Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a ~~non–accelerated~~non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule ~~12b–2~~12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule ~~12b–2~~12b-2 of the Exchange Act). Yes ¨ No x

Under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), Annie’s, Inc. qualifies as an “emerging growth company,” as defined under the JOBS Act.

On ~~January 31,~~July 15, 2013, the registrant had ~~17,338,339~~16,889,239 shares of common stock, par value $0.001 per share, outstanding.


	December 31, 2012			March 31, 2012			June 30, 2013			March 31, 2013
ASSETS
CURRENT ASSETS:
Cash	$	12,960		$	562		$	1,562		$	4,930
Accounts receivable, net		10,110			11,870			15,409			20,015
Inventory		21,127			10,202			18,473			15,147
Deferred tax assets		1,995			1,995			2,558			2,558
Income tax receivable		3,402			164			—			588
Prepaid expenses and other current assets		2,201			1,252			3,690			5,050


Total current assets		51,795			26,045			41,692			48,288
Property and equipment, net		5,517			4,298			6,142			6,138
Goodwill		30,809			30,809			30,809			30,809
Intangible assets, net		1,131			1,176			1,101			1,116
Deferred tax assets, long-term		4,115			4,650			3,673			3,704
Deferred initial public offering costs		—			5,343
Other non-current assets		145			108			162			157


Total assets	$	93,512		$	72,429		$	83,579		$	90,212


LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	4,290		$	861		$	2,501		$	4,342
Related-party payable		—			1,305
Accrued liabilities		8,699			7,452			11,046			12,021


Total current liabilities		12,989			9,618			13,547			16,363
Credit facility		—			12,796			7			7,007
Convertible preferred stock warrant liability		—			2,157
Other non-current liabilities		878			921			949			913


Total liabilities		13,867			25,492			14,503			24,283


Convertible preferred stock		—			81,373

STOCKHOLDERS’ EQUITY (DEFICIT):
Commitments and contingencies (Note 6)
STOCKHOLDERS’ EQUITY
Preferred stock		—			—			—			—
Common stock		17			1			17			17
Additional paid-in capital		111,140			4,392			94,308			93,190
Accumulated deficit		(31,512	)		(38,829	)		(25,249	)		(27,278	)


Total stockholders’ equity (deficit)		79,645			(34,436	)
Total stockholders’ equity								69,076			65,929


Total liabilities, convertible preferred stock and stockholders’ equity (deficit)	$	93,512		$	72,429
Total liabilities and stockholders’ equity							$	83,579		$	90,212

See accompanying notes to the unaudited condensed consolidated financial statements

Condensed Consolidated Statement of ~~Convertible Preferred Stock and~~ Stockholders’ Equity ~~(Deficit)~~

See accompanying notes to the unaudited condensed consolidated financial statements


	Nine Months Ended December 31,						Three Months Ended June 30,
	2012			2011			2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	7,317		$	7,660
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Net Income							$	2,029		$	2,131
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		749			578			309			200
Stock-based compensation		677			390			293			216
Allowances for trade discounts and other		(579	)		(477	)
Inventory reserves		492			—			239			(112	)
Excess tax benefit from stock-based compensation		(7,499	)		—			(370	)		(4,201	)
Accretion of imputed interest on purchase of intangible asset		107			—			36			35
Change in fair value of convertible preferred stock warrant liability		13			538			—			13
Amortization of deferred financing costs		12			25			3			5
Deferred taxes		535			(332	)		31			146
Changes in operating assets and liabilities:
Accounts receivable, net		2,339			3,737			4,606			4,482
Inventory		(11,417	)		(2,478	)		(3,565	)		(4,282	)
Income tax receivable		425			—			588			164
Prepaid expenses, other current and non-current assets		4,400			(508	)		1,415			(352	)
Accounts payable		3,417			(9,193	)		(1,867	)		284
Related-party payable		(1,305	)		(3	)		—			(1,305	)
Accrued expenses and other non-current liabilities		4,527			(708	)		(605	)		3,526


Net cash provided by (used in) operating activities		4,210			(771	)
Net cash provided by operating activities								3,142			950


CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(1,498	)		(1,504	)		(272	)		(735	)


Net cash used in investing activities		(1,498	)		(1,504	)		(272	)		(735	)


CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit facility		2,952			52,114			4,449			735
Payments to credit facility		(15,748	)		(38,812	)		(11,449	)		(13,531	)
Proceeds from common shares issued in initial public offering, net of issuance costs		11,146			—			—			11,146
Payment for intangible asset acquired by financing transaction		(7	)		—
Payments of initial public offering costs		—			(1,841	)
Dividends paid		—			(13,550	)
Net repurchase of stock options		—			(602	)
Excess tax benefit from stock-based compensation		7,499			—			370			4,201
Proceeds from exercises of stock options		3,844			47			392			1,774


Net cash provided by (used in) financing activities		9,686			(2,644	)		(6,238	)		4,325


NET INCREASE (DECREASE) IN CASH		12,398			(4,919	)		(3,368	)		4,540

CASH – Beginning of period		562			7,333
CASH—Beginning of period								4,930			562


CASH – End of period	$	12,960		$	2,414
CASH—End of period							$	1,562		$	5,102


NONCASH INVESTING AND FINANCING ACTIVITIES:
Purchase of property and equipment funded through accounts payable							$	26		$	40
Conversion of convertible preferred stock into common stock	$	81,373		$	—		$	—		$	81,373
Purchase of property and equipment funded through accrued expenses and accounts payable	$	425		$	120
Deferred initial public offering costs funded through accounts payable	$	—		$	621
Intangible asset acquired by financing transaction	$	—		$	1,023

See accompanying notes to the unaudited condensed consolidated financial statements

Annie’s, Inc. (the “Company”), a Delaware corporation incorporated on April 28, 2004, is a natural and organic food company. The Company offers over ~~125~~135 products in the following three product categories: meals; snacks; and dressings, condiments and other. The Company’s products are sold throughout the U.S. and Canada via a multi-channel distribution network that serves the mainstream grocery, mass merchandiser and natural retailer channels. The Company’s headquarters are located in Berkeley, California.

The accompanying interim condensed consolidated balance sheets as of ~~December 31, 2012~~June 30, 2013 and March 31, ~~2012,~~2013, the interim condensed consolidated statement of ~~convertible preferred stock and~~ stockholders’ equity ~~(deficit)~~ for the ~~nine~~three months ended ~~December~~March 31, ~~2012,~~2013, and the interim condensed consolidated statements of operations ~~for the three~~ and ~~nine months ended December 31, 2012 and 2011, and the interim condensed consolidated statements of~~ cash flows for the ~~nine~~three months ended ~~December 31,~~June 30, 2013 and 2012 ~~and 2011~~ are unaudited. These interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, ~~certain~~they do not include all of the information and ~~footnote disclosures normally included in financial statements prepared in accordance with~~notes required by U.S. GAAP ~~have been condensed or omitted pursuant to such rules and regulations.~~for complete financial statements. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in Company’s Annual Report on Form 10-K ~~for the fiscal year ended March 31, 2012,~~ filed with the SEC on June ~~8, 2012.~~14, 2013. The March 31, ~~2012~~2013 condensed consolidated balance sheet included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by ~~U.S.~~ GAAP for ~~audited~~complete financial statements.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to state fairly our financial position as of ~~December 31, 2012~~June 30, 2013 and results of our operations ~~for the three and nine months ended December 31, 2012 and 2011,~~ and cash flows for the ~~nine~~three months ended ~~December 31, 2012~~June 30, 2013 and ~~2011.~~2012. The interim results for the ~~nine~~three months ended ~~December 31, 2012~~June 30, 2013 are not necessarily indicative of the results that may be expected for the year ending March 31, ~~2013.~~2014.

The unaudited interim condensed consolidated financial statements include the accounts of the Company and its ~~wholly owned~~wholly-owned subsidiaries, Annie’s Homegrown, Inc., ~~Annie’s Enterprises,~~Napa Valley Kitchen, Inc. and ~~Napa Valley Kitchen,~~Annie’s Enterprises, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.

On April 2, 2012, the Company closed its IPO, in which it sold 950,000 shares of common stock at ~~an offering~~a price of $19.00 per share and raised $11.1 million in net proceeds after deducting underwriting discounts and commissions of $1.3 million and other offering expenses of $5.6 million. In addition, certain of the Company’s stockholders, including funds affiliated with Solera Capital, LLC, ~~(“Solera”),~~ sold 4.8 million shares at the $19.00 offering price in the IPO. The Company sometimes refers to Solera Capital, LLC and its affiliates as Solera in this Quarterly Report onForm 10-Q.

Immediately prior to the closing of the IPO, the outstanding shares of convertible preferred stock were automatically converted into 15,221,571 shares of common stock, the Company’s outstanding convertible preferred stock warrant was automatically converted into a common ~~stock~~ warrant to purchase a total of 80,560 shares of common stock and the related convertible preferred stock warrant liability was reclassified to additional paid-in capital.

Pursuant to the Company’s Amended and Restated Certificate of Incorporation or Charter and its Amended and Restated Bylaws, which became effective upon consummation of the IPO, the Company has authorized 35,000,000 shares of capital stock, 30,000,000 shares, par value $0.001 per share, of which are common stock and 5,000,000 shares, par value $0.001 per share, of which are preferred stock. As of ~~December 31, 2012, 17,328,797~~June 30, 2013, 16,889,060 shares of common stock were issued and outstanding and no shares of preferred stock were issued and outstanding.

On August 6, 2012, the Company closed a secondary public offering, in which certain stockholders, including funds affiliated with Solera, sold 3,649,976 shares of common stock at an offering price of $39.25 per share. The Company did not receive any proceeds from the sale of shares by the selling stockholders. The offering expenses incurred by the Company were $0.7 million, including legal, accounting and printing costs and various other fees associated with the registration and sale of common stock sold in the secondary public offering.

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reported periods. Actual results could differ from those estimates.

~~Customers with 10% or more~~The table below provides net sales, expressed as a percentage of the Company’s net sales, ~~consist of~~from the ~~following:~~three largest customers during the three months ended June 30, 2013 and 2012:

As of ~~December 31, 2012, Customer A~~June 30, 2013, three customers represented 31%, 20% and ~~Customer B represented 26% and 35%~~10%, respectively of accounts receivable. The same ~~two~~three customers represented ~~21%~~26%, 36% and ~~45%~~10%, respectively, of accounts receivable as of March 31, ~~2012.~~2013.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level ~~1 –~~ 1—Quoted prices in active markets for identical assets or liabilities.

Level ~~2 –~~ 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level ~~3 –~~ 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The carrying amounts of the Company’s financial instruments, including accounts receivable, accounts payable and accrued liabilities, ~~and credit facility,~~ approximate fair value due to their relatively short maturities. ~~The carrying amount of the convertible preferred stock warrant liability at March 31, 2012 represented its estimated fair value.~~ Upon consummation of the IPO on April 2, 2012, prior to the automatic conversion of the convertible preferred stock warrant into a common stock warrant, ~~the estimated fair value~~it was remeasured and the change in fair value was recorded as a non-cash charge in other income (expense), net and the related liability was reclassified to additional paid-in ~~capital.~~capital (Note 7).

The Company capitalizes certain internal and external costs related to the development and enhancement of the Company’s internal-use software. Capitalized internal-use software development costs are included in property and equipment on the accompanying condensed consolidated balance sheets. ~~At December 31, 2012 and March 31, 2012, capitalized software development costs, net of accumulated amortization, totaled $2.3 million and 2.0 million, respectively.~~ As of ~~December 31, 2012,~~June 30, 2013, the Company had ~~$2.0~~$2.1 million capitalized software development costs, net of accumulated amortization, ~~and $0.3~~including $0.5 million in construction in progress. As of March 31, 2013, the Company had $2.1 million capitalized software development costs, net of accumulated amortization, including $0.4 million in construction in progress.

Shipping and handling costs are included in selling, general and administrative expenses in the condensed consolidated statements of operations. Shipping and handling costs primarily consist of costs associated with moving finished products to customers, including costs associated with the Company’s distribution center, route delivery costs and the cost of shipping products to customers through third-party carriers. Shipping and handling costs recorded as a component of selling, general and administrative expenses were ~~$1.4~~$1.5 million and $1.3 million for the three months ended ~~December 31,~~June 30, 2013 and 2012, ~~and 2011, respectively, and were $4.2 million and $3.5 million for the nine months ended December 31, 2012 and 2011,~~ respectively.

Research and development costs consist of the costs incurred to develop new products. These costs include consumer research, prototype development, materials and resources to conduct trial production runs, package development and employee-related costs for personnel responsible for product innovation. Research and development costs recorded as a component of selling, general and administrative expenses were $0.6 million and ~~$0.7~~$0.8 million for the three months ended ~~December 31,~~June 30, 2013 and 2012, ~~and 2011, respectively, and were $2.1 million and $1.6 million for the nine months ended December 31, 2012 and 2011,~~ respectively.

Advertising costs include the costs of producing advertisements and the costs of communicating advertisements. The costs of producing advertisements are expensed as incurred and the costs of communicating advertising are expensed over the period of communication. Total advertising costs for the three months ended ~~December 31,~~June 30, 2013 and 2012 ~~and 2011~~ included in selling, general and administrative expenses were ~~$0.2~~$0.4 million and ~~$0.1~~$0.3 million, ~~respectively. Total advertising costs were $0.6 million and $0.5 million for the nine months ended December 31, 2012 and 2011,~~ respectively.

The Company establishes reserves for product recalls on a product-specific basis when circumstances giving rise to the recall become known. The Company, when establishing reserves for a product recall, considers cost estimates for any fees and incentives to customers for their effort to return the product, freight and destruction charges for returned products, warehouse and inspection fees, repackaging materials, point-of-sale materials and other costs including costs incurred by contract manufacturers. Additionally, the Company estimates product returns from consumers and customers across distribution channels, utilizing third-party data and other assumptions. These factors are updated and reevaluated each period and the related reserves are adjusted when these factors indicate that the recall reserves are either insufficient to cover or exceed the estimated product recall expenses.

Significant changes in the assumptions used to develop estimates for product recall reserves could affect key financial information, including accounts receivable, inventory, accrued liabilities, net sales, gross profit, operating expenses and net income. In addition, estimating product recall reserves requires a high degree of judgment in areas such as estimating consumer returns, shelf and in-stock inventory at retailers across distribution channels, fees and incentives to be earned by customers for their effort to return the products, future freight rates and consumers’ claims.

Basic net income per share of common stock is calculated by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted net income per share of common stock is computed by giving effect to all potentially dilutive securities outstanding during the period. ~~Potential~~The Company utilizes the treasury stock method to calculate potential common shares ~~included those underlying our convertible preferred stock (using the if-converted method),~~that underlie its stock options to purchase ~~our~~ common stock and restricted stock ~~units (using the treasury stock method) and the warrant to purchase our common stock (using the treasury stock method).~~units. Performance share units were excluded from potential common shares since no shares were issuable as of ~~December 31, 2012~~June 30, 2013 and March 31, 2012. The performance share units vest based on achievement of specified percentage of targeted cumulative compounded earnings per share growth rate during the three-year period ending March 31, 2015.

The potential common shares from the convertible preferred stock warrant had an anti-dilutive effect on the earnings per share for the nine months ended December 31, 2011, and the potential common shares from convertible preferred stock had an anti-dilutive effect on the earnings per share for the three and nine months ended December 31, 2011, and, accordingly, were excluded from the calculation. Additionally, certain2013. Certain stock options to purchase our common stock and restricted stock units had an anti-dilutive effect on the earnings per share for the periods presented, and were also excluded. ~~Further, certain restricted stock units had an anti-dilutive effect on the earnings per share for the three and nine months ended December 31, 2012 and were excluded.~~

Net income attributable to common stockholders during the three and nine months ended December 31, 2011 was allocated using the two-class method. The two-class method is an earnings allocation method for calculating earnings per share when a company’s capital structure includes two or more classes of common stock or common stock and participating securities. Under this method, the Company reduced income from operations by the dividends paid to convertible preferred stockholders and the rights of the convertible preferred stockholders to participate in undistributed earnings. The undistributed earnings were allocated based on the relative percentage of weighted average shares of outstanding convertible preferred stock to the total number of weighted average shares of outstanding common and convertible preferred stock.

During the nine months ended December 31, 2011, the Company corrected an error in the measurement of the convertible preferred stock warrant liability. The correction increased the fair value of the convertible preferred stock warrant liability by $0.9 million and decreased additional paid-in capital by $0.4 million with a corresponding increase in expense of $0.5 million, which was recorded in other income (expense), net in the accompanying statement of operations during the nine months ended December 31, 2011. The correction was an accumulation of an error that should have been recorded in prior periods and would have increased net loss for fiscal 2009 by $44,000, increased net income by $79,000 for fiscal 2010 and decreased net income by $0.6 million for fiscal 2011. Management assessed the impact of this error and did not believe that it was material, either individually or in the aggregate, to any prior period financial statements or to the financial statements for the year ended March 31, 2012.


	December 31, 2012		March 31, 2012		June 30, 2013		March 31, 2013

Raw materials	$	3,085	$	1,938	$	1,084	$	1,391
Work in process		3,285		754		1,854		2,142
Finished goods		14,757		7,510		15,535		11,614


Inventory	$	21,127	$	10,202	$	18,473	$	15,147


	December 31, 2012			March 31, 2012			June 30, 2013			March 31, 2013

Equipment and automotive	$	2,480		$	1,730		$	3,677		$	2,959
Software		3,200			1,188			2,410			2,410
Leasehold improvements		979			566			1,342			1,195
Plates and dies		371			352			253			244


Total property and equipment		7,030			3,836			7,682			6,808
Less: Accumulated depreciation and amortization		(2,370	)		(1,719	)		(2,051	)		(1,760	)
Construction in progress		857			2,181			511			1,090


Property and equipment, net	$	5,517		$	4,298		$	6,142		$	6,138

The Company incurred depreciation expense of ~~$271,000~~$294,000 and ~~$704,000 for the three and nine months ended December 31, 2012, respectively. The depreciation expense for the same periods in prior year was $270,000 and $567,000, respectively.~~

~~During~~$185,000 during the three months ended ~~December 31,~~June 30, 2013 and 2012, the Company began two construction projects. The first project was a remodel of the existing office space (the “Existing Space”). Costs totaling $131,000 related to the existing space have been recorded in leasehold improvements in the condensed consolidated balance sheet as of December 31, 2012. The Company expects to incur additional costs to complete the remodeling of the existing space in the fourth quarter of fiscal 2013.

In addition, pursuant to the Lease Amendment and Work Letter described in Note 6, the Company and the landlord began the reconfiguration of the warehouse space to additional office space in order to accommodate growth. The Company was considered to be the accounting owner pursuant to~~ASC 840-40 Sale-Leaseback Transactions~~because the Company was responsible for paying costs of the project directly to the supplier. The Company performed an analysis and determined that it qualified for sale/leaseback accounting. The structural components of the reconfiguration were completed as of December 31, 2012, at which time the asset was de-recognized and the asset and liability were removed from the balance sheet. Tenant improvements totaling approximately $282,000 were recorded in leasehold improvements on the Company’s condensed consolidated balance sheet as of December 31, 2012. The Company expects to incur additional costs for leasehold improvements related to the reconfiguration of the warehouse space.respectively.


	December 31, 2012			March 31, 2012			June 30, 2013			March 31, 2013

Product formulas	$	1,023		$	1,023		$	1,023		$	1,023
Other intangible assets		189			189			189			189


Total intangible assets		1,212			1,212			1,212			1,212
Less: accumulated amortization		(81	)		(36	)		(111	)		(96	)


Intangible assets, net	$	1,131		$	1,176		$	1,101		$	1,116

The Company incurred amortization expense of $15,000 ~~and $45,000~~ on its intangible assets during each of the three ~~and nine~~ months ended ~~December 31, 2012. The amortization expense for the same periods over the prior year was $6,000~~June 30, 2013 and ~~$11,000,~~2012, respectively.

The estimated future amortization expense relating to intangible assets is anticipated to be ~~$15,000~~$45,000 for the remainder of fiscal ~~2013,~~2014; $60,000 for each of the next five years from fiscal ~~2014~~2015 through fiscal ~~2018,~~2019, totaling ~~$300,000~~$300,000; and ~~$816,000~~$756,000 after fiscal ~~2018.~~2019.

Prepaid expenses and other current assets as of June 30, 2013 and March 31, 2013 included receivables from contract manufacturers and suppliers of $2.2 million and $3.9 million, respectively.

In December 2011, the Company entered into a second amendment and restated credit agreement (the “Credit Agreement”) with Bank of America, N.A., which provides for revolving loans and letters of credit up to $20.0 million and is available to the Company through August 2014. The Credit Agreement is secured by substantially all of the Company’s assets.

Revolving advances under the Credit Agreement bear interest at the LIBOR plus 1.5%, as defined. Weighted average interest was 1.5% for each of the three and nine months ended December 31, 2012. Weighted average interest was 1.6% and 2.3% for the three and nine months ended December 31, 2011, respectively. As of December 31, 2012 and March 31, 2012, there was $20.0 million and $7.2 million, respectively, of availability for borrowings under the Credit Agreement. An unused line fee of 0.0625% per quarter is applied to the available balance unless the Company’s outstanding borrowings exceed half of the borrowing limit. Interest is payable monthly.

In 2005, the Company entered into a bank line of credit agreement (the “Credit Agreement”) with Bank of America, N.A., which provided for revolving loans and letters of credit up to $11.0 million. In March 2008, the Company amended the Credit Agreement with Bank of America to establish an inter-creditor agreement with another lender (Note 7). In August 2010, the Company amended the Credit Agreement to decrease the maximum borrowing limit on revolving loans to $10.0 million and extended the expiration date to August 20, 2012. In December 2011, the Company entered into a second amended and restated credit facility with Bank of America that, among other things, provided for an increase in its line of credit to $20.0 million and an extension of the term through August 2014. In March 2013, the Company entered into another amendment to its credit facility. This amendment provides for, among other things, an increase in the line of credit to $40.0 million and extension of the term through August 2016. The Credit Agreement is collateralized by substantially all of the Company’s assets.

The Company may select from three interest rate options for borrowings under the credit facility: (i) LIBOR (as defined in the credit facility) plus 1.25%, (ii) IBOR (as defined in the credit facility) plus 1.25% or (iii) Prime Rate (as defined in the credit facility). Weighted average interest was 1.5% and 1.5% for the three months ended June 30, 2013 and 2012, respectively. The Company is required to pay a commitment fee on the unused credit facility commitments, if the outstanding balance is less than half the commitment at an annual rate ranging from 0.25% to 0.40% depending on the utilization rate. As of June 30, 2013 and March 31, 2013, there was $40.0 million and $33.0 million, respectively, of availability for borrowings under the Credit Agreement. Interest is payable monthly.

The credit facility contains restrictions on, among other things, the Company’s ability to incur additional indebtedness, pay dividends or make other distributions and make investments and loans. The credit facility also limits the Company’s ability to make capital expenditures in excess of $15.0 million. The credit facility requires that the Company maintain a Funded Debt (as defined in the credit facility) to Adjusted EBITDA (as defined in the credit facility) ratio of not more than 2.75 to 1.0 and a minimum Net Worth (as defined in the credit facility) equal to at least $50.0 million, plus 30% of earnings after taxes earned each quarter (if positive), beginning with the June 2013 quarterly earnings.

There are various financial and other covenants under the Credit Agreement. Financial covenants, as defined in the Credit Agreement include a net income covenant, total liabilities to tangible net worth covenant and a minimum fixed charge coverage ~~covenant.~~covenant, through the term of the agreement. The Credit Agreement requires the Company to submit interim and annual financial statements by specified dates after each reporting period. The Company was in compliance with the ~~financial~~ covenants ~~under the Credit Agreement~~ as of ~~December~~June 30, 2013 and March 31, ~~2012.~~2013.

The Company had an advisory services agreement with Solera, ~~to provide consulting and advisory services to the Company for a term ending on the later of: (i) March 5, 2014, or (ii) the date on~~ which Solera and its affiliates cease to own at least 10% of the voting equity of the Company (including any successor thereto). The services to be provided under the agreement included (i) assisting in the raising of additional debt and equity capital from time to time for the Company, if deemed advisable by the Company’s board of directors, (ii) assisting the Company in its long-term strategic planning generally, and (iii) providing such other consulting and advisory services as the Company may reasonably request.

In consideration of Solera providing the services listed above, effective April 1, 2011, the Company was obliged to pay Solera an annual advisory fee of $600,000, payable quarterly. The Company was also obliged to reimburse Solera for out-of-pocket costs and expenses incurred by Solera on behalf of the Company. During the three and nine months ended December 31, 2011, the Company incurred $150,000 and $450,000, respectively, for such consulting and advisory services. The advisory services agreement with Solera wasit terminated upon the consummation of the IPO and as such the Company paid Solera a one-time termination fee of $1.3 million in April 2012. Additionally, the Company is a party to an amended and restated registration rights agreement dated as of November 14, 2005, or Registration Rights Agreement, relating to its shares of common stock held by certain affiliates of Solera and certain other stockholders. In connection with Solera’s exercise of its rights under the Registration Rights Agreement, the Company filed a registration statement on Form S-3 on July 16, 2013 to register Solera’s remaining shares. In connection with preparations for filing of this registration statement, the Company incurred $34,000 for legal and other out-of-pocket expenses on Solera’s behalf during the three months ended June 30, 2013.

The Company ~~entered into a lease agreement (the “Lease”) for~~leases its ~~headquarters at 1610 Fifth Street, Berkeley, California on November 15, 2010 with an initial term~~offices and other equipment under noncancelable operating leases that began on March 1, 2011 and expires in February 2016. The space was comprised of 25,127 square feet of office space and 8,384 square feet of warehouse space. Pursuant to the Lease, the landlord reserved the right to elect to recapture from the Company, and lease to a third party, a portion of the warehouse space comprising not more than 6,525 square feet (“Recapture Space”), subject to certain terms and conditions provided for by the Lease. Notwithstanding the foregoing, the Company had a right of first refusal to lease the Recapture Space. The lease term for the Recapture Space was coterminous with the initial term, including any extensions. Further, in the event that the landlord did not elect to recapture the Recapture Space, the Company had the right, upon written notice to the landlord, to elect to lease the Recapture Space and the landlord shall build out the Recapture Space for office use. On September 25, 2012, the Company exercised the right and entered into an amendment to the Lease (the “Lease Amendment”).

The Lease Amendment provided (i) for the reconfiguration of the warehouse space to additional office space in order to accommodate growth, and (ii) the Company with a first option to extend the initial term of the Lease for three years (the “First Option”) followed by a second option to extend the Lease for an additional two years (the “Second Option” and, together with the First Option, the “Option Periods”). The terms, covenants and conditions of the Lease, as amended, will continue to govern the Options Periods, except that the applicable monthly rent for the Option Periods will be equal to 95% of the fair market rental rate for the property, however, the monthly rent payable during the Option Periods will not be less than the monthly rent payable during the immediately preceding month of the initial term or First Option period, as applicable. The landlord is required to deliver to the Company a notice of the fair market rental rate for the property no later than August 1, 2015. If the Company does not agree with the proposed fair market rental rate, then the term of the lease will expire at the end of the initial term in February 2016. In such event, the Company will have to reimburse to the landlord an amount not to exceed 40% of the total tenant improvement allowance plus interest, as determined in accordance with the Lease. Concurrently with the execution of the Lease Amendment, the Company exercised the First Option to extend the initial lease for an additional three years to Februarythrough fiscal year 2019.

Pursuant to the Lease Amendment, on September 25, 2012, the Company and the landlord entered into a Work Letter Agreement (“Work Letter”) for the Recapture Space which specifies the landlord’s responsibilities and the amount of tenant improvement allowance. Pursuant to the Work Letter, the landlord performed the majority of the structural work.

Rent expense for ~~non-cancelable~~non-cancellable operating leases with scheduled rent increases is recognized on a straight-line basis over the lease term. Rent expense for the three ~~and nine~~ months ended ~~December 31,~~June 30, 2013 and 2012 was ~~$146,000~~$150,000 and ~~$386,000, respectively. Rent expense for the three and nine months ended December 31, 2011 was $80,000 and $360,000,~~$120,000, respectively.

Future minimum lease payments ~~(after incorporating the effect of rent escalation and increase in rent for the recaptured space at the per square foot rate applicable to existing office space)~~ under the noncancelable operating ~~lease~~leases as of ~~December 31, 2012~~June 30, 2013 are as follows (in thousands):


	Lease Payments		Lease Payments

Three Months Ending March 31, 2013	$	147
Nine Months Ending March 31, 2014			$	493
Fiscal Year Ending March 31:
2014		601
2015		621		675
2016		638		673
2017		638		669
2018		638		662
2019		585		586


Total future minimum lease payments	$	3,868	$	3,758

The Company has material non-cancelable purchase commitments, directly or through contract manufacturers, to purchase ingredients to be used in the future to manufacture its products. As of ~~December 31, 2012,~~June 30, 2013, the Company’s purchase commitments totaled ~~$14.0~~$19.2 million, which will substantially be incurred within a year.

~~The~~In September 2011, the Company ~~has~~entered into an agreement with its contract warehousing company that includes minimum overhead fees of $200,000 annually beginning April 1, 2012 through June 30, 2015. As of June 30, 2013, the remaining obligation under the agreement for overhead fees was $400,000.

In November 2011, the Company entered into an agreement with one of its contract manufacturers for the purchase of product formulas for a purchase price of $2.0 million. The ~~expense is included~~agreement requires annual payments of at least $150,000 in ~~selling, general and administrative expenses~~each of the first six years of the agreement with the balance of the $2.0 million payment due at the end of the seven-year term in November 2018. As of June 30, 2013, the ~~condensed consolidated statements of operations.~~Company’s remaining obligation for product formulas was $1.85 million.

In the normal course of business, the Company enters into contracts that contain a variety of representations and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future but have not yet been made. ~~To date, the~~The Company has not paid any significant claims or been required to defend any action related to its indemnification obligations, and, accordingly, the Company believes that the estimated fair value of these indemnification obligations is minimal and has not accrued any amounts for these obligations.

From time to time, the Company is subject to claims and assessments in the ordinary course of business. The Company is not currently a party to any litigation ~~matter~~matters that, individually or in the aggregate, isare expected to have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

~~The outstanding~~In March 2008, in connection with a prior term loan, the Company had issued a warrant to Hercules Technology II, L.P. (“Hercules”) for the purchase of 80,560 shares of ~~convertible preferred~~Series A 2005 Convertible Preferred Stock at an exercise price of $8.07 per share. The warrant was immediately exercisable on the date of issuance and was scheduled to expire at the earlier of five years from a qualifying IPO of the Company’s common stock ~~immediately prior to~~or April 1, 2018. Upon the ~~closing~~consummation of the Company’s IPO on April 2, 2012, ~~were automatically converted into 15,221,571~~the warrant became a warrant to purchase 80,560 shares of our common stock. As such, the Company on April 2, 2012 measured the fair value of the outstanding convertible preferred stock warrant using an option pricing method and recorded a non-cash charge of $13,000 related to the increase in the fair value of the convertible preferred stock warrant in other income (expense), net and the related convertible preferred stock warrant liability was reclassified to additional paid-in capital. On April 12, 2012, Hercules exercised the warrant to purchase 80,560 shares of our common stock by surrendering 17,367 shares to pay for the exercise. As a result, the Company issued Hercules 63,193 shares of common stock. During the three and nine months ended December 31, 2011, the convertible preferred stockholders received a cash dividend of $0.767 and $0.863 per share, respectively, or approximately $11.6 million and $13.1 million in the aggregate, respectively, as a result of participating in the common stock dividend. No dividend was declared or paid during the three and nine months ended December 31, 2012.

~~The~~As of each of June 30, 2013 and March 31, 2013, the Company’s Charter authorized 5,000,000 shares of preferred stock, $0.001 par value per share. As of ~~December 31, 2012,~~June 30, 2013, no certificate of designations defining the rights and preferences of the preferred stock had been filed and no shares of preferred stock were issued and outstanding.

As of ~~December 31, 2012~~each of June 30, 2013 and March 31, ~~2012,~~2013, the Company’s Charter authorized 30,000,000 ~~and 24,000,000~~ shares of common stock, $0.001 par value per share, respectively, of which ~~17,328,797~~16,889,060 and ~~483,242~~16,849,016 shares were issued and outstanding, respectively. Each share of the common stock has the right to one vote. The holders of common stock are also entitled to receive dividends ~~out of~~whenever funds are legally available therefor and if, as and when declared by the Company’s ~~board~~Board of directors. During the three and nine months ended December 31, 2011, the Company declared and paid common shareholders a cash dividend of $0.767 and $0.862 per share, respectively, or $363,000 and $408,000, respectively, in the aggregate.Directors. No dividends were declared or paid during the three ~~and nine~~ months ended ~~December 31, 2012.~~June 30, 2013 and 2012, respectively.

The Company has adopted performance incentive plans (the 2004 Stock Option Plan and the Omnibus Incentive Plan, which together are the “Plans”) under which nonqualified stock options, restricted stock units and performance share units are granted to eligible employees, officers and directors. The Company has also granted non-plan performance based option awards to certain key management. Options granted under Plans to date generally vest over a two- to five-year period from the date of grant. Vested options can be exercised and generally expire ten years after the grant date. The restricted stock units granted to employees vest 50% on the second anniversary of the grant date, and the remaining 50% on the third anniversary of the grant date, provided continuance of employment with the Company. The performance share units granted to employees vest based on achievement of required cumulative compounded adjusted diluted earnings per share growth during the stipulated three-year performance period ~~ending March 31, 2015.~~applicable to a grant. Stock-based compensation expense included in selling, general and administrative expenses was ~~$230,000~~$293,000 and ~~$151,000~~$216,000 for the three months ended ~~December 31,~~June 30, 2013 and 2012, ~~and 2011, respectively, and was $677,000 and $390,000 for the nine months ended December 31, 2012 and 2011,~~ respectively.

~~The following table summarizes the activity of stock options during the nine months ended December 31, 2012:~~

Activity of stock options under our 2004 Plan, non-plan option awards and Omnibus Incentive Plan is set forth below:

The weighted average grant date fair value of employee stock options granted during the three months ended June 30, 2013 was $13.99 per share. The total intrinsic value of stock options exercised during the three months ended June 30, 2013 was $1.1 million. The intrinsic value is calculated based on the difference between the exercise price and the fair value of the common stock at time of exercise.

The following table summarizes the activity of unvested restricted stock units and performance share ~~units during the nine months ended December 31, 2012:~~units:


Shares-Based Awards	Shares			Weighted- Average Grant Date Fair Value		Shares			Weighted-Average Grant Date Fair Value

Unvested at March 31, 2012		65,899		$	19.00
Unvested at March 31, 2013							71,165		$	21.73
Granted		7,220			44.07		41,644			39.02
Vested		—			—		—			—
Performance Shares Adjustment		—			—
Forfeited		(3,568	)		19.00		(2,841	)		19.00


Unvested at December 31, 2012		69,551		$	21.60
Unvested at June 30, 2013							109,968		$	28.35

As of ~~December 31, 2012,~~June 30, 2013, there were 83,136 unvested performance share units outstanding, net of actual forfeitures. As of June 30, 2013, the number of shares estimated to be issued at the end of the performance period(s) is a total of 41,574 shares. The maximum number of total shares that could be issued at the end of performance period(s) is 124,710 shares.

As of June 30, 2013, there was ~~$2.8~~$4.5 million of total unrecognized compensation cost related to unvested share-based compensation arrangements which is expected to be recognized over a weighted average period of ~~2.9~~3.3 years.

The Company offers a retirement savings plan under Section 401(k) of the Internal Revenue Code. The plan covers all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Under the plan, the Company match was increased from 25% to 50% during three months ended December 31, 2012 up to a maximum of 6% of eligible compensation, not to exceed $4,000. Contribution expense was not material for the periods presented.

~~We recognized income tax expense of $0.9 million and $5.0 million for the three and nine months ended December 31, 2012, compared to $1.5 million and $4.9 million in the same periods last year.~~ The Company’s effective tax rate was ~~40.4%~~40.2% for the ~~nine~~three months ended ~~December 31, 2012,~~June 30, 2013, compared to ~~39.1% in~~40.9% for the ~~same period last year.~~three months ended June 30, 2012. The effective tax rate is based on a projection of ~~our full~~the Company’s annual fiscal year results. ~~Our~~The effective tax rate for the ~~nine~~three months ended ~~December 31, 2012~~June 30, 2013 was ~~higher~~lower than the effective tax rate for the ~~nine~~three months ended ~~December 31, 2011 largely~~June 30, 2012 due to ~~a tax benefit recorded during~~ the ~~nine months ended December 31, 2011 related to an increase in the tax rate applied for deferred tax assets due to an increase in the~~impact of permanent items and federal and state income tax ~~rates.~~

In addition, during the three and nine months ended December 31, 2012, we recognized $6.7 million and $20.8 million of tax deductions associated with stock option exercises. As of December 31, 2012, $6.0 million and $19.5 million of these tax deductions are considered “excess” stock compensation-related deductions, resulting in a reduction in taxes payable of $4.5 million, recording a tax refund receivable of $3.0 million, with a corresponding increase in additional paid in capital of $7.5 million. We will recognize the remaining $0.4 million of stock compensation-related deductions as a reduction in taxes payable in future periods as we generate state taxable income.

credits. The Company files consolidated tax returns for federal income taxes as well as for state income taxes in various state jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities. These audits include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal, state and local tax laws. The Company is potentially subject to U.S. federal, state and local income tax examinations for years 2005 and beyond.

~~The Company does not have any unrecognized tax positions as of December 31, 2012 that if recognized would affect the annual~~expects its full year effective tax ~~rate. No interest or penalties have been accrued~~rate for any period presented. Based on the Company’s assessment, including past experience and complex judgments about future events, the Company does not expect that changes in the liability for unrecognized tax benefits during the next twelve months will have a significant impact on its financial position or results of operations.fiscal 2014 to be approximately 40% to 41%.

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net income per share of common stock for the periods presented, because including them would have been anti-dilutive:


	Three Months Ended December 31,				Nine Months Ended December 31,				Three Months Ended June 30,
	2012		2011		2012		2011		2013		2012

Convertible preferred stock		—		15,221,571		—		15,221,571
Options to purchase common stock		2,562		167,314		2,562		167,314		132,737		2,562
Restricted stock units		—		—		6,256		—		7,640		—
Convertible preferred stock warrant		—		—		—		80,560


Total		2,562		15,388,885		8,818		15,469,445		140,377		2,562

A reconciliation of the basic and diluted net income per share attributable to common stockholders is as follows (in thousands except share and per share amounts):

The Company’s net sales by geographic areas, based on the location to where the product was shipped, are summarized as follows (in thousands):

~~The Company’s net sales by geographic area, based on the location to which the product was shipped, are summarized as follows (in thousands):~~


	Three Months Ended December 31,				Nine Months Ended December 31,				Three Months Ended June 30,
	2012		2011		2012		2011		2013		2012

Meals	$	16,223	$	14,235	$	52,759	$	41,411	$	16,554	$	14,667
Snacks		14,908		12,225		47,517		40,461		15,821		13,463
Dressings, condiments and other		5,152		4,378		16,986		16,448		6,665		6,163


	$	36,283	$	30,838	$	117,262	$	98,320	$	39,040	$	34,293

OnIn January ~~22,~~ 2013, the Company announced a voluntary product recall of certified organic and made with organic pizza products due to the possible presence of fragments of flexible metal mesh from a faulty screen at a third-party flour mill. The Company initiated the recall of all lots of pizza product manufactured with this supplier’s flour from its first purchase from the supplier in May 2012. The Company recorded certain items associated with the recall in its financial results for the three ~~and nine~~ months ended ~~December 31, 2012.~~June 30, 2013.

The Company recorded the estimated customer and consumer returns as a reduction of net sales, related costs associated with product returns, destruction charges, inventory write-off and costs incurred by contract manufacturers as cost of sales, and ~~will record~~ administrative costs associated with the recall such as legal expenses as selling, general and administrative expenses. As a result of the voluntary product recall, the Company recorded ~~an estimated accrual~~charges for product returns and recall-related costs of approximately ~~$2.3~~$0.3 million for the three ~~and nine~~ months ended ~~December 31, 2012~~June 30, 2013 as follows (in thousands except per share amount):


	Amount		Amount

Reduction of net sales	$	1,570	$	—
Incremental cost of sales		690		217
Incremental administrative costs				43


Total reduction to income before income taxes	$	2,260	$	260


Impact on net income	$	1,346	$	156


Impact on net income per diluted share	$	0.08	$	0.01

The accrual for product returns is based on ~~preliminary estimates~~the Company’s estimate of cases of pizza products at retail stores ~~included in channels through which the Company distributes its products~~ and is ~~based on the estimates~~ derived from third-party data and other assumptions. A high degree of judgment is required in estimating consumer returns, shelf and in-stock inventory at retailers across distribution channels, fees and incentives to be earned by customers for their effort to return the products, future freight rates and ~~consumers~~consumers’ claims. Actual results could differ from those estimates.

The Company ~~is anticipating additional accruals of approximately $1 million for product returns and related costs for sales subsequent to December 31, 2012, and~~ expects to incur ~~the majority~~approximately $0.1 million of ~~these~~additional costs associated with the voluntary product ~~recall within the next three to six months.~~recall.

The Company carries product recall insurance and expects to recover a substantial portion of the recall-related costs from its ~~insurance.~~insurance carrier. The Company may seek to recover additional costs from the third-party flour mill. ~~It is not possible~~The Company has submitted its claim to ~~predict~~ the ~~outcome~~insurance company and, as of July 31, 2013, recovered $0.4 million against the claims submitted. The impact of the ~~success of any such~~ recovery from the insurance ~~or claims against~~was included in net sales for the ~~supplier, given the early stage~~fourth quarter of the voluntary product recall. Consequently, no amounts have been recorded as receivable as of December 31, 2012 for any potential recoveries of any amounts from third parties and there can be no assurance there will be any recoveries.fiscal 2013.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the ~~fiscal~~ year ended March 31, ~~2012~~2013 (“fiscal ~~2012”~~2013”) included in our Annual Report on Form 10-K filed with the SEC on June ~~8, 2012.~~14, 2013. This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended,( the “Exchange Act”). These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “should,” ~~“estimate”~~“estimate,” or ~~“continue”~~“continue,” and similar expressions or variations. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those in ~~this Quarterly Report on Form 10-Q and in~~ our Form 10-K discussed in the section titled “Risk ~~Factors.”~~Factors” including risks relating to competition; new product introductions; implementation of our growth strategy; our brand; our reputation; product liability claims; product recalls and related insurance proceeds (if any); economic disruptions; changes in consumer preferences; ingredient and packaging costs and availability; reliance on a limited number of distributors, retailers, contract manufacturers and third-party suppliers and an outside warehouse facility; efficiency projects; intellectual property and related disputes; regulatory compliance; transportation; our supply-chain; our and our customers’ inventory levels; and seasonality. The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

Annie’s, Inc. is a ~~rapidly growing~~ natural and organic food company with a widely recognized brand, offering consumers great-tasting products in large packaged foods categories. We sell premium products made from high-quality ingredients at affordable prices. We have the #1 natural and organic market position in four product lines: macaroni and cheese, snack crackers, fruit snacks and graham crackers.

Our loyal and growing consumer following has enabled us to migrate from our natural and organic roots to a brand sold across the mainstream grocery, mass merchandiser and natural retailer channels. We offer over ~~125~~135 products and are present in over ~~25,000~~26,500 retail locations in the United States and Canada.

Our net sales are derived primarily from the sale of meals, snacks, dressings, condiments and other products under the Annie’s Homegrown and Annie’s Naturals brand names. We have experienced strong growth ~~driven by our meals and snacks~~across all product categories, resulting from our focus on supporting our best-selling items and the introduction of new products in these categories. We have reduced our offerings in our dressings and condiments product lines and discontinued our cereal product line in the fourth quarter of fiscal 2012, which resulted in low or negative quarter over quarter growth in that category in recent quarters. In the most recent quarter, despite the impact of discontinuance of the cereal, the category achieved strong growth quarter over quarter driven by stronger consumption trends.

Gross profit is net of cost of sales, which consists of the costs of ingredients in the manufacture of products, contract manufacturing fees, inventory write-off, packaging costs and in-bound freight charges. Ingredients account for the largest portion of the cost of sales, followed by contract manufacturing fees and ~~packaging.~~packaging costs.

Our selling, general and administrative expenses consist primarily of marketing and advertising expenses, freight and warehousing, wages, related payroll and employee benefit expenses, ~~including~~ stock-based compensation, commissions to outside sales representatives, legal and professional fees, travel expenses, other ~~facility-related~~facility related costs, such as rent and depreciation, and consulting expenses. The primary components of our marketing and advertising expenses include trade advertising, samples, consumer events, sales data, consumer research and search engine and digital advertising.

OnWe first began shipping organic frozen pizza in January ~~22,~~2012 and made with organic frozen pizza first shipped during second quarter of fiscal 2013. In January 2013, we announced a voluntary product recall of our certified organic and made with organic pizza products. The voluntary product recall was a result of our contract manufacturer for pizza crusts identifying small metal fragments in the pizza dough during a manufacturing run and

in some finished pizza crusts made on the same day. We immediately halted production and began investigating the issue. Soon thereafter, we determined that the small metal fragments originated at the third-party flour mill from where we source our pizza flour. We then initiated a recall of all lots of pizza product manufactured with this supplier’s flour from our first purchase from the supplier in May 2012.

~~The full~~Direct costs of the voluntary product recall include customer and consumer returns, costs associated with returned product, costs incurred by our contract manufacturers, incremental costs associated with short-term sourcing of replacement flour, destruction charges and inventory write-off, retailer margin and customer fees and incentives. We also ~~face the potential for lost sales from our consumers.~~incurred administrative costs such as legal expenses, accounting fees and public relations expenses.

As a result of the voluntary product recall, we recorded charges that negatively impacted our ~~net sales~~gross profit and net income by ~~$1.6~~$0.2 million and ~~$1.3~~$0.3 million, respectively, for the three ~~and nine~~ months ended ~~December 31, 2012.~~June 30, 2013. The recorded charges ~~were~~are estimated and based on ~~our best estimates and~~ information available to us when we recorded the charges. ~~We expect to recover a substantial portion~~So far we have recovered $0.4 million of the recall-related costs from our product recall ~~insurance.~~insurance, which was recorded in the fourth quarter of fiscal 2013. We ~~may seek~~expect to recover additional ~~costs~~amounts from our insurance or the third-party flour mill. ~~Any recovery would be~~Recoveries are recorded to offset the charges once recovery is probable. We expect the effects of the voluntary product recall to continue to be reflected in our financial statements over the next few quarters.

In addition, we expect to incur approximately $1.0 million of costs associated with product returns and related costs for sales subsequent to December 31, 2012 including the destruction and write off of inventory consisting of non-pizza products manufactured with flour sourced from the same third-party flour mill that provided flour for the recalled pizza products. None of these affected non-pizza products were shipped to customers. We expect to record these costs associated with the voluntary product recall inDuring the fourth quarter of fiscal ~~2013.~~

~~We have~~2013, we restarted the production of our certified organic and made with organic pizza products using flour from an alternative supplier with which we have a long-standing relationship and began shipping replacement product into distributors and retailers ~~as of~~in February ~~11,~~ 2013 in order to replenish retail shelves and inventories. ~~We expect to see a recovery in sales of our pizza products in the late fourth quarter of fiscal 2013 and first quarter of fiscal 2014, as retailers seek to restock inventory of pizza products.~~

~~Net sales~~The growth rates for the U.S. natural and organic food market have been, and are expected to continue to be, higher than those for the overall U.S. food market. We believe growth in the natural and organic food market is driven by various factors, including heightened awareness of the role that food and nutrition play in long-term health and wellness. Many consumers prefer natural and organic products due to increasing concerns over the purity and safety of food as a result of the presence of pesticide residues, growth hormones and artificial and genetically engineered ingredients in the foods we eat. In this growing market, we expect competition from other natural and organic packaged food companies as well as mainstream conventional packaged food companies to increase, as they may seek to introduce products in our key categories or seek to make existing products more attractive to the natural and organic consumer. We continue to experience greater consumer demand for natural and organic food products and increasing awareness of the Annie’s brand and our offerings have contributed to increased growth in net sales.

Our top-line growth continues to be driven by our increased penetration of mainstream grocery and mass merchandiser channels, ~~product innovation, increased brand awareness~~ and greater consumer demand for natural and organic food products. In the twelve months ended December 31, 2012, we have experienced acceleration in consumer trends for many of our products. We also have benefited from improved placement in the mainstream grocery ~~channel, which~~channel. Additionally, we believe ~~has resulted in increased sales of~~ our ~~products. Our~~continued product innovation, including adding new flavors and sizes to existing lines and introducing new product lines, will benefit net sales ~~growth has been primarily driven by volume; however,~~growth. In June 2013, we ~~have demonstrated~~entered into the ~~ability to execute price increases as needed to maintain margins, driven by~~single-serve microwavable cup segment of the macaroni and cheese category and in August 2013, we announced our ~~strong brand loyalty and perceived value relative to the competition.~~entry into family-size frozen entrées.

We purchase finished products from ~~independent~~our contract manufacturers. ~~We have long standing, strategic relationships with many~~With an industry-wide commodity cost escalation starting in fiscal 2008, we became more directly involved in the sourcing of the ingredients for our products. This allowed us to consolidate ingredient sourcing across contract manufacturers in order to negotiate more favorable pricing on ingredients and, ~~suppliers of organic ingredients. We enter, either~~in some cases, to lock in ingredient pricing for typically six to twelve months through non-cancelable purchase commitments, directly or through contract ~~manufacturers, into forward pricing contracts with certain ingredient suppliers. This practice provides us with significant visibility into our cost structure over the next six to twelve months.~~manufacturers. In fiscal ~~2012,~~2013, our contracted ingredients represented approximately ~~48%~~50% of our ~~material~~materials costs and ~~25%~~over 31% of our cost of sales. ~~Over~~These efforts mitigated the ~~past 18 months,~~impact of volatile and increasing commodity costs on our business. We plan to continue to expand our portfolio of contracted ingredients and negotiate pricing agreement for future purchases to allow us sufficient time to respond to changes in our ingredient costs over time.

Additionally, we have ~~experienced increased costs for many of our inputs~~invested significant time and ~~expect these higher costs~~energy to ~~continue throughout the remainder of our fiscal year ending March 31, 2013 (“fiscal 2013”). We strive to maintain or~~ improve gross margins ~~despite increasing commodity costs through a combination of~~and achieve permanent cost ~~management~~reductions and ~~price increases. We actively manage our input and production costs through commodity management practices, vendor negotiation,~~ productivity improvements ~~and cost reductions~~ in our supply chain. ~~We invest significant time and effort to achieve permanent cost reductions in our supply chain. To drive these initiatives, we~~These efficiency projects have ~~begun to selectively invest capital in equipment located at our~~focused on selecting more cost-effective contract manufacturers, ~~to drive down~~negotiating lower tolling fees, consolidating in-bound freight, leveraging warehouse expense and reducing ingredient and packaging costs ~~improve throughput~~through increased volume buys, contract consolidation, direct purchasing and ~~improve product quality.~~price negotiation.

Selling, general and administrative expenses have increased as a result of the investment we have made in building our organization and adding headcount to support our ~~growth and operating as a public company. During the course of fiscal 2013, we have continued to invest in our business with the addition of customer facing sales and operations staff.~~growth. Many of our selling, general and administrative expenses are variable with volume, including freight and warehouse expenses and commissions paid to our sales brokers. In addition, we continue to make investments in marketing to drive trial of our products and promote awareness of our brand and in research and development to support our robust innovation pipeline. Starting in fiscal 2012, we incurred incremental expense related to getting ready to operate as a public company. We expect to incur approximately $2 million in incremental expense annually related to being a public company.

The following table sets forth items included in our consolidated statements of operations in dollars and as a percentage of net sales for the periods presented:


	Three Months Ended December 31,						% of Net Sales						Nine Months Ended December 31,						% of Net Sales						Thee Months Ended June 30,						% of Net Sales
	2012			2011			2012			2011			2012			2011			2012			2011			2013			2012			2013			2012
	(in thousands, except for percentages)																								(in thousands, except for percentages)

Net sales	$	36,283		$	30,838			100.0	%		100.0	%	$	117,262		$	98,320			100.0	%		100.0	%	$	39,040		$	34,293			100.0	%		100.0	%
Cost of sales		23,267			18,275			64.1	%		59.3	%		72,539			60,034			61.9	%		61.1	%		24,278			20,486			62.2	%		59.7	%


Gross profit		13,016			12,563			35.9	%		40.7	%		44,723			38,286			38.1	%		38.9	%		14,762			13,807			37.8	%		40.3	%
Operating expenses:
Selling, general and administrative expenses		10,687			8,847			29.5	%		28.7	%		32,437			25,206			27.7	%		25.6	%		11,327			10,211			29.0	%		29.8	%


Total operating expenses		10,687			8,847			29.5	%		28.7	%		32,437			25,206			27.7	%		25.6	%		11,327			10,211			29.0	%		29.8	%


Income from operations		2,329			3,716			6.4	%		12.1	%		12,286			13,080			10.5	%		13.3	%		3,435			3,596			8.8	%		10.5	%
Interest expense		(40	)		(25	)		(0.1	)%		(0.1	)%		(120	)		(66	)		(0.1	)%		(0.1	)%		(71	)		(40	)		(0.2	)%		(0.1	)%
Other income (expense), net		31			43			0.1	%		0.1	%		116			(428	)		0.1	%		(0.4	)%		26			49			0.1	%		0.1	%


Income before provision for income taxes		2,320			3,734			6.4	%		12.1	%		12,282			12,586			10.5	%		12.8	%		3,390			3,605			8.7	%		10.5	%
Provision for income taxes		919			1,502			2.5	%		4.9	%		4,965			4,926			4.2	%		5.0	%		1,361			1,474			3.5	%		4.3	%


Net income	$	1,401		$	2,232			3.9	%		7.2	%	$	7,317		$	7,660			6.2	%		7.8	%	$	2,029		$	2,131			5.2	%		6.2	%

Our discussion of our results of operations in this Quarterly Report on Form 10-Q includes certain net ~~sales, gross profit, gross margin, selling, general and administrative expenses, income from operations and net~~ income figures that exclude the impact of our January 2013 voluntary product recall ~~of pizza products announced on January 22, 2013.~~and shelf registration costs. These figures are non-GAAP financial measures. We calculate these non-GAAP figures by eliminating the impact of our January 2013 voluntary product recall and shelf registration costs, which we do not consider indicative of our ongoing operations. We believe these non-GAAP figures provide additional information to facilitate the comparison of our past and present financial results and better visibility into our normal operating results by isolating the effects of the voluntary product ~~recall.~~recall and shelf registration costs. However, our computation of these non-GAAP measures is likely to differ from methods used by other companies in computing similarly titled or defined terms, limiting the usefulness of these measures. These non-GAAP financial measures should not be considered in isolation or as alternatives to GAAP financial measures and investors should not rely on any single financial measure to evaluate our business.

Three Months Ended ~~December 31, 2012~~June 30, 2013 Compared to Three Months Ended ~~December 31, 2011~~June 30, 2012

Net sales increased ~~$5.4~~$4.7 million, or ~~17.7%~~13.8%, to ~~$36.3~~$39.0 million ~~during~~in the three months ended ~~December 31, 2012~~June 30, 2013 compared to ~~$30.8~~$34.3 million ~~during~~in the three months ended ~~December 31, 2011.~~June 30, 2012. The net sales ~~for the three months ended December 31, 2012 included a $1.6 million reduction due~~increase was primarily driven by

volume with approximately 200 basis points of growth from higher average selling prices. Distribution gains and our mainline placement initiative contributed to the ~~voluntary product recall~~volume increase, primarily impacting mainstream grocery and mass merchandiser channels. These gains were partially offset by lower volume in the natural channel, primarily driven by a reduction in inventory carrying levels at one of our ~~certified organic and made with organic pizza products.~~ major customers.

The increase in net sales ~~(net of the effects of the voluntary product recall)~~ reflects ana $2.4 million, $1.9 million and $0.5 million increase in net sales of snacks, meals and dressings, condiments and other, respectively. Snacks growth outpaced meals growth in this quarter due to higher net sales to mass merchandiser customers, which typically sell a higher volume of ~~$2.7 million, $2.0 million~~snacks than our customers in mainstream grocery and ~~$0.8 million, respectively.~~natural retailer channels, on average. The increase in snacks was primarily due to growth in our fruit snacks, grahams, crackers and mixed snacks ~~and snack mix~~ product lines. The increase in meals was predominantly driven by strong growth in natural and gluten-free macaroni and cheese products partially offset by ~~the voluntary product recall~~lower sales of ~~frozen pizza~~organic and deluxe macaroni and cheese products. Organic frozen pizza first shipped in January 2012 and made with organic frozen pizza first shipped during second quarter. As discussed earlier, we initiated a voluntary product recall of all frozen pizza products in January 2013.

The increase in the dressings, condiments and other category was ~~attributable to strong performance of natural and organic~~predominantly driven by strength in dressings and condiments, partially offset by the discontinuation of our cereal product line. Distribution gains and our mainline placement initiatives also contributed to net sales growth, primarily in the mainstream grocery channel. The net sales increase was primarily driven by volume with approximately 3% of growth driven by higher average selling prices.

Excluding the impact of our voluntary product recall, our net sales would have increased $7.0 million, or 22.7%, to $37.9 million during the three months ended December 31, 2012 compared to $30.8 million during the three months ended December 31, 2011.condiments.


	Three Months Ended December 31,						Change					Three Months Ended June 30,						Change
	2012			2011			$		%			2013			2012			$		%
	(in thousands, except for percentages)											(in thousands, except for percentages)

Cost of sales	$	23,267		$	18,275		$	4,992		27.3	%	$	24,278		$	20,486		$	3,792		18.5	%


Gross profit	$	13,016		$	12,563		$	453		3.6	%	$	14,762		$	13,807		$	955		6.9	%


Gross margin %		35.9	%		40.7	%							37.8	%		40.3	%

Gross profit increased ~~$0.5~~$1.0 million, or ~~3.6%~~6.9%, to ~~$13.0~~$14.8 million ~~for~~in the three months ended ~~December 31, 2012~~June 30, 2013 from ~~$12.6~~$13.8 million ~~for~~in the three months ended ~~December 31, 2011.~~ June 30, 2012. The increase in gross profit was primarily driven by higher net sales, partially offset by higher commodity costs and a $0.2 million increase in cost of sales associated with our January 2013 voluntary product recall relating to increased flour costs from an alternative supplier on short notice.

Gross margin decreased ~~4.8~~2.5 percentage points to ~~35.9% from 40.7% during~~37.8% in the three months ended ~~December 31, 2012 compared to~~June 30, 2013 from 40.3% in the three months ended ~~December 31, 2011.~~June 30, 2012. The decrease in gross margin is primarily attributable to a reduction in net sales of $1.6 million due to voluntary product recall and a corresponding increase in cost of sales of $0.7 million for estimated costs associated with the product recall. The estimated costs associated with the product recall comprised of affected inventory write-off $0.6 million and costs incurred by contract manufacturers $0.1 million. The effect of the charge for voluntary product recall costs on gross margin was approximately 4.5 percentage points. To a lesser extent, the decrease in gross margin resulted from higher commodity costs and increased trade spending, partially offset by ~~a price increase that was implemented in October 2012 and the cumulative impact of various cost reduction initiatives. We expect to see slightly~~ higher commodity costs in the fourth quarter versus our year-to-date results driven by higher dairy costs. We also expect to invest in incremental trade promotions beyond our original plans to support pizza in our fourth quarter. As a result, we expect our fourth quarter gross margin to be in the low to mid 39 percentage range with a full year margin in the mid 39 percentage range.

Excluding the impact of the voluntary product recall, our gross profit would have increased $2.7 million, or 21.6%, to $15.3 million for the three months ended December 31, 2012 from $12.6 million for the three months ended December 31, 2011 and gross margin would have decreased 0.3 percentage points to 40.4% from 40.7% during the three months ended December 31, 2012 compared to the three months ended December 31, 2011.average selling prices.


	Three Months Ended December 31,				Change					Three Months Ended June 30,				Change
	2012		2011		$		%			2013		2012		$		%
	(in thousands, except for percentages)									(in thousands, except for percentages)

Operating expenses:
Selling, general and administrative expenses	$	10,687	$	8,847	$	1,840		20.8	%	$	11,327	$	10,211	$	1,116		10.9	%

Selling, general and administrative expenses increased ~~$1.8~~$1.1 million, or ~~20.8%~~10.9%, to ~~$10.7~~$11.3 million ~~during~~in the three months ended ~~December 31, 2012~~June 30, 2013 from ~~$8.8~~$10.2 million ~~during~~in the three months ended ~~December 31, 2011.~~June 30, 2012. This increase was due primarily to an increase in payroll expense resulting from increased headcount to support our ~~growth and operations as a public company. Additionally, public company-related expenses impacted selling, general and administrative expenses~~growth. In addition, during the three months ended December 31, 2012 compared with the three months ended December 31, 2011. Selling, general and administrative expenses for the three months ended December 31, 2012 were not impacted due to voluntary product recall since it was announced in January 2013. However,June 30, 2013, we ~~expect an increase in expenses due to~~incurred $43,000 administrative costs associated with the ~~management of the~~voluntary product recall ~~including~~and $34,000 for legal and other out-of-pocket expenses ~~in our fourth fiscal quarter ending March 31, 2013.~~on Solera’s behalf to file a registration statement on Form S-3 to register Solera’s remaining shares. As a percentage of net sales, selling, general and administrative expenses ~~increased~~decreased 0.8 percentage points to ~~29.5% during~~29.0% in the three months ended ~~December 31, 2012~~June 30, 2013 from ~~28.7% during~~29.8% in the three months ended December 31, 2011. While leveraging in the second half of fiscal 2013, we expect selling, general and administrative expenses as a percentage of net sales for fiscal 2013 to be on par with our prior fiscal year.June 30, 2012.

Excluding the impact of the voluntary product recall, our selling, general and administrative expenses as a percentage of net sales would have decreased 0.5 percentage points to 28.2% during the three months ended December 31, 2012 from 28.7% during the three months ended December 31, 2011.


	Three Months Ended December 31,						Change						Three Months Ended June 30,						Change
	2012			2011			$			%			2013			2012			$			%
	(in thousands, except for percentages)												(in thousands, except for percentages)

Income from operations	$	2,329		$	3,716		$	(1,387	)		(37.3	)%	$	3,435		$	3,596		$	(161	)		(4.5	)%


Income from operations as a percentage of net sales		6.4	%		12.1	%								8.8	%		10.5	%

As a result of the factors above, income from operations decreased ~~$1.4~~$0.2 million, or ~~37.3%~~4.5%, to ~~$2.3~~$3.4 million ~~during~~in the three months ended ~~December 31, 2012,~~June 30, 2013, from ~~$3.7~~$3.6 million ~~during~~in the three months ended ~~December 31, 2011.~~June 30, 2012. Income from operations as a percentage of net sales decreased ~~5.7~~1.7 percentage ~~points~~point to ~~6.4%~~8.8% in the three months ended ~~December 31, 2012,~~June 30, 2013, from ~~12.1%~~10.5% in the three months ended ~~December 31, 2011.~~

Excluding the impact of voluntary product recall, our income from operations would have increased $0.9 million, or 23.5% to $4.6 million for the three months ended December 31, 2012 from $3.7 million for the three months ended December 31, 2011.June 30, 2012.

Interest expense increased during the three months ended ~~December 31, 2012 primarily related~~June 30, 2013 compared to ~~non-cash imputed interest expense related to financing of product formulas intangible asset acquired in fiscal 2012. Interest expense during~~ the three months ended ~~December 31, 2011 consisted of expense related~~June 30, 2012 due to ~~borrowings on~~higher non-utilization fees under our revolving line of credit.

Other income (expense), net during the three months ended ~~December 31, 2012 and 2011 consisted of~~June 30, 2013 reflects royalty income.

Our effective tax rate was 39.6% for the three months ended December 31, 2012, compared to 40.2% in the same period last year. The effective tax rate is based on a projection of our annual fiscal year results. Our effective tax rate for the three months ended December 31, 2012 was lower than the effective tax rate for the three months ended December 31, 2011 due to the impact of state income tax credits. We expect our full year effective tax rate for fiscal 2013 to be approximately 40.4%.

In addition, during the three months ended December 31, 2012, we recognized $6.7 million of tax deductions associated with stock option exercises. As of December 31, 2012, $6.0 million of these tax deductions are considered “excess” stock compensation-related deductions, resulting in a reduction in taxes payable of $4.5 million, recording a tax refund receivable of $3.0 million, with a corresponding increase in additional paid in capital of $7.5 million. We will recognize the remaining $0.4 million of stock compensation-related deductions as a reduction in taxes payable in future periods as we generate state taxable income.

As a result of the factors above, net income decreased $0.8 million, or 37.2%, to $1.4 million for the three months ended December 31, 2012 from $2.2 million for the three months ended December 31, 2011.

Excluding the impact of the voluntary product recall, our net income would have increased $0.5 million, or 23.1%, to $2.7 million for the three months ended December 31, 2012 from $2.2 million for the three months ended December 31, 2011.

~~Nine Months Ended December 31, 2012 Compared to Nine Months Ended December 31, 2011~~

Net sales increased $18.9 million, or 19.3%, to $117.3 million during the nine months ended December 31, 2012 compared to $98.3 million during the nine months ended December 31, 2011. The net sales for the nine months ended December 31, 2012 included a $1.6 million reduction due to the voluntary product recall of our certified organic and made with organic pizza products. The increase in net sales (net of the effects of the voluntary product recall) reflects an increase in net sales of meals, snacks and dressings, condiments and other of $11.3 million, $7.1 million and $0.5 million, respectively. The increase in meals was predominantly driven by strong growth in the natural macaroni and cheese product line, offset by the voluntary product recall of frozen pizza products. Organic frozen pizza first shipped in January 2012 and made with organic pizza first shipped during our

second quarter. As discussed earlier, we initiated a voluntary product recall of all frozen pizza products in January 2013. The increase in snacks was primarily due to growth in our grahams, crackers, mixed snacks and fruit snacks product lines. The slight increase in dressings, condiments and other was attributable to strong growth in natural and organic dressings, partially offset by the discontinuation of our cereal product line. Distribution gains and our mainline placement initiatives also contributed to net sales growth, primarily in the mainstream grocery channel. The net sales increase was primarily driven by volume with slightly higher average selling prices adding modest growth.

Excluding the impact of our voluntary product recall, our net sales would have increased $20.5 million, or 20.9%, to $118.8 million during the nine months ended December 31, 2012 compared to $98.3 million during the nine months ended December 31, 2011.

Gross profit increased $6.4 million, or 16.8%, to $44.7 million for the nine months ended December 31, 2012 from $38.3 million for the nine months ended December 31, 2011. Gross margin decreased 0.8 percentage points to 38.1% from 38.9% during the nine months ended December 31, 2012 compared to the nine months ended December 31, 2011. The decrease in gross margin is primarily attributable to a reduction in net sales of $1.6 million due to voluntary product recall and a corresponding increase in cost of sales of $0.7 million for estimated costs associated with the product recall. The estimated costs associated with the product recall comprised of affected inventory write-off $0.6 million and costs incurred by contract manufacturers $0.1 million. The increase in gross profit was primarily driven by the increase in net sales, partially offset by the negative impact of the product recall.

Excluding the impact of the voluntary product recall, our gross profit would have increased $8.7 million, or 22.7%, to $47.0 million for the nine months ended December 31, 2012 from $38.3 million for the nine months ended December 31, 2011 and gross margin would have increased 0.6 percentage points to 39.5% from 38.9% during the nine months ended December 31, 2012 compared to the nine months ended December 31, 2011 due to price increases and the cumulative benefit of various cost reduction initiatives, which were partially offset by higher commodity costs.

Selling, general and administrative expenses increased $7.2 million, or 28.7%, to $32.4 million during the nine months ended December 31, 2012 from $25.2 million during the nine months ended December 31, 2011. This increase was due primarily to an increase in payroll expense resulting from increased headcount to support our

growth and operations as a public company. Additionally, public company-related expenses impacted selling, general and administrative expenses during the nine months ended December 31, 2012 compared with the nine months ended December 31, 2011. Further, during the nine months ended December 31, 2012, we incurred $0.7 million including legal, accounting and printing costs and various other fees associated with the registration and sale of common stock in the secondary public offering by certain stockholders, including Solera. We did not receive any proceeds from the sale of shares by the selling stockholders. Selling, general and administrative expenses for the nine months ended December 31, 2012 were not impacted due to voluntary product recall since it was announced in January 2013. However, we expect an increase in expenses due to administrative costs associated with the management of the recall including legal expenses in our fourth fiscal quarter ending March 31, 2013. As a percentage of net sales, selling, general and administrative expenses increased 2.1 percentage points to 27.7% during the nine months ended December 31, 2012 from 25.6% during the nine months ended December 31, 2011.

Excluding the impact of the voluntary product recall, our selling, general and administrative expenses as a percentage of net sales would have increased 1.7 percentage points to 27.3% during the nine months ended December 31, 2012 from 25.6% during the nine months ended December 31, 2011.

As a result of the factors above, income from operations decreased $0.8 million, or 6.1%, to $12.3 million during the nine months ended December 31, 2012, from $13.1 million during the nine months ended December 31, 2011. Income from operations as a percentage of net sales decreased 2.8 percentage points to 10.5% in the nine months ended December 31, 2012, from 13.3% in the nine months ended December 31, 2011.

Excluding the impact of voluntary product recall, our income from operations would have increased $1.5 million, or 11.2% to $14.6 million for the nine months ended December 31, 2012 from $13.1 million for the nine months ended December 31, 2011.

Interest expense during the nine months ended December 31, 2012 primarily related to non-cash imputed interest expense related to financing of product formulas intangible asset acquired in fiscal 2012. Interest expense during the nine months ended December 31, 2011 consisted of expense related to borrowings on our revolving line of credit.

Other income (expense), net during the ~~nine~~three months ended ~~December 31,~~June 30, 2012 primarily reflects royalty income partially offset by a non-cash charge of $13,000 related to the increase in the fair value of the convertible preferred stock warrant on April 2, 2012, prior to its conversion into a common stock warrant. Other income (expense), net during the nine months ended December 31, 2011 primarily reflects a non-recurring, non-cash out-of-period charge of $0.5 million related to the increase in the fair value of our convertible preferred stock warrant liability partially offset by royalty income.


	Nine Months Ended December 31,						Change					Three Months Ended June 30,						Change
	2012			2011			$		%			2013			2012			$			%
	(in thousands, except for percentages)											(in thousands, except for percentages)

Provision for income taxes	$	4,965		$	4,926		$	39		0.8	%	$	1,361		$	1,474		$	(113	)		(7.7	)%


Effective tax rate		40.4	%		39.1	%							40.1	%		40.9	%

Our effective tax rate was ~~40.4%~~40.1% for the ~~nine~~three months ended ~~December 31, 2012,~~June 30, 2013, compared to ~~39.1% in~~40.9% for the ~~same period last year.~~three months ended June 30, 2012. The effective tax rate is based on a projection of our annual fiscal year results. Our effective tax rate for the ~~nine~~three months ended ~~December 31, 2012~~June 30, 2013 was ~~higher~~lower than the effective tax rate for the ~~nine~~three months ended ~~December 31, 2011 largely~~June 30, 2012 due to ~~a tax benefit recorded during~~ the ~~nine months ended December 31, 2011 related to an increase in the tax rate applied for deferred tax assets due to an increase in the~~impact of permanent items and federal and state ~~tax rates, partially offset by the impact of state~~ income tax credits. We expect our full year effective tax rate for fiscal 2014 to be approximately 40% to 41%.

In addition, during the nine months ended December 31, 2012, we recognized $20.8 million of tax deductions associated with stock option exercises. As of December 31, 2012, $19.5 million of these tax deductions are considered “excess” stock compensation related deductions, resulting in a reduction in taxes payable of $4.5 million, recording a tax refund receivable of $3.0 million, with a corresponding increase in additional paid in capital of $7.5 million. We will recognize the remaining $0.4 million of stock compensation related deductions as a reduction in taxes payable in future periods as we generate state taxable income.

As a result of the factors above, net income decreased ~~$0.3~~$0.1 million, or ~~4.5%~~4.8%, to ~~$7.3~~$2.0 million ~~for~~in the ~~nine~~three months ended ~~December 31, 2012~~June 30, 2013 from ~~$7.7~~$2.1 million ~~for~~in the ~~nine~~three months ended ~~December 31, 2011.~~June 30, 2012.

Excluding the $0.2 million impact of the January 2013 voluntary product recall and shelf registration costs, our net income would have increased ~~$1.0~~$0.1 million, or ~~13.1%~~4.1%, to ~~$8.7~~$2.2 million for the ~~nine~~three months ended ~~December 31, 2012~~June 30, 2013 from ~~$7.7~~$2.1 million for the ~~nine~~three months ended ~~December 31, 2011.~~June 30, 2012.

Historically, we have experienced greater net sales in the second and fourth fiscal quarters than in the first and third fiscal quarters due to our customers’ merchandising and promotional activities around the back-to-school and spring seasons. Concurrently, inventory levels and working capital requirements increase during the first and third fiscal quarters of each fiscal year to support higher levels of net sales in the subsequent quarters. We anticipate that this seasonal impact on our net sales and working capital is likely to continue. Accordingly, our results of operations for any particular quarter are not indicative of the results we expect for the full year.


	December 31, 2012		March 31, 2012		June 30, 2013		March 31, 2013
	(in thousands)				(in thousands)

Cash	$	12,960	$	562	$	1,562	$	4,930
Accounts receivable, net		10,110		11,870		15,409		20,015
Accounts payable, related-party payable and accrued liabilities		12,989		9,618
Accounts payable						2,501		4,342
Accrued liabilities						11,046		12,021
Working capital⁽¹⁾		38,806		16,427		28,145		31,925

Our principal sources of liquidity are our cash and accounts receivable, as well as cash flows from operations. Our cash balance and working capital increased by $12.4 million and $22.4 million, respectively, as of December 31, 2012. The increase in working capital includes a $10.9 million increase in inventory. Following unanticipated demand spikes during the second quarter of fiscal 2013 related to strong back-to-school promotion efficiencies, we have significantly increased inventory levels to ensure our ability to meet peak demand in the fourth quarter, our largest sales quarter. Despite this investment in inventory levels, we generated $4.2 million cash from our operating activities during the nine months ended December 31, 2012. Working capital as of December 31, 2012 included a decrease in accounts receivable $1.6 million, a decrease in inventory $0.6 million and an increase in accrued liabilities $0.1 million, as a result of the provisions for product returns and costs associated with the product recall. We expect inventory levels to decrease in the fourth fiscal quarter of fiscal 2013.

Additionally, we have a credit facility with Bank of America, N.A., which provides for revolving loans and letters of credit up to $20.0 million and is available to us through August 2014. We believe that our cash and accounts receivable and potential cash flows from operations will be sufficient to satisfy our currently anticipated cash requirements through at least the next twelve months. We have historically generated cash from our operations, however, there can be no assurance that our operations will continue to generate cash flows in the future. We use cash generated from our operations to fund our ongoing operations including business expansion and growth.

The following table sets forth, for the periods indicated, our beginning balance of cash, net cash flows provided by (used in) operating, investing and financing activities and our ending balance of cash:


	June 30, 2013			June 30, 2012
	(in thousands)

Cash at beginning of period	$	4,930		$	562
Net cash provided by operating activities		3,142			950
Net cash used in investing activities		(272	)		(735	)
Net cash provided by (used in) financing activities		(6,238	)		4,325


Cash at end of period	$	1,562		$	5,102

Operating activities in the three months ended June 30, 2013 provided ~~$4.2~~$3.1 million of cash ~~during the nine months ended December 31, 2012,~~ primarily due to our net income of ~~$7.3~~$2.0 million, which included non-cash charges totaling $0.9 million, primarily comprised of ~~$0.7~~$0.3 million for depreciation and amortization, ~~$0.7~~$0.3 million for stock-based compensation and $0.2 million for increased inventory reserves. Changes in operating assets and liabilities provided an additional $0.6 million of net cash, which is primarily comprised of a $4.6 million decrease in accounts receivable, a $1.4 million decrease in prepaid expenses, other current and non-current assets and a $0.6 million ~~reduction~~decrease in ~~allowances for trade discounts and~~income tax receivable partially offset by a ~~$0.5~~$3.6 million increase in inventory, ~~reserves~~a $1.9 million decrease in accounts payable and a $0.6 million decrease in accrued expenses and other non-current liabilities. These increases were partially offset by the excess tax benefit from stock-based compensation of $0.4 million.

Operating activities provided $1.0 million of cash during the three months ended June 30, 2012, primarily due to ~~inventory write-off associated with the product recall.~~net income of $2.1 million, which included net non-cash charges of $0.5 million. Changes in operating asset and liability accounts provided an additional ~~$3.0~~$2.5 million of net cash ~~which was primarily comprised of~~resulting from a $4.5 million decrease in accounts receivable and a $3.5 million increase in accrued expenses a $4.4 million increase in prepaid expenses, other current and non-current assets, a $3.4 million increase in accounts payable, a $2.3 million increase in accounts receivable and a $0.4 million in income tax receivable and, offset by a ~~$10.8~~$4.3 million increase in inventory and a $1.3 million decrease in ~~related-party payable,~~related party-payable, resulting from the termination of our advisory services agreement ~~with Solera~~ upon consummation of our IPO. This increase in cash was offset by the excess tax benefit from stock-based compensation of ~~$7.5~~$4.2 million. During three months ended December 31, 2012, we significantly increased inventory levels to ensure our ability to meet peak demand in the fourth quarter, our largest sales quarter. The increase in accrued expenses was driven by the purchases of inventory, which had been received as of December 31, 2012 but not yet invoiced. The increase in accounts payable was related to timing of invoices received and check runs in relation to the quarter end, which can vary from year to year.

Operating activities used $0.8 million of cash during the nine months ended December 31, 2011, primarily due to our net income of $7.7 million, which included net non-cash charges of $0.7 million. Changes in operating asset and liability accounts used $9.2 million of net cash during the nine months ended December 31, 2011.

Cash used in investing activities related to purchases of property and equipment during the ~~nine~~three months ended ~~December 31,~~June 30, 2013 and 2012 ~~and 2011~~ was ~~$1.5~~$0.3 million and ~~$1.5~~$0.7 million, ~~respectively, primarily related to investments made in our new enterprise resource planning system and manufacturing equipment to support our cost efficiency projects during the periods presented.~~respectively.

Cash used in financing activities totaled $6.2 million in the three months ended June 30, 2013 including net pay down of $7.0 million for borrowings from our credit facility offset by $0.4 million in proceeds from exercises of stock options and $0.4 million in excess tax benefit from stock-based compensation.

Cash provided by financing activities totaled ~~$9.7~~$4.3 million during the ~~nine~~three months ended ~~December 31,~~June 30, 2012, comprised of:

Cash used in financing activities totaled $2.6 million during the nine months ended December 31, 2011, which primarily consisted of $13.6 million in cash dividend payments made to stockholders, $1.8 million in payments of IPO costs and $0.6 million to repurchase certain stock options partially offset by proceeds of $13.3 million from net borrowings under our credit facility.

In December 2011, we entered into a second amended and restated credit agreement (the “Credit Agreement”) with Bank of America, N.A., which provides for revolving loans and letters of credit up to $20.0 million and is available to us through August 2014. The Credit Agreement is secured by a lien on substantially all of our assets.

Revolving advances under the Credit Agreement bear interest at the LIBOR plus 1.50%, as defined. Weighted average interest was 1.5% for each of the three and nine months ended December 31, 2012. Weighted average interest was 1.6% and 2.3% for the three and nine months ended December 31, 2011, respectively. As of December 31, 2012 and March 31, 2012, there was $20.0 million and $7.2 million, respectively, of availability for borrowings under the Credit Agreement. An unused line fee of 0.0625% per quarter is applied to the available balance unless our outstanding borrowing exceeds half of the borrowing limit. Interest is payable monthly.

There are various financial and other covenants under the Credit Agreement. Financial covenants, as defined in the Credit Agreement, include a net income covenant, total liabilities to tangible net worth covenant and a minimum fixed charge coverage covenant. The Credit Agreement requires us to submit interim and annual financial statements by specified dates after each reporting period. We were in compliance with the financial covenants under the Credit Agreement as of December 31, 2012.

The following table summarizes our contractual obligations as of ~~December 31, 2012:~~June 30, 2013:


	Payments Due by Period										Payments Due by Period
	Total		Less Than One Year		1-3 Years		3-5 Years		More than Five Years		Total		Less Than One Year		1-3 Years		3-5 Years		More than Five Years
	(in thousands)										(in thousands)

Rent obligations(1)	$	3,868	$	596	$	1,250	$	1,277	$	745	$	3,622	$	630	$	1,287	$	1,279	$	426
Equipment lease obligations(2)		31		25		6		—		—		136		31		60		45		—


Total operating lease obligations		3,899		621		1,256		1,277		745		3,758		661		1,347		1,324		426
Purchase commitments(3)		14,033		14,023		10		—		—		19,199		18,930		269		—		—
Warehousing overheads obligations(4)		500		200		300
Product formula obligations(4)												1,850		150		300		1,400		—
Warehousing overheads obligations(5)												400		200		200		—		—


Total	$	18,432	$	14,844	$	1,566	$	1,277	$	745	$	25,207	$	19,941	$	2,116	$	2,724	$	426

We do not have any off-balance sheet arrangements or any holdings in variable interest entities.

During the first nine months of the prior fiscal year, we corrected an error in our measurement of the convertible preferred stock warrant liability. The correction increased the fair value of the convertible preferred stock warrant liability by $0.9 million and decreased additional paid-in capital by $0.4 million with a corresponding increase in expense of $0.5 million, which was recorded in other income (expense), net in the statement of operations during the nine months ended December 31, 2011. The correction was an accumulation of an error that should have been recorded in prior periods and would have increased net loss for fiscal 2009 by $44,000, increased net income by $79,000 for fiscal 2010 and decreased net income by $0.6 million for fiscal 2011. Management had assessed the impact of this error and did not believe that it was material, either individually or in the aggregate, to any prior period financial statements or to the financial statements for the fiscal year ended March 31, 2012.

~~There were no material changes to the Company’s critical accounting policies during the three-month period ended December 31, 2012, except for the following:~~

We establish reserves for product recalls on a product-specific basis when circumstances giving rise to the recall become known. When establishing reserves for a product recall, we consider cost estimates for any fees and incentives to customers for their effort to return the product, freight and destruction charges for returned products, warehouse and inspection fees, repackaging materials, point-of-sale materials and other costs including costs incurred by contract manufacturers. Additionally, we estimate product returns from consumers and customers across distribution channels, utilizing third-party data and other assumptions. These factors are updated and reevaluated each period and the related reserves are adjusted when these factors indicate that the recall reserves are either insufficient to cover or exceed the estimated product recall expenses.

Our Form 10-K for fiscal ~~2012,~~2013, filed with the SEC on June ~~8, 2012,~~14, 2013, provides a detailed discussion of the market risks affecting our operations. We believe our exposure to these market risks did not change materially during the three ~~and nine~~ months ended ~~December 31, 2012.~~June 30, 2013.

We ~~maintain~~have established disclosure controls and procedures ~~and internal controls~~ that are designed to ~~provide reasonable assurance~~ensure that the information required to be disclosed by the Company in ~~our~~the reports that it files or submits under the Securities Exchange Act ~~reports~~of 1934 is recorded, processed, summarized and reported within the time periods specified in ~~the SEC’s~~SEC rules and forms and that such information is accumulated and communicated to ~~our~~ management, including our ~~Chief Executive Officer~~principal executive officer and ~~Chief Financial Officer,~~principal financial officer, as appropriate to allow timely decisions regarding required ~~disclosures.~~disclosure.

Our management, including our ~~disclosure committee, Chief Executive Officer~~principal executive officer and ~~Chief Financial Officer,~~principal financial officer evaluated the effectiveness of our disclosure controls and procedures. Based on this review, the principal executive officer and principal financial officer of the Company have concluded that the Company’s disclosure controls and procedures ~~as required by~~(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of ~~the Exchange Act. Based on this review, our Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures~~1934) were effective as of ~~December 31, 2012.~~June 30, 2013.

There ~~were~~was no ~~changes~~change in our internal control over financial reporting (as defined in ~~Exchange Act~~ Rules 13a-15(f) and 15d-15(f)) under the Exchange Act) that ~~have~~occurred during the quarterly period ended June 30, 2013 that has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

From time to time, we are subject to ~~a variety of legal proceedings~~claims and assessments in the ordinary course of our business. We are not currently a party to any ~~legal proceeding~~litigation matters that, individually or in the aggregate, isare expected to have a material adverse effect on our business, financial condition, results of operations or cash flows.

~~The following risk factor has~~There have been ~~added to address our voluntary product recall and is a supplement to~~no material changes from the risk factors ~~previously~~ disclosed in Part 1, Item 1A, of our Annual Report on Form 10-K for the fiscal ~~2012 filed with the SEC on June 8, 2012.~~

~~Our voluntary recall of certified organic and made with organic pizza products has affected our third quarter financial results and will continue to impact our financial results in future quarters.~~

On January 22, 2013, we initiated a voluntary recall of our certified organic and made with organic pizza products due to the possible presence of fragments of flexible metal mesh from a faulty screen at a third-party flour mill. We have accounted for the voluntary recall primarily as a reduction to net sales to account for customer and consumer returns and an increase in cost of sales to account for the destruction of finished goods and raw materials inventory. In addition, we will record administrative costs associated with the management of the recall, including fees and incentives to customers and legal expenses in our fourth fiscal quarter endingyear ended March 31, 2013. Certain of these accounting charges are based on our best estimates and may be subject to change as we move forward in completing the voluntary recall. We will also incur some additional costs in future quarters. While we expect to recover a substantial portion of the charges for costs related to the voluntary recall in future quarters through our existing recall insurance and from the third-party supplier, we cannot guarantee that the amounts we recover will cover all costs associated with the voluntary recall. While we have restarted the production and began shipping replacement product into distributors and retailers as of February 11, 2013 in order to replenish retail shelves and inventories, we anticipate that pizza sales will be reduced in the fourth quarter ending March 31, 2013, as compared to our original expectations for the product line. Additionally, we may find it challenging to re-establish strong growth in pizza product sales for a period of time following the voluntary recall. Further, while there have been no illnesses or injuries reported to date, the occurrence of any illnesses or injuries could have serious consequences on pizza product sales and sales of our other products, our brand and reputation, any of which could harm our business.

During the third quarter ended December 31, 2012, we issued an aggregate of 201,350 shares and 6,198 shares of our common stock to certain employees and officers upon the exercise of options awarded under our 2004 Plan and non-plan based awards, respectively, and since January 1, 2013 through January 31, 2013, we issued an aggregate of 3,344 and 6,198 shares, respectively, of our common stock to employees upon the exercises of options awarded under our 2004 Plan and non-plan based awards. We received aggregate proceeds of $1.7 million during the three months ended December 31, 2012 and $85,000 in the period since January 1, 2013 through January 31, 2013 as a result of the exercise of these options. We believe these transactions were exempt from the registration requirements of the Securities Act in reliance on Rule 701 thereunder as transactions pursuant to compensatory benefit plans and contracts relating to compensation as provided under Rule 701. As of January 31, 2013, options to purchase an aggregate of 725,726 shares and 148,726 shares of our common stock remain outstanding under the 2004 Plan and non-plan based awards, respectively. All option awards granted under the 2004 Plan and non-plan based awards were made prior to the effectiveness of our IPO. No further option grants will be made under our 2004 Plan.

~~None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering.~~

~~The exhibits listed below are filed as a part of this Quarterly Report on Form 10-Q.~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


PART I – FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	12

	Condensed Consolidated Balance Sheets as of ~~December 31, 2012~~June 30, 2013 and March 31, ~~2012~~2013	12

	Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~December 31, 2012~~June 30, 2013 and ~~2011~~	2

	~~Condensed Consolidated Statement of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Nine Months Ended December 31,~~ 2012	3

	Condensed Consolidated Statement of Stockholders’ Equity for the Three Months Ended June 30, 2013	4

	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~December 31,~~June 30, 2013 and 2012 ~~and 2011~~	45

	Notes to Condensed Consolidated Financial Statements	56

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3126

Item 4.	Controls and Procedures	3227

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	3328

Item 1A.	Risk Factors	33

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	3428

Item 6.	Exhibits	3529

Signatures		3630


	December 31, 2012		March 31, 2012

Payroll and employee-related expenses	$	2,535	$	2,768
Accrued trade expenses		2,074		2,631
Inventory received not invoiced		3,150		531
Deferred rent		258		264
Brokerage commissions		149		382
Other accrued liabilities		533		876


Total accrued liabilities	$	8,699	$	7,452


	June 30, 2013		March 31, 2013

Payroll and employee-related expenses	$	1,856	$	3,779
Accrued trade expenses		1,891		2,299
Inventory received not invoiced		5,720		4,038
Deferred rent		257		260
Brokerage commissions		135		407
Other accrued liabilities		1,187		1,238


Total accrued liabilities	$	11,046	$	12,021


	Number of Shares			Weighted-Average Exercise Price

Balance, March 31, 2012		1,759,367		$	9.56
Granted		2,562			36.30
Cancelled		(15,606	)		16.62
Exercised		(610,791	)		6.38


Balance, December 31, 2012		1,135,532		$	11.24


	Convertible Preferred Stock						Preferred Stock				Common Stock				Additional Paid-in Capital		Accumulated Deficit			Total Stockholders’ Equity (Deficit)
	Shares			Amount			Shares		Amount		Shares		Amount		Additional Paid-in Capital		Accumulated Deficit			Total Stockholders’ Equity (Deficit)

Balance at March 31, 2012		12,281,553		$	81,373			—	$	—		483,242	$	1	$	4,392	$	(38,829	)	$	(34,436	)
Reclassification of convertible preferred stock warrant liability upon consummation of IPO		—			—			—		—		—		—		2,170		—			2,170
Conversion of convertible preferred stock into common stock upon consummation of IPO		(12,281,553	)		(81,373	)		—		—		15,221,571		15		81,358		—			81,373
Shares issued upon consummation of IPO		—			—			—		—		950,000		1		11,145		—			11,146
Exercise of stock options		—			—			—		—		610,791		—		3,899		—			3,899
Excess tax benefit from stock-based compensation		—			—			—		—		—		—		7,499		—			7,499
Net exercise of warrant to purchase shares of common stock												63,193		—		—		—			—
Stock-based compensation		—			—			—		—		—		—		677		—			677
Net Income		—			—			—		—		—		—		—		7,317			7,317


Balance at December 31, 2012		—		$	—			—	$	—		17,328,797	$	17	$	111,140	$	(31,512	)	$	79,645


									Additional					Total
	Preferred Stock				Common Stock				Paid-in		Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Equity

Balance at March 31, 2013		—	$	—		16,849,016	$	17	$	93,190	$	(27,278	)	$	65,929
Exercise of stock options		—		—		40,044		—		455		—			455
Excess tax benefit from stock-based compensation		—		—		—		—		370		—			370
Stock-based compensation		—		—		—		—		293		—			293
Net Income		—		—		—		—		—		2,029			2,029


Balance at June 30, 2013		—	$	—		16,889,060	$	17	$	94,308	$	(25,249	)	$	69,076


	Net Sales
	Customer A			Customer B			Customer C
Three Months Ended December 31,
2012		25	%		17	%		11	%
2011		20	%		14	%		11	%

Nine Months Ended December 31,
2012		26	%		13	%		12	%
2011		24	%		13	%		12	%


	Number of Shares			Weighted-Average Exercise Price

Balance, March 31, 2013		1,203,990		$	13.26
Granted		41,498			38.53
Forfeited		(9,793	)		19.00
Exercised		(40,044	)		11.36


Balance, June 30, 2013		1,195,651		$	14.15


		Incorporation by Reference
Exhibit Number	Description	Form	File No.	Exhibit(s)	Filing Date

10.1	Offer Letter between Annie’s, Inc. and Isobel Jones+	Form 8-K	001-35470	10.1	April 2, 2013

10.2	Form of Omnibus Incentive Plan Stock Option Award Agreement+	Form 10-K	001-35470	10.37	June 14, 2013

10.3	Form of Omnibus Incentive Plan Restricted Stock Unit Award Agreement +	Form 10-K	001-35470	10.38	June 14, 2013

10.4	Form of Omnibus Incentive Plan Performance Share Unit Award Agreement +	Form 10-K	001-35470	10.39	June 14, 2013

10.5	Independent Director Compensation Plan+	Form 10-K	001-35470	10.40	June 14, 2013

10.6	Independent Director Restricted Stock Unit Award Program under the Omnibus Incentive Plan (as amended and restated effective May 30, 2013)+	Form 10-K	001-35470	10.41	June 14, 2013

10.7	Form of Notice of Grant under Independent Director Restricted Stock Unit Award Program+	Form 10-K	001-35470	10.42	June 14, 2013

31.1*	Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended

31.2*	Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended

32.1*	Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350

101*	The following materials from Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 2013, formatted in Extensible Business Reporting Language (XBRL) includes: (i) Condensed Consolidated Balance Sheets as of June 30, 2013 and March 31, 2013, (ii) Condensed Consolidated Statements of Operations for the three months ended June 30, 2013 and 2012, (iii) Condensed Consolidated Statement of Stockholders’ Equity for the three months ended June 30, 2013, (iv) Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2013 and 2012 and (v) Notes to Condensed Consolidated Financial Statements.

*
~~Exhibit~~ ~~Number~~		~~Description~~

~~31.1~~		~~Certification of the Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~31.2~~		~~Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~32.1~~		~~Certification of Chief Executive Officer and Chief Financial Officer, pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.~~

~~101~~		~~The following materials from the Company’s Quarterly Report on Form 10-Q for the three and nine months ended December 31, 2012 are furnished~~Furnished or filed herewith, ~~formatted in XBRL (Extensible Business Reporting Language):~~

		(i) Unaudited Condensed Consolidated Balance Sheets, (ii) Unaudited Condensed Consolidated Statements of Operations, (iii) Unaudited Condensed Consolidated Statement of Convertible Preferred Stock and Stockholders’ Equity (Deficit) (iv) Unaudited Condensed Consolidated Statements of Cash Flows, and (v) Notes to Unaudited Condensed Consolidated Financial Statements.as applicable


ANNIE’S, INC.

By:		/s/ Kelly J. Kennedy
		Kelly J. Kennedy
		Chief Financial Officer
		(Principal Financial and Accounting Officer and Duly Authorized Officer)

Large accelerated filer

Accelerated filer

~~Non–accelerated~~Non-accelerated filer

x¨ (Do not check if a smaller reporting company)

Smaller reporting company