UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the Quarterly Period Ended December 31, 2012September 30, 2013

OR

For the Transition Period From                    To                    

Commission File Number: 001-35470

Annie’s, Inc.

(Exact name of registrant as specified in its charter)

(510) 558-7500

(Registrant’s telephone number, including area code)

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non–acceleratednon-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b–212b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b–212b-2 of the Exchange Act).    Yes  ¨    No  x

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

On January 31,October 15, 2013, the registrant had 17,338,33916,912,015 shares of common stock, par value $0.001 per share, outstanding.

Annie’s, Inc.

FORM 10-Q

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

ITEM 1 – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Annie’s, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands)

See accompanying notes to the unaudited condensed consolidated financial statements

Annie’s, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except share and per share amounts)

See accompanying notes to the unaudited condensed consolidated financial statements

Annie’s, Inc.

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

(unaudited)

(in thousands, except share amounts)

See accompanying notes to the unaudited condensed consolidated financial statements

Annie’s, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

See accompanying notes to the unaudited condensed consolidated financial statements

Annie’s, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Annie’s, Inc. (the “Company”), a Delaware corporation incorporated on April 28, 2004, is a natural and organic food company. The Company offers over 125135 products in the following three product categories: meals; snacks; and dressings, condiments and other. The Company’s products are sold throughout the U.S. and Canada via a multi-channel distribution network that serves the mainstream grocery, mass merchandiser and natural retailer channels. The Company’s headquarters are located in Berkeley, California.

Basis of Presentation and Consolidation

The accompanying interim condensed consolidated balance sheets as of December 31, 2012 and March 31, 2012,September 30, 2013, the interim condensed consolidated statement of convertible preferred stock and stockholders’ equity (deficit) for the ninesix months ended December 31, 2012,September 30, 2013, and the interim condensed consolidated statements of operations for the three and ninesix months ended December 31,September 30, 2013 and 2012, and 2011, and the interim condensed consolidated statements of cash flows for the ninesix months ended December 31,September 30, 2013 and 2012 and 2011 are unaudited. These interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, certainthey do not include all of the information and footnote disclosures normally included in financial statements prepared in accordance withnotes required by U.S. GAAP have been condensed or omitted pursuant to such rules and regulations.for complete financial statements. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2012, filed with the SEC on June 8, 2012.14, 2013. The March 31, 20122013 condensed consolidated balance sheet included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by U.S. GAAP for auditedcomplete financial statements.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to state fairly our financial position as of December 31, 2012September 30, 2013 and results of our operations for the three and ninesix months ended December 31,September 30, 2013 and 2012, and 2011, and cash flows for the ninesix months ended December 31, 2012September 30, 2013 and 2011.2012. The interim results for the ninesix months ended December 31, 2012September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending March 31, 2013.2014.

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

Initial Public Offering (IPO)

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

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

Pursuant to the Company’s Amended and Restated Certificate of Incorporation or Charter and its Amended and Restated Bylaws, which became effective upon consummation of the IPO, the Company has authorized 35,000,000 shares of capital stock, 30,000,000 shares, par value $0.001 per share, of which are common stock and 5,000,000 shares, par value $0.001 per share, of which are preferred stock. As of December 31, 2012, 17,328,797September 30, 2013, 16,909,546 shares of common stock were issued and outstanding and no shares of preferred stock were issued and outstanding.

Annie’s, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Secondary Public Offering

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

Shelf Registration Statement

On July 16, 2013, the Company filed a registration statement on Form S-3 to register 2,537,096 shares of common stock of the Company held by Solera. In connection with preparations for filing of this registration statement, the Company incurred $86,000 for legal, accounting and other out-of-pocket expenses on Solera’s behalf in the six months ended September 30, 2013.

Use of Estimates

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

Concentration Risk

Customers with 10% or more of the Company’s net sales consist of the following:

As of December 31, 2012, Customer ASeptember 30, 2013, three customers represented 31%, 19% and Customer B represented 26% and 35%10%, respectively, of accounts receivable. The same twothree customers represented 21%26%, 36% and 45%10%, respectively, of accounts receivable as of March 31, 2012.2013.

Fair Value of Financial Instruments

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

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

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

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

Annie’s, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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

Annie’s, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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

Property and Equipment

The Company capitalizes certain internal and external costs related to the development and enhancement of the Company’s internal-use software. Capitalized internal-use software development costs are included in property and equipment on the accompanying condensed consolidated balance sheets. At December 31, 2012 and March 31, 2012, capitalized software development costs, net of accumulated amortization, totaled $2.3 million and 2.0 million, respectively. As of December 31, 2012,September 30, 2013, the Company had $2.0$2.2 million capitalized software development costs, net of accumulated amortization, and $0.3including $0.6 million in construction in progress. As of March 31, 2013, the Company had $2.1 million capitalized software development costs, net of accumulated amortization, including $0.4 million in construction in progress.

Shipping and Handling Costs

Shipping and handling costs are included in selling, general and administrative expenses in the condensed consolidated statements of operations. Shipping and handling costs primarily consist of costs associated with moving finished products to customers, including costs associated with the Company’s distribution center, route delivery costs and the cost of shipping products to customers through third-party carriers. Shipping and handling costs recorded as a component of selling, general and administrative expenses were $1.4$1.8 million and $1.3$1.5 million for the three months ended December 31,September 30, 2013 and 2012, and 2011, respectively and were $4.2$3.3 million and $3.5$2.8 million for the ninesix months ended December 31,September 30, 2013 and 2012, and 2011, respectively.

Research and Development Costs

Research and development costs consist of the costs incurred to develop new products. These costs include consumer research, prototype development, materials and resources to conduct trial production runs, package development and employee-related costs for personnel responsible for product innovation. Research and development costs recorded as a component of selling, general and administrative expenses were $0.6 million and $0.7 million for the three months ended December 31,September 30, 2013 and 2012, and 2011, respectively and were $2.1$1.2 million and $1.6$1.5 million for the ninesix months ended December 31,September 30, 2013 and 2012, and 2011, respectively.

Advertising Costs

Advertising costs include the costs of producing advertisements and the costs of communicating advertisements. The costs of producing advertisements are expensed as incurred and the costs of communicating advertising are expensed over the period of communication. Total advertising costs for the three months ended December 31,September 30, 2013 and 2012 and 2011 included in selling, general and administrative expenses were $0.2$0.4 million and $0.1 million, respectively. Total advertising costsrespectively, and were $0.6$0.8 million and $0.5$0.4 million for the ninesix months ended December 31,September 30, 2013 and 2012, and 2011, respectively.

Product Recall

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

Annie’s, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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

Net Income Per Share of Common Stock

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

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

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

Out-of-period Adjustment

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

Annie’s, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Inventory

Inventory is comprised of the following (in thousands):

Property and Equipment, Net

Property and equipment, net are comprised of the following (in thousands):

Annie’s, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The Company incurred depreciation expense of $271,000$313,000 and $704,000$607,000 for the three and ninesix months ended December 31, 2012,September 30, 2013, respectively. The depreciation expense for the same periods in the prior year was $270,000$248,000 and $567,000,$433,000, respectively.

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

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

Annie’s, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Intangible Assets, Net

Intangible assets, net are comprised of the following (in thousands):

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

The estimated future amortization expense relating to intangible assets is anticipated to be $15,000 for the remainder of fiscal 2013, $60,0002014, for each of the next five years from fiscal 2014 through fiscal 2018, totaling $300,0002019 and $816,000 after fiscal 2018.thereafter is $30,000, $60,000 and $756,000, respectively.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets as of September 30, 2013 and March 31, 2013 include receivables from contract manufacturers and suppliers of $3.0 million and $3.9 million, respectively.

Accrued Liabilities

The following table shows the components of accrued liabilities (in thousands):

4. Credit Facility

Annie’s, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

In December 2011,2005, the Company entered into a second amendment and restatedbank line of credit agreement (the “Credit Agreement”) with Bank of America, N.A., which providesprovided for revolving loans up to $11.0 million. In March 2008, the Company amended the Credit Agreement with Bank of America to establish an inter-creditor agreement with another lender (Note 7). In August 2010, the Company amended the Credit Agreement to decrease the maximum borrowing limit on revolving loans to $10.0 million and lettersextended the expiration date to August 20, 2012. In December 2011, the Company entered into a second amended and restated credit facility with Bank of America that, among other things, provided for an increase in its line of credit up to $20.0 million and is available toan extension of the term through August 2014. In March 2013, the Company entered into another amendment to its credit facility. This amendment provides for, among other things, an increase in the line of credit to $40.0 million and extension of the term through August 2014.2016. The Credit Agreement is securedcollateralized by substantially all of the Company’s assets.

Revolving advancesThe Company may select from three interest rate options for borrowings under the Credit Agreement bearcredit facility: (i) LIBOR (as defined in the credit facility) plus 1.25%, (ii) IBOR (as defined in the credit facility) plus 1.25% or (iii) Prime Rate (as defined in the credit facility). Weighted average interest atwas 1.4% and 1.5% for the LIBOR plus 1.5%, as defined.three and six months ended September 30, 2013, respectively. Weighted average interest was 1.5% for each of the three and ninesix months ended December 31,September 30, 2012. Weighted average interest was 1.6% and 2.3% forThe Company is required to pay a commitment fee on the three and nine months ended December 31, 2011, respectively.unused credit facility commitments, if the outstanding balance is less than half the commitment at an annual rate ranging from 0.25% to 0.40% depending on the utilization rate. As of December 31, 2012September 30, 2013 and March 31, 2012,2013, there was $20.0$40.0 million and $7.2$33.0 million, respectively, of availability for borrowings under the Credit Agreement. An unused line fee of 0.0625% per quarter is applied to the available balance unless the Company’s outstanding borrowings exceed half of the borrowing limit. Interest is payable monthly.

Annie’s, Inc.

NotesThe credit facility contains restrictions on, among other things, the Company’s ability to Condensed Consolidated Financial Statements

(unaudited)

There are various financialincur additional indebtedness, pay dividends or make other distributions and other covenants undermake investments and loans. The credit facility also limits the Credit Agreement. Financial covenants, asCompany’s ability to make capital expenditures in excess of $15.0 million. The credit facility requires that the Company maintain a Funded Debt (as defined in the Credit Agreement, include a net income covenant, total liabilitiescredit facility) to tangible net worth covenantAdjusted EBITDA (as defined in the credit facility) ratio of not more than 2.75 to 1.0 and a minimum fixed charge coverage covenant.Net Worth (as defined in the credit facility) equal to at least $50.0 million, plus 30% of earnings after taxes earned each quarter (if positive), beginning with the June 2013 quarterly earnings. The Credit Agreement requires the Company to submit interim and annual financial statements by specified dates after each reporting period. The Company was in compliance with the financial covenants under the Credit Agreement as of DecemberSeptember 30, 2013 and March 31, 2012.2013.

AgreementAgreements with Solera Capital, LLC

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

In consideration of Solera providing the services listed above, effective April 1, 2011, the Company was obliged to pay Solera an annual advisory fee of $600,000, payable quarterly. The Company was also obliged to reimburse Solera for out-of-pocket costs and expenses incurred by Solera on behalf of the Company. During the three and nine months ended December 31, 2011, the Company incurred $150,000 and $450,000, respectively, for such consulting and advisory services. The advisory services agreement with Solera wasit terminated upon the consummation of the IPO and as such the Company paid Solera a one-time termination fee of $1.3 million in April 2012.

Lease Commitments

The Company entered into a lease agreement (the “Lease”) for its headquarters at 1610 Fifth Street, Berkeley, California on November 15, 2010 with an initial term that began on March 1, 2011 and expires in February 2016. The space was comprised of 25,127 square feet of office space and 8,384 square feet of warehouse space. Pursuant to the Lease, the landlord reserved the right to elect to recapture fromAdditionally, the Company is a party to an amended and leaserestated registration rights agreement dated as of November 14, 2005, or Registration Rights Agreement, relating to a third party, a portionits shares of the warehouse space comprising not more than 6,525 square feet (“Recapture Space”), subject tocommon stock held by certain termsaffiliates of Solera and conditions provided for by the Lease. Notwithstanding the foregoing, the Company had a right of first refusal to lease the Recapture Space. The lease term for the Recapture Space was coterminous with the initial term, including any extensions. Further, in the event that the landlord did not elect to recapture the Recapture Space, the Company had the right, upon written notice to the landlord, to elect to lease the Recapture Space and the landlord shall build out the Recapture Space for office use.certain other stockholders. On September 25,August 6, 2012, the Company exercisedclosed a secondary public offering, in which certain stockholders, including Solera, sold 3,649,976 shares of common stock at an offering price of $39.25 per share. The Company did not receive any proceeds from the right and entered into an amendment tosale of shares by the Lease (the “Lease Amendment”).

selling stockholders. The Lease Amendment provided (i) for the reconfiguration of the warehouse space to additional office space in order to accommodate growth, and (ii)offering expenses incurred by the Company with a first option to extend the initial term of the Lease for three years (the “First Option”) followed by a second option to extend the Lease for an additional two years (the “Second Option”were $0.7 million, including legal, accounting and togetherprinting costs and various other fees associated with the First Option,registration and sale of common stock sold in the “Option Periods”). The terms, covenantssecondary public offering.

In connection with Solera’s exercise of its rights under the Registration Rights Agreement, the Company filed a registration statement on Form S-3 on July 16, 2013 to register Solera’s remaining shares. In connection with preparations for filing of this registration statement, the Company incurred $86,000 for legal and conditions of the Lease, as amended, will continue to govern the Options Periods, except that the applicable monthly rent for the Option Periods will be equal to 95% of the fair market rental rate for the property, however, the monthly rent payableother out-of-pocket expenses on Solera’s behalf during the Option Periods will not be less than the monthly rent payable during the immediately preceding month of the initial term or First Option period, as applicable. The landlord is required to deliver to the Company a notice of the fair market rental rate for the property no later than August 1, 2015. If the Company does not agree with the proposed fair market rental rate, then the term of the lease will expire at the end of the initial term in February 2016. In such event, the Company will have to reimburse to the landlord an amount not to exceed 40% of the total tenant improvement allowance plus interest, as determined in accordance with the Lease. Concurrently with the execution of the Lease Amendment, the Company exercised the First Option to extend the initial lease for an additional three years to February 2019.six months ended September 30, 2013.

Annie’s, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Pursuant to the Lease Amendment, on September 25, 2012, theCommitments

The Company leases its offices and the landlord entered into a Work Letter Agreement (“Work Letter”) for the Recapture Space which specifies the landlord’s responsibilities and the amount of tenant improvement allowance. Pursuant to the Work Letter, the landlord performed the majority of the structural work.

other equipment under non-cancelable operating leases that expire through fiscal year 2019. Rent expense for non-cancelable operating leases with scheduled rent increases is recognized on a straight-line basis over the lease term. Rent expense for the three and ninesix months ended December 31, 2012September 30, 2013 was $146,000$156,000 and $386,000,$306,000, respectively. Rent expense for the three and ninesix months ended December 31, 2011September 30, 2012 was $80,000$120,000 and $360,000,$239,000, respectively.

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

Purchase Commitments

The Company has material non-cancelable purchase commitments, directly or through contract manufacturers, to purchase ingredients to be used in the future to manufacture its products. As of December 31, 2012,September 30, 2013, the Company’s purchase commitments totaled $14.0$14.5 million, which will substantially be incurred within a year.

TheIn September 2011, the Company hasentered into an agreement with its contract warehousing company that includes minimum overhead fees of $200,000 annually beginning April 1, 2012 through June 30, 2015. As of September 30, 2013, the remaining obligation under the agreement for overhead fees was $350,000.

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

Indemnifications

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

Legal Matters

FromOn September 4, 2013, a private organization called the Center for Environmental Health (“CEH”) issued a 60-day notice of intent to sue (“Notice”) the Company and its subsidiary, Annie’s Homegrown, Inc., under California Health & Safety Code §§ 25249.5 et seq. (commonly referred to as “Proposition 65”). In the Notice, CEH claims that warnings are required in California for alleged exposures to lead and lead compounds from cookies, including Annie’s Gluten-Free Ginger Snap Bunny Cookies. Under Proposition 65, any private enforcer such as CEH may file a lawsuit if it first issues a valid 60-day notice, and if the California Attorney General or other specified California public enforcers do not file suit within 60 days after service. A Proposition 65 plaintiff may seek

Annie’s, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

injunctive relief as well as civil penalties, which may be assessed up to a maximum of $2,500 per violation per day, and a private plaintiff does not need to show that anyone has been harmed by the alleged exposures. A prevailing plaintiff may also seek its attorneys’ fees and costs under other California laws.

Although CEH has not yet filed a lawsuit naming the Company or Annie’s Homegrown, Inc., within the past year CEH has filed several lawsuits against other manufacturers and retailers regarding various types of products containing molasses and/or ginger, such as licorice candy, cookies, and baking mix products. In CEH’s cases involving cookies and baking mix products, CEH’s operative complaints have put at issue only those cookies or baking mix products that contain ginger and/or molasses as ingredients. The Company cannot at this time reasonably estimate a range of exposure, if any, of the potential liability should a suit be brought in connection with the Notice.

Additionally, from time to time, the Company is subject to claims, and assessments or other legal proceedings in the ordinary course of business. The Companybusiness, including product liability claims, employee claims, and other general liability claims. While it is not currently a partyfeasible to any litigation matterpredict or determine the ultimate outcome of these matters, the Company believes that none of these legal proceedings, individually or in the aggregate, is expected towill have a material adverse effect on the Company’s business,its financial condition, results of operations or cash flows.

Annie’s, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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

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

As of December 31, 2012each of September 30, 2013 and March 31, 2012,2013, the Company’s Charter authorized 30,000,000 and 24,000,000 shares of common stock, $0.001 par value per share, respectively, of which 17,328,79716,909,546 and 483,24216,849,016 shares were issued and outstanding, respectively. Each share of the common stock has the right to one vote. The holders of common stock are also entitled to receive dividends out ofwhenever funds are legally available therefor and if, as and when declared by the Company’s boardBoard of directors. During the three and nine months ended December 31, 2011, the Company declared and paid common shareholders a cash dividend of $0.767 and $0.862 per share, respectively, or $363,000 and $408,000, respectively, in the aggregate.Directors. No dividends were declared or paid during the three and ninesix months ended December 31, 2012.September 30, 2013 and 2012, respectively.

The Company has adopted performance incentive plans (the 2004 Stock Option Plan and the Omnibus Incentive Plan, which together are the “Plans”) under which nonqualified stock options, restricted stock units and performance share units are granted to eligible employees, officers and directors. The Company has also granted non-plan performance based option awards to certain key management. Options granted under Plans to date generally vest over a two- to five-year period from the date of grant. Vested options can be exercised and generally expire ten years after the grant date. The restricted stock units granted to employees vest 50% on the second anniversary of the grant date, and the remaining 50% on the third anniversary of the grant date, provided

Annie’s, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

continuance of the employment with the Company. The performance share units granted to employees vest based on achievement of required cumulative compounded adjusted diluted earnings per share growth during the stipulated three-year period ending March 31, 2015.applicable to a grant. Stock-based compensation expense included in selling, general and administrative expenses was $230,000$116,000 and $151,000$231,000 for the three months ended December 31,September 30, 2013 and 2012, and 2011, respectively, and was $677,000$409,000 and $390,000$447,000 for the ninesix months ended December 31,September 30, 2013 and 2012, and 2011, respectively.

The following table summarizes the activity of stock options during the ninesix months ended December 31, 2012:September 30, 2013:

Annie’s, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The weighted average grant date fair value of employee stock options granted during the six months ended September 30, 2013 was $14.03 per share. The total intrinsic value of stock options exercised during the six months ended September 30, 2013 was $1.9 million. The intrinsic value is calculated based on the difference between the exercise price and the fair value of the common stock at time of exercise.

The following table summarizes the activity of unvested restricted stock units and performance share units during the ninesix months ended December 31, 2012:September 30, 2013:

As of December 31, 2012,September 30, 2013, there were 73,333 unvested performance share units outstanding, net of actual forfeitures. As of September 30, 2013, the number of shares estimated to be issued at the end of the performance period(s) is a total of 36,672 shares. The maximum number of total shares that could be issued at the end of performance period(s) is 110,005 shares.

As of September 30, 2013, there was $2.8$3.9 million of total unrecognized compensation cost related to unvested share-based compensation arrangements which is expected to be recognized over a weighted average period of 2.93.1 years.

Annie’s, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The Company offers a retirement savings plan under Section 401(k) ofCompany’s effective tax rate decreased to 40.2% for the Internal Revenue Code. The plan covers all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Under the plan, the Company match was increased from 25% to 50% during three months ended December 31, 2012 upSeptember 30, 2013, compared to a maximum of 6% of eligible compensation, not to exceed $4,000. Contribution expense was not material for the periods presented.

We recognized income tax expense of $0.9 million and $5.0 million40.5% for the three and nine months ended December 31, 2012, compared to $1.5 million and $4.9 million in the same periods last year.September 30, 2012. The effective tax rate was 40.4%40.2% for the ninesix months ended December 31, 2012,September 30, 2013, compared to 39.1% in40.6% for the same period last year.six months ended September 30, 2012. The effective tax rate is based on a projection of our fullthe Company’s annual fiscal year results. OurThe effective tax rate for the ninethree and six months ended December 31, 2012September 30, 2013 was higherlower than the effective tax rate for the ninethree and six months ended December 31, 2011 largelySeptember 30, 2012 due to a tax benefit recorded during the nine months ended December 31, 2011 related to an increase in the tax rate applied for deferred tax assets due to an increase in theimpact of permanent items and federal and state tax rates.

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

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

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

Annie’s, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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

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

Annie’s, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)