**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, DC20549**

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**FORM 10-Q**
| **x**      | ** ** | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934**  |
|------------|------------|----------------------------------------------------------------------------------------------------------|
| ** ** | ** ** | ** **                                                                                               |
| ** ** | ** ** | **For the quarterly period ended June 30, 2006**                                                         |
| ** ** | ** ** | ** **                                                                                               |
| ** ** | ** ** | **OR**                                                                                                   |
| ** ** | ** ** | ** **                                                                                               |
| **o**      | ** ** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |

 

**For the transitionperiod from            to**

**Commission FileNumber:  333-114102**

**MerisantWorldwide, Inc.**

(Exact Name of Registrant as Specified in its Charter)

| **Delaware**                                  | ** ** | **52-2219000**                           |
|-----------------------------------------------|------------|------------------------------------------|
| (State or Other  Jurisdiction of              |       | (I.R.S. Employer  Identification Number) |
| Incorporation or  Organization)               |       |                                     |
|                                          |       |                                     |
| **10  South Riverside Plaza, Suite 850** |       | ** **                               |
| **Chicago,  Illinois**                        |       | **60606**                                |
| (Address of  Principal Executive Offices)     |       | (Zip Code)                               |

 

Registrant’s telephone number, including areacode:  **(312) 840-6000**

Former name, former address and former fiscal year, ifchanged since last report:**Not applicable.**

Indicate by checkmark whether the registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes x    Noo

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the ExchangeAct.

Largeaccelerated filer  o                 Acceleratedfiler  o                 Non-acceleratedfiler  x

Indicateby check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). Yes o No x

Indicate thenumber of shares outstanding of each of the issuer’s classes of common stock,as of the latest practicable date.

As of August 11,2006, the registrant had outstanding 9,089,380 shares of common stock, parvalue $0.01 per share.

 

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**MERISANT WORLDWIDE, INC.**

**INDEX TO REPORT**

**FOR THE QUARTER ENDED JUNE30,2006**
| **PART I—FINANCIAL  INFORMATION** |
|---------------------------------------------|
|                                        |   |   |
| Item 1.                                     |   | Financial Statements of Merisant Worldwide, Inc. |
|                                        |   |   |
|                                        |   | Unaudited Consolidated Balance Sheets at  December 31, 2005 and June 30, 2006 |
|                                        |   |   |
|                                        |   | Unaudited Consolidated Statements of Operations and  Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2005  and 2006 |
|                                        |   |   |
|                                        |   | Unaudited Consolidated Statement of Stockholders’  Deficit for the Six Months Ended June 30, 2006 |
|                                        |   |   |
|                                        |   | Unaudited Consolidated Statements of Cash Flows for  the Six Months Ended June 30, 2005 and 2006 |
|                                        |   |   |
|                                        |   | Notes to Unaudited Consolidated Financial Statements |
|                                        |   |   |
| Item 2.                                     |   | Management’s Discussion and Analysis of Financial  Condition and Results of Operations |
|                                        |   |   |
| Item 3.                                     |   | Quantitative and Qualitative Disclosures About Market  Risk |
|                                        |   |   |
| Item 4.                                     |   | Controls and Procedures |
|                                        |   |   |
| **PART II—OTHER  INFORMATION**    |
|                                        |   |   |
| Item  1.                                    |   | Legal  Proceedings |
|                                        |   |   |
| Item 1A.                                    |   | Risk Factors |
|                                        |   |   |
| Item 4.                                     |   | Submission of Matters to a Vote of Security Holders |
|                                        |   |   |
| Item 6.                                     |   | Exhibits |

 

2

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**PART I**—**FINANCIAL INFORMATION**

**Item1. Financial Statements of Merisant Worldwide, Inc.**

**MERISANT WORLDWIDE, INC.**

**Unaudited Consolidated Balance Sheets**

**(Dollars In Thousands, Except PerShare Amounts)**
|                                                                                                           | ** ** | **At December 31,  2005** | ** ** | **At June 30,  2006** | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|-------------------------------------|------------|---------------------------------|------------|
| **ASSETS**                                                                                                | ** ** | ** **                          | ** ** | ** **                      | ** ** |
| Cash and cash  equivalents                                                                                |       | $                                   | 18,073     |                            | $          | 19,575 |   |
| Trade accounts  receivable, net of allowances of $3,616 and $188, respectively                       |       | 66,323                              |       | 61,747                          |       |
| Other receivables                                                                                         |       | 10,793                              |       | 5,885                           |       |
| Inventories                                                                                               |       | 29,201                              |       | 22,181                          |       |
| Prepaid expenses and  other assets                                                                        |       | 2,796                               |       | 2,333                           |       |
| Current portion of note  receivable from director                                                         |       | 970                                 |       | 970                             |       |
| Deferred income taxes                                                                                     |       | 474                                 |       | 692                             |       |
| Total current  assets                                                                                     |       | 128,630                             |       | 113,383                         |       |
| Property and equipment,  net                                                                              |       | 29,681                              |       | 26,238                          |       |
| Trademarks, less  accumulated amortization of $128,587 and $139,692, respectively                         |       | 213,432                             |       | 202,327                         |       |
| Goodwill                                                                                                  |       | 107,209                             |       | 107,209                         |       |
| Deferred financing  costs, less accumulated amortization of $6,540 and $6,536, respectively               |       | 16,172                              |       | 17,515                          |       |
| Non-current portion of  note receivable from director                                                     |       | 3,430                               |       | 2,540                           |       |
| Investment in equity  affiliate                                                                           |       | 362                                 |       | 382                             |       |
| Other non-current  assets                                                                                 |       | 1,309                               |       | 1,195                           |       |
| Total assets                                                                                              |       | $                                   | 500,225    |                            | $          | 470,789 |   |
|                                                                                                      |       |                                |       |                            |       |
| **LIABILITIES AND STOCKHOLDERS’  DEFICIT**                                                           | ** ** | ** **                          | ** ** | ** **                      | ** ** |
| Accounts payable                                                                                          |       | $                                   | 16,237     |                            | $          | 16,105 |   |
| Income taxes payable                                                                                      |       | 1,933                               |       | 610                             |       |
| Accrued interest  expense                                                                                 |       | 12,855                              |       | 12,170                          |       |
| Accrued trade and  consumer promotions                                                                    |       | 18,648                              |       | 15,349                          |       |
| Accrued expenses and  other liabilities                                                                   |       | 19,041                              |       | 15,667                          |       |
| Current maturities of  long-term obligations                                                              |       | 25,750                              |       | 7,810                           |       |
| Total current  liabilities                                                                                |       | 94,464                              |       | 67,711                          |       |
| Long-term obligations                                                                                     |       | 512,877                             |       | 536,063                         |       |
| Deferred income tax  liabilities                                                                          |       | 14,317                              |       | 17,084                          |       |
| Other liabilities                                                                                         |       | 14,257                              |       | 12,761                          |       |
| Total  liabilities                                                                                        |       | 635,915                             |       | 633,619                         |       |
| Commitments and  contingencies (Note 7)                                                                   |       |                                |       |                            |       |
| Stockholders’ Deficit:                                                                               |       |                                |       |                            |       |
| Common stock,  $0.01 par value, 10,000,000 shares authorized, 9,169,552 issued and 9,089,380  outstanding |       | 91                                  |       | 91                              |       |
| Due for purchase  of common stock                                                                         |       | (767                                | )          | (767                            | )          |
| Retained deficit                                                                                          |       | (126,262                            | )          | (154,262                        | )          |
| Accumulated  other comprehensive loss                                                                     |       | (7,031                              | )          | (6,171                          | )          |
|                                                                                                      |       | (133,969                            | )          | (161,109                        | )          |
| Less cost of  treasury stock (80,172 shares)                                                              |       | (1,721                              | )          | (1,721                          | )          |
| Total  stockholders’ deficit                                                                         |       | (135,690                            | )          | (162,830                        | )          |
| Total liabilities and  stockholders’ deficit                                                         |       | $                                   | 500,225    |                            | $          | 470,789 |   |

 

The accompanying notes are an integral part ofthese unaudited consolidated financial statements.

3

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**MERISANTWORLDWIDE, INC.**

**Unaudited ConsolidatedStatements of Operations and**

**Comprehensive Income (Loss)**

**(Dollars InThousands)**
|                                    | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                         | ** ** | **2005**                                        | ** ** | **2006**                                      | ** ** | **2005** | ** ** | **2006** | ** ** |
|                               |       |                                            |       |                                          |       |   |   |   |   |
| Net sales                          |       | $                                               | 79,159     |                                          | $          | 78,629 |   | $ | 155,064 |   | $ | 148,296 |   |
| Cost of sales                      |       | 33,322                                          |       | 32,604                                        |       | 64,737 |   | 61,619 |   |
|                               |       |                                            |       |                                          |       |   |   |   |   |
| Gross profit                       |       | 45,837                                          |       | 46,025                                        |       | 90,327 |   | 86,677 |   |
|                               |       |                                            |       |                                          |       |   |   |   |   |
| Operating expenses:                |       |                                            |       |                                          |       |   |   |   |   |
| Marketing and  selling expenses    |       | 19,655                                          |       | 22,201                                        |       | 40,874 |   | 39,109 |   |
| Administration  expenses           |       | 10,539                                          |       | 10,814                                        |       | 21,967 |   | 22,573 |   |
| Amortization of  intangible assets |       | 5,552                                           |       | 5,554                                         |       | 11,108 |   | 11,108 |   |
| Transaction fees                   |       | (381                                            | )          | 3,300                                         |       | (441 | ) | 3,300 |   |
| Restructuring  expenses            |       | 564                                             |       | 1,305                                         |       | 1,912 |   | 3,596 |   |
|                               |       |                                            |       |                                          |       |   |   |   |   |
| Total operating  expenses          |       | 35,929                                          |       | 43,174                                        |       | 75,420 |   | 79,686 |   |
|                               |       |                                            |       |                                          |       |   |   |   |   |
| Income from operations             |       | 9,908                                           |       | 2,851                                         |       | 14,907 |   | 6,991 |   |
|                               |       |                                            |       |                                          |       |   |   |   |   |
| Other expense (income):            |       |                                            |       |                                          |       |   |   |   |   |
| Interest income                    |       | (329                                            | )          | (216                                          | )          | (470 | ) | (364 | ) |
| Interest expense                   |       | 14,725                                          |       | 16,942                                        |       | 28,827 |   | 30,876 |   |
| Other expense  (income), net       |       | (4,570                                          | )          | 1,329                                         |       | (8,893 | ) | 1,538 |   |
|                               |       |                                            |       |                                          |       |   |   |   |   |
| Total other  expense               |       | 9,826                                           |       | 18,055                                        |       | 19,464 |   | 32,050 |   |
|                               |       |                                            |       |                                          |       |   |   |   |   |
| Income (loss) before  income taxes |       | 82                                              |       | (15,204                                       | )          | (4,557 | ) | (25,059 | ) |
| Provision for income  taxes        |       | 1,727                                           |       | 2,688                                         |       | 3,930 |   | 2,941 |   |
|                               |       |                                            |       |                                          |       |   |   |   |   |
| Net loss                           |       | $                                               | (1,645     | )                                             | $          | (17,892 | ) | $ | (8,487 | ) | $ | (28,000 | ) |
|                               |       |                                            |       |                                          |       |   |   |   |   |
| Net loss from above                |       | $                                               | (1,645     | )                                             | $          | (17,892 | ) | $ | (8,487 | ) | $ | (28,000 | ) |
| Other comprehensive  income (loss) |       | (291                                            | )          | 662                                           |       | (3,172 | ) | 860 |   |
|                               |       |                                            |       |                                          |       |   |   |   |   |
| Total comprehensive loss           |       | $                                               | (1,936     | )                                             | $          | (17,230 | ) | $ | (11,659 | ) | $ | (27,140 | ) |

 

The accompanying notes are anintegral part of these unaudited consolidated financial statements.

4

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**MERISANTWORLDWIDE, INC.**

**Unaudited ConsolidatedStatement of Stockholders’ Deficit**

**(Dollars InThousands)**
|                                          | ** ** | **Common  Stock** | ** ** | **Due for Purchase  of Common Stock** | ** ** | **Retained  Deficit** | ** ** | **Accumulated  Other  Comprehensive  Loss** | ** ** | **Treasury  Stock,  at Cost** | ** ** | **Total** | ** ** |
|------------------------------------------|------------|-------------------|------------|-----------------------------------------------------------|------------|-----------------------|------------|---------------------------------------------|------------|------------------------------------|------------|-----------|------------|
| Balance at  December 31, 2005       |       | $                 | 91         |                                                      | $          | (767                  | )          | $                                           | (126,262   | )                                  | $          | (7,031    | )          | $ | (1,721 | ) | $ | (135,690 | ) |
| Foreign currency  translation adjustment |       | —            |       | —                                                    |       | —                |       | 860                                         |       | —                             |       | 860       |       |
| Net loss                                 |       | —            |       | —                                                    |       | (28,000               | )          | —                                      |       | —                             |       | (28,000   | )          |
| Balance at June 30, 2006                 |       | $                 | 91         |                                                      | $          | (767                  | )          | $                                           | (154,262   | )                                  | $          | (6,171    | )          | $ | (1,721 | ) | $ | (162,830 | ) |

 

The accompanying notes are anintegral part of these unaudited consolidated financial statements.

5

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**MERISANTWORLDWIDE, INC.**

**Unaudited ConsolidatedStatements of Cash Flows**

**(Dollars InThousands)**
|                                                                                            | ** ** | **Six Months Ended  June 30,** | ** ** |
|--------------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                                 | ** ** | **2005**                                      | ** ** | **2006** | ** ** |
| **Operating Activities**                                                                   | ** ** | ** **                                    | ** ** | ** ** | ** ** |
| Net loss                                                                                   |       | $                                             | (8,487     | ) | $ | (28,000 | ) |
| Adjustments to  reconcile net loss to net cash provided by (used in) operating activities: |       |                                          |       |   |   |
| Depreciation                                                                               |       | 5,248                                         |       | 4,315 |   |
| Loss on sale or  disposal of fixed assets                                                  |       | 30                                            |       | 85 |   |
| Amortization of  intangible assets                                                         |       | 11,108                                        |       | 11,108 |   |
| Amortization of  deferred financing costs                                                  |       | 1,386                                         |       | 1,609 |   |
| Interest  accretion on senior subordinated discount notes                                  |       | 5,622                                         |       | 5,969 |   |
| Write off of  deferred financing costs                                                     |       | —                                        |       | 2,478 |   |
| Euro-denominated  loan foreign exchange (gain) loss                                        |       | (4,800                                        | )          | 1,928 |   |
| Unrealized gain  on derivative instruments                                                 |       | (3,983                                        | )          | — |   |
| Realized gain on  derivative instruments                                                   |       | —                                        |       | (694 | ) |
| Equity in income  of affiliate                                                             |       | (67                                           | )          | (21 | ) |
| Deferred income  tax provision                                                             |       | 867                                           |       | 2,569 |   |
| Changes in  operating assets and liabilities:                                              |       |                                          |       |   |   |
| Trade accounts  receivable                                                                 |       | 11,887                                        |       | 5,433 |   |
| Other  receivables                                                                         |       | 3,891                                         |       | 5,761 |   |
| Inventories                                                                                |       | (11,597                                       | )          | 7,500 |   |
| Prepaid expenses  and other assets                                                         |       | 948                                           |       | 574 |   |
| Accounts payable                                                                           |       | (7,460                                        | )          | (181 | ) |
| Accrued expenses  and other                                                                |       | (6,146                                        | )          | (9,882 | ) |
| Net cash  provided by (used in) operating activities                                       |       | (1,553                                        | )          | 10,551 |   |
| **Investing Activities**                                                                   | ** ** | ** **                                    | ** ** | ** ** | ** ** |
| Proceeds from  sale of property and equipment                                              |       | 65                                            |       | 26 |   |
| Purchases of  property and equipment                                                       |       | (1,349                                        | )          | (1,330 | ) |
| Net cash used in  investing activities                                                     |       | (1,284                                        | )          | (1,304 | ) |
| **Financing Activities**                                                                   | ** ** | ** **                                    | ** ** | ** ** | ** ** |
| Net borrowings  (payments) under revolving credit facility                                 |       | 10,000                                        |       | (16,000 | ) |
| Borrowings under  long-term obligations                                                    |       | —                                        |       | 85,095 |   |
| Principal  payments on long-term obligations, excluding revolving credit facility          |       | (4,992                                        | )          | (71,480 | ) |
| Payment of  deferred financing costs                                                       |       | (1,219                                        | )          | (5,429 | ) |
| Net cash  provided by (used in) financing activities                                       |       | 3,789                                         |       | (7,814 | ) |
| Effect of exchange rate  on cash and cash equivalents                                      |       | (335                                          | )          | 68 |   |
| Net increase in cash  and cash equivalents                                                 |       | 617                                           |       | 1,501 |   |
|                                                                                       |       |                                          |       |   |   |
| Cash and cash  equivalents at beginning of period                                          |       | 9,103                                         |       | 18,074 |   |
| Cash and cash equivalents at end of period                                                 |       | $                                             | 9,720      |   | $ | 19,575 |   |

 

The accompanying notes are anintegral part of these unaudited consolidated financial statements.

6

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**MERISANTWORLDWIDE, INC.**

**Notes to UnauditedConsolidated Financial Statements**

**(Dollars InThousands)**

**1.**                                      Principlesof Consolidation

The consolidated financial statementsand notes do not contain certain information included in the annualconsolidated financial statements and notes of Merisant Worldwide, Inc. andsubsidiaries.  Unless otherwise indicatedor unless the context otherwise requires, all references to the “Company” meanMerisant Worldwide, Inc. and its consolidated subsidiaries.  The consolidated balance sheet atDecember 31, 2005 was derived from the Company’s audited consolidatedfinancial statements, but does not include all disclosures required bygenerally accepted accounting principles in the United States of America (“GAAP”).The remaining consolidated financial statements are unaudited. In the opinionof management, all normal, recurring adjustments necessary for a fairpresentation of such unaudited financial statements have been included therein.For interim reporting purposes, certain marketing and advertising expenses arecharged to results of operations as a percentage of sales. Interim results maynot be indicative of results for a full year. These unaudited consolidatedfinancial statements and notes should be read in conjunction with the Company’sannual consolidated financial statements.

The preparation of consolidatedfinancial statements in conformity with generally accepted accountingprinciples requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities, disclosure of contingent assetsand liabilities at the date of the consolidated financial statements and thereported amounts of revenues and expenses during the reporting period. Actualresults could differ from those estimates.

The Company adopted FASB No. 123(R),“Share-Based Payment—An Amendment of FASB Statements No. 123 and 95”on January 1, 2006, which requires a fair value approach to expensing thecost of stock-based payments to employees. Adoption of this pronouncement hadno impact on the Company’s consolidated financial statements.

**2.****                                     ****Segment Information**

The Company manufactures and marketsprimarily low-calorie tabletop sweeteners globally. Therefore, the Company’s reportable segments are organized and managed principally by geographicregion:  North America;Europe/Africa/Middle East, referred to as EAME; Latin America; andAsia/Pacific. The Company’s management reviews Operating EBITDA to evaluatesegment performance and allocate resources. Operating EBITDA consists ofsegment earnings before interest expense, income tax expense, depreciation andamortization as well as items such as expenses related to start up costs,restructuring charges, certain significant charges related to new productdevelopment and launch costs, costs related to the transition to a newexclusive distributor in the United States and certain other non-cash orexcludable charges or losses. Other expense (income), net, as reported in theunaudited consolidated financial statements, is included in Operating EBITDA ofthe respective reportable segments, except for the portion of other expense(income), net that relates to the foreign currency transaction gains or lossesassociated with the Company’s euro-denominated debt (see Note 5) and unrealizedgains or losses on derivative instruments. Corporate expenses include corporatestaff and related amounts. Corporate expenses, interest and other expenses andthe provision for income taxes are centrally managed and, accordingly, suchitems are not presented by segment since they are excluded from the measure ofsegment performance reviewed by management. The Company launched a new productline in North America in the first quarter of 2006 which management will beevaluating and managing separately from its other North American operations. Assuch, this item will also be excluded from the measure of segment performancereviewed by management. The Company’s assets, which are principally in theUnited States and Europe, are also managed geographically. A summary of theCompany’s results of operations by reportable segment for the three and sixmonths ended June 30, 2005 and 2006 is as follows:

7

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**MERISANT WORLDWIDE, INC.****Notes to Unaudited ConsolidatedFinancial Statements (Continued)****(Dollars In Thousands)**

**For theThree Months Ended June 30, 2005**
|                                            | ** ** | **North  America** | ** ** | **EAME** | ** ** | **Latin  America** | ** ** | **Asia/  Pacific** | ** ** | **Consolidated** | ** ** |
|--------------------------------------------|------------|--------------------|------------|----------|------------|--------------------|------------|--------------------|------------|------------------|------------|
|                                       |       |               |       |     |       |               |       |               |       |             |       |
| Total net sales for  reportable segments   |       | $                  | 29,329     |     | $          | 37,473             |       | $                  | 7,185      |             | $          | 5,172 |   | $ | 79,159 |   |
|                                       |       |               |       |     |       |               |       |               |       |             |       |
| Operating EBITDA                           |       | $                  | 9,210      |     | $          | 12,461             |       | $                  | 1,546      |             | $          | 1,896 |   | $ | 25,113 |   |
| Less (plus):                               |       |               |       |     |       |               |       |               |       |             |       |
| Corporate expenses                         |       |               |       |     |       |               |       |               |       | 6,138            |       |
| Restructuring expense                      |       |               |       |     |       |               |       |               |       | 564              |       |
| Depreciation expense                       |       |               |       |     |       |               |       |               |       | 2,692            |       |
| Loss on sale or  disposal of fixed assets  |       |               |       |     |       |               |       |               |       | 14               |       |
| Amortization expense                       |       |               |       |     |       |               |       |               |       | 5,552            |       |
| Currency gain on euro  debt                |       |               |       |     |       |               |       |               |       | (2,362           | )          |
| Unrealized gain on  derivative instruments |       |               |       |     |       |               |       |               |       | (1,546           | )          |
| Transaction fees                           |       |               |       |     |       |               |       |               |       | (381             | )          |
| Other non-cash income                      |       |               |       |     |       |               |       |               |       | (36              | )          |
| Other income, net                          |       |               |       |     |       |               |       |               |       | 4,570            |       |
| Income from operations                     |       |               |       |     |       |               |       |               |       | 9,908            |       |
| Interest expense, net                      |       |               |       |     |       |               |       |               |       | 14,396           |       |
| Other income, net                          |       |               |       |     |       |               |       |               |       | (4,570           | )          |
| Income before income taxes                 |       |               |       |     |       |               |       |               |       | $                | 82         |   |

 

**For the Three Months Ended June30, 2006**
|                                                                      | ** ** | **North  America** | ** ** | **EAME** | ** ** | **Latin  America** | ** ** | **Asia/  Pacific** | ** ** | **Consolidated** | ** ** |
|----------------------------------------------------------------------|------------|--------------------|------------|----------|------------|--------------------|------------|--------------------|------------|------------------|------------|
|                                                                 |       |               |       |     |       |               |       |               |       |             |       |
| Total net sales for reportable segments                              |       | $                  | 33,025     |     | $          | 31,945             |       | $                  | 8,291      |             | $          | 5,360 |   | $ | 78,621 |   |
| Plus: Net sales related to new product launch                        |       |               |       |     |       |               |       |               |       | 8                |       |
| Total consolidated net sales                                         |       |               |       |     |       |               |       |               |       | $                | 78,629     |   |
|                                                                 |       |               |       |     |       |               |       |               |       |             |       |
| Operating EBITDA                                                     |       | $                  | 12,263     |     | $          | 6,354              |       | $                  | 2,502      |             | $          | 1,836 |   | $ | 22,955 |   |
| Less (plus):                                                         |       |               |       |     |       |               |       |               |       |             |       |
| Corporate expenses                                                   |       |               |       |     |       |               |       |               |       | 6,723            |       |
| Restructuring expense                                                |       |               |       |     |       |               |       |               |       | 1,305            |       |
| Depreciation expense                                                 |       |               |       |     |       |               |       |               |       | 2,136            |       |
| Loss on sale or disposal of fixed assets                             |       |               |       |     |       |               |       |               |       | 35               |       |
| Amortization expense                                                 |       |               |       |     |       |               |       |               |       | 5,554            |       |
| Currency loss on euro debt                                           |       |               |       |     |       |               |       |               |       | 1,345            |       |
| Loss related to new product launch                                   |       |               |       |     |       |               |       |               |       | 947              |       |
| Transition costs for  new exclusive distributor in the United States |       |               |       |     |       |               |       | 81                 |       |
| Transaction fees                                                     |       |               |       |     |       |               |       |               |       | 3,300            |       |
| Other non-cash expense                                               |       |               |       |     |       |               |       |               |       | 7                |       |
| Other expense, net                                                   |       |               |       |     |       |               |       |               |       | (1,329           | )          |
| Income from operations                                               |       |               |       |     |       |               |       |               |       | 2,851            |       |
| Interest expense, net                                                |       |               |       |     |       |               |       |               |       | 16,726           |       |
| Other expense, net                                                   |       |               |       |     |       |               |       |               |       | 1,329            |       |
| Loss before income taxes                                             |       |               |       |     |       |               |       |               |       | $                | (15,204    | ) |

 

8

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**MERISANT WORLDWIDE, INC.****Notes to Unaudited ConsolidatedFinancial Statements (Continued)****(Dollars In Thousands)**

**For the SixMonths Ended June 30, 2005**
|                                                                 | ** ** | **North  America** | ** ** | **EAME** | ** ** | **Latin  America** | ** ** | **Asia/  Pacific** | ** ** | **Consolidated** | ** ** |
|-----------------------------------------------------------------|------------|--------------------|------------|----------|------------|--------------------|------------|--------------------|------------|------------------|------------|
|                                                            |       |               |       |     |       |               |       |               |       |             |       |
| Total net sales for reportable segments                         |       | $                  | 57,538     |     | $          | 71,811             |       | $                  | 15,631     |             | $          | 10,084 |   | $ | 155,064 |   |
|                                                            |       |               |       |     |       |               |       |               |       |             |       |
| Operating EBITDA                                                |       | $                  | 18,795     |     | $          | 19,580             |       | $                  | 3,949      |             | $          | 3,003 |   | $ | 45,327 |   |
| Less (plus):                                                    |       |               |       |     |       |               |       |               |       |             |       |
| Corporate expenses                                              |       |               |       |     |       |               |       |               |       | 12,318           |       |
| Restructuring expense                                           |       |               |       |     |       |               |       |               |       | 1,912            |       |
| Depreciation and impairment expense                             |       |               |       |     |       |               |       |               |       | 5,248            |       |
| Loss on sale or disposal of fixed assets                        |       |               |       |     |       |               |       |               |       | 30               |       |
| Amortization expense                                            |       |               |       |     |       |               |       |               |       | 11,108           |       |
| Currency gain on euro debt                                      |       |               |       |     |       |               |       |               |       | (4,800           | )          |
| Unrealized gain on derivative instruments                       |       |               |       |     |       |               |       |               |       | (3,983           | )          |
| Provision for doubtful  accounts excluded from Operating EBITDA |       |               |       |     |       |               |       | 141                |       |
| Transaction fees                                                |       |               |       |     |       |               |       |               |       | (441             | )          |
| Other non-cash income                                           |       |               |       |     |       |               |       |               |       | (6               | )          |
| Other income, net                                               |       |               |       |     |       |               |       |               |       | 8,893            |       |
| Income from operations                                          |       |               |       |     |       |               |       |               |       | 14,907           |       |
| Interest expense, net                                           |       |               |       |     |       |               |       |               |       | 28,357           |       |
| Other income, net                                               |       |               |       |     |       |               |       |               |       | (8,893           | )          |
| Income before income taxes                                      |       |               |       |     |       |               |       |               |       | $                | (4,557     | ) |

 

**For the Six Months Ended June 30,2006**
|                                                                      | ** ** | **North  America** | ** ** | **EAME** | ** ** | **Latin  America** | ** ** | **Asia/  Pacific** | ** ** | **Consolidated** | ** ** |
|----------------------------------------------------------------------|------------|--------------------|------------|----------|------------|--------------------|------------|--------------------|------------|------------------|------------|
|                                                                 |       |               |       |     |       |               |       |               |       |             |       |
| Total net sales for reportable segments                              |       | $                  | 62,917     |     | $          | 60,742             |       | $                  | 14,706     |             | $          | 9,905 |   | $ | 148,270 |   |
| Plus: Net sales related to new product launch                        |       |               |       |     |       |               |       |               |       | 26               |       |
| Total consolidated net sales                                         |       |               |       |     |       |               |       |               |       | $                | 148,296    |   |
|                                                                 |       |               |       |     |       |               |       |               |       |             |       |
| Operating EBITDA                                                     |       | $                  | 22,848     |     | $          | 15,719             |       | $                  | 3,626      |             | $          | 3,362 |   | $ | 45,555 |   |
| Less (plus):                                                         |       |               |       |     |       |               |       |               |       |             |       |
| Corporate expenses                                                   |       |               |       |     |       |               |       |               |       | 14,174           |       |
| Restructuring expense                                                |       |               |       |     |       |               |       |               |       | 3,596            |       |
| Depreciation expense                                                 |       |               |       |     |       |               |       |               |       | 4,314            |       |
| Loss on sale or disposal of fixed assets                             |       |               |       |     |       |               |       |               |       | 61               |       |
| Amortization expense                                                 |       |               |       |     |       |               |       |               |       | 11,108           |       |
| Currency loss on euro debt                                           |       |               |       |     |       |               |       |               |       | 1,928            |       |
| Realized gain on derivative instruments                              |       |               |       |     |       |               |       |               |       | (694             | )          |
| Loss on liquidation or sale of subsidiary                            |       |               |       |     |       |               |       |               |       | 144              |       |
| Loss related to new product launch                                   |       |               |       |     |       |               |       |               |       | 1,487            |       |
| Transition costs for  new exclusive distributor in the United States |       |               |       |     |       |               |       | 673                |       |
| Transaction fees                                                     |       |               |       |     |       |               |       |               |       | 3,300            |       |
| Other non-cash expense                                               |       |               |       |     |       |               |       |               |       | 11               |       |
| Other expense, net                                                   |       |               |       |     |       |               |       |               |       | (1,538           | )          |
| Income from operations                                               |       |               |       |     |       |               |       |               |       | 6,991            |       |
| Interest expense, net                                                |       |               |       |     |       |               |       |               |       | 30,512           |       |
| Other expense, net                                                   |       |               |       |     |       |               |       |               |       | 1,538            |       |
| Loss before income taxes                                             |       |               |       |     |       |               |       |               |       | $                | (25,059    | ) |

** **

9

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**MERISANTWORLDWIDE, INC.Notes to Unaudited Consolidated Financial Statements (Continued)(Dollars In Thousands)**

**3.****                                     ****Restructuring Expenses**

During the six months ended June 30,2006, the Company continued to evaluate opportunities to increase efficiencyand reduce costs. This review resulted in the continuation of workforcereductions and planned changes in the Company’s global business model. Theseactions are designed to improve both financial results and the long-term valueof the business. Restructuring expenses for workforce reductions of  $564 and $1,305 were recorded for the threemonths ended June 30, 2005 and June 30, 2006, respectively, and $1,912 and$3,596 were recorded for the six months ended June 30, 2005 and 2006, respectively.The 2006 charges principally related to planned termination costs foremployees, including charges related to 63 additional personnel that werenotified of their termination during the six months ended June 30, 2006 and tocontinuing provisions for previously notified employees being recorded overtheir stay periods. Severance payments and benefits are scheduled to be madeover the next five months.

Reconciliation of the restructuringliability at June 30, 2006 is as follows: 

| Restructuring liability at  December 31, 2005             |   | $      | 2,677  |   |
|----------------------------------------------------------------|--------|--------|--------|--------|
| Restructuring  expenses for the six months ended June 30, 2006 |   | 3,596  |   |
| Cash payments  for the six months ended June 30, 2006          |   | (5,492 | )      |
| Restructuring liability  at June 30, 2006                      |   | $      | 781    |   |

 

The restructuring liability atDecember 31, 2005 and June 30, 2006 is included in the line item “Accruedexpenses and other liabilities” in the accompanying consolidated balancesheets.

The following table representsrestructuring expenses included in each segment and corporate expenses for thethree and six months ended June 30, 2005 and 2006:

|               | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|---------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **    | ** ** | **2005**                                        | ** ** | **2006**                                      | ** ** | **2005** | ** ** | **2006** | ** ** |
|          |       |                                            |       |                                          |       |   |   |   |   |
| North America |       | $                                               | 139        |                                          | $          | 38 |   | $ | 139 |   | $ | 103 |   |
| EAME          |       | 9                                               |       | 634                                           |       | 1,065 |   | 1,867 |   |
| Latin America |       | 256                                             |       | 451                                           |       | 333 |   | 1,039 |   |
| Asia/Pacific  |       | 39                                              |       | 53                                            |       | 39 |   | 505 |   |
| Corporate     |       | 121                                             |       | 129                                           |       | 336 |   | 82 |   |
| Total         |       | $                                               | 564        |                                          | $          | 1,305 |   | $ | 1,912 |   | $ | 3,596 |   |

 

**4.**                                      Inventories

Inventories consisted of thefollowing at December 31, 2005 and June 30, 2006:

|                                  | ** ** | **December 31, 2005** | ** ** | **June 30, 2006** | ** ** |
|----------------------------------|------------|---------------------------------|------------|-----------------------------|------------|
|                             |       |                            |       |                        |       |
| Raw materials  and supplies      |       | $                               | 15,594     |                        | $          | 11,641 |   |
| Work in process                  |       | 1,822                           |       | 1,105                       |       |
| Finished goods                   |       | 16,221                          |       | 11,445                      |       |
| Inventory  obsolescence reserves |       | (4,436                          | )          | (2,010                      | )          |
| Total                            |       | $                               | 29,201     |                        | $          | 22,181 |   |

 

In the three months ended June 30,2006, the Company shipped certain fully reserved finished goods, with anoriginal cost of $1,390, to Icon International, Inc. (“Icon”) in exchange fortrade credits totaling $1,390. The trade credits could be used in the future toreduce the Company’s cost of goods or services made available throughreasonable efforts by Icon.  Goods or

10

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**MERISANT WORLDWIDE, INC.****Notes to Unaudited ConsolidatedFinancial Statements (Continued)****(Dollars In Thousands)**

services available from Icon are notcurrently likely to be required by the Company in sufficient volume to usemost, if any, of the credits, and as such they have been fully reserved and norevenues were recorded for this transaction.

**5.**                                      Debt

The Company is highly leveraged. AtJune 30, 2006, the Company and its subsidiaries, including Merisant Company (“Merisant”),had $543,746 of long-term debt outstanding, consisting of $103,417 aggregateprincipal amount of the Company’s 12 1⁄4% senior subordinated discount notes due2014 (the “Discount Notes”), $225,000 aggregate principal amount of Merisant’s9 1⁄2% senior subordinated notes due 2013 (the “Notes”), $130,329 aggregateprincipal amount outstanding under Merisant’s senior credit agreement (the “SeniorCredit Agreement”) and $85,000 aggregate principal amount outstanding underMerisant’s second lien credit agreement (the “Second Lien Credit Agreement”),excluding capital lease obligations of $127 and unused commitments on therevolving portion of the Senior Credit Agreement.

At June 30, 2006, borrowings underthe Senior Credit Agreement included $22,438 (“Term A”) aggregate principalamount of term loans bearing annual interest of 6.07% and $107,891 (“Term B”)aggregate principal amount of term loans bearing annual interest of 8.38%. TheTerm A loans are euro-denominated and are translated into U.S. dollars at thespot rate as of June 30, 2006. At June 30, 2006, all of Merisant’s maximum$35,000 borrowing capacity was available under the revolving loan facilityunder its Senior Credit Agreement.

At June 30, 2006, borrowings underthe Second Lien Credit Agreement included $85,000 aggregate principal amountof  term loans bearing annual interest of13.98%.

Merisant paid interest on borrowingsunder the Senior Credit Agreement and on the Notes totaling $20,337 and $21,369for the six months ended June 30, 2005 and 2006, respectively.  No interest was paid on borrowings under theSecond Lien Credit Agreement during these periods.

On March 29, 2006, the lendersholding a majority of the aggregate principal amount of outstanding loans andrevolver commitments under the Senior Credit Agreement agreed to amend theterms of the Senior Credit Agreement (the “Fourth Amendment”) and waived atechnical default related to the use of proceeds from the repayment of theinter-company loan between Merisant and its Swiss subsidiary. Among otherthings, the Fourth Amendment amended the financial covenants as ofDecember 31, 2005, adjusted the financial covenants through the maturitydate of loans outstanding under the Senior Credit Agreement, incorporated newfinancial covenants, adjusted the interest rate on borrowings under the SeniorCredit Agreement, amended the definition of Bank EBITDA to provide additional “addbacks” related to Merisant’s restructuring and new product development efforts,and amended certain other covenants. The Fourth Amendment also requiredMerisant to refinance a portion of the loans outstanding with the proceeds of aborrowing secured by a second lien on all of the assets securing Merisant’sobligations under the Senior Credit Agreement or, in the alternative, refinancethe Senior Credit Agreement in its entirety by January 2, 2007. The FourthAmendment increased the interest rates of all term loans and revolver loansunder the Senior Credit Agreement to euro-LIBOR or LIBOR plus 425 basis pointscommencing on the date of the Fourth Amendment.

On June 23, 2006, Merisant enteredinto the Second Lien Credit Agreement. The Second Lien Credit Agreement consists of an aggregate of $85,000principal amount of term loans, the net proceeds of which were used to prepay$9,540 of euro-denominated Term A loans, prepay $53,320 million of Term B loansand to repay $15,000 of revolving loans, in each case, outstanding under theSenior Credit Agreement.  The maturitydate of the term loans outstanding under the Second Lien Credit Agreement isJune 11, 2010. The Second Lien Credit Agreement satisfied Merisant’srefinancing obligation under the Fourth Amendment and the interest rate onloans under the Senior Credit Agreement reverted to euro-LIBOR or LIBOR plus325 basis points upon the completion of the Second Lien Credit Agreement.  In conjunction with the Second Lien CreditAgreement, Merisant incurred fees of approximately $7,161, of which $3,861 arebeing amortized over the term of the loan and $3,300 were recorded astransaction fees.  The extinguishment ofthe debt under the Senior Credit Agreement resulted in a write-off of existingdeferred financing fees totaling $2,478.

11

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**MERISANT WORLDWIDE, INC.****Notes to Unaudited ConsolidatedFinancial Statements (Continued)****(Dollars In Thousands)**

Depending on the type of borrowing byMerisant, the applicable interest rate under the Second Lien Credit Agreementis calculated as a per annum rate equal to (a) LIBOR plus 850 basis points or(b) (i) the greater of (x) the prime rate or (y) the federal funds effectiverate plus 0.5% plus (ii) 750 basis points.

The Second Lien Credit Agreementcontains provisions for mandatory prepayments of outstanding loans with 100% ofthe net cash proceeds of asset sales, recovery events and debt issuances and50% of the net cash proceeds of equity issuances, subject to certainexceptions. Merisant may prepay the term loans under the Second Lien CreditAgreement in whole or in part at any time. If Merisant makes any such prepayments during the first three years ofthe credit facility, it must pay a premium of 3%, 2% and 1% of the aggregateprincipal amount of term loans prepaid in the first, second and third years ofthe Second Lien Credit Agreement, respectively, except that these prepaymentpremiums will be reduced to 1.5%, 1% and 0.5%, respectively on the first $25.5million aggregate principal amount of the term loans prepaid with the net cashproceeds from an equity issuance by the Company.

The obligations under the Second LienCredit Agreement are guaranteed by the Company and Merisant’s domesticsubsidiaries, and are secured by a lien on substantially all of the assets ofthe Company, Merisant and each subsidiary guarantor, including a pledge of 65%of the ownership interests in each first-tier foreign subsidiary held by aguarantor, with certain exceptions.

On June 23, 2006, Merisant enteredinto a Fifth Amendment to the Senior Credit Agreement (the “Fifth Amendment”)to accommodate the Second Lien Credit Agreement and to effect certain otheramendments that are intended to facilitate transactions aimed at de-leveragingthe Company’s capital structure.  Noassurances can be made that any such transactions will be initiated by theCompany or, if initiated, will be successful in de-leveraging the Company.

The Senior Credit Agreement and theSecond Lien Credit Agreement contain covenants, including financial covenantsthat must be met on a quarterly basis. “Bank EBITDA” is the measure by whichthe financial covenants contained in the Senior Credit Agreement and the SecondLien Credit Agreement are measured. However, Bank EBITDA is not a measure ofliquidity under GAAP. Accordingly, while providing useful information withrespect to an assessment of liquidity as measured in accordance with thecovenants in Merisant’s primary debt obligations, this measure should not beconsidered in isolation from, or as a substitute for, consolidated statement ofcash flow data prepared in accordance with GAAP as an indication of liquidity.In addition, the Bank EBITDA measure presented may differ from, and may not becomparable to, similarly titled measures used by other companies. Merisant wasin compliance with its covenants under the Senior Credit Agreement, as amended,and the Second Lien Credit Agreement as of June 30, 2006.

**6.**                                      Transactionswith Related Parties

Merisant has a deferred compensationpayable to Arnold Donald, its former Chairman and a current director, and anote receivable in the same amount from Mr. Donald. Merisant recorded $67and $55 of interest income on the note receivable for the three months endedJune 30, 2005 and 2006, respectively, and $134 and $111 of interest income onthe note receivable for the six months ended June 30, 2005 and 2006, respectively,and an equal amount of interest expense in the respective periods.

Merisant had been a party to asublease agreement with The Digital Home/Digital Office, LLC (“Digital Home”),pursuant to which it subleased office space located at One North BrentwoodBoulevard in Clayton, Missouri to Digital Home for a term that expired onMarch 31, 2006 at a rate of $9 per month. At the end of the term of thesublease agreement, Digital Home acquired the office furniture and equipment atno cost. The underlying lease expired on March 31, 2006 and Merisant hadleased the office space for $15 per month. The acquisition value of thefurniture and equipment was $225 and the net book value of these assets waszero, subsequent to a previously recorded impairment charge of $143. DigitalHome is controlled by Mr. Donald.

12

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**MERISANT WORLDWIDE, INC.****Notes to Unaudited ConsolidatedFinancial Statements (Continued)****(Dollars In Thousands)**

On March 28, 2006, Merisantacquired from Pegasus Partners II, L.P. all of the issued and outstandinglimited liability interests of Whole Earth Sweetener Company LLC for $1. At thetime of the acquisition, the only assets of Whole Earth Sweetener CompanyLLC were trademark applications for the **Sweet Simplicity**trademark.

**7.**                                      Commitmentsand Contingencies

The Company has an investment in anaffiliate located in the Philippines that is accounted for using the equitymethod. The affiliate, a 50/50 joint venture, distributes sugar substitutesweeteners for the international consumer food markets, primarily under theEqual® and Nutrasweet® brands. In addition to its investment in the jointventure, the Company is committed to a 50% share in any new borrowings of thejoint venture. As of December 31, 2005 and June 30, 2006, there were noadditional joint venture borrowings.

In October 2004, the Company requestedthe National Advertising Division of the Council of Better Business Bureaus,referred to as the NAD, to review advertising and other claims made by McNeilNutritionals, LLC (“McNeil”) in connection with its Splenda® brand sweetener.The Company believed and continues to believe McNeil’s Splenda® advertising tobe false and misleading. Despite McNeil’s previous use of the NAD for suchdisputes and the NAD’s industry-wide, self-regulatory nature, McNeil refused toallow their advertising claims to be judged by the NAD and instead sought tohave the issue considered by the United States District Court for the Districtof Puerto Rico. Under NAD rules, McNeil’s filing in Puerto Rico precluded theNAD from reviewing the matter or referring McNeil’s advertising to the FederalTrade Commission. In order to have McNeil’s advertising addressed by a jury andcourt in the continental United States familiar with McNeil’s claims, onNovember 26, 2004, the Company filed a federal and state false advertisingcomplaint against McNeil in the United States District Court for the EasternDistrict of Pennsylvania. That suit continues today and seeks to have McNeil’sSplenda® campaign stopped because of its misleading nature and seekssignificant damages resulting from the impact McNeil’s false advertising hashad on the Company’s sales. On January 13, 2005, McNeil voluntarilydismissed its action in Puerto Rico and in April 2005, McNeil amended itsanswer to the Company’s complaint in the Pennsylvania action to add a counterclaimagainst the Company alleging that its Equal® Sugar LiteTM packaging andadvertising were misleading. McNeil has dismissed its counterclaim relating toEqual® Sugar LiteTM packaging and advertising and on July 7, 2006, the courtentered a dismissal with prejudice of those claims.

Merisant Europe B.V.B.A., the Company’sBelgium subsidiary, entered into a co-branding agreement with Galleria Srl, acompany through which the Italian designer Elio Fiorucci operates. Under thisco-branding arrangement, Merisant Europe produced a line of Canderel® tabletdispensers that featured designs and trademarks from Mr. Fiorucci’s “LoveTherapy by Elio Fiorucci” collection. The co-branding arrangement contains arepresentation and warranty that Galleria owns all rights in the name “LoveTherapy by Elio Fiorucci” and associated designs and further provides thatGalleria will indemnify and hold Merisant Europe and its affiliates harmlessagainst damages resulting from or related to their use of the name and designspursuant to the agreement. Beginning in 2005, Merisant Europe sold tabletdispensers with the “Love Therapy by Elio Fiorucci” designs in Italy.Edwin & Co. Ltd. has claimed that it owns all rights inMr. Fiorucci’s name and in the designs used by the Company and has filedsuit against Merisant Europe in Milan, Italy. On or about March 17, 2006,the court in Milan enjoined Merisant Europe from producing or selling thetablet dispensers after the date of the court order. The Company no longerproduces the dispensers and has stopped selling dispensers to its distributorin Italy and to customers through the Internet. Merisant Europe has filed anappeal and will vigorously oppose the court’s order. Merisant Europe will alsoenforce its indemnification rights under its co-branding arrangement withGalleria Srl.

H. J. Heinz Company (“Heinz”) andMerisant US, Inc. entered into a termination agreement dated March 31, 2006pursuant to which the Heinz retail grocery and foodservice distributionagreements were terminated effective May 4, 2006.  In accordance with thetermination agreement, the Company placed $2,500 into an escrow account on May3, 2006 (included as cash and cash equivalents on the June 30, 2006 balancesheet) for the purpose of reimbursing Heinz for expenses incurred by Heinzrelating to trade promotion programs associated with products distributedby Heinz prior to May 4, 2006 and that

13

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**MERISANT WORLDWIDE, INC.****Notes to Unaudited ConsolidatedFinancial Statements (Continued)****(Dollars In Thousands)**

had been approved by theCompany.  Unused funds and earned interest totaling $1,235 and $26,respectively, were remitted from the escrow account to the Company on August 1,2006.  The current balance of $500, lessany additional reimbursements to Heinz, will be remitted to the Companyon September 15, 2006.  At June 30, 2006, the Company believes thatsufficient reserves are in place to address any remaining obligations toHeinz.  ACH Food Companies, Inc. becamethe Company’s exclusive distributor in the United States effective May 5, 2006.

The Company has an obligation toindemnify Monsanto, the Company’s prior owner, for certain liabilities that mayarise out of the business or assets purchased on March 17, 2000. TheCompany does not believe that this indemnification obligation will have amaterial adverse effect on the Company’s consolidated financial position orresults of operations.

The Company is subject to variousother claims, pending and possible legal actions for product liability andother damages, and other matters arising out of the conduct of the Company’sbusiness, including tax uncertainties arising from doing business in variousEuropean jurisdictions. The Company believes, based on current knowledge,recorded accruals, and consultation with counsel, that the outcome of suchclaims and actions will not have a material adverse effect on the Company’sconsolidated financial position or results of operations.

**8.****                                      SubsequentEvent**

Merisant Company 2, Sàrl and Merisantentered into a share purchase and sale agreement with DunaPro Kereskedelmi èsSzolgáltató Részvénytársaság (“DunaPro”) pursuant to which Merisant Company 2,Sàrl and Merisant sold all issued and outstanding shares of Merisant HungaryLtd. to DunaPro.  DunaPro is adistributor of consumer products in Hungary and is now Merisant Company 2, Sàrl’sexclusive distributor of Canderel® and Merisant’s other branded products inHungary.  The transaction closed on July13, 2006 with a purchase price of approximately $1,182, of which 75% was paidat closing, 16% is payable 60 days after close and 9% is payable on December31, 2006.

14

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**Item 2.Management’s Discussion and Analysis of Financial Condition and Results ofOperations**

*The following discussion should be read in conjunction with the Company’sunaudited consolidated financial statements and accompanying notes includedelsewhere in this document. The Company’s discussion of results by reportablesegment should be read in conjunction with Note 2 to the Company’sunaudited consolidated financial statements included elsewhere in thisdocument, which illustrates the reconciliation of Operating EBITDA to income(loss)  before income taxes. Unlessotherwise indicated or unless the context requires otherwise, all references inthis discussion to “Merisant Worldwide” or “the Company” mean MerisantWorldwide, Inc. and its consolidated subsidiaries and all references to “Merisant”mean Merisant Company and its consolidated subsidiaries..*

**Overview**

Merisant Worldwide is a worldwide leader in themarketing of low-calorie tabletop sweeteners, with an estimated 24% dollarshare as of December 31, 2005 of a growing global retail market, which theCompany estimates at $1.5 billion. Merisant Worldwide believes that it has theleading dollar market share as of December 31, 2005 in approximately halfof what it estimates as the top 20 markets for low-calorie tabletop sweetenersales. The Company’s premium-priced brands, *Equal*®and *Canderel*®, are among the mostrecognized low-calorie tabletop sweetener products in the world, with aidedbrand awareness estimated at between 77% and 97% in the Company’s four topmarkets. In addition to *Equal*®and *Canderel*®, Merisant Worldwidemarkets its products under approximately 20 other regional brands that enjoysignificant brand recognition in their target markets. Merisant Worldwide sellsits brands in over 85 countries.

The Company’s business is the result ofover 25 years of history in the low-calorie tabletop sweetener industry, firstas a division of G.D. Searle & Co. (“Searle”) and later MonsantoCompany (“Monsanto”). Searle invented the key sweetening ingredient in theCompany’s products, aspartame, in 1965. Aspartame was first approved forconsumer use in France in 1979, where Searle marketed the product under the *Canderel*® brand. By the early 1980s, *Canderel*®was being marketed in much of Europe. In 1981, the U.S. Food and DrugAdministration approved the tabletop use of aspartame. The following year,Searle launched *Equal*® in the United States.Monsanto entered the sweetener market in 1985 through its acquisition ofSearle. Merisant Worldwide, Inc. is a Delaware corporation that was formed in2000 by an investor group led by an affiliate of Pegasus CapitalAdvisors, L.P. to acquire Monsanto’s tabletop sweetener business.

This business legacy has providedMerisant Worldwide with a global infrastructure dedicated to the manufacture,marketing and distribution of low-calorie tabletop sweeteners. The Company’sworldwide headquarters are located in Chicago, Illinois, and its principal regionaloffices are located in Mexico City, Mexico, Neuchâtel, Switzerland, Paris,France and Sydney, Australia. The Company owns and operates manufacturingfacilities in Manteno, Illinois and Zarate, Argentina and owns processing linesthat are operated exclusively for it at plants located in Bergisch and Stendal,Germany. As of August 13, 2006, Merisant Worldwide had twenty-six direct andindirect subsidiaries, including its wholly owned subsidiary, Merisant, threeadditional subsidiaries in the United States, nine subsidiaries in Europeancountries, eight subsidiaries in Mexico, Central America and South America, andfive subsidiaries in the Asia/Pacific region, including Australia and India. Inaddition, Merisant’s Swiss subsidiary holds a 50% interest in a joint venturein the Philippines.

The Company’s corebusiness continues to be products sweetened with aspartame, and the *Equal*® and *Canderel*® brands accounted for approximately 86% of theCompany’s net sales in 2005. The majority of the Company’s 20 other regionalbrands around the world are also sweetened with aspartame.

***Sales Trends and Strategy***

Merisant Worldwide’spremium-priced brands had enjoyed a dominant market position among low-caloriesweeteners in many of the Company’s key markets. In recent years, however, theCompany has faced significant competition from McNeil Nutritionals LLC, asubsidiary of Johnson & Johnson (“McNeil”), which markets anddistributes the artificial sweetener*Splenda*®.*Splenda*® is sweetened withsucralose, which is produced by Tate & Lyle PLC through a complexchemical process that converts sucrose molecules into a synthetic compound.Between December 2002 and December 2005, *Splenda* ®’s dollar share of the United States retail grocerylow-calorie sweetener market has grown from approximately 15% to 60% and hassurpassed that of *Equal* ® tobecome the number one premium low-calorie sweetener in the United States. Whilethe Company believes that the introduction of *Splenda*®has increased the size of the market for low-calorie sweeteners in general, theCompany’s net sales have declined during this period, particularly in NorthAmerica which had accounted for 46% and 37% of itsnet sales in 2003 and 2005,respectively. As a result of declining net sales, Merisant has experiencedsignificant declines in its Bank EBITDA from $110.2 million in 2003 to $68.0million in 2005. For a description of Bank EBITDA and a reconciliation of BankEBITDA to cash flow

15

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from operatingactivities, see “—Liquidity and Capital Resources”.

Managementbelieves that there are opportunities for future growth in the low-calorietabletop sweetener and sweetened food category and that the Company ispositioned to pursue these opportunities. Despite recent declines in net sales,the Company’s premium brands *Equal* ® and *Canderel* ® are among the most recognized low-calorietabletop sweetener products in the world, with aided brand awareness estimatedbetween 77% and 97% in its top four markets.

Paul Block wasappointed Chief Executive Officer in November 2004 and has led aninitiative to strengthen the Company’s core brands, improve the efficiency ofthe Company’s operations, reduce costs and transform the Company into aconsumer focused sweetener and sweetened food company.  Mr. Block has recruited individuals fromoutside the Company and promoted individuals from within the organization toform a new senior management team with the goal of developing a culture ofinnovation with a focus on invasive marketing campaigns combined with thedevelopment and launch of new products designed to revitalize the existingconsumer base and attract new consumers.

The Company seeksto stabilize and then grow revenues through the following four strategicinitiatives:

·                  Promotenew usage among existing consumers and expand the *Equal*® and *Canderel* ® brand positioning to attractnew consumers through invasive marketing campaigns and improved salesexecution.

·                  Increasethe pace of product innovation to bring new aspartame sweetened products andbrand extensions to the market.  TheCompany plans to launch several new products in 2006 with numerous additionalproducts in the development pipeline.

·                  Dedicatesignificant resources to improving the efficiency of operations by, among otherthings, implementing supply chain-based programs to streamline manufacturingcapabilities and improving the efficiency of certain support services.   The Company has successfully reduced costsand made its business more efficient, which has significantly contributed tothe current stabilization of EBITDA compared to 2005.

·                  Developand test products that have the potential to transform the Company’s brandportfolio. The Company has developed an all-natural, zero-calorie sweetener andrecently shipped this new product to Whole Foods, Wild Oats and independentorganic retail outlets.  This innovativeproduct is being marketed under the *Sweet Simplicity*TMbrand for the Whole Earth Sweetener Company LLC, a newly formed entity andwholly owned subsidiary of Merisant.

Managementbelieves that the development and introduction of new products under its *Equal* ® and *Canderel* ®brands may help to stabilize its core business while innovative, all-naturalsweeteners and sweetened food products under its *SweetSimplicity*TM brand for the Whole Earth Sweetener Company presentgrowth opportunities for the Company. However, the Company may be constrainedin its ability to realize fully the value of these new products as a result ofits current capital structure. The successful launch of new products and marketingof its core brands requires capital, and the Company must use a significantportion of its cash flows from operations to service its outstanding debt. TheCompany had an aggregate of $543.7 million of long-term debt outstanding atJune 30, 2006 and paid $41.9 million in interest costs for the year endedDecember 31, 2005, $23.0 million of which represented interest payments onMerisant’s 9 1⁄2% senior subordinated notes due 2013 (the “Notes”). If theCompany cannot generate cash flows from operations significantly in excess ofits short-term debt obligations, it may not have the resources required tofully realize the value of its strategic initiatives.

***RecentFinancing Activities***

Merisant’s BankEBITDA declined from $110.2 million in 2003 to $68.0 million in 2005. As aresult of this decline, the Company faced an issue in the first quarter of 2006with a possible immediate default under Merisant’s senior credit agreement (the“Senior Credit Agreement”).  Merisantsucceeded in negotiating amendments to the Senior Credit Agreement which mayafford the Company time to stabilize its core business, improve operatingefficiencies and provide more flexibility to address the Company’s capitalstructure and long-term capital needs. Merisant also refinanced a portion of loans outstanding under its SeniorCredit Agreement with the proceeds of loans under a senior credit facility thatis secured by a second lien on all the collateral that secures loansoutstanding under the Senior Credit Agreement (the “Second Lien CreditAgreement”).   For a description of BankEBITDA and a reconciliation of Bank EBITDA to cash flows from operatingactivities, see “—Liquidity and Capital Resources”.

16

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On March 29,2006, the lenders holding a majority of the aggregate principal amount ofoutstanding loans and revolver commitments under the Senior Credit Agreementagreed to amend the terms of the Senior Credit Agreement (the “Fourth Amendment”)and waived a technical default related to the use of proceeds from therepayment of the inter-company loan between Merisant and its Swiss subsidiary.Among other things, the Fourth Amendment amended the financial covenants as ofDecember 31, 2005, adjusted the financial covenants through the maturitydate of loans outstanding under the Senior Credit Agreement, incorporated newfinancial covenants, adjusted the interest rate on borrowings under the SeniorCredit Agreement, amended the definition of Bank EBITDA to provide additional “addbacks” related to Merisant’s restructuring and new product development efforts,and amended certain other covenants.

TheFourth Amendment avoided a possible immediate default under the Senior CreditAgreement resulting from the decline in Merisant’s Bank EBITDA. The FourthAmendment required Merisant to raise approximately $85.0 million of newborrowings and use the proceeds to prepay loans currently outstanding under theSenior Credit Agreement by January 2, 2007. On June 23, 2006, Merisantentered into the Second Lien Credit Agreement with a syndicate of lenders,including Credit Suisse, as administrative agent, and Wells Fargo Bank,National Association, as collateral agent. The Second Lien Credit Agreement consists of an aggregate principalamount of $85.0 million in term loans, the net proceeds of which were used toprepay $9.5 million of euro-denominated term A loans, prepay $53.3 million ofterm B loans and to repay $15.0 million of revolving loans, in each case,outstanding under Merisant’s Senior Credit Agreement.   This refinancing transaction satisfiedMerisant’s obligation under the Fourth Amendment to refinance a portion of theloans outstanding under the Senior Credit Agreement.

Concurrentwith the closing of the Second Lien Credit Agreement, Merisant entered into aFifth Amendment to the Senior Credit Agreement (the “Fifth Amendment”) to amendcertain terms and conditions set forth in the Senior Credit Agreement. See “—Liquidityand Capital Resources—Financing” for a more detailed description of the FifthAmendment and Second Lien Credit Agreement.

**Results ofOperations**

For each of the periodsdiscussed below, the information set forth under the caption “ConsolidatedResults” represents an overview of the Company’s results of operations on aconsolidated basis. Additional detail regarding the results of operations canbe found under the caption “—SegmentResults” for each period discussed below.

***Three Months Ended June 30, 2006 Compared toThree Months Ended June 30, 2005***

The following table sets forth certain of theCompany’s financial data for the three month periods ended June 30, 2005 and2006 (totals may not foot due to rounding).

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|                                    | ** ** | **Three Months Ended  June 30,** | ** ** | **Three Months Ended  June 30,** | ** ** |        |
|------------------------------------|------------|-------------------------------------------------|------------|-------------------------------------------------|------------|-------------|
| ** **                         | ** ** | **2005**                                        | ** ** | **2006**                                        | ** ** | **2005**    | ** ** | **2006** | ** ** | **Better/(Worse)  than Prior Year** | ** ** |   |
| ** **                         | ** ** | **(in millions)**                          | ** ** | **As% of Net Sales**             | ** ** | **Dollars** | ** ** | **%** | ** ** |   |
|                               |       |                                            |       |                                            |       |        |   |   |   |   |   |   |   |
| Net sales                          |       | $                                               | 79.2       |                                            | $          | 78.6        |   | 100 | % | 100 | % | $ | (0.5 | ) | (1 | )% |
| Cost of sales                      |       | 33.3                                            |       | 32.6                                            |       | 42          | % | 41 | % | 0.7 |   | 2 | % |
| Gross profit                       |       | 45.8                                            |       | 46.0                                            |       | 58          | % | 59 | % | 0.2 |   | 0 | % |
|                               |       |                                            |       |                                            |       |        |   |   |   |   |   |   |   |
| Operating  expenses:               |       |                                            |       |                                            |       |        |   |   |   |   |   |   |   |
| Marketing and selling expenses     |       | 19.7                                            |       | 22.2                                            |       | 25          | % | 28 | % | (2.5 | ) | (13 | )% |
| Administration expenses            |       | 10.0                                            |       | 10.5                                            |       | 13          | % | 13 | % | (0.5 | ) | (5 | )% |
| Research and development expenses  |       | 0.6                                             |       | 0.3                                             |       | 1           | % | 0 | % | 0.2 |   | 40 | % |
| Amortization of intangibles        |       | 5.6                                             |       | 5.6                                             |       | 7           | % | 7 | % | (0.0 | ) | (0 | )% |
| Transaction fees                   |       | (0.4                                            | )          | 3.3                                             |       | (0          | )% | 4 | % | (3.7 | ) | (966 | )% |
| Restructuring expenses             |       | 0.6                                             |       | 1.3                                             |       | 1           | % | 2 | % | (0.7 | ) | (131 | )% |
| Total operating expenses           |       | 35.9                                            |       | 43.2                                            |       | 45          | % | 55 | % | (7.2 | ) | (20 | )% |
|                               |       |                                            |       |                                            |       |        |   |   |   |   |   |   |   |
| Income from  operations            |       | 9.9                                             |       | 2.9                                             |       | 13          | % | 4 | % | (7.1 | ) | (71 | )% |
|                               |       |                                            |       |                                            |       |        |   |   |   |   |   |   |   |
| Other expenses  (income):          |       |                                            |       |                                            |       |        |   |   |   |   |   |   |   |
| Interest income                    |       | (0.3                                            | )          | (0.2                                            | )          | (0          | )% | (0 | )% | (0.1 | ) | (34 | )% |
| Interest expense                   |       | 14.7                                            |       | 16.9                                            |       | 19          | % | 22 | % | (2.2 | ) | (15 | )% |
| Other expense (income), net        |       | (4.6                                            | )          | 1.3                                             |       | (6          | )% | 2 | % | (5.9 | ) | (129 | )% |
| Total other expenses               |       | 9.8                                             |       | 18.1                                            |       | 12          | % | 23 | % | (8.2 | ) | (84 | )% |
|                               |       |                                            |       |                                            |       |        |   |   |   |   |   |   |   |
| Income (loss)  before income taxes |       | 0.1                                             |       | (15.2                                           | )          | 0           | % | (19 | )% | (15.3 | ) | (18643 | )% |
|                               |       |                                            |       |                                            |       |        |   |   |   |   |   |   |   |
| Provision for  income taxes        |       | 1.7                                             |       | 2.7                                             |       | 2           | % | 3 | % | (1.0 | ) | (56 | )% |
| Net loss                           |       | $                                               | (1.6       | )                                               | $          | (17.9       | ) | (2 | )% | (23 | )% | $ | (16.2 | ) | (988 | )% |

 

**Consolidated Results**

*Net sales.*Overall,net sales declined in the second quarter of 2006 compared to the second quarterof 2005.  The decline was related tolower sales in the EAME region, primarily France, Italy, Middle East, Portugaland the UK, as well as a foreign currency translation loss of approximately$0.7 million, most of which occurred in the EAME region.  In France and Italy, weakenedeconomies continued to depress sales, and the decreased revenues for the secondquarter of 2006 also reflected the loss of consumers resulting from thepublication in July 2005 of a now widely discredited study on the safety ofaspartame.  In France, these factors, as well as increasedhealth consciousness, negatively affected the low-calorie sweetener category ingeneral as well as the sugar category. Sales declined in Portugal and the Middle East in the second quarter of2006 compared to the same period in the prior year due to timing of shipmentsbetween quarters.  In the UK, aggressivepricing by major grocery retailers forced higher discounting, but Merisantmaintained its value share of the market through higher sales volumes.  In Latin America and Asia/Pacific, salesincreased in the second quarter of 2006 compared to the second quarter of 2005due mainly to the initial inventory purchases of a new distributor in Chile,distributor inventory adjustments and improved sales in the club channel inMexico and timing of sales in Asia/Pacific. In North America, net salesimproved in the grocery channel in the United States, despite reduced consumerdemand.  This increase was due to salesto ACH Food Companies, Inc. (“ACH”) as ACH built inventory in connection withits role as a new distributor for Merisant. In the mass channel, sales improveddue to abnormally high shipments related to a customer system issue resultingin increased ending inventory levels. Increased contract manufacturing activity also improved sales.  Unfavorable sales mix and increased trademarketing partially offset the improved sales in North America.

*Cost ofsales.* The Company realized some improved efficiencies in itsmanufacturing conversion costs due to lower spending and headcount reductionsand improved overhead absorption through contract manufacturingactivities.  Favorable currencytranslation and lower inventory obsolescence costs also contributed to lowercost of sales. Increased freight and distribution costs partially offset theseimprovements. Overall, gross profit as a percentage of net sales improved from58% for the three months ended June 30, 2005 to 59% for the three months endedJune 30, 2006 as changes in sales mix partially offset the cost improvementspreviously described.

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*Operating expenses.*Marketingand selling expenses increased mainly due to higher brand support in the UK andFrance and higher selling costs in the United States related to increased salesvolumes and commissions relating to the transition to the new distributor.These unfavorable impacts were partially offset by favorable foreign currencytranslations, lower brand support in the United States and Latin America andlower marketing and selling administration costs in all regions due to savingsfrom restructuring actions. Administration expenses increased significantly due to an increase in corporateexpenses mainly related to higher performance based incentive expense and anincrease in litigation costs, partially offset by lower consulting andinformation technology costs and savings from restructuring actions.Transaction fees increased as a result of $3.3 million in expenses incurred inconjunction with the Second Lien Credit Agreement. During the second quarter of2006, the Company continued its restructuring initiatives to improve bothfinancial results and the long-term value of the business. As a result of theseactions, the Company recorded restructuring charges for workforce reductions of$1.3 million in the second quarter of 2006 as compared to $0.6 million in thesecond quarter of 2005. The restructuring charges incurred in the secondquarter of 2006 relate primarily to new employee termination costs in the EAMEand Latin America segments and are expected to be substantially paid by the endof the third quarter of 2006. Additional information regarding restructuringcharges and the related liability can be found in Note 3 to the unauditedconsolidated financial statements located elsewhere in this document.

*Interest.*On June 23, 2006, Merisant entered into the SecondLien Credit Agreement. The Second Lien Credit Agreement consists of an$85.0 million term loan, the net proceeds of which were used to prepay $77.9million in borrowings outstanding under the Senior Credit Agreement.  The extinguishment of indebtedness under theSenior Credit Agreement resulted in an increase in interest expense due to thewrite-off of related deferred financing fees totaling $2.5 million.  In addition, the Company  and Merisantsuccessfully closed the registered exchange offers of the Discount Notes andthe Notes in October 2005 which resulted in the discontinuation of penaltyinterest. The penalty interest went into effect as the Company and Merisant hadnot consummated the registered exchange offers prior to the previously agreeddeadline. Net interest decreased as a result of the discontinuation of thepenalty interest.  Merisant’sfuture interest expense is expected to increase as a result of higher interestbearing loans under the Second Lien Credit Agreement and the use of proceedsfrom the Second Lien Credit Agreement to prepay lower interest bearing loansunder the Senior Credit Agreement. Loans outstanding under the Senior CreditAgreement had a weighted average interest rate of approximately 9.0% per annumprior to the closing of the Second Lien Credit Agreement.  Merisant’s borrowings under the Senior CreditAgreement and Second Lien Credit Agreement had a weighted average interest rateof approximately 10.3% per annum upon the closing of the Second Lien CreditAgreement.

*Other income/expense, net*. The unfavorable variance of $5.9 million ismainly attributable to a $2.4 million currency gain on the euro-denominateddebt for the second quarter of 2005 as compared to a $1.3 million currency losson the euro-denominated debt for the quarter ended June 30, 2006.  In addition, a $1.5 million unrealized gainon derivative instruments that expired in March, 2006 and the impact of a $1.3million reversal of a currency loss in Latin America, both occurring in thequarter ended June 30, 2005 and not repeating in the quarter ended June 30,2006, also contributed to the unfavorable variance.  These items were partially offset byfavorable balance sheet remeasurement impacts as compared to the quarter endedJune 30, 2005.

*Taxes.*For the three months ended June 30, 2006, theCompany recorded a $2.7 million tax provision on a loss before income taxes of$15.2 million. The unusual relationship of the Company’s tax provision to itspre-tax loss in the second quarter of 2006 relates to a combination of factors.These factors include increased tax loss carryforwards, primarily generated inthe United States, for which the Company has not recorded a tax benefit, aswell as **provisionsfor future tax costs which may be incurred upon the potential repatriation ofcertain 2006 foreign earnings that are not deemed to be permanentlyreinvested. **With regard to the deferred income taxassets on the tax loss carryforwards, the Company determined that it has notsatisfied the “more likely than not” test and has increased its total valuationallowance by $6.0 million in the second quarter of 2006 to a total of $69.8million. The Company will continue to assess the valuation allowances, and, tothe extent the Company determines that such allowances are no longer required,these deferred income tax assets will be recognized in the future.

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**Segment Results**

The following table presents net sales and OperatingEBITDA expressed in millions of dollars for each reportable segment(totals may not foot due to rounding):
|                          | ** ** | **Net Sales**                          | ** ** | **Operating EBITDA (1)**            | ** ** |
|--------------------------|------------|---------------------------------------------|------------|-----------------------------------------------|------------|
| ** **               | ** ** | **Three Months  Ended  June 30,** | ** ** | **Better/(Worse)  than Prior Year** | ** ** | **Three Months  Ended  June 30,** | ** ** | **Better/(Worse)  than Prior Year** | ** ** |
| ** **               | ** ** | **2005**                                    | ** ** | **2006**                                      | ** ** | **$** | ** ** | **%** | ** ** | **2005** | ** ** | **2006** | ** ** | **$** | ** ** | **%** | ** ** |
| ** **               | ** ** | **(in millions)**                      | ** ** | **(in millions)**                        | ** ** |
| ** **               | ** ** | ** **                                  | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| North America  (2)       |       | $                                           | 29.3       |                                          | $          | 33.0 |   | $ | 3.7 |   | 13 | % | $ | 9.2 |   | 12.3 |   | $ | 3.1 |   | 33 | % |
| Operating EBITDA  Margin |       |                                        |       |                                          |       |   |   |   |   | 31 | % | 37 | % | 6 | % |   |   |
| EAME                     |       | 37.5                                        |       | 31.9                                          |       | (5.5 | ) | (15 | )% | 12.5 |   | 6.4 |   | (6.1 | ) | (49 | )% |
| Operating EBITDA  Margin |       |                                        |       |                                          |       |   |   |   |   | 33 | % | 20 | % | (13 | )% |   |   |
| Latin America            |       | 7.2                                         |       | 8.3                                           |       | 1.1 |   | 15 | % | 1.5 |   | 2.5 |   | 1.0 |   | 62 | % |
| Operating EBITDA  Margin |       |                                        |       |                                          |       |   |   |   |   | 22 | % | 30 | % | 9 | % |   |   |
| Asia/Pacific             |       | 5.2                                         |       | 5.4                                           |       | 0.2 |   | 4 | % | 1.9 |   | 1.8 |   | (0.1 | ) | (3 | )% |
| Operating EBITDA Margin  |       |                                        |       |                                          |       |   |   |   |   | 37 | % | 34 | % | (2 | )% |   |   |
|                          |            |                                             |            |                                               |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

----

(1)             “OperatingEBITDA” as used with respect to the Company’s operating segments is a measureupon which management assesses the financial performance of these segments.Operating EBITDA excludes interest expense, income tax expense and depreciationand amortization, as well as items such as start-up expenses, restructuringexpenses, certain significant charges related to new product development andlaunch costs, cost related to the transition to a new exclusive distributor inthe United States and certain other non-cash items. See Note 2 to the unauditedconsolidated financial statements for a description of Operating EBITDA and areconciliation of Operating EBITDA to income (loss) before income taxes.Operating EBITDA margin represents Operating EBITDA as a percentage of netsales.

(2)             NorthAmerica segment results exclude immaterial sales and $0.9 million of negativeOperating EBITDA related to a new product launch which management evaluatesseparately from this geographical segment.

***North America***

*Net sales.*In North America, net sales improved in thegrocery channel, despite reduced consumer demand, as ACH built inventory inconnection with its role as a new distributor for Merisant.  In the mass channel, sales improved due toabnormally high shipments related to a customer system issue resulting inincreased ending inventory levels.  Increasedcontract manufacturing activity also improved sales. Unfavorable sales mix andincreased trade marketing partially offset the improved sales in North America.

*Operating EBITDA.*The increase in Operating EBITDA was primarilyrelated to the margin impact of the improved sales volumes, lower conversioncosts related to reduced spending, improved overhead absorption costs relatedto increased contract manufacturing activities, lower brand support and reducedmarketing and selling administrative expenses due to savings from restructuringactions. These favorable impacts were partially offset by higher selling costsdue to increased sales volumes and commissions to the new distributor andincreased distribution costs relating to fuel surcharges. Operating EBITDAmargin increased due primarily to the favorable conversion costs and overheadabsorption previously described.

***EAME***

*Net sales.*InEAME, sales declined primarily as a result of a $0.4 million unfavorablecurrency translation and lower sales in France, Italy, Middle East, Portugaland the UK.  In France and Italy, weakenedeconomies continued to depress sales, and the decreased revenues for the secondquarter of 2006 also reflected the loss of consumers resulting from thepublication in July 2005 of a now widely discredited study on the safety ofaspartame.  In France, these factors, as well as increasedhealth consciousness, negatively affected the low-calorie sweetener category ingeneral as well as the sugar category. Sales declined in Portugal and the Middle East in the second quarter of2006 compared to the same period in the prior year due to timing of shipmentsbetween quarters.  In the UK, aggressivepricing between the major retailers forced higher discounting, however highervolumes have translated into Merisant’s value share of the market remainingstable.

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*Operating EBITDA.* Operating EBITDA decreased mainly due to lowersales and a sizable increase in brand support in  France and the UK.  These unfavorable impacts were partiallyoffset by lower inventory obsolescence costs, reduced sales, marketing andsupply chain infrastructure costs due to savings from restructuring actions andlower material pricing.  The decrease inOperating EBITDA margin was primarily due to significantly higher marketingcosts as a percentage of sales.

***Latin America***

*Net sales.*The increase in Latin American sales was mainlydue to the initial inventory purchases of a new distributor in Chile andimproved sales in Mexico due to an adverse distributor inventory adjustment inthe second quarter of 2005 that did not repeat in the same period in 2006 andhigher sales in the club channel.

*Operating EBITDA.*The increase in Operating EBITDA was mainlyrelated to the margin impact of higher sales, lower brand support and reducedmarketing and selling administrative costs due to savings from restructuringactions, partially offset by the impact of a $1.3 million reversal of acurrency loss in the second quarter of 2005 that did not repeat in 2006.  Operating EBITDA margin increased primarilydue to higher gross profit percentage and lower marketing and selling costs asa percentage of sales.

***Asia/Pacific***

*Net sales.*Net sales in the Asia/Pacific region increasedprimarily due to timing of low margin sales in Australia between the firstquarter and second quarter, partially offset by lower sales in Malaysia.

*Operating EBITDA.*Operating EBITDA and Operating EBITDA margindecreased primarily due to unfavorable sales mix.

**CorporateExpenses**

Corporate expenses increased from$6.1 million in the second quarter of 2005 to $6.7 million in the secondquarter of 2006, primarily due to higher performance based incentive expenseand litigation costs, partially offset by lower consulting and informationtechnology costs and savings from restructuring actions.

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***Six Months Ended June 30, 2006 Compared to SixMonths Ended June 30, 2005***

The following table sets forthcertain of the Company’s financial data for the six month periods ended June30, 2005 and 2006 (totals may not foot due to rounding).
| ** **                        | ** ** | **Six Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|-----------------------------------|------------|-----------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                        | ** ** | **2005**                                      | ** ** | **2006**                                      | ** ** | **2005** | ** ** | **2006** | ** ** | **Better/(Worse)  than Prior Year** | ** ** |
| ** **                        | ** ** | **(in millions)**                        | ** ** | **as% of Net Sales**           | ** ** | **Dollars** | ** ** | **%** | ** ** |
| Net sales                         |       | $                                             | 155.1      |                                          | $          | 148.3 |   | 100 | % | 100 | % | $ | (6.7 | ) | (4 | )% |
| Cost of sales                     |       | 64.7                                          |       | 61.6                                          |       | 42 | % | 42 | % | 3.1 |   | 5 | % |
| Gross profit                      |       | 90.3                                          |       | 86.7                                          |       | 58 | % | 58 | % | (3.7 | ) | (4 | )% |
|                              |       |                                          |       |                                          |       |   |   |   |   |   |   |   |   |
| Operating  expenses:              |       |                                          |       |                                          |       |   |   |   |   |   |   |   |   |
| Marketing and selling expenses    |       | 40.9                                          |       | 39.1                                          |       | 26 | % | 26 | % | 1.8 |   | 4 | % |
| Administration expenses           |       | 21.0                                          |       | 21.6                                          |       | 14 | % | 15 | % | (0.6 | ) | (3 | )% |
| Research and development expenses |       | 0.9                                           |       | 1.0                                           |       | 1 | % | 1 | % | (0.0 | ) | (0 | )% |
| Amortization of intangibles       |       | 11.1                                          |       | 11.1                                          |       | 7 | % | 7 | % | 0.0 |   | 0 | % |
| Transaction fees                  |       | (0.4                                          | )          | 3.3                                           |       | (0 | )% | 2 | % | (3.7 | ) | (848 | )% |
| Restructuring expenses            |       | 1.9                                           |       | 3.6                                           |       | 1 | % | 2 | % | (1.7 | ) | (88 | )% |
| Total operating expenses          |       | 75.4                                          |       | 79.7                                          |       | 49 | % | 54 | % | (4.3 | ) | (6 | )% |
|                              |       |                                          |       |                                          |       |   |   |   |   |   |   |   |   |
| Income from  operations           |       | 14.9                                          |       | 7.0                                           |       | 10 | % | 5 | % | (7.9 | ) | (53 | )% |
|                              |       |                                          |       |                                          |       |   |   |   |   |   |   |   |   |
| Other expenses  (income):         |       |                                          |       |                                          |       |   |   |   |   |   |   |   |   |
| Interest income                   |       | (0.5                                          | )          | (0.4                                          | )          | (0 | )% | (0 | )% | (0.1 | ) | (23 | )% |
| Interest expense                  |       | 28.8                                          |       | 30.9                                          |       | 19 | % | 21 | % | (2.0 | ) | (7 | )% |
| Other expense (income), net       |       | (8.9                                          | )          | 1.5                                           |       | (6 | )% | 1 | % | (10.4 | ) | (117 | )% |
| Total other expenses              |       | 19.5                                          |       | 32.1                                          |       | 13 | % | 22 | % | (12.6 | ) | (65 | )% |
|                              |       |                                          |       |                                          |       |   |   |   |   |   |   |   |   |
| Loss before  income taxes         |       | (4.6                                          | )          | (25.1                                         | )          | (3 | )% | (17 | )% | (20.5 | ) | (450 | )% |
|                              |       |                                          |       |                                          |       |   |   |   |   |   |   |   |   |
| Provision for  income taxes       |       | 3.9                                           |       | 2.9                                           |       | 3 | % | 2 | % | 1.0 |   | 25 | % |
| Net loss                          |       | $                                             | (8.5       | )                                             | $          | (28.0 | ) | (5 | )% | (19 | )% | $ | (19.5 | ) | (230 | )% |

 

**Consolidated Results**

*Net sales.*Overall,net sales declined in the six-month period ended June 30, 2006 compared to thesix-month period ended June 30, 2005. The decline was primarily related to lower sales in the EAME region, ledby France, Italy and Portugal, as well as a foreign currency translation lossof approximately $3.1 million, most of which occurred in the EAME region.  In France and Italy, weakenedeconomies continued to depress sales, and the decreased revenues for the firstsix months of 2006 also reflected the loss of consumers resulting from thepublication in July 2005 of a now widely discredited study on the safety ofaspartame. In France, these factors, as wellas increased health consciousness, negatively affected the low-caloriesweetener category in general as well as the sugar category.  Sales declined in Portugal as the newdistributor purchased more inventory than required to be on hand as ofDecember 31, 2005 and a shift occurred in timing of shipments between quarters.  Sales also declined in Belgium, Ireland,Hungary, Greece and Germany, primarily as a result of lower consumer demand,weak economies and health concerns.  InSouth Africa, the conversion from a direct sales model to a distributor modelcaused declines in net sales, but this decline in revenue was more than offsetby reduced infrastructure costs.  InLatin America and Asia/Pacific, sales decreased due mainly to reduced volumesin Mexico and foreign currency translation losses in Asia/Pacific.  In North America, despite reduced consumerdemand, net sales improved in the grocery channel as ACH built inventory inconnection with its role as a new distributor for Merisant.  In the mass channel, sales improved due toabnormally high shipments related to customer system issues resulting inincreased inventory levels.  Increasedcontract manufacturing activity also favorably impacted sales. Lower foodservice sales related to increased competition, unfavorable sales mix andincreased trade marketing partially offset the improved sales in North America.

*Cost of sales.* TheCompany realized some improved efficiencies in its manufacturing conversioncosts due to lower spending and headcount reductions and improved overheadabsorption through contract manufacturing activities.  Favorable currency

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translationand lower inventory obsolescence costs also contributed to lower cost of sales.Increased freight and distribution costs partially offset these improvements.Overall, the gross profit as a percentage of net sales remained stable at 58%for the six months ended June 30, 2006 and June 30, 2005 as changes in salesmix offset the cost improvements previously described.

*Operating expenses.*Marketingand selling expenses decreased mainly due to lower brand support in allregions, favorable foreign currency translations and lower marketing andselling costs in the EAME, Latin America and Asia/Pacific regions due to lowervolumes and savings from restructuring actions. These favorable impacts werepartially offset by termination costs and higher commissions relating to thetransition from H. J. Heinz Company to ACH as Merisant’s exclusive distributorin the United States. Administration expenses improved due to the non-recurring$1.4 million charge related to the Food Brokers, LTD receivable that wasincurred in the period ended June 30, 2005 after Food Brokers, LTD went intoreceivership. Lower consulting and information technology costs and savingsrelated to restructuring actions also reduced administration expenses.  These favorable impacts were more than offsetby an increase in corporate expenses related to higher performance basedincentive expense and an increase in litigation costs. Transaction feesincreased as a result of $3.3 million in expenses incurred in conjunction withthe Second Lien Credit Agreement. During the six months ended June 30, 2006,the Company continued its restructuring initiatives to improve both financialresults and the long-term value of the business. As a result of these actions,the Company recorded restructuring charges for workforce reductions of $3.6million in the first six months of 2006 as compared to $1.9 million in thefirst six months of 2005. The restructuring charges incurred in the first sixmonths of 2006 relate primarily to new employee termination costs in the EAME,Latin America and Asia/Pacific segments and are expected to be substantiallypaid by the end of the third quarter of 2006. Additional information regardingrestructuring charges and the related liability can be found in Note 3 to theunaudited consolidated financial statements.

*Interest.*On June23, 2006, Merisant entered into the Second Lien Credit Agreement. TheSecond Lien Credit Agreement consists of an $85.0 million term loan, the netproceeds of which were used to prepay $77.9 million in borrowings outstandingunder the Senior Credit Agreement.  Theextinguishment of indebtedness under the Senior Credit Agreement resulted in anincrease in interest expense due to the write-off of related deferred financingfees totaling $2.5 million.  In addition,the Company and Merisant successfully closedthe registered exchange offers of the Discount Notes and the Notes inOctober  2005 which resulted in the discontinuation of penalty interest.The penalty interest went into effect as the Company and Merisant had notconsummated the registered exchange offers prior to the previously agreeddeadline. Net interest decreased as a result of the discontinuation of thepenalty interest. Merisant’s future interest expense is expected toincrease as a result of higher interest bearing loans under the Second LienCredit Agreement and the use of proceeds from the Second Lien Credit Agreementto prepay lower interest bearing loans under the Senior Credit Agreement. Loansoutstanding under the Senior Credit Agreement had a weighted average interestrate of approximately 9.0% per annum prior to the closing of the Second LienCredit Agreement.  Merisant’s borrowingsunder the Senior Credit Agreement and Second Lien Credit Agreement had a weightedaverage interest rate of approximately 10.3% per annum upon the closing of theSecond Lien Credit Agreement.

*Other income/expense, net*. The unfavorable variance of $10.4 million is mainly attributable to a$4.8 million currency gain on the euro-denominated debt for the six monthsended June 30, 2005 as compared to a $1.9 million currency loss on theeuro-denominated debt for the six month period ended June 30, 2006, as well asa $4.0 million unrealized gain on derivative instruments for the six monthperiod ended June 30, 2005 as compared to a $0.7 million realized gain onderivative instruments for the six month period ended June 30, 2006.  In addition, the impact of a $1.3 millionreversal of a currency loss in Latin America, occurring in the period endedJune 30, 2005 and not repeating in the period ended June 30, 2006, alsocontributed to the unfavorable variance. These items were partially offset by favorable balance sheetremeasurement impacts as compared to the period ended June 30, 2005.

*Taxes.*For the sixmonths ended June 30, 2006, the Company recorded a $2.9 million tax provisionon a loss before income taxes of $25.1 million. The unusual relationship of theCompany’s tax provision to its pre-tax loss in the first six months of 2006relates to a combination of factors. These factors include increased tax loss carryforwards, primarilygenerated in the United States, for which the Company has not recorded a taxbenefit, as well as **provisions for future tax costs which may beincurred upon the potential repatriation of certain 2006 foreign earningsthat are not deemed to be permanently reinvested.*** *** With regard to the deferred income tax assets on the tax losscarryforwards, the Company determined that it has not satisfied the “morelikely than not” test and has increased its total valuation allowance by $10.2million in the first six months of 2006 to a total of $69.8 million. TheCompany will continue to assess the valuation allowances, and, to the extentthe Company determines that such allowances are no longer required, thesedeferred income tax assets will be recognized in the future.

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**Segment Results**

The followingtable presents net sales and Operating EBITDA expressed in millions ofdollars for each reportable segment (totals may not foot due to rounding):
| ** **              | ** ** | **Net Sales**                        | ** ** | **Operating EBITDA (1)**            | ** ** |
|-------------------------|------------|-------------------------------------------|------------|-----------------------------------------------|------------|
| ** **              | ** ** | **Six Months  Ended  June 30,** | ** ** | **Better/(Worse)  than Prior Year** | ** ** | **Six Months  Ended  June 30,** | ** ** | **Better/(Worse)  than Prior Year** | ** ** |
| ** **              | ** ** | **2005**                                  | ** ** | **2006**                                      | ** ** | **$** | ** ** | **%** | ** ** | **2005** | ** ** | **2006** | ** ** | **$** | ** ** | **%** | ** ** |
| ** **              | ** ** | **(in millions)**                    | ** ** | **(in millions)**                        | ** ** |
|                    |       |                                      |       |                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
| North America (2)       |       | $                                         | 57.5       |                                          | $          | 62.9 |   | $ | 5.4 |   | 9 | % | $ | 18.8 |   | $ | 22.8 |   | $ | 4.1 |   | 22 | % |
| Operating EBITDA Margin |       |                                      |       |                                          |       |   |   |   |   | 33 | % | 36 | % | 4 | % |   |   |
| EAME                    |       | 71.8                                      |       | 60.7                                          |       | (11.1 | ) | (15 | )% | 19.6 |   | 15.7 |   | (3.9 | ) | (20 | )% |
| Operating EBITDA Margin |       |                                      |       |                                          |       |   |   |   |   | 27 | % | 26 | % | (1 | )% |   |   |
| Latin America           |       | 15.6                                      |       | 14.7                                          |       | (0.9 | ) | (6 | )% | 3.9 |   | 3.6 |   | (0.3 | ) | (8 | )% |
| Operating EBITDA Margin |       |                                      |       |                                          |       |   |   |   |   | 25 | % | 25 | % | (1 | )% |   |   |
| Asia/Pacific            |       | 10.1                                      |       | 9.9                                           |       | (0.2 | ) | (2 | )% | 3.0 |   | 3.4 |   | 0.4 |   | 12 | % |
| Operating EBITDA Margin |       |                                      |       |                                          |       |   |   |   |   | 30 | % | 34 | % | 4 | % |   |   |
|                         |            |                                           |            |                                               |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(1)             “OperatingEBITDA” as used with respect to the Company’s operating segments is a measureupon which management assesses the financial performance of these segments.Operating EBITDA excludes interest expense, income tax expense and depreciationand amortization, as well as items such as start-up expenses, restructuringexpenses, certain significant charges related to new product development andlaunch costs, cost related to the transition to a new exclusive distributor inthe United States and certain other non-cash items. See Note 2 to the unauditedconsolidated financial statements for a description of Operating EBITDA and areconciliation of Operating EBITDA to income (loss) before income taxes.Operating EBITDA margin represents Operating EBITDA as a percentage of netsales.

(2)             NorthAmerica segment results exclude immaterial sales and $1.5 million of negativeOperating EBITDA results related to a new product launch which managementevaluates separately from this geographical segment.

***North America***

*Net sales.*Net sales improved in the grocery channel, despitereduced consumer demand, as ACH built inventory in connection with its role asa new distributor for Merisant.  In themass channel, sales improved due to abnormally high shipments related tocustomer system issues resulting in increased inventory levels.  Increased contract manufacturing activityalso improved sales. Lower food service sales related to increased competition,unfavorable sales mix and increased trade marketing partially offset theimproved sales in North America.

*Operating EBITDA.*The increase in Operating EBITDA was primarilyrelated to the margin impact of the improved sales volumes, lower conversioncosts related to reduced spending, improved overhead absorption costs relatedto increased contract manufacturing activities and lower brand support.  These favorable impacts were partially offsetby higher selling costs due to increased sales volumes and commissions to thenew distributor and increased distribution costs relating to fuel surcharges.Operating EBITDA margin increased due primarily to the favorable conversioncosts and overhead absorption previously described.

***EAME***

*Net sales.*InEAME, sales declined primarily as a result of a $2.8 million unfavorablecurrency translation and lower sales across most of the region, led by France,Italy and Portugal.  In France and Italy,weakened economies continued to depress sales, and the decreasedrevenues for the first six months of 2006 also reflected the loss of consumersresulting from the publication in July 2005 of a now widely discredited studyon the safety of aspartame.  In France, these factors, as well as increasedhealth consciousness, negatively affected the low-calorie sweetener category ingeneral as well as the sugar category. In Portugal, the Company closed its office and converted its proprietarydistribution operation into a third party distributor operation at the end of2005. The new distributor acquired more inventory than normally required aspart of its start-up of the distributorship, which caused unusually low salesto that distributor thus far in 2006.  Inaddition, sales were negatively impacted by a shift in shipments from June 2006to July 2006. In addition, sales declined in Belgium, Ireland, Hungary, Greeceand Germany, primarily impacted by factors

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including lower consumer demand, weak economies and healthconcerns.  In South Africa, a change froma direct sales model to a distributor model negatively impacted net sales, butthis decline in revenue was more than offset by reduced infrastructurecosts.  These negative variances werepartially offset by slightly higher sales in the UK and Switzerland.

*Operating EBITDA.* Operating EBITDA decreased mainly due to themargin impact of lower sales and an increase in brand support in France.  These negative impacts were partially offsetby reduced brand support at the regional level, lower variable selling costsdue to reduced sales, reduced supply chain, marketing and sellingadministration costs due to savings from restructuring actions, lower inventoryobsolescence costs and the $1.3 million charge related to the Food Brokers, LTDreceivable that was incurred in the period ended June 30, 2005 that did notrecur in the corresponding period in 2006. The decrease in Operating EBITDAmargin was primarily due to higher marketing costs as a percentage of sales andunfavorable sales mix partially offset by the favorable items previouslydescribed.

***Latin America***

*Net sales.*Thedecrease in Latin American sales was mainly due to lower sales volumes inMexico and Colombia. In the six months ended June 30, 2005, a new product waslaunched in Mexico, whereas no new product launch occurred in the same periodin 2006.  In Colombia, a decline in thecategory and a shift in the timing of sales orders negatively impactedsales.  Improved sales in Chile andEcuador partially offset the sales declines in Mexico and Colombia.

*Operating EBITDA.*Thedecrease in Operating EBITDA was mainly related to the margin impact of lowersales, increased manufacturing and inventory obsolescence costs and the impactof a $1.3 million reversal of a currency loss in the second quarter of 2005that did not repeat in the corresponding period in 2006. These impacts werepartially offset by lower brand support primarily in Mexico due to the absenceof a product launch in the first six months of 2006 and reduced marketing andselling administrative costs due to savings from restructuring actions.  Operating EBITDA margin decreased slightlyprimarily due to lower gross profit percentage offset by lower marketing andselling costs as a percentage of sales.

***Asia/Pacific***

*Net sales.*Netsales in the Asia/Pacific region decreased primarily due to foreign currencytranslation losses.  Sales increases inAustralia/New Zealand and Thailand were offset by sales decreases in Malaysia,Hong Kong and Indonesia.

*Operating EBITDA.*OperatingEBITDA and Operating EBITDA margin increased due to reductions in brand supportand selling and general administrative costs due to savings from restructuringactions, mainly in Australia and India.

**CorporateExpenses**

Corporate expenses increased from $12.3 million in the firstsix months of 2005 to $14.2 million in the first six months of 2006, primarilydue to higher performance based incentive expense and litigation costs,partially offset by lower consulting costs, information technology costs andsavings related to restructuring actions.

**Liquidity and Capital Resources**

The Company’s liquidity needs are primarily met through internallygenerated cash flow. From time to time, the Company borrows money underMerisant’s revolving line of credit under the Senior Credit Agreement. TheCompany’s primary uses of cash are cost of sales, operating expenses, debtservice and capital expenditures. The Company’s foreign subsidiariesgenerated approximately 59% of its consolidated net sales during the six monthsended June 30, 2006, and it has relied upon the repatriation of cash from itsforeign subsidiaries to satisfy many of its cash requirements. Historically,the Company had received a vast majority of funds from its foreign subsidiariesthrough its Swiss subsidiary in the form of payments pursuant to a promissorynote. This promissory note was repaid in full in January 2006. OnMarch 30, 2006, Merisant issued a revolver note to its Swiss subsidiary,which will mature in 2011. Merisant may borrow up to $200 million from itsSwiss subsidiary during the term of the revolver note, and Merisant expects torepatriate cash to the United States through borrowings under this revolvernote.

Accounts receivable levels, time to payment and inventorylevels impact the amount of internally generated cash flow. The following tableshows information with respect to the Company’s accounts receivable andinventory at December 31, 2005 and June 30, 2006. Accounts receivabledecreased in the six months ended June 30, 2006 primarily due to the transitionto a new distributor in the United States with improved terms and collectionsas compared to the previous distributor. The decrease in inventory resulted

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from the purchase of significant aspartame inventory in 2005 to satisfya minimum volume commitment, and this excess inventory is being consumedthroughout 2006.

|                                    | ** ** | **December 31, 2005** | ** ** | **June 30, 2006** | ** ** |
|------------------------------------|------------|---------------------------------|------------|-----------------------------|------------|
|                               |       |                            |       |                        |       |
| Accounts  receivable (in millions) |       | $                               | 66.3       |                        | $          | 61.7 |   |
| Days sales  outstanding            |       | 78                              |       | 75                          |       |
| Inventory (in  millions)           |       | $                               | 29.2       |                        | $          | 22.2 |   |
| Days sales in inventory            |       | 81                              |       | 63                          |       |

 

***Six Months Ended June 30,2006 Compared to Six Months Ended June 30, 2005***

For the six months ended June 30, 2006, net cash providedby operating activities was $10.6 million, whereas in the six months ended June30, 2005, net cash used in operating activities was $1.6 million. Operatingcash flows increased $12.1 million versus the six months ended June 30, 2005,due to an increase in the contribution from working capital of $17.7 million,partially offset by decreased net income after adjusting for non-cash items.The contribution from working capital increased mainly due to a significantdecrease in accounts receivable due to improved terms with a key distributor,reduction in other receivables due to the collection of funds related to thesale of the South African subsidiary and lower aspartame inventories as theCompany consumes significant quantities purchased in 2005 to satisfy a minimumvolume commitment.

Net cash used in investing activities totaled $1.3million for the six months ended June 30, 2006 and the six months ended June30, 2005.

For the six months ended June 30, 2006, financingactivities used $7.8 million in cash as compared to providing $3.8 million incash for the six months ended June 30, 2005. In the six months ended June 30, 2006, cash was provided from borrowingsof $85.0 million under Merisant’s Second Lien Credit Agreement, but theproceeds were used fully to prepay borrowings under Merisant’s Senior CreditAgreement and for costs relating to the Second Lien Credit Agreement.  Additional funds obtained from Merisant’s  sale of its South African subsidiary wereused to prepay existing debt obligations under the Term A and Term B loans inaccordance with the terms of the Senior Credit Agreement.  For the six months ended June 30, 2006, theCompany also used cash to pay Merisant’s scheduled principal payments under theSenior Credit Agreement and to pay fees related to amendments to Merisant’sSenior Credit Agreement, as was also the case for the period ended June 30,2005.

***Capital Expenditures***

Capital expenditures in 2006 are expected to be in therange of $3.0 million to $5.0 million. The Company believes thatinternally generated cash flow, together with borrowing available underMerisant’s Senior Credit Agreement, will be sufficient to fund capitalexpenditures over the next 12 months.

***Financing***

OnNovember 12, 2003, the Company issued $136.0 million stated aggregate principalamount at maturity of its Discount Notes. On July 11, 2003, Merisant issued $225.0 million principal amountof its Notes and refinanced its then existing credit facility with the SeniorCredit Agreement.  A portion of theproceeds of the Discount Notes, the Notes and the Senior Credit Agreement wereused to pay a dividend to the stockholders of Merisant Worldwide.

TheSenior Credit Agreement provides for aggregate commitments of up to $310.0million, consisting of a revolving loan facility of $35.0 million, of which aportion is available at Merisant’s option in euro or dollars or in the form ofletters of credit denominated in dollars or euro, as well as term loanfacilities of $275.0 million, consisting of a Euro Term Loan A of $50.0million, and a Term Loan B of $225.0 million, denominated in dollars. The EuroTerm Loan A and the revolving loan facility have a maturity of five andone-half years while the Term Loan B has a maturity of six and one-half years.The Senior Credit Agreement is guaranteed by Merisant Worldwide and each ofMerisant’s domestic subsidiaries. The Senior Credit Agreement and theguarantees of the guarantors are secured by a first-priority security interestin substantially all of Merisant’s assets and the assets of the guarantors.

Aspart of the issuance of the Discount Notes, the Notes and Merisant’s refinancingin 2003, the Company and Merisant

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incurredsignificant financing costs that are being amortized in accordance with theterms of the respective debt instruments. As of June 30, 2006, the deferredfinancing cost balance relating to the issuance of the Discount Notes inNovember 2003 and the 2005 registered exchange offer with respect to theDiscount Notes was approximately $2.3 million. As of June 30, 2006, the deferred financing cost balance related to therefinancing of the Senior Credit Agreement, the issuance of the Notes inJuly 2003, the 2005 registered exchange offer with respect to the Notesand the execution of any subsequent amendments to the Senior Credit Agreementwas approximately $11.3 million.

Merisanthas sought and obtained amendments to the Senior Credit Agreement from time totime.  The Company faced an issue in thefirst quarter of 2006 with a possible immediate default under the Senior CreditAgreement as a result of continued declines in Bank EBITDA.  Merisant successfully completed the FourthAmendment to the Senior Credit Agreement on March 29, 2006, which amended thefinancial covenants as of December 31, 2005, adjusted the financial covenantsthrough the maturity date of loans outstanding under the Senior CreditAgreement, incorporated new financial covenants, adjusted the interest rate onborrowings under the Senior Credit Agreement, amended the definition of BankEBITDA to provide additional “add backs” related to Merisant’s restructuringand new product development efforts, and amended certain other covenants.  The Fourth Amendment also required Merisantto raise approximately $85.0 million of new borrowings under the Senior CreditAgreement before January 2, 2007, including pursuant to loans secured by asecond lien on all of the assets that secure loans outstanding under the SeniorCredit Agreement.

OnJune 23, 2006, Merisant completed the Fifth Amendment to the Senior CreditAgreement concurrent with the closing of the Second Lien Credit Agreement.  The Fifth Amendment amended the Senior CreditAgreement to accommodate the Second Lien Credit Agreement and to effect certainother amendments that were intended to facilitate a de-leveraging of Merisant’scapital structure.  The amendmentsinclude exceptions to the restrictive covenants to permit, subject to certainlimitations and subject to the restrictions contained in the indenturesgoverning the Discount Notes and the Notes:

·                                          theissuance of certain preferred stock by Merisant Worldwide;

·                                          theissuance of up to an aggregate of $100.0 million of payment-in-kind (“PIK”)notes and additional secured indebtedness;

·                                          additionalrestricted payments up to $10.0 million each fiscal year;

·                                          theexchange by Merisant Worldwide or Merisant of capital stock of MerisantWorldwide, PIK notes or additional secured PIK indebtedness for the DiscountNotes or the Notes or the repurchase of the Notes or Discount Notes with thenet cash proceeds from the issuance of such capital stock, PIK notes oradditional secured PIK indebtedness so long as the Notes and the Discount Notesare cancelled in connection with any such transaction; and

·                                          theacquisition by Merisant Worldwide and Merisant of the Notes or Discount Notesin transactions permitted under the restricted payment covenant.

Inaddition, the beneficial owners of the Notes and the Discount Notes may acquirethe common stock of Merisant Worldwide without triggering a change of controlevent of default so long as the original investors in Merisant Worldwidecontinue to control of record and beneficially, directly or indirectly, atleast 51% of the outstanding common stock of Merisant Worldwide.

Merisantconsummated the Second Lien Credit Agreement on June 23, 2006.  The Second Lien Credit Agreement provides foran $85.0 million term loan facility, which was drawn in a single draw atclosing. The maturity date of the term loan is June 11, 2010.

Dependingon the type of borrowing by Merisant, the applicable interest rate under theSecond Lien Credit Agreement is calculated as a per annum rate equal to (a)LIBOR plus 850 basis points or (b) (i) the greater of (x) the prime rate or (y)the federal funds effective rate plus 0.5% plus (ii) 750 basis points.  As of June 30, 2006, there were $85.0 millionin term loans outstanding under the Second Lien Credit Agreement at an interestrate of 13.98%.

The Second Lien Credit Agreement contains provisionsfor mandatory prepayments from 100% of the net cash proceeds

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of asset sales, recovery events and debt issuances and50% of the net cash proceeds of equity issuances, subject to certainexceptions.  Merisant may prepay theterms loans under the Second Lien Credit Agreement in whole or in part at anytime.  If Merisant makes any suchpayments during the first three years of the credit facility, Merisant must paya premium of 3%, 2% and 1% of the aggregate principal amount of term loansprepaid in the first, second and third years of the Second Lien CreditAgreement, respectively, except that these prepayment premiums will be reducedto 1.5%, 1% and 0.5%, respectively on the first $25.5 million aggregateprincipal amount of the term loans prepaid with the net cash proceeds from anequity issuance by Merisant Worldwide.

The obligations under the Second Lien Credit Agreementare guaranteed by Merisant Worldwide and Merisant’s domestic subsidiaries, andare secured by a lien on substantially all of the assets of Merisant, MerisantWorldwide and each subsidiary guarantor, including a pledge of 65% of theownership interests in each first-tier foreign subsidiary held by a guarantor,with certain exceptions.

TheSecond Lien Credit Agreement increased the aggregate principal amount ofMerisant’s indebtedness by $7.2 million, and Merisant’s interest expense willincrease as a result of the transaction. Merisant’s loans outstanding under the Senior Credit Agreement had aweighted average interest rate of approximately 9.0% per annum prior to theclosing of the Second Lien Credit Agreement. Merisant’s borrowings under the Senior Credit Agreement and Second LienCredit Agreement had a weighted average interest rate of approximately 10.3%per annum upon the closing of the Second Lien Credit Agreement.  The interest rates on loans outstanding underthe Senior Credit Agreement reverted to Euro-LIBOR plus 325 basis points on Euro-denominatedterm A loans, or 6.1% per annum, and LIBOR plus 325 basis points on term Bloans and revolving loans, or 8.4% per annum, upon the closing of the SecondLien Credit Agreement.

**IntercreditorArrangements**.  Theloans outstanding under the Second Lien Credit Agreement are secured by asecond lien on all of the assets that secure loans outstanding under the SeniorCredit Agreement.  In connection with theclosing of the Second Lien Credit Agreement, Merisant, Merisant Worldwide,lenders under the Senior Credit Agreement (the “First Lien Lenders”), thelenders under the Second Lien Credit Agreement (the “Second Lien Lenders”),Credit Suisse, as agent to the first lien lenders, and Wells Fargo Bank,National Association, as agent for the second lien lenders, entered into anIntercreditor Agreement.  TheIntercreditor Agreement subordinates the liens securing the obligations underthe Second Lien Credit Agreement to the liens securing the obligations underthe Senior Credit Agreement.  TheIntercreditor Agreement restricts amendments to the Senior Credit Agreement andthe Second Lien Credit Agreement. Certain amendments to the Senior Credit Agreement or the Second LienCredit Agreement require the prior consent of the administrative agent for theother credit facility acting at the direction of the requisite lenders for thatfacility.  The aggregate principal ofloans under the Senior Credit Agreement may not exceed $175.0 million plusinterest that has been capitalized under the Senior Credit Agreement that doesnot exceed the applicable base rate plus a margin of 6% per annum, exclusive ofany default interest.  This limitationwill be further reduced by any permanent repayments of principal and reductionsor eliminations of commitments under the Senior Credit Agreement.  The aggregate principal amount of loansoutstanding under the Second Lien Credit Agreement may not be increased.  In addition, neither the Senior Credit Agreementnor the Second Lien Credit Agreement may be amended to provide for covenants,representations or warranties, events of default, rights or remedies which are,in the aggregate, on terms less favorable to the lenders under the other creditfacility or increase the amount of interest by an applicable margin of morethan 6% with no more than 4% of any such increase payable in cash, exclusive,in each case, of default interest.

**RestrictiveCovenants and Bank EBITDA**. The indentures governing the Discount Notes and the Notes, the SeniorCredit Agreement and the Second Lien Credit Agreement contain certain covenantsthat limit or restrict the incurrence of liens, investments (includingacquisitions), sales of assets, indebtedness, restricted payments (includingdividends) and mergers and consolidations, subject to certain exceptions.  In addition, the Senior Credit Agreement andthe Second Lien Credit Agreement require Merisant to maintain compliance with aconsolidated first-lien leverage ratio covenant, a consolidated senior leverageratio covenant, a consolidated leverage ratio covenant, a consolidated interestcoverage ratio covenant, and a consolidated fixed charge coverage ratiocovenant.  The representations,warranties, covenants and defaults in the Second Lien Credit Agreement aresubstantially similar to the representations, warranties, covenants anddefaults in the Senior Credit Agreement in all material respects, except thatcertain negative covenants are less restrictive on Merisant and itssubsidiaries’ business and operations and the financial covenant ratios areless restrictive, in each case, than those set forth in the Senior CreditAgreement.

As noted above,the Senior Credit Agreement and the Second Lien Credit Agreement containfinancial covenants that require Merisant to maintain certain ratios. Theseratios are measured on the basis of Bank EBITDA for the four fiscal quartersending at least 45 days prior to the payment date.  Bank EBITDA is described here because it isthe measure upon which the

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covenants contained inthe Senior Credit Agreement are measured. However, Bank EBITDA is not a measure of liquidity under GAAP.Accordingly, while providing useful information with respect to assessingMerisant’s compliance with covenants under its primary debt obligations, thismeasure should not be considered in isolation from, or as a substitute for,consolidated statement of cash flow data prepared in accordance with GAAP as anindication of liquidity. In addition, the Bank EBITDA measure presented maydiffer from, and may not be comparable to, similarly titled measures used byother companies.

Bank EBITDA asdefined under the Senior Credit Agreement and the Second Lien Credit Agreementexcludes interest expense, income tax expense, depreciation and amortization aswell as the certain other expenses and non-cash items, including:

·                                          anyextraordinary, unusual or non-recurring non-cash expenses or losses (includingnon-cash losses on sales of assets outside of the ordinary course of business);

·                                          non-cashcontributions and other non-cash compensation expense;

·                                          non-cashlosses attributable to equity in non-consolidated subsidiaries;

·                                          transactioncosts associated with the 2003 recapitalization transaction which are expensedand not amortized;

·                                          anynon-cash foreign currency translation adjustments;

·                                          anyextraordinary or non-recurring cash losses or expenses arising fromrestructuring not to exceed in the aggregate (A) if such period ends prior toJanuary 1, 2004 (for Senior Credit Agreement), (B) if such period ends prior toJanuary 1, 2006, $14,600,000, (C) if such period begins on or after January 1,2006, (x) $11,000,000 with respect to any such non-recurring cash losses orexpenses arising from the implementation of the Merisant’s plan known as “ProjectArrow” and related restructuring, (y) $4,000,000 with respect to any suchnon-recurring cash losses or expenses arising from the transition from H.J.Heinz Company to ACH Food Companies, Inc. as exclusive distributor to Merisantand its subsidiaries in the United States; and (z) any cash expenses incurredin connection with (i) any waiver of a default or event of default and anyamendment to the Senior Credit Agreement including the fees and expenses of anyattorneys and financial advisers retained by the administrative agent pursuantthereto with respect to any such waiver or amendment and (ii) the negotiation,execution and closing of the Second Lien Credit Agreement and any waiver of adefault or event of default and any amendment to the Second Lien CreditAgreement including the fees and expenses of any attorneys and financialadvisers retained by the administrative agent with respect to any such waiveror amendment; and

·                                          expensesincurred by Merisant or any subsidiary prior to January 1, 2007 in connectionwith the development and commercialization of the all-natural, zero-caloriesweetener to be marketed under the *Sweet Simplicity*TMtrademark, in an amount not to exceed in the aggregate $3,000,000.

Bank EBITDA for the six monthsended June 30, 2006 was $31.5 million. Merisant was in compliance with itscovenants under the Senior Credit Agreement, as amended, and the Second LienCredit Agreement at June 30, 2006.

The following table illustratesthe reconciliation of Bank EBITDA to cash flow from operating activities, whichmanagement believes is the most nearly equivalent GAAP measure:

|                                                                   | ** ** | **Six Months  Ended  June 30, 2006** | ** ** |
|-------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                        | ** ** | **(in millions)**                              | ** ** |
| Net cash  provided by operating activities                        |       | $                                                   | 10.6       |   |
| Provision for  income taxes, net of deferred income tax provision |       | 0.4                                                 |       |
| Interest  expense, net of non-cash interest expense               |       | 22.9                                                |       |
| Cash costs of  refinancing                                        |       | 0.8                                                 |       |
| Restructuring  expenses (a)                                       |       | 3.6                                                 |       |
| Other items (b)                                                   |       | 2.4                                                 |       |
| Equity in  (income) loss of affiliates                            |       | 0.0                                                 |       |
| Net change in  operating assets and liabilities                   |       | (9.2                                                | )          |
| Bank EBITDA                                                       |       | $                                                   | 31.5       |   |

 

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(a)                                  The charges principally relate to planned employeetermination costs that have been announced in the period presented. Therestructuring liability as of the end of each period is included in Accruedexpenses and other liabilities in our consolidated balance sheets.

(b)                                 Other items consist mainly of certain non-cashexpenses (income) and charges related to certain new product development andlaunch expenses that are excluded from the definition of Bank EBITDA.

***ForwardLooking Statements***

Certaininformation included or incorporated in this report may be deemed to be “forward-lookingstatements” within the meaning of Section 27A of the Securities Act andSection 21E of the Exchange Act. All statements, other than statements ofhistorical facts, included or incorporated in this report, are forward-lookingstatements. In particular, statements made under the heading “Management’sDiscussion and Analysis of Financial Condition and Results of Operations,”relating to overall volume trends, pricing trends and industry forces,anticipated results, expectations for funding capital expenditures andoperations and increased market share and the sufficiency of capital to meetworking capital, capital expenditures requirements and strategies areforward-looking statements. When used in this document, the words “anticipate,”“estimate,” “project” and similar expressions are intended to identifyforward-looking statements.

These statementsare based on assumptions and assessments made by management in light of theirexperience and their perception of historical trends, current conditions,expected future developments and other factors they believe to be appropriate.Any forward-looking statements are not guarantees of future performance and aresubject to risks and uncertainties that could cause actual results,developments and business decisions to differ materially from thosecontemplated by such forward-looking statements. The Company disclaims any dutyto update any forward-looking statements. Some of the factors that may causeactual results, developments and business decisions to differ materially fromthose contemplated by such forward-looking statements include thefollowing:  changes in consumerpreferences and nutritional and health-related concerns; increased competition;changes in the terms on which the Company may obtain aspartame; damagedconsumer confidence in the Company’s products as a result of health-relatedallegations; product liability claims; fluctuations in exchange rates and othercurrency risks; disruptions in the Company’s business as a result of strikes orwork stoppages; changes in the Company’s relationship with its largestdistributor; and changes in economic and political conditions in the countriesin which the Company markets and produces its products.

**Item 3.  Quantitative and Qualitative DisclosuresAbout Market Risk**

***Foreign Operations***

With approximately64% and 59% of the Company’s consolidated total net sales generated by itssubsidiaries outside of the United States in the six months ended June 30, 2005and 2006, respectively, the Company’s ability to obtain funds necessary to meetits obligations is subject to applicable laws, foreign taxes and intercompanypricing laws, including those relating to the flow of funds between the Company’sforeign affiliates pursuant to, for example, purchase agreements, licensingagreements or other arrangements. Historically, the Company received a vastmajority of funds from its foreign affiliates through its Swiss subsidiary inthe form of payments pursuant to a promissory note. The note was repaid in fullin January 2006. On March 30, 2006, Merisant issued a revolver noteto its Swiss subsidiary, which will mature in 2011. Merisant may borrow up to$200 million from its Swiss subsidiary during the term of the revolver note,and the Company expects to repatriate cash to the United States throughborrowings under this revolver note. Regulators in the United States and otherforeign countries where the Company operates may closely monitor its corporatestructure and how it effects intercompany fund transfers.

In addition, as of June 30, 2006, foreign affiliatescomprised approximately 45% of the Company’s consolidated total assets.Accordingly, the Company has been, and will continue to be, exposed to foreignexchange risk.

***Foreign Currency and Interest Rate Risks***

Inherent in the Company’s operations are certain risksrelated to changes in foreign currency exchange rates and interest rates. TheCompany bears foreign exchange risk because a majority of the Company’sfinancing was obtained in U.S. dollars although a significant portion of itsrevenues are earned in the various currencies of its foreign subsidiaries’operations. Under Merisant’s Senior Credit Agreement, a portion of itsfinancing was obtained in euros. This euro-denominated loan decreases theCompany’s transactional exposure to euro exchange fluctuations until the europrincipal and interest are repaid. Any decrease in

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sales and earnings fromeuro denominated countries that results from the euro weakening against the U.S.dollar is currently more than offset by the decrease in the euro denominateddebt obligations (i.e., foreign currency transaction gain) and interest expensethat also results from such a decrease in exchange rate. Likewise, any increasein sales and earnings from the euro denominated countries that results from astrengthening euro against the U.S. dollar partially offsets the increase inthe euro denominated debt obligations (i.e., foreign currency transaction loss)and interest expense that results from such an exchange rate increase.

A significant portion of the Company’s debt bearsinterest at a fixed rate. Interest rate exposure results from Merisant’sfloating rate borrowings. For the six month period ended June 30, 2006, a 1.0%per annum increase or decrease in interest rates would have resulted in anincrease or decrease in cash interest costs for Merisant’s Term A and Term Bloans of approximately $1.1 million, excluding the impact from the interestrate derivatives that were still in place for the majority of the three monthperiod ended March 31, 2006.

Inthe normal course of business, Merisant identifies risks relating to foreigncurrency exchange rates and interest rates and mitigates their financial impactthrough corporate policies and, at times, through the use of derivativefinancial instruments. Merisant uses derivatives only where there is anunderlying exposure and does not use them for trading or speculative purposes.The counter parties to the hedging activities are highly rated financialinstitutions. The Company did not have any foreign currency forward exchangecontracts or interest rate derivatives outstanding at June 30, 2006.

***Inflation Risk***

Inflation is not expected to have a material impact onthe Company’s business, financial condition or results of operations. Inmarkets outside the United States in countries with higher inflation, Merisantgenerally has been able to offset the impact of inflation through a combinationof cost-cutting measures and price increases.

**Item 4. Controls and Procedures**

# ***Evaluation ofDisclosure Controls and Procedures***

The Company conducted an evaluation,under the supervision of the Chief Executive Officer and Chief FinancialOfficer, of the effectiveness as of December 31, 2005 of the Company’sdisclosure controls and procedures (as defined in Exchange Act Rule 15d-15(e)).Based on this evaluation, the Chief Executive Officer and Chief FinancialOfficer had concluded that, as of December 31, 2005, the Company’sdisclosure controls and procedures needed improvement and were not effective toprovide reasonable assurance that information required to be disclosed by theCompany in reports that it files with the SEC or submits under the Exchange Actis recorded, processed, summarized and reported within the time periodsspecified in the SEC’s rules and forms. In making this conclusion, theChief Executive Officer and Chief Financial Officer considered the materialweaknesses in the Company’s internal controls over financial reporting and thestatus of the corrective actions to remedy those material weaknesses describedbelow. In its reevaluation of the Company’s disclosure controls and proceduresas of June 30, 2006, the Chief Executive Officer and the Chief FinancialOfficer noted certain incremental improvements. However, the Company has notformally documented and tested all of its potentially remediated controls toaffirmatively conclude that such controls are operating effectively.

The certifications of the Chief ExecutiveOfficer and Chief Financial Officer required in accordance withSection 302 of the Sarbanes-Oxley Act of 2002 appear as exhibits to thisreport. The disclosures set forth in this Item 4 contain information concerningthe evaluation of the Company’s disclosure controls and procedures, and changesin internal controls over financial reporting, referred to in paragraphs4(b) and (c) of the certifications. The certifications should be readin conjunction with this Item 4 for a more complete understanding of the topicspresented.

## *MaterialWeaknesses Identified*

In a letter to the Company datedSeptember 24, 2004 related to the audit of the Company’s financialstatements for the year ended December 31, 2003 and through discussionswith management and the audit committee of its board of directors on April 14,2005 related to the former auditor’s audit of its financial statements for theyear ended December 31, 2004, the former auditor identified certainmatters involving the Company’s system of internal control and its operationthat the auditor considered to be material weaknesses as defined in the PublicCompany Accounting Oversight Board’s, or PCAOB’s, Auditing Standard No. 2,*An Audit of Internal Control Over FinancialReporting Performed in Conjunction with an Audit of Financial Statements*(the PCAOB’s final standard will apply to the Company’s audit for the yearended December 31, 2007). The Company’s former

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auditor noted thebalance sheet accounts for income taxes, fixed assets, inventory, and accruedtrade promotions were not reconciled, or not reconciled in a timely manner. Asa result, the Company made material adjustments to the financial statementsthat were not initially identified by its internal controls over financialreporting.

## *CorrectiveActions*

There have been some improvements, asdescribed more fully below, in the Company’s internal control over financialreporting that occurred during the period covered by this report that havematerially affected, or are reasonably likely to materially affect, itsinternal control over financial reporting. During the period covered by thisreport, the Company has taken steps to improve its internal control structureand procedures regarding disclosures in its financial reporting, includingthose contemplated by Section 404 of the Sarbanes-Oxley Act and therules and regulations of the SEC promulgated thereunder, with which theCompany is required to be in compliance as of December 31, 2007. TheCompany continues to take further steps with regard to these matters.

During and prior to the periods coveredby this report, the Company has taken steps to improve its control activitiesand procedures over financial reporting. The Company continues to make furtherenhancements with regards to its entity level disclosure controls. Theseactions include the following enhancements.

·                  The Company’sdisclosure committee has been expanded to include management at the corporate,regional and local levels to discuss operational and financial issues for thereporting period. At a minimum, the committee meets once aquarter, just prior to releasing results for the quarter then ended. Thecommittee meetings provide the necessary forum to give reasonable assurancethat the information required to be disclosed in the reports filed pursuant tothe Exchange Act is analyzed, reviewed and included where relevant.

·                  A monthly regional resultsreview is held between corporate and regional financial management to discusseach region’s financial results, including explanations of significantvariances between the actual results as compared to projections and prior year.For the quarter, additional corporate financial personnel attend the meeting toparticipate in the financial review and to discuss the quarterly financialclose process and any pending issues.

·                  Aquarter-end review checklist which documents that key controls in the financialclose process were performed is sent to financial personnel at both theregional and headquarter levels. The checklists are now submitted on a timelybasis and are reviewed by corporate and regional financial personnel during theregional results review for the quarter.

The Company reviewed the mattersidentified by its former auditor and initiated an effort to implement controlsto mitigate the identified control weaknesses and implement plans to fullyremediate these weaknesses. This process is ongoing, and during the periodcovered by this report, the Company continued to make material changes in thefollowing areas.

*Income Taxes*. Theincome tax accounts were reconciled at year-end and quarter-end. The Companycontinues to use an outside adviser to assist with its taxes andreconciliations on a regular basis as well as to assist with training ourfinance personnel on tax accounting matters. In addition, the Company has hiredan internal tax manager to further build its core competencies in the tax area.

*Inventory*. Theinventory accounts were substantially reconciled at year-end and quarter-end.While the entire inventory process, from acquiring raw materials to shippingfinished goods, requires frequent manual intervention, the Company hasimplemented critical monthly and annual controls to ensure that the inventoryaccounts presented in our financial statements are fairly stated. Specifically,the following actions are taken:

·                  The Company reconciles thethird-party warehouse inventory system to the Company’s inventory system,monthly.

·                  The Company conducted its annualphysical inventory at its largest inventory location at year-end, whichrepresented approximately 59% of the consolidated inventory value, excludinginventory reserves. The resulting adjustment was less than 1% of totalinventory value. Internal and external auditors observed and validated that theinventory taking procedures surrounding the physical inventory were wellcontrolled.

·                  In 2006, the Company continuesto reassess its analytical procedures to ensure that each inventory account andthe

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postphysical inventory adjustment is thoroughly analyzed and reviewed.

*Fixed Assets*. TheNorth America fixed asset accounts were reconciled at year-end and quarter-end.Prior to 2004, certain fixed assets were accounted for on a manual spreadsheet,which led to errors. In 2004, the fixed asset spreadsheet was reviewed andcorrected. The corrected asset values and depreciable lives were uploaded intothe SAP fixed asset module, automating the process. In the EAME region, themanual fixed asset process mentioned above is currently used. During 2005, theCompany performed a physical inventory and reconciliation of fixed assets,including reviewing each asset’s depreciable life. The Company intends toimplement the SAP fixed asset module for the region. All fixed asset accountswere reconciled at year-end and quarter-end.

*Accrued Trade Promotions*.The accrued trade promotion account was reconciled at year-end andquarter-ends. Throughout 2005 and the first six months of 2006, the Company hascontinued to refine its detailed methodology for estimating and accruing trademarketing expenses.

The Company believes that the changes ithas implemented are sufficient to mitigate the material weaknesses describedabove. However, while the Company has enhanced the design of the currentcontrols and implemented additional controls, there are still opportunities foradditional improvements in certain areas. Additionally, the Company has not yetformally tested the on-going effectiveness of the new controls. In addition tothe continuing efforts described above, the Company has made significantprogress in documenting, testing and remediating its system of internal controlsin preparation for compliance with the requirements of Section 404 of theSarbanes-Oxley Act and the rules and regulations of the SEC promulgatedthereunder, with which it must be in compliance by December 31, 2007.

# ***Changes in InternalControl Over Financial Reporting***

Except as otherwise described above, there have beenno changes in the Company’s internal control over financial reporting duringthe most recently completed fiscal quarter that have materially affected, orare reasonably likely to materially affect, the Company’s internal control overfinancial reporting.

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**PART II**—**OTHER INFORMATION**

**Item 1.Legal Proceedings**

From time to time,the Company is involved in litigation concerning its business operations.

InOctober 2004, Merisant requested the National Advertising Division of theCouncil of Better Business Bureaus, referred to as the NAD, to reviewadvertising and other claims made by McNeil Nutritionals, LLC (“McNeil”) inconnection with its *Splenda®* brandsweetener. Merisant believed and continues to believe McNeil’s *Splenda®* advertising to be false and misleading. DespiteMcNeil’s previous use of the NAD for such disputes and the NAD’s industry-wide,self-regulatory nature, McNeil refused to allow their advertising claims to bejudged by the NAD and instead sought to have the issue considered by the UnitedStates District Court for the District of Puerto Rico. Under NAD rules, McNeil’sfiling in Puerto Rico precluded the NAD from reviewing the matter or referringMcNeil’s advertising to the Federal Trade Commission. In order to have McNeil’sadvertising addressed by a jury and court in the continental United Statesfamiliar with McNeil’s claims, on November 26, 2004, Merisant filed afederal and state false advertising complaint against McNeil in the UnitedStates District Court for the Eastern District of Pennsylvania. That suitcontinues today and seeks to have McNeil’s *Splenda®*campaign stopped because of its misleading nature and seeks significant damagesresulting from the impact McNeil’s false advertising has had on Merisant’ssales. On January 13, 2005, McNeil voluntarily dismissed its action inPuerto Rico and in April 2005 McNeil amended its answer to the Company’scomplaint in the Pennsylvania action to add a counterclaim against the Companyalleging that its *Equal® Sugar LiteTM*packaging and advertising were misleading. McNeil has dismissed itscounterclaim relating to *Equal® Sugar LiteTM*packaging and advertising and on July 7,2006, the court entered a dismissal with prejudice of those claims.

OnFebruary 15, 2006, a putative consumer class action lawsuit was filedagainst the Company in the United District Court for the Northern District ofIllinois Eastern Division alleging that the Company’s *Equal® Sugar LiteTM* packaging andadvertising were misleading. The plaintiffs alleged that on a volumetric basis,*Equal® Sugar LiteTM* does notdeliver half the calories of a cup of sugar. On April 17, 2006, the Company filed a motion to dismiss thelawsuit for failure to state a claim upon which relief may be granted.  On June 14, 2006, the court entered a stipulationof dismissal of this lawsuit with prejudice.

The Company is subject to various other claims, pendingand possible legal actions for product liability and other damages, and othermatters arising out of the conduct of the Company’s business, including taxuncertainties arising from doing business in various European jurisdictions.Some on-going legal proceedings have been disclosed in previous reports, butare not required to be disclosed in this report because no material changes inthose proceedings occurred during the period covered by this report. TheCompany believes, based on current knowledge, recorded accruals, andconsultation with counsel, that the outcome of such claims and actions will nothave a material adverse effect on the Company’s consolidated financial positionor results of operations.

**Item 1A. Risks Related to Our Business**

The most significant riskfactors applicable to the Company are described in Part I, Item 1A “RiskFactors” of the Company’s Annual Report on Form 10-K for the year endedDecember 31, 2005. There have been no material changes from the riskfactors previously disclosed in the Company’s report on Form 10-K.

**Item 4.    Submission of Matters to a Vote of SecurityHolders.**

Theannual meeting of the stockholders of the Company was held on May 23, 2006 atwhich the stockholders elected directors and ratified the appointment of BDOSeidman, LLP as the Company’s independent auditor.  The stockholders elected Paul Block, RobertAlbus, Arnold Donald, Alec Machiels and Adam Stagliano as directors of theCompany for an additional one-year term by a vote of 8,682,416 shares in favor,1,603 shares opposed and 405,361 shares abstaining.  All stockholders voting on the issue of theappointment of BDO Seidman, LLP as independent auditor voted in favor of thatresolution.

OnJuly 20, 2006, the stockholders of the Company took action by written consentto elect Mr. David House as a director.

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**Item 6.Exhibits**
| Exhibit No. | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|-------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1        |       | Second Lien Credit Agreement, dated June 23, 2006,  among Merisant Company, as borrower, Merisant Worldwide, Inc. and certain  subsidiaries of Merisant Company, as guarantors, Credit Suisse, as  administrative agent, and Wells Fargo Bank, National Association, as  collateral agent (incorporated by reference to Exhibit 10.1 of Merisant  Worldwide’s Form 8-K filed on June 27, 2006).                                                                                                   |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.2        |       | Second Lien Security Agreement, dated June 23, 2006,  among Merisant Company, Merisant Worldwide, the lenders thereunder, Wells  Fargo Bank, National Association, as collateral agent, Jefferies &  Company, Inc. and Credit Suisse Securities (USA) LLC, as joint lead  arrangers, Credit Suisse, as collateral agent and Credit Suisse Securities  (USA) LLC, as documentation agent (incorporated by reference to Exhibit 10.2  of Merisant Worldwide’s Form 8-K filed on June 27, 2006). |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.3        |       | Intercreditor Agreement, dated June 23, 2006, among  Merisant Company, Merisant Worldwide, Inc., the subsidiary guarantors, Credit  Suisse, as administrative agent under the Senior Credit Agreement, and Wells  Fargo Bank, National Association, as a administrative agent under the Second  Lien Credit Agreement (incorporated by reference to Exhibit 10.3 of Merisant  Worldwide’s Form 8-K filed on June 27, 2006).                                                                       |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.4        |       | Fifth Amendment to Senior Credit Agreement, dated  June 23, 2006, among Merisant Company, Merisant Worldwide, Inc., certain  subsidiaries of Merisant Company, as guarantors, the lenders thereunder and  Credit Suisse, Cayman Islands Branch (formerly Credit Suisse First Boston),  as administrative agent (incorporated by reference to Exhibit 10.4 of  Merisant Worldwide’s Form 8-K filed on June 27, 2006).                                                                              |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.5        |       | Amended and Restated Security Agreement, dated June  23, 2006, among guarantors named on the signature page thereto, and Credit  Suisse, Cayman Islands Branch (formerly Credit Suisse First Boston), as  collateral agent (incorporated by reference to Exhibit 10.5 of Merisant  Worldwide’s Form 8-K filed on June 27, 2006).                                                                                                                                                                  |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 31.1        |       | Certificate of Paul R. Block pursuant to  Rule 15d-14 under the Securities Exchange Act of 1934.                                                                                                                                                                                                                                                                                                                                                                                                  |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 31.2        |       | Certificate of Anthony J. Nocchiero pursuant to  Rule 15d-14 under the Securities Exchange Act of 1934.                                                                                                                                                                                                                                                                                                                                                                                           |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 32.1        |       | Certificate of Paul R. Block pursuant to 18 U.S.C.  Section 1350.                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 32.2        |       | Certificate of Anthony J. Nocchiero pursuant to 18  U.S.C. Section 1350.                                                                                                                                                                                                                                                                                                                                                                                                                          |

 

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SIGNATURES

Pursuant to therequirements of the Securities Exchange Act of 1934, the registranthas duly caused this report to be signed on its behalf by the undersignedthereunto duly authorized.

 

 
|                       |   | MERISANT WORLDWIDE,  INC. |
|-----------------------|--------|---------------------------|
|                  |   |                      |   |   |
|                  |   |                      |   |   |
| Date: August 11, 2006 |   | By:                       | /s/ Anthony J.  Nocchiero |   |
|                  |   |                      | Anthony J. Nocchiero |   |
|                  |   |                      | Chief Financial  Officer |   |
|                  |   |                      | (on behalf of the Company  and in capacity |   |
|                  |   |                      | of principal financial  officer) |   |

 

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