UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

~~(Mark One)~~

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

For the quarterly period ended September 30, ~~2017~~2021

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

Commission File Number: 001-36729

FRESHPET, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware

20-1884894

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)


400 Plaza Drive, 1^st Floor, Secaucus, New Jersey	07094

(Address of principal executive offices)

(~~Address of principal executive offices)~~Zip Code)

~~(Zip Code)~~

Registrant’s telephone number, including area code: (201) 520-4000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock	FRPT	NASDAQ Global Market

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site,~~ if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 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 ☒ No ☐

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

Large accelerated filer	☐☒	Accelerated filer		☒
			☐
Non-accelerated filer	☐ ~~(Do not check if a small reporting company)~~	Smaller reporting company		☐
Emerging growth company	☐
~~Emerging growth company~~	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒☐

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

As of November ~~3, 2017,~~5, 2021, the registrant had ~~34,861,198~~43,390,482 shares of common stock, $0.001 par value per share, outstanding.

TABLE OF CONTENTS

		Page No.
Part I. Financial Information		4
Item 1.		Financial Statements	34
		Consolidated Balance Sheets	35
		Consolidated Statements of Operations and Comprehensive (Loss) ~~Income~~	45
	Changes to Statements of Stockholders’ Equity	6
	Consolidated Statements of Cash Flows	57
		Notes to Consolidated Financial Statements	68
Item 2.		Management’s Discussion and Analysis of Financial ~~Conditions~~Condition and Results of Operations	1316
Item 3.		Quantitative and Qualitative Disclosures ~~About~~about Market Risks	2631
Item 4.		Controls and Procedures	2732
Part II. Other Information		2833
Item 1.		Legal Proceedings	2833
Item 1A.		Risk Factors	2833
Item 6.		Exhibits	2934

2Forward-Looking Statements

This report contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this report are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “aim,” “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “outlook,” “potential,” “project,” “projection,” “plan,” “intend,” “seek,” “may,” “could,” “would,” “will,” “should,” “can,” “can have,” “likely,” the negatives thereof and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. They appear in a number of places throughout this report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:

	•	our ability to successfully implement our growth strategy;
	•	our ability to timely complete the construction at our Freshpet Kitchens South and Freshpet Kitchens Ennis (our Freshpet Kitchens Bethlehem, Freshpet Kitchens South and Freshpet Kitchens Ennis together, our “Freshpet Kitchens") and achieve the anticipated benefits therefrom;

	•	the effect of the novel coronavirus (“COVID-19”) on our business, employees, suppliers, customers and end consumers;
	•	the loss of key members of our senior management team;

	•	allegations that our products cause injury or illness or fail to comply with government regulations;
	•	the loss of a significant customer;

	•	the entrance of new competitors into our industry;
	•	the effectiveness of our marketing and trade spending programs;

	•	our ability to introduce new products and improve existing products;
	•	our ability to match our manufacturing capacity with demand;

	•	the impact of government regulation, scrutiny, warnings and public perception;
	•	the effect of false marketing claims;

	•	adverse weather conditions, natural disasters, pestilence and other natural conditions affecting our operations;
	•	our ability to meet our sustainability targets, goals, and commitments, including due to the impact of climate change;
	•	our ability to develop and maintain our brand;

	•	the effect of potential price increases and shortages on the inputs, commodities and ingredients that we require, including those caused by inflation;
	•	our ability to manage our supply chain effectively;

	•	our ability to generate sufficient cash flow or raise capital on acceptable terms;
	•	volatility in the price of our common stock; and

•

other factors discussed under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report and the headings "Risk Factors," "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2020.

While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

FRESHPET, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

~~(Unaudited)~~(Unaudited, in thousands, except per share data)

							*September 30,*			*December 31,*
	September 30, 2017			December 31, 2016			*2021*			*2020*
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,069,344		$	3,908,177		$	170,836		$	67,247
Accounts receivable, net of allowance for doubtful accounts		12,390,110			8,886,790			32,217			18,438
Inventories, net		8,690,803			5,402,735			29,305			19,119
Prepaid expenses		598,499			741,091			3,870			3,378
Other current assets		876,792			304,560			1,562			914
Total Current Assets		24,625,549			19,243,353			237,790			109,096
Property, plant and equipment, net		101,422,104			101,493,080			471,964			281,073
Deposits on equipment		4,057,627			3,620,444			3,189			3,710
Operating lease right of use assets								6,874			7,866
Equity method investment								26,736			27,894
Other assets		2,021,805			2,094,339			11,774			4,749
Total Assets	$	132,127,085		$	126,451,216		$	758,327		$	434,388
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable		8,231,738			6,884,155		$	12,828		$	16,452
Accrued expenses		6,660,234			4,531,139			14,556			15,371
Accrued warrants		—			253,391
Borrowings under Credit Facilities		5,500,000			7,000,000
Current operating lease liabilities								1,359			1,298
Total Current Liabilities	$	20,391,972		$	18,668,685		$	28,743		$	33,121
Other liabilities		236,878			—
Long term operating lease liabilities								6,066			7,098
Total Liabilities	$	20,628,850		$	18,668,685		$	34,809		$	40,219
STOCKHOLDERS' EQUITY:
Common stock — voting, $0.001 par value, 200,000,000 shares authorized, 34,835,698 and 33,961,650 issued and outstanding on September 30, 2017 and December 31, 2016, respectively		34,835			33,961
Common stock — voting, $0.001 par value, 200,000 shares authorized, 43,404 issued and 43,390 outstanding on September 30, 2021, and 40,732 issued and 40,718 outstanding on December 31, 2020								43			41
Additional paid-in capital		308,969,771			299,477,706			949,995			600,388
Accumulated deficit		(197,506,371	)		(191,729,136	)		(226,357	)		(205,924	)
Accumulated other comprehensive income (loss)								93			(80	)
Treasury stock, at cost — 14 shares on September 30, 2021 and on December 31, 2020								(256	)		(256	)
Total Stockholders' Equity		111,498,235			107,782,531			723,518			394,169
Total Liabilities and Stockholders' Equity	$	132,127,085		$	126,451,216		$	758,327		$	434,388

	For the Three Months Ended						For the Nine Months Ended						*For the Three Months Ended*						*For the Nine Months Ended*
	September 30,						September 30,						*September 30,*						*September 30,*
	2017			2016			2017			2016			*2021*			*2020*			*2021*			*2020*
NET SALES	$	41,199,780		$	34,536,151		$	115,682,698		$	98,992,060		$	107,590		$	84,190		$	309,620		$	234,268
COST OF GOODS SOLD		21,697,051			19,185,274			62,206,855			53,841,492			66,065			47,535			188,689			131,891
GROSS PROFIT		19,502,729			15,350,877			53,475,843			45,150,568			41,525			36,654			120,931			102,377
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES		19,303,705			14,542,680			57,844,411			48,916,509			42,365			32,895			137,955			101,273
(LOSS)/INCOME FROM OPERATIONS		199,024			808,197			(4,368,568	)		(3,765,941	)
OTHER INCOME/(EXPENSES):
Other Income/(Expenses), net		41,435			41,601			(515,473	)		(93,036	)
(LOSS) INCOME FROM OPERATIONS														(840	)		3,760			(17,024	)		1,104
OTHER (EXPENSES)/INCOME:
Other (Expenses)/Income, net														2			25			(5	)		70
Interest Expense		(465,253	)		(214,067	)		(830,932	)		(490,097	)		(677	)		(216	)		(2,232	)		(999	)
		(423,818	)		(172,466	)		(1,346,405	)		(583,133	)		(675	)		(191	)		(2,237	)		(930	)
(LOSS)/INCOME BEFORE INCOME TAXES		(224,794	)		635,731			(5,714,973	)		(4,349,074	)
(LOSS) INCOME BEFORE INCOME TAXES														(1,515	)		3,569			(19,261	)		175
INCOME TAX EXPENSE		20,754			15,000			62,261			45,000			16			22			48			65
NET (LOSS)/INCOME		(245,548	)		620,731			(5,777,234	)		(4,394,074	)
NET (LOSS)/INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(245,548	)	$	620,731		$	(5,777,234	)	$	(4,394,074	)
NET (LOSS)/INCOME PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
LOSS ON EQUITY METHOD INVESTMENT														539			0			1,124			0
(LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS													$	(2,070	)	$	3,547		$	(20,433	)	$	110
OTHER COMPREHENSIVE INCOME:
Change in foreign currency translation													$	4		$	368		$	173		$	40
TOTAL OTHER COMPREHENSIVE INCOME														4			368			173			40
TOTAL COMPREHENSIVE (LOSS) INCOME													$	(2,066	)	$	3,916		$	(20,260	)	$	150
NET (LOSS) INCOME PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
-BASIC	$	(0.01	)	$	0.02		$	(0.17	)	$	(0.13	)	$	(0.05	)	$	0.09		$	(0.48	)	$	0.00
-DILUTED	$	(0.01	)	$	0.02		$	(0.17	)	$	(0.13	)	$	(0.05	)	$	0.09		$	(0.48	)	$	0.00
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING USED IN COMPUTING NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING USED IN COMPUTING NET (LOSS) INCOME PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
-BASIC		34,666,180			33,717,676			34,316,161			33,603,535			43,373			40,560			42,774			39,452
-DILUTED		34,666,180			34,171,036			34,316,161			33,603,535			43,373			41,700			42,774			40,473

For the Nine Months Ended

September 30,

2017

2016

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss
$
(5,777,234
)

$
(4,394,074
)
Adjustments to reconcile net loss to net cash flows provided by operating activities:

Provision for loss/(gains) on accounts receivable

30,953

(7,147
)
Loss on disposal of equipment and deposits on equipment

97,692

169,797

Share-based compensation

3,292,362

3,459,094

Fair value adjustment for outstanding warrants

334,628

(19,007
)
Change in reserve for inventory obsolescence

315,006

113,581

Depreciation and amortization

9,411,173

6,958,113

Amortization of deferred financing costs and loan discount

398,648

109,678

Changes in operating assets and liabilities

Accounts receivable

(3,534,273
)

(1,631,493
)
Inventories

(3,603,074
)

419,060

Prepaid expenses and other current assets

(347,876
)

(550,392
)
Other assets

(162,488
)

(324,893
)
Accounts payable

2,307,943

571,388

Accrued expenses

2,129,095

2,445,710

Other liabilities

236,878

—

Net cash flows provided by operating activities

5,129,433

7,319,415

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from maturities of short-term investments

—

3,250,000

Acquisitions of property, plant and equipment, software and deposits on equipment

(10,835,532
)

(26,083,581
)
Net cash flows used in investing activities

(10,835,532
)

(22,833,581
)
CASH FLOWS FROM FINANCING ACTIVITIES:

Debt issuance costs

(245,291
)

—

Exercise of options to purchase common stock

5,612,557

1,981,066

Proceeds from borrowings under Credit Facilities

7,500,000

10,000,000

Repayment of borrowings under Credit Facilities

(9,000,000
)

(1,000,000
)
Net cash flows provided by financing activities

3,867,266

10,981,066

NET CHANGE IN CASH AND CASH EQUIVALENTS

(1,838,833
)

(4,533,100
)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

3,908,177

8,029,413

CASH AND CASH EQUIVALENTS, END OF PERIOD
$
2,069,344

$
3,496,313

SUPPLEMENTAL CASH FLOW INFORMATION:

Interest paid
$
489,738

$
363,991

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Property, plant and equipment purchases in accounts payable
$
497,209

$
472,362

Conversion of warrants to common stock
$
588,019

$
—

	Common Shares		Common Stock		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income			Treasury Shares		Treasury Stock			Total Stockholders' Equity
BALANCES, December 31, 2019		36,162	$	36	$	334,299		$	(202,735	)	$	(79	)		14	$	(256	)	$	131,265
Exercise of options to purchase common stock		408		1		4,663			0			0			0		0			4,664
Vesting of restricted stock units		75		0		(1,636	)		0			0			0		0			(1,636	)
Share-based compensation expense		—		0		7,985			0			0			—		0			7,985
Shares issued in primary offering		4,000		4		252,058			0			0			0		0			252,062
Foreign Currency Translation		—		0		0			0			40			—		0			40
Net (loss)		—		0		0			109			0			—		0			109
BALANCES, September 30, 2020		40,645	$	41	$	597,369		$	(202,626	)	$	(39	)		14	$	(256	)	$	394,489

Note 1 – Nature of the Business and Summary of Significant Accounting Policies:

Nature of the Business – Freshpet, Inc. (hereafter referred to as “Freshpet”, the “Company”, “we,” "us" or ~~the “Company”~~“our”), a Delaware corporation, manufactures and markets natural fresh meals and treats for dogs and cats. The Company’s products are distributed throughout the United States, Canada and other international markets, into major retail classes including Grocery (including online), Mass and ~~Mass (which includes internet and club) as well as~~Club, Pet Specialty, and Natural retail.

Basis of ~~Consolidation~~Presentation – The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”). The unaudited consolidated financial statements include the accounts of the Company as well as the Company’s wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

~~Basis of Presentation~~ – The accompanying consolidated balance sheet as of September 30, 2017, statements of operations and comprehensive (loss) income for the three and nine months ended September 30, 2017 and 2016, and statements of cash flows for the nine months ended September 30, 2017 and 2016 are unaudited. The interim unaudited consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements and in accordance with the rules and regulations of the United States Securities and Exchange ~~Commission.~~Commission (the “SEC”). In the opinion of management, the interim unaudited financial statements reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, ~~2017,~~2021, the results of its operations and changes to stockholders’ equity for the three and nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, and its cash flows for the nine months ended September 30, ~~2017~~2021 and ~~2016. The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2017 and 2016 are unaudited.~~2020. The results for the three and nine months ended September 30, ~~2017~~2021 are not necessarily indicative of results to be expected for the year ending December 31, ~~2017,~~2021, or any other interim periods, or any future year or period. Certain amounts that appear in this report may not add up because of differences due to rounding.

These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes in Item 8 of Part II, “Financial Statements and Supplementary Data,” of our Annual Report on Form ~~10-K~~10-K for the year ended December 31, ~~2016.~~2020.

Equity method investment – The Company utilizes the equity method to account for investments when the Company possesses the ability to exercise significant influence, but not control, over the operating and financial policies of the investee. The ability to exercise significant influence is presumed when an investor possesses more than 20% of the voting interests of the investee. This presumption may be overcome based on specific facts and circumstances that demonstrate that the ability to exercise significant influence is restricted. The Company applies the equity method to investments in common stock and to other investments when such other investments possess substantially identical subordinated interests to common stock. The Company has elected to record its share of equity in income (losses) of equity method investment on a one-quarter lag based on the most recently available financial statements.

In applying the equity method, the Company records the investment at cost and subsequently increases or decreases the carrying amount of the investment by our proportionate share of the net income or loss.

Variable interest entities – In accordance with the applicable accounting guidance for the consolidation of variable interest entities, the Company analyzes its variable interests to determine if an entity in which it has a variable interest is a variable interest entity. The Company's analysis includes both quantitative and qualitative reviews to determine if we must consolidate a variable interest entity as its primary beneficiary.

Estimates and Uncertainties – The preparation of our consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results, as determined at a later date, could differ from those estimates.

~~Foreign Currency Contracts~~ –The Company may enter into forward exchange contracts to reduce the Company’s exposure to foreign currency fluctuations of certain assets and liabilities denominated in foreign currencies. The foreign currency forward contracts have not been designated as hedges and, accordingly, any changes in their fair value are recognized on the Consolidated Statements of Operations and Comprehensive Loss in Other income/(expenses), net, and carried at their fair value in the Consolidated Balance Sheet with assets reported in Prepaid expenses and other current assets and liabilities reported in Accrued expenses.

As of September 30, 2017, the notional value of foreign currency forward contracts outstanding was 0.7 million pounds sterling. The fair value of the foreign currency forward contracts are measured using Level 2 inputs in the fair value hierarchy because they are determined based on a market approach utilizing externally quoted forward rates for similar contracts. For the three months and nine months ended September 30, 2017 the net loss recognized on forward contracts was less than $0.1 million.

~~Reclassifications~~ – ~~Certain prior period amounts were reclassified to conform to the current year’s~~ ~~presentation.~~

Fair Value of Financial Instruments – Financial Accounting ~~Standard~~Standards Board (“FASB”) ~~issued ASU No. 2014-09, “Revenue~~guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from ~~Contracts with Customers,” which requires an entity~~independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to ~~recognize~~unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the ~~amount~~lowest priority to unobservable inputs (Level 3 measurement).

The carrying amounts reported in the balance sheets for cash and cash equivalents, short-term investments, other receivables, accounts payable and accrued expenses approximate their fair value based on the short-term maturity of these instruments. Certain assets, including the equity method investment, right-of-use assets and property and equipment are also subject to ~~which it expects~~measurement at fair value on a non-recurring basis if they are deemed to be ~~entitled~~impaired as a result of an impairment review.

As of September 30, 2021, the Company only maintained Level 1 assets and liabilities.

Trade accounts receivable – The allowance for doubtful accounts is based on the Company's assessment of the collectability of customer accounts. The Company regularly reviews the allowance by considering factors such as historical experience, credit quality, the age of the accounts receivable balances and current economic conditions that may affect a customer's ability to pay.

Restricted Stock Tax Withholdings– To meet payroll tax withholdings obligations arising from the vesting of restricted stock units, the Company withheld 1 share totaling $281 and 20 shares totaling $3,198 for the ~~transfer~~three and nine months ended September 30,2021, respectively, and withheld 26 shares totaling $1,636 for the nine months ended September 30,2020.

Debt Issuance Cost– During the first quarter of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In connection with this ASU, the FASB also issued ASU No. 2016-10 regarding identification of performance obligations and licensing considerations, ASU No. 2016-12 regarding narrow scope improvements and practical expedients- and ASU No. 2016-08 which clarifies the implementation of guidance on principal versus agent considerations. In August 2015, the FASB deferred the effective date of ASU No. 2014-09 to fiscal years beginning after December 15, 2017, with early adoption permitted only for fiscal years beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method.

The Company is currently utilizing a comprehensive approach to assess the impact of this guidance by reviewing current accounting policies to identify the potential impact of the new requirements on its revenue contracts. The Company does not currently expect this guidance to have a material impact on its consolidated financial statements. The new standard will be effective as of January 1, 2018. The Company currently anticipates adopting Topic 606 using the modified retrospective transition approach that may result in a cumulative adjustment to beginning retained earnings as of January 1, 2018. Based on the Company’s analysis to date, the Company expects the new standard will require accelerated recognition of trade promotions and customer incentives. These transactions are currently recognized at the later of the sale of goods or agreement, however under the new standard the Company will estimate incentives to be offered to customers2021, as part of the ~~sales price.~~Sixth Amended and Restated Loan and Security Agreement, dated February 19, 2021, (as amended, the "New Loan Agreement"), the Company incurred an additional $3,166 of fees associated with the debt modification, of which $2,713 of the fees were related to the Delayed Draw Term Loan (as defined below) with the remaining balance relating to the Revolving Loan Facility (as defined below). The Company ~~does not expect~~also wrote down $485 of fees incurred from the ~~change to be material.~~

In February 2016, the FASB issued ASU No. 2016-02, "Leases,” which requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term.prior credit facilities. The ~~new guidance~~Company’s policy is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is assessing the impact of ASU No. 2016-02 on its corporate office lease, and upon adoption of this guidance, expects to record the ~~lease on its consolidated balance sheet in accordance~~debt issuance cost related to the Delayed Draw Term Loan, net of debt, for the portion of the Delayed Draw Term Loan that is outstanding, with ~~ASU No. 2016-02.~~the remaining amount recorded within assets. As of September 30, 2021, there was $2,677 of debt issuance cost that was recorded to other assets and $793 was recorded to other current assets.

~~Note 3 – Inventories:~~The Company amortizes debt issuance costs categorized as assets on a straight-line basis over the term of the loan and amortizes the debt issuance costs that are categorized net of debt using the effective interest method, over the term of the loan.

Net Sales - Information about the Company’s net sales by class of retailer is as follows:

Depreciation expense related to property, plant and equipment totaled $3,154,623 and $9,235,932 for the three and nine months ended September 30, 2017, respectively, of which $1,447,992 and $4,329,624 was recorded to cost of goods sold for the three and nine months ended September 30, 2017, respectively, with the remainder of depreciation and amortization expense recorded to selling, general and administrative expense.

Depreciation expense related to property, plant and equipment totaled ~~$2,669,278~~$7,389 and ~~$6,830,780~~$21,571 for the three and nine months ended September 30, ~~2016,~~2021, respectively, of which ~~$1,241,563~~$4,075 and ~~$2,660,340~~$11,896 was recorded to cost of goods sold for the three and nine months ended September 30, ~~2016,~~2021, respectively, with the remainder of depreciation and amortization expense recorded to selling, general and administrative expense.

Depreciation expense related to property, plant and equipment totaled $4,970 and $14,709 for the three and nine months ended September 30, 2020, respectively, of which $2,129 and $6,422 was recorded to cost of goods sold for the three and nine months ended September 30, 2020, respectively, with the remainder of depreciation and amortization expense recorded to selling, general and administrative expense.

(1) Accrued Leadership Transition Expenses represent costs detailed within our former Chief Executive Officer’s separation agreement as well as incremental costs associated with leadership transition.

On November 13, 2014, the Company entered into senior secured credit facilities (the “Debt Refinancing”) comprised of a five-year $18.0 million term facility (the “Term Facility”), a three-year $10.0 million revolving facility (the “Revolving Facility”) and a $12.0 million additional term loan commitment earmarked primarily for capital expenditures (the “Capex Commitments” and together with the Term Facility and Revolving Facility, the “Credit Facilities” and such loan agreement, the “Loan Agreement”).

On ~~December 23, 2014,~~ February 19, 2021, the Company ~~repaid~~entered into the ~~outstanding $18.0 million~~New Loan Agreement, which amended and ~~modified~~restated in full the ~~terms~~Company’s Fifth Amended and Restated Loan and Security Agreement, dated as of ~~the $40.0 million~~April 17, 2020. The New Loan Agreement provides for a $350,000 senior secured credit facility (the "New Credit ~~Facilities. The $18.0 million term facility was extinguished, the three-year $10.0 million Revolving Facility remained unchanged and the $12.0 million~~Facility"), encompassing a $300,000 delayed draw term loan ~~commitment earmarked for capital expenditures was increased to $30.0 million.~~facility (the "Delayed Draw Facility") and a $50,000 revolving loan facility (the "Revolving Loan Facility"), which replaces the Company's prior $130,000 delayed draw term loan facility and $35,000 revolving loan facility.

The New ~~Revolver~~Credit Facility matures ~~in September 2020~~ on February 19, 2026 and borrowings thereunder ~~will~~ bear interest at variable rates depending on the ~~Company’s~~Company's election, either at a base rate or at ~~the London Interbank Offered Rate (“LIBOR”)~~LIBOR (or a comparable successor rate if LIBOR no longer exists), in each case, plus an applicable margin. Subject to the ~~Company’s~~Company's leverage ratio, the applicable margin ~~will vary~~varies between 0.75% and ~~1.25%~~2.25% for base rate loans and 1.75% and ~~2.25%~~3.25% for LIBOR loans. The Company has the option to borrow term loans under the Delayed Draw Facility ("Delayed Draw Term Loans") until August 19, 2023, subject to certain conditions. Commencing on August 19, 2022, the amount of any outstanding Delayed Draw Term Loans shall be repayable in equal consecutive quarterly installments equal to 1/28th of the total single term loan ("the Initial Combined Delayed Draw Term Loan"). Commencing on August 19, 2023, the amount of any outstanding Delayed Draw Term Loans, combined with the Initial Combined Delayed Draw Term Loan, shall be repayable in equal consecutive quarterly installments equal to 1/28th of the outstanding Delayed Draw Term Loans and the remainder shall be due and payable on February 19,2026.

~~On September 21, 2017,~~Borrowings under the ~~Company further amended~~New Credit Facility are secured by substantially all of the ~~Loan Agreement (the “New Loan Agreement”) which modified the $10.0 million Revolving Facility to $30.0 million (the “New Revolving Facility”)~~Company's and ~~extinguished the $30.0 million Capex Commitments.~~certain of its subsidiaries' assets. The New Loan Agreement ~~has a term~~requires compliance with various covenants customary for agreements of ~~three years~~this type, including financial covenants and negative covenants that limit, among other things, the Company's ability to ~~increase the~~incur additional debt, create or incur liens, engage in mergers or consolidations, sell, transfer or otherwise dispose of assets, make voluntary prepayments to subordinated debt, permit a change of control, pay dividends or distributions, make investments, and enter into certain transactions with affiliates. The New ~~Revolving Facility by $10.0 million, with borrowings bearing interest at variable rates.~~Loan Agreement also includes events of default customary for agreements of this type.

~~The~~As of September 30, 2021, the Company had ~~$7.5 million~~0 debt outstanding under the ~~existing~~New Credit ~~Facilities prior~~Facility. The New Credit Facility includes a quarterly commitment fee on any unused amounts at a per annum rate between 0.30% to ~~closing, which was repaid with proceeds from~~0.50% depending on the ~~New Revolving Facility and cash on hand. Upon closing, the Company had $5.5 million outstanding and $24.5 million available under the New Revolving Facility.~~aggregate principal outstanding.

In connection with ~~this amendment,~~entering into the New Credit Facility, the Company ~~accelerated the amortization~~incurred $3,166 of ~~$0.3 million of unamortized~~ debt issuance ~~costs related to~~cost, which is capitalized on the ~~existing Loan Agreement. These costs are included in Interest Expense in~~balance sheet and amortized over the ~~three and nine months ended September 30, 2017.~~

~~The New Loan Agreement provides for the maintenance~~life of various covenants, including financial covenants, and includes events of default that are customary for facilities of this type. As of September 30, 2017, the Company was in compliance with all the covenants in the New ~~Loan Agreement.~~

~~Borrowings under our~~ Credit ~~Facilities totaled $7.5 million~~Facility, and ~~repayments totaled $9.0 million for~~wrote off $485 of fees incurred from the ~~nine months ended September 30, 2017. The Company had $5.5 million in debt outstanding under the Credit Facilities.~~

Interest expense and fees totaled $0.5 million and $0.8 million for the three and nine months ended September 30, 2017, respectively, of which $0.2 million was related to new debt issuance costs. Interest expense and fees totaled $0.2 million and $0.5 million for the three and nine months ended September 30, 2016, respectively. There was less than $0.1 million of accrued interest on the Credit Facilities as of September 30, 2017 and December 31, 2016.prior credit facilities.

~~Total compensation cost for share-based payments recognized for the three months ended~~ As of September 30, ~~2017 and 2016~~2021, there was ~~$1,132,852 and $787,675, respectively. Total compensation~~$3,470 of debt issuance cost ~~for share-based payments recognized for~~from the ~~nine months ended September 30, 2017 and~~ ~~2016~~ ~~was $3,292,362 and $3,490,754, respectively.~~

~~2006 Stock Plan—In December 2006,~~New Credit Facility as well as fees incurred from the Company approved the 2006 Stock Plan (the “2006 Plan”) under which options to purchase approximately 624,223 shares of the Company’s common stock were granted to employees and affiliates of the Company. These options are time-based (vest over five years). Certain option awards provide for accelerated vesting if there is a change in control (as defined in the 2006 Plan). At September 30, 2017, there were zero shares available for grant as the 2006 Plan is frozen.

~~2010 Stock Plan—In December 2010, the Company approved the 2010 Stock Plan (the “2010 Plan”) under which options to purchase approximately 2,146,320~~shares of the Company’s common stock were granted to employees and affiliates of the Company (in 2012, the 2010 Plan was amended to allow for the granting of approximately 2,220,280 options to purchase shares of the Company’s common stock). The outstanding options are time-based (vest between two and four years). The options granted have maximum contractual terms of 10 years. The Board of Directors froze the 2010 Plan such that no further grants may be issued under the 2010 Plan.

~~2014 Omnibus Incentive Plan—In November 2014, the Company approved the 2014 Omnibus Incentive Plan (the “2014 Plan”) under which 1,479,200 shares of common stock may be issued or used~~We have various noncancelable lease agreements for reference purposes as awards granted under the 2014 Plan. In September 2016, the 2014 Plan was amended to allow for the granting of an additional 2,500,000 shares of common stock to be issued or used for reference purposes as awards granted, for a total of 3,979,200 shares. These awards may be in the form of stock options, stock appreciation rights, restricted stock,office and warehouse space, as well as office equipment, with original remaining lease terms of two years to nine years, some of which include an option to extend the lease term for up to five years. Because the Company is not reasonably certain to exercise these renewal options, the options are not considered in determining the lease term and associated potential option payments are excluded from lease payments. The Company’s leases generally do not include termination options for either party to the lease or restrictive financial or other ~~stock-based~~covenants.

Weighted-average remaining lease term (in years) and ~~cash-based awards.~~ discount rate related to operating leases were as follows:

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date to determine the present value of lease payments.

Maturities of lease liabilities under noncancelable operating leases as of September 30, ~~2017,~~2021 were as follows:

A summary of rent expense for the ~~awards granted were either time-based, performance-based (vest when performance targets are met, as defined in the stock option grant agreement), or restricted stock units (employee RSUs vest over~~ three ~~years~~ and ~~non-employee director RSUs vest over one year).~~

At nine months ended September 30, ~~2017, there were 2,092,881 shares of common stock available to be issued or used for reference purposes under the 2014 Plan.~~

~~NASDAQ Marketplace Rules Inducement Award—During fiscal year 2016, stock-based awards were granted to the Company’s Chief Executive Officer~~2021 and 2020 was as an inducement under the NASDAQ Marketplace Rules, and therefore outside of any Plan. Under the terms of the agreement, the grant is governed as if issued under the 2014 Omnibus Plan. As of September 30, 2017, the awards granted were time-based (cliff vest over four years) and performance-based (vest when performance targets are met, as defined in the stock option grant agreement).

~~The following table includes activity related to outstanding service period stock options during the nine months ended September 30, 2017.~~

~~The following table includes activity related to outstanding performance-vested stock options during the nine months ended September 30, 2017.~~follows:

~~(1) As of September 30, 2017, 516,877 performance-vested stock options at a weighted average exercise price of $9.79 have performance metrics that~~

Supplemental cash flow information and non-cash activity relating to operating leases are ~~probable of achievement. These shares are included in share-based compensation costs for the three and nine months ended September 30, 2017.~~

~~The following table includes activity related to outstanding~~Total compensation cost for share-based payments recognized for the three and nine months ended September 30,2021 was $5,746 and $18,587, respectively and for the three and nine months ended September 30,2020 was $3,410 and $7,984, respectively. During the nine months ended September 30, 2021, 85 and 118 service period stock options and performance stock options, respectively, were exercised. During the nine months ended September 30,2021, 32 service period restricted stock units ~~during~~were granted at a weighted average grant-date fair market value of $155.67. During the nine months ended September 30, ~~2017.~~2021, 74 service period restricted stock units vested.

Note 8 – Earnings Per ~~Share:~~Share Attributable to Common Stockholders:

Basic net ~~loss~~earnings (loss) per share of common stock is calculated by dividing net ~~loss~~income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted net ~~loss~~earnings (loss) per share of common stock is computed by giving effect to all potentially dilutive securities.

~~For the three and nine months ended September 30, 2017 and 2016, there were no adjustments between net loss and net loss attributable to common stockholders.~~

The ~~potentially dilutive securities are as follows:~~following table shows how we computed basic and diluted earnings per common share:

For the three and nine months ended September 30, ~~2017 and nine months ended September 30 2017 and 2016,~~2021, diluted net loss per share of common stock is the same as basic net loss per share of common stock, due to the fact that potentially dilutive securities would have an antidilutive effect as the Company incurred a net loss during such ~~periods.~~

~~For the three months ended September 30, 2016, diluted net income per share of common stock is calculated as follows:~~period.

~~For the three months ended September 30, 2016, there were 450,189 anti-dilutive service period stock options excluded from the diluted earnings per share calculation.~~

Payments of $2,016,716 and $6,323,016 for the three and nine months ended September 30, 2017, and $1,484,600 and $4,666,495 for the three and nine months ended September 30, 2016, were made to one stockholder for the purchase of raw materials. The Company believes that all payments made to the shareholder are at market value and thus at arms-length.

Concentration of Credit Risk—The Company maintains its cash balances in financial institutions ~~which~~that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to ~~$250,000~~$250 each. At times, such balances may be in excess of the FDIC insurance limit.

Note 10 – ~~The following table sets forth net sales by class of retailer:~~ Commitments and Contingencies:

We are currently involved in various claims and legal actions that arise in the ordinary course of our business, including claims resulting from employment related matters. None of these claims or proceedings, most of which are covered by insurance, are expected to have a material adverse effect on our business, financial condition, results of operations or cash flows. However, a significant increase in the number of these claims or an increase in amounts owing under successful claims could materially and adversely affect our business, financial condition, results of operations or cash flows.

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are ~~issued. Based upon the evaluation, the~~issued for recognitions or disclosures.

The Company did not identify any recognized or unrecognized subsequent events that have required adjustment or disclosure in the financial statements.

I~~tem~~Item 2. Management’s Discussion and Analysis ofof Financial ~~Conditions~~Condition and Results of Operations

The following discussion summarizes the significant factors affecting our consolidated operating results, financial condition, liquidity and cash flows as of and for the periods presented below. The following discussion and analysis should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes in Item 1 and with the audited consolidated financial statements and the related notes included in ourAnnual Report on Form ~~10-K.~~10-K for the year ended December 31, 2020 (our "Annual Report").

In addition to historical information, this discussion and analysis contains forward-looking statements based on current expectations that involve risks, uncertainties and assumptions, such as our plans, objectives, expectations, and ~~intentions set forth under the sections entitled "Forward-Looking Statements" in this report and "Risk Factors" in our Annual Report on Form 10-K.~~intentions. Our actual results and the timing of events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section entitled "Forward-Looking Statements" in this report and in the section entitled "Risk Factors" in our Annual Report.

For information regarding our consolidated operating results, financial condition, liquidity and cash flows for the nine months ended September 30, 2020 as compared to the same period in 2019, refer to "Part I—Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Quarterly Report on Form ~~10-K.~~10-Q for the period ended September 30, 2020, filed with the SEC on November 3, 2020, which information is incorporated herein by reference.

We started Freshpet with a single-minded mission to bring the power of real, fresh food to our dogs and cats. We were inspired by the rapidly growing view among pet owners that their dogs and cats are a part of their family, leading them to demand healthier pet food choices. Since our Company’s inception ~~of the company~~ in 2006, we have created a comprehensive business model to deliver wholesome pet food that pet parents can trust, and in the process we believe we have become one of the fastest growing pet food companies in North America. Our business model is difficult for others to replicate and we see significant opportunity for future growth by leveraging the unique elements of our business, including our brand, our product know-how, our Freshpet Kitchens, our refrigerated distribution, our Freshpet Fridge and our culture.

Our priorities during the COVID-19 pandemic continue to be protecting the health and safety of our employees, maximizing the availability of our products, and executing our "Feed the Growth" strategy.

We are unsure how long the COVID-19 pandemic, including current and evolving health and safety guidance and local health and safety responses as well as emergence of new variants, will require us to absorb higher costs to protect and reward our employees while simultaneously ensuring we ~~amended~~can support our ~~Credit Facilities to replace our Term Facility and Capex Commitments of $30.0 million and $10.0 million Revolving Facility~~pet parents with a ~~straight $30.0~~continual supply of Freshpet products. We are also monitoring our supply chain generally, including our supply of raw materials, ingredients and packaging materials along with other impacts to our Freshpet Kitchens.

We will continue to monitor the retail environment and pet parent demand, and intend to adapt to changing conditions to continue to drive growth and meet our goal of "changing the way people feed their pets forever" during the evolving COVID-19 pandemic.

In 2021, the Company raised its 2025 household penetration target from 8 million ~~revolver~~to 11 million households. To support the strategic plan, Freshpet is committed to invest in production capacity as well as upgrades to our systems and processes. The Company is continuously evaluating its ability to feed as many pets as possible and minimize its impact on the environment, and will continue to make investments that provide the necessary returns on its investments to deliver on "Pets, People, Planet."

Additionally, the Company is upgrading its enterprise resource planning (“ERP”) system. The project commenced in Q1 2020 and is expected to run through Q1 of 2022.

In order to fund the strategic capital investments as well as provide the Company with capital flexibility, in February 2021, the Company completed a public offering of its common stock, which provided the Company with net proceeds of $332.2 million.

In addition, on February 19, 2021, the Company entered into a Sixth Amended and Restated Loan and Security Agreement with City National Bank, as the arranger and administrative agent, and the other lenders party thereto (the “New Loan Agreement”). The New Loan Agreement provides for a $350.0 million senior secured credit facility (the “New Credit Facility”), encompassing a $300.0 million delayed draw term loan facility (the “New Delayed Draw Facility”) and a $50.0 million revolving loan facility (the “New Revolving Loan Facility”), which replaced the Company’s prior $130.0 million delayed draw term loan facility and $35.0 million revolving loan facility.

The Company intends to use the ability to increase the New Revolving Facility by an additional $10.0 million. The New Revolving Facility will mature in September 2020. At closing, we had total borrowings of $5.5 million under the $30.0 million New Revolving Facility, with $24.5 million available. We expect to fund our business through cash provided by operations for the remainder of 2017, while continuing to reduce the facility usage. This represents a reduction in the unused rate of between 25 and 75 basis points and a reduction in the total rate of between 200 and 250 basis points. The existing facility, which had $7.5 million outstanding, was repaid withnet proceeds from the ~~new revolver~~equity offering, borrowings from the New Credit Facility and cash ~~on hand.~~from operations to continue to fund the Freshpet Kitchens expansion projects.

Our net sales are derived from the sale of pet food to our customers, who purchase either directly from us or through third-party distributors. Our products are sold to consumers through a fast-growing network of company-owned branded refrigerators, known as Freshpet Fridges, located in our customers’ stores. We continue to roll out Freshpet Fridges ~~across~~at leading retailers across North America and parts of Europe and have installed Freshpet Fridges in ~~over 17,600~~approximately 23,394 retail stores as of September 30, ~~2017. All of our~~2021. Our products are sold under the Freshpet brand name with ingredients, packaging and labeling customized by class of retail. Sales are recorded net of discounts, ~~slotting,~~ returns and promotional allowances.

We believe that as a result of the above key factors, we will continue to penetrate the pet food marketplace and increase our share of the pet food category.

Our gross profit is net of costs of goods sold, which include the costs of product manufacturing, product ingredients, packaging materials ~~spoils~~ and inbound freight. In 2016, we undertook a capital expansion project at our Freshpet Kitchens facility that we believe will further increase our production capacity by at least 130%. Over time, growing capacity utilization of our new facility will allow us to leverage fixed costs and thereby expand our gross profit margins.

Our gross profit margins are also impacted by the cost of ingredients, packaging materials, labor and ~~packaging materials.~~overhead and share-based compensation related to direct labor and overhead, and depreciation and amortization. We expect to mitigate any adverse movement in input costs through a combination of cost management and price increases.

~~Selling, general and administrative costs.~~ ~~Selling, general & administrative (“SG&A”) costs as~~

Outbound freight. We use a percentage of net sales have historically decreased from 81.3% in the year ended 2012, 62.7% in 2013, 55.7% in 2014, 50.2% in 2015 and to 47.0% in 2016. Due to our Feed the Growth initiative, which increases our investment in media, we do not expect our SG&A as a percentage of net sales to change significantly in the near term future, which is noted within our slight increase of SG&A costs as a percentage of net sales increase from 49.4% in the nine months ended September 30, 2016 to 50.0% in the nine months ended September 30, 2017. We believe that as we begin to realize the benefits of our Feed the Growth initiative SG&A expenses will once again decrease as a percentage of net sales.

~~Outbound freight.~~ ~~Prior to the second quarter of 2016,~~third-party logistics provider for outbound freight ~~from our Freshpet Kitchens was managed by a national~~that ships directly to retailers as well as third-party refrigerated and frozen human food manufacturer. During the second quarter of 2016, we transitioned to a new third-party logistics provider. We have realized cost efficiencies in logistics through our new third-party logistics provider’s infrastructure. Additionally, we sell through third-party distributors for the grocery, mass, club, pet specialty and natural classes in the United States, Canada, and in the United Kingdom.distributors.

Marketing & advertising. Our marketing and advertising expenses primarily consist of national television media, digital marketing, social media and grass roots marketing to drive brand awareness. These expenses may vary from quarter to quarter depending on the timing of our marketing and advertising campaigns. Our Feed the Growth initiative will focus on growing the business through increased marketing investments.

Freshpet Fridge operating costs. Freshpet Fridge operating costs consist of repair costs and depreciation. The purchase and installation costs for new Freshpet Fridges are capitalized and depreciated over the estimated useful life. All new refrigerators are covered by a manufacturer warranty for three years. We subsequently incur maintenance and freight costs for repairs and refurbishments handled by third-party service providers.

Research & development. Research and development costs consist of expenses to develop and test new products. The costs are expensed as incurred.

Brokerage. We ~~utilize~~use third-party brokers to assist with monitoring our products at the point-of-sale as well as representing us at headquarters for various customers. These brokers visit our retail customers’ store locations to ensure items are appropriately stocked and maintained.

Share-based compensation. We account for all share-based compensation payments issued to employees, directors and non-employees using a fair valuemethod. Accordingly, share-based compensation expense is measured based on the estimated fair value of the awards on the grant date. Werecognize compensation expense for the portion of the award that is ultimately expected to vest over the period during which the recipient renders therequired services to us using the straight-line single option method.

Other general & administrative costs. Other general and administrative costs include non-plant personnel salaries and benefits, as well as corporate general & administrative costs.

We had federal net operating loss (“NOL”) carry forwards of approximately ~~$160.7~~$239.8 million as of December 31, ~~2016,~~2020, of which approximately $175.0 million, generated in 2017 and prior, will expire between 2025 and ~~2036. We~~2037. The Company may be subject to ~~certain limitations in our annual~~the net operating loss utilization provisions of ~~NOL carry forwards to off-set future taxable income pursuant to~~ Section 382 of the Internal Revenue ~~Code, which could result in~~Code. The effect of an ownership change would be the imposition of an annual limitation on the use of NOL carry forwards ~~expiring unused.~~attributable to periods before the change. The amount of the annual limitation depends upon the value of the Company immediately before the change, changes to the Company’s capital during a specified period prior to the change, and the federal published interest rate. At December 31, ~~2016,~~2020, we had approximately ~~$132.4~~$189.8 million of ~~State NOL carry forwards,~~state NOLs, which expire between ~~2017~~2021 and ~~2036.~~2039. At December 31, ~~2016,~~2020, we had a full valuation allowance against our net deferred tax assets as the realization of such assets was not considered more likely than not.

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Amount

% of
Net Sales

Amount

% of
Net Sales

Amount

% of
Net Sales

Amount

% of
Net Sales

(Dollars in thousands)

(Dollars in thousands)

Net sales
$
41,200

100
%

$
34,536

100
%

$
115,683

100
%

$
98,992

100
%
Cost of goods sold

21,697

53

19,185

56

62,207

54

53,841

54

Gross profit

19,503

47

15,351

44

53,476

46

45,151

46

Selling, general and administrative
expenses

19,304

47

14,543

42

57,844

50

48,917

49

(Loss)/Income from operations

199

0

808

2

(4,368
)

(4
)

(3,766
)

(4
)
Other income/(expenses):

Other income/(expenses), net

41

0

42

0

(516
)

(0
)

(93
)

(0
)
Interest expense

(465
)

(0
)

(214
)

0

(831
)

(0
)

(490
)

(0
)
(Loss)/Income before income taxes

(225
)

(1
)

636

2

(5,715
)

(5
)

(4,349
)

(4
)
Income tax expense

21

0

15

0

62

0

45

0

Net (Loss)/Income
$
(246
)

(1
)%

$
621

2
%

$
(5,777
)

(5
)%

$
(4,394
)

(4
)%

Three Months Ended September 30, ~~2017~~2021 Compared to Three Months Ended September 30, ~~2016~~2020

Three Months Ended September 30,

2017

2016

Amount

% of
Net Sales

Store Count

Amount

% of
Net Sales

Store Count

(Dollars in thousands)

Grocery, Mass and Club* (1)

$
33,562

81
%

12,777

$
27,551

80
%

11,454

Pet Specialty, Natural and Other (2)

7,638

19

4,873

6,985

20

4,807

Net Sales

$
41,200

100
%

17,650

$
34,536

100
%

16,261

* Includes sales from Freshpet Baked product of $0.4 million and $0.9 million, or 1.0% and 3.0% of total net sales, for the three months ended September 30, 2017 and 2016, respectively.

Net sales increased ~~$6.7~~$23.4 million, or ~~19%~~27.8%, to ~~$41.2~~$107.6 million for the three months ended September 30, ~~2017~~2021 as compared to $84.2 million in the same period in the prior year. The ~~$6.7~~$23.4 million increase in net sales was driven by ~~growth~~an increase of ~~$6.8~~$20.1 million in our Grocery (including Online), Mass, and Club refrigerated channel and ~~$0.7~~$3.3 million in our Pet Specialty and Natural ~~and Other~~ refrigerated ~~channel, partially offset~~channel. Our Freshpet Fridge store locations grew by ~~declines in Baked~~4.6% to 23,381 as of ~~$0.8 million. Net sales excluding baked~~September 30, 2021 compared to 22,371 as of September 30, 2020.

Gross profit increased ~~$7.1~~$4.9 million, or ~~21.2%~~13.3%, to ~~$40.8~~$41.5 million for the three months ended September 30, ~~2017~~2021 as compared to ~~the same period~~$36.7 million in ~~the prior year. Our Freshpet Fridge store locations grew by 8.5% from 16,261 as of September 30, 2016 to 17,650 as of September 30, 2017.~~

~~Gross profit increased $4.2 million, or 27%, to $19.5 million for the three months ended September 30, 2017 as compared to~~ the same period in the prior year. The increase in gross profit was primarily driven by higher net sales, ~~and an increase in gross profit margin.~~offset by increased cost, which were driven by the factors discussed below.

Gross profit margin of ~~47.3%~~38.6% for the three months ended September 30, ~~2017 increased 290~~2021 decreased 490 basis points compared to the same period in the prior year, ~~primarily related to cost savings and margin improvement through scale and plant startup costs in the prior year, partially offset by a decrease~~ due to ~~additional depreciation of~~increased costs at our Freshpet Kitchens ~~expansion.~~of 360 basis points as result of the wage increase and investments as we grow into capacity, inflation of ingredient cost and higher costs at our Freshpet Kitchen South partner of 140 basis points, increased depreciation and stock compensation cost of 190 basis points, slightly offset by lower plant start-up cost of 160 basis points, and lower COVID-19 related cost of 40 basis points.

Adjusted Gross Profit was ~~$21.0~~$47.4 million and ~~$17.1~~$41.5 million in the three months ended September 30, ~~2017~~2021 and ~~2016,~~2020, respectively. Adjusted Gross Profit Margin was ~~50.9%~~44.0% and ~~49.6%~~49.3% in the three months ended September 30, ~~2017~~2021 and ~~2016,~~2020, respectively. The decrease in Adjusted Gross Profit ~~excludes $1.4~~as a percentage of net sales was driven by the increased Freshpet Kitchens, inflation and partner costs previously discussed. See “—Non-GAAP Financial Measures” for how we define Adjusted Gross Profit and a reconciliation of Adjusted Gross Profit to gross profit, the closest comparable U.S. GAAP measure.

Selling, general and administrative expenses increased $9.5 million, or 28.8%, to $42.4 million for the three months ended September 30, 2021 as compared to the same period in the prior year. Key components of the increase include higher variable costs of $6.1 million due to increased volume and increased freight cost, increased options expense of $1.8 million, increased media expense of $1.0 million, increased depreciation expense of $0.7 million, higher incremental operating costs of $0.6 million and selling expense of $0.5 million. The increased operating expenses were primarily due to new hires, and increased employee incentive and benefit costs. As a percentage of net sales, selling, general and administrative expenses increased to 39.4% for the three months ended September 30, 2021 from 39.1% for the three months ended September 30, 2020.

Adjusted SG&A was $32.8 million and $24.5 million in the three months ended September 30, ~~2017,~~2021 and ~~$1.2 million~~2020, respectively. Adjusted SG&A increased as a percentage of ~~depreciation expense and $0.5 million of non-capitalizable plant start-up costs~~net sales to 30.4% in the three months ended September 30, ~~2016.~~2021 as compared to 29.1% of net sales in the three months ended September 30, 2020. The increase of 130 basis points in Adjusted SG&A is a result of increasing variable cost of 350 basis points due to freight, offset by leverage of 160 basis points and media as a percentage of net sales decreasing by 60 basis points. See “—Non-GAAP Financial Measures” for how we define Adjusted SG&A and a reconciliation of Adjusted SG&A to SG&A, the closest comparable U.S. GAAP measure.

(Loss) Income from operations decreased by $4.6 million to a loss from operations of $0.8 million for the three months ended September 30, 2021 as compared to an income from operations of $3.8 million for the same period in the prior year as a result of the factors discussed above.

Interest expense relating to our credit facilities increased $0.5 million to interest expense of $0.7 million for the three months ended September 30, 2021 as compared to an interest expense of $0.2 million for the same period in the prior year as a result of the New Loan Agreement.

Net (loss) income decreased $5.6 million to a net loss of $2.1 million for the three months ended September 30, 2021 as compared to a net income of $3.5 million for the same period in the prior year as a result of the factors discussed above.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Net sales increased $75.3 million, or 32.2%, to $309.6 million for the nine months ended September 30, 2021 as compared to $234.3 million in the same period in the prior year. The $75.3 million increase in net sales was driven by an increase of $59.1 million in our Grocery (including Online), Mass, and Club refrigerated channel and $16.2 million in our Pet Specialty and Natural refrigerated channel. Our Freshpet Fridge store locations grew by 4.6% to 23,381 as of September 30, 2021 compared to 22,371 as of September 30, 2020.

Gross profit increased $18.6 million, or 18.1%, to $120.9 million for the nine months ended September 30, 2021 as compared to $102.4 million in the same period in the prior year. The increase in gross profit was primarily driven by higher net sales, offset by increased cost.

Gross profit margin of 39.1% for the nine months ended September 30, 2021 decreased 460 basis points compared to the same period in the prior year, due to increased cost at our Kitchens of 230 basis points as result of the wage increase and investments as we grow into capacity, inflation of ingredient cost of 120 basis points, increased depreciation and stock compensation cost of 150 basis points, slightly offset by lower COVID-19 related cost of 40 basis points.

Adjusted Gross Profit was $141.1 million and $115.4 million in the nine months ended September 30, 2021 and 2020, respectively. Adjusted Gross Profit Margin was 45.6% and 49.3% in the nine months ended September 30, 2021 and 2020, respectively. The decrease in Adjusted Gross Profit as a percentage of net sales was driven by the increased Freshpet Kitchens, inflation and partner costs previously discussed. See “—Non-GAAP Financial Measures” for how we define Adjusted Gross Profit and a reconciliation of Adjusted Gross Profit to Gross Profit, the closest comparable U.S. GAAP measure.

Selling, general and administrative expenses increased ~~$4.8~~$36.7 million, or ~~33%~~36.2%, to ~~$19.3~~$138.0 million for the ~~three~~nine months ended September 30, ~~2017~~2021 as compared to the same period in the prior year. Key components of the ~~dollar~~ increase include higher variable costs of $17.3 million due to increased volume and increased freight cost, increased options expense of $9.2 million, increased media ~~spend~~expense of $4.1 million, increased selling expense of $2.2 million, higher incremental operating costs of $1.9 million higher stock-based compensation expenses of $0.3 million, higher freight costs due to volume of $0.8 million, higher non-recurring expenses related to leadership transition expenses of $0.4 million, higherand increased depreciation expense of ~~$0.3 million and incremental operating expenses of $1.1~~$2.1 million. The increased operating expenses were primarily due to new hires, and increased employee incentive and benefit ~~costs, which include variable compensation.~~

costs. As a percentage of net sales, selling, general and administrative expenses increased to ~~46.9%~~44.6% for the ~~three~~nine months ended September 30, ~~2017~~2021 from ~~42.1%~~43.2% for the ~~three~~nine months ended September 30, ~~2016.~~ 2020.

Adjusted SG&A ~~increased~~was $107.9 million and $81.5 million in the nine months ended September 30, 2021 and 2020, respectively. Adjusted SG&A as a percentage of ~~net~~ sales ~~to 44.0%~~was 34.8% for the nine months ended September 30, 2021 which represents no change from the same period in the third quarter of 2017 as compared to 40.8% of net sales in the third quarter of 2016. Adjusted SG&A excludes $1.1 million and $0.7 million for stock-based compensation expense in the third quarter of 2017 and 2016, respectively, and $0.1 million incremental costs and $0.3 million change in estimate related to leadership transition expenses in the third quarter of 2017 and 2016, respectively.prior year. See “—Non-GAAP Financial Measures” for how we define Adjusted SG&A and a reconciliation of Adjusted SG&A to SG&A, the closest comparable U.S. GAAP measure.

(Loss) Income from ~~Operations~~operations decreased ~~$0.6~~$18.1 million ~~or 75%,~~ to ~~$0.2~~a loss from operations of $17.0 million for the ~~three~~nine months ended September 30, ~~2017~~2021 as compared to an income from operations of $1.1 million for the same period in the prior year as a result of the factors discussed above.

Interest expense relating ~~primarily~~ to our ~~Credit Facilities was $0.5~~credit facilities increased $1.2 million ~~and $0.2~~to $2.2 million infor the ~~three~~nine months ended September 30, 2017 and 2016, respectively. Interest expense in the three months ended September 30, 2017 includes $0.3 million of accelerated amortization of debt issuance costs related to the amendment of our Credit Facilities.

~~Other income, net decreased less than $0.1 million for the three months ended September 30, 2017.~~

~~Net Loss increased $0.8 million to $0.2 million for the three months ended September 30, 2017~~2021 as compared to ~~income~~an interest expense of ~~$0.6~~$1.0 million for the same period in the prior ~~year.~~

~~Nine Months Ended September 30, 2017 Compared~~Net (loss) income decreased $20.5 million to ~~Nine Months Ended September 30, 2016~~

~~The following table sets forth~~a net ~~sales by class~~(loss) of ~~retailer:~~

Nine Months Ended September 30,

2017

2016

Amount

% of
Net Sales

Store Count

Amount

% of
Net Sales

Store Count

(Dollars in thousands)

Grocery, Mass and Club* (1)

$
93,703

81
%

12,777

$
77,584

78
%

11,454

Pet Specialty, Natural and Other (2)

21,980

19

4,873

21,408

22

4,807

Net Sales

$
115,683

100
%

17,650

$
98,992

100
%

16,261

~~(1)Stores at September 30,~~ ~~2017 and September 30, 2016 consisted of 8,872 and 7,669 Grocery and 3,905 and 3,785 Mass and Club, respectively.~~

~~(2)Stores at September 30, 2017 and September 30, 2016 consisted of 4,539 and 4,505 Pet Specialty and 334 and 302 Natural, respectively.~~

* Includes sales from Freshpet Baked product of $1.7 million and $3.6 million, or 2.0% and 4.0% of total net sales, for the nine months ended September 30, 2017 and 2016, respectively.

~~Net sales increased $16.7 million, or 17%, to $115.7~~$20.4 million for the nine months ended September 30, ~~2017~~2021 as compared to ~~the same period in the prior year. The $16.7 million increase in~~a net ~~sales was driven by growth~~income of $18.0 million in our Grocery, Mass, and Club refrigerated channel and $0.6 million in our Pet Specialty, Natural, and Other refrigerated channel and declines in Baked of $1.9 million. Net sales excluding baked increased $18.6 million, or 19.4%, to $113.9 million for the nine months ended September 30, 2017 as compared to the same period in the prior year. Our Freshpet Fridge store locations grew by 8.5% from 16,261 as of September 30, 2016 to 17,650 as of September 30, 2017.

Gross profit increased $8.3 million, or 18%, to $53.5 million for the nine months ended September 30, 2017 as compared to the same period in the prior year. The increase in gross profit was primarily driven by higher net sales and an increase in gross profit margin.

Our gross profit margin of 46.2% for the nine months ended September 30, 2017 increased 60 basis points compared to the same period in the prior year, primarily related to cost savings and margin improvement through scale and plant startup costs in the prior year, partially offset by additional depreciation of our Freshpet Kitchens expansion.

Adjusted Gross Profit was $57.8 million and $49.0 million in the nine months ended September 30, 2017 and 2016, respectively. Adjusted Gross Profit Margin was 50.0% and 49.5% in the nine months ended September 30, 2017 and 2016, respectively. Adjusted Gross Profit excludes $4.3 million of depreciation expense in the nine months ended September 30, 2017, and $2.7 million of depreciation expense and $1.2 million of non-capitalizable plant start-up costs in the nine months ended September 30, 2016. See “—Non-GAAP Financial Measures” for how we define Adjusted Gross Profit and a reconciliation of Adjusted Gross Profit to Gross Profit, the closest comparable U.S. GAAP measure.

Selling, general and administrative expenses increased $8.9 million, or 18%, to $57.8 million for the nine months ended September 30, 2017 as compared to the same period in the prior year. Key components of the dollar increase include higher media spend of $4.9 million, higher depreciation expense of $0.8 million, increased freight costs due to volume of $1.0 million and higher incremental operating expenses of $3.6 million, offset by lower share-based compensation expense of $0.2 million and lower non-recurring costs related to leadership transition expenses of $1.2 million

As a percentage of net sales, selling, general and administrative expenses increased to 50.0% for the nine months ended September 30, 2017 from 49.4% for the nine months ended September 30, 2016. Adjusted SG&A increased as a percentage of net sales to 47.2% in the first nine months of 2017 as compared to 44.8% of net sales in the same period of 2016. Adjusted SG&A excludes $3.1 million and $3.3 million for stock-based compensation expense in the nine months

~~ended September 30 2017 and 2016, respectively, and~~ $0.1 million ~~and $1.3 million of costs related to leadership transition expenses in the third quarter of 2017 and 2016, respectively. See “—Non-GAAP Financial Measures”~~ for ~~how we define Adjusted SG&A and a reconciliation of Adjusted SG&A to SG&A, the closest comparable U.S. GAAP measure.~~

~~Loss from operations increased $0.6 million to $4.4 million for the nine months ended September 30, 2017 as compared to~~ the same period in the prior year as a result of the factors discussed above.

Interest expense relating primarily to our Credit Facilities was $0.8 million and $0.5 million in the nine months ended September 30, 2017 and 2016, respectively. Interest expense in the nine months ended September 30, 2017 includes $0.3 million of accelerated amortization of debt issuance costs related to the amendment of our Credit Facilities.

Other expenses, net increased $0.4 million to $0.5 million for the nine months ended September 30, 2017, primarily related to the revaluation of warrants of $0.3 million and foreign currency forward contracts of $0.1 million to fair value. The outstanding warrants were converted to common stock during the third quarter of 2017.

~~Net Loss increased $1.4 million, or 31%, to $5.8 million for the nine months ended September 30, 2017 as compared to a loss of $4.4 million for the same period in the prior year.~~

Freshpet uses the following non-GAAP financial measures in its financial communications. These non-GAAP financial measures should be considered as supplements to the U.S GAAP reported measures, should not be considered replacements for, or superior to, the U.S GAAP measures and may not be comparable to similarly named measures used by other companies.

•~~Adjusted Gross Profit as a percentage of net sales (Adjusted Gross Margin)~~

~~The non-GAAP~~Such financial measures are not financial measures prepared in accordance with U.S. GAAP. We define Adjusted Gross Profit as Gross Profit before ~~non-cash~~ depreciation expense, ~~and~~ plant start-up ~~costs.~~expense, non-cash share-based compensation and COVID-19 expenses. We define Adjusted SG&A ~~Expenses~~ as SG&A ~~Expenses~~expenses before depreciation and amortization expense, non-cash share-based compensation, ~~leadership transition expenses and~~launch expense, fees related to ~~a secondary offering.~~equity offerings of our common stock, implementation and other costs associated with the implementation of an ERP system, loss on disposal of equipment and COVID-19 expenses. We anticipate any remaining COVID-19 related expenses beginning of the fourth quarter of 2021 to be part of our operating performance. EBITDA represents net ~~loss~~income (loss) plus interest expense, income tax expense and depreciation and ~~amortization, interest expense and income tax expense.~~amortization. Adjusted EBITDA represents EBITDA plus loss on equity method investment, non-cash share-based compensation, launch expenses, plant start-up expense, fees related to equity offerings of our common stock, implementation and other costs associated with the implementation of an ERP system, loss on disposal of equipment ~~plant start-up expense, share-based compensation, warrant fair valuation, launch expenses, fees related to a secondary offering~~ and ~~leadership transition costs.~~COVID-19 expenses.

We believe that each of these non-GAAP financial measures ~~provides an~~provide additional ~~metric~~metrics to evaluate our operations and, when considered with both our U.S. GAAP results and the reconciliation to the closest comparable U.S. GAAP measures, ~~provides~~provide a more complete understanding of our business than could be obtained absent this disclosure. We use the non-GAAP financial measures, together with U.S. GAAP financial measures, such as net sales, gross profit margins and cash flow from operations, to assess our historical and prospective operating performance, to provide meaningful comparisons of operating performance across periods, to enhance our understanding of our operating performance and to compare our performance to that of our peers and competitors.

Adjusted EBITDA is also an important component of internal budgeting and setting management compensation.

The non-GAAP financial measures are presented here because we believe they are useful to investors in assessing the operating performance of our business without the effect of non-cash items, and other items as detailed below. The non-GAAP financial measures should not be considered in isolation or as alternatives to net ~~loss,~~ income (loss), income (loss) from operations or any other measure of financial performance calculated and prescribed in accordance with U.S. GAAP. Neither EBITDA nor Adjusted EBITDA should be considered a measure of discretionary cash available to us to invest in the growth of our business. Our non-GAAP financial measures may not be comparable to similarly titled measures in other organizations because other organizations may not calculate non-GAAP financial measures in the same manner as we do.

Our presentation of the non-GAAP financial measures should not be construed as an inference that our future results will be unaffected by the expenses that are excluded from that term or by unusual or non-recurring items. We recognize that the non-GAAP financial measures have limitations as analytical financial measures. For example, the non-GAAP financial measures do not reflect:

Additionally, Adjusted EBITDA excludes (i) non-cash ~~stock based~~share-based compensation expense, which is and will remain a key element of our overall ~~long term~~long-term incentive compensation package, ~~and~~ (ii) certain costs essential to our sales growth and strategy, including an allowance for marketing expenses for each new store added to our network and non-capitalizable freight costs associated with Freshpet Fridge ~~replacements.~~replacements, and (iii) plant start-up expense incurred to add manufacturing lines and additional Freshpet Kitchens. Adjusted EBITDA also excludes certain cash charges resulting

from matters we consider not to be indicative of our ongoing operations. Other companies in our industry may calculate the non-GAAP financial measures differently than we do, limiting their usefulness as comparative measures.

The following table provides a reconciliation of EBITDA and Adjusted EBITDA to net loss, the most directly comparable financial measure presented in accordance with U.S. GAAP:

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(Dollars in thousands)

Net (Loss)/Income

$
(246
)

$
621

$
(5,778
)

$
(4,394
)
Depreciation and amortization

3,216

2,720

9,411

6,957

Interest expense

465

214

831

490

Income tax expense

21

15

62

45

EBITDA

$
3,456

$
3,570

$
4,526

$
3,098

Loss on disposal of equipment

7

11

98

170

Launch expense (a)

929

728

2,359

2,038

Plant start-up expenses and processing (b)

—

540

—

1,208

Non-cash stock based compensation (c)

1,133

788

3,292

3,459

Warrant fair valuation (d)

(44
)

(47
)

335

(19
)
Leadership transition expenses (e)

100

(253
)

100

1,327

Adjusted EBITDA

$
5,580

$
5,337

$
10,709

$
11,281

(a)Represents new store marketing allowance of $1,000 for each store added to our distribution network as well as the non-capitalized freight costs associated with Freshpet Fridge replacements. The expense enhances the overall marketing spend to support our growing distribution network.

~~(b)Represents additional operating costs incurred in 2016 in connection with the start-up of our new manufacturing lines as part of the Freshpet Kitchens expansion project.~~

~~(d)Represents the change of fair value for the outstanding common stock warrants. All warrants were converted to common stock in the third quarter of 2017.~~

~~(e)Leadership Transition Expenses represent costs detailed within our former Chief Executive Officer’s separation agreement as well as incremental costs associated with leadership transition.~~

The following table provides a reconciliation of Adjusted Gross Profit to Gross Profit, the most directly comparable financial measure presented in accordance with U.S. GAAP:

	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
	2017			2016			2017			2016			2021			2020			2021			2020
Gross Profit (as reported)	$	19,503		$	15,351		$	53,476		$	45,151
Depreciation expense (a)		1,448			1,242			4,330			2,660
Plant start-up expenses and processing (b)		—			540			—			1,208
													(Dollars in thousands)
Gross Profit													$	41,525		$	36,654		$	120,931		$	102,377
Depreciation expense														4,075			2,129			11,896			6,422
Plant start-up expense (a)														588			1,828			3,561			3,020
Non-cash share-based compensation														1,058			484			2,970			1,425
COVID-19 expense (b)														119			395			1,753			2,157
Adjusted Gross Profit	$	20,951		$	17,133		$	57,805		$	49,019		$	47,365		$	41,490		$	141,111		$	115,402
Adjusted Gross Profit as a % of Net Sales														44.0	%		49.3	%		45.6	%		49.3	%
Adjusted Gross Profit	$	20,951		$	17,133		$	57,805		$	49,019
Net Sales	$	41,200		$	34,536		$	115,683		$	98,992
Adjusted Gross Profit as a % of Net Sales		50.9	%		49.6	%		50.0	%		49.5	%

~~(b)Represents additional operating costs incurred in 2016 in connection with the start-up of our new manufacturing lines as part of the Freshpet Kitchens expansion project.~~

The following table provides a reconciliation of Adjusted SG&A Expenses to SG&A Expenses, the most directly comparable financial measure presented in accordance with U.S. GAAP:

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

��
2016

SG&A expenses (as reported)

$
19,304

$
14,543

$
57,844

$
48,917

Non-cash stock based compensation (a)

1,064

716

3,118

3,282

Leadership transition expenses (b)

100

(253
)

100

1,327

Adjusted SG&A Expenses

$
18,139

$
14,080

$
54,628

$
44,308

Adjusted SG&A Expenses as a % of Net Sales

Adjusted SG&A Expenses

$
18,139

$
14,080

$
54,628

$
44,308

Net Sales

$
41,200

$
34,536

$
115,683

$
98,992

Adjusted SG&A as a % of Net Sales

44.0
%

40.8
%

47.2
%

44.8
%

~~(b)Represents~~ ~~costs detailed within our former Chief Executive Officer’s separation agreement as well as incremental costs associated with leadership transition.~~

Developing our business will require significant capital in the future. We expect to make future capital expenditures of approximately $565.0 million in connection with the development of Freshpet Kitchens Bethlehem, Freshpet Kitchens Ennis, and Freshpet Kitchens South to enable estimated capacity of approximately $2.0 billion in annual net sales. To meet our capital needs, we expect to rely on our current and future cash flow from operations, ~~and~~ our ~~current~~ available borrowing ~~capacity.~~capacity, and access to the capital markets, if appropriate. Our ability to obtain additional funding will be subject to various factors, including general market conditions, our operating performance, the ~~market’s~~market's perception of our growth potential, lender sentiment and our ability to incur additional debt in compliance with other contractual restrictions, such as financial covenants under our debt agreements.

Additionally, our ability to make payments on, and to refinance, any indebtedness under our ~~Credit Facilities~~credit facilities and to fund any necessary expenditures for our growth will depend on our ability to generate cash in the future. If our business does not achieve the levels of profitability or generate the amount of cash that we anticipate or if we expand faster than anticipated, we may need to seek additional debt or equity financing to operate and expand our business. Future third-party financing may not be available on favorable terms or at all.

Our primary cash needs, in addition to our plant expansions, are for purchasing ingredients, ~~purchases and~~ operating expenses, marketing expenses and capital expenditures to procure Freshpet ~~Fridges and expand and improve our manufacturing plant to support our net sales growth.~~Fridges. We believe that cash and cash equivalents, expected cash flow from operations, ~~and~~ planned borrowing capacity and our ability to access the capital markets, if appropriate, are adequate to fund our debt service requirements, operating lease obligations, capital expenditures and working capital obligations for the foreseeable future. However, our ability to continue to meet these requirements and obligations will depend on, among other things, our ability to achieve anticipated levels of revenue and cash flow from operations and our ability to manage costs and working capital successfully. Additionally, our cash flow generation ability is subject to general economic, financial, competitive, legislative and regulatory factors and other factors that are beyond our control. We cannot assure you that our business will generate cash flow from operations in an amount sufficient to enable us to fund our liquidity needs. Further, our capital requirements may vary materially from those currently planned if, for example, our revenues do not reach expected levels, or we have to incur unforeseen capital expenditures and make investments to maintain our competitive position. If this is the case, we may seek alternative financing, such as selling additional debt or equity securities, and we cannot assure you that we will be able to do so on favorable terms, if at all. Moreover, if we issue new debt securities, the debt holders would have rights senior to common stockholders to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock. If we issue additional equity or convertible debt securities, existing stockholders may experience dilution, and such new securities could have rights senior to those of our common stock. These factors may make the timing, amount, terms and conditions of additional financings unattractive. Our inability to raise capital could impede our growth or otherwise require us to ~~forego~~forgo growth opportunities and could materially adversely affect our business, financial condition and results of operations.

Working capital consists of current assets net of current ~~liabilities, excluding cash, net of debt.~~liabilities. Working capital increased ~~$3.9~~$133.0 million to ~~$7.6~~$209.0 million at September 30, ~~2017~~2021 compared with ~~$3.7~~working capital of $76.0 million at December 31, ~~2016.~~2020. The increase was primarily a result of ~~increased accounts receivable~~an increase of $103.6 million in cash and ~~inventory,~~cash equivalents, driven mainly by the equity offering of our common stock in February 2021 of $332.2 million, offset by ~~an increase~~capital expenditures to fund our growth in ~~accounts payable and accrued expenses.~~Freshpet Kitchens Ennis.

We normally carry three to four weeks of finished goods inventory. The average duration of our accounts receivable is approximately ~~three weeks.~~25 days.

As of September 30, ~~2017,~~2021, our capital resources consisted primarily of ~~$2.1~~$170.8 million of cash on hand, ~~and $24.5~~$348.0 million available under our ~~Credit Facilities. In the third quarter of 2017, we amended our Credit Facilities, under~~$350.0 million credit facilities, which ~~outstanding borrowings of $5.5 million were refinanced and~~reflects $2.0 million ~~were repaid. In 2017, as part~~reserved for two letters of our Feed The Growth initiative, we are increasing our investment in marketing and borrowed an additional $2.0 million. On a net basis, we have repaid $6.5 million and have $5.5 million outstanding on our Credit Facilities. credit.

We expect to fund our ongoing operations and obligations with cash and cash equivalents, ~~on hand,~~ cash flow from operations and available funds under our ~~Credit Facilities.~~credit facilities.

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

Cash ~~provided by~~used in operating activities consists primarily of net ~~income~~loss adjusted for certain non-cash items (i.e., provision for loss on receivables, ~~loss~~loss/(gain) on disposal of equipment, change in reserve for inventory obsolescence, depreciation and amortization, amortization of deferred financing costs and loan discount, and share-based ~~compensation and the fair valuation of warrants)~~compensation).

For the nine months ended September 30, 2017, net cash provided by operating activities was $5.1 million, consisting of net income, adjusted for reconciling non-cash items, of $8.1 million and a decrease in operating assets and liabilities of $3.0 million. Net income, adjusted for reconciling non-cash items, excludes $13.9 million of non-cash items primarily relating to

$3.3 million of share-based compensation and $9.4 million of depreciation and amortization. The increase in assets of $7.6 million is primarily related to growth in accounts receivable, which is primarily due to growth in net sales and an increase in the number of stores with a Freshpet Fridge. The increase in liabilities of $4.7 million was primarily due to timing of payments due to increased media spend in the third quarter of fiscal year 2017.

For the nine months ended September 30, 2016, net cash provided by operating activities was $7.3 million, primarily consisting of adjusted net income of $6.4 million, which excludes $10.8 million of non-cash items primarily relating to $3.5 million of share based compensation and $7.0 million of depreciation and amortization. Proceeds were offset by a change in operating assets and liabilities of $0.9 million. Change in assets of $2.1 million is primarily related to growth in accounts receivable, which is primarily due to growth in net sales and an increase in the number of stores with a Freshpet Fridge. The increase in liabilities of $3.0 million was due to timing of payments and accrued leadership transition costs.

Net cash used in ~~investing~~operating activities ~~was $10.8~~of $3.3 million for the nine months ended September 30, ~~2017, relating~~2021, was primarily ~~to capital expenditures~~attributed to:

Net cash from operating activities of $13.1 million for ~~Freshpet Kitchens of $2.8 million and investment~~the nine months ended September 30, 2020, was primarily attributed to:

Net Cash Used in ~~fridges and other capital spend of $8.0 million.~~Investing Activities

Net cash used in investing activities ~~was $22.8~~of $220.8 million for the nine months ended September 30, ~~2016, relating~~2021, was primarily to September 30, 2016 capital expenditures for Freshpet Kitchens of $19.8 million (including the Freshpet Kitchens expansion of $17.4 million and recurring capital expenditures of $2.4 million) and investment in fridges and other capital spend of $6.3 million. Theattributed to:

Net cash used in investing activities ~~was partially offset by maturities~~ of ~~short-term investments of $3.3 million.~~

~~Net cash provided by financing activities was $3.9~~$137.5 million for the nine months ended September 30, ~~2017, attributable to the proceeds from borrowings under our Credit Facilities of $7.5 million and cash proceeds from the exercise of stock options of $5.6~~2020, was primarily attributed to:

Net Cash Provided by ~~repayments of borrowings under Credit Facilities of $9.0 million and payments of debt issuance costs in connection with the amendment of our Credit Facility of $0.2 million.~~Financing Activities

Net cash ~~from~~provided by financing activities of $327.8 million for the nine months ended September 30, 2021, was ~~$11.0~~primarily attributed to:

Net cash provided by financing activities of $199.2 million for the nine months ended September 30, ~~2016, attributable to the exercise of stock options of $2.0 million and the proceeds from borrowing $10.0 million under our Credit Facilities,~~2020, was primarily attributed to:

This was partially offset ~~by repayments of short term borrowing of $1.0 million.~~by:

On November 13, 2014, the Company entered into Debt Refinancing comprised of the Credit Facilities and such Loan Agreement. On December 23, 2014, the Company repaid the outstanding $18.0 million and modified the terms of the $40.0 million Credit Facilities. The $18.0 million term facility was extinguished, the three-year $10.0 million Revolving Facility remained unchanged and the $12.0 million term loan commitment earmarked for capital expenditures was increased to $30.0 million.

~~The New Revolver matures~~For a discussion of our material indebtedness, see Note 5 to our consolidated financial statements included in September 2020 and borrowings thereunder will bear interest at variable rates depending on the Company’s election, either at a base rate or at the London Interbank Offered Rate (“LIBOR”), in each case, plus an applicable margin. Subject to the Company’s leverage ratio, the applicable margin will vary between 0.75% and 1.25% for base rate loans and 1.75% and 2.25% for LIBOR loans. In addition, the Company will be required to pay customary fees and expenses in connection with the New Loan Agreement.this report.

On September 21, 2017, the Company further amended the Loan Agreement (the “New Loan Agreement”) which modified the $10.0 million Revolving Facility to $30.0 million and extinguished the $30.0 million Capex Commitments. The New Loan Agreement has a term of three years and the ability to increase the New Revolving Facility by $10.0 million, with borrowings bearing interest at variable rates.Contractual Obligations

The Company had $7.5 million outstanding under the existing Credit Facilities prior to closing, which was repaid with proceeds from the New Revolving Facility and cash on hand. Upon closing, the Company had $5.5 million outstanding and $24.5 million available under the New Revolving Facility.

In connection with this amendment, the Company accelerated the amortization of $0.3 million of unamortized debt issuance costs related to the existing Loan Agreement. These costs are included in Interest expense in the three and nine months ended September 30, 2017.

The New Loan Agreement provides for the maintenance of various covenants, including financial covenants, and includes events of default that are customary for facilities of this type. As of September 30, 2017, the Company was in compliance with all the covenants in the New Loan Agreement.

Borrowings under our Credit Facilities totaled $7.5 million and repayments totaled $9.0 million for the nine months ended September 30, 2017. The Company had $5.5 million in debt outstanding under the Credit Facilities.

There were no material changes to our commitments under contractual obligations, as disclosed in our ~~Form 10-K.~~Annual Report.

We have no off balance sheet ~~arrangements or any holdings in variable interest entities.~~arrangements.

Our management’s discussion and analysis of ~~our~~ financial condition and results of operations ~~are~~is based ~~upon~~on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States or ("U.S. ~~GAAP.~~GAAP"). The preparation of these financial statements requires us to make estimates and ~~judgments~~assumptions that affect the reported amounts of assets and liabilities and the ~~related~~ disclosure of contingent assets and liabilities ~~revenue and expenses~~ at the date of the financial ~~statements. Generally,~~statements, as well as the revenue and expenses incurred during the reported periods. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses and share-based compensation. We base our estimates on historical experience and on various other ~~assumptions in accordance with U.S. GAAP~~factors that we believe ~~to be~~are reasonable under the ~~circumstances.~~circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from these ~~estimates.~~estimates under different assumptions or conditions.

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our ~~Form 10-K.~~Annual Report.

We consider the applicability and impact of all Accounting Standards Updates (ASUs) issued by the Financial Accounting ~~Standard~~Standards Board ~~(“FASB”) issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects~~(FASB). ASUs not listed herein were assessed and determined to be ~~entitled for the transfer of promised goods~~either not applicable or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In connection with this ASU, the FASB also issued ASU No. 2016-10 regarding identification of performance obligations and licensing considerations, ASU No. 2016-12 regarding narrow scope improvements and practical expedients- and ASU No. 2016-08 which clarifies the implementation of guidance on principal versus agent considerations. In August 2015, the FASB deferred the effective date of ASU No. 2014-09 to fiscal years beginning after December 15, 2017, with early adoption permitted only for fiscal years beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method.

The Company is currently utilizing a comprehensive approach to assess the impact of this guidance by reviewing current accounting policies to identify the potential impact of the new requirements on its revenue contracts. The Company does not currently expect this guidanceare expected to have ~~a material~~minimal impact ~~on its~~to our consolidated financial statements. The new standard will be effective as of January 1, 2018. The Company currently anticipates adopting Topic 606 using the modified retrospective transition approach that may result in a cumulative adjustment to beginning retained earnings as of January 1, 2018. Based on the Company’s analysis to date, the Company expects the new standard will require accelerated recognition of trade promotions and customer incentives. These transactions are currently recognized at the later of the sale of goods or agreement, however under the new standard the Company will estimate incentives to be offered to customers as part of the sales price. The Company does not expect the change to be material.

In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a

liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is assessing the impact of ASU No. 2016-02 on its corporate office lease, and upon adoption of this guidance, expects to record the lease on its consolidated balance sheet in accordance with ASU No. 2016-02.

Item 3. Quantitative and Qualitative Disclosures ~~About~~about Market Risks

We are sometimes exposed to market risks from changes in interest rates on debt and changes in commodity prices. Our exposure to interest rate fluctuations is limited to our outstanding indebtedness under our credit ~~agreements,~~facilities, which bears interest at variable rates. As of September 30, ~~2017,~~2021, we ~~had $5.5 million~~did not have any outstanding borrowings under our ~~Credit Facilities. A change in interest rates of 100 basis points would cause a $0.1 million increase or decrease in annual interest expense.~~credit facilities.

We purchase certain products and services that are affected by commodity prices and are, therefore, subject to price volatility caused by weather, market conditions and other factors which are not considered predictable or within our control. In many cases, we believe we will be able to address material commodity cost increases by either increasing prices or reducing operating expenses. However, increases in commodity prices, without adjustments to pricing or reduction to operating expenses, could increase our operating costs as a percentage of our net sales.

Fluctuations in the currencies of countries where the Company operates outside the U.S. may have a significant impact on financial results. The Company is exposed to movements in the British pound ~~sterling.~~sterling and Euro. The Statements of Financial Position of ~~non U.S.~~non-U.S. business units are translated into U.S. dollars using period-end exchange rates for assets and liabilities and weighted-average exchange rates for revenues and expenses. The percentage of our consolidated revenue for the three and nine months ended September 30, ~~2017~~2021 recognized in ~~the United Kingdom~~Europe was approximately 1%.

The Company may, from time to time, enter into forward exchange contracts to reduce the Company’s exposure to foreign currency fluctuations of certain assets and liabilities denominated in foreign currencies. ~~The~~Historically, the foreign currency forward contracts have not been designated as hedges and, accordingly, any changes in their fair value are recognized on the Consolidated Statements of Operations and Comprehensive ~~Loss~~Income (Loss) in Other expenses, net, and carried at their fair value in the Consolidated Balance Sheet with gains reported in ~~Prepaid~~prepaid expenses and other current assets and losses reported in ~~Accrued~~accrued expenses.

As of September 30, ~~2017, the notional value of foreign currency~~2021, there were no forward contracts outstanding was 0.7 million pounds sterling. The fair value of the foreign currency forward contracts are measured using Level 2 inputs in the fair value hierarchy because they are determined based on a market approach utilizing externally quoted forward rates for similar contracts. For the three and nine months ended September 30, 2017 the net loss recognized on forward contracts was less than $0.1 million.outstanding.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of such date our disclosure controls and procedures were effective.

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our management, including our Chief Executive Officer and ~~evaluating the~~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. However, our management ~~recognizes~~does not expect that ~~any~~our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well ~~designed~~conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of ~~achieving~~ the ~~desired~~ control ~~objectives. In addition,~~system are met. Further, the design of ~~disclosure controls and procedures~~a control system must reflect the fact that there are resource constraints, and ~~that management is required to apply judgment in evaluating~~ the benefits of ~~possible~~ controls ~~and procedures~~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.

A securities lawsuit, Curran v. Freshpet, Inc. et al, Docket No. 2:16-cv-02263, was instituted April 21, 2016 in the United States District Court for the District of New Jersey against us and certain of our executive officers and directors on behalf of certain purchasers of our common stock. We were served with a copy of the complaint in June 2016. The plaintiffs seek to recover damages for investors under the federal securities laws. The Company believes that the plaintiffs’ allegations are without merit and intends to vigorously defend against the claims. Because the Company is in the early stages of litigation, the Company is unable to estimate a reasonably possible range of loss, if any, that may result from this matter.

~~In addition, we~~We are currently involved in various claims and legal actions that arise in the ordinary course of our business, including claims resulting from employment related matters. None of these claims or proceedings, most of which are covered by insurance, are expected to have a material adverse effect on our business, financial condition, results of operations or cash flows. However, a significant increase in the number of these claims or an increase in amounts owing under successful claims could materially and adversely affect our business, financial condition, results of operations or cash flows.

There have been no material changes from the risk factors previously disclosed in our Annual ~~Report on Form 10-K for the year ended December 31, 2016.~~


Exhibit No.		Description
~~10.1~~ 3.1		~~Third~~Fifth Amended and Restated ~~Loan~~Certificate of Incorporation of Freshpet, Inc. (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, filed with the SEC on September 27, 2021)
3.2		Amended and ~~Security Agreement, dated September 21, 2017,~~Restated Bylaws (incorporated by ~~and among Freshpet, Inc., City National Bank, a national banking association, as~~reference to Exhibit 3.1 to the ~~arranger and administrative agent, and~~Company's Current Report on Form 8-K, filed with the ~~lenders party thereto~~SEC on June 9, 2021)
~~31.1~~31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
~~31.2~~31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
~~32.1~~32.1*		Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~EX-101.INS~~EX-101.INS*		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document.
~~EX-101.SCH~~EX-101.SCH*		Inline XBRL Taxonomy Extension Schema ~~Documents~~Document
~~EX-101.CAL~~EX-101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
~~EX-101.LAB~~EX-101.LAB*		Inline XBRL ~~Labels~~Taxonomy Extension Label Linkbase Document
~~EX-101.PRE~~EX-101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
~~EX-101.DEF~~EX-101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
EX-104		Inline XBRL Formatted Cover Page (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith.

SIGNATURES

~~SIGNATURES~~

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.

Date: November ~~7, 2017~~9, 2021	FRESHPET, INC.

	/s/ William B. Cyr William B. Cyr Chief Executive Officer (Principal Executive Officer)

	/s/ ~~Richard Kassar~~Heather Pomerantz
	~~Richard Kassar~~Heather Pomerantz Chief Financial Officer
	(Principal Financial and Accounting Officer)	~~(Principal Financial and Accounting Officer)~~

	*For the Nine Months Ended*
	*September 30,*
	*2021*			*2020*
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(20,433	)	$	110
Adjustments to reconcile net (loss) income to net cash flows provided by operating activities:
Provision for loss (gains) on accounts receivable		15			(4	)
Loss on disposal of equipment		284			1,301
Share-based compensation		18,516			7,811
Inventory obsolescence		249			147
Depreciation and amortization		22,489			14,946
Amortization of deferred financing costs and loan discount		1,013			763
Change in operating lease right of use asset		992			962
Loss on equity method investment		1,124			0
Changes in operating assets and liabilities:
Accounts receivable		(13,794	)		(3,060	)
Inventories		(10,435	)		(5,115	)
Prepaid expenses and other current assets		(1,140	)		9,587
Other assets		(5,520	)		(222	)
Accounts payable		5,057			(3,021	)
Accrued expenses		(781	)		(10,300	)
Other lease liabilities		(971	)		(842	)
Net cash flows (used in) provided by operating activities		(3,335	)		13,063
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments		0			(20,001	)
Proceeds from maturities of short-term investments		0			10,001
Investments in equity method investment		0			(27,625	)
Acquisitions of property, plant and equipment, software and deposits on equipment		(220,835	)		(99,924	)
Net cash flows used in investing activities		(220,835	)		(137,549	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common shares issued in primary offering, net of issuance cost		332,172			252,062
Proceeds from exercise of options to purchase common stock		2,048			4,664
Tax withholdings related to net shares settlements of restricted stock units		(3,198	)		(1,636	)
Proceeds from borrowings under Credit Facilities		0			20,933
Repayment of borrowings under Credit Facilities		0			(76,000	)
Fees paid in connection with financing agreements		(3,263	)		(824	)
Net cash flows provided by financing activities		327,759			199,199
NET CHANGE IN CASH AND CASH EQUIVALENTS		103,589			74,713
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		67,247			9,472
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	170,836		$	84,185
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid	$	1,288		$	925
NON-CASH FINANCING AND INVESTING ACTIVITIES:
Property, plant and equipment purchases in accounts payable	$	2,599		$	2,670

	September 30, 2017			December 31, 2016
Raw Materials and Work in Process	$	2,031,997		$	1,568,789
Packaging Components Material		834,189			908,771
Finished Goods		6,116,330			3,219,634
		8,982,516			5,697,194
Reserve for Obsolete Inventory		(291,713	)		(294,459	)
	$	8,690,803		$	5,402,735

	*September 30,*			*December 31,*
	*2021*			*2020*
Raw Materials and Work in Process	$	10,534		$	9,347
Packaging Components Material		2,456			1,872
Finished Goods		16,649			8,365
		29,639			19,584
Reserve for Obsolete Inventory		(334	)		(465	)
Inventories, net	$	29,305		$	19,119

							*September 30,*			*December 31,*
	September 30, 2017			December 31, 2016			*2021*			*2020*
Refrigeration Equipment	$	68,903,218		$	62,603,188		$	119,999		$	107,703
Machinery and Equipment		46,444,727			45,953,884			118,233			106,336
Building, Land, and Improvements		25,162,046			25,114,611			103,976			101,786
Furniture and Office Equipment		4,228,574			3,941,995			8,134			5,687
Automotive Equipment		319,496			317,615
Leasehold Improvements		360,505			297,681			1,314			1,301
Construction in Progress		4,740,444			2,841,035			226,567			44,497
		150,159,010			141,070,009			578,223			367,310
Less: Accumulated Depreciation and Amortization		(48,736,906	)		(39,576,929	)
	$	101,422,104		$	101,493,080
Less: Accumulated Depreciation								(106,259	)		(86,237	)
Property, plant and equipment, net							$	471,964		$	281,073

	September 30, 2017		December 31, 2016
Accrued Compensation	$	2,893,834	$	1,895,443
Accrued Chiller Cost		1,343,951		1,010,018
Accrued Freight		838,665		359,009
Accrued Marketing		460,018		282,784
Accrued VAT		278,817		—
Accrued Utility		150,000		124,000
Accrued Leadership Transition Expenses (1)		66,505		428,150
Other Accrued Expenses		628,444		431,735
	$	6,660,234	$	4,531,139

	•	Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities.
	•	Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active). Level 2 includes financial instruments that are valued using models or other valuation methodologies.
	•	Level 3 - Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.

	*Three Months Ended*				*Nine Months Ended*
	*September 30,*				*September 30,*
	*2021*		*2020*		*2021*		*2020*
Grocery, Mass and Club	$	91,148	$	71,025	$	259,227	$	200,128
Pet Specialty and Natural		16,442		13,165		50,393		34,139
Net Sales (a)	$	107,590	$	84,190	$	309,620	$	234,268

Weighted-average remaining lease term			4.74
Weighted-average discount rate			6.15	%

Operating Lease Obligations	*As of September 30, 2021*
2021 (a)	$	440
2022		1,764
2023		1,802
2024		1,511
2025 and beyond		2,786
Total lease payments	$	8,303
Less: Imputed interest		(878	)
Present value of lease liabilities	$	7,425

Service Period Stock Options	Shares			Weighted Average Exercise Price
Outstanding at December 31, 2016		2,788,285		$	8.61
Granted		340,618			11.00
Exercised		(776,938	)		7.22
Forfeited		(17,073	)		10.15
Expired		(7,776	)		9.01
Outstanding at September 30, 2017		2,327,116		$	9.41

Performance Based Options	Shares			Weighted Average Exercise Price
Outstanding at December 31, 2016		1,357,561		$	10.24
Granted		110,741			11.00
Forfeited		(35,221	)		10.45
Outstanding at September 30, 2017		1,433,081		$	10.29

Restricted Stock Units	Shares			Weighted-Average Grant-Date Fair Value Per Unit
Outstanding at December 31, 2016		97,515		$	9.05
Granted		115,320			11.00
Issued Upon Vesting		(59,183	)		9.05
Forfeited		(1,433	)		9.98
Outstanding at September 30, 2017		152,219		$	10.52

		~~Three Months Ended~~
		~~September 30, 2016~~
~~Net Income Attributable to Common Stockholders~~		~~$ 620,731~~

~~Weighted Average Common Shares Outstanding, Basic~~		~~33,717,676~~
~~Dilutive Effect of Stock-Based Awards:~~
~~Service Period Stock Options~~		~~381,953~~
~~Restricted Stock Units~~		~~49,283~~
~~Warrants~~		~~22,124~~
~~Weighted Average Common Shares Outstanding, Diluted~~		~~34,171,036~~

~~Basic Earnings per Share~~		~~$ 0.02~~
~~Diluted Earnings per Share~~		~~$ 0.02~~

Manufacturing Site	Manufacturing Capability	Investments to be Made
Freshpet Kitchens Bethlehem	Kitchens 1.0 Kitchens 1.0 is an approximately 100,000 square-foot manufacturing facility in Bethlehem, PA. It has four manufacturing lines, each of which has the ability to produce our Freshpet Recipes seven days a week/24 hours a day. Kitchens 2.0 Kitchens 2.0 is an approximately 140,000 square-foot addition to our Bethlehem, PA campus. It has two manufacturing lines. Freshpet Kitchens 2.0 makes greater use of automation to improve quality, safety and reduce costs. In addition, Kitchens 2.0 delivers on our commitment to continue to minimize our manufacturing impact. Production of saleable product began in October 2020.	Kitchens 2.0 cost approximately $116.0 million.
Freshpet Kitchens South	During 2020, the Company officially opened a manufacturing facility called "Freshpet Kitchens South," which cooked its first meal in February 2020. In order to ensure we are able to deliver on projected growth, the Company is also looking to add additional manufacturing lines. The capacity build out is expected to occur in two phases. By the end of 2021, we expect the first phase of Freshpet Kitchens South to be completed. By the start of 2023, we expect the second phase to be completed, which will include a second building that will house additional manufacturing lines.	To date, we have invested approximately $70.6 million in Freshpet Kitchens South.
Freshpet Kitchens Ennis	During the end of 2019, the Company started its initial design and engineering phase of Freshpet Kitchens Ennis, which sits on 74 acres in Ennis, Texas. We expect initial production to begin by the second quarter��of 2022.	We have invested approximately $167.4 million in the project to date.

	Three Months Ended September 30,												Nine Months Ended September 30,
	2021						2020						2021						2020
	Amount			% of Net Sales			Amount			% of Net Sales			Amount			% of Net Sales			Amount			% of Net Sales
	(Dollars in thousands)												(Dollars in thousands)
Net sales	$	107,590			100	%	$	84,190			100	%	$	309,620			100	%	$	234,268			100	%
Cost of goods sold		66,065			61			47,535			56			188,689			61			131,891			56
Gross profit		41,525			39			36,654			44			120,931			39			102,377			44
Selling, general and administrative expenses		42,365			39			32,895			39			137,955			45			101,273			43
(Loss) income from operations		(840	)		(1	)		3,760			4			(17,024	)		(5	)		1,104			0
Other (expenses)/income, net		2			0			25			0			(5	)		(0	)		70			0
Interest expense		(677	)		(0	)		(216	)		(0	)		(2,232	)		(1	)		(999	)		(0	)
(Loss) income before income taxes		(1,515	)		(1	)		3,569			4			(19,261	)		(6	)		175			0
Income tax expense		16			0			22			0			48			0			65			0
Loss on equity method investment		539			1			—			0			1,124			0			—			0
Net (loss) income	$	(2,070	)		(2	)%	$	3,547			4	%	$	(20,433	)		(7	)%	$	110			0	%

(2)	Stores at September 30, 2021 and 2020 consisted of 4,967 and 4,467 Pet Specialty and 473 and 469 Natural, respectively.
(3)	Online sales associated with each class of retailer are included within their respective total.

	•	our capital expenditures or future requirements for capital expenditures;
	•	the interest expense, or the cash requirements necessary to service interest expense or principal payments, associated with indebtedness;
	•	depreciation and amortization, which are non-cash charges, although the assets being depreciated and amortized will likely have to be replaced in the future, nor any cash requirements for such replacements; and
	•	changes in or cash requirements for our working capital needs.

	(b)	Represents fees associated with public offerings of our common stock.
	(c)	Represents implementation and other costs associated with the implementation of an ERP system.
	(d)	Represents COVID-19 expenses including (i) costs incurred to protect the health and safety of our employees during the COVID-19 pandemic, (ii) temporary increased compensation expense to ensure continued operations during the pandemic, and (iii) costs related to mitigating potential supply chain disruptions during the pandemic included in SG&A.

	September 30,			December 31,
	2021			2020
	(Dollars in thousands)
Cash and cash equivalents	$	170,836		$	67,247
Accounts receivable, net of allowance for doubtful accounts		32,217			18,438
Inventories, net		29,305			19,119
Prepaid expenses		3,870			3,378
Other current assets		1,562			914
Accounts payable		(12,828	)		(16,452	)
Accrued expenses		(14,556	)		(15,371	)
Current operating lease liabilities		(1,359	)		(1,298	)
Total Working Capital	$	209,047		$	75,975

	•	$3.0 million capital expenditures related to Freshpet Kitchens Bethlehem expansion.
	•	$53.6 million capital expenditures related to Freshpet Kitchens South expansion.
	•	$136.3 million capital expenditures related to Freshpet Kitchens Ennis expansion.
	•	$12.8 million in plant recurring capital expenditures.
	•	$15.1 million capital expenditures relating to investment in fridges and other capital spend.

	•	$63.3 million capital expenditures related to Freshpet Kitchens Bethlehem expansion.
	•	$6.2 million capital expenditures related to Freshpet Kitchens South expansion.

	•	$7.5 million capital expenditures related to Freshpet Kitchens Ennis expansion.
	•	$5.3 million in plant recurring capital expenditures.
	•	$17.6 million capital expenditures relating to investment in fridges and other capital spend.
	•	$27.6 million in connection with an equity method investment pursuant to which the Company received a 19% interest in a privately held company.
	•	$20.0 million purchase of short-term investments.

	•	$252.1 million of proceeds from common shares issued in a primary offering, net of issuance cost.
	•	$20.9 million of proceeds from borrowings under our credit facilities.

	•	$76.0 million repayment of borrowings under our credit facilities.
	•	$1.6 million for tax withholdings related to net share settlements of restricted stock units.
	•	$0.8 million financing fees paid in connection with borrowings.