Barfresh Food Group Inc.

Good afternoon, everyone, and thank you for participating on today's fourth quarter folio corporate update call for Barfresh Food Group. Joining us today is Barfresh Food Group's founder and CEO, Ricardo Delacoste, and Barfresh Food Group CFO, Lisa Roger. Following prepared remarks, we will open the call for your questions. The discussion today will include forward-looking statements, except for historical information herein. Matters set forth in this call are forward-looking within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements about the company's commercial progress, success of its strategic relationships, and projections of future financial performance. These forward-looking statements are identified by use of words such as grow, expand, anticipate, intend, estimate, believe, expect, plan, should, hypothetical, potential, forecast, and project. Continue, could, may, predict, and will, and variations of such words and similar expressions are intended to identify such forward-looking statements. All statements other than the statements of historical fact that address activities, events, or developments that a company believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made based on experience expected future developments, and other factors that the company believes are appropriate under the circumstances. Such statements are subject to a number of assumptions, risks, and uncertainties, many of which are beyond the control of the company. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date they are made. The contents of this call should be considered in conjunction with the company's recent filings with Securities and Exchange Commission, including its annual report on Form 10-K and quarterly reports on Form 10-Q and current reports on Form 8-K, including any warnings, risks, factors, and cautionary statements contained therein. Furthermore, the company expressly This claims any current intention to update publicly any forward-looking statements of this call, whether as a result of new information, future events, changes in assumptions, or otherwise. In order to aid in understanding of the company's business performance, the company is also presenting certain non-GAAP measures, including adjusted EBITDA, which are reconciled in a table in the business update release to the most comparable GAAP measures. The reconciling items are non-operational or non-cash costs, including stock compensation, stock issue for services, and gain or loss on the sale of derivatives. Maginot believes that the adjusted EBITDA provides useful information to the investor because it's directly reflective of the peer-to-peer performance of the company's core business. Now I'll turn the call over to the CEO of Barcash Food Group, Mr. Ricardo Delacoste. Please go ahead, sir.

Thank you, and good afternoon, everyone. I'm very pleased with our fourth quarter and full year results and our business accomplishments throughout 2021. Revenue in the fourth quarter was our highest quarterly revenue in company history, and the first time we had sequential growth from the third quarter to the fourth quarter, with revenue increasing 27% sequentially and 296% year over year. We ended the year with a record $6.7 million in revenue. up 161% from fiscal year 2020 and up 56% from fiscal year 2019. The increase in revenue was due to our ability to introduce our Twist and Go product across an increased customer base in the education channel and the gradual return throughout the year in sales of our single serve and bulk products compared to the COVID-19 affected prior year periods. These results were achieved in the face of supply challenges, preventing us from servicing some of our larger school districts and only servicing a subset of our other sales channels. We made the strategic decision last quarter to temporarily scale back servicing some of our larger school customers to prevent cancelled orders due to supply challenges and a negative impact to those relationships. Additionally, the total addressable market in the education channel is massive. We've only just scratched the surface of the over 98,000 schools and 14,000 school districts in the United States. We will continue to be aggressive in our pursuit of new school customers, both through our sales team and through our distribution partnerships. And we are beginning to see supply challenges slightly ease, so we will be able to re-engage with more of our existing customers in fiscal year 2022. Additionally, despite minimal sales from our higher margin single-serve and bulk products due to COVID and significantly higher supply chain costs in the second half of the year, we reduced core operating expenses for fiscal year 2021 with total G&A declining by 9% to $4 million compared to the prior year. This is on top of the 36% reduction we achieved in fiscal year 2020 over the prior year. We anticipate the elevated shipping and storage costs will continue into the first half of 2022. However, our planned increase in volume per load and higher sales volume, as well as taking advantage of more efficient distribution arrangements, will partially offset these costs. Additionally, we are buying more raw materials in advance, taking a closer look at all of our supplier relationships and, where possible, passing on price increases to help mitigate industry-wide cost increases. We have great sales momentum heading into 2022 as we entered the 2021-22 school year in double the number of school locations from the prior year and have continued to add to that customer base with the addition of 39 new school districts in the last three months. We also announced this past December that we had been awarded a five-year contract from the Army and Air Force Exchange Service for Twist and Go to be served to students in 76 military-based schools across nine countries overseas. The 76 schools served an average of 17,700 meals per day for a total of more than 3 million meals in 2020-21 school year. And most recently, we announced the distribution arrangement with the largest independently owned and operated Pepsi franchise bottler, G&J Pepsi Cola Bottlers. Twist and Go will now be distributed to G&J's customers through the same network that distributes well-known brands like Tropicana, Covita, and Naked Juice. Pepsi products are sold in practically every type of retail account across the United States, including schools. We believe this arrangement has incredible value, especially as we start to expand Twist and Go outside of the school channel. We hope this partnership can serve as a blueprint for the additional 80 independent bottlers to begin similar programs with Barfresh. The education channel has longstanding relationships with specific distributors, and in order for a beverage company to access those accounts, it must go through the distributor rather than the school or school district in most cases. We have a high rate of success with our products in the education channel, as they have been shown to significantly increase breakfast participation and have solid repeat consumption rates. And therefore, once we begin working with a distributor, it becomes a sticky business relationship and with significant barriers to entry. We have therefore made partnering with distributors, such as GNJ Pepsi, a focus of our sales strategy going forward. Another business tailwind for our company heading into the new fiscal year was a successful uplisting of our common stock to the NASDAQ capital market. This achievement followed years of hard work strengthening our balance sheet, dramatically improving our expenses and increasing our top line to ready ourselves for this financial milestone. We will now garner broader access to investors and it solidifies our place as a serious player in the beverage industry. Our growing position within the industry has also helped us attract the right talent, as seen with the announcement earlier this year in the hiring of Lisa Roger as CFO. Lisa has had extensive public company manufacturing experience and successfully managed all aspects of finance for numerous companies, including Fox Factory. Lisa has elevated our financial team to the next level and will be an integral part of our company's next chapter of growth. Now with that, I'll turn it over to our CFO, Lisa Roger. Lisa?

Thank you, Ricardo. I'm excited to be part of an innovative company like Barfresh and recognize all the incredible improvements Ricardo and his team have made to the business over the past few years and look forward to working with them at this exciting time in their company expansion. Now to discuss our results in more detail. Revenue for the fourth quarter of 2021 increased 296% to $2.5 million compared to $620,000 for the same period last year, and up 27% compared to $1.9 million in the third quarter of 2021. As Ricardo mentioned, this was our highest quarterly revenue in company history and the first time we had sequential revenue growth from the third quarter into the seasonally light fourth quarter. Revenue for the full year of 2021 increased 161% to a record $6.7 million, compared to $2.6 million for the full year of 2020. The fourth quarter and full year increase in revenue is the result of increased orders for our Twist & Go product in the school channel, as well as the gradual return in sales of our single-serve and bulk products. Gross margins for the fourth quarter of 2021 were 36%, compared to negative 4% for the same period last year. The negative gross margins in the prior period was due to the company realizing startup expenses related to launching Twist & Go and World's 100% juice concentrates, as well as COVID-related product write-downs. Gross margins for the full year of 2021 were 37% compared to 30% for the full year of 2020. The increase was due to the higher sales volume and product mix of our Twist & Go and World's 100% juice concentrates. As Ricardo explained, we, along with the entire industry, are experiencing inflationary headwinds that we expect to persist throughout fiscal year 2022. However, as outlined earlier, we have plans in place to help offset these headwinds, and with the expected increase in sales of our Twist and Go and World's products, along with the return of our higher-margin single and bulk-serve products, we expect gross profit margins for the full fiscal year 2022 to stay in the 30s. Our net income for the fourth quarter of 2021 improved to $130,000 as compared to a net loss of $1.4 million in the fourth quarter of 2020. Net income in the fourth quarter of 2021 benefited from forgiveness of a $568,000 PPP loan. G&A expenses for the fourth quarter of 2021 were flat at $1.1 million compared to the same period last year. While we experienced a significant increase in shipping and storage costs from the unprecedented market increases and labor shortages in the quarter, such additional costs were partially offset by lower R&D and personnel costs. Net loss for fiscal year 2021 improved to $1.3 million as compared to a net loss of $4.2 million in fiscal year 2020. G&A expenses for fiscal year 2021 decreased by 9% compared with the prior year. We expect the elevated shipping and storage costs to continue into the first half of 2022. However, our expected increase in volume per load and higher sales volume, as well as us taking advantage of more efficient distribution arrangements, will help partially offset these costs. For the fourth quarter of 2021 and full year 2021, our adjusted EBITDA improved to a loss of $67,000 and $1.2 million, respectively, as compared to a loss of approximately $1 million and $3.2 million for the same periods last year. Now moving on to our balance sheet. As of December 31, 2021, we had approximately $5.7 million of cash and $700,000 of inventory on our balance sheet, compared to $2 million of cash and $900,000 of inventory as of December 31, 2020. On June 3, 2021, we announced the completion of a private placement of approximately $6 million of common stock with no warrant coverage. In addition, We also negotiated conversion of approximately $700,000 and the retirement of approximately $800,000 of existing debt and interest. This transaction eliminated all prior convertible debt and related interest. Additionally, we had our second PPP loan for $568,000 forgiven in the fourth quarter of 2021. Now I will turn the call back to Ricardo for closing remarks.