Executive Summary

Q3 2025 delivered the 11th consecutive profitable quarter, with revenue of $8.01M (+12.4% YoY) and EPS of $0.01; gross margin expanded YoY to 70.9% but compressed sequentially vs Q2 (76.7%) due to mix and lower license revenue .
Results were mixed vs Wall Street: EPS was in line at $0.01*, while revenue was a significant miss at $8.01M vs $10.90M consensus*; prior quarters showed EPS beats but revenue below consensus* .
Strategic momentum continued: major DSD distribution build-out, EG America launch (~1,600 stores in Q4), Wakefern placement (365 stores), and pharmacist recognition as #1 OTC memory supplement for 2025-2026 .
Balance sheet position improved with a working capital surplus of $16.68M and $4.4M equity raised in August to fund beverage rollouts; management emphasized inventory readiness (>3M cans) and accelerated hiring to support DSD execution .
Near-term stock catalysts: narrative hinges on pace of beverage revenue scaling and national convenience rollouts; sequential margin trajectory and incremental G&A tied to DSD support are watch items .

What Went Well and What Went Wrong

What Went Well

Retail/distribution wins: EG America to launch Focus Energy in ~1,600 locations in Q4; Wakefern to carry five SKUs across 365 stores; regional distributors (AlaBev, Atlantic Importing) added .
Supplement brand strength: Focus Factor named #1 Pharmacist Recommended OTC memory supplement for 2025-2026, reinforcing category leadership .
Operating leverage YoY: gross margin rose to 70.9% vs 67.2% YoY, driven by mix and an ~11% price increase to Costco in supplements; operating income up 21.8% YoY .
- “We are pleased to report our 11th consecutive quarter of profitability... Revenue, gross profit, and income from operations increased year over year” — CEO Jack Ross .

What Went Wrong

Revenue miss vs consensus: $8.01M actual vs $10.90M consensus*; similar revenue shortfalls occurred in Q1 and Q2 vs estimates* .
Sequential margin compression: gross margin fell to 70.9% in Q3 from 76.7% in Q2, reflecting lower license revenue mix .
EPS down YoY and lower EBITDA: EPS dropped to $0.01 (vs $0.11 YoY) and EBITDA was $1.31M (vs $1.33M YoY); CFO cited higher expenses launching beverages and other income last year .

Financial Results

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	$8.171	$8.135	$8.010
EPS ($USD)	$0.10	$0.17	$0.01
Gross Margin %	75.4%	76.7%	70.9%
Operating Income ($USD Millions)	$1.948	$1.624	$1.280
Net Income ($USD Millions)	$0.876	$1.473	$0.125
EBITDA ($USD Millions)	$1.98	$3.80	$1.31

Segment/Revenue Detail	Q1 2025	Q2 2025	Q3 2025
Product Sales ($USD Millions)	$6.671	$6.735	$8.010
License Revenue ($USD Millions)	$1.500	$1.400	$0.000
Beverage Revenue ($USD Millions)	$0.030	$0.148	$0.159

KPIs	Q1 2025	Q2 2025	Q3 2025
Cash And Equivalents ($USD Millions)	$0.178	$1.459	$1.006
Inventory ($USD Millions)	$2.346	$2.364	$2.146
Working Capital ($USD Millions)	N/A	$12.4	$16.68
Total Liabilities ($USD Millions)	$31.295	$32.106	$28.943

Estimates vs Actuals	Q1 2025	Q2 2025	Q3 2025
Revenue Consensus Mean ($USD Millions)*	9.025	10.800	10.900
Revenue Actual ($USD Millions)	$8.171	$8.135	$8.010
Result vs Estimate	Miss	Miss	Miss
Primary EPS Consensus Mean ($USD)*	0.07	0.08	0.01
EPS Actual ($USD)	$0.10	$0.17	$0.01
Result vs Estimate	Beat	Beat	In-line

Values with asterisk (*) retrieved from S&P Global.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	Q4 2025	Not provided	Not provided	Maintained (no guidance)
EPS	Q4 2025	Not provided	Not provided	Maintained (no guidance)
Gross Margin	Q4 2025	Not provided	Not provided	Maintained (no guidance)
Operating Expenses	Q4 2025	Not provided	Directional: higher due to added human capital for DSD	Raised (directional)
Cash/Working Capital	FY 2025	N/A	Working capital surplus $16.68M reported	Informational

Note: The company did not issue formal quantitative guidance in the Q3 press release or call; management provided directional commentary on adding sales/service headcount to support DSD rollout .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
Functional beverage rollout & DSD	Q1: Hired beverage veteran; ~400 Canadian convenience stores opened; Amazon POs ~$1M for Q2 RTD rollout . Q2: National item authorization via Core-Mark; Canadian retail wins; RTD revenue improving (Amazon $148k) .	EG America launch in Q4 (~1,600 stores); Wakefern placement; added DSD partners (AlaBev, Atlantic Importing); beverage revenue $159k; >3M cans inventory .	Accelerating rollout, infrastructure readiness
Supplements pricing/mix & margin	Q2 gross margin 76.7% driven by license revenue .	~11% price increase to Costco on supplements; gross margin ~75% on supplements pre-increase .	Sustained margin support via pricing/mix
Licensing strategy	Q1: UAE license fee $1.5M; plan more territories where no direct footprint . Q2: Added Turkey; $1.4M license revenue; lumpy outlook .	No license revenue in Q3; YTD license $2.9M .	Lumpy; Q3 lull
Capital structure/liquidity	Q1: Term sheets to refinance into 2029 . Q2: $20M term loan to 2029; liabilities reduced .	$4.4M equity raise in Aug; working capital surplus $16.68M .	Improved flexibility
G&A and hiring	Q1: G&A expected relatively flat with minor headcount adds .	Added human capital (sales/service) to support all-state DSD; G&A likely higher near term .	Rising to support growth
International expansion	Q1: Mexico subsidiary; Costco/Walmart Mexico; AU/Taiwan planned . Q2: Canada placements (Walmart Canada, McKesson Canada) .	POs from Costco Mexico to ship in Q4; travel to Dubai for partner/licensing .	Expanding footprint

Management Commentary

“EG America... will launch our Focus Energy beverages to over 1,600 high-traffic locations nationwide in Q4 of this year... Wakefern... will carry five Focus Energy SKUs across 365 retail locations” — CEO Jack Ross .
“In our supplement business, we... took a price increase to our Costco business of 11%... our gross margin on our supplements... is about 75%...” — CEO Jack Ross .
“Adjusted EBITDA... was $1.52 million, up 13.4%... These decreases [EPS/EBITDA per share] are due to other income in the same period last year and higher expenses this year to launch the beverage division” — CFO Jaime Fickett .
“We currently have over 3 million cans of drink inventory now in stock... We are continuing to add key employees... 2025 has been a foundational year... refinancing our debt out to 2029, raising equity...” — CEO Jack Ross .

Q&A Highlights

Beverage contribution: Q3 beverage revenue was $159k; prior quarter Amazon RTD revenue was $148k; Q1 RTD revenue was $30k .
Margin drivers: ~11% price increase at Costco supplements supported elevated gross margin; blended margin benefited from mix .
G&A trajectory: Management expects higher G&A as sales/service headcount are added to support DSD distributors and regional retailers; all-state DSD strategy targeted quickly .
Distribution landscape: Open lanes in DSD networks (Poppi-Alani moves back to Pepsi/Celsius) create opportunity for rapid RTD acceleration .

Estimates Context

Q3: EPS $0.01 in line with $0.01 consensus*, while revenue of $8.01M missed $10.90M consensus* .
Q2: EPS $0.17 beat $0.08 consensus*, but revenue $8.13M missed $10.80M consensus* .
Q1: EPS $0.10 beat $0.07 consensus*, while revenue $8.17M missed $9.03M consensus* .
Values marked with asterisk (*) retrieved from S&P Global.

Implication: Street likely revisits near-term revenue scaling assumptions for RTD/beverages while acknowledging margin resiliency from supplements pricing/mix.

Key Takeaways for Investors

Revenue caution: Multiple quarters of revenue below consensus despite strong distribution news; Q3 revenue $8.01M vs $10.90M consensus* — monitor conversion of authorizations to sell-through .
Margin posture: YoY gross margin expansion to 70.9% aided by supplement pricing; sequential compression vs Q2 (76.7%) due to lower license mix — watch mix shifts and license cadence .
Beverage scaling proof points: EG America launch, DSD build-out, >3M cans inventory, and added sales/service headcount are setup catalysts for H1 2026 — track beverage revenue trajectory from current ~$0.16M quarterly base .
Licensing is lumpy: $1.5M in Q1 and $1.4M in Q2, none in Q3; YoY comp volatility likely; street models should reflect episodic timing .
Balance sheet improved: Working capital surplus $16.68M; equity raise $4.4M provides growth funding for inventory and marketing .
Expense ramp near term: G&A to rise with DSD support hires; monitor opex discipline and ROI as distribution broadens .
Narrative drivers: Near-term stock reaction hinges on evidence of RTD sell-through in national convenience channels and sustained supplement margin strength; lack of formal guidance suggests focusing on quarterly momentum indicators .

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