BARFRESH FOOD GROUP INC.

Previous wording

We have been able to expand our capacity on a limited basis at our existing smoothie bottle manufacturer and have been developing an additional manufacturer relationship since the fourth quarter of 2024, after the candidate we contracted with in July 2024 was unable to successfully produce product at scale. We expect expanded capacity to become available in the second half of 2025, 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 have been developing an additional manufacturer relationship since the fourth quarter of 2024, after the candidate we contracted with in July 2024 was unable to produce product due to insufficient labor and inadequate equipment, and a second candidate was in production trials and only able to package product made at other locations until new equipment that had been ordered arrived and was installed. We expect expanded capacity to become available in the second half of 2025, subject to the risks and uncertainties associated with early-stage production activities, which, along with other contracting and investing activities, including additional capacity from new bottling equipment installed at an existing manufacturer of smoothie cartons, are expected to offset the loss of our existing manufacturer in February 2026

Previous wording

Cost of revenue increased $371,000, or 22%, to $2,030,000 in 2025 as compared to $1,659,000 in 2024. Cost of revenue increased at a higher rate compared to revenue due to trial costs at our new manufacturer and elevated costs to supply product in a sub-optimal manner while the production process at our new manufacturer is under development. The increase was partially offset by the non-recurrence of costs to relocate our single-serve manufacturing line, which amounted to $45,000 in 2024.

Current wording

Cost of revenue increased $164,000, or 17%, to $1,119,000 in 2025 as compared to $955,000 in 2024. Cost of revenue increased at a higher rate compared to revenue due to trial costs at our new manufacturer and elevated costs to supply product in a sub-optimal manner while the production process at a new manufacturer is under development.

Previous wording

Our gross profit was $900,000 (31%) and $1,170,000 (41%) for 2025 and 2024, respectively. Excluding production relocation costs, our gross profit was $1,215,000 in 2024 (43%). The reduction in gross margin is a result of product mix and new manufacturer trial and developments costs.

Current wording

Our gross profit was $506,000 (31.1%) and $509,000 (34.8%) for 2025 and 2024, respectively. Excluding production relocation costs, our gross profit was $514,000 in 2024 (35.1%). The reduction in gross margin is a result of product mix and new manufacturer trial and development costs.

Previous wording

Personnel cost represents the cost of employees including salaries, bonuses, employee benefits and employment taxes. Personnel cost increased by approximately $110,000 (42%) from approximately $262,000 in 2024 to $372,000 in 2025. The increase in personnel cost resulted from increased head count, and acceleration of employer payroll taxes due to vesting of stock-based compensation.

Current wording

Personnel cost represents the cost of employees including salaries, bonuses, employee benefits and employment taxes. Personnel cost decreased by approximately $49,000 (14%) from approximately $341,000 in 2024 to $292,000 in 2025. The decrease in personnel cost resulted from a decreased head count.

Previous wording

Stock-based compensation decreased by approximately $145,000 (48%) from $303,000 in 2024 to $158,000 in 2025 as a result of lower expected attainment under our performance stock unit program.

Current wording

Stock-based compensation decreased by approximately $75,000 from $214,000 in 2024 to $139,000 in 2025 as a result of lower expected attainment under our performance stock unit program and a reduction in the size of our board of directors.

Previous wording

We had net losses of approximately $761,000 and $449,000 for the three-month periods ending March 31, 2025 and 2024, respectively. The increase in net loss of approximately $312,000 was primarily due to the 10.7 percentage point reduction in gross margin, from 41.4% to 30.7%, resulting in a reduction in gross profit of $270,000. We expect our gross margin to normalize in the second half of 2025 as new co-manufacturers are operating at full capacity and capability, improving our supply and cost structure.

Current wording

We had net losses of approximately $880,000 and $1,011,000 for the three-month periods ended June 30, 2025 and 2024, respectively. The decrease in net loss of approximately $131,000 was primarily due to the reduction in general and administrative expense, partially offset by increased storage and freight costs. Gross profit was relatively flat, as the 3.6 percentage point reduction in gross margin offset the increase in revenue. We expect our gross margin to normalize in the second half of 2025 as new co-manufacturers are operating at full capacity and capability, improving our supply and cost structure.

Previous wording

Sales and marketing expense increased approximately $103,000 (31%) from approximately $330,000 in 2024 to $433,000 in 2025. The increase is a result of higher personnel costs and broker commissions due to expansion of the broker network, as well as an increase in sample expense due to the introduction of our Pop & Go freeze pops.

Current wording

Sales and marketing expense increased approximately $93,000 (13%) from approximately $698,000 in 2024 to $791,000 in 2025. The increase is a result of personnel costs and broker commissions. Additionally, sample expense increased as a result of the launch of our Pop & Go product.

Previous wording

Legal, professional and consulting fees decreased by approximately $76,000 (48%) from $157,000 in 2024 to $81,000 in 2025 due to a reduction in dispute related legal costs that are paid through non-recourse litigation financing that was arranged in May 2024.

Current wording

Legal, professional and consulting fees decreased by approximately $104,000 (48%) from $215,000 in 2024 to $111,000 in 2025 due to funding the Schrieber litigation through non-recourse litigation funding starting in Q3, 2024.

Previous wording

During the three months ended March 31, 2025, we used $506,000 in operations. Our net loss adjusted for non-cash operating expenses was a loss of $525,000, while changes in current assets and liabilities generated $19,000 primarily because of a reduction of $372,000 in inventory and increases in accounts payable and accrued expense of $222,000 and $218,000, respectively, partially offset by an increase in accounts receivable of $670,000.

Current wording

During the six months ended June 30, 2025, we used $1,575,000 in operations. Our net loss adjusted for non-cash operating expenses was a loss of $1,184,000, while changes in current assets and liabilities used $391,000 primarily because of an investment of $342,000 in inventory and decreases of $364,000 in accounts payable and accrued expenses, partially offset by an decrease in accounts receivable of $278,000. The changes reflect the build of inventory in an effort to minimize the impact of production capacity constraints and the collection of receivables from higher revenue volume at the education channel’s seasonal low point.

Previous wording

As of March 31, 2025, we had working capital of $2,848,000 compared with $606,000 at December 31, 2024, both excluding disputed accounts payable of $499,000 resulting from our dispute with the Manufacturer. The increase in working capital is primarily due to capital raised in the three months ended March 31, 2025 through the sale of common stock, partially offset by losses incurred in the three months ended March 31, 2025.

Current wording

As of June 30, 2025, we had working capital of $2,101,000 compared with $606,000 at December 31, 2024, both excluding disputed accounts payable of $499,000 resulting from our dispute with the Manufacturer. The increase in working capital is primarily due to capital raised in the six months ended June 30, 2025 through the sale of common stock, partially offset by losses incurred in the six months ended June 30, 2025.