), which modifies disclosure requirements on fair value measurements~~GAAP for other areas of ~~ASC 820.~~accounting for income taxes by clarifying and amending existing guidance. This ASU is effective ~~for all entities~~ for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted including in any interim period for which financial statements have not yet been issued. Entities are permitted to early adopt the eliminated or modified disclosure requirements and delay the adoption new disclosure requirements until their effective date. The Company does not anticipate adoption of this ASU to be material to its consolidated financial statements.

~~In August 2018, the FASB issued ASU No. 2018-15,~~ ~~Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract~~, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The ASU is effective for fiscal years ending after December 15, 20192020, with early adoption permitted. The Company is currently evaluating the effects adoption of this guidance will have on the consolidated financial statements and does not expect that the adoption of this ASU will be material to its consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited period of time to ease the potential burden in accounting for reference rate reform on financial reporting. The amendments in this ASU are effective for all entities and can be applied to contract modifications due to rate reform and eligible existing and new hedging relationships entered into between March 12, 2020 and December 31, 2022. The amendments of this ASU should be applied on a prospective basis. The Company will continue to monitor the effects of rate reform, if any, on any new or amended contracts through December 31, 2022. The Company does not anticipate the amendments in this ASU will be material to its consolidated financial statements.

~~Table~~ In October 2020, the FASB issued ASU 2020-10, Codification Improvements, which provides updates for technical corrections, clarifications to guidance, simplifications to wording or structure of ~~Contents~~

guidance, and other minor improvements across various areas of accounting within GAAP. This ASU is effective for all entities for fiscal years beginning after December 15, 2020, with early adoption permitted. The amendments of this ASU should be applied retrospectively. The Company does not anticipate the adoption of this ASU will be material to its consolidated financial statements.

No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material effect on the Company’s consolidated financial statements.

Recently Adopted Accounting Pronouncements

In ~~May 2014,~~June 2016, the FASB issued ASU 2016-13, Financial ~~Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09,~~ ~~Revenue from Contracts with Customers~~ ~~(ASC Topic 606). The objective~~Instruments—Credit Losses (Topic 326), which modified the measurement of ASU No. 2014-09 is to outline a new, single comprehensive model to use in accounting for revenue arising from contracts with customers. The new revenue recognition model provides a five-step analysis for determining when and how revenue is recognized, depicting the transferexpected credit losses of ~~promised goods or services to customers in an amount that reflects the consideration expected to be received in exchange for those goods or services.~~certain financial instruments. The Company adopted this ASU as of the first day of fiscal 2021. As a result, the Company changed its method of estimating its allowance for doubtful accounts for trade receivables to be based upon the Company’s historical credit loss experience, adjusted for asset-specific risk characteristics, current economic conditions, and reasonable forecasts. The change in estimating the allowance for doubtful accounts did not have a material effect on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), which modified disclosure requirements on fair value measurements of ASC Topic ~~606 and all related requirements using the modified retrospective method in~~820, Fair Value Measurement. The Company adopted this ASU as of the first ~~quarter~~day of fiscal 2019. Upon completing our assessment of ASC Topic 606, we concluded that no adjustments were required to the opening balance of retained earnings at the date of adoption and the comparative information has not been restated.2021. The adoption of this ASU did not have a material effect on the ~~Company’s~~ consolidated financial statements. ~~Disclosures required by ASC Topic 606 are presented within Note 4, Revenue Recognition.~~

~~In January 2016,~~

3. Business Combination

On August 21, 2019, Simply Good USA entered into the ~~FASB issued ASU No. 2016-01,~~ ~~Financial Instruments—Overall (Subtopic 825-10). This new standard enhances~~Purchase Agreement to acquire Quest. On November 7, 2019, Simply Good USA completed the ~~reporting model~~Quest Acquisition for ~~financial instruments regarding certain aspects~~a cash purchase price at closing of ~~recognition, measurement, presentation, and disclosure. This ASU is~~$988.9 million subject to be applied using a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The Company adopted this ASU in the first quarter of fiscal 2019. The adoption of this ASU did not have a material effect on the Company’s consolidated financial statements.

In ~~August 2016, the FASB issued ASU No. 2016-15,Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.~~ The new guidance is intended to eliminate diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance requires application using a retrospective transition method. The Company adopted this ASU in the first quarter of fiscal 2019. The adoption of this ASU did not have a material effect on the Company’s consolidated financial statements.

~~In January 2017, the FASB issued ASU No. 2017-04,~~ ~~Intangibles—Goodwill and other (Topic 350): Simplifying the Test for Goodwill Impairment~~. The standard simplifies how an entity tests goodwill by eliminating Step 2 of the goodwill impairment test. The amended standard also modifies the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. The new guidance is effective for the Company beginning in fiscal 2020. The Company adopted this ASU in fiscal 2019. The adoption of this ASU did not have a material effect on the Company’s consolidated financial statements.

~~In January 2017, the FASB issued ASU No. 2017-01,~~ ~~Business Combinations (Topic 805)~~, to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The provisions of this ASU provide a more robust framework to use in determining when a set of assets and activities is a business by clarifying the requirements related to inputs, processes, and outputs. The Company adopted this ASU in the first quarter of fiscal 2019. The adoption of this ASU did not have a material effect on the Company’s consolidated financial statements.

~~In May 2017, the FASB issued ASU No. 2017-09,~~ ~~Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting.~~ The amended standard specifies the modification accounting applicable to any entity which changes the terms or conditions of a stock-based payment award. The Company adopted this ASU in the first quarter of fiscal 2019. The adoption of this ASU did not have a material effect on the Company’s consolidated financial statements.

~~4. Revenue Recognition~~

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The singular performance obligation of our customer contracts is determined by each individual purchase order and the products ordered, with revenue being recognized at a point-in-time when the obligation under the terms of the agreement is satisfied and product control is transferred to the customer. Specifically, control transfers to our customers when the product is delivered to or picked up by our customers based on applicable shipping terms. The performance obligations of our customer contracts are generally satisfied within 30 days.

Revenue is measured as the amount of consideration we expect to receive in exchange for fulfilled product orders, including estimates of variable consideration. The most common forms of variable consideration include trade programs, consumer incentives, coupon redemptions, allowances for unsaleable products, and any additional amounts where a distinct good or service cannot be identified or the value cannot be reasonably estimated. Estimates of variable consideration are made using various information including historical data on performance of similar trade promotional activities, market data from IRI, and the Company’s best estimate of current activity. We review these estimates regularly and make revisions as necessary. Revisions can include changes for consideration paid to customers that lack sufficient evidence to support a distinct good or service assertion, or for which a reasonably estimable fair value cannot be determined, primarily related to our assessments of cooperative advertising programs. Uncertainties related to the estimate of variable consideration are resolved in a short time frame and do not require any additional constraint on variable consideration. Adjustments to variable consideration are recognized in the

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~~period the adjustments are identified and have historically been insignificant. Revenue is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities.~~

We provide standard assurance type warranties that our products will comply with all agreed-upon specifications. No services beyond an assurance type warranty are provided to our customers. While customers generally have a right to return defective or non-conforming products, past experience has demonstrated that product returns have been immaterial. Customer remedies for defective or non-conforming products may include a refund or exchange. As a result, the right of return is estimated and recordedcustomary post-closing adjustments. Simply Good USA acquired Quest as a ~~reduction in revenue, at the time of sale.~~

Our customer contracts identify product quantity, price and payment terms. Payment terms are granted consistent with industry standards. Although some payment terms may be more extended, the majority of our payment terms are less than 60 days. The Company does not have any payment terms that extend beyond one year. As a result, we do not adjust our revenue for the effects of a significant financing component. Amounts billed and due from our customers are classified as ~~Accounts receivable, net~~ ~~on the Consolidated Balance Sheets.~~

The Company utilizes third-party contract manufacturers for the manufacture of our products. We have evaluated whether the Company is the principal or agent in these relationships. We have determined that the Company is the principal in all cases, as it maintains the responsibility for fulfillment, risk of loss and establishes the price.

~~We recognize a minor amount of royalty income for the license of Atkins’ frozen meals. Royalty income represents less than 1%~~part of the Company’s vision to lead the nutritious snacking movement with trusted brands that offer a variety of convenient, innovative, great-tasting, better-for-you snacks and meal replacements. Quest is a healthy lifestyle food company offering a variety of bars, cookies, chips, ready-to-drink shakes and pizzas that compete in many of the attractive, fast growing sub-segments within the nutritional snacking category.

The Quest Acquisition was funded through a combination of cash, equity and debt financing. Total consideration paid on the closing date was $988.9 million. Cash sources of funding included $195.3 million of cash on hand, net ~~sales. Royalty revenue is recognized over time as sales~~proceeds of ~~licensed products occur.~~

~~The~~approximately $350.0 million from an underwritten public offering of common stock, and $443.6 million in new term loan debt. In the third fiscal quarter of 2020, the Company ~~has elected~~received a post-closing release from escrow of approximately $2.1 million related to net working capital adjustments, resulting in a total net consideration paid of $986.8 million. Business transaction costs within the ~~following practical expedients in accordance with ASC Topic 606:~~

~~Shipping and handling costs~~—We have elected to account for shipping and handling costs incurred to deliver products to customers as fulfillment activities, rather than a promised service. As such, fulfillment costs are included in ~~Cost of goods sold~~ ~~in our~~ Consolidated Statements of Operations and Comprehensive Income (Loss). for the fifty-two weeks ended August 29, 2020 was $27.1 million, which included $14.5 million of transaction advisory fees related to the Quest Acquisition, $3.2 million of banker commitment fees, $6.1 million of non-deferrable debt issuance costs related to the incremental term loan, and $3.3 million of other costs, including legal, due diligence, and accounting fees.

Included in the transaction advisory fees paid for the Quest Acquisition was $12.0 million paid to Centerview Partners LLC, an investment banking firm that served as the lead financial advisor to the Company for this transaction. Three members of the Company’s Board of Directors, Messrs. Kilts, West, and Ratzan, have business relationships with certain partners of Centerview Partners LLC (including relating to Centerview Capital Consumer, a private equity firm and affiliate of Conyers Park Sponsor LLC), but they are not themselves partners, executives or employees of Centerview Partners LLC, and Centerview Partners LLC is not a related party of the

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Company pursuant to applicable rules and policies. The advisory fee paid to Centerview Partners LLC represents approximately 1.2% of the total cash purchase price paid by the Company on the closing date of the Quest Acquisition. All transaction advisory fees relating to the Quest Acquisition were approved by the Company’s Audit Committee.

The following table sets forth the final purchase price allocation of the Quest Acquisition to the estimated fair value of the net assets acquired at the date of acquisition, in thousands:



Assets acquired:
Cash and cash equivalents	$	4,745
Accounts receivable, net	25,359
Inventories	44,032
Prepaid assets	1,214
Other current assets	3,812
Property and equipment, net (1)	9,843
Intangible assets, net (2)	868,375
Other long-term assets	20,997
Liabilities assumed:
Accounts payable	25,200
Other current liabilities	11,237
Deferred income taxes (3)	10,754
Other long-term liabilities	18,891
Total identifiable net assets	912,295
Goodwill (4)	74,525
Total assets acquired and liabilities assumed	$	986,820

(1) Property and equipment, net primarily consisted of leasehold improvements for the Quest headquarters of $6.9 million, furniture and fixtures of $2.2 million, and equipment of $0.7 million. The Quest headquarters lease ends in April 2029. The useful lives of the leasehold improvements, furniture and fixtures, and equipment are consistent with the Company’s accounting policies.

(2) Intangible assets were recorded at fair value consistent with ASC Topic 820, Fair Value Measurement, as a result of the Quest Acquisition. Intangible assets consisted of $750.0 million of indefinite brands and trademarks, $115.0 million of amortizable customer relationships, and $3.4 million of internally developed software. The useful lives of the intangible assets are disclosed in Note 5 of the Consolidated Financial Statements. The fair value measurements of the assets and liabilities were based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value measurement hierarchy. Level 3 fair market values were determined using a variety of information, including estimated future cash flows and market comparable data and companies. The fair values of the intangible assets were estimated using inputs primarily from the income approach and the with/without method, which estimates the value using the cash flow impact in a hypothetical scenario where the customer relationships are not in place. The significant assumptions used in estimating the fair value of the intangible assets include the estimated life the asset will contribute to cash flows, profitability, and the estimated discount rate.

(3) Primarily as a result of the fair value attributable to the identifiable intangible assets, the deferred income tax liability was $10.8 million.

(4) Goodwill was recorded at fair value consistent with ASC Topic 820, Fair Value Measurement, as a result of the Quest Acquisition. Amounts recorded for goodwill created in an acquisition structured as a stock purchase for tax are generally not expected to be deductible for tax purposes. Amounts recorded for goodwill resulting in a tax basis step-up are generally expected to be deductible for tax purposes. Tax deductible goodwill was estimated to be $67.7 million. Goodwill represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized.

The Company completed its final assessment of purchase price allocation for the Quest Acquisition to the estimated fair value of the net assets acquired at the date of acquisition during the first quarter of fiscal 2021. Since the initial preliminary estimates reported in the first fiscal quarter of 2020, the Company updated certain amounts reflected in the final purchase price allocation, as summarized in the fair values of assets acquired and liabilities assumed in the table above. Specifically, the carrying amount of the intangible assets, net increased by $20.0 million as a result of valuation adjustments related to the Company’s finalization of tax attributes, which also resulted in a decrease to deferred income taxes of $3.2 million. Additionally, accounts receivable, net decreased $4.3 million and inventories increased $0.9 million due to fair value measurement period adjustments, and the carrying amount of property and equipment, net decreased by $0.5 million to reflect its estimated fair value. As a result of these adjustments and the change in total net consideration paid of approximately $2.1 million related to net working capital adjustments discussed above, goodwill decreased $21.5 million. Measurement period adjustments were recognized in the reporting period in which the adjustments were determined and calculated as if the accounting had been completed at the acquisition date.

~~Costs~~

Table of ~~obtaining a contract—We~~Contents

The results of Quest’s operations have ~~elected~~been included in the Company’s consolidated financial statements since November 7, 2019, the date of acquisition. The following table provides net sales from the acquired Quest business included in the Company’s results:


	52-Weeks Ended		52-Weeks Ended
(In thousands)	August 28, 2021		August 29, 2020
Net sales (1)	$	453,619	$	286,803

(1) Net sales for the fifty-two weeks ended August 28, 2021 excludes immaterial international sales.

Unaudited Pro Forma Financial Information

Pro forma financial information is not intended to ~~expense costs~~represent or be indicative of ~~obtaining a contract because~~ the ~~amortization period~~actual results of operations of the combined business that would ~~be less than one year.~~

have been reported had the Quest Acquisition been completed at the beginning of the fiscal year 2019, nor is it representative of future operating results of the Company.

~~Revenue from transactions with external customers for each~~ The following unaudited pro forma combined financial information presents combined results of ~~Atkins’ products would be impracticable to disclose~~the Company and ~~management does not view its business by product line. For revenue disaggregated by geographic area see Note 16, Segment and Customer Information.~~Quest as if the Quest Acquisition has occurred at the beginning of fiscal 2019:


	52-Weeks Ended		53-Weeks Ended
(In thousands)	August 29, 2020		August 31, 2019
Net sales	$	885,044	$	832,629
Gross profit	$	355,395	$	317,758
Net income (loss)	$	90,028	$	(42,627)

4. Property and Equipment, Net

Property and equipment, net, as presented with the Consolidated Balance Sheets, ~~are~~is summarized as follows:


	August 31, 2019			August 25, 2018
(In thousands)	(Successor)			(Successor)			(In thousands)	August 28, 2021		August 29, 2020
Furniture and fixtures	$	715		$	638		Furniture and fixtures	$	3,100	$	3,197
Computer equipment and software	956			305			Computer equipment and software	1,093		1,062
Machinery and equipment	385			233			Machinery and equipment	1,934		1,135
Website development costs	2,237			1,746

Leasehold improvements	361			337			Leasehold improvements	8,219		8,137
Finance lease right-of-use-assets							Finance lease right-of-use-assets	1,185		1,185
Construction in progress	139			507			Construction in progress	6,189		—
Property and equipment, gross	4,793			3,766			Property and equipment, gross	21,720		14,716
Less: accumulated depreciation	(2,337		)	(1,201		)	Less: accumulated depreciation	(5,136)		(2,866)
Property and equipment, net	$	2,456		$	2,565		Property and equipment, net	$	16,584	$	11,850

Total depreciation expense was $2.3 million for the fifty-two weeks ended August 28, 2021, $1.8 million for the fifty-two weeks ended August 29, 2020, and $1.1 million for the ~~fifty-two week period~~fifty-three weeks ended August 31, 2019, $1.2 million for the fifty-two week period ended August 25, 2018, $0.1 million for the successor period from July 7, 2017 through August 26, 2017, and $1.0 million for the predecessor period from August 28, 2016 through July 6, 2017. ~~General and administrative~~ ~~includes a $0.1 million loss on disposal of property and equipment in the fifty-two week period ended August 25, 2018.~~2019.

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6.5. Goodwill and Intangibles

~~The following table presents~~ Changes to Goodwill during the ~~changes in~~ ~~Goodwill~~:

(In thousands) Total
Balance as of August 26, 2017 $ 465,030
Goodwill working capital adjustment 1,757
Measurement period adjustment of the Business Combination 4,640
Balance as of August 25, 2018 $ 471,427

~~There were no changes in the Company's goodwill in the fifty-three week period~~fifty-two weeks ended August ~~31, 2019.~~28, 2021 and the fifty-two weeks ended August 29, 2020 were as follows:


(In thousands)	Goodwill
Balance as of August 31, 2019	$	471,427
Acquisition of business	73,347
Balance as of August 29, 2020	$	544,774
Acquisition of business	1,178
Sale of business	(2,818)
Balance as of August 28, 2021	$	543,134

The change in Goodwill attributed to the acquisition of a business during the fifty-two weeks ended August 28, 2021 and the fifty-two weeks ended August 29, 2020 was the result of the Quest Acquisition and subsequent measurement period adjustments made to finalize the acquisition method of accounting as described in Note 3, Business Combination. Additionally, effective September 24, 2020, the Company sold the assets exclusively related to its SimplyProtein® brand of products for approximately $8.8 million of consideration, including cash of $5.8 million and a note receivable for $3.0 million, to a newly formed entity led by the Company’s former Canadian-based management team who had been responsible for this brand prior to the sale transaction (the “SimplyProtein Sale”). In addition to purchasing these assets, the buyer assumed certain liabilities related to the SimplyProtein brand’s business. There was no gain or loss recognized as a result of the SimplyProtein Sale. In conjunction with the SimplyProtein Sale, the Company disposed of $2.8 million of goodwill associated with the SimplyProtein business.

For fiscal year 2021, the Company performed qualitative goodwill impairment assessments for each reporting unit that had goodwill, which consisted of both of the Company’s operating segments, Atkins and Quest. The qualitative assessments did not identify indicators of impairment, and it was determined that it was more likely than not each reporting unit had fair values in excess of their carrying values. Accordingly, no further impairment assessment was necessary, and the Company determined neither reporting unit was impaired. There were no impairment charges related to goodwill in the ~~period~~fifty-two weeks ended August ~~31, 2019~~28, 2021 or since the inception of the Company.

Intangible assets, net in ~~our consolidated balance sheets~~the Consolidated Balance Sheets consist of the following:


				August 28, 2021
(In thousands)	Useful life			Gross carrying amount		Accumulated amortization		Net carrying amount
Intangible assets with indefinite life:
Brands and trademarks	Indefinite life			$	974,000	$	—	$	974,000
Intangible assets with finite lives:
Customer relationships	15 years			$	174,000	$	30,103	$	143,897
Licensing agreements	13 years			22,000		6,664		15,336
Proprietary recipes and formulas	7 years			7,000		4,131		2,869
Software and website development costs	3	-	5 years	5,560		2,924		2,636
Intangible assets in progress	3	-	5 years	303		—		303
				$	1,182,863	$	43,822	$	1,139,041

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		August 31, 2019										August 29, 2020
(In thousands)	Useful life	Gross carrying amount		Accumulated amortization		Net carrying amount		(In thousands)	Useful life			Gross carrying amount		Accumulated amortization		Net carrying amount
Intangible assets with indefinite life:								Intangible assets with indefinite life:
Brands and trademarks	Indefinite life	$	232,000	$	—	$	232,000	Brands and trademarks	Indefinite life			$	979,000	$	—	$	979,000
Intangible assets with finite lives:								Intangible assets with finite lives:
Customer relationships	15 years	59,000		8,382		50,618		Customer relationships	15 years			$	174,000	$	18,503	$	155,497
Licensing agreements								Licensing agreements	14 years			22,000		4,920		17,080
Proprietary recipes and formulas	7 years	7,000		2,131		4,869		Proprietary recipes and formulas	7 years			7,000		3,131		3,869
Licensing agreements	14 years	22,000		3,348		18,652
Software and website development costs								Software and website development costs	3	-	5 years	5,967		2,645		3,322
		$	320,000	$	13,861	$	306,139
												$	1,187,967	$	29,199	$	1,158,768

August 25, 2018
(In thousands) Useful life Gross carrying amount Accumulated amortization Net carrying amount
Intangible assets with indefinite life:
Brands and trademarks Indefinite life $ 232,000
$ —
$ 232,000
Intangible assets with finite lives:
Customer relationships 15 years 59,000
4,448
54,552
Proprietary recipes and formulas 7 years 7,000
1,131
5,869
Licensing agreements 14 years 22,000
1,778
20,222
$ 320,000
$ 7,357
$ 312,643

Changes in Intangible assets, net ~~changed due~~ during the fifty-two weeks ended August 28, 2021 were primarily related to the SimplyProtein Sale and recurring amortization expense. In conjunction with the SimplyProtein Sale, the Company sold its SimplyProtein brand intangible asset, which had a carrying value of approximately $5.0 million as of the date of the sale. Changes in Intangible assets, net during the fifty-two weeks ended August 29, 2020 were primarily related to the Quest Acquisition, recurring amortization expense, and an impairment loss related to brand and trademark intangible assets. During the fourth quarter of fiscal 2020, the Company determined there were indicators of impairment related to the SimplyProtein brand intangible asset. Therefore, the Company performed a quantitative assessment of its brand intangible asset, which indicated its fair value did not exceed its carrying value, resulting in a loss on impairment of $3.0 million during the fifty-two weeks ended August 29, 2020.

During the fifty-two weeks ended August 28, 2021, the Company performed qualitative impairment assessments for its indefinite-lived intangible assets. The qualitative assessments did not identify indicators of impairment, and it was determined that it was more likely than not each indefinite-lived intangible asset had fair values in excess of their carrying values. Accordingly, no further impairment assessment was necessary. There were no impairment charges related to indefinite-lived intangibles recognized in the fifty-two weeks ended August 28, 2021 or the fifty-three weeks ended August 31, 2019. There was a $3.0 million loss on impairment of an indefinite-lived intangible in the fifty-two weeks ended August 29, 2020, as discussed above.

During the fifty-two weeks ended August 28, 2021, the Company did not identify indicators of impairment related to its finite-lived intangible assets, which are tested for impairment when events or circumstances indicated that the carrying amount may not be recoverable. There were no impairment charges related to the Company’s finite-lived intangible assets in the fifty-two weeks ended August 28, 2021, fifty-two weeks ended August 29, 2020, or the fifty-three weeks ended August 31, 2019.

Amortization expense related to intangible assets was $15.6 million for the fifty-two weeks ended August 28, 2021, $14.0 million for the fifty-two weeks ended August 29, 2020, and $6.5 million for the fifty-three ~~week period~~weeks ended August 31, 2019, $6.5 million for the fifty-two week period ended August 25, 2018, $0.9 million for the successor period from July 7, 2017 through August 26, 2017, and $8.5 million for the predecessor period from August 28, 2016 through July 6, 2017.2019.

Estimated future amortization for each of the next five fiscal years and thereafter is as follows:


(In thousands)	Amortization
2022	$	15,795
2023	15,326
2024	14,635
2025	13,517
2026	13,517
Thereafter	91,948
Total	$	164,738

(In thousands)
2020 $ 6,505
2021 6,505
2022 6,505
2023 6,505
2024 6,505
Thereafter 41,614
Total $ 74,139

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7.6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities in the Consolidated Balance Sheets were comprised of the following:


(In thousands)	August 28, 2021		August 29, 2020
Accrued professional fees	$	2,124	$	3,125
Accrued advertising allowances and claims	4,309		2,625
Accrued bonus expenses	16,689		12,261
Accrued freight expenses	2,812		1,795
Accrued payroll-related expenses	1,871		2,179
Accrued commissions	1,909		1,789
Income taxes payable	9,020		839
VAT payable	4,386		2,367
Accrued restructuring	851		4,139
Accrued capital expenditures	788		—
Other accrued expenses	5,059		2,559
Current operating lease liabilities	3,788		4,329
Accrued expenses and other current liabilities	$	53,606	$	38,007

August 31, 2019 August 25, 2018
(In thousands) (Successor) (Successor)
Professional fees $ 8,903
$ 1,473
Accrued advertising allowances and claims 2,095
1,525
Accrued bonus 10,908
6,726
Freight accrual 1,791
1,318
Payroll-related accruals 841
1,004
Commissions 932
977
Income taxes payable 382
386
VAT payable 1,787
1,481
Other 2,294
985
Accrued expenses and other current liabilities $ 29,933
$ 15,875

8.7. Long-Term Debt and Line of Credit

On July 7, 2017, the Company entered into a credit agreement with Barclays Bank PLC and other ~~parties.~~parties (as amended to date, the “Credit Agreement”). The ~~credit agreement provides~~Credit Agreement at that time provided for (i) a term facility of $200.0 million (“Term Facility”) with a seven ~~year~~-year maturity and (ii) a revolving credit facility of up to $75.0 million (the “Revolving Credit Facility”) with a five ~~year maturity, under the first lien senior secured loan facilities (the “First Lien”).~~-year maturity. Substantially concurrent with the consummation of the Business Combination, the full $200.0 million of the ~~First Lien term loan~~Term Facility (the “Term Loan”) was drawn. ~~No amounts were drawn on the Revolving Credit Facility.~~ The interest rate per annum is based on ~~either~~either: (i) a base rate equaling the higher of (a) the “prime ~~rate”,~~rate,” (b) the federal funds effective rate plus 0.50% ~~and~~, or (c) the Euro-currency rate applicable for an interest period of one month plus 1.00% plus (x) 3.00% margin for the Term Loan or (y) 2.00% margin for the Revolving Credit Facility, or (ii) London Interbank Offered Rate (“LIBOR”) adjusted for statutory reserve requirements plus (x) 4.00% margin for the Term Loan subject to a floor of 1.00% or (y) 3.00% margin for the Revolving Credit Facility. The Simply Good Foods Company is not a borrower under the Credit Agreement and has not provided a guarantee of the Credit Agreement. Simply Good Foods USA, Inc., is the administrative borrower and certain other subsidiary holding companies are co-borrowers under the Credit Agreement. Each of the Company’s domestic subsidiaries that is not a named borrower under the Credit Agreement has provided a guarantee on a secured basis. As security for the payment or performance of ~~its~~the debt under the ~~Company has~~Credit Agreement, the borrowers and the guarantors have pledged certain equity interests in ~~its~~their respective subsidiaries and granted the lenders a security interest in substantially all of their domestic assets. All guarantors other than Quest Nutrition, LLC are holding companies with no assets other than their investments in their respective subsidiaries.

On March 16, 2018 (the “Amendment Date”), the Company entered into an amendment (the “Repricing Amendment”) to the ~~First Lien.~~Credit Agreement. As a result of the Repricing Amendment, the interest rate on the Term Loan was reduced and, as of the Amendment Date, such loans ~~bear~~had an interest ~~at a~~ rate equal to, at the ~~Company's~~Company’s option, either LIBOR plus an applicable margin of 3.50%, or a base rate plus an applicable margin of 2.50%. The Repricing Amendment did not change the interest rate on the Revolving Credit Facility. The Revolving Credit Facility ~~will continue~~continued to bear interest based upon the ~~Company's~~Company’s consolidated ~~First Lien~~ net leverage ratio as of the last financial statements delivered to the administrative agent. No additional debt was incurred or any proceeds received by the Company in connection with the Repricing Amendment. The incremental fees paid to the administrative agent are reflected as additional debt discount and are amortized over the terms of the long-term financing agreements using the effective-interest method.

On November 7, 2019, the Company entered into a second amendment (the “Incremental Facility Amendment”) to the Credit Agreement to increase the principal borrowed on the Term Facility by $460.0 million. The ~~credit facilities governing our debt contain~~Term Facility together with the incremental borrowing make up the Initial Term Loans (as defined in the Incremental Facility Amendment) and as of the Amendment No. 2 Effective Date (as defined in the Incremental Facility Amendment), the Initial Term Loans bear interest at a rate equal to, at the Company’s option, either LIBOR plus an applicable margin of 3.75%, or a base rate plus an applicable margin of 2.75%. The Incremental Facility Amendment was executed to partially finance the Quest Acquisition. No amounts under the Term Facility were repaid as a result of the execution of the Incremental Facility Amendment.

The Credit Agreement contains certain financial and other covenants that limit ~~our~~the Company’s ability to, among other things, incur and/or undertake asset sales and other dispositions, liens, indebtedness, certain acquisitions and investments, consolidations, mergers, reorganizations and other fundamental changes, payment of dividends and other distributions to equity and warrant holders, and

Table of Contents

prepayments of material subordinated debt, in each case, subject to customary exceptions materially consistent with credit facilities of such type and size. The Revolving Credit Facility has a maximum total net leverage ratio equal to or less than ~~6.25:1.00 (with a reduction to~~ 6.00:1.00 ~~on the third anniversary of the closing date of the credit facilities)~~ contingent on credit extensions in excess of 30% of the total amount of commitments available under the Revolving Credit Facility. Any failure to comply with the restrictions of the credit facilities may result in an event of default. The Company was in compliance with all financial covenants as of August ~~31, 2019~~28, 2021 and August ~~25, 2018,~~29, 2020, respectively.

~~Table of Contents~~

~~At August 31, 2019 and August 25, 2018, there were no amounts drawn against the Revolving Credit Facility.~~ Long-term debt consists of the following:


	August 31, 2019		August 25, 2018
(In thousands)	(Successor)		(Successor)		(In thousands)	August 28, 2021		August 29, 2020
Term Loan	$	196,500	$	198,500
Term Facility (effective rate of 4.8% at August 28, 2021)					Term Facility (effective rate of 4.8% at August 28, 2021)	$	456,500	$	606,500
Finance lease liabilities (effective rate of 5.6% at August 28, 2021)					Finance lease liabilities (effective rate of 5.6% at August 28, 2021)	690		922
Less: Deferred financing fees	5,565		6,917		Less: Deferred financing fees	5,636		10,272
Total debt	190,935		191,583		Total debt	451,554		597,150
Less: Current maturities, net of deferred financing fees of $1.3 million at August 31, 2019 and $1.4 million at August 25, 2018, respectively	676		648

Less: Current finance lease liabilities					Less: Current finance lease liabilities	285		271
Long-term debt, net of deferred financing fees	$	190,259	$	190,935	Long-term debt, net of deferred financing fees	$	451,269	$	596,879


~~For the fiscal year ended August 31, 2019~~OR
OR
o☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______



Delaware						82-1038121
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


				Page
					~~Page~~PART I
~~PART I~~Item 1		Business		7
Item 11A		~~Business~~Risk Factors		418
~~Item 1A~~		~~Risk Factors~~	14
Item 1B	Unresolved Staff Comments		2834
Item 2		Properties		2834
Item 3		Legal Proceedings		2934
Item 4		Mine Safety Disclosures		2934
PART II
Item 5		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		3035
Item 6		~~Selected Financial Data~~Rese rve d		3236
Item 7		Management’s Discussion and Analysis of Financial Condition and Results of Operations		3437
Item 7A		Quantitative and Qualitative Disclosures About Market Risk		4449
Item 8		Financial Statements and Supplementary Data		4650
Item 9		Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		7684
Item 9A		Controls and Procedures		7684
Item 9B		Other Information		7887
~~PART III~~Item 9 C		Disclosure Regarding Foreign Jurisdictions that Prevent Inspections		87
PART III
Item 10		Directors, Executive Officers and Corporate Governance		7988
Item 11		Executive Compensation		7988
Item 12		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		7988
Item 13		Certain Relationships and Related Transactions, and Director Independence		7988
Item 14		Principal ~~Accounting~~Accountant Fees and Services		7988
PART IV
Item 15		Exhibits and Financial Statement Schedules		8089
Item 16		Form 10-K Summary		8291

SIGNATURES


	August 28, 2021			August 29, 2020			August 31, 2019
Exercise price	$	11.50		$	11.50		$	11.50
Stock price	$	35.35		$	25.39		$	29.63
Dividend yield	—		%	—		%	—		%
Expected term (in years)	0.86			1.85			2.85
Risk-free interest rate	0.06		%	0.14		%	1.43		%
Expected volatility	21.70		%	29.20		%	21.10		%
Per share value of warrants	$	23.86		$	13.98		$	18.59



(Mark One)
ý☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchase as Part of Publicly Announced Plans or Programs⁽¹⁾	Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
May 26, 2019 - June 22, 2019	22,245	$	21.61	22,245	$	47,853,462
June 23, 2019 - July 20, 2019	—	—		—	47,853,462
July 21, 2019 - August 31, 2019	—	—		—	47,853,462
Total	22,245	$	21.61	22,245	$	47,853,462



	Annual Return Percentage
	Quarters Ending
Company Name / Index	July 10, 2017		August 26, 2017		November 25, 2017		February 24, 2018		May 26, 2018		August 25, 2018		November 24, 2018		February 25, 2019		May 25, 2019		August 31, 2019
The Simply Good Foods Company	$	100.0	$	99.0	$	105.6	$	114.1	$	114.8	$	149.8	$	163.8	$	172.8	$	184.3	$	246.9
S&P 500 Index	100.0		100.6		107.2		113.2		112.1		118.4		108.5		115.1		116.4		120.6
S&P 500 Packaged Foods & Meats Index	100.0		99.5		101.5		99.6		89.8		94.3		92.8		88.4		96.9		101.4



	2019			2018			2017						2016			2015			2014
	53-weeks ended			52-weeks ended			From July 7, 2017 through August 26, 2017			From August 28, 2016 through July 6, 2017			52-weeks ended			35-weeks ended			52-weeks ended
	August 31, 2019			August 25, 2018									August 27, 2016			August 29, 2015			December 27, 2014
	(audited)			(audited)			(audited)			(audited)			(audited)			(audited)			(audited)
(In thousands)	(Successor)			(Successor)			(Successor)			(Predecessor)			(Predecessor)			(Predecessor)			(Predecessor)
Net sales	$	523,383		$	431,429		$	56,334		$	339,837		$	427,858		$	252,898		$	429,858
Cost of goods sold⁽¹⁾	305,978			251,063			39,584			200,026			248,464			151,978			249,832
Gross profit	217,405			180,366			16,750			139,811			179,394			100,920			180,026

Operating Expenses:
Distribution ⁽¹⁾	—			—			—			—			18,489			11,429			19,481
Selling and marketing ⁽²⁾	67,488			59,092			6,937			47,494			56,264			45,147			55,830
General and administrative ⁽¹⁾	61,972			49,635			6,969			34,567			48,503			29,093			41,146
Depreciation and amortization ⁽¹⁾	7,496			7,498			985			8,409			10,179			7,267			11,195
Business combination transaction costs	7,107			2,259			—			25,608			—			—			—
Loss (gain) in fair value change of contingent consideration - TRA liability	533			(2,848		)	—			—			—			—			—
Total operating expenses	144,596			115,636			14,891			116,078			133,435			92,936			127,652

Income from operations	72,809			64,730			1,859			23,733			45,959			7,984			52,374

Other income (expense):
Change in warrant liabilities	—			—			—			722			(722		)	1,689			143
Interest income	3,826			—			—			—			—			—			—
Interest expense	(13,627		)	(12,551		)	(1,662		)	(22,724		)	(27,195		)	(18,331		)	(27,823		)
Gain on settlement of TRA liability	1,534			—			—			—			—			—			—
Loss (gain) on foreign currency transactions	(452		)	97			513			133			(619		)	(1,045		)	(1,211		)
Other income	196			815			30			221			118			55			96
Total other expense	(8,523		)	(11,639		)	(1,119		)	(21,648		)	(28,418		)	(17,632		)	(28,795		)

Income before income taxes	64,286			53,091			740			2,085			17,541			(9,648		)	23,579
Income tax (benefit) expense	16,750			(17,364		)	290			4,570			7,507			(4,334		)	9,623
Net income (loss)	$	47,536		$	70,455		$	450		$	(2,485	)	$	10,034		$	(5,314	)	$	13,956

Earnings per share from net income:
Basic	$	0.59		$	1.00		$	0.01
Diluted	$	0.56		$	0.96		$	0.01

Balance Sheet Data (at end of periods)
Total assets	$	1,141,650		$	974,605		$	922,488		$	344,867		$	389,512		$	366,953		$	385,215
Long-term debt, less current maturities	190,259			190,935			191,856			281,445			321,638			331,565			330,758
Warrant liabilities	—			—			—			15,000			15,722			15,000			16,689
Stockholders’ equity (deficit)	837,444			672,601			598,702			(28,027		)	(27,834		)	(41,322		)	(36,217		)



	53-Weeks Ended			% of Sales		52-Weeks Ended			% of Sales
(In thousands)	August 31, 2019			% of Sales		August 25, 2018			% of Sales
	(Successor)					(Successor)
Net sales	$	523,383		100.0	%	$	431,429		100.0	%
Cost of goods sold ⁽¹⁾	305,978			58.5	%	251,063			58.2	%
Gross profit	217,405			41.5	%	180,366			41.8	%

Operating expenses:
Selling and marketing ⁽²⁾	67,488			12.9	%	59,092			13.7	%
General and administrative ⁽¹⁾	61,972			11.8	%	49,635			11.5	%
Depreciation and amortization ⁽¹⁾	7,496			1.4	%	7,498			1.7	%
Business transaction costs	7,107			1.4	%	2,259			0.5	%
Gain in fair value change of contingent consideration - TRA liability	533			0.1	%	(2,848		)	(0.7	)%
Total operating expenses	144,596			27.6	%	115,636			26.8	%

Income from operations	72,809			13.9	%	64,730			15.0	%

Other income (expense):
Interest income	3,826			0.7	%	—			—	%
Interest expense	(13,627		)	(2.6	)%	(12,551		)	(2.9	)%
Gain on settlement of TRA liability	1,534			0.3	%	—			—	%
Gain (loss) on foreign currency transactions	(452		)	(0.1	)%	97			—	%
Other income	196			—	%	815			0.2	%
Total other expense	(8,523		)	(1.6	)%	(11,639		)	(2.7	)%

Income before income taxes	64,286			12.3	%	53,091			12.3	%
Income tax (benefit) expense	16,750			3.2	%	(17,364		)	(4.0	)%
Net income (loss)	$	47,536		9.1	%	$	70,455		16.3	%

Other financial data:
Adjusted EBITDA	$	98,719		18.9	%	$	78,602		18.2	%



	Successor					Successor					Predecessor
	52-Weeks Ended			% of Sales		From July 7, 2017 through August 26, 2017			% of Sales		From August 28, 2016 through July 6, 2017			% of Sales
(In thousands)	August 25, 2018			% of Sales		From July 7, 2017 through August 26, 2017			% of Sales		From August 28, 2016 through July 6, 2017			% of Sales
Net sales	$	431,429		100.0	%	$	56,334		100.0	%	$	339,837		100.0	%
Cost of goods sold ⁽¹⁾	251,063			58.2	%	39,584			70.3	%	200,026			58.9	%
Gross profit	180,366			41.8	%	16,750			29.7	%	139,811			41.1	%

Operating expenses:
Selling and marketing ⁽²⁾	59,092			13.7	%	6,937			12.3	%	47,494			14.0	%
General and administrative ⁽¹⁾	49,635			11.5	%	6,969			12.4	%	34,567			10.2	%
Depreciation and amortization ⁽¹⁾	7,498			1.7	%	985			1.7	%	8,409			2.5	%
Business transaction costs	2,259			0.5	%	—			—	%	25,608			7.5	%
Gain in fair value change of contingent consideration - TRA liability	(2,848		)	(0.7	)%	—			—	%	—			—	%
Total operating expenses	115,636			26.8	%	14,891			26.4	%	116,078			34.2	%

Income from operations	64,730			15.0	%	1,859			3.3	%	23,733			7.0	%

Other income (expense):
Change in warrant liabilities	—			—	%	—			—	%	722			0.2	%
Interest expense	(12,551		)	(2.9	)%	(1,662		)	(3.0	)%	(22,724		)	(6.7	)%
Gain (loss) on foreign currency transactions	97			—	%	513			0.9	%	133			—	%
Other income	815			0.2	%	30			0.1	%	221			0.1	%
Total other expense	(11,639		)	(2.7	)%	(1,119		)	(2.0	)%	(21,648		)	(6.4	)%

Income before income taxes	53,091			12.3	%	740			1.3	%	2,085			0.6	%
Income tax (benefit) expense	(17,364		)	(4.0	)%	290			0.5	%	4,570			1.3	%
Net income (loss)	$	70,455		16.3	%	$	450		0.8	%	$	(2,485	)	(0.7	)%

Other financial data:
Adjusted EBITDA	$	78,602		18.2	%	$	8,654		15.4	%	$	63,889		18.8	%



Adjusted EBITDA Reconciliation:	53-Weeks Ended			52-Weeks Ended			From July 7, 2017 through August 26, 2017				From August 28, 2016 through July 6, 2017
	August 31, 2019			August 25, 2018			From July 7, 2017 through August 26, 2017				From August 28, 2016 through July 6, 2017
(In thousands)	(Successor)			(Successor)			(Successor)				(Predecessor)
Net income (loss)	$	47,536		$	70,455		$	450			$	(2,485	)
Interest expense	13,627			12,551			1,662				22,724
Interest income	(3,826		)	(301		)	—				—
Income tax expense (benefit)	16,750			(17,364		)	290				4,570
Depreciation and amortization	7,644			7,672			1,000				8,617
EBITDA	81,731			73,013			3,402				33,426
Business transaction costs	7,107			2,259			—				25,608
Stock-based compensation and warrant expense	5,501			4,029			412				1,719
Transaction fees / IPO readiness	—			—			—				371
Restructuring	22			631			—			��	167
Roark management fee	—			—			—				1,200
Recall receivable reserve	—			—			(1,195		)		—
Gain on settlement of TRA	(1,534		)	—			—				—
Frozen licensing media	—			250			456				794
Non-core legal costs	4,851			1,314			96				723
Loss (gain) in fair value change of contingent consideration - TRA liability	533			(2,848		)	—				—
Purchase accounting inventory step-up	—			—			5,989				—
Other (1)	508			(46		)	(506		)		(119		)
Adjusted EBITDA	$	98,719		$	78,602		$	8,654			$	63,889



	53-Weeks Ended			52-Weeks Ended			From July 7, 2017 through August 26, 2017			From August 28, 2016 through July 6, 2017
	August 31, 2019			August 25, 2018			From July 7, 2017 through August 26, 2017			From August 28, 2016 through July 6, 2017
	(Successor)			(Successor)			(Successor)			(Predecessor)
Net cash provided by (used in) operating activities	$	73,042		$	61,038		$	(27,356	)	$	21,939
Net cash used in investing activities	$	(1,787	)	$	(3,513	)	$	(197,304	)	$	(20,458	)
Net cash provided by (used in) financing activities	$	83,376		$	(1,587	)	$	280,799		$	(53,536	)



	Payments due by period
(In thousands)	Total		Year 1		Years 2-3		Years 4-5		Thereafter
Long-term debt obligations	$	196,500	$	2,000	$	4,000	$	190,500	$	—
Operating leases (1)	7,406		2,546		3,624		1,180		56
Interest payments	55,245		11,648		22,836		20,761		—
Total	$	259,151	$	16,194	$	30,460	$	212,441	$	56



Fifty-Three Weeks Ended August 31, 2019	Under Previous Method	Change in Accounting Principle and Presentation		Other Operating Expense⁽¹⁾	As Reported
Cost of goods sold	273,682	32,296		—	305,978
Distribution	23,387	(23,387	)	—	—
General and administrative	70,712	(8,761	)	21	61,972
Depreciation and amortization	7,644	(148	)	—	7,496

Fifty-Two Weeks Ended August 25, 2018	As Reported	Change in Accounting Principle and Presentation		Other Operating Expense⁽¹⁾	As Adjusted
Cost of goods sold	223,873	27,190		—	251,063
Distribution	19,685	(19,685	)	—	—
General and administrative	56,333	(7,331	)	633	49,635
Depreciation and amortization	7,672	(174	)	—	7,498

From July 7, 2017 through August 26, 2017	As Reported	Change in Accounting Principle and Presentation		Other Operating Expense⁽¹⁾	As Adjusted
Cost of goods sold	35,941	3,643		—	39,584
Distribution	2,784	(2,784	)	—	—
General and administrative	7,813	(844	)	—	6,969
Depreciation and amortization	1,000	(15	)	—	985

From August 28, 2016 through July 6, 2017	As Reported	Change in Accounting Principle and Presentation		Other Operating Expense⁽¹⁾	As Adjusted
Cost of goods sold	179,998	20,028		—	200,026
Distribution	14,970	(14,970	)	—	—
General and administrative	39,276	(4,850	)	141	34,567
Depreciation and amortization	8,617	(208	)	—	8,409



(In thousands)	Total
Balance as of August 26, 2017	$	465,030
Goodwill working capital adjustment	1,757
Measurement period adjustment of the Business Combination	4,640
Balance as of August 25, 2018	$	471,427



(In thousands)
2020	$	6,505
2021	6,505
2022	6,505
2023	6,505
2024	6,505
Thereafter	41,614
Total	$	74,139


(In thousands)			(In thousands)	Principal maturities
Fiscal year ending:
2020	$	2,000
2021	2,000
2022	2,000		2022	$	285
2023	2,000		2023	263
2024	188,500		2024	456,642
2025			2025	—
2026			2026	—
Thereafter	—		Thereafter	—
Total debt	$	196,500	Total debt	$	457,190



Successor	Level 1		Level 2		Level 3		Total
Liabilities
TRA liability	$	—	$	—	$	27,468	$	27,468


(In thousands)	Balance Sheet Caption	August 28, 2021		August 29, 2020
Assets
Operating lease right-of-use assets	Other long-term assets	$	46,197	$	25,703
Finance lease right-of-use assets	Property and equipment, net	640		912
Total lease assets		$	46,837	$	26,615

Liabilities
Current:
Operating lease liabilities	Accrued expenses and other current liabilities	$	3,788	$	4,329
Finance lease liabilities	Current maturities of long-term debt	285		271
Long-term:
Operating lease liabilities	Other long-term liabilities	44,892		22,764
Finance lease liabilities	Long-term debt, less current maturities	405		651
Total lease liabilities		$	49,370	$	28,015


(In thousands)	Operating Leases		Finance Leases
Fiscal year ending:
2022	$	6,087	$	313
2023	7,005		278
2024	7,489		145
2025	7,152		—
2026	6,701		—
Thereafter	25,501		—
Total lease payments	59,935		736
Less: Interest	(11,255)		(46)
Present value of lease liabilities	$	48,680	$	690


	Operating Leases		Finance Leases
As of August 28, 2021
Weighted-average remaining lease term (in years)	8.38		2.44
Weighted-average discount rate	4.9	%	5.6	%
As of August 29, 2020
Weighted-average remaining lease term (in years)	6.97		3.41
Weighted-average discount rate	5.7	%	5.6	%



(In thousands)	Future Payments
2020	$	2,546
2021	1,947
2022	1,677
2023	1,093
2024	87
Thereafter	56
Total	$	7,406



	Shares		Weighted average exercise price		Weighted average remaining contractual life (in years)	Aggregate intrinsic value
Outstanding as of August 25, 2018	2,506,083		$	12.28	8.84	$	14,293,484

Granted	362,565		20.34
Exercised	(119,913	)	12.00
Forfeited	—		—
Outstanding as of August 31, 2019	2,748,735		$	13.35	8.13

Vested and expected to vest as of August 31, 2019	2,748,735		$	13.35	8.13	$	44,743,427

Exercisable as of August 31, 2019	1,478,216		$	12.16	7.91	$	25,829,992


Range of Exercise Prices	Range of Exercise Prices			Number Outstanding	Weighted-Average Exercise Price		Weighted-Average Remaining Life (Years)	Number Exercisable	Weighted-Average Exercise Price		Range of Exercise Prices			Number outstanding	Weighted average exercise price		Weighted average remaining life (years)	Number exercisable	Weighted average exercise price
$	12.00	-	14.99	2,268,617	$	12.05	7.90	1,439,033	$	12.05	12.00	-	14.99	1,880,525	$	12.04	5.91	1,880,525	$	12.04
$	15.00	-	17.99	117,553	16.88		8.88	39,183	16.88		15.00	-	17.99	117,553	16.88		6.89	117,553	16.88
$	18.00	-	20.99	315,331	19.89		9.19	—	—		18.00	-	20.99	552,078	20.08		8.17	189,019	19.89
$	21.00	-	23.99	13,386	21.49		9.75	—	—		21.00	-	23.99	48,396	21.85		8.57	20,594	21.77
$	24.00	-	26.99	33,848	24.08		9.86	—	—		24.00	-	26.99	188,008	24.19		8.13	73,949	24.18
$											27.00	-	29.99	6,603	28.38		9.49	—	—
$											30.00	-	32.99	—	—		0.00	—	—
$											33.00	-	35.99	—	—		0.00	—	—
$											36.00	-	38.99	200,000	36.56		9.96	—	—
				2,748,735	$	13.35	8.13	1,478,216	$	12.16				2,993,163	$	16.31	6.83	2,281,640	$	13.42


						Units	Weighted average grant-date fair value
	Units		Weighted average grant-date fair value
Outstanding as of August 25, 2018	111,085		$	12.06

Non-vested as of August 29, 2020					Non-vested as of August 29, 2020	208,023	$	22.82
Granted	78,180		18.84		Granted	428,752	25.00
Vested	(87,158	)	11.98		Vested	(89,745)	24.46
Forfeited	(9,707	)	15.61		Forfeited	(50,696)	21.27
Outstanding as of August 31, 2019	92,400		$	17.50
Non-vested as of August 28, 2021					Non-vested as of August 28, 2021	496,334	$	24.56


	Shares Underlying SARs	Weighted average exercise price		Weighted average remaining contractual life (in years)
Outstanding as of August 29, 2020	150,000	$	24.20
Granted	—	—
Exercised	—	—
Forfeited	—	—
Outstanding as of August 28, 2021	150,000	$	24.20	8.18

Vested and expected to vest as of August 28, 2021	150,000	$	24.20	8.18

Exercisable as of August 28, 2021	—	$	—	0.00



	From August 28, 2016 through July 6, 2017
Expected volatility	55%
Expected dividend yield	—%
Expected option term	5.1		-	6.5 years
Risk-free rate of return	1.62	%	-	1.74%



	From August 28, 2016 through July 6, 2017
Intrinsic value of options exercised	$	11,106
Fair value of shares vested	$	—
Tax benefit related to stock option expense	$	910


(In thousands)	Termination benefits and severance		Other		Restructuring liability
Balance as of August 31, 2019	$	—	$	—	$	—
Charges	4,139		1,388		5,527
Cash payments	—		(1,388)		(1,388)
Balance as of August 29, 2020	$	4,139	$	—	$	4,139
Charges	3,458		342		3,800
Cash payments	(6,746)		(342)		(7,088)

Balance as of August 28, 2021	$	851	$	—	$	851



	53-weeks ended		13-weeks ended		13-weeks ended		13-weeks ended		13-weeks ended
(In thousands, except per share amounts)	August 31, 2019		August 31, 2019		May 25, 2019		February 23, 2019		November 24, 2018
Net sales	$	523,383	$	139,184	$	139,468	$	123,800	$	120,931
Gross profit ⁽¹⁾	$	217,405	$	59,173	$	56,657	$	49,655	$	51,920
Income from operations	$	72,809	$	12,115	$	20,510	$	19,002	$	21,182
Net income	$	47,536	$	6,091	$	13,466	$	12,722	$	15,257

Earnings per share from net income:
Basic	$	0.59	$	0.07	$	0.16	$	0.16	$	0.20
Diluted	$	0.56	$	0.07	$	0.16	$	0.15	$	0.18



Exhibit No.						Document
2.1(a)						Agreement and Plan of Merger, dated April 10, 2017, by and among Conyers Park Acquisition Corp., The Simply Good Foods Company, Conyers Park Parent Merger Sub, Inc., Conyers Park Merger Sub 1, Inc., Conyers Park Merger Sub 2, Inc., Conyers Park Merger Sub 3, Inc., Conyers Park Merger Sub 4, Inc., NCP-ATK HOLDINGS, INC., Atkins Holdings LLC, solely in its capacity as the Majority Stockholder and, solely in its capacity as the Stockholders’ Representative, Roark Capital Acquisition LLC (incorporated by reference to Exhibit 2.1 to Registration Statement on Form S-4, filed on April 11, 2017).
2.2(a)						Stock and Unit Purchase Agreement, dated as of August 21, 2019, by and among Voyage Holdings, LLC, VMG Quest Blocker, Inc., VMG Voyage Holdings, LLC, VMG Tax-Exempt II, L.P., The Michael K. Osborn and Kaplana P. Osborn Revocable Living Trust, The Ava M. Osborn 2018 Irrevocable Gift Trust, The Cole M. Osborn 2018 Irrevocable Gift Trust, Ronald Penna and Thomas Bilyeu, Voyage Employee Holdings, LLC, Atkins Nutritionals, Inc. and solely for the purposes of Section 8.10 therein, the Restricted Sellers (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed on August 22, 2019).
3.1						Second Amended and Restated Certificate of Incorporation of The Simply Good Foods Company (incorporated by reference to Exhibit 3.1 ~~to Our~~of our Current Report on Form 8-K filed on ~~July 13, 2017)~~January 27, 2020).
3.2						Second Amended and Restated ~~Bylaws.~~Bylaws (incorporated by reference to Exhibit 3.2 of our Current Report on Form 10-K filed on October 31, 2019).
4.1						Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Amendment No. 3 to our Registration Statement on Form S-4 filed on June 12, 2017).
4.2						Warrant Agreement, dated July 14, 2016, between Conyers Park Acquisition Corp. and Continental Stock Transfer & Trust Company (incorporated by reference to Form 8-K filed by Conyers Park Acquisition Corp. on July 20, 2016).
4.3						Form of Warrant (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed on July 13, 2017).
4.4						Description of ~~Securities.~~Securities (incorporated by reference to Exhibit 4.4 to our Annual Report on Form 10-K filed on October 28, 2020).
10.1						Investor Rights Agreement, dated July 7, 2017, between The Simply Good Foods Company and Conyers Park Sponsor LLC (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on July 13, 2017).
10.2†						2017 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.3 to Amendment No. 3 to Registration Statement on Form S-4 filed on June 12, 2017).
10.3†						Offer Letter, dated December 23, 2010, between Scott Parker and Atkins Nutritionals, Inc. (incorporated by reference to Exhibit 10.7 to Amendment No. 1 to our Registration Statement on Form S-4 filed on May 15, 2017).
10.4†						Form of Indemnity Agreement (incorporated by reference to Exhibit 10.8 to Amendment No. 3 to our Registration Statement on Form S-4 filed on June 12, 2017).
10.5						Credit Agreement, dated July 7, 2017, by and among Atkins Intermediate Holdings, LLC, Conyers Park Parent Merger Sub, Inc., Conyers Park Acquisition Corp., Conyers Park Merger Sub 1, Inc., Conyers Park Merger Sub 2, Inc., Conyers Park Merger Sub 3, Inc., Conyers Park Merger Sub 4, Inc., NCP-ATK Holdings, Inc., Atkins Nutritionals Holdings, Inc., Atkins Nutritionals Holdings II, Inc., Atkins Nutritionals, Inc., the lenders party thereto and Barclays Bank PLC, as the Administrative Agent (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on July 13, 2017).
10.6						Amendment No. 2 (Incremental Facility Amendment), dated as of November 7, 2019, by and among Atkins Intermediate Holdings, LLC, a Delaware limited liability company, Conyers Park Acquisition Corp., a Delaware corporation, Atkins Nutritionals, Inc., a New York corporation, Atkins Nutritionals Holdings, Inc., a Delaware corporation, Atkins Nutritionals Holdings II, Inc., a Delaware corporation, NCP-ATK Holdings, Inc., a Delaware corporation and the financial institutions set forth on Schedule A thereto as Additional Term Lenders, and acknowledged by Barclays Bank PLC, as administrative agent (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed on November 7, 2019).
10.7						Assignment, Assumption and Amendment Agreement, dated July 7, 2017, by and among The Simply Good Foods Company, Conyers Park Acquisition Corp. and Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit 10.7 to our Current Report on Form 8-K filed on July 13, 2017).
~~10.7†~~10.8†						Amended and Restated Employment Agreement, dated July 7, 2017, between The Simply Good Foods Company and Joseph E. Scalzo (incorporated by reference to Exhibit 10.8 to our Current Report on Form 8-K filed on July 13, 2017).
~~10.8~~10.9						Income Tax Receivable Agreement, dated July 7, 2017, by and among The Simply Good Foods Company, Atkins Holdings, LLC and Roark Capital Acquisition, LLC (solely in its capacity as the Stockholders’ Representative) (incorporated by reference to Exhibit 10.6 to our Current Report on Form 8-K filed on July 13, 2017).
~~10.9~~10.10						Termination Agreement, dated November 14, 2018, among The Simply Good Foods Company, Atkins Holdings, LLC and Roark Capital Acquisition, LLC (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on November 16, 2018).
~~10.10†~~10.11†						Offer Letter, dated June 19, 2017, between Atkins Nutritionals, Inc. and Todd Cunfer (incorporated by reference to Exhibit 10.1 to our Current Report on our Current Report on Current Report on Form 8-K filed on August 11, 2017).
~~10.11†~~10.12†						Letter Agreement, dated August 21, 2017, between The Simply Good Foods Company and Todd Cunfer (incorporated by reference to Exhibit 10.2 to Amendment No. 1 to our Current Report on Form 8-K filed on August 25, 2017).
~~10.12~~10.13						Repricing Amendment, dated March 16, 2018, by and among Atkins Intermediate Holdings, LLC, Conyers Park Acquisition Corp., Atkins Nutritionals, Inc., Atkins Nutritionals Holdings, Inc., Atkins Nutritionals Holdings II, Inc. and NCP-ATK Holdings, Inc. and Barclays Bank PLC (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on March 20, 2018).


~~10.13†~~Exhibit No.						Document
10.14†						The Simply Good Foods Executive Severance Compensation Plan, dated July 23, 2018 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on July 27, 2018).
~~10.14†~~10.15†						Form of Executive Severance Compensation Plan, Tier I Participation Agreement, dated July 23, 2018 (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on July 27, 2018).
~~10.15†~~10.16†						First Amendment to Amended and Restated Employment Agreement, dated October 16, 2019, between The Simply Good Foods Company and Joseph E. Scalzo. (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on October 18, 2019)



~~Exhibit No.~~	~~Document~~
~~18.1~~	~~Preferability letter from Deloitte & Touche LLP.~~
~~21.1~~10.17†		Employment Agreement, dated November 5, 2019, between Quest Nutrition, LLC and David Ritterbush (incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K (File No. 001-38115) filed on November 7, 2019).
10.18†		2017 Omnibus Incentive Plan, as amended from time to time Policy Regarding Treatment of Awards in the Event of an Awardee’s Retirement (incorporated by reference to Exhibit 10.18 to our Annual Report on Form 10-K filed on October 28, 2020).
10.19†		Second Amendment to the Amended and Restated Employment Agreement, dated as of August 13, 2021 by and between The Simply Good Foods Company and Joseph Scalzo. (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on August 13, 2021.)
21.1		Subsidiaries of The Simply Good Foods ~~Company.~~Compan y.
23.1		Consent of Deloitte & Touche LLP.
~~23.2~~		~~Consent of Ernst & Young LLP.~~
31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
32.1		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101).



†			Indicates a management contract or compensatory plan.
(a)			Certain schedules and exhibits to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the Securities and Exchange Commission upon request.