Freshpet Inc

Note1 – Summary of Significant Accounting Policies:

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

Basis of Presentation– The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”). The unaudited condensed consolidated financial statements include the accounts of the Company as well as the Company’s wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The interim unaudited condensed consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). In the opinion of management, the interim unaudited financial statements reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of* March 31, 2024*, the results of its operations and changes to stockholders’ equity for thethree months ended* March 31, 2024* and2023, and its cash flows for thethree months ended* March 31, 2024* and2023. The results for thethree months ended* March 31, 2024*, arenot necessarily indicative of results to be expected for the year ending* December 31, 2024*, or any other interim periods, or any future year or period. All amounts included herein have been rounded except where otherwise stated. As figures are rounded, numbers presented throughout this document* maynot* add up precisely to the totals we provide and percentages* maynot* precisely reflect the absolute figures.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes in Item8 of Part II, “Financial Statements and Supplementary Data,” of our Annual Report on Form10-K for the year ended* December 31, 2023*.

Estimates and Uncertainties – The preparation of our consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used in determining, among other items, trade incentives, share-based compensation and useful lives for long-lived assets. Actual results, as determined at a later date, could differ from those estimates.

Segments – The Company operates as a single operating segment reporting to its chief operating decision maker.

Investment in Unconsolidated Company – The Company utilizes the equity method to account for investments when the Company possesses the ability to exercise significant influence, butnot control, over the operating and financial policies of the investee. The ability to exercise significant influence is presumed when an investor possesses more than20% of the voting interests of the investee. This presumption* may*be overcome based on specific facts and circumstances that demonstrate that the ability to exercise significant influence is restricted.

In applying the equity method, the Company records the investment at cost and subsequently increases or decreases the carrying amount of the investment by its proportionate share of the net income or loss. The Company has elected to record its share of equity in income (losses) of equity method investment on aone-quarter lag based on the most recently available financial statements.

Through2022, we invested a total of $31,200 in a privately held company that operates in our industry, withno additional investments thereafter. The Company concluded that it isnot the primary beneficiary, which is primarily the result of the Company's conclusion that it doesnot have the power to direct activities that most significantly impact economic performance. Prior to* March 30, 2023,*the Company accounted for the investment under the equity method of accounting based on its ability to exercise significant influence, based on its representation on and the makeup of the investee's Board of Directors.

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On* March 30, 2023,the Companyno* longer had representation on the investee's Board of Directors, and therefore determined that significant influence had been lost as of that date. As such, as of* March 30, 2023,the Company stopped accounting for the investment as an equity method investment and began to account for the investment under ASC Topic321* ("ASC321"), Investments - Equity Securities. As of* March 31, 2024,the Company's ability to exercise significant influence continues to be restricted as itno* longer has, or the ability to obtain, board representation and it hasno means of participation in any decision making processes as the privately held investee's Board of Directors is closely held.

Because the investee is a privately held company, there isnot a means to obtain a readily determinable fair value of the entity. The Company follows ASC Topic321 using the measurement alternative to measure investments in investees that donot have readily determinable fair value and over which the Company doesnot have significant influence. Under ASC321, the initial carrying value of the investment is equal to the previous carrying amount of the investment under the equity method. The carrying amount of the investment is subsequently adjusted for any impairment or adjustments resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer, if any. Dividends and distributions, if any, from the investee would be recognized in the period in which they are received and recorded in other income on the consolidated statement of operations.

The Company performs a qualitative assessment of whether the investment is impaired at each reporting date. If a qualitative assessment indicates that the investment is impaired, the Company estimates the investment’s fair value in accordance with the principles of ASC Topic820 (“ASC820”),Fair Value Measurements and Disclosures. If the fair value is less than the investment’s carrying value, the entity recognizes an impairment loss in earnings equal to the difference between the carrying value and fair value. On* March 26, 2024,the investee completed an equity funding, which we concluded represented an orderly transaction for an identical equity security withno* differences in rights and obligations. As a result, pursuant to the ASC321 measurement alternative, we adjusted the carrying amount of our equity investment from $23,528 as of* December 31, 2023to $33,446 as of March 31, 2024,recognizing a gain of $9,918 in earnings for thethree*-months ended* March 31, 2024,*based on the observable transactional price of the identical equity security issued by the investee.

March 2023Issuance of $402.5 million of 3.00% Convertible Senior Notes (the "Convertible Notes")* -In conjunction with the issuance of the $402.5 million Convertible Notes in March 2023,*the Company evaluated the debt instrument and its embedded features to determine if the contract or the embedded components of the contract qualified as a derivative that would be required to be separately accounted for in accordance with the relevant accounting literature.

The Company accounts for the Convertible Notes as a single liability measured at amortized cost. The Company uses the effective interest rate method to amortize the debt issuance costs to interest expense over the respective term of the Convertible Notes.

Leases – The Company is a lessee in noncancelable (1) operating leases, and (2) finance leases, which it accounts for in accordance with Accounting Standards Codification (ASC) Topic842, Leases.

The Company determines if an arrangement is or contains a lease at contract inception. The Company recognizes a right of use asset and a lease liability at the lease commencement date. For both operating and finance leases, the right of use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received; and the lease liability is initially measured at the present value of the unpaid lease payments at the lease commencement date.

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The Company’s leases donot provide an implicit rate; therefore, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments for those leases. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms in a similar economic environment.

Right of use assets for the operating and finance leases are periodically reviewed for impairment losses. The Company uses the long-lived assets impairment guidance in ASC Subtopic360-10, Property, Plant, and Equipment - Overall, to determine whether a right of use asset is impaired, and if so, the amount of the impairment loss to recognize.No such loss was recognized as of* March 31, 2024.*

The Company monitors for events or changes in circumstances that require a reassessment of its leases. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding right of use asset.

The Company has elected the practical expedient to combine lease and non-lease components when determining the right of use asset and lease liability. The Company has also electednot to recognize right of use assets and lease liabilities for short-term leases that have a lease term of12 months or less. The Company recognizes the lease payments associated with its short-term leases as an expense on a straight-line basis over the lease term.

Cash Equivalents– The Company holds treasury bills with original maturities when purchased of less thanthree months, within cash and cash equivalents, carried at amortized cost on the Consolidated Balance Sheet. Treasury bills have been classified as held-to-maturity as we have the ability and intent to hold them to maturity. As of* March 31, 2024,the Company had $99,661 of treasury bills within cash equivalents, which included $361 of amortized discount. As of December 31, 2023,*the Company had $134,570 of treasury bills within cash equivalents, which included $692 of amortized discount.

Short-Term Investments– The Company, from time to time, holds treasury bills with original maturities when purchased of greater thanthree months, within short-term investments, carried at amortized cost on the Consolidated Balance Sheet. Treasury bills have been classified as held-to-maturity as we have the ability and intent to hold them to maturity. As of* March 31, 2024and December 31, 2023,there wereno* short-term investments.

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

Implementation Costs of Cloud Computing Arrangement – As of* March 31, 2024and December 31, 2023,the Company's deferred implementation costs of our new ERP system associated with our cloud computing arrangement, which were reflected within prepaid and other assets, were $9,827 and $9,895, respectively. The cost will be recognized over the term of the agreement, which began in thefirst* quarter of2022.

Fair Value of Financial Instruments – Financial Accounting Standards Board (“FASB”) ASC820, Fair Value Measurements and Disclosure guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level1 measurement) and the lowest priority to unobservable inputs (Level3 measurement).

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Thethree levels of the fair value hierarchy are as follows:

Our financial assets and liabilities include cash and cash equivalents, receivables, accounts payable and accrued liabilities, the fair values of which approximate their carrying values due to the short-term nature of these instruments. The Company holds certain financial assets within cash and cash equivalents in the form of held-to-maturity treasury bills as we have the ability and intent to hold them to maturity, as such, they arenot fair valued each reporting period but instead measured at amortized cost. The fair value of these assets is based on quoted market prices for the same or similar securities within less active markets, which the Company determined to be Level2 inputs. As of* March 31, 2024,*the fair value of these treasury bills approximates their carrying value due to the short-term nature of these instruments.

Certain financial and non-financial assets, including operating lease right-of-use assets and property, plant and equipment are reported at their carrying values and arenot subject to recurring fair value measurements. We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset* may**not* be recoverable. For the investment in equity securities, we have elected the measurement alternative under which we measure this investment at cost minus impairment, if any, plus or minus changes resulting from observable price changes, if any, in orderly transactions for an identical or a similar investment of the same issuer, for which the change in fair value would be included in net income.

Refer to Note6 for the fair value of our Convertible Senior Notes.

As of* March 31, 2024*, the Company maintained Level1 and Level2 assets and liabilities.

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

Pet specialty continues to grow at a slower rate than our overall business and will soon be less than10% of our total net sales. As of* March 31, 2024,*the Company is providing a more meaningful breakout of its sales, which now combines pet specialty and club as both classes of retailers service a specific consumer through specialized offerings, which include value focused and or premium products. In contrast, grocery, mass, international and digital offer a wide variety of products.

Recently Issued Accounting Pronouncements

In* November 2023,the Financial Accounting Standards Board ("FASB") issuedASU2023-07, Segment Reporting (Topic280): Improvements to Reportable Segment Disclosures* to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This guidance will be effective for the Company for the annual report for the fiscal year ending* December 31, 2024*and subsequent interim periods. Early adoption is permitted and retrospective adoption is required for all prior periods presented. The Company is currently evaluating the provisions of this guidance and its effect on its future consolidated financial statements and plans to adopt the standard on its effective date.

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In* March 2024,the SEC adopted final rules to require disclosures about certain climate-related information in registration statements and annual reports. As adopted, the Final Climate Rules mandate disclosure of, among other things, material climate-related risks, how the board of directors and management oversee and manage such risks, and the actual and potential material impacts of such risks on us. The rules also require disclosure about material climate-related targets and goals, Scope1* and Scope2 GHG emissions, and the financial impacts of severe weather events and other natural conditions. In* April 2024,the SEC voluntarily stayed the Final Climate Rules pending resolution of legal challenges. If the rules are ultimately implemented, their adoption will be phased and, accordingly, we are required to begin certain disclosures for our annual period ending December 31, 2025.*These rules will be applied prospectively.

Note2 – Inventories, net:

Note3 – Property, Plant and Equipment, net:

Depreciation and amortization expense related to property, plant and equipment for thethree months ended* March 31, 2024* totaled $15,806, of which $11,351, was recorded to cost of goods sold with the remainder of depreciation expense recorded to selling, general and administrative expense.

Depreciation expense related to property, plant and equipment for thethree months ended* March 31, 2023* totaled $14,394, of which $10,721, was recorded to cost of goods sold with the remainder of depreciation expense recorded to selling, general and administrative expense.

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Note4 – Accrued Expenses:

Note5 – Debt:

On* February 19, 2021,*the Company entered into the Sixth Amended and Restated Loan and Security Agreement ("Credit Agreement"), which provided for a $350,000 senior secured credit facility (as amended the "Credit Facility"), encompassing a $300,000 delayed draw term loan facility (the "Delayed Draw Facility") and a $50,000 revolving loan facility (the "Revolving Loan Facility").

On* March 15, 2023,the Company terminated the Credit Agreement in connection with the offering of the Convertible Notes (as defined below) and it hadno borrowings outstanding under the Credit Facility as of such date. Interest expense and fees totaled $2,785 in2023,* which included $2,478 of debt issuance costs written off in conjunction with the termination of the Credit Facility in* March 2023.There was $0 of accrued interest on the credit facilities as of December 31, 2023.*

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Note6 – Convertible Senior Notes:

In* March 2023,we issued $402,500 aggregate principal amount of 3.0% convertible senior notes due2028* (the "Convertible Notes"). The Convertible Notes were issued in a private offering to qualified institutional buyers pursuant to Rule144A under the Securities Act of1933, as amended (the “Securities Act”). The net proceeds from the sale of the Convertible Notes were approximately $391,492 after deducting offering and issuance costs related to the Convertible Notes and before the2023 Capped Call transactions, as described below.

The Convertible Notes are our senior, unsecured obligations and accrue interest at a rate of 3.0% per annum, payable semi-annually in arrears on* April 1and October 1of each year, beginning on October 1, 2023.The Convertible Notes will mature on April 1, 2028unless earlier converted, redeemed or repurchased by us. Before January 3, 2028,noteholders will have the right to convert their Convertible Notes only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ended on June 30, 2023 (and only during such calendar quarter), if the last reported sale price of our common stock, par value $0.001 per share (the "common stock"), for each of at least20* trading days (whether ornot consecutive) during a period of30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to130% of the conversion price on each applicable trading day; (2) during thefive consecutive business day period immediately after any10 consecutive trading day period (the "measurement period") in which the trading price per*$1,000* principal amount of notes, as determined following a request by a holder or holders of the Convertible Notes in the manner described in indenture pursuant to which the Convertible Notes were issued and are governed (the “Indenture”), for each trading day of the measurement period, was less than98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; (3) if we call any or all of the Convertible Notes for redemption, but only with respect to the convertible notes called (or deemed called) for redemption; or (4) upon the occurrence of specified corporate events (e.g., a fundamental change or the making of certain distributions). On or after* January 3, 2028,until the close of business on thesecond* scheduled trading day immediately preceding the maturity date, a holder* may*convert its Convertible Notes at any time, regardless of the foregoing circumstances.

As of* March 31, 2024,noteholders have the right to early convert under the 130% early conversion feature, with such conversion right exercisable only during thesecond* quarter of2024. No early conversions have occurred during thesecond quarter of2024 as of the date of this filing.

We will settle conversions by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. The initial conversion rate for the Convertible Notes is 14.3516 shares of common stock per*$1,000* principal amount of Notes, which represents an initial conversion price of approximately $69.68 per share of common stock. The conversion rate and conversion price are subject to customary adjustments upon the occurrence of certain events. In addition, in connection with a make-whole fundamental change (as defined in the Indenture), which shall include among other things the Company's delivery of a notice of redemption, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its notes in connection with such a corporate event or redemption, as the case* may*be.

We* maynot* redeem the Convertible Notes prior to* April 3, 2026.We mayredeem for cash all or any portion of the Convertible Notes, at our option, on or after April 3, 2026and on or before the40th scheduled trading day immediately preceding the maturity date, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for each of at least 20 trading days (whether ornot* consecutive) during the 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we send the notice of redemption, at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. However, we* maynot* redeem less than all of the outstanding Convertible Notes unless at least $100 million aggregate principal amount of Convertible Notes are outstanding andnot called for redemption as of the time we send the related redemption notice.

Upon the occurrence of a fundamental change (as defined in the Indenture), holders* mayrequire the Company to repurchase for cash all or any portion of their Convertible Notes at a fundamental change repurchase price equal to100%* of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid additional interest, if any, to, but excluding, the fundamental change repurchase date.

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The effective interest rate for the Convertible Notes is 3.59%. Transaction costs of $11,008 attributable to the issuance of the Convertible Notes were recorded as a direct deduction from the related debt liability in the Consolidated Balance Sheet and are amortized to interest expense over the term of the Convertible Notes using the effective interest method.

The Company measures the fair value of its Convertible Notes for disclosure purposes. The fair value is based on observable market prices for this debt, which is traded in less active markets and is therefore classified as a Level2 fair value measurement. The following table discloses the carrying value and fair value of the Company's Convertible Notes as of* March 31, 2024:*

(1)The carrying amounts presented are net of unamortized debt issuance costs of $8,912 as of* March 31, 2024.*

Lender fees that were paid upfront to the lenders and debt issuance fees paid tothird parties are recorded as a discount to the carrying amount of debt and are being amortized to interest expense over the life of the debt. The total interest expense for thethree months ended* March 31, 2024,*recognized related to the Convertible Notes consists of the following:

As of* March 31, 2024,the interest expense incurred to date was paid in full, with $0 of accrued interest expense as of quarter end. Of the $3,019 of interest expense incurred during thethree* months ended* March 31, 2024,approximately $1,045 of interest expense was capitalized to construction in progress, as the proceeds from the sale of the Convertible Notes are being used to fund construction on the Company's manufacturing facility expansion in Ennis, Texas. During thethree* months ended* March 31, 2024,$0 of capitalized interest was reclassified from construction in progress to assets placed in service. For thethree* months ended* March 31, 2023,*$0 of interest expense was capitalized to construction in progress as the Convertible Notes were issued near quarter end, as such any capitalizable interest would have been de minimis.

Note7 – Purchase of Capped Call Options:

In connection with the pricing of the Convertible Notes issued in* March 2023,*we used $66,211 of the net proceeds from the Convertible Notes to enter into privately negotiated capped call transactions (collectively, the “Capped Call Transactions”) with certain financial institutions.

The Capped Call Transactions are generally expected to reduce potential dilution to holders of our common stock upon any conversion of the Convertible Notes and/or offset any cash payments we are required to make in excess of the principal amount of the Convertible Notes upon conversion of the Convertible Notes in the event that the market price per share of our common stock is greater than the strike price of the Capped Call Transactions, with such reduction and/or offset subject to a cap.

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The Capped Call Transactions have an initial cap price of approximately $120.23 per share, which represents a premium of120% over the last reported sale price of our common stock of $54.65 per share on* March 15, 2023,*and is subject to certain adjustments under the terms of the Capped Call Transactions. Collectively, the Capped Call Transactions cover, initially, the number of shares of our common stock underlying the Convertible Notes, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes.

The Capped Call Transactions are accounted for as freestanding derivatives and recorded at the initial fair value in additional paid-in-capital in the Consolidated Balance Sheet withno recorded subsequent change to fair value as long as they meet the criteria for equity classification. As of* March 31, 2024,*the instrument continued to qualify for equity classification.

Note8 – Leases:

We have various noncancelable operating lease agreements for office and warehouse space with original remaining lease terms oftwo years tonine years, some of which include an option to extend the lease term for up tofour years. Because the Company isnot reasonably certain to exercise the renewal options on these lease arrangements, the options arenot considered in determining the lease term and associated potential option payments are excluded from lease payments. The Company’s leases generally donot include termination options for either party to the lease or restrictive financial or other covenants.

During thethird quarter of2023, we also entered into a finance lease agreement for manufacturing equipment with an initial term often years, which includes an option to extend the lease term for up toten years, which the Company isnot reasonably certain to exercise. The agreement didnot include termination options for either party to the lease or restrictive financial or other covenants. In connection with the manufacturing equipment lease, which is a new asset class, we elected the practical expedient to combine lease and non-lease components to determine the right of use asset and lease liability.

Weighted-average remaining lease term (in years) and discount rate related to operating and finance leases were as follows:

As most of our leases donot provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date to determine the present value of lease payments.

Maturities of lease liabilities under noncancelable operating leases and finance lease as of* March 31, 2024* were as follows:

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A summary of lease costs for thethree months ended* March 31, 2024* and2023 was as follows:

Supplemental balance sheet information as of* March 31, 2024and December 31, 2023*related to leases are as follows:

Supplemental cash flow information and non-cash activity relating to operating and finance leases are as follows:

Note9 – Warrants (in thousands, except share data):

In connection with an agreement we entered into with operators of Freshpet Kitchens South during thethird quarter of2022 in exchange for services, we issued our partner warrants to purchase up to an aggregate of 194,000 shares of voting common stock of the Company at a purchase price of $0.01 per share. The Company determined these warrants are accounted for under FASB ASC718 Stock Compensation. The warrants were recorded as a prepaid expense as the warrants were exercisable at the grant date. The prepaid expense will be amortized within Cost of Goods Sold as services are provided by the supplier. As of* March 31, 2024,there were $811 of warrants in prepaid expense and $0 of warrants in other assets. As of December 31, 2023,*there were $2,027 of warrants in prepaid expense and $0 of warrants in other assets.

During2022, 194,000 warrants were both issued and exercised, respectively. The grant date fair value of warrants granted during2022 was $50.32 per share.

Total amortization associated with partner warrants for thethree months ended* March 31, 2024and2023* was $1,216 and $1,438, respectively.

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Note10 – Equity Incentive Plans:

Total compensation cost for share-based payments recognized for thethree months ended* March 31, 2024* totaled $5,005, of which $1,405, was recorded to cost of goods sold with the remainder recorded to selling, general and administrative expense.

Total compensation cost for share-based payments recognized for thethree months ended* March 31, 2023* totaled $8,415, of which $2,956, was recorded to cost of goods sold with the remainder recorded to selling, general and administrative expense.

During thethree months ended* March 31, 2024,*0 stock options were granted and 105 stock options were exercised.

During thethree months ended* March 31, 2024,99 restricted stock units were granted at a weighted average grant-date fair market value of $105.62. During thethree* months ended* March 31, 2024,*67 restricted stock units vested.

Note11 – Net Income (Loss) Per Share Attributable to Common Stockholders:

Basic net income (loss) per share of common stock is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted net income (loss) per share of common stock is computed by giving effect to all potentially dilutive securities. For purpose of determining diluted earnings per common share, the treasury stock method is used for stock options, warrants, and RSUs, and the if-converted method is used for convertible instruments such as convertible debt as prescribed in FASB ASC Topic260. In conjunction with the issuance of the $402.5 million Convertible Notes in* March 2023,the Company used $66.2 million of the proceeds to purchase capped call instruments. In accordance with FASB ASC260,* antidilutive contracts, such as purchased put options and purchased call options are excluded from the computation of diluted net income (loss) per share. Accordingly, any potential impact resulting from capped call transaction is excluded from our computation of diluted net income (loss) per share.

For thethree months ended* March 31, 2024,*diluted net income per share attributable to common stockholders is calculated as follows:

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The potentially dilutive securities excluded from the determination of diluted loss per share, as their effect is antidilutive, are as follows (in thousands):

Note12 – Concentrations:

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

Note13 – Commitments and Contingencies:

Commitments - In* August 2023,we entered into a lease arrangement for a to-be constructed office space, which will contribute right of use assets and lease liabilities upon lease commencement, which is anticipated to occur by thefirst* quarter of2025. As of* March 31, 2024,the future commitments related to this arrangement arenot* determinable as they are variable in nature. Our current headquarters lease in Secaucus, NJ expires in* June**2024.*

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

On* April 8, 2022,Phillips Feed Service, Inc., d/b/a Phillips Feed And Pet Supply ("Phillips") filed a complaint against the Company in U.S. District Court for the Eastern District of Pennsylvania (Allentown Division) for damages allegedly sustained as a result of the termination of the Company's distribution arrangement with Phillips, a former distributor of Freshpet products. Phillips asserts a claim for breach of contract, and seeks monetary damages in excess of $8,300 based on a claimed "termination payment" under a2018* "Letter Of Intent" and additional damages based on a claim for improper notice of termination. Phillips also claims a right of setoff with respect to monies owed by Phillips to the Company.

On* July 5, 2022,*the Company answered the complaint disputing the claimed damages, assertions of breach of contract, and the right of offset. In addition, the Company counterclaimed breach of contract for amounts owed to Freshpet earned while Phillips served as an authorized distributor of Freshpet product.

As of* December 31, 2022,*due to the claims and counterclaims between the parties, the Company reclassified the amounts due from Phillips of $8,971 to other noncurrent assets.

The fact discovery period in this action closed on* December 31, 2023.*

The expert discovery phase, closed on* March 31, 2024.Phillips filed a Motion for Partial Summary Judgment on April 1, 2024,and on April**29,2024,* the court ordered all further proceedings and deadlines as reflected in its* November 15, 2023,Case Management Order to be extended for60* days. The case is scheduled for a non-jury trial on* September 16, 2024.*

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Based on information currently available and advice of counsel, we donot believe that the outcome of this matter is likely to have a material adverse effect on our business, financial condition, results of operations or liquidity. However, in the event of unexpected further developments, it is possible that the ultimate resolution of this matter, if unfavorable,* may*be materially adverse to our business, financial condition, results of operations or liquidity. Legal costs such as outside counsel fees and expenses are charged to selling, general and administrative expenses in the period incurred.

Note14 – Subsequent Events:

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued for recognition or disclosures.

The Company didnot identify any recognized or unrecognized subsequent events that require adjustment or disclosure in the financial statements.

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