EX-99.6 8 ex99-6.htm

Exhibit 99.6

YERBAÉ BRANDS CORP.

(the “Company” or “Yerbaé”)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes a number of forward-looking statements that reflect management’s current views with respect to future events and financial performance. Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements include statements regarding the intent, belief or current expectations of us and members of our management team, as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks set forth in the section entitled “Risk Factors” in our Form 10, as filed with the U.S. SEC on July 19, 2024, any of which may cause our Company’s or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied in our forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or performance. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Readers should carefully review and consider the various disclosures made by us in the Form 10 filed with the SEC on July 19, 2024, this report and in our other reports filed with the SEC. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time except as required by law. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions.

Use of United States Generally Accepted Accounting Principles (“GAAP”) Financial Measures

We use United States GAAP financial measures, unless otherwise noted. All of the GAAP financial measures used by us in this report relate to the inclusion of financial information. This discussion and analysis should be read in conjunction with our financial statements and the notes thereto included elsewhere in this quarterly report. All references to dollar amount in this section are in United States dollars, unless expressly stated otherwise.

Overview

Yerbaé was founded by Todd Gibson and Karrie Gibson in 2016 to create plant-based energy drinks containing yerba mate, a South American herb and a natural source of caffeine. Yerbaé’s first beverage was launched in the first quarter of 2017.

Yerbaé is engaged in the development, marketing, sale, and distribution of plant-based energy beverages that do not contain calories, carbohydrates, or sugar. Yerbaé’s line of beverages are blended with non-GMO plant-based ingredients and offer the benefits of yerba mate and white tea; sustainably sourced from Brazil and other growing regions in South America.

Yerbaé beverages are created to provide products targeted at consumers focused on health, wellness, and fitness and seeking healthier beverages as an alternative to existing energy drinks. The products are formulated to provide a more refreshing taste than coffee, with additional benefits to existing sodas and sparkling waters, along with healthier ingredients than traditional energy drinks. Yerbaé’s products complement a variety of healthy lifestyles, such as non-GMO, Keto, Vegan, Kosher, Paleo and gluten-free diets.

The accompanying unaudited condensed interim consolidated financial statements have been prepared on a basis that assumes that the Company will continue as a going concern and that contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The Company had an accumulated deficit of $41.5 million and $34.5 million as of September 30, 2024, and December 31, 2023, respectively. Further, the Company had cash and cash equivalents of approximately $0.3 million and $1.0 million as of September 30, 2024, and December 31, 2023, respectively. The Company’s primary focus in recent months has been and will continue to be supporting the manufacturing of its products which requires capital and resources. The Company expects that its operating losses and negative cash flows will continue for the foreseeable future. Based on the Company’s currently available cash resources, current and forecasted level of operations, and forecasted cash flows for the 12-month period subsequent to the date of issuance of these unaudited condensed interim consolidated financial statements, the Company will require additional funding to continue to progress its operational obligations as they come due. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, and to generate profitable operations in the future. Management plans to provide for the Company’s capital requirements through financing, operations, or other transactions, including third party loans.

Management’s discussion and analysis of financial condition and results of operations

Liquidity and Capital Resources

As of September 30, 2024, and December 31, 2023, the Company had a working capital deficit of $5,095,669 and surplus of $843,478, respectively. The Company has incurred losses since inception and as of September 30, 2024, and December 31, 2023, had an accumulated deficit of approximately $41.5 million and $34.5 million, respectively. The Company’s objective in managing its capital is to ensure that there is sufficient liquidity to finance and grow its operations, maximize the preservation of capital, provide adequate capital to fund its business objectives, and deliver competitive returns on invested capital. To fund its activities, the Company has primarily relied on private placement financing, warrant exercises, loans and other forms of debt. The material debt financing and loan transactions were as follows:

Notes Payable

Convertible Notes

During 2023, convertible notes payable were issued in the amount of $3,802,000 with a stated interest rate of 6.00%. The convertible notes were unsecured and are due on April 30, 2025. The balance, net of debt discount, of the convertible notes as of September 30, 2024, and December 31, 2023, was $2,734,936 and $2,196,302, respectively.

Motor Vehicle Loan

During 2023, the Company entered into various notes payable related to vehicles with monthly installments ranging from $543 to $652, including interest ranging from 2.90% to 5.49%, due October 2026. The notes are secured by vehicles and had a balance of $30,968 and $60,914 as of September 30, 2024 and December 31, 2023. There were no changes to the terms of these loans. All changes were a result of repayment.

Amazon Lending

During 2023, the Company entered into a financing arrangement with Amazon Lending, maturing December 26, 2024 at an interest rate of 14.49%, secured by inventories. There were no changes to the terms of these loans. All changes were a result of repayment.

Ampla and Oxford Financing

On May 16, 2023, Yerbaé replaced their finance provider Ampla LLC (“Ampla”) and secured a new accounts receivable and inventory of $2,500,000 with Oxford Commercial Finance, a Michigan banking corporation, through its Delaware subsidiary Yerbaé LLC. The Company can draw down funds as needed, and only pay interest on the amount borrowed. The debt facility was secured by a security interest in all assets of Yerbaé, including a first security interest in Yerbaé’s accounts receivable and inventory. The facility was repaid during 2023.

Unrelated Third-Party Loans

On July 5, 2024, the Company entered into a loan agreement with MaximCash solutions for $750,000. The loan included an origination cost of $22,500. In addition, the Company agreed to issue the lender $75,000 in common stock of the Company for a total discount of $97,500. The loan matures on July 5, 2025. The balance of the loan was $584,801 net of discounts and repayments as of September 30, 2024 and had an effective interest rate of 42%.

On August 26, 2024, the Company entered into an agreement with a lender whereby the lender agreed to loan an aggregate of up to $60,000 The loan matures on February 26, 2025. The balance of the loan was $51,667 net of discount and repayments as of September 30, 2024 and had an effective interest rate of approximately 8.3%.

On September 16, 2024, the Company entered into an agreement with a private lender whereby the lender agreed to loan an aggregate of up to $540,000. The loan matures on August 16, 2025. The balance of the loan was $500,000 as of September 30, 2024 and had an effective interest rate of approximately 8.0%.

During June of 2024, the Company entered into a loan agreement with Parafin for $230,000 and stated fee of $30,000; of which $10,000 was paid during period. This stated fee is treated as an interest and amortized over the term of the loan. The loan agreement includes a payment rate of 15% of the Company’s weekly sales over an 8-month period. The balance of the loan was $159,137, net of discounts and repayments as of September 30, 2024.

Related Party Loans

On January 30, 2023, the Company entered into a loan agreement with a director of the Company. An aggregate of $100,000 was advanced by the related party pursuant to the loan agreement. The loan was fully repaid during 2023.

On July 1, 2024, the Company entered into a loan agreement with a director of the Company, whereby the director loaned the Company $330,000. The loan matures on June 15, 2025 and had an effective interest rate 10%. The net balance of the loan as of September 30, 2024, was $307,500 which includes accrued interest to the end of the period.

On August 26, 2024, the Company entered into a loan agreement with a director of the Company, whereby the director loaned the Company $24,000 with an effective rate of 8.3%. The loan matures on February 26, 2024. The net balance of the loan as of September 30, 2024, was $20,667 net of discount and repayments.

Warrant Exercise and Expiration

On January 16, 2024, the Company issued, in connection with the exercise by one eligible warrant holder who participated in the Company’s warrant exercise incentive program an aggregate of 835,000 Warrants for gross proceeds to the Company of $1,002,000, and an aggregate of 835,000 warrants to the Eligible Holder. The Incentive Warrants are exercisable into the same number of common shares of the Company at an exercise price of $1.50 per common share until December 14, 2025, subject to an acceleration provision whereby, if for any thirty (30) consecutive trading days (the “Premium Trading Days”) following the repricing the closing price of the common shares exceeds $2.50 per common share, the Incentive Warrants’ expiry date will be accelerated such that holders will have thirty (30) calendar days to exercise the Incentive Warrants (if they have not first expired in the normal course) (the “Acceleration Clause”).

On January 22, 2024, the Company issued 263,157 Common Shares upon the exercise of 263,157 share purchase warrants at an exercise price of $0.95 per Common Share for gross aggregate proceeds of $250,000.

On January 30, 2024, the Company issued 352,941 Common Shares upon the exercise of 352,941 share purchase warrants at an exercise price of $0.85 per Common Share for gross aggregate proceeds of $300,000.

On April 8, 2024, the Company issued an aggregate of 1,103,811 common shares and 1,103,811 share purchase warrants pursuant to the exercise and terms of 1,003,468 special warrants originally issued pursuant to the closing of a special warrants offering which closed on December 6, 2023. The proceeds of the special warrants of approximately $1.5 million were received on December 6, 2023, and no proceeds were received upon the exercise of the special warrants.

During the three months ended September 30, 2024, there was a total of 3,208,498 warrants expired unexercised.

Commitments

As discussed in our consolidated financial statements for the annual period ended December 31, 2023, the Company entered into an office lease agreement during December of 2022. The ongoing monthly payments are not expected to have a material impact on the Company’s financial condition.

In addition to the lease agreement, the Company also enters into unconditional purchase obligations for inventory items such as cans and product ingredients. However, these obligations are not entered into for a period greater than one year. The Company has not entered into any off-balance sheet arrangements.

Going Concern

Yerbaé’s evaluation of its ability to continue as a going concern requires it to evaluate its future sources and uses of cash sufficient to fund its currently expected operations in conducting business activities one year from the date the financial statements are issued. Yerbaé evaluates the probability associated with each source and use of cash resources in making its going concern determination.

Due to our recurring losses, the ongoing challenging market conditions for beverage companies and our limited cash balance as of September 30, 2024, management believes that it is probable that the Company will be unable to meet its obligations as they come due within one year after the date that the unaudited condensed consolidated financial statements are issued. While the Company is attempting to plan additional financings, which are intended to mitigate the conditions or events that raise substantial doubt about our ability to continue as a going concern, those financings may not occur. If the financings do not occur, management will try and implement alternative arrangements, and such arrangements could have a potentially significant negative impact on the current net asset value of the Company. These alternatives include: (1) raising additional capital by means other than those planned through equity and/or debt financings; and/or (2) entering into new commercial relationships to help fund future expenses.

As a result of the Company’s recurring losses from operations, and the need for additional financing to fund its operating and capital requirements within one year after the date that the financial statements are issued, there is uncertainty regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the Company’s ability to continue as a going concern.

Cash Flows

The following tables summarize the results of the Company’s cash flows for the below respective periods:

|  | For the Nine Months Ended September 30, |
|  | 2024 |  |  | 2023 |
Net cash provided by (used in): |  |  |  |  |  |  |  |
Operating activities |  | $ | (3,598,634 | ) |  | $ | (9,985,012 | )
Investing activities |  |  | - |  |  |  | 736,877 |
Financing activities |  |  | 2,890,409 |  |  |  | 9,992,329 |
Net change in cash |  | $ | (708,225 | ) |  | $ | 744,194 |

Operating Activities

Net cash used in operating activities was approximately $3.6 million for the nine months ended September 30, 2024, and was comprised of the net loss of $7.0 million and had net non-cash items totalling $2.2 million, consisting primarily of $1.7 million in share-based compensation expense and $0.5 million in accretion expense. Changes in operating assets and liabilities was $1.1 million, primarily consisting of a change in accounts receivable of $0.3 million, inventory of $0.2 million, prepaid expenses of $0.2 million, accounts payable of $0.1 million, accrued interest of $0.1 million and accrued expenses of $0.1 million.

Net cash used in operating activities was $10.0 million for the nine months ended September 30, 2023. The net loss for the nine months ended September 30, 2023, was $16.7 million and had net noncash items of $8.0 million, primarily consisting of performance shares granted upon consummation of the reverse takeover of $6.1 million, share-based compensation of $1.7 million and accretion expense of $0.2 million. Changes in operating assets and liabilities was ($1.3 million), primarily consisting of a change in accounts payable of ($1.1 million), prepaid expenses of ($0.3 million), accrued expenses of $0.1 million and ($0.1 million) in inventory.

Investing Activities

The Company did not engage in any material investing activities during the nine months ended September 30, 2024. Net cash provided from investing activities for the nine months ended September 30, 2023 was $0.6 million. The $0.6 million amount for the nine months ended September 30, 2023, was comprised primarily of $0.6 million of cash acquired as part of the reverse merger with Kona Bay.

Financing Activities

Net cash provided by financing activities was $2.9 million and $10.0 million for the nine months ended September 30, 2024, and 2023, respectively. For the nine months ended September 30, 2024, these amounts consisted of net proceeds from the exercise of warrants of $1.6 million and net proceeds from debt instruments and notes payable of $1.0 million and proceeds from note to related party of $0.3 million. For the nine months ended September 30, 2023, these amounts consisted of proceeds from issuance of common stock and warrants of $8.2 million, net proceeds from debt instruments and notes payable of $2.0 million and fees related to the issuance of convertible notes of ($0.2 million).

Results of Operations

Three months ended September 30, 2024, compared to three months ended September 30, 2023

The following tables set forth the Company’s results of operations for the periods presented. The comparison of financial results is not necessarily indicative of future results.

|  | For the Three Months Ended September 30, |
|  | 2024 |  |  | 2023 |
Revenues |  | $ | 1,631,615 |  |  | $ | 2,986,734 |
Cost of sales |  |  | 599,845 |  |  |  | 1,417,603 |
Gross profit |  | $ | 1,031,770 |  |  | $ | 1,569,131 |
General and administrative |  | $ | 1,792,423 |  |  | $ | 3,589,314 |
Sales, advertising and marketing |  |  | 311,915 |  |  |  | 1,886,414 |
Total expenses |  | $ | 2,104,338 |  |  | $ | 5,475,728 |
Net loss before other income (expense) |  |  | (1,072,568 | ) |  |  | (3,906,597 | )
Interest expense |  |  | (406,926 | ) |  |  | (234,756 | )
Net loss before income taxes |  |  | (1,479,494 | ) |  |  | (4,141,353 | )
Income tax expense |  |  | - |  |  |  | - |
Net loss and comprehensive loss |  | $ | (1,479,494 | ) |  | $ | (4,141,353 | )

Revenues

|  | For the Three Months Ended September 30, |  |  | Change |
|  | 2024 |  |  | 2023 |  |  | $ |  |  | % |
Revenues |  | $ | 1,631,615 |  |  | $ | 2,986,734 |  |  | $ | (1,355,119 | ) |  |  | -45 | %

Yerbaé’s revenues declined by $1.4 million, or 45%, for the three months ended September 30, 2024, compared to the same period in the prior year. This decline was primarily attributed to the non-renewal of its agreement with Sam’s Club, the nation’s second-largest club retailer, as well as the challenging consumer packaged goods (CPG) U.S. market today, which has been impacted by inflation and may be contributing to a reduction in consumer basket size. Despite this decrease, Yerbaé continued to advance its distribution footprint, executing with major retailers such as Kroger, Amazon, and Costco, along with multiple other retail chains. In the third quarter of 2024, the Company prioritized efforts to stabilize its business foundation, focusing on core strengths. Key growth was seen in the Natural Foods, Direct-to-Consumer, and Direct Store Delivery (“DSD”) channels, bolstered by the successful rollout of the new 12oz can platform launched in Q1 2024. Club store placements continued to perform well in select regions; however, a reduction in the number of stocked club stores as noted above led to a decline in quarterly sales.

Cost of Sales

|  | For the Three Months Ended September 30, |  |  | Change |
|  | 2024 |  |  | 2023 |  |  | $ |  |  | % |
Cost of sales |  | $ | 599,845 |  |  | $ | 1,417,603 |  |  |  | (817,758 | ) |  |  | -58 | %

Cost of sales is primarily comprised of product materials, ingredient costs, bottling, inbound freight, and other related expenses. Costs of sales decreased by $0.8 million, or 58%, as compared to the same period in the prior year. The decrease in cost of goods sold was directly related to the decrease in sales during 2024.

General and Administrative

|  | For the Three Months Ended September 30, |  |  | Change |
|  | 2024 |  |  | 2023 |  |  | $ |  |  | % |
General and administrative |  | $ | 1,792,423 |  |  | $ | 3,589,314 |  |  |  | (1,796,891 | ) |  |  | -50 | %

General and administrative expense included operational and administrative costs as detailed in the following table:

|  | For the Three Months Ended September 30, |
|  | 2024 |  |  | 2023 |
Share-based compensation |  | $ | 198,784 |  |  | $ | 733,686 |
Outbound freight |  |  | 442,380 |  |  |  | 575,560 |
Employee benefits |  |  | 471,508 |  |  |  | 756,147 |
Professional fees |  |  | 420,757 |  |  |  | 1,030,786 |
Office expenses |  |  | 222,801 |  |  |  | 254,353 |
Other |  |  | 36,193 |  |  |  | 238,782 |
Total general and administrative expenses |  | $ | 1,792,423 |  |  | $ | 3,589,314 |

General and administrative expenses decreased to $1.8 million for the three months ended September 30, 2024, as compared to $3.6 million for the prior comparable period. The decrease was primarily due to decreases in share-based compensation of $0.5, professional fees of $0.6 million, employee benefits of $0.3 million, a decrease of outbound freight of $0.1 million and other expense of $0.2 million.

Sales, Advertising and Marketing

|  | For the Three Months Ended September 30, |  |  | Change |
|  | 2024 |  |  | 2023 |  |  | $ |  |  | % |
Sales, advertising and marketing |  | $ | 311,915 |  |  | $ | 1,886,414 |  |  |  | (1,574,499 | ) |  |  | -83 | %

Sales, advertising and marketing decreased to $0.3 million for the three months ended September 30, 2024, compared to $1.9 million for the prior year period. Throughout 2024, the Company has prioritized delivering efficiencies across its sales, advertising, and marketing platforms. This effort included a strategic focus on optimizing product availability in both retail and eCommerce channels. As the Company continues its expansion, maximizing the effectiveness of every dollar spent has been a top priority. This optimization involved streamlining fewer less-effective programs and leveraging insights gained about our customers’ evolving needs in a dynamic consumer landscape. Our efforts included refining consumer messaging and enhancing in-market activities with higher quality visuals and retailer-specific programs. These initiatives have contributed to the continuous improvement of the brand’s positioning and increased consumer engagement.

Interest Expense

|  | For the Three Months Ended September 30, |  |  | Change |
|  | 2024 |  |  | 2023 |  |  | $ |  |  | % |
Total interest expense |  | $ | 406,926 |  |  | $ | 234,756 |  |  |  | 172,170 |  |  |  | 73 | %

Interest expense includes interest expense and accretion expense related to the principal amount of $3,802,000 convertible debentures issued in 2023 and new debt issuances in 2024 and increased to $0.4 million for the three-month period ended September 30, 2024, compared to $0.2 million during the comparable prior year period. The increase was primarily related to an increase in interest and accretion expense related to new debt instruments that were entered into during 2024.

Nine months ended September 30, 2024, compared to nine months ended September 30, 2023

The following tables set forth the Company’s results of operations for the periods presented. The comparison of financial results is not necessarily indicative of future results.

|  | For the Nine Months Ended September 30, |
|  | 2024 |  |  | 2023 |
Revenues |  | $ | 4,628,830 |  |  | $ | 9,991,758 |
Cost of sales |  |  | 2,122,316 |  |  |  | 4,968,058 |
Gross profit |  | $ | 2,506,514 |  |  | $ | 5,023,700 |
General and administrative |  | $ | 7,469,589 |  |  | $ | 15,735,214 |
Sales, advertising and marketing |  |  | 1,136,839 |  |  |  | 5,542,848 |
Total expenses |  | $ | 8,606,428 |  |  | $ | 21,278,062 |
Net loss before other income (expense) |  |  | (6,099,914 | ) |  |  | (16,254,362 | )
Interest expense |  |  | (932,637 | ) |  |  | (418,748 | )
Net loss before income taxes |  |  | (7,032,551 | ) |  |  | (16,673,110 | )
Income tax expense |  |  | - |  |  |  | - |
Net loss and comprehensive loss |  | $ | (7,032,551 | ) |  | $ | (16,673,110 | )

Revenues

|  | For the Nine Months Ended September 30, |  |  | Change |
|  | 2024 |  |  | 2023 |  |  | $ |  |  | % |
Revenues |  | $ | 4,628,830 |  |  | $ | 9,991,758 |  |  | $ | (5,362,928 | ) |  |  | -54 | %

Yerbaé’s revenues declined by $5.4 million, or 54%, for the nine months ended September 30, 2024, compared to the same period in the prior year. Throughout this period, the Company prioritized optimizing its customer base by phasing out less profitable accounts, including previously announced exits from Sam’s Club and other high-slotting, low-volume retailers, which resulted in lower revenues for the nine-month period ended September 30, 2024 compared to the prior period. Yerbaé has instead focused on growth-oriented retail partnerships that enhance gross margins and deliver greater shareholder value. Significant progress was made in core focus channels, establishing a strong foundation for future growth. The Company also expanded its Direct-to-Consumer segment, introducing new variety packs and increasing brand awareness through a broader network of social media influencers and digital advertising. Additionally, Yerbaé strengthened its distributor relationships, onboarding 14 new distributors in the third quarter of 2024 to support its growth initiates for 2025 and beyond. Nine-month 2024 revenues were also impacted by the challenging CPG U.S. market, which has been impacted by higher inflation earlier in the period and as the Company transitioned from 16oz to 12 oz packaging, aligning with consumer demand for a more efficient product size, however this also resulted in decreased sales as the Company transitioned to the new can format. This transition was completed in Q2 2024.

Cost of Sales

|  | For the Nine Months Ended September 30, |  |  | Change |
|  | 2024 |  |  | 2023 |  |  | $ |  |  | % |
Cost of sales |  | $ | 2,122,316 |  |  | $ | 4,968,058 |  |  |  | (2,845,742 | ) |  |  | -57 | %

Cost of sales is primarily comprised of product materials, ingredient costs, bottling, inbound freight, and other related expenses. Costs of sales decreased by $2.8 million, or 57%, as compared to the same period in the prior year. The decrease in cost of goods sold was directly related to the decrease in sales during 2024.

General and Administrative

|  | For the Nine Months Ended September 30, |  |  | Change |
|  | 2024 |  |  | 2023 |  |  | $ |  |  | % |
General and administrative |  | $ | 7,469,589 |  |  | $ | 15,735,214 |  |  |  | (8,265,625 | ) |  |  | -53 | %

General and administrative expense included operational and administrative costs as detailed in the following table:

|  | For the Nine Months Ended September 30, |
|  | 2024 |  |  | 2023 |
Share-based compensation |  | $ | 1,734,941 |  |  | $ | 1,694,970 |
Outbound freight |  |  | 1,333,707 |  |  |  | 1,956,911 |
Employee benefits |  |  | 1,788,796 |  |  |  | 2,272,388 |
Professional fees |  |  | 1,314,551 |  |  |  | 2,197,653 |
Office expenses |  |  | 838,652 |  |  |  | 889,376 |
Performance shares granted upon consummation of RTO |  |  | - |  |  |  | 6,086,596 |
Other |  |  | 458,942 |  |  |  | 637,320 |
Total general and administrative expenses |  | $ | 7,469,589 |  |  | $ | 15,735,214 |

General and administrative expenses decreased to $7.5 million for the nine months ended September 30, 2024. The decrease was primarily due to a decrease in expense related to performance shares granted upon consummation of the reverse takeover during the nine months ended September 30, 2023, of $6.1 million, a decrease of professional fees of $0.9 million, a decrease of outbound freight of $0.6 million, a decrease of employee benefits of $0.5 million and a decrease of other expenses $0.2 million.

Sales, Advertising and Marketing

|  | For the Nine Months Ended September 30, |  |  | Change |
|  | 2024 |  |  | 2023 |  |  | $ |  |  | % |
Sales, advertising and marketing |  |  | 1,136,839 |  |  | $ | 5,542,848 |  |  |  | (4,406,009 | ) |  |  | -79 | %

Sales, advertising and marketing decreased to $1.1 million for the nine months ended September 30, 2024, compared to $5.5 million for the prior year period. Over the past nine months, the Company has focused on evaluating and optimizing retailer performance, promotions, and growth levels. By concentrating on select channels, the Company has demonstrated its ability to operate more efficiently. This has involved reducing the number of promotions during the period and eliminating programs that did not meet expectations, such as paid pallet positions, slotting fees, and other sales initiatives. Additionally, the Company has prioritized more efficient and effective digital targeting in its eCommerce channels, which continues to deliver positive results.

Interest Expense

|  | For the Nine Months Ended September 30, |  |  | Change |
|  | 2024 |  |  | 2023 |  |  | $ |  |  | % |
Total interest expense |  |  | 932,637 |  |  |  | 418,748 |  |  |  | 513,889 |  |  |  | 123 | %

Interest expense includes interest expense and accretion expense related to the principal amount of $3,802,000 convertible debentures issued in 2023 and new debt issuances in 2024. Interest expense increased to $0.9 million for the nine months ended September 30, 2024, compared to $0.4 million during the comparable prior year period. The increase was primarily related to an increase in accretion expense of $0.3 million and an increase in interest expense related to new debt instruments that were entered into during 2024.

Critical Accounting Estimates

Refer to the Company’s critical accounting estimates section provided in its consolidated annual financial statements for the period ended December 31, 2023. There were no material updates or changes to the disclosure for the nine-month period ended September 30, 2024.