BARFRESH FOOD GROUP INC

Previous wording

Revenue decreased $47,000, or 3%, to $1,464,000 in 2024 as compared to $1,511,000 in 2023. Our revenue in 2024 benefited from continued acceptance of our carton packaging format and improvements in bulk sales due to the reintroduction of our WHIRLZ 100% juice product in the fourth quarter of 2023. Our revenues in 2023 were positively impacted by adjustments to estimated credits related to the dispute with the Manufacturer. Excluding such adjustments, revenue increased by 6%.

Current wording

Revenue increased $1,034,000, or 40%, to $3,637,000 in 2024 as compared to $2,603,000 in 2023. Our revenue in 2024 benefited from increased sales of our bottled Twist & Go smoothies due to improved availability resulting from inventory built over the months prior to the commencement of the school year, continued acceptance of Twist & Go smoothies provided in cartons, and improvements in bulk sales due to the reintroduction of our WHIRLZ 100% juice product in the fourth quarter of 2023.

Previous wording

While the introduction of our carton packaging format has mitigated the loss of supply, the product offering has not been accepted by some customers or as a substitute for the bottle product in all use cases. We have been able to expand our capacity on a limited basis at our existing smoothie bottle manufacturer and in July 2024 contracted with an additional manufacturer. We expect expanded capacity to become available in the third quarter of 2024, subject to the risks and uncertainties associated with pre-production activities.

Current wording

We have been able to expand our capacity on a limited basis at our existing smoothie bottle manufacturer and in July 2024 contracted with an additional manufacturer. We expect expanded capacity to become available in the fourth quarter of 2024, subject to the risks and uncertainties associated with pre-production activities.

Previous wording

Our gross profit was $509,000 (34.8%) and $474,000 (31.4%) for 2024 and 2023, respectively. The improvement in gross margin is a result of favorable product mix, pricing actions, and a slight improvement in the cost of supply chain components.

Current wording

Our gross profit was $1,260,000 (35%) and $913,000 (35%) for 2024 and 2023, respectively. Excluding production relocation costs, our gross profit was $1,386,000 in 2024 (38%). The improvement in gross margin is a result of favorable product mix, pricing actions, and a slight improvement in the cost of supply chain components.

Previous wording

Sales and marketing expense decreased approximately $7,000 (5%) from approximately $373,000 in 2023 to $366,000 in 2024. The increase is a result of a reduction in compensation expense, partially offset by higher broker commissions due to expansion of the broker network.

Current wording

Sales and marketing expense increased approximately $183,000 (56%) from approximately $327,000 in 2023 to $510,000 in 2024. The increase is a result of higher personnel cost, travel and broker commissions due to expansion of the broker network.

Previous wording

Storage and outbound freight expense decreased approximately $35,000 (14%) from approximately $252,000 in 2023 to $217,000 in 2024, primarily because of freight efficiencies, and lower storage and inventory management cost in 2024.

Current wording

Storage and outbound freight expense increased approximately $110,000 (30%) from approximately $370,000 in 2023 to $480,000 in 2024, lower than the 40% rate of increase in revenue primarily because of freight efficiencies, and lower storage and inventory management cost in 2024.

Previous wording

Personnel cost represents the cost of employees including salaries, bonuses, employee benefits and employment taxes. Personnel cost increased by approximately $97,000 (40%) from approximately $244,000 in 2023 to $341,000 in 2024. The increase in personnel cost resulted from the non-recurrence of the recognition of a COVID-19 related Employee Retention Tax Credit in 2023.

Current wording

Personnel cost represents the cost of employees including salaries, bonuses, employee benefits and employment taxes. Personnel cost increased by approximately $116,000 (59%) from approximately $196,000 in 2023 to $312,000 in 2024. The increase in personnel cost resulted from the non-recurrence of the 2023 reversal of cash bonuses in favor of increased performance-based stock compensation in the third quarter, increased head count and higher staff utilization, and resulting deferral of paid time off. Similarly, director fees paid in cash decreased as a result of a shift to stock-based compensation in the third quarter of 2023.

Previous wording

We had net losses of approximately $1,011,000 and $742,000 for the three-month periods ended June 30, 2024 and 2023, respectively. The increase in net loss of approximately $269,000, was primarily the result of a shift to stock-based compensation and the non-recurrence of recognizing ERTC benefits in 2023.

Current wording

We had net losses of approximately $513,000 and $476,000 for the three-month periods ended September 30, 2024 and 2023, respectively. The increase in net loss of approximately $37,000, was primarily the result of operating expense increases of $384,000 due to headcount, and variable freight and broker commission costs, partially offset by increased gross profit of $347,000 from our 40% increase in revenue.

Previous wording

Results of Operation for the Six Months Ended June 30, 2024 as Compared to the Six Months Ended June 30, 2023

Current wording

Results of Operation for the Nine Months Ended September 30, 2024 as Compared to the Nine Months Ended September 30, 2023

Previous wording

Revenue increased $691,000, or 19%, to $4,293,000 in 2024 as compared to $3,602,000 in 2023. Our revenue in 2024 benefited from continued acceptance of our carton packaging format and improvements in bulk sales due to the reintroduction of our WHIRLZ 100% juice product in the fourth quarter of 2023.

Current wording

Revenue increased $1,724,000, or 28%, to $7,929,000 in 2024 as compared to $6,205,000 in 2023. Our revenue in 2024 benefited from continued acceptance of our carton packaging format, increased sales of our bottled Twist & Go smoothies due to improved availability in the third quarter of 2024, and improvements in bulk sales due to the reintroduction of our WHIRLZ 100% juice product in the fourth quarter of 2023.

Previous wording

Cost of revenue increased $341,000, or 15%, to $2,614,000 in 2024 as compared to $2,273,000 in 2023. Cost of revenue increased at a lower rate compared to revenue due to product mix and slight improvements in raw material and other input costs.

Current wording

Cost of revenue increased $1,028,000, or 26%, to $4,991,000 in 2024 as compared to $3,963,000 in 2023. Cost of revenue increased at a lower rate compared to revenue due to product mix and slight improvements in raw material and other input costs, partially offset by $176,000 in cost incurred to relocate our single-serve smoothie pouch production line.

Previous wording

Our gross profit was $1,679,000 (39.1%) and $1,329,000 (36.9%) for 2024 and 2023, respectively. The improvement in gross margin is a result of favorable product mix, pricing actions, and a slight improvement in the cost of supply chain components.

Current wording

Our gross profit was $2,938,000 (37%) and $2,242,000 (36%) for 2024 and 2023, respectively. Excluding production relocation costs, our gross profit was $3,114,000 in 2024 (39%). The improvement in gross margin is a result of favorable product mix, pricing actions, and a slight improvement in the cost of supply chain components.

Previous wording

Sales and marketing expense decreased approximately $35,000 (5%) from approximately $731,000 in 2023 to $696,000 in 2024. The decrease is a result of a reduction in compensation expense. Advertising and sample expense were lower as a result of non-recurring costs in 2023 associated with the launch of our smoothie carton format offering. These cost reductions were partially offset by higher broker commissions due to expansion of the broker network.

Current wording

Sales and marketing expense increased approximately $148,000 (14%) from approximately $1,058,000 in 2023 to $1,206,000 in 2024. The increase is a result of higher personnel costs, travel and broker commission due to expansion of the broker network. Advertising and sample expense were lower as a result of non-recurring costs in 2023 associated with the launch of our smoothie carton format offering.

Previous wording

Storage and outbound freight expense increased approximately $19,000 (3%) from approximately $562,000 in 2023 to $581,000 in 2024, primarily because of the 19% increase in revenue over the same period, partially offset by freight efficiencies, and lower storage and inventory management cost in 2024.

Current wording

Storage and outbound freight expense increased approximately $129,000 (14%) from approximately $932,000 in 2023 to $1,061,000 in 2024, primarily because of the 28% increase in revenue over the same period, partially offset by freight efficiencies, and lower storage and inventory management cost in 2024.

Previous wording

Personnel cost decreased by approximately $130,000 (18%) from approximately $733,000 in 2023 to $603,000 in 2024. The decrease in personnel cost resulted from a reduction in headcount and cash bonus expense as a result of adopting an equity-only incentive structure in mid-2023, partially offset by the non-recurrence of the recognition of a COVID-19 related Employee Retention Tax Credit in 2023.

Current wording

Personnel cost decreased by approximately $13,000 (1%) from approximately $929,000 in 2023 to $916,000 in 2024. The decrease in personnel cost resulted from a reduction in headcount and cash bonus expense as a result of adopting an equity-only incentive structure in mid-2023, partially offset by the non-recurrence of the recognition of a COVID-19 related Employee Retention Tax Credit in 2023.

Previous wording

Stock-based compensation increased by approximately $229,000 from ($15,000) in 2023 to $214,000 in 2024 as a result of the Company adopting an equity-only structure for management incentives Board of Directors compensation, implemented to conserve cash and to achieve compliance with NASDAQ listing regulations.

Current wording

Stock-based compensation increased by approximately $265,000 (61%) from $431,000 in 2023 to $696,000 in 2024 as a result of the Company adopting an equity-only structure for management incentives and Board of Directors compensation, implemented to conserve cash and to achieve compliance with NASDAQ listing regulations. Increases in management headcount and the issuance of long-term incentive awards also contributed to the increase.

Previous wording

Other general and administrative expenses increased by approximately $63,000 (22%) due to recruiting fees incurred to broaden the capabilities of our management team, partially offset by a decrease in patent fees due to targeted renewals in 2024.

Current wording

Other general and administrative expenses increased by approximately $84,000 (22%) due to recruiting fees incurred to broaden the capabilities of our management team, partially offset by a decrease in patent fees due to targeted renewals in 2024.

Previous wording

We had net losses of approximately $1,460,000 and $1,647,000 for the six-month periods ended June 30, 2024 and 2023, respectively. The decrease in net loss of approximately $187,000, was primarily the result an increase in gross profit of approximately $350,000, partially offset by increased operating expense of $163,000 due to the shift to stock-based compensation and the non-recurrence of recognizing ERTC benefits in 2023.

Current wording

We had net losses of approximately $1,973,000 and $2,123,000 for the nine-month periods ended September 30, 2024 and 2023, respectively. The decrease in net loss of approximately $150,000, was primarily the result an increase in gross profit of approximately $696,000, partially offset by increased operating expense of $546,000 due to variable freight and broker commission costs, increased headcount, and the non-recurrence of recognizing ERTC benefits in 2023.

Previous wording

As of June 30, 2024, we had working capital of $1,185,000 compared with $1,846,000 at December 31, 2023. The decrease in working capital is primarily due to losses incurred in the six months ended June 30, 2024, partially offset by capital raised in the six months ended June 30, 2024 through the sale convertible notes and the conversion of those notes and other current liabilities to equity.

Current wording

As of September 30, 2024, we had working capital of $1,371,000 compared with $2,345,000 at December 31, 2023, both excluding disputed accounts payable of $499,000 resulting from our dispute with the Manufacturer. The decrease in working capital is primarily due to losses incurred in the nine months ended September 30, 2024, partially offset by capital raised in the nine months ended September 30, 2024 through the sale of convertible notes and the conversion of those notes and other current liabilities to equity.

Previous wording

Our liquidity needs will depend on how quickly we are able to profitably ramp up sales, as well as our ability to control and reduce variable operating expenses, and to continue to control fixed overhead expense. Our current dispute with the Manufacturer and the resulting loss of product supply and legal expense continue to negatively impact our financial position, results of operations and cash flow. While the introduction of our carton packaging format has mitigated the loss of supply, the product offering has not been accepted by some customers or as a substitute for the bottle product in all use cases. We have contracted with a co-manufacturer for additional smoothie bottle manufacturing capacity. We expect expanded capacity to become available in 2024, subject to the risks and uncertainties associated with pre-production activities. Additionally, we have taken other measures to reduce our liquidity requirements, including compensating our directors and employees with equity to reduce cash compensation requirements, obtaining non-recourse litigation financing, and securing receivables financing in the third quarter of 2024.

Current wording

Our liquidity needs will depend on how quickly we are able to profitably ramp up sales, as well as our ability to control and reduce variable operating expenses, and to continue to control fixed overhead expense. Our current dispute with the Manufacturer and the resulting loss of product supply and legal expense have negatively impacted our financial position, results of operations and cash flow. While the introduction of our carton packaging format in 2023 has mitigated the loss of supply, the product offering has not been accepted by some customers or as a substitute for the bottle product in all use cases. We have contracted with a co-manufacturer for additional smoothie bottle manufacturing capacity. We expect expanded capacity to become available in the fourth quarter of 2024, subject to the risks and uncertainties associated with pre-production activities. Additionally, we have taken other measures to reduce our liquidity requirements, including compensating our directors and employees with equity to reduce cash compensation requirements, obtaining non-recourse litigation financing, and securing receivables financing in the third quarter of 2024.

Previous wording

Our operations to date have been financed by the sale of securities, the issuance of convertible debt and the issuance of short-term debt, including related party advances. If we are unable to generate sufficient cash flow from operations with the capital raised we will be required to raise additional funds either in the form of equity or in the form of debt. There are no assurances that we will be able to generate the necessary capital to carry out our current plan of operations.

Current wording

Our operations to date have been financed by the sale of securities, the issuance of convertible debt and the issuance of short-term debt. If we are unable to generate sufficient cash flow from operations with the capital raised we will be required to raise additional funds either in the form of equity or in the form of debt. There are no assurances that we will be able to generate the necessary capital to carry out our current plan of operations.