BARFRESH FOOD GROUP INC.

Previous wording

Cost of revenue increased $2,569,000, or 127%, to $4,599,000 in 2026 as compared to $2,030,000 in 2025. Cost of revenue increased at a higher rate compared to revenue due to the inclusion of the raw and processed milk operations after the Acquisition. Products in this segment are generally commodities with commensurate margins, but provide a strategic milk supply to the business and contribute to fixed overhead costs. Cost of revenue in the frozen beverages and food segment, which consisted primarily of Barfresh legacy products in 2026, increased at the same rate as revenue.

Current wording

Cost of revenue increased $3,738,000, or 334%, to $4,857,000 in 2026 as compared to $1,119,000 in 2025. Cost of revenue increased at a significantly higher rate compared to revenue due to the inclusion of the raw and processed milk operations after the Acquisition. Products in this segment are generally commodities with commensurate margins, but provide a strategic milk supply to the business and contribute to fixed overhead costs. Cost of revenue in the frozen beverages and food segment, which consisted primarily of Barfresh legacy products in 2026, increased 76% due to start-up costs and lower than anticipated productivity at the Existing Facility.

Previous wording

Gross profit from frozen beverages and food was $905,000 in 2026 (30%) compared to $900,000 in 2025 (31%). The slight decrease is due to product mix.

Current wording

Gross loss from frozen beverages and food was $209,000 (-12%) in 2026 compared to a gross profit of $506,000 (31%) in 2025. The decrease is due to high start-up costs and lower than anticipated productivity at the Existing Facility.

Previous wording

Gross profit from raw and processed milk was $128,000 in 2026 (5%).

Current wording

Gross profit from raw and processed milk was $59,000 (2%) in 2026.

Previous wording

Storage and outbound freight expense increased approximately $52,000 (13%) from approximately $391,000 in 2025 to $443,000 in 2026, primarily due to costs associated with the delivery of processed milk at Arps Dairy.

Current wording

Storage and outbound freight expense increased approximately $29,000 (11%) from approximately $276,000 in 2025 to $305,000 in 2026, primarily due to costs associated with the delivery of processed milk at Arps Dairy, partially offset by lower revenue and finished goods inventory of legacy Barfresh products.

Previous wording

Personnel cost represents the cost of employees including salaries, bonuses, employee benefits and employment taxes. Personnel cost decreased by approximately $14,000 (4%) from approximately $372,000 in 2025 to $358,000 in 2026. The decrease in personnel cost resulted from decreased head count, and lower employer payroll taxes due to timing of vesting of stock-based compensation.

Current wording

Personnel cost represents the cost of employees including salaries, bonuses, employee benefits and employment taxes. Personnel cost increased by approximately $43,000 (15%) from approximately $292,000 in 2025 to $335,000 in 2026 due to the addition of headcount associated with Arps Dairy.

Previous wording

Interest expense was $225,000 in 2026 compared to $23,000 in 2025. The increase of $202,000 is a result of mortgage debt, notes and lease financing related to the Acquisition and the purchase of equipment required for the New Facility, as well as the issuance of $7,528,000 of convertible notes in March 2026.

Current wording

Interest expense was $344,000 in 2026 compared to $12,000 in 2025. The increase of $332,000 is a result of mortgage debt, notes and lease financing related to the Acquisition and the purchase of equipment required for the New Facility, as well as the issuance of $7,528,000 of convertible notes in March 2026.

Previous wording

We had net losses of approximately $661,000 and $761,000 for the three-month periods ending March 31, 2026 and 2025, respectively. The decrease in net loss of approximately $100,000 was primarily due to a decrease in the loss from operations of $302,000, offset by an increase of $202,000 in interest expense incurred related to the acquisition of Arps Dairy and the build out of the New Facility.

Current wording

We had net losses of approximately $1,861,000 and $880,000 for the three-month periods ending June 30, 2026 and 2025, respectively. The increase in net loss of approximately $981,000 was primarily due to an increase in loss from operations of $649,000, and an increase of $332,000 in interest expense incurred related to the acquisition of Arps Dairy and the build out of the New Facility.

Previous wording

Revenue increased $2,702,000, or 92%, to $5,632,000 in 2026 as compared to $2,930,000 in 2025. Arps Dairy contributed $2,837,000 to revenue, including $2,566,000 in raw and processed milk sales.

Current wording

Revenue increased $5,784,000, or 127%, to $10,339,000 in 2026 as compared to $4,555,000 in 2025. Arps Dairy contributed $6,021,000 to revenue, including $5,508,000 in raw and processed milk sales.

Previous wording

Our gross profit was $1,033,000 (18%) and $900,000 (31%) for 2026 and 2025, respectively.

Current wording

Our gross profit was $883,000 (9%) and $1,406,000 (31%) for 2026 and 2025, respectively.

Previous wording

Sales and marketing expense decreased approximately $179,000 (41%) from approximately $433,000 in 2025 to $254,000 in 2026. The decrease is a result of lower personnel costs as we rely more heavily on our broker network, as well as a decrease in sample expense, which was elevated in 2025 due to the introduction of our Pop & Go freeze pops. Additionally, equipment maintenance expense for machines provided to our customers for use with our bulk products decreased, as single serve products have become more prominent in the school setting.

Current wording

Sales and marketing expense decreased approximately $281,000 (36%) from approximately $791,000 in 2025 to $510,000 in 2026. The decrease is a result of lower personnel costs as we rely more heavily on our broker network. Additionally, equipment maintenance expense for machines provided to our customers for use with our bulk products decreased, as single serve products have become more prominent in the school setting. Finally, sample expense decreased due to non-recurring sample costs associated with the 2025 launch of our Pop & Go product.

Previous wording

Stock-based compensation decreased by approximately $56,000 (35%) from $158,000 in 2025 to $102,000 in 2026 as a result of lower expected attainment under our performance stock unit program.

Current wording

Stock-based compensation decreased by approximately $41,000 from $297,000 in 2025 to $256,000 in 2026 as a result of lower expected attainment under our performance stock unit program.

Previous wording

Legal, professional and consulting fees increased by approximately $26,000 (32%) from $81,000 in 2025 to $107,000 in 2026 due to costs of temporary personnel associated with integration of Arps Dairy.

Current wording

Legal, professional and consulting fees increased by approximately $63,000 (57%) from $111,000 in 2025 to $174,000 in 2026 due to audit costs associated with the expanded scope of work resulting from the Acquisition, and temporary consultants associated with the integration of Arps Dairy.

Previous wording

Other general and administrative expenses increased by approximately $25,000 (21%) due to travel costs associated with the integration of Arps Dairy.

Current wording

Other general and administrative expenses increased by approximately $58,000 (24%) due to increased information technology and insurance expense associated with Arps Dairy.

Previous wording

We acquired $823,000 of equipment through leasing transactions in 2025 and the first three months of 2026. In December 2025, we were granted $2,400,000 to fund up to 50% of the cost of new equipment purchases and installation for the New Facility.

Current wording

We acquired $888,000 of equipment through leasing transactions in 2025 and the first six months of 2026. In December 2025, we were granted $2,400,000 to fund up to 50% of the cost of new equipment purchases and installation for the New Facility.

Previous wording

In March 2026, we raised $7,528,000 through the sale of convertible promissory notes. The proceeds were used to retire $2,541,000 in mortgage debt and construction payables, and are expected to be used to repay remaining construction related payables as well as complete construction of the New Facility in 2026.

Current wording

In March 2026, we raised $7,528,000 through the sale of convertible promissory notes. The proceeds were used to retire $2,541,000 in mortgage debt and certain construction payables.

Previous wording

During the quarter ended March 31, 2026, we used $2,382,000 in operations. Our net loss adjusted for non-cash operating expenses was a loss of $455,000, while changes in current assets and liabilities used $1,927,000 primarily because of settlements of amounts due to co-manufacturers who discontinued providing product in December 2025 and January 2026.

Current wording

During the six months ending June 30, 2026, we used $3,051,000 in operations. Our net loss adjusted for non-cash operating expenses used $2,002,000, while changes in current assets and liabilities used $1,049,000 primarily because of settlements of amounts due to co-manufacturers who discontinued providing product in December 2025 and January 2026, partially offset by a decrease in accounts receivable due to seasonality.

Previous wording

As of March 31, 2026, we had net current assets of $903,000, including $1,861,000 of construction payables, compared with net current liabilities of $6,303,000 on December 31, 2025. Disputed accounts payable due to the Manufacturer of $499,000 are excluded from both March 31, 2026 and December 31, 2025 amounts.

Current wording

As of June 30, 2026, we had net current liabilities of $1,041,000, including $1,818,000 of construction payables, compared with net current liabilities of $6,303,000 on December 31, 2025. Disputed accounts payable due to the Manufacturer of $499,000 are excluded from both June 30, 2026 and December 31, 2025 amounts.

Previous wording

Our operations to date have been financed by the sale of securities, the issuance of convertible and short-term debt and equipment leasing. Our liquidity needs will depend on careful management of the construction of the New Facility, as well as how quickly we are able to profitably ramp up sales, achieve manufacturing cost synergies anticipated as a result of the Acquisition, control and reduce variable operating expenses, and control fixed overhead expense. There are no assurances that the grant received in December 2025 and the proceeds from the sale of convertible promissory notes in March 2026 will be sufficient to carry out our current plan of operations. We anticipate that we will have additional sources of liquidity, if required, through mortgage financing supported by the guarantee of the United States Department of Agriculture, and equipment lease financing, among other options. However, there are no assurances that these funds will be available. If we are unable to generate sufficient cash flow from operations, control construction costs, or raise additional capital through debt issuances, we may be required to raise additional funds in the form of equity.

Current wording

Our operations to date have been financed by the sale of securities, the issuance of convertible and short-term debt and equipment leasing. Our liquidity needs will depend on careful management of the construction of the New Facility, as well as how quickly we are able to profitably ramp up sales, achieve manufacturing cost synergies anticipated as a result of the Acquisition, control and reduce variable operating expenses, and control fixed overhead expense. The proceeds from the sale of convertible promissory notes in March 2026 are not sufficient to carry out our current plan of operations, which includes the investment of $6,662,000 in Construction Obligations described in Note 5 of the accompanying unaudited financial statements. The $2,400,000 grant received in December 2025 is subject to uncertainty associated with the requirement to complete all funded phases of the project by December 31, 2026. This uncertainty could increase the Construction Obligation to $9,062,000. We anticipate that we will have additional sources of liquidity through mortgage financing supported by the guarantee of the United States Department of Agriculture, and equipment lease financing, among other options. However, there are no assurances that these funds will be available. If we are unable to generate sufficient cash flow from operations, control construction costs, or raise additional capital through debt issuances, we may be required to raise additional funds in the form of equity.