Barfresh(BRFH) - 2023 Q3 - Quarterly Report

Revenue and Profitability - Revenue increased by $197,000, or 8%, from $2,406,000 in Q3 2022 to $2,603,000 in Q3 2023, despite a 14% decrease in product shipped[93] - Gross profit improved to $2,242,000 (36%) in 2023 from $924,000 (12%) in 2022, reflecting favorable product mix and pricing actions[109] - Net loss for Q3 2023 was approximately $476,000, a decrease of $2,211,000 compared to a net loss of $2,687,000 in Q3 2022[105] - Revenue for the nine months ended September 30, 2023, was $6,205,000, a decrease of $1,526,000, or 20%, compared to $7,731,000 in 2022[106] Expenses and Cost Management - Cost of revenue decreased by $1,912,000, or 33%, from $5,875,000 in 2022 to $3,963,000 in 2023, excluding the impact of a $932,000 inventory write-off[108] - Selling, marketing, and distribution expenses decreased by approximately $246,000 (-11%) from $2,236,000 in 2022 to $1,990,000 in 2023[111] - General and administrative expenses decreased by approximately $572,000 (-22%) from $2,637,000 in 2022 to $2,065,000 in 2023[116] - Research and development expenses decreased by approximately $259,000 (-75%) from $347,000 in 2022 to $88,000 in 2023, as activities were minimized to conserve working capital[119] - Stock-based compensation increased by approximately $76,000 (21%) from $355,000 to $431,000 due to the conversion of directors' fees to stock-based compensation[118] Working Capital and Liquidity - As of September 30, 2023, the company had working capital of $541,000, a decrease from $1,801,000 at December 31, 2022, primarily due to an operating loss for the nine months ended September 30, 2023[122] - The company has no debt as of the latest report, following the retirement of $840,000 in debt and conversion of $399,000 in principal and $234,000 in interest into common stock[124] - The company’s liquidity needs will depend on the ability to profitably ramp up sales and control operating expenses[125] Manufacturing and Production Capacity - The company expects expanded smoothie bottle manufacturing capacity to become available in early 2024, subject to risks associated with contracting and pre-production activities[93] - The company has identified and is actively working to develop additional smoothie bottle manufacturing capacity, expected to be available in early 2024[125] Supply Chain and Operational Challenges - The company experienced disruptions in supply chain due to COVID-19, impacting product availability and sales channels, although the business climate appears to have stabilized in 2023[123] - The introduction of carton packaging has mitigated supply loss, but acceptance varies among customers[125] Internal Controls and Management Assessment - Management has concluded that as of September 30, 2023, the company's disclosure controls and procedures are not effective[128] - The company has identified material weaknesses in internal control over financial reporting, which management believes did not affect financial results[136][138] Cash Flow and Financing Activities - During the nine months ended September 30, 2023, the company used $2,008,000 in operations[129] - From July to October 2023, the company executed subscription agreements for $1,880,000 of a $2,000,000 privately placed convertible debt offering, with $1,390,000 of convertible notes issued on October 23, 2023[131]