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

For the quarterly period ended ~~June~~September 30, 2022

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

For the transition period from ____ to ____

Commission File Number: 000-55181

Twinlab Consolidated Holdings, Inc.

(Exact name of registrant as specified in its charter)

Nevada	46-3951742
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4800 T-Rex Avenue, Suite 225
Boca Raton, Florida	33431
(Address of principal executive offices)	(Zip Code)

(561) 443-4301

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class	Trading Symbol	Name of each exchange on which registered

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 every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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	☒	Smaller reporting 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 ☒

The number of shares of common stock, par value $0.001, outstanding on ~~July 25,~~October 26, 2022 was 259,092,833 shares.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “target,” “potential,” “contemplate,” “goals,” “will,” “would,” “could,” “should,” “continue,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about our plans and ability to raise additional capital, including through equity offerings, debt financing, collaborations, strategic alliances, sales of assets, other merger and acquisition activities, or ~~other arrangements,~~licensing arrangements; the ~~potential~~ impact of the ongoing COVID-19 ~~pandemic, including~~pandemic; supply chain disruptions; the ~~duration~~impact of inflation; consumer preferences; spending and ~~spread of~~debt levels; and the ~~pandemic,~~ ~~the potential that current vaccines may be less effective against future COVID-19 virus variants~~general economic and ~~disruptions in our operations and supply chain.~~credit environment.

These forward-looking statements are only predictions and we may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements. You should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. We have included important factors in the cautionary statements included and in “Part I, Item 1A - Risk Factors” included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 29, 2022 that could cause actual future results or events to differ materially from the forward-looking statements that we make.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.

Twinlab Consolidated Holdings, Inc.

Form 10-Q

		Page No.
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets (Unaudited)	1

	Condensed Consolidated Statements of Operations (Unaudited)	2

	Condensed Consolidated Statements of Stockholders’ Deficit (Unaudited)	3

	Condensed Consolidated Statements of Cash Flows (Unaudited)	4

	Notes to Condensed Consolidated Financial Statements (Unaudited)	5

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23

Item 4.	Controls and Procedures	24

PART II – OTHER INFORMATION		25

Item 1.	Legal Proceedings	25

Item 1A.	Risk Factors	25

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 3.	Defaults Upon Senior Securities	25

Item 4.	Mine Safety Disclosures	25

Item 5.	Other Information	25

Item 6.	Exhibits	26

	Signatures	27

PART I. – FINANCIAL INFORMATION

Item 1. Financial Statements

Twinlab Consolidated Holdings, Inc.

Condensed Consolidated Balance Sheets (unaudited)

(amounts in thousands, except share and per share data)

	June 30, 2022			December 31, 2021			September 30, 2022			December 31, 2021
ASSETS

Current assets:
Cash	$	142		$	3,631		$	286		$	3,631
Accounts receivable, net		5,610			6,881			7,424			6,881
Inventories, net		9,868			5,814			10,553			5,814
Prepaid expenses and other current assets		565			1,045			262			1,045
Total current assets		16,185			17,371			18,525			17,371

Property and equipment, net		215			140			201			140
Right-of-use assets		5,007			5,480			4,392			5,480
Intangible assets, net		518			576			489			576
Other assets		1,301			1,301			1,301			1,301

Total assets	$	23,226		$	24,868		$	24,908		$	24,868

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:
Accounts payable	$	4,568		$	6,047		$	5,250		$	6,047
Lease liabilities		1,102			1,039			1,135			1,039
Accrued expenses and other current liabilities		4,666			5,422			4,418			5,422
Accrued interest		30,054			26,844			31,693			26,844
Notes payable and current portion of long-term debt		97,236			97,408			100,037			97,408
Total current liabilities		137,626			136,760			142,533			136,760

Long-term liabilities:
Lease liabilities		4,632			5,197			4,333			5,197
Total long-term liabilities		4,632			5,197			4,333			5,197

Total liabilities		142,258			141,957			146,866			141,957

Stockholders’ deficit:
Preferred stock, $0.001 par value, 500,000,000 shares authorized, 0 shares issued and outstanding		-			-
Preferred stock, $0.001 par value, 500,000,000 shares authorized, no shares issued and outstanding								-			-
Common stock, $0.001 par value, 5,000,000,000 shares authorized, 393,898,884 and 393,898,884 shares issued, respectively		394			394			394			394
Additional paid-in capital		231,249			231,249			231,249			231,249
Stock subscriptions receivable		(30			(30	)		(30	)		(30	)
Treasury stock, 134,806,051 shares at cost		(500			(500	)		(500	)		(500	)
Accumulated deficit		(350,145	)		(348,202	)		(353,071	)		(348,202	)
Total stockholders’ deficit		(119,032	)		(117,089	)		(121,958	)		(117,089	)

Total liabilities and stockholders' deficit	$	23,226		$	24,868		$	24,908		$	24,868

The accompanying notes are an integral part of these condensed consolidated financial statements.

Twinlab Consolidated Holdings, Inc.

Condensed Consolidated Statements of Stockholders’ Deficit (unaudited)

(amounts in thousands, except share and per share data)

	Common Stock				Additional Paid-in			Stock Subscriptions			Treasury Stock					Accumulated						Common Stock				Additional Paid-in			Stock Subscriptions			Treasury Stock					Accumulated
	Shares		Amount		Capital			Receivable			Shares		Amount			Deficit			Total			Shares		Amount		Capital			Receivable			Shares		Amount			Deficit			Total

Balance, December 31, 2020		392,864,182	$	393	$	231,250		$	(30	)		134,806,051	$	(500	)	$	(333,262	)	$	(102,149	)		392,864,182	$	393	$	231,250		$	(30	)		134,806,051	$	(500	)	$	(333,262	)	$	(102,149	)
Shares issued upon exercise of warrants		1,034,702		1		(1	)		-			-		-			-			-			1,034,702		1		(1	)		-			-		-			-			-
Net income		-		-		-			-			-		-			383			383			-		-		-			-			-		-			383			383
Balance, March 31, 2021		393,898,884		394		231,249			(30	)		134,806,051		(500	)		(332,879	)		(101,766	)		393,898,884		394		231,249			(30	)		134,806,051		(500	)		(332,879	)		(101,766	)
Net income		-		-		-			-			-		-			1,082			1,082			-		-		-			-			-		-			1,082			1,082
Balance, June 30, 2021		393,898,884	$	394	$	231,249		$	(30	)		134,806,051	$	(500	)	$	(331,797	)	$	(100,684	)		393,898,884	$	394	$	231,249		$	(30	)		134,806,051	$	(500	)	$	(331,797	)	$	(100,684	)
Net loss																							-		-		-			-			-		-			(1,188	)		(1,188	)
Balance, September 30, 2021																							393,898,884	$	394	$	231,249		$	(30	)		134,806,051	$	(500	)	$	(332,985	)	$	(101,872	)


Balance, December 31, 2021		393,898,884	$	394	$	231,249		$	(30	)		134,806,051	$	(500	)	$	(348,202	)	$	(117,089	)		393,898,884	$	394	$	231,249		$	(30	)		134,806,051	$	(500	)	$	(348,202	)	$	(117,089	)
Net income		-		-		-			-			-		-			276			276			-		-		-			-			-		-			276			276
Balance, March 31, 2022		393,898,884		394		231,249			(30	)		134,806,051		(500	)		(347,926	)		(116,813	)		393,898,884		394		231,249			(30	)		134,806,051		(500	)		(347,926	)		(116,813	)
Net loss		-		-		-			-			-		-			(2,219	)		(2,219	)		-		-		-			-			-		-			(2,219	)		(2,219	)
Balance, June 30, 2022		393,898,884	$	394	$	231,249		$	(30	)		134,806,051	$	(500	)	$	(350,145	)	$	(119,032	)		393,898,884	$	394	$	231,249		$	(30	)		134,806,051	$	(500	)	$	(350,145	)	$	(119,032	)
Net loss																							-		-		-			-			-		-			(2,926	)		(2,926	)
Balance, September 30, 2022																							393,898,884	$	394	$	231,249		$	(30	)		134,806,051	$	(500	)	$	(353,071	)	$	(121,958	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Twinlab Consolidated Holdings, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

(amounts in thousands)

	Six Months Ended June 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Cash flows from operating activities:
Net (loss) income	$	(1,943	)	$	1,465		$	(4,869	)	$	277
Adjustments to reconcile net (loss) income to net cash used in operating activities
Depreciation and amortization		82			203			125			351
Amortization of right-to-use assets		473			434			715			656
Amortization of debt discount		-			431			-			647
Recovery of obsolete inventories		(462	)		(475	)		(547	)		(1,001	)
Provision for (recovery of) losses on accounts receivable		31			(625	)
Recovery of losses on accounts receivable								(391	)		(682	)
Forgiveness of PPP loan		(1,674	)		-			(1,674	)		-
Other non-cash items								373			-
Changes in operating assets and liabilities:
Accounts receivable		1,240			(1,426	)		(152	)		(1,292	)
Inventories		(3,592	)		(3,690	)		(4,192	)		(3,269	)
Prepaid expenses and other current assets		479			(415	)		783			128
Other assets		-			(968	)		-			(955	)
Accounts payable		(1,479	)		813			(797	)		(99	)
Lease liabilities		(501	)		(433	)		(767	)		(655	)
Accrued expenses and other current liabilities		2,454			2,018			3,844			5,164

Net cash used in operating activities		(4,892	)		(2,668	)		(7,549	)		(730	)

Cash flows from investing activities:
Purchase of property and equipment		(99	)		(135	)		(99	)		(147	)

Cash flows from financing activities:
Proceeds from the issuance of debt		-			1,344			-			1,344
Net borrowings from revolving credit facility		1,502			2,329			4,303			1,257

Net cash provided by financing activities		1,502			3,673			4,303			2,601

Net (decrease) increase in cash		(3,489	)		870			(3,345	)		1,724
Cash at the beginning of the period		3,631			424			3,631			424

Cash at the end of the period	$	142		$	1,294		$	286		$	2,148

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	$	577		$	743		$	1,033		$	1,098

The accompanying notes are an integral part of these condensed consolidated financial statements.

Note 2 – Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Except as described herein, there have been no changes in the Company’s significant accounting policies as described in Note 2, Summary of Significant Accounting Policies, within the “Notes to Consolidated Financial Statements” accompanying the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and as required by Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the Securities and Exchange Commission (“SEC”) on March 29, 2022. These interim condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of the Company’s financial position and results of operations for the periods presented. All amounts and disclosures set forth in this Quarterly Report on Form 10-Q reflect adoption of these changes.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. Significant management estimates include those with respect to returns and allowances, allowance for doubtful accounts, reserves for inventory obsolescence, the recoverability of long-lived assets, intangibles and goodwill.

Contract Liabilities

Our contract liabilities consist of customer deposits and contractual guaranteed returns. Net contract liabilities are recorded in accrued expenses and other current liabilities and consisted of the following:

June 30, 2022

December 31, 2021

Contract Liabilities - Customer Deposits

$
2,023

$
2,104

Contract Liabilities - Guaranteed Returns

53

56

$
2,076

$
2,160

	September 30, 2022		December 31, 2021
Contract Liabilities - Customer Deposits	$	1,711	$	2,104
Contract Liabilities - Guaranteed Returns		51		56
	$	1,762	$	2,160

Disaggregation of Revenue

Revenue is disaggregated from contracts with customers by goods or services as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. See details in the tables below.

Three Months Ended June 30, 2022

Three Months Ended June 30, 2021

Product Sales

$
14,308

$
17,914

Fulfillment Services

165

195

$
14,473

$
18,109

	Three Months Ended September 30, 2022		Three Months Ended September 30, 2021
Product Sales	$	15,375	$	18,106
Fulfillment Services		147		166
	$	15,522	$	18,272

Six Months Ended June 30, 2022

Six Months Ended June 30, 2021

Product Sales

$
27,366

$
37,094

Fulfillment Services

358

476

$
27,724

$
37,570

	Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021
Product Sales	$	42,740	$	55,200
Fulfillment Services		506		641
	$	43,246	$	55,841

Fair Value of Financial Instruments

We apply the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 – inputs are quoted prices in active markets for identical assets that the reporting entity has the ability to access at the measurement date.

Level 2 – inputs are other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly.

Level 3 – inputs are unobservable inputs for the asset that are supported by little or no market activity and that are significant to the fair value of the underlying asset or liability.

The Company did not have any financial instruments that are measured at fair value on a recurring basis as of ~~June~~September 30, 2022 and December 31, 2021.

Accounts Receivable and Allowances

We grant credit to customers and generally do not require collateral or other security. We perform credit evaluations of our customers and provide for expected claims related to promotional items, customer discounts, shipping shortages, damages, and doubtful accounts based upon historical bad debt and claims experience. As of ~~June~~September 30, 2022, total allowances amounted to $~~1,422~~,$1,000, of which $~~444~~$153 was related to doubtful accounts receivable. As of December 31, 2021, total allowances amounted to $~~1,391~~,$1,391, of which $~~511~~$511 was related to doubtful accounts receivable.

Net (Loss) Income per Common Share

Basic net (loss) income per common share (“Basic EPS”) is computed by dividing net (loss) income by the weighted average number of common shares outstanding. Diluted net (loss) income per common share (“Diluted EPS”) is computed by dividing net (loss) income by the sum of the weighted average number of common shares outstanding and the dilutive potential common shares then outstanding. Potential dilutive common share equivalents consist of total shares issuable upon the exercise of outstanding stock options and warrants to acquire common stock using the treasury stock method and the average market price per share during the period.

When calculating diluted (loss) income per share, if the effects are dilutive, companies are required to add back to net income the effects of the change in derivative liabilities related to warrants. Additionally, if the effects of the change in derivative liabilities are added back to net income, companies are required to include the warrants outstanding related to the derivative liability in the calculation of the weighted average dilutive shares.

The common shares used in the computation of our basic and diluted net (loss) income per share are ~~reconciled~~ as follows:

	Three Months Ended June 30,					Six Months Ended June 30,					Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021		2022			2021		2022			2021			2022			2021
Numerator:
Net (loss) income	$	(2,219	)	$	1,082	$	(1,943	)	$	1,465	$	(2,926	)	$	(1,188	)	$	(4,869	)	$	277

Total net (loss) income for purpose of calculating diluted net (loss) income per common share	$	(2,219	)	$	1,082	$	(1,943	)	$	1,465

Number of shares used in per common share calculations:
Total shares for purpose of calculating basic net (loss) income per common share		259,092,833			259,092,833		259,092,833			259,606,931
Weighted-average effect of dilutive securities:
Common stock warrants		-			-		-			-

Total shares for purpose of calculating diluted net (loss) income per common share		259,092,833			259,092,833		259,092,833			259,606,931
Total shares for purpose of calculating net (loss) income per common share												259,092,833			259,092,833			259,092,833			258,751,722

Net (loss) income per common share:
Basic	$	(0.01	)	$	0.01	$	(0.01	)	$	0.01	$	(0.01	)	$	0.00		$	(0.02	)	$	0.00
Diluted	$	(0.01	)	$	0.01	$	(0.01	)	$	0.01	$	(0.01	)	$	0.00		$	(0.02	)	$	0.00

Significant Concentration of Credit Risk

Sales to our top 3three customers aggregated to approximately 23%22% and 34%24% of total sales for the three months ended ~~June~~September 30, 2022 and 2021, respectively and ~~26%~~23% and ~~31%~~28% of total sales for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively. Sales to 1one of those customers were approximately 11%9% and 15%13% of total sales for the three months ended ~~June~~September 30, 2022 and 2021, respectively, and ~~11%~~9% and 5%12% of total sales for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively. Accounts receivable from these 3three customers were approximately 21%34% and 23% 17% of total accounts receivable as of ~~June~~September 30, 2022 and December 31, 2021, respectively.

A single customer represents 51% and 2% of total accounts receivable as of ~~June~~September 30, 2022 and December 31, 2021, respectively. This customer is a related party through a director who sits on both the Company’s ~~Board~~board of ~~Directors~~directors and that of the customer.

Revenue Recognition

The Company recognizes revenue based on a five-step model in accordance with Accounting Standards Codification ("ASC") 606. For our customer contracts, (i) we identify the contract with a customer, (ii) we identify the performance obligations in the contract, (iii) we determine the transaction price, (iv) we allocate the transaction price to the performance obligation; and (v) we recognize revenue when we satisfy the performance obligation. Our revenues are recorded at a point in time when the performance is fulfilled, which is when the product is shipped to or received by the customer.

Product sales are recorded net of variable considerations, such as provisions for returns, discounts, and allowances.

We account for shipping and handling costs as costs to fulfill a contract and not as performance obligations to our customers.

Leases

The Company accounts for leases in accordance with ~~Accounting Standards Codification ("ASC")~~ ASC 842. The Company reviews all contracts and determines if the arrangement is or contains a lease, at inception. Operating leases are included in right-of-use (“ROU”) assets, current lease liabilities and long-term lease liabilities on the condensed consolidated balance sheets. The Company does not have any finance leases.

Operating lease ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The Company uses its estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The operating lease ROU asset also includes any upfront lease payments made and excludes lease incentives and initial direct costs incurred. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases with a term of 12 months or less are not recorded on the balance sheet. The Company’s lease agreements do not contain any residual value guarantees.

New Accounting Pronouncements - Not Yet Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update ("ASU") ~~2016~~-~~13,~~2016-13, Financial Instruments-Credit losses (Topic 326): Measurement of Credit losses on Financial Instruments. ASU ~~2016~~-132016-13 requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Our status as a smaller reporting company allows us to defer adoption until the annual period, including interim periods within the annual period, beginning January 1, 2023. Management is currently evaluating the requirements of this guidance and has not yet determined the impact of the adoption on the Company's financial position or results of operations.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional guidance to companies to ease the potential burden associated with transitioning away from reference rates that are expected to be discontinued. The new guidance provides optional expedients and exceptions to apply GAAP to contract modifications and hedging relationships, subject to certain criteria, that reference ~~LIBOR~~London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued. Companies can adopt ASU 2020-04 immediately; however, the guidance will only be available through December 31, 2022. While we are continuing to evaluate the impact of this ASU on our financial position or results of operations, we do not expect its impact will be material at this time.

Note 6 – Debt

Debt consisted of the following:

June 30,

December 31,

2022

2021

Related Party Debt:

July 2014 note payable to Little Harbor, LLC

$
3,267

$
3,267

July 2016 note payable to Little Harbor, LLC

4,770

4,770

January 2016 note payable to Great Harbor Capital, LLC

2,500

2,500

March 2016 note payable to Great Harbor Capital, LLC

7,000

7,000

December 2016 note payable to Great Harbor Capital, LLC

2,500

2,500

August 2017 note payable to Great Harbor Capital, LLC

3,000

3,000

February 2018 note payable to Great Harbor Capital, LLC

2,000

2,000

July 2018 note payable to Great Harbor Capital, LLC

5,000

5,000

November 2018 note payable to Great Harbor Capital, LLC

4,000

4,000

February 2020 note payable to Great Harbor Capital, LLC

2,500

2,500

January 2016 note payable to Golisano Holdings LLC

2,500

2,500

March 2016 note payable to Golisano Holdings LLC

7,000

7,000

July 2016 note payable to Golisano Holdings LLC

4,770

4,770

December 2016 note payable to Golisano Holdings LLC

2,500

2,500

March 2017 note payable to Golisano Holdings LLC

3,267

3,267

February 2018 note payable to Golisano Holdings LLC

2,000

2,000

February 2020 note payable to Golisano Holdings LLC

2,500

2,500

November 2014 note payable to Golisano Holdings LLC formerly payable to Penta Mezzanine SBIC Fund I, L.P.

8,000

8,000

January 2015 note payable to Golisano Holdings LLC formerly payable to JL-BBNC Mezz Utah, LLC

5,000

5,000

February 2015 note payable to Golisano Holdings LLC formerly payable to Penta Mezzanine SBIC Fund I, L.P.

1,999

1,999

Macatawa Bank

15,000

15,000

Total related party debt

91,073

91,073

Senior Credit Facility with Midcap

6,163

4,661

May 2020 Note Payable to Fifth Third Bank, N.A.

-

1,674

Total debt

97,236

97,408

Less current portion

97,236

97,408

Long-term debt

$
-

$
-

	September 30,		December 31,
	2022		2021
Related Party Debt:
July 2014 note payable to Little Harbor, LLC	$	3,267	$	3,267
July 2016 note payable to Little Harbor, LLC		4,770		4,770
January 2016 note payable to Great Harbor Capital, LLC		2,500		2,500
March 2016 note payable to Great Harbor Capital, LLC		7,000		7,000
December 2016 note payable to Great Harbor Capital, LLC		2,500		2,500
August 2017 note payable to Great Harbor Capital, LLC		3,000		3,000
February 2018 note payable to Great Harbor Capital, LLC		2,000		2,000
July 2018 note payable to Great Harbor Capital, LLC		5,000		5,000
November 2018 note payable to Great Harbor Capital, LLC		4,000		4,000
February 2020 note payable to Great Harbor Capital, LLC		2,500		2,500
January 2016 note payable to Golisano Holdings LLC		2,500		2,500
March 2016 note payable to Golisano Holdings LLC		7,000		7,000
July 2016 note payable to Golisano Holdings LLC		4,770		4,770
December 2016 note payable to Golisano Holdings LLC		2,500		2,500
March 2017 note payable to Golisano Holdings LLC		3,267		3,267
February 2018 note payable to Golisano Holdings LLC		2,000		2,000
February 2020 note payable to Golisano Holdings LLC		2,500		2,500
November 2014 note payable to Golisano Holdings LLC formerly payable to Penta Mezzanine SBIC Fund I, L.P.		8,000		8,000
January 2015 note payable to Golisano Holdings LLC formerly payable to JL-BBNC Mezz Utah, LLC		5,000		5,000
February 2015 note payable to Golisano Holdings LLC formerly payable to Penta Mezzanine SBIC Fund I, L.P.		1,999		1,999
Macatawa Bank		15,000		15,000
Total related party debt		91,073		91,073

Senior Credit Facility with Midcap		8,964		4,661

May 2020 Note Payable to Fifth Third Bank, N.A.		-		1,674

Total debt		100,037		97,408
Less current portion		100,037		97,408

Long-term debt	$	-	$	-

Little Harbor LLC

Mr. David L. Van Andel, the Chairman of the Company’s Board of Directors, is the owner and principal of Little Harbor LLC. Mr. Mark Bugge, at the time the notes were entered into, was a member of the Company’s Board of Directors and the Secretary of Little Harbor LLC.

July 2014 Note Payable to Little Harbor, LLC

Pursuant to a July 2014 Debt Repayment Agreement with Little Harbor, LLC (“Little Harbor”), an entity owned by certain stockholders of the Company, on February 6, 2018 we entered into an agreement with Little Harbor to convert a debt repayment obligation of $~~3,267~~$3,267 into an unsecured promissory note (“Little Harbor Debt Repayment Note”). The note bears interest at an annual rate of ~~8.5~~%8.5%, with the principal payable at maturity. The Little Harbor Debt Repayment Note was scheduled to mature on July 25, 2020; the maturity was subsequently extended to October 22, 2021.

July 2016 Note Payable to Little Harbor, LLC

On July 21, 2016, we issued an unsecured delayed draw promissory note in favor of Little Harbor (“Little Harbor Delayed Draw Note”), pursuant to which Little Harbor loaned us the full approved amount of $~~4,770~~$4,770 during the year ended December 31, 2016. This note bears interest at an annual rate of ~~8.5~~%8.5%, with the principal payable at maturity. We issued a warrant into escrow in connection with this loan (see Little Harbor Escrow Warrant in Note 7). This unsecured note was scheduled to mature on January 28, 2019; the maturity was subsequently extended to June 30, 2019 and October 22, 2021.

Little Harbor delivered a deferment letter pursuant to which Little Harbor agreed to defer all payments due under the aforementioned notes held by Little Harbor through October 22, 2021 and agreed to refrain from declaring a default and/or exercising any remedies under the notes.

Am~~endments~~mendments to extend the maturity date and related payment deferrals of the aforementioned notes have not been executed and these notes to Little Harbor are currently in default. We anticipate extending the maturity dates and related payment deferrals with the lending party, but we cannot guarantee that such extensions and payment deferrals will be successfully obtained on a timely basis or at ~~all~~.all. To date, Little Harbor has not exercised any of its remedies available upon a default for ~~either~~any of the aforementioned notes.

Great Harbor Capital LLC

Mr. David L. Van Andel, the Chairman of the Company’s Board of Directors, is the owner and principal of Great Harbor Capital LLC. Mr. Mark Bugge, at the time the notes were entered into, was a member of the Company’s Board of Directors and the Secretary of Great Harbor Capital LLC.

January 2016 Note Payable to Great Harbor Capital, LLC

Pursuant to a January 28, 2016 unsecured promissory note (“January 2016 GH Note”) with Great Harbor Capital, LLC (“GH”), an affiliate of a member of our Board of Directors, GH lent us $~~2,500~~.$2,500. The January 2016 GH Note bears interest at an annual rate of ~~8.5~~%8.5%, with the principal payable in 24 monthly installments of $~~104~~$104 which payment was to commence on February 28, 2017 but was deferred to August 31, 2019. We issued a warrant into escrow in connection with this loan (see GH Escrow Warrants in Note 7). The original maturity date of the January 2016 GH Note was January 28, 2019; the maturity was subsequently extended to June 30, 2019 and October 22, 2021.

March 2016 Note Payable to Great Harbor Capital, LLC

Pursuant to a March 21, 2016 unsecured promissory note (“March 2016 GH Note”), GH lent us $~~7,000~~.$7,000. This March 2016 GH Note bears interest at an annual rate of ~~8.5~~%8.5%, with the principal payable in 24 monthly installments of $~~292~~$292 which payment was to commence on April 21, 2017 but was deferred to August 30, 2019. We issued a warrant into escrow in connection with this loan (see GH Escrow Warrants in Note 7). The note was scheduled to mature on March 21, 2019; the maturity was subsequently extended to June 30, 2019 and October 22, 2021.

December 2016 Note Payable to Great Harbor Capital, LLC

Pursuant to a December 31, 2016 unsecured promissory note (“December 2016 GH Note”), GH lent us $~~2,500~~.$2,500. The December 2016 GH Note bears interest at an annual rate of ~~8.5~~%8.5%, with the principal payable at maturity. We issued a warrant into escrow in connection with this loan (see GH Escrow Warrants in Note 7). The note was scheduled to mature on December 31, 2019; the maturity was subsequently extended to October 22, 2021.

August 2017 Note Payable to Great Harbor Capital, LLC

Pursuant to an August 30, 2017 secured promissory note, GH lent us $~~3,000~~$3,000 (“August 2017 GH Note”). The August 2017 GH Note bears interest at an annual rate of ~~8.5~~%8.5%, with the principal payable at maturity. We issued a warrant into escrow in connection with this loan (see GH Escrow Warrants in Note 7). The note was scheduled to mature on August 29, 2020; the maturity was subsequently extended to October 22, 2021.

February 2018 Note Payable to Great Harbor Capital, LLC

Pursuant to a February 6, 2018 secured promissory note, GH lent us $~~2,000~~$2,000 (“February 2018 GH Note”). The note bears interest at an annual rate of ~~8.5~~%8.5%, with the principal payable at maturity. This note is secured by collateral and is subordinate to the indebtedness owed to Midcap Funding X Trust as successor-by-assignment from MidCap Financial Trust (“MidCap”). The note was scheduled to mature on February 6, 2021; the maturity was subsequently extended to October 22, 2021.

As previously reported, on February 6, 2018, the Company issued an amended and restated secured promissory note to GH (“A&R August 2017 GH Note”) replacing the prior secured promissory note issued on August 30, 2017. The amendment and restatement added a requirement that when the Company consummates any Special Asset Disposition (as defined in the February 2018 GH Note), provided that the Company has a minimum liquidity of $~~1,000~~,$1,000, the Company will use the net cash proceeds from the Special Asset Disposition to pay any accrued and unpaid interest under the A&R August 2017 GH Note and any other note subject to the Intercreditor Agreement (defined below). The interest rate and payment terms remain unchanged from the original secured promissory note issued to GH on August 30, 2017; however, the maturity date was extended to October 22, 2021.

Furthermore, as a result of notes issued on February 6, 2018, by GH and Golisano Holdings LLC (“Golisano LLC”), GH and Golisano LLC entered into an “Intercreditor Agreement” where they agreed that each of the February 2018 GH Note, A&R August 2017 GH Note, and the Golisano LLC February 2018 Note (as defined below) are pari passu as to repayment, security and otherwise and are equally and ratably secured.

July 2018 Note Payable to Great Harbor Capital, LLC

Pursuant to a July 27, 2018 secured promissory note, GH loaned the Company $~~5,000~~$5,000 ("July 2018 GH Note"). The July 2018 GH Note bears interest at an annual rate of ~~8.5~~%8.5%, with the principal payable on maturity. Interest on the outstanding principal accrues at a rate of 8.5% per year and is payable monthly on the first day of each month, beginning September 1, 2018. The principal of the July 2018 GH Note was payable at maturity on January 27, 2020. The July 2018 GH Note is secured by collateral. We issued a warrant to GH in connection with this loan (see GH Warrants in Note 7). In July 2019, the Company and GH amended this note to extend the maturity date to October 22, 2021.

The July 2018 GH Note is subordinate to the indebtedness owed to MidCap. The July 2018 GH Note is senior to the indebtedness owed to Little Harbor and Golisano LLC.

November 2018 Note Payable to Great Harbor Capital, LLC

Pursuant to a November 5, 2018 secured promissory note, GH loaned the Company $~~4,000~~$4,000 ("November 2018 GH Note"). The November 2018 GH Note bears interest at an annual rate of 8.5%, with the principal payable on maturity. Interest on the outstanding principal accrues at a rate of ~~8.5~~%8.5% per year and is payable monthly on the first day of each month, beginning December 1, 2018. The principal of the November 2018 GH Note was payable at maturity on November 5, 2020. The November 2018 GH Note is secured by collateral. We issued a warrant to GH in connection with this loan (see GH Warrants in Note 7). In July 2019, the Company and GH amended this note to extend the maturity to October 22, 2021.

February 2020 Note Payable to Great Harbor Capital, LLC

Pursuant to a February 2020 unsecured promissory note (“February 2020 GH Note”), an affiliate of a member of our Board of Directors, GH lent us $~~2,500~~.$2,500. The February 2020 GH Note bears interest at an annual rate of 8%8%, with the principal payable at the maturity of October 22, 2021. GH delivered a deferment letter pursuant to which GH agreed to defer all payments due under the aforementioned notes held by GH, through October 22, 2021 and agreed to refrain from declaring a default and/or exercising any remedies under the notes.

A~~mendments~~Amendments to extend the maturity date and related payment deferrals of the aforementioned notes to GH have not been executed and these notes are currently in default. We anticipate extending the maturity dates and related payment deferrals with the lending party, but we cannot guarantee that such extensions and payment deferrals will be successfully obtained on a timely basis or at all. To date, GH has not exercised any of its remedies available upon a default for ~~either~~any of the aforementioned notes.

Golisano Holdings LLC

Mr. B. Thomas Golisano, a member of the Company’s Board of Directors, is a principal of Golisano LLC.

November 2014 Note Payable to Golisano Holdings LLC (formerly payable to Penta Mezzanine SBIC Fund I, L.P.)

On November 13, 2014, we raised proceeds of $~~8,000~~,$8,000, less certain fees and expenses, from the issuance of a secured note to Penta Mezzanine SBIC Fund I, L.P. (“Penta”). The managing director of Penta, an institutional investor, is also a director of our Company. We granted Penta a security interest in our assets and pledged the shares of our subsidiaries as security for the note. On March 8, 2017, Golisano LLC acquired this note payable from Penta (“First Golisano Penta Note”). Interest on the outstanding principal accrued at a rate of 12%12% per year from the date of issuance to March 8, 2017, and decreased to 8%8% per year thereafter, payable monthly. The Company and Golisano LLC amended this note to extend the maturity from November 5, 2020 to October 22, 2021. We issued a warrant to Penta to purchase 4,960,740 shares of the Company’s common stock in connection with this loan.

January 2015 Note Payable to Golisano Holdings LLC (formerly payable to JL-Mezz Utah, LLC-f/k/a JL-BBNC Mezz Utah, LLC)

On January 22, 2015, we raised proceeds of $~~5,000~~,$5,000, less certain fees and expenses, from the sale of a note to JL-Mezz Utah, LLC (f/k/a JL-BBNC Mezz Utah, LLC) (“JL-US”). The proceeds were restricted to pay a portion of the Nutricap Labs, LLC (“Nutricap”) asset acquisition. We granted JL-US a security interest in the Company’s assets, including real estate and pledged the shares of our subsidiaries as security for the note. On March 8, 2017, Golisano LLC acquired this note payable from JL-US. Interest on the outstanding principal accrued at a rate of 12%12% per year from the date of issuance to March 8, 2017, and decreased to 8%8% per year thereafter, payable monthly (“Golisano JL-US Note”). On August 30, 2017, we entered into an amendment with Golisano LLC which extended payment of principal to maturity. We issued a warrant to JL-US to purchase 2,329,400 shares of the Company’s common stock on January 22, 2015 and 434,809 shares of the Company’s common stock on February 4, ~~2015~~.2015. The 434,809 warrants expired unexercised on February 13, 2020. The note matured on October 22, 2021.

February 2015 Note Payable to Golisano Holdings LLC (formerly payable to Penta Mezzanine SBIC Fund I, L.P.)

On February 6, 2015, we raised proceeds of $~~2,000~~,$2,000, less certain fees and expenses, from the issuance of a secured note payable to Penta. The proceeds were restricted to pay a portion of the acquisition of the customer relationships of Nutricap. On March 8, 2017, Golisano LLC acquired this note payable from Penta (“Second Golisano Penta Note”). Interest on the outstanding principal accrued at a rate of 12%12% per year from the date of issuance to March 8, 2017, and decreased to 8%8% per year thereafter, payable monthly. On August 30, 2017, we entered into an amendment with Golisano LLC which extended payment of principal to maturity. We issued a warrant to Penta to purchase 869,618 shares of the Company’s common stock in connection with this loan. The note matured on October 22, 2021.

January 2016 Note Payable to Golisano Holdings LLC

Pursuant to a January 28, 2016 unsecured promissory note with Golisano LLC (“Golisano LLC January 2016 Note”), an affiliate of a member of our Board of Directors, Golisano LLC lent us $~~2,500~~.$2,500. The note was scheduled to mature on January 28, 2019; the maturity was subsequently extended to June 30, 2019 and October 22, 2021. This note bears interest at an annual rate of ~~8.5~~%8.5%. We issued a warrant into escrow in connection with this loan (see Golisano Escrow Warrants in Note 7).

March 2016 Note Payable to Golisano Holdings LLC

Pursuant to a March 21, 2016 unsecured promissory note, Golisano LLC lent us $~~7,000~~$7,000 (“Golisano LLC March 2016 Note”). The note was scheduled to mature on March 21, 2019; the maturity was subsequently extended to June 30, 2019 and October 22, 2021. This note bears interest at an annual rate of ~~8.5~~%8.5%. We issued a warrant into escrow in connection with this loan (see Golisano Escrow Warrants in Note 7).

July 2016 Note Payable to Golisano Holdings LLC

On July 21, 2016, we issued an unsecured delayed draw promissory note in favor of Golisano LLC pursuant to which Golisano LLC may, in its sole discretion and pursuant to draw requests made by the Company, loan the Company up to the maximum principal amount of $~~4,770~~$4,770 (the “Golisano LLC July 2016 Note”). During the year ended December 31, 2016, we requested and Golisano LLC approved, draws totaling $~~4,770~~.$4,770. The Golisano LLC July 2016 Note was scheduled to mature on January 28, 2019; the maturity was subsequently extended to October 22, 2021. Interest on the outstanding principal accrues at a rate of 8.5% per year. The principal of the Golisano LLC July 2016 Note is payable at maturity. We issued a warrant into escrow in connection with this loan (see Golisano Escrow Warrants in Note 7).

December 2016 Note Payable to Golisano Holdings LLC

Pursuant to a December 31, 2016 unsecured promissory note, as amended and restated, Golisano LLC lent us $~~2,500~~$2,500 (“Golisano LLC December 2016 Note”). The note bears interest at an annual rate of ~~8.5~~%8.5%, with the principal payable at maturity. We issued a warrant into escrow in connection with this loan (see Golisano Escrow Warrants in Note 7). The note was scheduled to mature on December 30, 2019; the maturity was subsequently extended to October 22, 2021.

March 2017 Note Payable to Golisano Holdings LLC

Pursuant to a March 14, 2017 unsecured promissory note, as amended and restated, Golisano LLC lent us $~~3,267~~$3,267 (“Golisano LLC March 2017 Note”). The note bears interest at an annual rate of ~~8.5~~%8.5%, with the principal payable at maturity. We issued a warrant into escrow in connection with this loan (see Golisano Escrow Warrants in Note 7). The note was scheduled to mature on December 30, 2019; the maturity was subsequently extended to October 22, 2021.

February 2018 Note Payable to Golisano Holdings LLC

Pursuant to a February 6, 2018 secured promissory note, Golisano LLC lent us $~~2,000~~$2,000 (“Golisano LLC February 2018 Note”). The note bears interest at an annual rate of ~~8.5~~%8.5%, with the principal payable at maturity. This note is secured by collateral and is subordinate to the indebtedness owed to MidCap. The note was scheduled to mature on February 6, 2021; the maturity was subsequently extended to October 22, 2021.

February 2020 Note Payable to Golisano Holdings LLC

Pursuant to a February 2020 unsecured promissory note (“Golisano LLC February 2020 Note”), an affiliate of a member of our Board of Directors, Golisano LLC lent us $~~2,500~~.$2,500. The Golisano LLC February 2020 Note bears interest at an annual rate of 8%8%, with the principal payable at the maturity date of October 22, 2021.

Golisano LLC delivered a deferment letter pursuant to which Golisano LLC agreed to defer all payments due under the aforementioned notes held by Golisano LLC through October 22, 2021 and agreed to refrain from declaring a default and/or exercising any remedies under the notes.

Am~~endments~~mendments to extend the maturity date and related payment deferrals of the aforementioned notes to Golisano LLC have not been executed and these notes are currently in default. We anticipate extending the maturity dates and related payment deferrals with the lending party, but we cannot guarantee that such extensions and payment deferrals will be successfully obtained on a timely basis or at all. To date, Golisano LLC has not exercised any of its remedies available upon a default for ~~either~~any of the aforementioned notes.

Macatawa Bank

Mr. Mark Bugge is a former member of the board of directors of Macatawa Bank (“Macatawa”) and was a member of the Company’s board of directors; he was an active member of both boards at the time of the term loan note as described below. Two other members of the Company’s Board of Directors, Mr. B. Thomas Golisano and Mr. David L. Van Andel, are the owners and principals of the guarantor, 463IP Partners, LLC (“(“463IP”). Furthermore, Mr. Van Andel, through his interest in a trust, holds an indirect limited partnership interest in White Bay Capital, LLLP, which has an ownership interest of greater than 10%10% in Macatawa.

On December 4, 2018, the Company entered into a Term Loan Note and Agreement (the "Term Loan") in favor of Macatawa. Pursuant to the Term Loan, Macatawa loaned the Company $~~15,000~~.$15,000. The Term Loan was scheduled to mature on November 30, 2020; however, in September 2020, the Company and Macatawa amended the Term Loan to extend the maturity date to November 30, 2022. The Term Loan accrues interest at the interest rate equivalent to the one-month LIBOR Rate plus ~~1.00~~%1.00% (the interest rate will not be less than 2.50%; the rate was ~~2.50~~%3.63% as of ~~June~~September 30, 2022). After the maturity date or upon the occurrence or continuation of an event of default, the unpaid principal balance shall bear interest at the interest rate of the note plus ~~3.00~~%3.00%. The note is secured by the Limited Guaranty, defined below, and is subordinate to the indebtedness owed to MidCap.

In connection with the Term Loan, 463IP has entered into a limited guaranty, dated as of December 4, 2018, in favor of Macatawa (the "Limited Guaranty") pursuant to which it has agreed to guarantee payment under the Term Loan and any and all renewals of the Term Loan and all interest accrued on such indebtedness limited to ~~$15,000~~$15,000 plus any accrued interest. On October 28, 2019, the Term Loan was amended and GH and Golisano LLC replaced 463IP as “Entity Guarantor” as defined in the Term Loan, and provided their guaranties for payment of the Company’s indebtedness and obligations under the Term Loan.

Senior Credit Facility with Midcap

On January 22, 2015, we entered into a three-year $15,000 revolving credit facility (the “Senior Credit Facility”) pursuant to a credit and security agreement, based on our accounts receivable and inventory, which could be increased to up to $~~20,000~~$20,000 upon satisfaction of certain conditions, with MidCap. MidCap subsequently assigned the agreement to an affiliate, Midcap Funding X Trust.

On September 2, 2016, we entered into an amendment with Midcap to increase the Senior Credit Facility to $~~17,000~~$17,000 and extend our facility an additional 12 months. We granted MidCap a first priority security interest in certain of our assets and pledged the shares of our subsidiaries as security for amounts owed under the Senior Credit Facility. We agreed to pay Midcap an unused line fee of ~~0.50~~%0.50% per annum, a collateral management fee of 1.20% per month, and interest of LIBOR plus 5%5% per annum. We issued a warrant to Midcap to purchase 500,000 shares of the Company’s common stock (see Midcap Warrant in Note 7).

On January 22, 2019, we entered into Amendment Sixteen to the Credit and Security Agreement (the "MidCap Sixteenth Amendment"). The MidCap Sixteenth Amendment reduced the revolving credit facility amount from a total of $17,000 to a total of $~~5,000~~$5,000 and extended the expiration date from January 22, 2019 to April 22, 2019.

On February 13, 2019, MidCap informed the Company that MidCap had re-assigned all of its rights, powers, privileges and duties as “Agent” under the Credit and Security Agreement, as well as all of its right, title and interest in and to the revolving loans made under the facility from Midcap Funding X Trust to MidCap IV Funding.

On April 22, 2019, we entered into Amendment Seventeen to the Credit and Security Agreement (the "MidCap Seventeenth Amendment"), which effectively increased the revolving credit facility amount to $~~12,000~~$12,000 and renewed the Senior Credit Facility for an additional two years expiring on April 22, 2021.

On April 22, 2021, we entered into Amendment Eighteen to the Credit and Security Agreement (the "MidCap Eighteenth Amendment"), which effectively updated the unused line fee to ~~0.375~~%0.375% per annum, updated the interest rates to ~~3.75~~%3.75% per annum, and renewed the Senior Credit Facility for an additional three years expiring on April 22, 2024.

We have incurred loan fees totaling $~~540~~$540 relating to the Senior Credit Facility and the subsequent amendments, which is also being amortized into interest expense over the term of the Senior Credit Facility. The balance owed on the Senior Credit Facility was $~~6,163~~$8,964 as of ~~June~~September 30, 2022.

Other Debt

May 2020 Note Payable to Fifth Third Bank N.A.

On May 7, 2020, Twinlab Consolidated Corporation ("TCC"), the operating subsidiary of the Company, received the proceeds of a loan from Fifth Third Bank, National Association ("Fifth Third Bank") in the amount of $~~1,674~~$1,674 obtained under the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted March 27, 2020 (the "PPP Loan”). The PPP Loan, evidenced by a promissory note dated May 5, 2020 (the “PPP Note”), has a two-year term and bears interest at a rate of 1.0% per annum, with expected monthly principal and interest payments that were due to begin December 1, 2020. TCC used the proceeds of the PPP Loan for payroll, office rent, and utilities, which allowed the Company to seek forgiveness for this loan.

The Company submitted its application for 100% forgiveness for this loan in November 2021. In January 2022, the full amount of the PPP Loan was forgiven by the Small Business Administration ("SBA"). As a result, the Company recorded a gain on the forgiveness of the loan in the amount of $1,674.

February 2021 Note Payable to Fifth Third Bank N.A.

On February 9, 2021, TCC received the proceeds of a second loan from Fifth Third Bank in the amount of $1,344 ( the "Second PPP Loan") obtained under the Paycheck Protection Program. The Second PPP Loan, evidenced by a promissory note dated February 5, 2021 (the "Second PPP Note”), has a two-year term and bears interest at a rate of 1.0% per annum, with expected monthly principal and interest payments that were due to begin September 1, 2021. TCC used the proceeds of the Second PPP Loan for payroll, which allowed the Company to seek forgiveness for this loan.

The company submitted its application for 100% forgiveness for this loan in November 2021. In December 2021, the full amount of the Second PPP Loan was forgiven by the SBA. As a result, the Company recorded a gain on the forgiveness of the loan in the amount of $1,344.

Financial Covenants

Certain of the foregoing debt agreements, as amended, require us to meet certain affirmative and negative covenants, including maintenance of specified ratios. As of ~~June~~September 30, 2022, we were in default for lack of compliance with the EBITDA-related financial covenant of the debt agreement with MidCap. The amount due to MidCap for this revolving credit line is ~~$6,163~~$8,964 as of ~~June~~September 30, 2022.

Note 7 – Warrants and Registration Rights Agreements

The following table presents a summary of the status of our issued warrants as of ~~June~~September 30, 2022, and changes during the ~~six~~nine months then ended:

Shares Underlying

Weighted Average

Warrants

Exercise Price

Outstanding, December 31, 2021

4,500,000

$
0.01

Granted

-

-

Canceled / Expired

-

-

Exercised

-

-

Outstanding, June 30, 2022

4,500,000

$
0.01

	Shares Underlying		Weighted Average
		Warrants	Exercise Price
Outstanding, December 31, 2021		4,500,000	$	0.01
Granted		-		-
Canceled / Expired		-		-
Exercised		-		-
Outstanding, September 30, 2022		4,500,000	$	0.01

GH Warrants

In connection with the July 2018 GH Note, we issued GH a warrant to purchase an aggregate of 2,500,000 shares of the Company’s common stock at an exercise price of $~~0.01~~$0.01 per share (the "July 2018 GH Warrant"). The Company has reserved 2,500,000 shares of the Company’s common stock for issuance under the July 2018 GH Warrant. The July 2018 GH Warrant expires on July 27, 2024. The July 2018 GH Warrant is also subject to customary adjustments upon any recapitalization, reorganization, stock split, combination of shares, merger or consolidation. The Company estimated the value of the warrant using the Black-Scholes option pricing model and recorded a debt discount of $~~1,479~~,$1,479, which was amortized over the original term of the July 2018 GH Note.

In connection with the November 2018 GH Note, we issued GH a warrant to purchase an aggregate of 2,000,000 shares of the Company’s common stock at an exercise price of $0.01 per share (the "November 2018 GH Warrant"). The Company has reserved 2,000,000 shares of the Company’s common stock for issuance under the November 2018 GH Warrant. The November 2018 GH Warrant expires on November 5, 2024. The November 2018 GH Warrant is also subject to customary adjustments upon any recapitalization, reorganization, stock split, combination of shares, merger or consolidation. The Company estimated the value of the warrant using the Black-Scholes option pricing model and recorded a debt discount of $1,214 which was amortized over the original term of the November 2018 GH Note.

Warrants Issued into Escrow

At ~~June~~September 30, 2022, there were ~~13,093,929~~8,757,573 outstanding warrants held in escrow (“Escrow Warrants”). These Escrow Warrants are held in escrow and are not exercisable unless the Company defaults on the related debt. While the related debt is currently in default (see Note 6), warrants are not expected to be exercised as the related debt is expected to be amended which will remedy the current default. These Escrow Warrants are as follows:

Golisano Escrow Warrants

In connection with the Golisano LLC January 2016 Note, we issued into escrow in the name of Golisano LLC a warrant to purchase an aggregate of 1,136,363 shares of the Company’s common stock at an exercise price of $~~0.01~~$0.01 per share (the “January 2016 Golisano Warrant”). The January 2016 Golisano Warrant was not to be released from escrow or be exercisable unless and until we fail to pay Golisano LLC the entire unamortized principal amount of the related promissory note and any accrued and unpaid interest thereon as of January 28, 2019 (which was extended to October 22, 2021 - See Note 6 for further information) or such earlier date as required pursuant to an Acceleration Notice (as defined in the related note agreement). The January 2016 Golisano Warrant expired unexercised on February 28, 2022.

In connection with the Golisano LLC March 2016 Note, we issued into escrow in the name of Golisano LLC a warrant to purchase an aggregate of 3,181,816 shares of the Company’s common stock at an exercise price of $~~0.01~~$0.01 per share (the “March 2016 Golisano Warrant”). The March 2016 Golisano Warrant was not to be released from escrow or be exercisable unless and until we fail to pay Golisano LLC the entire unamortized principal amount of the related promissory note and any accrued and unpaid interest thereon as of March 21, 2019 (~~which~~(which was extended to October 22, 2021 - See Note 6 for further information) or such earlier date as is required pursuant to an Acceleration Notice (as defined in the related note agreement). The March 2016 Golisano Warrant expired unexercised on March 21, 2022.

In connection with the Golisano LLC July 2016 Note, we issued into escrow in the name of Golisano LLC a warrant to purchase an aggregate of 2,168,178 shares of the Company’s common stock, at an exercise price of $~~0.01~~$0.01 per share (the “Golisano July 2016 Warrant”). The Golisano July 2016 Warrant will not be released from escrow or be exercisable unless and until we fail to pay Golisano LLC the entire unamortized principal amount of the Golisano LLC July 2016 Note and any accrued and unpaid interest thereon as of July 21, 2019 (~~which~~(which was extended to October 22, 2021 - See Note 6 for further information) or such earlier date as is required pursuant to an Acceleration Notice (as defined in the Golisano LLC July 2016 Note). We have reserved 2,168,178 shares of the Company’s common stock for issuance under the Golisano July 2016 Warrant. The Golisano July 2016 Warrant expired unexercised on July 21, 2022.

In connection with the Golisano LLC December 2016 Note, we issued into escrow in the name of Golisano LLC a warrant to purchase an aggregate of 1,136,363 shares of the Company’s common stock, at an exercise price of $~~0.01~~$0.01 per share (the “Golisano December 2016 Warrant”). The Golisano December 2016 Warrant will not be released from escrow or be exercisable unless and until we fail to pay Golisano LLC the entire unamortized principal amount of the Golisano LLC December 2016 Note and any accrued and unpaid interest thereon as of December 31, 2019, (~~which~~(which was extended to October 22, 2021 - See Note 6 for further information) or such earlier date as is required pursuant to an Acceleration Notice (as defined in the Golisano LLC December 2016 Note). We have reserved 1,136,363 shares of the Company’s common stock for issuance under the Golisano December 2016 Warrant. The Golisano December 2016 Warrant, if exercisable, expires on December 30, 2022. The Golisano December 2016 Warrant is also subject to customary adjustments upon any recapitalization, capital reorganization or reclassification, consolidation, merger or transfer of all or substantially all of our assets.

In connection with the Golisano LLC March 2017 Note, we issued into escrow in the name of Golisano LLC a warrant to purchase an aggregate of 1,484,847 shares of the Company’s common stock, at an exercise price of $~~0.01~~$0.01 per share (the “Golisano March 2017 Warrant”). The Golisano March 2017 Warrant will not be released from escrow or be exercisable unless and until we fail to pay Golisano LLC the entire unamortized principal amount of the Golisano LLC March 2017 Note and any accrued and unpaid interest thereon as of December 31, 2019 (~~which~~(which was extended to October 22, 2021 - See Note 6 for further information) or such earlier date as is required pursuant to an Acceleration Notice (as defined in the Golisano LLC March 2017 Note). We have reserved 1,484,847 shares of the Company’s common stock for issuance under the Golisano March 2017 Warrant. The Golisano March 2017 Warrant, if exercisable, expires on March 14, 2023. The Golisano March 2017 Warrant is also subject to customary adjustments upon any recapitalization, capital reorganization or reclassification, consolidation, merger or transfer of all or substantially all of our assets.

In connection with the Golisano LLC February 2018 Note, we issued into escrow in the name of Golisano LLC a warrant to purchase an aggregate of 1,818,182 shares of the Company’s common stock at an exercise price of $~~0.01~~$0.01 per share (the "Golisano 2018 Warrant"). The Golisano 2018 Warrant will not be released from escrow or be exercisable unless and until the Company fails to pay Golisano LLC the entire unamortized principal amount of the Golisano LLC February 2018 Note and any accrued and unpaid interest thereon as of February 6, 2021, (~~which~~(which was extended to October 22, 2021 - See Note 6 for further information) or such earlier date as is required pursuant to an acceleration notice. The Company has reserved 1,818,182 shares of the Company’s common stock for issuance under the Golisano 2018 Warrant. The Golisano 2018 Warrant expires on February 6, 2024.

We previously entered into a registration rights agreement with Golisano LLC, dated as of October 5, 2015 (the “Registration Rights Agreement”), granting Golisano LLC certain registration rights for certain shares of the Company’s common stock. The shares of common stock issuable pursuant to the above Golisano LLC warrants are also entitled to the benefits of the Registration Rights Agreement.

GH Escrow Warrants

In connection with a January 2016 GH Note, we issued into escrow in the name of GH a warrant to purchase an aggregate of 1,136,363 shares of the Company’s common stock at an exercise price of $~~0.01~~$0.01 per share (the “January 2016 GH Warrant”). The January 2016 GH Warrant was not to be released from escrow or be exercisable unless and until we fail to pay GH the entire unamortized principal amount of the January 2016 GH Note and any accrued and unpaid interest thereon as of January 28, 2019 (~~which~~(which was extended to October 22, 2021 - See Note 6 for further information) or such earlier date as is required pursuant to an Acceleration Notice (as defined in the January 2016 GH Note). The January 2016 GH Warrant expired unexercised on February 28, 2022.

In connection with a March 2016 GH Note, we issued into escrow in the name of GH a warrant to purchase an aggregate of 3,181,816 shares of the Company’s common stock at an exercise price of $~~0.01~~$0.01 per share (the “March 2016 GH Warrant”). The March 2016 GH Warrant was not to be released from escrow or be exercisable unless and until we fail to pay GH the entire unamortized principal amount of the March 2016 GH Note and any accrued and unpaid interest thereon as of March 21, 2019 (~~which~~(which was extended to October 22, 2021 - See Note 6 for further information) or such earlier date as is required pursuant to an Acceleration Notice (as defined in the March 2016 GH Note). The March 2016 GH Warrant expired unexercised on March 21, 2022.

In connection with the December 2016 GH Note, we issued into escrow in the name of GH a warrant to purchase an aggregate of 1,136,363 shares of the Company’s common stock, at an exercise price of $~~0.01~~$0.01 per share (the “December 2016 GH Warrant”). The December 2016 GH Warrant will not be released from escrow or be exercisable unless and until we fail to pay GH the entire unamortized principal amount of the December 2016 GH Note and any accrued and unpaid interest thereon as of December 31, 2019 (~~which~~(which was extended to October 22, 2021 - See Note 6 for further information) or such earlier date as is required pursuant to an Acceleration Notice (as defined in the December 2016 GH Note). We have reserved 1,136,363 shares of common stock for issuance under the December 2016 GH Warrant. The December 2016 GH Warrant, if exercisable, expires on December 30, 2022. The December 2016 GH Warrant is also subject to customary adjustments upon any recapitalization, capital reorganization or reclassification, consolidation, merger or transfer of all or substantially all of our assets.

In connection with the August 2017 GH Note, we issued into escrow in the name of GH a warrant to purchase an aggregate of 1,363,636 shares of the Company’s common stock, at an exercise price of $~~0.01~~$0.01 per share (the “August 2017 GH Warrant”). The August 2017 GH Warrant will not be released from escrow or be exercisable unless and until we fail to pay GH the entire unamortized principal amount of the August 2017 GH Note and any accrued and unpaid interest thereon as of August 29, 2020 (~~which~~(which was extended to October 22, 2021 - See Note 6 for further information) or such earlier date as is required pursuant to an Acceleration Notice (as defined in the August 2017 GH Note). We have reserved 1,363,636 shares of common stock for issuance under the August 2017 GH Warrant. The August 2017 GH Warrant, if exercisable, expires on August 30, 2023. The August 2017 GH Warrant is also subject to customary adjustments upon any recapitalization, capital reorganization or reclassification, consolidation, merger or transfer of all or substantially all of our assets.

In connection with the February 2018 GH Note, we issued into escrow in the name of GH a warrant to purchase an aggregate of 1,818,182 shares of the Company’s common stock at an exercise price of $~~0.01~~$0.01 per share (the "February 2018 GH Warrant"). The February 2018 GH Warrant will not be released from escrow or be exercisable unless and until the Company fails to pay GH the entire unamortized principal amount of the note and any accrued and unpaid interest thereon as of February 6, 2021, (~~which~~(which was extended to October 22, 2021 - See Note 6 for further information) or such earlier date as is required pursuant to an acceleration notice. The Company has reserved 1,818,182 shares of the Company’s common stock for issuance under the February 2018 GH Warrant. The February 2018 GH Warrant expires on February 6, 2024.

Little Harbor Escrow Warrant

The Little Harbor Delayed Draw Note required that we issue into escrow in the name of Little Harbor a warrant to purchase an aggregate of 2,168,178 shares of common stock at an exercise price of $~~0.01~~$0.01 per share (the “Little Harbor July 2016 Warrant”). The Little Harbor July 2016 Warrant will not be released from escrow or be exercisable unless and until we fail to pay Little Harbor the entire unamortized principal amount of the Little Harbor Delayed Draw Note and any accrued and unpaid interest thereon as of January 28, 2019 (~~which~~(which was extended to October 22, 2021 - See Note 6 for further information) or such earlier date as is required pursuant to an acceleration notice (as defined in the Little Harbor Delayed Draw Note). We have reserved 2,168,178 shares of the Company’s common stock for issuance under the Little Harbor July 2016 Warrant. The Little Harbor July 2016 Warrant expired unexercised on July 21, 2022.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (amounts in thousands, except share and per share amounts and number of employees)

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the Securities and Exchange Commission (the “SEC”) on March 29, 2022. This discussion and analysis and other parts of this Quarterly Report contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions. Any statements contained herein that are not statements of historical fact, including statements regarding guidance, industry prospects or future results of operations or financial position made in this report are forward-looking. We often use words such as "anticipates", "believes", "estimates", "expects", "intends", "predicts", "hopes", "should", "plans", "will" and similar expressions to identify forward-looking statements. These statements are based on management’s current expectations and accordingly are subject to uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained herein due to various important factors, including (but not limited to): the impact of the ongoing COVID-19 pandemic; ~~the duration and spread of the pandemic; the potential that current vaccines may be less effective against future COVID-19 virus variants;~~ supply chain disruptions; the impact of inflation; consumer preferences, spending and debt levels; the general economic and credit environment; interest rates; variations in consumer purchasing activities; competitive pressures on sales; the loss of a significant customer or material reduction of business with a significant customer; pricing and gross sales margins; the associated fees or estimated cost savings from contract renegotiations; and our ability to establish and maintain acceptable commercial terms with contract manufacturers. We undertake no obligation to publicly update or revise any forward-looking statements except as required by law.

Overview

We are an integrated formulator, marketer, distributor, and retailer of branded nutritional supplements and other natural products sold to and through domestic health and natural food stores, mass market retailers, specialty retailers, on-line retailers, and websites. Internationally, we market and distribute branded nutritional supplements and other natural products to and through health and natural product distributors and retailers.

Our products include vitamins, minerals, specialty supplements, and sports nutrition products primarily under the Twinlab®, Reserveage and ResVitale® brands. We also formulate, market and sell diet and energy products under the Metabolife® brand, and a full line of herbal teas under the Alvita® brand. To accommodate consumer preferences, our products come in various formulations and delivery forms, including capsules, tablets, softgels, chewables, liquids, sprays, powders, and whole herbs. These products are sold primarily through health and natural food stores and on-line retailers, supermarkets, and mass-market retailers.

We distribute one of the broadest branded product lines in the industry with approximately 260 stock keeping units, or SKUs. We believe that as a result of our emphasis on innovation, quality, loyalty, education and customer service, our brands are widely recognized in health and natural food stores and among their customers. In most periods since our formation, we have generated losses from operations.

We also perform services between private label distributors and contract manufacturers under the NutraScience Labs ("NSL") brand name. NSL facilitates the production of new supplements to market and reformulates existing products to include scientifically-backed ingredients. We provide our customers with numerous production services, including manufacturing, testing, label and packaging design, order fulfillment, and regulatory compliance.

NSL facilitates the contract manufacture of a variety of high-quality vitamin and supplement products, including but not limited to, immune support supplements, cognitive support products, prebiotics and probiotics, supplements for weight management, and sports nutrition supplements. Our role in the production of these products is to help our customers manufacture or reformulate dietary supplements for sale and distribution. We do this by working with contract manufacturers to build scientifically backed formulas for resale to our end customers. We also simplify the production process by providing quality control checks, storing inventory on site, labeling and designing finished products, and drop shipping finished products ready for sale to our end customers. We do not market these private label products, but rather sell the products to the customer, who is then responsible for the marketing, distribution, and sale to retailers or to their end customers.

Going Concern Uncertainty

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which assumes continuity of operations and realization of assets and liabilities in the ordinary course of business. In most periods since our formation, we have generated losses from operations. At ~~June~~September 30, 2022, we had an accumulated deficit of ~~$350.1~~$353.1 million. Historical losses are primarily attributable to lower than planned sales resulting from low fill rates on demand due to limitations of our working capital, delayed product introductions and postponed marketing activities, merger-related and other restructuring costs, interest and refinancing charges associated with our debt refinancing, and impairment of goodwill and intangible assets. Losses have been funded primarily through issuance of common stock and third-party or related party debt.

Because of our history of operating losses and significant interest expense on our debt, we have a working capital deficiency of ~~$121.4~~$124.0 million at ~~June~~September 30, 2022. We also have ~~$97.2~~$100.0 million of debt, ~~net of discount,~~ presented in current liabilities. These continuing conditions, among others, raise substantial doubt about our ability to continue as a going concern.

Management has addressed operating issues through the following actions: focusing on growing the core business and brands; continuing emphasis on major customers and key products; reducing manufacturing and operating costs and continuing to negotiate lower prices from major suppliers. We believe that we may need additional capital to execute our business plan. If additional funding is required, there can be no assurance that sources of funding will be available when needed on acceptable terms or at all.

The condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Results of Operations

Comparison of the Three and ~~Six~~Nine Month Periods Ended ~~June~~September 30, 2022 and 2021

The following table summarizes our financial results for the three and ~~six~~nine month periods ended ~~June~~September 30, 2022 and 2021:

		Three Months Ended June 30,					Increase			%			Six Months Ended June 30,						Increase			%				Three Months Ended September 30,					Increase			%			Nine Months Ended September 30,						Increase			%
	2022			2021			(Decrease)			Change			2022			2021			(Decrease)			Change			2022			2021			(Decrease)			Change			2022			2021			(Decrease)			Change
Net sales	$	14,473		$	18,109		$	(3,636	)		(20)	%	$	27,724		$	37,570		$	(9,846	)		(26)	%	$	15,522		$	18,272		$	(2,750	)		(15)	%	$	43,246		$	55,841		$	(12,595	)		(23)	%
Cost of sales		10,711			13,273			(2,562	)		(19)	%		19,533			25,615			(6,082	)		(24)	%		12,238			12,230			8			0	%		31,770			37,844			(6,074	)		(16)	%
Gross profit		3,762			4,836			(1,074	)		(22)	%		8,191			11,955			(3,764	)		(31)	%		3,284			6,042			(2,758	)		(46)	%		11,476			17,997			(6,521	)		(36)	%
Operating costs and expenses:
Selling expenses		821			737			84			11	%		1,745			1,626			119			7	%		909			912			(3	)		0	%		2,654			2,538			116			5	%
General and administrative expenses		3,184			1,312			1,872			143	%		6,253			4,971			1,282			26	%		3,237			4,096			(859	)		(21)	%		9,491			9,067			424			5	%
(Loss) income from operations		(243	)		2,787			(3,030	)		(109)	%		193			5,358			(5,165	)		(96)	%		(862	)		1,034			(1,896	)		(183)	%		(669	)		6,392			(7,061	)		(110)	%

Other income (expense):
Interest expense, net		(1,976	)		(2,241	)		(265	)		(12)	%		(3,812	)		(4,410	)		(598	)		(14)	%		(2,064	)		(2,208	)		(144	)		(7)	%		(5,876	)		(6,619	)		(743	)		(11)	%
Other income		-			536			(536	)		(100)	%		1,676			517			1,159			224	%
Other income (expense)																										-			(14	)		(14	)		(100)	%		1,676			504			1,172			233	%
Total other expense		(1,976	)		(1,705	)		271			16	%		(2,136	)		(3,893	)		(1,757	)		(45)	%		(2,064	)		(2,222	)		(158	)		(7)	%		(4,200	)		(6,115	)		(1,915	)		(31)	%

(Loss) income before income taxes		(2,219	)		1,082			(3,301	)		(305)	%		(1,943	)		1,465			(3,408	)		(233)	%		(2,926	)		(1,188	)		(1,738	)		(146)	%		(4,869	)		277			(5,146	)		(1,858)	%

Provision for income taxes		-			-									-			-									-			-									-			-

Total net (loss) income	$	(2,219	)	$	1,082		$	(3,301	)		(305)	%	$	(1,943	)	$	1,465		$	(3,408	)		(233)	%	$	(2,926	)	$	(1,188	)	$	(1,738	)		(146)	%	$	(4,869	)	$	277		$	(5,146	)		(1,858)	%

The decrease in our net sales of ~~20%~~15% and ~~26%~~23% for the three and ~~six~~nine month periods ended ~~June~~September 30, 2022, respectively, compared to the same period in 2021 is due to production backlogs at manufacturers, resulting in extended lead-time for production and fulfillment of sales, along with softening demand for branded products at retail locations. In contrast, prior year figures recognized higher sales due to resolution of production issues from 2020.

Our overall gross profit decrease of ~~22%~~46% and ~~31%~~36% for the three and ~~six~~nine month periods ended ~~June~~September 30, 2022, respectively, compared to the same period in 2021 was primarily due to reduced demand from some of our major ~~customers and promotional initiatives to counteract the reduced demand. Some~~customers. In addition, some input costs have increased including transportation that are resulting in higher costs of goods sold relative to the prior year. In contrast, prior year figures recognized higher sales due to resolution of production issues from 2020.

Our selling expenses ~~increased by 11% and 7%~~were relatively unchanged with a $3 decrease for the three ~~and six month periods~~months ended ~~June~~September 30, 2022 ~~respectively,~~compared to the same period in 2021. Our selling expenses increased 5% for the nine months ended September 30, 2022 compared to the same period in 2021, primarily due to the Company's attendance at trade shows, revitalization of our Alvita Tea brand, updates to packaging and messaging for several product lines, and increased advertising costs across multiple marketing segments.

Our general and administrative expenses ~~increased~~decreased by ~~143% and 26%~~21% for the three ~~and six~~ ~~month periods~~months ended ~~June~~September 30, 2022 ~~respectively,~~ compared to the same period in 2021, due to the impact in 2021 of one time ~~gains~~losses that resulted in a significant overall ~~reduction~~increase in operating expenses and, therefore, overall general and administrative expenses.Our general and administrative expenses increased by 5% for the nine months ended September 30, 2022 compared to the same period in 2021, primarily due to the lease impairment loss recorded during the third quarter of 2022.

Our interest expense, net decreased by ~~12%~~7% and ~~14%~~11% for the three and ~~six~~nine month periods ended ~~June~~September 30, 2022 compared to the same period in 2021, primarily due to ~~reduced lending costs and~~ the ~~associated interest,~~fully amortization of our debt discount in 2021, as well as forgiveness of both of our PPP Loan and Second PPP Loan and the associated interest charges.

~~The decrease in other~~Other income ~~of $~~(expense) decreased slightly by~~536~~ $14 for the three months ended ~~June~~September 30, 2022 compared to the same period in ~~2021 was due to the recovery of embezzled funds during the three months ended June 30,~~ 2021. The increase in other income (expense) of ~~$1,159~~$1,172 for the ~~six~~nine months ended ~~June~~September 30, 2022 compared to the same period in 2021, was primarily due to the forgiveness of the PPP Loan.

At ~~June~~September 30, 2022, we had an accumulated deficit of ~~$350.1~~$353.1 million primarily because of our history of operating losses and loss on stock purchase guarantee. We have a working capital deficiency of ~~$121.4~~$124.0 million at ~~June~~September 30, 2022. Losses have been funded primarily through the issuance of common stock and warrants, borrowings from our stockholders, and third-party ~~debt and proceeds from the exercise of warrants.~~debt. As of ~~June~~September 30, 2022, we had cash of ~~$142.~~$0.3 million. On an ongoing basis, we also seek to improve operating cash through trade receivables and payables management as well as inventory stocking levels. We used net cash in operating activities of ~~$4,892~~$7.5 million for the ~~six~~nine months ended ~~June~~September 30, 2022. During the ~~six~~nine months ended ~~June~~September 30, 2022, we incurred net borrowings from our revolving credit facility of ~~$1,502.~~$4.3 million.

Our total liabilities increased by ~~$0.3~~$4.9 million to ~~$142.3~~$146.9 million at ~~June~~September 30, 2022 from $142.0 million at December 31, 2021 primarily due to the increase of $~~3.2~~4.8 million in accrued interest and $2.6 million in notes payable and current portion of long-term debt; partially offset by the decrease of $~~1.5~~0.8 million in accounts payable and ~~$0.8~~$1.0 million in accrued expenses and other current liabilities.

Net cash used in operating activities was $~~4.9~~7.5 million for the ~~six~~nine months ended ~~June~~September 30, 2022 as a result of our net loss of $~~1.9~~4.9 million, forgiveness of PPP Loan of $1.7 million, a decrease in net operating assets and liabilities of $1.3 million and other non-cash items expenses totaling $0.3 million net. By comparison, for the nine months ended September 30, 2021, net cash used in operating activities was $0.7 million as a result of our net income of $0.3 million, a recovery of losses on accounts receivable of $0.7 million in doubtful accounts receivable, other non-cash expenses totaling ~~$0.1~~$0.7 million net, and a decrease in net operating assets and liabilities of ~~$1.4~~$1.0 million. ~~By comparison, for the six months ended June 30, 2021, net cash used in operating activities was $2.7~~ ~~million as a result of our net income of $1.5~~ million, a recovery of losses on accounts receivable of $625 in doubtful accounts receivable, other non-cash expenses totaling $593 net, and a decrease in net operating assets and liabilities of $4,101.

Net cash provided by financing activities was ~~$1,502~~$4.3 million for the ~~six~~nine months ended ~~June~~September 30, 2022, consisting of net borrowings of $~~1,502~~4.3 million under our revolving credit facility. Net cash provided by financing activities was ~~$3,673~~$2.6 million for the ~~six~~nine months ended ~~June~~September 30, 2021, consisting of net borrowings of ~~$2,329~~$1.3 million under our revolving credit facility, and proceeds from the issuance of debt of ~~$1,344.~~$1.3 million.

As set forth above, we obtained additional debt financing in the year ended December 31, 2021 and the ~~six~~nine months ended ~~June~~September 30, 2022 to support operations. It is possible that we may need additional funding to enable us to fund our operating expenses and capital expenditure requirements.

In response to COVID-19 and to protect our liquidity and cash position, we have taken a number of steps. In August of 2020, we obtained deferment letters from each of Great Harbor Capital, LLC, Little Harbor, LLC, and Golisano Holdings LLC, pursuant to which each lender agreed to defer all payments due under outstanding notes held by each lender through October 22, 2021 and agreed to refrain from declaring a default and/or exercising any remedies under the outstanding notes. Amendments to extend the maturity date and related payment deferrals of the aforementioned notes have not been executed and these notes are currently in default. We anticipate extending the maturity dates and related payment deferrals with the lending parties, but we cannot guarantee that such extensions and payment deferrals will be successfully obtained on a timely basis or at all.

On May 7, 2020, TCC received the proceeds of a loan from Fifth Third Bank in the amount of $1.7 million obtained under the Paycheck Protection Program ("PPP") under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted March 27, 2020 (the “PPP Loan”). The PPP Loan, evidenced by a promissory note dated May 5, 2020 (the “PPP Note”), had a two-year term and bore interest at a rate of 1.0% per annum, with the monthly principal and interest payments that were due beginning December 1, 2020. TCC used the proceeds of the PPP Loan for payroll, office rent, and utilities which allowed the Company to seek forgiveness of this loan. The Company submitted its application for 100% forgiveness for this loan in November 2021. In January 2022, the full amount of the PPP Loan was forgiven by the Small Business Administration ("SBA"). As a result, the Company recorded a gain on the forgiveness of the loan in the amount of $1.7 million.

On January 25, 2021, TCC applied for another PPP loan with Fifth Third Bank in the amount of $1.3 million (the "Second PPP Loan”). The Second PPP Loan, evidenced by a promissory note dated February 5, 2021 (the "Second PPP Note”), had a two-year term and bore interest at a rate of 1.0% per annum, with expected monthly principal and interest payments that were due to begin September 1, 2021. TCC used the proceeds of the Second PPP Loan for payroll, which allowed the Company to seek forgiveness for this loan. The Company submitted its application for 100% forgiveness for this loan in November 2021. In December 2021, the full amount of the Second PPP Loan was forgiven by the SBA. As a result, the Company recorded a gain on the forgiveness of the loan in the amount of $1.3 million.

Until such time, if ever, as we can generate substantial product revenues, we intend to finance our cash needs through a combination of equity offerings, debt financing, collaborations, strategic alliances, sales of assets, other merger and acquisition activities, and licensing arrangements. There can be no assurance that any of those sources of funding will be available when needed on acceptable terms or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of existing stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, strategic alliances, sales of assets, other merger and acquisition activities, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financing or relationships with third parties when needed or on acceptable terms, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts; abandon our business strategy of growth through acquisitions; or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable SEC rules.

This item is not applicable as we are currently considered a smaller reporting company.

Our management, with the participation of our principal executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of ~~June~~September 30, 2022 pursuant to Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), as amended. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. On the basis of this review, our management, including our principal executive officer and chief financial officer, has concluded that as of the end of the period covered by this report, our disclosure controls and procedures were not effective to give reasonable assurance that the information required to be disclosed in our reports filed with the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and to ensure that the information required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and chief financial officer, in a manner that allows timely decisions regarding required disclosure.

On May 14, 2021, the Company announced that an internal investigation discovered that a recently terminated employee in the Company’s accounting department had been embezzling Company funds. The investigation indicated losses of approximately $500,000 occurred between 2016 and 2021. As a result of the findings of the investigation, the terminated employee returned the majority of the embezzled funds to the Company.

The employee took advantage of a complex consolidation process between multiple Enterprise Resource Planning ("ERP") systems, a lack of segregation of duties, weak internal controls, and a lack of managerial oversight.

In the first quarter of 2021, the Company transitioned into a single ERP system which allows for establishment of increased segregation of duties and improvements of internal controls within the ERP system itself. Additionally, remediation of internal control weaknesses includes additional focus on managerial oversight and staffing changes within the accounting department.

Although we have implemented certain measures that we believe will remediate these material weaknesses, we can provide no assurance that our remediation efforts will be effective or that additional material weaknesses in our internal control over financial reporting will not be identified in the future. Any failure to maintain or implement required new or improved controls, or any difficulties that may be encountered in their implementation, could result in additional material weaknesses, cause us to fail to meet our periodic or annual reporting obligations or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of periodic management evaluations regarding the effectiveness of our internal control over financial reporting required under Section 404 of the Sarbanes Oxley Act of 2002 and the rules promulgated thereunder. The existence of material weaknesses could result in errors in our financial statements that could result in a restatement of those financial statements.

The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurances. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but we cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.

There were no changes in our internal controls over financial reporting during the quarter ended ~~June~~September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

	June 30, 2022			December 31, 2021
Raw materials	$	1,318		$	2,016
Finished goods		8,876			4,586
		10,194			6,602
Reserve for obsolete inventory		(326	)		(788	)

Inventories, net	$	9,868		$	5,814

	September 30, 2022			December 31, 2021
Raw materials	$	1,500		$	2,016
Finished goods		9,294			4,586
		10,794			6,602
Reserve for obsolete inventory		(241	)		(788	)

Inventories, net	$	10,553		$	5,814

	June 30, 2022			December 31, 2021
Trademarks	$	4,739		$	4,739
Indefinite-lived intangible assets		120			120
Customer relationships		6,363			6,363
		11,222			11,222
Accumulated amortization		(10,704	)		(10,646	)

Intangible assets, net	$	518		$	576

	September 30, 2022			December 31, 2021
Trademarks	$	4,739		$	4,739
Indefinite-lived intangible assets		120			120
Customer relationships		6,363			6,363
		11,222			11,222
Accumulated amortization		(10,733	)		(10,646	)

Intangible assets, net	$	489		$	576

2022 (excluding the six months ended June 30, 2022)	$	760
2023		1,534
2024		1,524
2025		1,566
2026		1,150
Thereafter		305
Total lease payments		6,839
Less: imputed interest		(1,105	)
Present value of lease liabilities	$	5,734

	Three Months Ended June 30, 2022		Three Months Ended June 30, 2021
Product Sales	$	14,308	$	17,914
Fulfillment Services		165		195
	$	14,473	$	18,109

	Six Months Ended June 30, 2022		Six Months Ended June 30, 2021
Product Sales	$	27,366	$	37,094
Fulfillment Services		358		476
	$	27,724	$	37,570


	June 30, 2022			December 31, 2021
Machinery and equipment	$	124		$	36
Leasehold improvements		118			118
Computers and other		69			58
		311			212
Accumulated depreciation and amortization		(96	)		(72	)

Property and equipment, net	$	215		$	140

	June 30,		December 31,
	2022		2021
Related Party Debt:
July 2014 note payable to Little Harbor, LLC	$	3,267	$	3,267
July 2016 note payable to Little Harbor, LLC		4,770		4,770
January 2016 note payable to Great Harbor Capital, LLC		2,500		2,500
March 2016 note payable to Great Harbor Capital, LLC		7,000		7,000
December 2016 note payable to Great Harbor Capital, LLC		2,500		2,500
August 2017 note payable to Great Harbor Capital, LLC		3,000		3,000
February 2018 note payable to Great Harbor Capital, LLC		2,000		2,000
July 2018 note payable to Great Harbor Capital, LLC		5,000		5,000
November 2018 note payable to Great Harbor Capital, LLC		4,000		4,000
February 2020 note payable to Great Harbor Capital, LLC		2,500		2,500
January 2016 note payable to Golisano Holdings LLC		2,500		2,500
March 2016 note payable to Golisano Holdings LLC		7,000		7,000
July 2016 note payable to Golisano Holdings LLC		4,770		4,770
December 2016 note payable to Golisano Holdings LLC		2,500		2,500
March 2017 note payable to Golisano Holdings LLC		3,267		3,267
February 2018 note payable to Golisano Holdings LLC		2,000		2,000
February 2020 note payable to Golisano Holdings LLC		2,500		2,500
November 2014 note payable to Golisano Holdings LLC formerly payable to Penta Mezzanine SBIC Fund I, L.P.		8,000		8,000
January 2015 note payable to Golisano Holdings LLC formerly payable to JL-BBNC Mezz Utah, LLC		5,000		5,000
February 2015 note payable to Golisano Holdings LLC formerly payable to Penta Mezzanine SBIC Fund I, L.P.		1,999		1,999
Macatawa Bank		15,000		15,000
Total related party debt		91,073		91,073

Senior Credit Facility with Midcap		6,163		4,661

May 2020 Note Payable to Fifth Third Bank, N.A.		-		1,674

Total debt		97,236		97,408
Less current portion		97,236		97,408

Long-term debt	$	-	$	-

2022 (excluding the nine months ended September 30, 2022)	$	380
2023		1,534
2024		1,524
2025		1,566
2026		1,150
Thereafter		306
Total lease payments		6,460
Less: imputed interest		(992	)
Present value of lease liabilities	$	5,468

	Three Months Ended June 30, 2022			Six Months Ended June 30, 2022
Sublease income	$	(229	)	$	(459	)
Cash paid for operating leases	$	374		$	745
Weighted average remaining lease term (years) - operating leases		4.4			4.4
Weighted average discount rate – operating leases		8.25	%		8.25	%

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

	None.

	Exhibit Number	Exhibit Description

	31.1	Rule 13a-14(a)/15d-14(a) Certification.

	~~31.2~~	~~Rule 13a-14(a)/15d-14(a) Certification.~~

	32.1*	Certification Pursuant to 18 U.S.C. Section 1350.

	32.2*	~~Certification Pursuant to 18 U.S.C. Section 1350.~~

	101.INS	Inline XBRL Instance.

	101.SCH	Inline XBRL Taxonomy Extension Schema.

	101.CA	Inline XBRL Taxonomy Extension Calculation.

	101.DEF	Inline XBRL Taxonomy Extension Definition.

	101.LAB	Inline XBRL Taxonomy Extension Label.

	101.PRE	Inline XBRL Taxonomy Extension Presentation.

	104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

	* Furnished herewith.

	TWINLAB CONSOLIDATED HOLDINGS, INC.

Date: ~~July 28, 2022~~	~~By:~~	~~/s/ Daniel DiPofi~~
		~~Daniel DiPofi~~
		~~Chief Executive Officer and Director~~ ~~(Principal Executive Officer)~~

~~Date: July 28,~~October 31, 2022	By:	/s/ Kyle Casey
		Kyle Casey
		Interim Chief Executive Officer and Chief Financial Officer (Interim Principal Executive Officer and Principal Financial Officer)

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