What changed in this filing

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Item 1A. Risk Factors

2024-03-22 compared with 2023-03-02 · 207 added, 112 removed, 294 unchanged (52% of the section changed)

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actually occur, our business, prospects, financial condition or results of operations could be negatively affected.

impact of COVID-19 on the Company is constantly evolving.

The direct impact to our operations had begun to take effect at the close of

the first quarter ended March 31, 2020.

Specifically, our business was impacted by dining bans targeted at restaurants to reduce the

size of public gatherings.

Such bans precluded our single serve products from being served at those establishments for a number of weeks,

and in some instances, resulted in abandoned product launches.

Furthermore, many school districts closed regular attendance for a period

of time thereby disrupting sales of product into that channel.

More recently, we have experienced a disruption in the supply chain for

manufacturing our products due to COVID-19.

The developments surrounding COVID-19 remain fluid and dynamic, and consequently, will require

the Company to continue to monitor news headlines from government and health officials, as well as, the business community.

in March 2020, the COVID-19 pandemic had a significant impact on the Company.

Specifically, our business was impacted by dining bans

targeted at restaurants to reduce the size of public gatherings.

Such bans precluded our single-serve products from being served at those

establishments and in some instances, resulted in abandoned product launches.

Furthermore, many school districts closed regular attendance

for a period of time thereby disrupting sales of product into that channel.

In 2022 and 2023, we experienced supply chain interruptions

and inflation for component and transportation costs.

We believe that the impact of the pandemic has substantially abated, but will continue

to monitor and assess developments.

Related to Our Business

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or otherwise respond to competitive pressures, could be significantly limited.

with a manufacturer have resulted in a significant loss for 2022, as well as other negative impacts.

with a manufacturer have resulted in a significant loss for 2022 and 2023, as well as other negative impacts.

described more fully in Item 7, we experienced product quality issues with a contract manufacturer (the “Manufacturer”) that

provided approximately 52% and 42% of our products in the years ended December 31, 2022 and 2021.

Complaints from customers led us to

withdraw product from the market and destroy existing inventory.

The results for 2022 reflect the estimated accounting impact of these

actions, including $493,000 in refunds and administrative fees due to customers and $932,000 to dispose of unsaleable inventory.

provided approximately 52% of our products in the year ended December 31, 2022.

Complaints from customers led us to withdraw product

from the market and destroy existing inventory.

The results for 2022 reflect the estimated accounting impact of these actions, including

$493,000 in refunds and administrative fees due to customers and $932,000 to dispose of unsaleable inventory.

addition to the accounting impact, we must obtain suitable replacement contract manufacturers and regain the confidence of our customers

and investing public, all while seeking a resolution with the Manufacturer.

These tasks require substantial amounts of personnel and

capital resources.

As of the filing of this report, we are unable to predict the impact on our results for the 2023 fiscal year.

These tasks have required substantial amounts of personnel

and capital resources in 2023 with ongoing activities expected in 2024.

may need additional financing in the future, which may not be available when needed or may be costly and dilutive.

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Accordingly, we may experience declines in revenue during

economic turmoil or during periods of uncertainty.

Any material decline in the amount of discretionary spending, leading cost-conscious

consumers to be more selective in restaurants visited, could have a material adverse effect on our revenue, results of operations, business

and financial condition.

economic turmoil or during periods of uncertainty including uncertainty resulting from war, terrorism or contagious disease.

decline in the amount of discretionary spending, leading cost-conscious consumers to be more selective in restaurants visited, could

have a material adverse effect on our revenue, results of operations, business and financial condition.

challenges of competing with the many food services businesses may result in reductions in our revenue and operating margins.

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our markets for workers and may become subject to higher labor costs as a result of such competition.

recent global coronavirus outbreak could harm our business and results of operations.

March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic.

This contagious disease outbreak, which has

continued to spread, and any related adverse public health developments, has adversely affected workforces, customers, economies, and

financial markets globally, potentially leading to an economic downturn.

It has also disrupted the normal operations of many businesses,

including ours.

This outbreak could decrease spending, adversely affect demand for our product and harm our business and results of operations.

It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business

or results of operations at this time.

is difficult to predict the timing and amount of our sales because our distributors and national accounts may not be required to place

minimum orders with us.

distributors are not required to place minimum monthly or annual orders for our products.

Accordingly, we cannot predict the timing or

quantity of purchases by any of our independent distributors or whether any of our distributors will continue to purchase products from

us in the same frequencies and volumes as they may have done in the past.

Additionally, our larger distributors and partners may make

orders that are larger than we have historically been required to fill.

Shortages in inventory levels, supply of raw materials or other

key supplies could negatively affect us.

within our supply chain, contract manufacturing or distribution channels could have an adverse effect on our business, financial condition

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condition and results of operations.

the fourth quarter of 2023, the beverage industry began experiencing a shortage of 4-ounce and 8-ounce cartons, directly impacting our

“Twist & Go”™ product.

As of the date of this report, the shortage is continuing and could impair the ability of

our manufacturers to fulfill orders that we place with them and/or increase our costs.

If we are unable to pass on any increased costs,

our gross margin will decrease.

experience with the Manufacturer demonstrates how our reliance on a limited number of manufacturers and suppliers further increases this

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If we materially underestimate demand for our products or are unable to maintain

sufficient inventory of raw materials, we might not be able to satisfy demand on a short-term basis.

If we overestimate distributor or

retailer demand for our products, we may end up with too much inventory, resulting in higher storage costs, increased trade spending

and the risk of inventory spoilage.

If we fail to manage our inventory to meet demand, we could damage our relationships with our distributors

and retailers and could delay or lose sales opportunities, which would unfavorably impact our future sales and adversely affect our operating

In addition, if the inventory of our products held by our distributors and retailers is too high, they will not place orders

for additional products, which would also unfavorably impact our sales and adversely affect our operating results.

sufficient inventory, we might not be able to satisfy demand on a short-term basis.

If we overestimate distributor or retailer demand

for our products, we may end up with too much inventory, resulting in higher storage costs, increased trade spending and the risk of

inventory spoilage.

If we fail to manage our inventory to meet demand, we could damage our relationships with our distributors and retailers

and could delay or lose sales opportunities, which would unfavorably impact our future sales and adversely affect our operating results.

In addition, if the inventory of our products held by our distributors and retailers is too high, they will not place orders for additional

products, which would also unfavorably impact our sales and adversely affect our operating results.

in costs of packaging, ingredients and contract manufacturing tolling fees may have an adverse impact on our gross margin.

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is unable to pass on these costs, the gross margin will be significantly impacted.

or legal proceedings could expose us to significant liabilities and damage our reputation.

may become party to litigation claims and legal proceedings.

Litigation involves significant risks, uncertainties and costs, including

distraction of management attention away from our business operations.

We evaluate litigation claims and legal proceedings to assess

the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses.

Based on these assessments and estimates,

we establish reserves and disclose the relevant litigation claims or legal proceedings, as appropriate.

These assessments and estimates

are based on the information available to management at the time and involve a significant amount of management judgment.

Actual outcomes

or losses may differ materially from those envisioned by our current assessments and estimates.

Our policies and procedures require strict

compliance by our employees and agents with all U.S.

and local laws and regulations applicable to our business operations, including

those prohibiting improper payments to government officials.

Nonetheless, our policies and procedures may not ensure full compliance

by our employees and agents with all applicable legal requirements.

Improper conduct by our employees or agents could damage our reputation

or lead to litigation or legal proceedings that could result in civil or criminal penalties, including substantial monetary fines, as

well as disgorgement of profits.

the litigation with the Manufacturer has been voluntarily moved from the court system, there is no assurance that we will be able to

reach a suitable resolution with the Manufacturer and not be forced to refile our case with the court.

have identified a material weakness in our disclosure controls and procedures and internal control over financial reporting.

If not remediated,

our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could

result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which

could have a material adverse effect on our financial condition and the trading price of our common stock.

effective internal control over financial reporting and effective disclosure controls and procedures are necessary for us to produce

reliable financial statements.

As discussed in Item 9A – “Controls and Procedures” of this Form 10-K, we have re-evaluated

our internal control over financial reporting and our disclosure controls and procedures and concluded that they were not effective as

of December 31, 2022.

material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that

there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or

detected on a timely basis.

Management has concluded that there is a material weakness due to the control environment.

The control environment

is impacted due to the Company’s inadequate segregation of duties.

Company is committed to remediating its material weaknesses as promptly as possible.

Implementation of the Company’s

remediation plans has commenced , including adding appropriate staffing and implementing an improved information system.

is being overseen by the audit committee.

However, there can be no assurance as to when these material weaknesses will be remediated

or that additional material weaknesses will not arise in the future.

Even effective internal control can provide only reasonable

assurance with respect to the preparation and fair presentation of financial statements.

Any failure to remediate the material

weaknesses or the development of new material weaknesses in our internal control over financial reporting, could result in material

misstatements in our financial statements, which in turn could have a material adverse effect

on our financial condition and the trading price of our common stock and we could fail to meet our financial reporting

in various food and supply costs, particularly fruit and dairy, could adversely affect our operating results.

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hiring and integrating excellent personnel, or retaining and motivating existing personnel, we may be unable to grow effectively.

loss of any key employee, including members of our senior management team, and our inability to attract highly skilled personnel with

sufficient experience in our industries could harm our business.

inability to attract highly skilled personnel with sufficient experience in our industries could harm our business.

liability exposure may expose us to significant liability.

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we may incur significant costs in defending ourselves that could hurt our financial performance and condition.

or legal proceedings could expose us to significant liabilities and damage our reputation.

may become party to litigation claims and legal proceedings.

Litigation involves significant risks, uncertainties and costs, including

distraction of management attention away from our business operations.

We evaluate litigation claims and legal proceedings to assess

the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses.

Based on these assessments and estimates,

we establish reserves and disclose the relevant litigation claims or legal proceedings, as appropriate.

These assessments and estimates

are based on the information available to management at the time and involve a significant amount of management judgment.

Actual outcomes

or losses may differ materially from those envisioned by our current assessments and estimates.

Our policies and procedures require strict

compliance by our employees and agents with all U.S.

and local laws and regulations applicable to our business operations, including

those prohibiting improper payments to government officials.

Nonetheless, our policies and procedures may not ensure full compliance

by our employees and agents with all applicable legal requirements.

Improper conduct by our employees or agents could damage our reputation

or lead to litigation or legal proceedings that could result in civil or criminal penalties, including substantial monetary fines, as

well as disgorgement of profits.

litigation with Manufacturer was voluntarily withdrawn from the court system in January 2023 and refiled in August 2023, as we were unable

to reach a suitable resolution.

While we believe that that our claims have merit, there is no assurance of a favorable outcome to this

inability to protect our intellectual property rights may force us to incur unanticipated costs.

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disclosure and governance practices.

have identified a material weakness in our disclosure controls and procedures and internal control over financial reporting.

If not remediated,

our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could

result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which

could have a material adverse effect on our financial condition and the trading price of our common stock.

effective internal control over financial reporting and effective disclosure controls and procedures are necessary for us to produce

reliable financial statements.

As discussed in Item 9A – “Controls and Procedures” of this Form 10-K, we have re-evaluated

our internal control over financial reporting and our disclosure controls and procedures and concluded that they were not effective as

of December 31, 2023.

material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that

there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or

detected on a timely basis.

Management has concluded that there is a material weakness due to the control environment.

The control environment

is impacted due to the Company’s inadequate segregation of duties.

Company is committed to remediating its material weaknesses as promptly as possible.

Implementation of the Company’s remediation

plans has commenced , including adding appropriate staffing and implementing an improved information system.

Remediation is being overseen

by the audit committee.

However, there can be no assurance as to when these material weaknesses will be remediated or that additional

material weaknesses will not arise in the future.

Even effective internal control can provide only reasonable assurance with respect

to the preparation and fair presentation of financial statements.

Any failure to remediate the material weaknesses or the development

of new material weaknesses in our internal control over financial reporting, could result in material misstatements in our financial

statements, which in turn could have a material adverse effect on our financial condition and the trading price of our common stock and

we could fail to meet our financial reporting obligations.

to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.

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business, financial condition and results of operations.

is difficult to predict the timing and amount of our sales because our distributors and national accounts may not be required to place

minimum orders with us.

distributors are not required to place minimum monthly or annual orders for our products.

Accordingly, we cannot predict the timing or

quantity of purchases by any of our independent distributors or whether any of our distributors will continue to purchase products from

us in the same frequencies and volumes as they may have done in the past.

Additionally, our larger distributors and partners may make

orders that are larger than we have historically been required to fill.

Shortages in inventory levels, supply of raw materials or other

key supplies could negatively affect us.

use of information technology and third-party service providers exposes us to cybersecurity breaches and other business disruptions.

use information technology and third-party service providers to support our business processes and activities, including supporting critical

business operations such as manufacturing and distribution;

communicating with our suppliers, customers and employees;

maintaining effective

accounting processes and financial and disclosure controls;

executing corporate transactions;

conducting research and development activities;

and meeting regulatory, legal and tax requirements.

Shared service centers managed by third parties provide an increasing number of services

important to conducting our business, including accounting, internal control, human resources and computing functions.

of business applications and services has been, and may in the future be, disrupted by events such as infection by viruses or malware;

other cybersecurity attacks;

issues with or errors in systems’ maintenance or security;

power outages;

hardware or software failures;

denial of service attacks;

telecommunication failures;

natural disasters;

terrorist attacks;

and other catastrophic occurrences.

use of new and emerging technologies such as cloud-based services and mobile applications continues to evolve, presenting new and additional

risks in managing access to our data, relying on third parties to manage and safeguard data, ensuring access to our systems and availability

of third-party systems.

In addition, we are experiencing new and more frequent attempts by third parties to gain access to our systems,

such as through increased email phishing of our workforce.

leverage third parties for various technology and business services who may experience cybersecurity breaches, whether from circumvention

of security systems, denial-of-service attacks or other cyberattacks such as hacking, phishing attacks, computer viruses, ransomware

or malware, cyber extortion, employee or insider error, malfeasance, social engineering, physical breaches or other actions or attempts

to exploit vulnerabilities may cause confidential information or Personally Identifiable Information belonging to us or our employees,

customers, consumers, partners, suppliers, or governmental or regulatory authorities to be misused or breached.

These risks could be

magnified since the number of employees, contractors and others working outside of offices increased since the COVID-19 pandemic.

Additionally,

continued geopolitical turmoil, including the ongoing war in Ukraine, has heightened the risk of cyberattacks.

When risks such as these

materialize, the need for us to coordinate with various third-party service providers and for third-party service providers to coordinate

amongst themselves might increase challenges and costs to resolve related issues.

Our information security program includes capabilities

designed to evaluate and mitigate cyber risks arising from third-party service providers.

Cyber threats to externally-hosted technology

and business services are beyond our control.

Additionally, new initiatives, such as those related to digital commerce and direct sales,

that increase the amount of confidential information that we process and maintain increase our potential exposure to a cybersecurity

Furthermore, the rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity

If our controls, disaster recovery and business continuity plans or those of our third-party providers do not effectively respond

to or resolve the issues related to any such disruptions in a timely manner, our product sales, financial condition, results of operations

and stock price may be materially and adversely affected, and we might experience delays in reporting our financial results, loss of

intellectual property and damage to our reputation or brands.

Related to Ownership of Our Common Stock

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common stock would only be tradable on the “Pink Sheets” and could suffer a decrease in or absence of liquidity.

may not be able to continue to comply with Nasdaq listing standards.

May 2023, we received a letter from Nasdaq indicating that we were not in compliance with Nasdaq Listing Rule 5550(b)(1), which requires

companies listed on The Nasdaq Stock Market to maintain a minimum of $2,500,000 in stockholders’ equity for continued listing.

In our quarterly report on Form 10-Q for the period ended March 31, 2023, we reported stockholders’ equity of $1,845,000, thereby

failing to satisfy Listing Rule 5550(b)(1).

While we recently regained compliance with this Rule, our stockholders’ equity at December

31, 2023 was only $2,503,000.

Incurring net losses going forward may cause us to fail to meet Nasdaq listing standards and result in

our common stock only being tradable in the over-the-counter markets.

use of information technology and third-party service providers exposes us to cybersecurity breaches and other business disruptions.

use information technology and third-party service providers to support our business processes and activities, including supporting critical

business operations such as manufacturing and distribution;

communicating with our suppliers, customers and employees;

maintaining effective

accounting processes and financial and disclosure controls;

executing corporate transactions;

conducting research and development activities;

and meeting regulatory, legal and tax requirements.

Shared service centers managed by third parties provide an increasing number of services

important to conducting our business, including accounting, internal control, human resources and computing functions.

of business applications and services has been, and may in the future be, disrupted by events such as infection by viruses or malware;

other cybersecurity attacks;

issues with or errors in systems’ maintenance or security;

power outages;

hardware or software failures;

denial of service attacks;

telecommunication failures;

natural disasters;

terrorist attacks;

and other catastrophic occurrences.

use of new and emerging technologies such as cloud-based services and mobile applications continues to evolve, presenting new and additional

risks in managing access to our data, relying on third parties to manage and safeguard data, ensuring access to our systems and availability

of third-party systems.

In addition, we are experiencing new and more frequent attempts by third parties to gain access to our systems,

such as through increased email phishing of our workforce.

leverage third parties for various technology and business services who may experience cybersecurity breaches, whether from circumvention

of security systems, denial-of-service attacks or other cyberattacks such as hacking, phishing attacks, computer viruses, ransomware

or malware, cyber extortion, employee or insider error, malfeasance, social engineering, physical breaches or other actions or attempts

to exploit vulnerabilities may cause confidential information or Personally Identifiable Information belonging to us or our employees,

customers, consumers, partners, suppliers, or governmental or regulatory authorities to be misused or breached.

These risks could be

magnified since the number of employees, contractors and others working outside of offices increased since the COVID-19 pandemic.

Additionally,

continued geopolitical turmoil, including the ongoing war in Ukraine, has heightened the risk of cyberattacks.

When risks such as these

materialize, the need for us to coordinate with various third-party service providers and for third-party service providers to coordinate

amongst themselves might increase challenges and costs to resolve related issues.

Our information security program includes capabilities

designed to evaluate and mitigate cyber risks arising from third-party service providers.

Cyber threats to externally-hosted technology

and business services are beyond our control.

Additionally, new initiatives, such as those related to digital commerce and direct sales,

that increase the amount of confidential information that we process and maintain increase our potential exposure to a cybersecurity

Furthermore, the rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity

If our controls, disaster recovery and business continuity plans or those of our third-party providers do not effectively respond

to or resolve the issues related to any such disruptions in a timely manner, our product sales, financial condition, results of operations

and stock price may be materially and adversely affected, and we might experience delays in reporting our financial results, loss of

intellectual property and damage to our reputation or brands.

securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our share

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the approval of mergers and other significant corporate transactions.

Unresolved Staff Comments.

principal executive offices are located at 3600 Wilshire Boulevard Suite 1720, Los Angeles, 90010.

Beginning in April 2019, we leased

this office space pursuant to a direct lease for approximately $80,000 annually through March 31, 2023.

The Company extended its lease through June 2023 while management evaluates options for renewal or relocation.

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 1A. Risk Factors