What changed in this filing

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Item 9A. Controls and Procedures

2023-03-02 compared with 2022-03-10 · 271 added, 678 removed, 547 unchanged (63% of the section changed)

30 unchanged sentences

The control environment is impacted due to the Company’s

inadequate segregation of duties.

In addition, we note that a different person was identified as our principal financial officer in

each of our last three annual reports on Form 10-K.

This lack of continuity and institutional knowledge has also affected internal control

over financial reporting.

inadequate segregation of duties, including information technology control activities.

the assessment of the effectiveness of our internal control over financial reporting did identify material weaknesses, management considers

5 unchanged sentences

changes in conditions or due to deterioration in the degree of compliance with our established policies and procedures.

an effort to remediate the identified material weakness and enhance our internal control over financial reporting, we plan to hire additional

an effort to remediate the identified material weakness and enhance our internal control over financial reporting, we have hired additional

financial personnel to help ensure that we are able to properly implement internal control procedures.

6 unchanged sentences

Directors, Executive Officers and Corporate Governance.

and Executive Officers

following sets forth information about our directors and executive officers as of the date of this Report:

Chief Executive Officer and Chairman

Financial Officer

Delle Coste has been the Chairman of our board of directors, President and Chief Executive Officer since January 10, 2012.

has also been the President and Chief Executive Officer of Barfresh Inc., a Nevada corporation and our wholly owned subsidiary (“Barfresh

NV”), since its inception.

Delle Coste is the inventor of the patented technology and the creator of Barfresh.

developed a unique system using controlled pre-packaged portions to deliver a freshly made smoothie that is quick, cost efficient, healthy

and with no waste.

In building the business, he is responsible for securing new business and maintaining key client relationships.

is also responsible for the development of new product from testing to full-scale production, establishment of the manufacturing facilities

that have all necessary accreditations, technology development, product improvement and research and development with new product launches.

Delle Coste also has over five years of investment banking experience.

Delle Coste attended Macquarie University, Sydney, Australia

while studying for a Bachelor of Commerce for 3.5 years but left to pursue business interests before receiving a degree.

Qualifications :

Delle Coste has 18 years of experience within retail, hospitality and dairy manufacturing.

Roger was appointed on January 4, 2022 to serve as our Chief Financial Officer effective

January 17, 2022.

Roger previously served as the EVP Corporate Controller at FreshRealm, a fresh meals solution provider that partners

with retailers, from May 2021 to December 2021.

From March 2014 to May 2021, she held various positions with Fox Factory Inc., most recently

as the Vice President, Accounting and Tax.

Fox Factory Inc.

is a designer, manufacturer and marketer of products and systems used primarily

on bikes, side-by-sides, off-road vehicles and trucks, ATVs, snowmobiles, specialty vehicles and applications, motorcycles, and commercial

Roger holds a Bachelor of Arts degree in Economics and Business from University of California, Los Angeles and a Master of

Business Administration degree from University of California, Los Angeles Anderson Graduate School of Management, and is a Certified

Public Accountant in the State of California (inactive status).

Lang was appointed as Director of the Company on January 10, 2012.

He has also served as Secretary of Barfresh NV since its inception.

Prior to joining Barfresh NV, from 2003 to 2007, Mr.

Lang was a director of Vericap Finance Limited, a company that specializes in providing

advice to and investing in Australian companies with international growth potential.

From 1990 to 1999, he served as a director of Babcock

& Brown’s Australian operations where he was responsible for international structured finance transactions.

Lang received

a Bachelor of Commerce and a Bachelor of Laws from the University of New South Wales in 1976 and a Master of Laws from the University

of Sydney in 1984.

He has been a member of the Institute of Chartered Accountants in Australia and was licensed to practice foreign law

Qualifications :

Lang has over 40 years of experience in business, accounting, law and finance and served as Chairman of an Australian public company.

Tinter was appointed as Director, Chief Financial Officer and Secretary of the Company on January 10, 2012.

Tinter resigned

his position as Chief Financial Officer on May 18, 2015, and served temporarily as Principal Accounting Officer.

Tinter founded Corporate

Finance Group, Inc., a consulting firm located in Denver, Colorado, in 1992, and is its President.

Corporate Finance Group, Inc., is

involved in financial consulting in the areas of strategic planning, mergers and acquisitions and capital formation.

He has been the

chief financial officer and a director of other public companies In all of the companies his responsibilities included oversight of all

accounting functions, including SEC reporting, strategic planning and capital formation.

Since May 2015, he has served as chief financial

officer of Bambu Franchising LLC, LLC, a privately held company that is a franchisor of Vietnamese-themed shoppes that serve drinks and

Prior to 1990, Mr.

Tinter was chief executive officer of Source Venture Capital, a holding company with investments in the

gaming, printing and retail industries.

Tinter received a B.S.

degree in Accounting in 1967 from C.W.

Post College, Long Island University,

and is licensed as a Certified Public Accountant in Colorado.

Qualifications:

Tinter has over 45 years of experience as a Certified Public Accountant and a financial consultant.

During his career he served as

a director of numerous public companies.

Cugine was appointed as Director of the Company on July 29, 2014, and served as president of our wholly owned subsidiary,

Barfresh Corporation, Inc., from April 27, 2015, to July 13, 2021.

Cugine is the owner and president of Cugine Foods and JC Restaurants,

a franchisee of Taco Bell and Pizza Hut in New York.

He is also president and owner of Restaurant Consulting Group LLC.

Prior to owning

and operating his own firms, Mr.

Cugine held a series of leadership roles with PepsiCo, lastly as chief customer officer and senior vice

president of PepsiCo’s Foodservice division.

Cugine also serves on the board of directors of The Chef’s Warehouse, Inc.,

a publicly traded specialty food products distributor in the U.S., as well as Ridgefield Playhouse and R4 Technology.

He received his

degree from St.

Joseph’s University in Philadelphia.

Qualifications:

Cugine’s career in sales, marketing, operations and supply chain spans more than 25 years.

He has extensive industry contacts

and proven experience leading and advising numerous successful food distribution companies.

Ortiz-Cochet was appointed as director of the Company on December 16, 2016.

She is the Chief Investment Officer for Unibel, parent

company of Bel Group.

Bel is an international France-based group, a world leader in branded cheese business and fruit pouches, with brands

such as Laughing Cow, Mini-Babybel, Boursin or GoGo Squeez.

In that position since January 2016, Ms.

Ortiz-Cochet drives Unibel diversification

strategy, and leads the investment portfolio development.

She was previously VP Strategic Development at Bel Group Form September 2013

to December 2015.

From 2007 to 2013, based out of Bel’s New York office, Ms.

Ortiz-Cochet led the development of long term strategies

in North and South America, as well as Marketing strategy in the region.

Prior to that position, she held a number of leadership positions

in marketing and global strategy at Bel out of the Paris office, at French, European and corporate levels.

Isabelle began her career

with Kimberly Clark in France.

Isabelle earned a master’s degree from ESSEC Business School in France, and an executive MBA from

HEC Business School, France .

to the investor rights agreement between Barfresh and Unibel dated November 23, 2016, Unibel is entitled to appoint one director to the

board of directors of Barfresh, which director is entitled to sit on each committee of the board of directors selected by the Unibel,

unless Unibel has beneficial ownership of less than:

(i) 75.0% of its Shares;

and (ii) 5.0% of the company’s issued and outstanding

common stock.

Unibel has designated Isabelle Ortiz-Cochet as its board designee.

Barfresh has agreed to call shareholder meetings whenever

necessary to ensure Unibel’s designee is elected as a director.

At any time that Unibel’s designee is not a director, Unibel’s

designee will be entitled to be a board observer.

Riccardo Delle Coste, Steven Lang and their respective affiliates have agreed to vote

their shares in favor of Unibel’s designee.

Ware was appointed as director of the company on July 13, 2016.

Currently, Mr.

Ware serves as advisor to Foodsby, Inc.

From September 2018 to December 2021, Mr.

Ware served as President of Foodsby, Inc., a fast-growing meal ordering platform

for office buildings.

Previously, he served as Interim President, Executive Vice President and Chief Financial Officer of Buffalo Wild

Wings from October 2016 to 2018.

From 2012 through 2016, Mr.

Ware was Executive Chairman of MStar Holding Corporation (MicroStar), and

had served as Interim Chief Executive Officer in 2013.

Prior to MicroStar, he served as a Senior Advisor and previously as Executive

Vice President of Strategic Development of Pohlad Companies, a family office, from 2010 to 2015.

Starting in 1994, he served in increasing

capacities at PepsiCo, then PepsiAmericas, Inc.

culminating as Executive Vice President and Chief Financial Officer from 2005 to 2010.

Previously, he was a Senior Associate at Booz Allen Hamilton, Inc.

from 1990 to 1994.

Ware received his Bachelor of Arts degree in

Economics from Hampden-Sydney College and his Master of Business Administration from the Darden Graduate School of Business at University

In addition to Barfresh, Mr.

Ware currently serves on the board of MStar Holding Corporation and on the advisory board of

Stonearch Capital.

Qualifications :

Ware has specific and relevant industry experience in the production and marketing of beverages as well as the operations and management

of restaurants.

In addition, Mr.

Ware has knowledge in the areas of strategic and financial planning, corporate development, personnel

management, resource allocation and distribution.

Borus was appointed as a Director of the Company on April 29, 2020.

Borus has approximately 20 years of capital markets expertise.

He has been the Chief Investment Officer of Ibex Investors, LLC, a firm focused on niche, differentiated strategies including microcap

companies for over 10 years.

Prior to joining Ibex, he worked in both the private equity and investment banking groups at Bear, Stearns

in New York and London.

Borus has served on the Board of Directors of several non-profits including the Anti-Defamation

League and Colorado Public Radio.

Qualifications:

Borus brings over 20 years of capital markets expertise.

are appointed for a one-year term to hold office until the next annual general meeting of shareholders or until removed from office in

accordance with our bylaws.

Our officers are appointed by our board of directors and hold office until the earlier of resignation or

use the definition of “independence” standards as defined in the NASDAQ Stock Market Rule 5605(a)(2) provides that an “independent

director” is a person other than an officer or employee of the Company or any other individual having a relationship, which, in

the opinion of the Company’s board of directors, would interfere with the exercise of independent judgment in carrying out the

responsibilities of a director.

We have determined that five of our seven directors are independent, which constitutes a majority.

currently have an audit committee, a compensation committee and a nominating and governance committee.

The members of the audit committee

are Arnold Tinter, Steven Lang and Alexander Ware.

The audit committee is primarily responsible for reviewing the services performed

by our independent auditors and evaluating our accounting policies and our system of internal controls.

Steven Lang, Arnold Tinter, and

Alexander Ware are independent members of the audit committee, as defined below.

The members of the compensation committee are Arnold

Tinter and Justin Borus.

The compensation committee is primarily responsible for reviewing and approving our salary and benefits policies

(including stock options) and other compensation of our executive officers.

The members of the nominating committee are Arnold Tinter,

Steven Lang, and Isabelle Ortiz-Cochet.

The nominating and governance committee is primarily responsible for overseeing corporate governance

and for identifying, evaluating and recommending individuals to serve as directors of the Company.

the best of our knowledge, none of our executive officers or directors are parties to any material proceedings adverse to the Company,

have any material interest adverse to the Company or have been subject to legal, administrative or judicial orders, proceedings or decrees

required to be disclosed.

Chief Executive Officer and our Chief Financial Officer are bound by a Code of Ethics that complies with Item 406 of Regulation S-K of

the Exchange Act.

16(a) Beneficial Ownership Reporting Compliance

16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) requires our directors and executive officers

and beneficial holders of more than 10% of our common stock to file with the SEC initial reports of ownership and reports of changes

in ownership of our equity securities.

our knowledge, based solely upon a review of Forms 3 and 4 and amendments thereto furnished to Barfresh under 17 CFR 240.16a-3(e) during

our most recent fiscal year and Forms 5 and amendments thereto furnished to Barfresh with respect to our most recent fiscal year, we

believe that during the fiscal year ended December 31, 2021 our directors, executive officers and persons who own more than 10% of our

common stock complied with all Section 16(a) filing requirements with the exception of the following:

Riccardo Delle Coste, late filing of Form 4

Cugine, late filing of Form 4

Ortiz-Cochet, late filing of Form 4

Ware, late filing of Form 4

Lang, late filing of Form 4

late filing of Form 4

late filing reported one transaction unless otherwise indicated.

None of our officers or directors submitted Form 5 filings.

required by this Item regarding our directors and executive officers, corporate governance, including our audit committee and code of

ethics, and compliance with Section 16(a) of the Exchange Act is incorporated by reference to our proxy statement to be filed with the

SEC in connection with our 2023 Annual Meeting of Stockholders (the “Proxy Statement”).

Executive Compensation.

following table sets forth information about the remuneration of our principal executive officer for services rendered during our fiscal

years ended December 31, 2021 and 2020, and our other executive officers that had total compensation of $100,000 or more for our last

completed full fiscal year (the “Named Officers”).

Certain tables and columns have been omitted as no information was required

to be disclosed under those tables or columns.

COMPENSATION TABLE

and Principal Position

other compensation ($)

Executive Officer

Loussararian,

President Finance (5)

the salary earned in 2021, 397,031 was paid and none was deferred.

In 2020, $213,648 was paid and $136,352 was

Represents a stock option grant of 19,233 option shares

issued 4/27/21 with an exercise price of $5.72, which vests in equal increments on each of the first, second and third anniversaries

of the grant date.

a stock option grant of 19,231 option shares issued 04/27/2020 with an exercise price of $4.94, which vests in equal increments on

each of the first, second and third anniversaries of the date of grant.

the car allowance paid to Mr.

Loussararian served as Vice President Finance from July 29, 2019 to January 6, 2021.

a stock option grant of 11,539 shares issued 01/06/2020 with an exercise price of $4.81, which vests 3 years after the date of grant

(cliff vesting).

April 27, 2015, Smoothie, Inc.

entered into an executive employment agreement with Riccardo Delle Coste, its Chief Executive Officer

and director.

Delle Coste is also the Chief Executive Officer and Chairman of the Company.

Pursuant to the employment agreement,

he receives a base salary of $350,000 and performance bonuses of 75% of his base salary based on mutually agreed upon performance targets.

In addition, Mr.

Delle Coste receives up to an additional 38,462 performance options, on an annual basis.

All options granted under the

employment agreement are subject to the Company’s 2015 Equity Incentive Plan.

Company entered into an executive employment agreement with Raffi Loussararian on July 29, 2019, to which he agreed to serve as Vice

President, Finance.

Pursuant to the employment agreement, Mr.

Loussararian received a base salary of $175,000 and performance bonuses

of 25% of his base salary, based upon performance targets determined by the Board of Directors.

In addition, Mr.

Loussararian was granted

3-year options to purchase up to 11,539 shares of common stock of Barfresh.

The option grant was to vest ratably on each anniversary

of the date of commencement of Mr.

Loussararian’s employment.

All options granted under the employment agreement are subject to

the Company’s 2015 Equity Incentive Plan.

Loussararian left the Company in January 2021, thereby terminating his options.

following table sets forth information with respect to outstanding equity awards for the Named Officers:

EQUITY AWARDS AT FISCAL YEAR-END

Option Awards

Number of securities underlying unexercised options (#) exercisable

Number of securities underlying unexercised options (#) unexercisable

Option expiration

Riccardo Delle Coste

ratably in equal increments on the first, second and third anniversary of the date of grant of the option.

following table summarizes the compensation paid to our directors that were not employees for the fiscal year ended December 31, 2021.

A director who is a Company employee does not receive any compensation for service as a director.

The compensation received by directors

that are employees of the Company is shown above in the summary compensation table.

We reimburse all directors for expenses incurred

in their capacity as directors.

Fees earned or paid in

Stock awards ($)

Option awards ($)

Arnold Tinter

Isabelle Ortiz-Cochet

Joseph Cugine

required by this Item regarding executive compensation is incorporated by reference to our Proxy Statement.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Ownership of Certain Beneficial Owners and Management

following table sets forth certain information regarding our shares of common stock beneficially owned as of March 3, 2022, for (i) each

shareholder known to be the beneficial owner of 5% or more of our outstanding shares of common stock, (ii) each named executive officer

and director, and (iii) all executive officers and directors as a group.

A person is considered to beneficially own any shares:

which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the

right to acquire beneficial ownership at any time within 60 days through an exercise of stock options or warrants or otherwise.

otherwise indicated, voting and investment power relating to the shares shown in the table for our directors and executive officers is

exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children.

purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock

that such person has the right to acquire within 60 days of March 3, 2022.

As of March 3, 2022, the Company had 12,917,246 shares of

common stock outstanding.

For purposes of computing the percentage of outstanding shares of our common stock held by each person or group

of persons named above, any shares that such person or persons has the right to acquire within 60 days of March 31, 2022 is deemed to

be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.

The inclusion

herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.

Name and address of beneficial owner (1)

Amount and nature

of beneficial

Riccardo Delle Coste (2) (3) (4) (5)

Justin Borus (6) (7) (8)

Steven Lang (9) (10) (11) (12)

Joe Cugine (13) (14) (15)

Arnold Tinter (16)

Alexander Ware (17) (18)

Isabelle Ortiz-Cochet

2 Allee De Longchamp Suresnes, France (19) (20)

Lisa Roger (21)

All directors and officers as a group (8 persons)

Unibel, 2 Allee De Longchamp Suresnes, France 92150 (22)

IBEX Investors LLC

260 N Josephine Street, Suite 300, Denver, CO 80206 (23)

Bleichroeder LP

1345 Avenue of the Americas, 47th Floor, New York, NY 10105 (24)

Brian L Pessin;

Sandra F Pessin

370 Lexington Ave, Suite 704, New York, NY 10017

address of those listed, except as noted is c/o Barfresh Food Group Inc., 3600 Wilshire Blvd., Suite 1720 Los Angeles CA 90010.

Delle Coste is the Chief Executive Officer, President and a Director of the Company.

1,501,880 shares owned by R.D.

Capital Holdings PTY Ltd.

and of which Riccardo Delle Coste is deemed to be a beneficial owner.

137,824 shares issuable under exercisable options granted.

6,223 shares underlying warrants issued in connection with promissory notes the holder of which is Riccardo Delle Coste or R.D.

Holdings PTY Ltd.

and of which Riccardo Delle Coste is deemed to be a beneficial owner and 56,280 shares underlying warrants issued

in connection with deferred compensation.

Borus is a Director of the Company.

1,110,982 shares owned by Ibex Microcap Fund LLLP, of which Justin Borus is the manager of the investment manager and general partner,

respectively, and deemed to be a beneficial owner.

138,462 shares underlying warrants issued to Ibex Microcap Fund LLLP in connection with the purchase of common stock.

Lang is a Director of the Company.

1,471,323 shares owned by Sidra Pty Limited and 43,852 shares by Hodumo Pty Ltd of which Steven Lang is deemed to be a beneficial

35,098 shares underlying options granted.

37,331 shares underlying warrants issued in connection with promissory notes the holder of which is Hodumo Pty Limited, of which

Steven Lang is deemed to be a beneficial owner.

Cugine is a Director of the Company.

116,017 shares issuable under exercisable options granted.

27,944 shares underlying warrants issued in connection with purchase of common shares.

Tinter is the Secretary and a Director of the Company.

Ware is a Director of the Company.

57,959 shares owned by The Alexander Ware Revocable Trust of which Mr.

Ware is deemed to be a beneficial owner.

Ortiz-Cochet is a Director of the Company

53,356 shares underlying options granted.

Roger is the Chief Financial Officer of the Company.

137,613 shares underlying warrants issued in connection with the conversion of a promissory note.

138,462 shares underlying warrants issued in connection with the purchase of common stock

LP is deemed to be the beneficial owner of these shares as a result of acting as investment adviser to various clients.

Bleichroeder have the right to receive and the ultimate power to direct the receipt of dividends from, or the proceeds of the sale

of, such securities.

Information required by this Item regarding executive compensation is incorporated by reference to our Proxy Statement.

Information required by this item regarding securities authorized for issuance

under our equity compensation plans is incorporated by reference to the information set forth under the caption “Executive Compensation”

in our Proxy Statement.

Certain Relationships and Related Transactions, and Director Independence.

Relationships and Related Transactions

following includes a summary of transactions since the beginning of fiscal 2021 or any currently proposed transaction, in which we were

or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total

assets at year-end for the last two completed fiscal years and in which any related person had or will have a direct or indirect material

interest (other than compensation described under “Executive Compensation”).

We believe the terms obtained or consideration

that we paid or received, as applicable, in connection with the transactions described below were comparable to or better than terms

available or the amounts that would be paid or received, as applicable, in arm’s-length transactions.

Company’s policy with regard to related party transactions requires any related party loans that are (i) non-interest bearing and

in excess of $100,000 or (ii) interest bearing, irrespective of amount, must be approved by the Company’s board of directors.

issuances of securities by the Company must be approved by the board of directors, irrespective of whether the recipient is a related

Each of the foregoing transactions, if required by its terms, was approved in this manner.

use the definition of “independence” standards as defined in the NASDAQ Stock Market Rule 5605(a)(2) provides that an “independent

director” is a person other than an officer or employee of the company or any other individual having a relationship, which, in

the opinion of the Company’s board of directors, would interfere with the exercise of independent judgment in carrying out the

responsibilities of a director.

We have determined as of December 31, 2021 that five of our seven directors are independent, which constitutes

required by this Item regarding executive compensation is incorporated by reference to our Proxy Statement.

Principal Accounting Fees and Services.

fees for professional services rendered to the Company by Eide Bailly LLP for the years ended December 31, 2021 and December 31, 2020

were as follows.

Audit related fees

All other fees

defined by the SEC, (i) “audit fees” are fees for professional services rendered by our principal accountant for the audit

of our annual financial statements and review of financial statements included in our Form 10-K, or for services that are normally provided

by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years;

(ii) “audit-related

fees” are fees for assurance and related services by our principal accountant that are reasonably related to the performance of

the audit or review of our financial statements and are not reported under “audit fees;” (iii) “tax fees” are

fees for professional services rendered by our principal accountant for tax compliance, tax advice, and tax planning;

and (iv) “all

other fees” are fees for products and services provided by our principal accountant, other than the services reported under “audit

fees,” “audit-related fees,” and “tax fees.”

The aggregate fees billed for the years ended December 31, 2021 and 2020 were for the audits of our financial statements and

reviews of our interim financial statements included in our annual and quarterly reports.

Related Fees.

Eide Bailly LLP did not provide us with audit related services for the years ended December 31, 2021 or December 31,

2020, that are not reported under Audit Fees.

The aggregate tax fees billed for the years end December 31, 2021 and 2020 related to the preparation of corporate income tax

Eide Bailly LLP did not provide us with professional services related to “Other Fees” for the years ended

December 31, 2021 or December 31, 2020.

Committee Pre-Approval Policies and Procedures

the SEC’s rules, an audit committee is required to pre-approve the audit and non-audit services performed by the independent registered

public accounting firm in order to ensure that they do not impair the auditors’ independence.

The SEC’s rules specify the

types of non-audit services that an independent auditor may not provide to its audit client and establish the audit committee’s

responsibility for administration of the engagement of the independent registered public accounting firm.

The Company has established

an Audit Committee.

Accordingly, audit services and non-audit services described in this Item 14 were pre-approved by an Audit Committee.

were no hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most

recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent

required by this Item regarding executive compensation is incorporated by reference to our Proxy Statement.

Exhibits and Financial Statements.

23 unchanged sentences

Financial Officer)

Arnold Tinter

Isabelle Ortiz-Cochet

/s/ Alexander

Certificate of Incorporation of Moving Box Inc.

9 unchanged sentences

dated December 17, 2021 (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K as filed December 29, 2021)

Certificate of Amendment of Certificate of Incorporation of Barfresh Food Group Inc.

dated August 1, 2022 (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K as filed August 2, 2022)

Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934, as amended (incorporated by reference to Exhibit 4.20 to Annual Report on Form 10-K for the year ended December 31, 2019, as filed April 13, 2020)

7 unchanged sentences

Subsidiaries (incorporated by reference to Exhibit 21.1 to Annual Report on Form 10-K for the year ended December 31, 2019, filed April 13 2020)

Consent of Independent Registered Public Accounting Firm

Rule 13a-14(a) Certification of Principal Executive Officer*

11 unchanged sentences

to Consolidated Financial Statements

of Independent Registered Public Accounting Firm (Eide Bailly LLP, Denver, Colorado, PCAOB ID 286 )

Report of Independent Registered Public Accounting Firm (Eide Bailly LLP, Denver, Colorado, PCAOB ID 286 )

Consolidated Balance Sheets as of December 31, 2022 and 2021

47 unchanged sentences

matters below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

and Equity Transactions

discussed in Notes 7, 8 and 10 to the consolidated financial statements, the Company has entered into debt and equity agreements which

include stock-based compensation, debt modification and derivative liabilities.

These agreements include transactions, including the

issuance of stock options, that are required to be recorded at estimated fair value.

These transactions resulted in recording of stock-based

compensation expense of $91,959 and a loss on debt extinguishment of $193,562 for the year ended December 31, 2021, and the valuation

of a derivative liability of $25,170 as of May 26, 2021.

Company’s determination of the estimated fair values involves the identification of related financial instruments and a clear understanding

of the terms of the agreements.

Auditing management’s estimates of fair value requires a high degree of auditor judgment and an

increased extent of effort, including the need to carefully examine to understand the true nature of the related agreements.

audit procedures related to determination of the estimated fair values of these debt and equity transactions included the following,

among others:

obtained an understanding of management’s process and methodology to develop the estimates.

obtained an understanding of the internal controls relating to the methodology, reliability

and accuracy of the information used in the calculation and management’s review and

approval for the transactions.

examined signed contracts and amendments.

evaluated the reasonableness of the inputs and assumptions used by management in developing

the estimates.

evaluated the adequacy of the disclosures related to these fair value measurements.

Estimated Product Return Allowance

As discussed in Note 1 to the consolidated

financial statements, in 2022 the Company experienced product quality issues stemming from a single co-manufacturer, resulting in customer complaints and product

The Company has an estimated product return allowance of $330,000 and total product returns reducing revenue of $493,000,

as of and for the year ended December 31, 2022.

The determination of the estimated product return allowance requires management to

make significant estimates and assumptions related to estimating product returns that will occur in 2023 relating to 2022 product

We identified the estimated

product return allowance as a critical audit matter.

Auditing the judgments and assumptions involves especially challenging auditor judgment

due to the nature and extent of audit evidence and effort required to address these matters.

The primary procedures we performed to address this critical audit matter

· We obtained an understanding of management’s process and methodology to develop the estimates.

· We obtained an understanding of the internal controls relating to the methodology, reliability and accuracy

of the information used in the calculation and management’s review and approval for the transactions.

· We examined communications with distributors.

· We tested product returns in 2022.

· We evaluated the completeness and accuracy of the information provided and reasonableness of the

inputs and assumptions used by management in developing the estimate.

· We evaluated the adequacy of the disclosures related to the estimate.

Eide Bailly LLP

1 unchanged sentence

Food Group Inc.

Balance Sheets

31, 2021 and 2020

Consolidated Balance Sheets

Current assets:

Restricted cash

Accounts receivable, net

Trade accounts receivable, net

Other receivables

Inventory, net

7 unchanged sentences

Accounts payable

Disputed co-manufacturer accounts payable (Notes 1, 9)

Accrued expenses

Advance payment

Accrued payroll and employee related

Accrued interest

Lease liability

Loan payable - Paycheck Protection Program

Convertible note, net of discount

Derivative liabilities

Total current liabilities

1 unchanged sentence

Accrued interest

Lease liability

Loan payable - Paycheck Protection Program

Convertible note - related party, net of discount

Convertible note, net of discount

Lease liability, net of current portion

Total liabilities

2 unchanged sentences

Preferred stock, $ 0.000001 par value, 400,000 shares authorized, none issued or outstanding

Common stock, $ 0.000001

Common stock, $ 0.000001 par value;

23,000,000 shares authorized;

12,905,112 and 11,471,797

shares issued and outstanding at December 31, 2021 and 2020, respectively

12,934,741 and 12,905,112 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively

Additional paid in capital

5 unchanged sentences

the accompanying notes to the consolidated financial statements

Food Group Inc.

Statements of Operations

the years ended December 31, 2021 and 2020

Barfresh Food Group Inc.

Consolidated Statements of Operations

For the years ended December 31, 2022 and 2021

Cost of revenue

Depreciation of manufacturing equipment

Operating expenses:

Selling, marketing and distribution

General and administrative

Depreciation and amortization

Impairment of long-lived assets

Total operating expenses

6 unchanged sentences

( 1,136,000 )

Loss (gain) on debt extinguishment

Loss on debt extinguishment

Total other income

4 unchanged sentences

Net loss per share

the accompanying notes to the consolidated financial statements.

See the accompanying notes

to the consolidated financial statements

Food Group Inc.

of Stockholders’ Equity

Statements of Stockholders’ Equity

the years ended December 31, 2022 and 2021

Balance January 1, 2020

Balance December 31, 2020

$ ( 50,900,000 )

Issuance of stock for capital raise, net of offering costs of $ 27,200

Conversion of debt

Issuance of stock for capital raise

Conversion of debt and accrued interest

Interest paid in shares

Issuance of stock for services

Issuance of stock and options for services

Equity based compensation

Warrants issued to management

Warrant modification

Warrant issued for note extension

Restricted stock issuance

Net (loss) for the year

( 1,265,000 )

2 unchanged sentences

( 52,165,000 )

Issuance of stock for capital raise

Conversion of debt and accrued interest

Interest paid in shares

Issuance of stock for services

Shares issued for warrant exercise

Equity based compensation

Net (loss) for the year

Issuance of stock and options for services

( 6,219,000 )

3 unchanged sentences

the accompanying notes to the consolidated financial statements.

Food Group Inc.

Barfresh Food Group Inc.

Consolidated Statements of Cash Flows

the years ended December 31, 2021 and 2020

For the years ended December 31 2022 and 2021

$ ( 6,219,000 )

1 unchanged sentence

Adjustments to reconcile net loss to net cash used in operating activities

Asset impairment

Depreciation and amortization

Interest expense related to debt discount

Stock-based compensation

Stock and options issued for services

Loss on debt extinguishment

Interest expense related to debt discount

Gain on debt extinguishment - Paycheck Protection Program

1 unchanged sentence

Gain on derivative

Loss (gain) on debt extinguishment

Changes in assets and liabilities

Accounts receivable

Other receivables

Prepaid expenses and other assets

Accounts payable

Disputed accounts payable

Accrued expenses

8 unchanged sentences

Financing activities

Cash received for stock, net of offering costs

Proceeds from issuance of stock

Proceeds from note payable

Repayment of convertible notes

Debt issuance costs

Net cash from financing activities

Net change in cash and restricted cash

( 2,656,000 )

Cash and restricted cash, beginning of year

Cash and restricted cash, end of year

the accompanying notes to the condensed consolidated financial statements.

the accompanying notes to the consolidated financial statements.

food Group Inc.

3 unchanged sentences

25, 2010 in the State of Delaware.

We are engaged in the manufacturing and distribution of ready-to-drink and ready-to-blend beverages,

particularly, smoothies, shakes and frappes.

The Company is engaged in the manufacturing and distribution of ready-to-drink and ready-to-blend

beverages, particularly, smoothies, shakes and frappes.

Business Developments

Company’s products are produced to its specifications through several contract manufacturers.

One of the Company’s contract

manufacturers (the “Manufacturer”) has provided approximately 52 % and 42 % of the Company’s products in the years ended

December 31, 2022 and 2021, respectively, under a Supply Agreement with an initial term through September 2025.

the course of 2022, the Company experienced numerous quality issues with the case packaging utilized by the Manufacturer.

addition, in July of 2022, the Company began receiving customer complaints about the texture of the Company’s smoothie

products produced by the Manufacturer.

In response, the Company withdrew product from the market and destroyed on-hand inventory,

withholding $ 499,000

in payments due to the Manufacturer.

The results reflect the estimated accounting impact of such actions, including an estimated

product return allowance of $ 330,000

and total product returns reducing revenue by $ 493,000

as of and for the year ended December 31, 2022, and $ 932,000

in cost of revenue to dispose of unsaleable inventory.

Company attempted to resolve the issues based on the contractual procedures described in the Supply Agreement.

However, on November 4,

2022, in response to a formal proposal of alternate resolutions, the Company received notification from the Manufacturer that it was

denying any responsibility for the defective manufacture of the product.

In response, on November 10, 2022, the Company filed a complaint

in the United States District Court for the Central District of California, Western Division (the “Complaint”), claiming

that the Manufacturer has not met its obligations under the Supply Agreement, and seeking economic damages.

In response, the Manufacturer

terminated the Supply Agreement.

On January 20, 2023, the Company filed a voluntary dismissal of the Complaint which allows the parties

to reach a potential resolution outside of the court system.

However, if the parties are once again unable to come to an agreement, the

Company has the right to refile the Complaint in California State Court.

to the uncertainties surrounding the claim, the Company is not able to predict either the outcome or a range of reasonably possible recoveries

that could result from its actions against the Manufacturer, and no gain contingencies have been recorded.

The disruption in its supply

resulting from the dispute will adversely impact its results of operations and cash flow until a suitable resolution is reached or new

sources of reliable supply at sufficient volume can be identified and developed, the timing of which is uncertain.

of Presentation

1 unchanged sentence

United States of America (“GAAP”).

Certain reclassifications have been made to the 2020 consolidated statement of cash flows

to conform to the 2021 presentation.

December 29, 2021, the Company amended its certificate of incorporation to implement a 1-for-13 reverse stock split of its issued and

outstanding shares of common stock.

All the share numbers, share prices, exercise prices and other per share information throughout these

financial statements have been adjusted, on a retroactive basis, to reflect the 1-for-13 reverse stock split.

of Consolidation

12 unchanged sentences

we believe that cash on deposit that exceeds $ 250,000 in the financial institutions is financially sound and the risk of loss is minimal.

both December 31, 2021 and 2020, the Company had $ 142,382 in restricted cash related to our co-packing agreement.

food Group Inc.

to Consolidated Financial Statements

following customers accounted for 10% or more of the Company’s accounts receivable balance at December 31:

of Concentration of Credit Risk for Accounts Receivable

December 31, 2022 and 2021, the Company had $ 211,000 and $ 142,000 , respectively, in restricted cash related to a contract manufacturing

Value Measurement

7 unchanged sentences

1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

The types of assets and

liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the

New York Stock Exchange.

The types of assets

and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on

the New York Stock Exchange.

2 – Pricing inputs are other than quoted prices in active markets but are either directly or indirectly observable as of the reported

2 unchanged sentences

3 – Significant inputs to pricing that are unobservable as of the reporting date.

The types of assets and liabilities included in Level

3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts

The types of assets and liabilities included

in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts

used to determine the fair value of financial transmission rights.

financial instruments consist of cash, accounts receivable, accounts payable, advanced payments, derivative liabilities, convertible

notes, restricted cash, and Paycheck Protection Plan (“PPP”) loan payable.

The carrying value of our financial instruments

approximates their fair value, except for the derivative liability in which carrying value is fair value.

receivable are typically unsecured.

financial instruments consist of cash, restricted cash, accounts receivable and accounts payable.

The carrying value of our financial

instruments approximates their fair value.

receivable from customers are typically unsecured.

The Company’s credit policy calls for payment generally within 30 days.

The credit worthiness

of a customer is evaluated prior to a sale.

As of December 31, 2021, and 2020, the Company’s allowance for doubtful accounts

was $ 121,230

and $ 133,424

respectively.

There was ($ 7,000 )

of bad debt recoveries recorded for the year

ended December 31, 2021, and $ 133,424 of

bad debt expense for the year ended December 31, 2020.

The allowance was applied to certain receivable accounts which are over 95 days.

credit worthiness of a customer is evaluated prior to a sale.

Accounts receivable totaled $ 126,000 , $ 1,223,000 and $ 425,000 as of

December 31, 2022, 2021 and 2020, respectively.

allowance for doubtful accounts as of December 31, 2022.

As of December 31, 2021, the Company’s allowance for doubtful

accounts was $ 121,000 .

There was no bad debt

expense for the year ended December 31, 2022, and ($ 7,000 )

of bad debt recoveries recorded for the year ended December 31, 2021.

The allowance was applied to certain receivable accounts which

are over 95 days.

consists of finished goods and is carried at the lower of cost or net realizable value on a first in first out basis.

monitors the remaining useful life of its inventory and establishes a reserve of obsolescence where appropriate.

The Company monitors

the remaining useful life of its inventory and establishes a reserve of obsolescence where appropriate.

assets are comprised of patents, net of amortization and trademarks.

1 unchanged sentence

which is twenty years from the date of filing the patent application.

In accordance with ASC Topic 350 Intangibles - Goodwill and

Other (“ASC 350”), the costs of internally developing other intangible assets, such as patents, are expensed as incurred.

In accordance with ASC Topic 350 Intangibles – Goodwill

and Other (“ASC 350”), the costs of internally developing other intangible assets, such as patents, are expensed as incurred.

However, as allowed by ASC 350, costs associated with the acquisition of patents from third parties, legal fees and similar costs relating

13 unchanged sentences

to fair value.

We have not recorded any impairment charges during the years presented.

food Group Inc.

to Consolidated Financial Statements

We recorded impairment charges of $ 746,000 related to idle equipment resulting from overcapacity for single-serve products

and equipment that is held at the Manufacturer in 2022.

There was no impairment in 2021.

Plant, and Equipment

5 unchanged sentences

estimated useful lives used for financial statement purposes are:

of Estimated Useful Lives of Assets

and fixtures:

Summary of Estimated Useful Lives of Assets

Manufacturing

16 unchanged sentences

and is generally stated on the approved sales order.

Variable consideration, which typically includes volume-based rebates or discounts,

are estimated utilizing the most likely amount method.

Variable consideration, which typically includes rebates or discounts, are estimated

utilizing the most likely amount method.

Provisions for refunds are generally provided for in the period the related sales are recorded, based on management’s

assessment of historical and projected trends.

the transaction price to performance obligations in the contract

our contracts contain a single performance obligation, delivery of frozen beverages, the transaction price is allocated to that single

performance obligation.

the Company’s contracts contain a single performance obligation, delivery of frozen beverages, the transaction price is allocated

to that single performance obligation.

revenue when or as the Company satisfies a performance obligation

3 unchanged sentences

discounts are treated as a reduction of sales at the time the sale is recognized.

Shipping and handling costs are treated as fulfillment

Shipping and handling costs are treated as fulfilment

costs and presented in distribution, selling and administrative costs.

2 unchanged sentences

product, frozen beverages.

food Group Inc.

to Consolidated Financial Statements

and Development

for research activities relating to product development and improvement are charged to expense as incurred.

We incurred $ 244,609 and

$ 515,145 , in research and development expenses for the years ended December 31, 2021 and 2020, respectively.

and Storage Costs

and Storage costs are included in general and administrative expenses.

For the years ended December 31, 2021 and 2020, shipping

and handling costs totaled $ 1,054,182

and $ 488,465 ,

respectively.

The Company incurred $ 382,000

and $ 245,000 , in research and development expenses for the years ended December 31, 2022 and 2021, respectively.

and Shipping Costs

and outbound freight costs are included in selling, marketing and distribution expense.

For the years ended December 31, 2022 and 2021,

storage and outbound freight amounted to $ 1,467,000 and $ 1,054,000 , respectively.

determine if an arrangement is a lease upon inception.

4 unchanged sentences

the asset is used.

After adoption of ASU 2016-02 and related standards, operating lease right-of-use assets and liabilities are recognized

Operating lease right-of-use assets and liabilities are recognized

at commencement date based on the present value of lease payments over the lease term.

45 unchanged sentences

or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.

food Group Inc.

to Consolidated Financial Statements

The Company’s derivative instruments were settled in 2021, and there

were no outstanding derivatives as of December 31, 2021 or 2022.

calculate net loss per share in accordance with ASC Topic 260, Earnings per Share .

9 unchanged sentences

extinguished.

Accordingly, the Company recorded a net loss of $ 193,562

and net gain of $ 379,200 ,

respectively, non-cash gain/loss on extinguishment of debt in its statements of operations for the years ended December 31, 2021

and 2020, respectively.

Accordingly, the Company recorded a net loss of $ 194,000 on extinguishment of debt in its statement of operations for the

year ended December 31, 2021.

There were no debt extinguishments in the year ended December 31, 2022.

Based Compensation

calculate stock compensation in accordance with ASC Topic 718, Compensation-Stock Based Compensation (“ASC 718”).

Company calculates stock compensation in accordance with ASC Topic 718, Compensation-Stock Based Compensation (“ASC 718”).

ASC 718 requires that the cost resulting from all share-based payment transactions be recognized in the financial statements and establishes

1 unchanged sentence

measurement method in accounting for share-based payment transactions with employees.

Reclassifications

reclassifications have been made to the 2021 financial statements to conform to the 2022 presentation, namely the presentation of selling

and marketing expense apart from general and administrative expense in the consolidated statement of operations.

pronouncements

6 unchanged sentences

Inventory, net

food Group Inc.

to Consolidated Financial Statements

Property Plant and Equipment

classes of property and equipment at December 31, 2021 and 2020 consist of the following:

classes of property and equipment consist of the following at December 31:

of Major Classes of Property and Equipment

Furniture and fixtures

Manufacturing equipment and customer equipment

Leasehold improvements

Manufacturing and customer equipment

Other property

Property and equipment, gross

accumulated depreciation

1 unchanged sentence

( 2,894,000 )

Property and equipment

Equipment not yet placed in service

Property and equipment, net of depreciation

recorded depreciation expense related to these assets of $ 557,306 and $ 529,385 for the years ended December 31, 2021 and 2020, respectively.

Depreciation expense in cost of goods sold was $ 17,673 and $ 18,938 for the years ended December 31, 2021 and 2020 respectively.

recorded depreciation expense related to these assets of $ 467,000

and $ 557,000

for the years ended December 31, 2022 and 2021, respectively.

Depreciation expense in cost of revenue was $ 29,000

for the years ended December 31, 2022 and 2021 respectively.

Intangible Assets

of December 31, 2021, intangible assets consist of patent costs of $ 768,138 ,

trademarks of $ 124,395 and

accumulated amortization of $ 522,255 .

of December 31, 2020, intangible assets consist of patent costs of $ 768,138 , trademarks of $ 119,911 and accumulated amortization of $ 457,833 .

assets consist of the following at December 31:

Schedule of Intangible Assets

Patent costs, subject to amortization

accumulated amortization

Patent costs, net

Trademarks, not subject to amortization

amounts carried on the balance sheet represent cost to acquire, legal fees and similar costs relating to the patents incurred by the

1 unchanged sentence

The amount charged to expenses for amortization of the

patent costs was $ 64,422 and $ 63,813 for the years ended December 31, 2021 and 2020, respectively.

patent costs was $ 64,000 for each of the years ended December 31, 2022 and 2021, respectively.

future amortization expense related to patents as of December 31, 2022, is as follows:

of Estimated Future Amortization Expense Related to Intangible Property

Total Amortization

Years ending December 31,

asset, net of amortization

Intangible asset, net of amortization

Related Parties

of management and directors invested in the Company’s convertible notes (Note 7).

Additionally, members of management and directors

have received shares of stock and options in exchange for services (Note 10).

food Group Inc.

to Consolidated Financial Statements

Paycheck Protection Program (PPP) Loan

11 unchanged sentences

2018, the Company issued Milestone I and Milestone II Convertible Notes.

March 20, 2020, the Company obtained a 24-month extension on $ 1,071,000 in principal, and conversion of $ 720,000 of principal of the

Milestone I Convertible Notes at a conversion price of $ 6.50 per share.

The remaining $ 110,166 was extended for thirty days.

rate on the principal balance of the extended Milestone I Convertible Notes was amended to 15 %.

Furthermore, the Company obtained a 12-month

extension on $ 168,000 in principal, and conversion of $ 1,128,000 in principal of the Milestone II Convertible Notes.

The Convertible

Noteholders of the Milestone I and II Convertible Notes were granted additional interest depending upon their election to convert or

extend their Convertible Notes.

The Company accounted for the modification in accordance with ASC 470-50, Modifications and Extinguishments

(“ASC 470-50”), which states that for all extinguishments of debt, the difference between the reacquisition price (including

any premium) and the net carrying amount of the debt being extinguished (including any deferred debt issuance costs) should be recognized

as a gain or loss when the debt is extinguished.

Accordingly, the Company recorded a net gain on extinguishment of debt of $ 379,200 which

was comprised of a gain of $ 437,201 related to notes that were converted to 366,925 shares of common stock and a loss of $ 58,001 related

to convertible notes that were extended by either 24 months for Milestone I Convertible Notes, or 12 months for Milestone II Convertible

the year ended December 31, 2021, the Company settled the remaining Milestone I Convertible Notes by issuing 89,173 shares of common

the year ended December 31, 2021, the Company settled all remaining Milestone I Convertible Notes by issuing 89,173 shares of common

stock in exchange for $ 231,000 ($ 30,000 related party) and $ 193,000 ($ 38,000 related party) in principal and interest, respectively,

and repaying $ 840,000 ($ 180,000 related party) in cash.

Additionally, the Company settled the remaining amounts due under Milestone II

Additionally, the Company settled all remaining amounts due under Milestone II

Convertible Notes by issuing 44,818 shares of common stock in exchange for $ 168,000 and $ 42,000 of principal and interest, respectively.

In accordance with ASC 470-50, the Company recorded a loss of $ 194,000 upon extinguishment of the Milestone I and Milestone II Convertible

note balances outstanding consisted of the following components:

of Convertible Notes

Convertible notes, net

current portion convertible notes, net

related party convertible notes, net

Long term convertible notes, net

Milestone I Convertible Notes, net of unamortized discount of $ 60,097 at December 31, 2020

Milestone II Convertible Notes, net of unamortized discount of $ 11,862 at December 31, 2020

Convertible notes, net

current portion convertible notes, net

related party convertible notes, net

Long term convertible notes, net

food Group Inc.

to Consolidated Financial Statements

Derivative Liabilities

3 unchanged sentences

value of the derivative resulting from the variable conversion provisions each reporting period.

The fair value was reported as a derivative

liability in the accompanying consolidated balance sheets and the change in value was recorded as a gain or loss in the accompanying

consolidated statements of operations.

The change in fair value was recorded

in the accompanying consolidated statements of operations.

May 26, 2021, the Milestone II Convertible Notes were settled.

2 unchanged sentences

fair value of the derivative liabilities for Milestone II Convertible Notes was calculated using the Black-Scholes model using the following

of Fair Value of the Derivative Liability

of Fair Value of Derivative Liability

Expected life

1 unchanged sentence

Risk free interest rate

Dividend yield (on common stock)

Dividend yield

following table provides a reconciliation of the beginning and ending balances for the Company’s derivative liabilities measured

1 unchanged sentence

of Derivative Liability Measured at Fair Value on a Recurring Basis

December 31, 2019

Initial derivative value - March 20, 2020

Extinguishment of derivative upon debt conversion and extension

Net gain from change in fair value

December 31, 2020

Fair value, December 31, 2020

Extinguishment of derivative upon debt settlement

Net gain from change in fair value

December 31, 2021

following table presents the Company’s fair value hierarchy for applicable assets and liabilities measured at fair value as of

December 31, 2021 and December 31, 2020:

of Fair Value Hierarchy of Assets and Liabilities

Derivative Liability December 31, 2021

Derivative Liability December 31, 2020

Fair value, December 31, 2021

Commitments and Contingencies

lease office space under a non-cancelable operating lease which expires on March

We incurred lease expense of $ 79,267

for the years ended December 31, 2021 and 2020,

respectively.

As of December 31, 2021, our right of use asset and related liability was $ 87,391

and $ 94,996 ,

respectively.

food Group Inc.

to Consolidated Financial Statements

Company leases office space under a non-cancelable operating lease which expires on March 31, 2023 .

The Company incurred lease expense

of $ 80,000 for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022, the right of use asset and related

liability were $ 18,000 and $ 20,000 , respectively.

determining the present value of our operating lease right-of-use asset and liability, we used a 10 % discount rate (which approximates

1 unchanged sentence

The remaining term on the lease is 0.25 years.

following table presents the future operating lease payment as of December 31, 2021:

of Estimate Future Maturities of Lease Liabilities

Total lease payments

Less:imputed interest

Total lease liability

The Company expects to extend the lease on a short-term basis.

described in Note 1, the Company has an on-going dispute with the Manufacturer, the outcome of which cannot be predicted at this time.

time to time, various lawsuits and legal proceedings may arise in the ordinary course of business.

5 unchanged sentences

Stockholders’ Equity

the year ended December 31, 2020, the Company completed a funding, including a Private Placement Offering for common shares priced at

$ 6.50 per share (subject to adjustment) in the amount of $ 3,825,000 and the issuance of 588,462 shares.

The investors of this Private

Placement Offering were granted 294,231 O warrants, exercisable for a period of 3 years at an exercise price of $ 7.80 per share (subject

to adjustment).

If the volume-weighted average trading price for the 20 consecutive trading days that conclude upon 6 months after the

initial closing (the “Six Month Price”) exceeds or equals $6.50 per share (the “Target Price”), the per share

purchase price will not be adjusted.

If the Six Month Price is less than the Target Price, the per share purchase price will be automatically

reduced to the Six Month Price, but in no event less than $4.55 per share, in which case the Company shall issue to each investor, pro-rata

based on such investor’s investment:

(a) shares in a quantity that equals the difference between the number of shares issued to

such purchaser at closing and the number of shares that would have been issued to such purchaser at closing at the Six Month Price;

(b) a warrant for 0.50 shares for each additional share issued, with an exercise price equal to the sum of $1.30 per share and the Six

Month Price, but in no event less than $5.85 per share.

On September 28, 2020, the Company issued 409,451 additional shares in accordance

with provisions of the Private Placement Offering and an additional 204,726 warrants exercisable at $ 5.85 per share.

2020, the Company issued 366,925 shares of common stock in exchange for convertible notes and 35,308 warrants to convertible noteholders

that extended the term of their convertible notes (Note 7).

2020, the Company, at its option, issued 50,358

shares of common stock to pay interest due

of $ 392,789 .

2020, the Company issued 20,966 shares of common stock, valued between $ 3.25 - $ 6.50 per share, for services rendered.

2020, the Company settled deferred executive compensation liabilities with the issuance of 121,076 warrants exercisable at $ 3.51 per

The fair value of the warrants totaled $ 251,837 , resulting in $ 83,945 of additional stock-based compensation.

June 1, 2021, the Company completed a private placement of 1,282,051 shares of its common stock at $ 4.68 per share, resulting in gross

2 unchanged sentences

in the amount of $ 840,000 was retired (Note 7).

food Group Inc.

to Consolidated Financial Statements

2021, the Company issued 17,273 shares of common stock, valued between $ 4.94 - $ 10.15 per share, for services rendered.

1 unchanged sentence

average $ 4.15 ) in exchange for services rendered.

2022, the Company issued 23,643 shares of common stock, valued between $ 5.00 - $ 5.16 per share, for services rendered.

Additionally,

5,000 fully vested shares of common stock were granted and issued for equity-based compensation at a value of $ 4.50 per share.

2022, the Company issued 986

shares of common stock due to the exercise of a warrant at an exercise price of $ 5.07 .

following is a summary of changes in warrants outstanding for the years ended December 31, 2022 and 2021:

of Changes in Warrants Outstanding

Number of warrants

Outstanding at December 31,2020

3 unchanged sentences

of Outstanding Warrants

issuance event

average exercise price

price per share

term in years

value at date of grant

placements of common stock

placement of notes

of deferred compensation

Warrant issuance event

Number of warrants

Exercise price

Private placements of common stock

$ 5.85 – 6.89

Private placement of notes

Settlement of deferred compensation

$ 3.51 - 9.10

Incentive Plan

3 unchanged sentences

stock, restricted stock units, performance shares and stock appreciation rights.

The Company has only issued options with no intrinsic

value through December 31, 2021, and issues new shares upon exercise of options.

As of December 31, 2021, there were 435,750 shares available

for the issuance of awards under the 2015 Plan.

food Group Inc.

to Consolidated Financial Statements

following summarizes activity related to stock options for the years ended December 31, 2021 and 2020:

of Stock Options Activity

Number of Options

Exercise price per share

Remaining term in years

Outstanding January 1, 2020

The Company has issued options with no intrinsic value,

stock awards and stock units through December 31, 2022, and issues new shares upon exercise of options or vesting of stock awards and

As of December 31, 2022, there were 354,000 shares available for the issuance of awards under the 2015 Plan.

has reserved approximately 30,000 shares for equity awards issued outside of the 2015 Plan.

total amount of equity-based compensation included in general and administrative expense in the accompanying consolidated statements

of operations was $ 386,000 and $ 92,000 for the years ended December 31, 2022 and 2021.

of December 31, 2022, the Company has $ 281,000 of total unrecognized share-based compensation expense related to unvested options, stock

awards and stock units, which is expected to be amortized over the remaining weighted average period of 1.9 years.

following is a summary of stock option activity:

Summary of Stock Options Activity

exercise price

term in years

Outstanding on December 31, 2020

Cancelled/expired

4 unchanged sentences

fair value of the options issued was calculated using the Black-Sholes option pricing model, based on the criteria shown below:

of Fair Value of Options Using Black-Sholes Option Pricing Model

Summary of Fair Value of Options Using Black-Sholes Option Pricing Model

Expected term (in years)

Expected volatility

85.0 % - 89.4 %

Risk-free interest rate

1.5 % - 3.9 %

0.7 % - 1.3 %

Expected dividends

Weighted average grant date fair value per share

total amount of equity-based compensation included in general and administrative expense in the accompanying consolidated statements

of operations was $ 91,959 and $ 276,641 for the years ended December 31, 2021 and 2020.

of December 31, 2021, the Company has $ 148,398 of total unrecognized share-based compensation expense related to unvested options, which

is expected to be amortized over the remaining weighted average period of 1.5 years.

following is a summary of restricted stock award and restricted stock unit activity:

of Restricted Stock Award and Restricted Stock Unit Activity

average grant

date fair value

Unvested at January 1, 2021

Unvested at January 1, 2022

Unvested at December 31, 2022

2022, the Company issued performance share units (“PSUs”) that represent shares potentially issuable based upon achievement

of Company and individual performance targets in 2022.

The grantees have the ability to earn 0 % - 200 % of the PSU target award.

also included a time-based service requirement through March 2023.

following is a summary of PSU activity:

of Performance Stock Unit Activity

average grant

date fair value

Unvested at January 1, 2022

Unvested at December 31, 2022

February 2023, the awards were modified to pay the original grant-date fair value of the shares expected to vest in cash.

Additionally, the Company performance targets were modified to allow approximately 77,000

shares to vest that would have otherwise been forfeited.

As a result of the modifications, the Company expects to record an

additional $ 218,000

in compensation expense, primarily in 2023.

tax provision (benefit) for the years ended December 31, 2022 and 2021 is summarized below:

3 unchanged sentences

Provision for income taxes

food Group Inc.

to Consolidated Financial Statements

provision for income taxes differs from the amount computed by applying the statutory federal income tax rate before provision for income

11 unchanged sentences

( 12,669,000 )

Deferred Tax Assets, Net

Deferred tax assets,

740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of evidence, it is more than likely

1 unchanged sentence

After consideration of all the evidence, both positive

and negative, management has determined that a $ 12,669,000

and $ 11,345,000

allowance at December

and negative, management has determined that a $ 13,948,000 and $ 12,669,000 allowance at December

31, 2022 and 2021, respectively, is necessary to reduce the deferred tax assets to the amount that will more likely than not be realized.

The increase in the valuation allowance for the current period is $ 1,324,000

resulting for current

year tax losses, including the 2021 loss adjusted for the PPP loan forgiveness and the true up of prior year net operating loss carryforwards.

The increase in the valuation allowance for the current period is $ 1,279,000 resulting for current year tax losses.

of December 31, 2022, the Company has a net operating loss carry forward to offset future taxable income of approximately $ 49,843,000 ,

1 unchanged sentence

Net operating loss carry forwards of $ 21,361,000 may be carried forward indefinitely.

The Company may have experienced an ownership change that could limit its ability to utilize its operating loss carryforward to offset

taxable income in future years.

An analysis will be required to determine whether such change has occurred, the outcome of which could

impact the Company’s operating results and cash flow if and when it achieves profitability in taxable jurisdictions.

Business Segments and Customer Concentrations

3 unchanged sentences

of Revenue by Major Customers by Reporting Segments

food Group Inc.

to Consolidated Financial Statements

Supplemental Cash Flow Information

cash flow information for the years ended December 31, 2021 and 2020 is as follows:

cash flow information is as follows:

of Cash Flow Supplemental Information

Cash paid during the period for:

Cash paid for amounts included in the measurement of lease liabilities

Cash paid during the year for:

Amounts included in the measurement of lease liabilities

Non-cash financing and investing activities:

Net carrying value of convertible notes and accrued interest settled through

issuance of stock (debt extinguishment)

Accrued interest settled through issuance of stock

Deferred compensation settled through issuance of warrants

Debt discount warrant and derivative liability

Extinguishment of derivative liability

Net carrying value of convertible notes and accrued interest extinguished through issuance of stock

Accrued interest paid in stock

Equipment included in accounts payable and accrued liability

Extinguishment of derivative liability

the years ended December 31, 2022 and 2021, the Company used cash for operations of $ 2,648,000 and $ 1,861,000 , respectively.

has a history of operating losses and negative cash flow, which were expected to improve with growth, offset by working capital required

to achieve such growth.

As described more fully in Note 1, the litigation against the Manufacturer has resulted in uncertainty around

our ability to procure product, which in turn may inhibit our ability to achieve positive cash flow.

Additionally, management has considered

that dispute resolution, including litigation, is costly and will require the outlay of cash.

as of December 31, 2022, we have $ 3,019,000 of cash and restricted cash and even though we have identified certain indicators, these

indicators do not raise substantial doubt regarding the Company’s ability to continue as a going concern.

However, we cannot predict,

with certainty, the outcome of its potential actions to generate liquidity, including the availability of additional financing, or whether

such actions would generate the expected liquidity as planned.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures