Barfresh Food Group, Inc. (NASDAQ:BRFH) Q3 2024 Earnings Conference Call October 24, 2024 4:30 PM ET Company Participants Riccardo Delle Coste - Founder & CEO Lisa Roger - CFO Conference Call Participants Anthony Vendetti - Maxim Group Operator Good afternoon, everyone, and thank you for participating on today's Third Quarter 2024 Corporate Update Call for Barfresh Food Group. Joining us today is Barfresh Food Group's Founder and CEO, Riccardo Delle Coste; and Barfresh Food Group's CFO, Lisa Roger. Followin ...

分组1 - Barfresh Food Group Inc. reported a quarterly loss of $0.03 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.01, and an improvement from a loss of $0.04 per share a year ago, indicating a -200% earnings surprise [1] - The company generated revenues of $3.64 million for the quarter ended September 2024, exceeding the Zacks Consensus Estimate by 0.47% and showing a year-over-year increase from $2.6 million [1] - Over the last four quarters, Barfresh has surpassed consensus revenue estimates two times, while it has only exceeded consensus EPS estimates once [1] 分组2 - Barfresh Food Group shares have increased approximately 57% since the beginning of the year, outperforming the S&P 500's gain of 21.5% [2] - The current consensus EPS estimate for the upcoming quarter is breakeven on revenues of $4.62 million, and for the current fiscal year, it is -$0.11 on revenues of $12.53 million [4] - The Beverages - Soft drinks industry, to which Barfresh belongs, is currently ranked in the top 35% of over 250 Zacks industries, indicating a favorable outlook for the sector [5]

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements.) The company's financial statements for the period ended September 30, 2024, show a decrease in total assets and stockholders' equity compared to December 31, 2023, with revenue increasing year-over-year for both periods, despite continued net losses and negative operating cash flow, necessitating new debt and financing agreements [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2024, total assets decreased to **$3.77 million** from **$4.81 million** at year-end 2023, primarily due to reduced cash and inventory, while total liabilities slightly increased to **$2.37 million**, and stockholders' equity declined from **$2.50 million** to **$1.40 million** Balance Sheet Comparison (in thousands) | Account | Sep 30, 2024 (Unaudited) | Dec 31, 2023 (Audited) | | :--- | :--- | :--- | | **Total Current Assets** | $3,090 | $4,153 | | Cash | $401 | $1,891 | | Inventory, net | $770 | $1,214 | | **Total Assets** | **$3,772** | **$4,810** | | **Total Current Liabilities** | $2,218 | $2,307 | | **Total Liabilities** | **$2,369** | **$2,307** | | **Total Stockholders' Equity** | **$1,403** | **$2,503** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q3 2024, revenue grew **40%** year-over-year to **$3.64 million**, with gross profit increasing to **$1.26 million**, but rising operating expenses led to a slightly larger net loss of **$513,000** compared to **$476,000** in Q3 2023, while the nine-month revenue increased **28%** to **$7.93 million**, and the net loss narrowed to **$1.97 million** from **$2.12 million** in the prior year Statement of Operations Highlights (in thousands, except per share data) | Metric | Q3 2024 | Q3 2023 | 9 Months 2024 | 9 Months 2023 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | **$3,637** | **$2,603** | **$7,929** | **$6,205** | | Gross Profit | $1,260 | $913 | $2,938 | $2,242 | | Loss from Operations | $(500) | $(475) | $(1,949) | $(2,120) | | **Net Loss** | **$(513)** | **$(476)** | **$(1,973)** | **$(2,123)** | | Net Loss Per Share | $(0.03) | $(0.04) | $(0.13) | $(0.16) | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2024, the company used **$1.54 million** in cash from operating activities, an improvement from the **$1.99 million** used in the same period of 2023, with net cash provided by financing activities at **$115,000**, resulting in a **$1.49 million** decrease in cash, ending the period at **$401,000** Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,544) | $(1,990) | | Net cash used in investing activities | $(61) | $0 | | Net cash provided by (used in) financing activities | $115 | $(18) | | **Net decrease in cash** | **$(1,490)** | **$(2,008)** | | **Cash, end of period** | **$401** | **$1,011** | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Key notes highlight significant vendor concentration, an ongoing legal dispute with a former key manufacturer, new debt facilities to improve liquidity, and the alleviation of substantial doubt about the company's ability to continue as a going concern, alongside the adoption of a new equity incentive plan and modification of its performance share unit program - The company has significant vendor concentration, with two manufacturers (A and B) accounting for **100%** of finished goods purchases in Q3 2024 and **98%** in the first nine months of 2024[11](index=11&type=chunk) - The company is in a legal dispute with a former key contract manufacturer over product quality issues, withholding **$499,000** in payments, which has adversely impacted supply and operations, though partially mitigated by new product formats and litigation financing obtained in May 2024[26](index=26&type=chunk)[27](index=27&type=chunk) - In August 2024, the company secured a **$1.5 million** receivables financing facility to improve liquidity, with **$1.4 million** available to borrow as of September 30, 2024[29](index=29&type=chunk) - Despite a history of negative cash flow and operating losses, management's actions, including securing new financing and contracting additional manufacturing capacity, have alleviated substantial doubt about the company's ability to continue as a going concern[42](index=42&type=chunk)[44](index=44&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management attributes the **40%** revenue growth in Q3 2024 to improved availability of its bottled smoothies and continued acceptance of its carton products, with gross margin improving to **38%** excluding one-time production relocation costs, while operating expenses increased due to higher sales and marketing costs to support growth, and the company has taken several steps to manage liquidity, including securing a new credit line and litigation financing, expecting expanded manufacturing capacity in Q4 2024 [Results of Operations](index=16&type=section&id=Results%20of%20Operations) For Q3 2024, revenue increased **40%** year-over-year, driven by improved product availability and new product formats, with gross margin at **35%** (or **38%** excluding **$126,000** in production relocation costs), and selling, marketing, and distribution expenses rising **42%** to support sales growth, while for the nine-month period, revenue grew **28%** and net loss decreased by **$150,000**, as higher gross profit offset increased operating expenses Q3 2024 vs Q3 2023 Performance (in thousands) | Metric | Q3 2024 | Q3 2023 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | **$3,637** | **$2,603** | **$1,034** | **40%** | | Gross Profit | $1,260 | $913 | $347 | 38% | | Gross Margin | 35% | 35% | - | - | | Selling, Marketing & Distribution | $990 | $697 | $293 | 42% | | General & Administrative | $705 | $577 | $128 | 22% | | **Net Loss** | **$(513)** | **$(476)** | **$(37)** | **8%** | Nine Months 2024 vs 2023 Performance (in thousands) | Metric | 9M 2024 | 9M 2023 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | **$7,929** | **$6,205** | **$1,724** | **28%** | | Gross Profit | $2,938 | $2,242 | $696 | 31% | | Gross Margin | 37% | 36% | - | - | | **Net Loss** | **$(1,973)** | **$(2,123)** | **$150** | **-7%** | [Liquidity and Capital Resources](index=19&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity has been strained by operating losses and a dispute with a key manufacturer, addressed by a **$2 million** convertible debt offering, non-recourse litigation financing, and a receivables financing line in Q3 2024, though working capital decreased to **$1.37 million** from **$2.35 million** at year-end 2023, with future liquidity dependent on ramping up sales profitably and controlling expenses - The company used **$1.54 million** in cash from operations during the first nine months of 2024, primarily due to a net loss adjusted for non-cash items and an increase in accounts receivable[69](index=69&type=chunk) - Working capital (excluding disputed payables) decreased from **$2.35 million** at Dec 31, 2023, to **$1.37 million** at Sep 30, 2024, due to operating losses[70](index=70&type=chunk) - The company has taken measures to reduce liquidity requirements, including compensating directors and employees with equity, obtaining non-recourse litigation financing, and securing receivables financing[71](index=71&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=20&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) As a smaller reporting company, Barfresh Food Group Inc. is not required to provide this information - Disclosure is not required because the company is a smaller reporting company[73](index=73&type=chunk) [Item 4. Controls and Procedures](index=20&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2024, with a previously disclosed material weakness related to the control environment and inadequate segregation of duties successfully remediated - The CEO and CFO concluded that as of September 30, 2024, the company's disclosure controls and procedures were effective at a reasonable assurance level[73](index=73&type=chunk) - A material weakness in internal control over financial reporting related to inadequate segregation of duties, previously disclosed through 2023, has been remediated as of September 30, 2024[74](index=74&type=chunk)[75](index=75&type=chunk) [PART II - OTHER INFORMATION](index=21&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=21&type=section&id=Item%201.%20Legal%20Proceedings.) The company is involved in an ongoing dispute with a former contract manufacturer, the outcome of which is currently unpredictable, and is also a defendant in another minor legal proceeding for an amount less than **$100,000**, which management believes is unlikely to have a material unfavorable outcome - The company has an ongoing dispute with a former manufacturer, as described in Note 4 of the financial statements, and the outcome cannot be predicted at this time[76](index=76&type=chunk) [Item 1A. Risk Factors](index=21&type=section&id=Item%201A.Risk%20Factors.) As a smaller reporting company, Barfresh Food Group Inc. is not required to provide this information - Disclosure is not required because the company is a smaller reporting company[77](index=77&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=21&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) During the third quarter of 2024, the company issued **22,266** shares of common stock for services valued at **$97,300**, with the issuance exempt from registration under Rule 506(b) and Section 4(a)(2) of the Securities Act - In the quarter ended September 30, 2024, the company issued **22,266** shares of common stock in exchange for services valued at **$97,300**[77](index=77&type=chunk) [Item 3. Defaults Upon Senior Securities](index=21&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) The company reported no defaults upon senior securities - None[78](index=78&type=chunk) [Item 4. Mine Safety Disclosures](index=21&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This item is not applicable to the company - Not applicable[78](index=78&type=chunk) [Item 5. Other Information](index=21&type=section&id=Item%205.%20Other%20Information.) The company reported no other information - None[78](index=78&type=chunk) [Item 6. Exhibits](index=21&type=section&id=Item%206.%20Exhibits.) The report lists the exhibits filed, including officer certifications (Exhibits 31.1, 31.2, 32.1) and Inline XBRL documents - Exhibits filed with the report include certifications from the Principal Executive Officer and Principal Financial Officer, as well as Inline XBRL data files[74](index=74&type=chunk)[79](index=79&type=chunk)

[Barfresh Third Quarter 2024 Results and Business Update](index=1&type=section&id=Barfresh%20Provides%20Record%20Third%20Quarter%202024%20Results%20and%20Business%20Update) [Management Comments](index=1&type=section&id=Management%20Comments) The CEO highlights record Q3 revenue growth driven by existing products ahead of the new Pop & Go™ launch - Achieved record quarterly revenue in Q3 2024, exceeding **$3.6 million**, a **40% year-over-year increase**[2](index=2&type=chunk) - The new Pop & Go™ product is expected to significantly expand the company's presence in the high-volume school lunch channel[2](index=2&type=chunk) - The company is positioned for sustained growth with expanded capacity and a distribution network covering over **95% of the country**[2](index=2&type=chunk) [Financial Performance](index=1&type=section&id=Financial%20Performance) The company reports significant revenue growth for Q3 and the first nine months of 2024, with improved gross margins [Third Quarter 2024 Financial Results](index=1&type=section&id=Third%20Quarter%20of%202024%20Financial%20Results) Q3 2024 revenue surged 40% to $3.6 million with improved adjusted gross margins, though the net loss slightly increased Q3 2024 vs Q3 2023 Key Metrics | Financial Metric | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | | **Revenue** | $3.6M | $2.6M | +40% | | **Gross Margin** | 35% | 35% | 0% | | **Adjusted Gross Margin** | 38% | 35% | +3 p.p. | | **Net Loss** | ($513,000) | ($476,000) | +7.8% | | **Adjusted EBITDA** | ($124,000) | ($89,000) | +39.3% | - Revenue growth was attributed to improvements in Twist & Go bottled smoothie sales and sales of smoothie cartons and bulk formats[3](index=3&type=chunk) - The increase in net loss was primarily due to higher personnel costs, travel, broker commissions, and the non-recurrence of an Employee Retention Tax Credit benefit recognized in 2023[4](index=4&type=chunk) [First Nine Months of 2024 Financial Results](index=2&type=section&id=First%20Nine%20Months%20of%202024%20Financial%20Results) Revenue for the first nine months grew 28% to $7.9 million, accompanied by a narrowed net loss and improved Adjusted EBITDA Nine Months 2024 vs 2023 Key Metrics | Financial Metric | Nine Months 2024 | Nine Months 2023 | Change | | :--- | :--- | :--- | :--- | | **Revenue** | $7.9M | $6.2M | +28% | | **Gross Margin** | 37% | 36% | +1 p.p. | | **Adjusted Gross Margin** | 39% | 36% | +3 p.p. | | **Net Loss** | ($2.0M) | ($2.1M) | -4.7% | | **Adjusted EBITDA** | ($752,000) | ($1.2M) | +39.7% | - The improvement in Gross Margin and Adjusted Gross Margin resulted from a favorable product mix, pricing actions, and a slight improvement in supply chain component costs[5](index=5&type=chunk) - The increase in G&A expenses was driven by higher management headcount, increased stock-based compensation for the Board, and the non-recurrence of 2023 tax benefits[6](index=6&type=chunk) [Balance Sheet and Liquidity](index=3&type=section&id=Balance%20Sheet) The company managed liquidity through inventory buildup, a new receivables financing facility, and non-recourse litigation financing - As of September 30, 2024, the company had approximately **$2.1 million of cash and accounts receivable**, and approximately **$770,000 of inventory**[12](index=12&type=chunk) - In August 2024, the company secured a **$1.5 million receivables financing facility** to provide flexibility for funding inventory as needed[13](index=13&type=chunk) - Obtained non-recourse litigation financing to vigorously pursue its legal complaint without further expense to the company[13](index=13&type=chunk) - The company has taken measures to reduce liquidity requirements, including compensating directors and employees with equity to reduce cash compensation[12](index=12&type=chunk) [2024 Outlook](index=3&type=section&id=Commentary%20and%20Outlook%20for%202024) The company expects to achieve record annual revenue in 2024 with gross margins in the mid to high 30s and positive Q4 Adjusted EBITDA - Expects to achieve **record fiscal year revenue** for fiscal year 2024[14](index=14&type=chunk) - Gross Margin and Adjusted Gross Margin for 2024 are expected to be in the **mid to high 30's**[14](index=14&type=chunk) - Expects to achieve **positive adjusted EBITDA** in the fourth quarter of fiscal year 2024[14](index=14&type=chunk) [Supplier Dispute](index=3&type=section&id=Supplier%20Dispute) The company is engaged in an ongoing legal dispute with a former manufacturer over a product quality issue from Q3 2022 - The dispute stems from customer complaints in Q3 2022 regarding the textural consistency of the Twist & Go™ bottle product from a single manufacturer[15](index=15&type=chunk) - After unsuccessful informal negotiations, Barfresh re-filed a complaint in California State Court in August 2023, and the case is progressing through the court system[15](index=15&type=chunk) - The company cannot predict the outcome or a range of reasonably possible recoveries from its legal actions, and **no gain contingencies have been recorded**[15](index=15&type=chunk) [Non-GAAP Financial Measures](index=2&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP measures like Adjusted Gross Profit and Adjusted EBITDA to provide a clearer view of core performance - The company presents non-GAAP measures like Adjusted Gross Profit and Adjusted EBITDA to provide useful information that is directly reflective of its core business performance[8](index=8&type=chunk) - Exclusions from GAAP measures, such as manufacturing relocation costs and stock compensation, are intended to provide a more useful measure for period-to-period comparisons[8](index=8&type=chunk) Reconciliation to Adjusted Gross Profit | Reconciliation to Adjusted Gross Profit | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | **Gross Profit** | $1,260,000 | $913,000 | $2,938,000 | $2,242,000 | | Manufacturing relocation | $126,000 | - | $176,000 | - | | **Adjusted Gross Profit** | $1,386,000 | $913,000 | $3,114,000 | $2,242,000 | Reconciliation to Adjusted EBITDA | Reconciliation to Adjusted EBITDA | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | **Net Loss** | ($513,000) | ($476,000) | ($1,973,000) | ($2,123,000) | | Adjustments (D&A, Interest, etc.) | $389,000 | $387,000 | $981,000 | $576,000 | | **Adjusted EBITDA** | ($124,000) | ($89,000) | ($752,000) | ($1,247,000) | [Conference Call Information](index=4&type=section&id=Conference%20Call) A conference call to discuss Q3 2024 results was scheduled for October 24, 2024, with webcast and replay details provided - A conference call was scheduled for October 24, 2024, at 1:30 pm Pacific Time (4:30 pm Eastern Time) to discuss the results[16](index=16&type=chunk) - Dial-in numbers for North American and international listeners were provided, along with a passcode for a telephonic playback available through November 7, 2024[16](index=16&type=chunk)

Record Quarterly Revenue of $3.6 Million and Gross Margin of 35% and Adjusted Gross Margin of 38% for Third Quarter 2024 Company Generating Revenue from New Pop & Go™ Freeze Pops in Fourth Quarter 2024 Company Expects to Achieve Positive Adjusted EBITDA for Fourth Quarter 2024 Capacity and Product Portfolio Expansion Paving Way for Record Annual Revenue and Year-over-Year Adjusted Gross Margin Improvement in Fiscal Year 2024 LOS ANGELES, Oct. 24, 2024 (GLOBE NEWSWIRE) -- Barfresh Food Group Inc. (the “Compa ...

Core Viewpoint - Barfresh Food Group Inc. will host a business update call on October 24, 2024, to discuss company developments and performance [1]. Group 1: Business Update Call - The business update call is scheduled for October 24, 2024, at 1:30 pm Pacific Time (4:30 pm Eastern Time) [1]. - Listeners can join the call by dialing (877) 407-4018 in North America or (201) 689-8471 for international listeners [1]. - A telephonic playback will be available two hours after the call and can be accessed until November 7, 2024, with specific dial-in numbers provided [2]. Group 2: Webcast Information - A simultaneous webcast of the conference call will be available on the company's website in the Investors-Presentations section [3]. - The replay of the webcast will be accessible for approximately 30 days following the call [3]. Group 3: Company Overview - Barfresh Food Group Inc. is a developer, manufacturer, and distributor of ready-to-blend and ready-to-drink beverages, focusing on smoothies, shakes, and frappes [4]. - The company primarily serves the education market, foodservice industry, and restaurant chains, offering products in both single-serving and bulk formats [4]. - Barfresh utilizes a proprietary system for on-site preparation of beverages, emphasizing freshness, cost efficiency, and waste reduction [4].

Core Insights - Barfresh Food Group has begun selling its new product, "Pop & Go," targeting the education channel and expects to generate revenue from it in Q4 2024 [1][4] - Preliminary figures indicate record quarterly revenue of over $3.6 million for Q3 2024, representing a 40% increase year-over-year [3][5] - The company anticipates achieving record annual revenue for fiscal year 2024 along with year-over-year margin improvement [1][3] Product Details - "Pop & Go" is a 100% juice freeze pop containing a half-cup of fruit juice, with no added sugars, preservatives, artificial flavors, or colors, compliant with USDA meal programs [2] - This product complements Barfresh's existing offerings in schools, including bulk juice concentrates and other beverage products [2] Market Strategy - The CEO highlighted that "Pop & Go" strategically targets school lunch menus, which can potentially yield five times the volume of current breakfast offerings [4] - Initial feedback from students and administrators has been positive, indicating strong market potential for "Pop & Go" [4] - The company sees opportunities for future expansion of "Pop & Go" into other foodservice and retail channels [4]

Barfresh Food Group Inc. (BRFH) came out with a quarterly loss of $0.07 per share versus the Zacks Consensus Estimate of a loss of $0.04. This compares to loss of $0.06 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of -75%. A quarter ago, it was expected that this company would post a loss of $0.05 per share when it actually produced a loss of $0.03, delivering a surprise of 40%. Over the last four quarters, the company has su ...

Financial Data and Key Metrics Changes - Revenue for Q2 2024 decreased by 3% to $1.46 million compared to $1.51 million in Q2 2023, but excluding adjustments related to a manufacturer dispute, revenue increased by 6% year-over-year [13] - Gross margin for Q2 2024 was 34.8%, up from 31.4% in Q2 2023, attributed to product mix, pricing actions, and slight improvements in supply chain costs [13] - Net loss for Q2 2024 was $1 million, compared to a net loss of $742,000 in Q2 2023, primarily due to stock-based compensation and management team enhancements [15] Business Line Data and Key Metrics Changes - The company has expanded its product line and production capacity, with a 400% increase in manufacturing capacity, allowing for the production of over 120 million units annually [10] - The introduction of the new Pop & Go product line is expected to significantly increase sales volume, particularly in school lunch menus [9] Market Data and Key Metrics Changes - The company has announced over 3,100 new custom locations in the education sector, serving over 2.2 million students [8] - The sales broker network now covers 95% of the country, enhancing market reach [7] Company Strategy and Development Direction - The company is focused on long-term growth through infrastructure investments, product line expansion, and enhancing its management team [6][12] - Strategic partnerships for manufacturing are aimed at diversifying the production footprint and mitigating risks [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving record quarterly revenue in Q3 and positive adjusted EBITDA in the second half of the year [6][20] - The company is well-positioned for growth with a strong product portfolio and increased operational capacity [20] Other Important Information - The company secured a $1.5 million receivables financing facility to support inventory funding and has received non-recourse litigation financing [17] - Adjusted EBITDA for Q2 2024 was a loss of approximately $682,000, compared to a loss of $617,000 in the prior year [15] Q&A Session Summary Question: What have you been seeing in the non-education channels in the second quarter? - Management noted that summer sales were flat compared to last year, with a focus on the education channel expected to increase next year [21] Question: What is the hiring outlook for the sales team? - Management indicated that the sales team is fully staffed with the recent hire of the VP of Sales and plans to expand outreach to other channels beyond education [22]

Financial Performance - Total revenue for Q2 2024 was $1,464,000, a decrease of 3.1% from $1,511,000 in Q2 2023[4] - Gross profit for Q2 2024 increased to $509,000, up 7.4% from $474,000 in Q2 2023[4] - Net loss for Q2 2024 was $(1,011,000), compared to a net loss of $(742,000) in Q2 2023, representing a 36.4% increase in losses[4] - Revenue increased by $691,000, or 19%, to $4,293,000 in 2024 compared to $3,602,000 in 2023, driven by the acceptance of carton packaging and improved bulk sales[55] - Gross profit was $1,679,000 (39.1%) for the six months ended June 30, 2024, compared to $1,329,000 (36.9%) for the same period in 2023, reflecting improved gross margins[65] - Net loss for the three months ended June 30, 2024, was approximately $1,011,000, an increase of $269,000 from a net loss of $742,000 in 2023[65] - Net loss decreased to approximately $1,460,000 in 2024 from $1,647,000 in 2023, primarily due to an increase in gross profit[71] Assets and Liabilities - Total current assets decreased to $2,729,000 as of June 30, 2024, down 34.2% from $4,153,000 at December 31, 2023[3] - Total liabilities decreased to $1,655,000 as of June 30, 2024, down 28.2% from $2,307,000 at December 31, 2023[3] - As of June 30, 2024, the company had $1,185,000 in working capital, including $383,000 in cash[48] - Working capital as of June 30, 2024, was $1,185,000, down from $1,846,000 at December 31, 2023, primarily due to losses incurred[76] Cash Flow and Expenses - Cash at the end of Q2 2024 was $383,000, a significant decrease of 79.8% from $1,891,000 at the beginning of the period[5] - Operating expenses for Q2 2024 totaled $1,520,000, an increase of 24.9% from $1,216,000 in Q2 2023[4] - The company experienced negative cash flow of $1,549,000 in operations during the six months ended June 30, 2024[49] - Selling, marketing, and distribution expenses decreased by approximately $42,000 (7%) from $625,000 in 2023 to $583,000 in 2024[60] - General and administrative expenses increased by approximately $378,000 (77%) from $493,000 in 2023 to $871,000 in 2024, primarily due to increased personnel costs and stock-based compensation[61] - Personnel costs decreased by approximately $130,000 (18%) from $733,000 in 2023 to $603,000 in 2024 due to a reduction in headcount[70] - Stock-based compensation increased by approximately $326,000 (171%) from $191,000 in 2023 to $517,000 in 2024[70] Inventory and Production - As of June 30, 2024, the Company’s inventory totaled approximately $1,534,000, an increase from $1,214,000 as of December 31, 2023[22] - The company expects expanded production capacity to become available in the third quarter of 2024, following a contract with an additional manufacturer[56] - The company expects expanded manufacturing capacity for smoothie bottles to become available in 2024, subject to pre-production risks[77] Debt and Financing - The Company executed subscription agreements for a $2,000,000 privately placed convertible debt offering, with $1,390,000 drawn down by October 23, 2023[30] - The company secured a $1,500,000 receivables financing facility in August 2024, with a thirteen-month term and interest at prime plus 1.2%[47] - The Company executed subscription agreements for a $2,000,000 convertible debt offering, with $1,390,000 issued and $1,207,000 converted into common stock[73] Legal and Operational Challenges - The company faced supply disruptions due to a dispute with a contract manufacturer, impacting operations and cash flow until a resolution is reached[28] - Legal proceedings are ongoing with a manufacturer, which may impact financial results, but management believes a material unfavorable outcome is remote[84] Cost of Revenue - Cost of revenue increased by $341,000, or 15%, to $2,614,000 in 2024, growing at a lower rate than revenue due to product mix and improvements in raw material costs[65]