What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-03-22 compared with 2023-03-02 · 279 added, 338 removed, 480 unchanged (56% of the section changed)

6 unchanged sentences

Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that the Company’s

disclosure controls and procedures were not effective as of December 31, 2022, due to inadequate segregation of duties.

disclosure controls and procedures were effective as of December 31, 2023.

Annual Report on Internal Control over Financial Reporting

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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

its internal control over financial reporting to be ineffective.

recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective

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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 have hired additional

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

In an effort to remediate the identified material weakness and enhance

our internal control over financial reporting, we have hired additional information technology personnel to help ensure that we are able

to properly implement internal control procedures.

report shall not be deemed to be filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that

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

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.

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

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.

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Financial Officer)

Arnold Tinter

Isabelle Ortiz-Cochet

/s/ Alexander

Alexander Ware

Certificate of Incorporation of Moving Box Inc.

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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)

Form of Series O Warrant (incorporated by reference to Exhibit 4.21 to Annual Report on Form 10-K for the year ended December 31, 2019, as filed April 13, 2020)

Barfresh Food Group, Inc.

2015 Equity Incentive Plan (incorporated by reference to Exhibit 10.10 to Annual Report Form 10-K filed July 7, 2015)+

Barfresh Food Group, Inc.

2023 Equity Incentive Plan (incorporated by reference to Exhibit 4.5 to Registration Statement on Form S-8 filed August 14, 2023)+

Executive Employment Agreement by and between Smoothie, Inc.

and Riccardo Delle Coste dated April 27, 2015 (incorporated by reference to Exhibit 10.11 to Annual Report Form 10-K filed July 7, 2015)+

Form of Securities Purchase Agreement dated March 15, 2020 by and between Barfresh Food Group, Inc.

and certain investors (incorporated by reference to Exhibit 10.14 to Annual Report on 10-K for the year ended December 31, 2019, filed April 13, 2020)

Form of Securities Purchase Agreement together with form of Convertible Promissory Note (incorporated by reference to Exhibit 10.1 from the Quarterly Report on Form 10-Q filed October 26, 2023)

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)

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Certification Pursuant to 18 U.S.C.

Section 1350*

Compensation Recovery Policy*

Presentation.

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(the “Company”) as of December 31,

2022 and 2021, and the related consolidated statements of operations ,

stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial

statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position

of Barfresh Food Group, Inc.

as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then

ended, in conformity with accounting principles generally accepted in the United States of America.

2023 and 2022, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended,

and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated

financial statements present fairly, in all material respects, the financial position of Barfresh Food Group, Inc.

as of December 31,

2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles

generally accepted in the United States of America.

discussed in Note 2 to the consolidated financial statements, the 2022 financial statements have been restated to correct a misstatement.

consolidated financial statements are the responsibility of the Company’s management.

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Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used

and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated

or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial

statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters

does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit

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

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

critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that

was communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material

to the consolidated financial statements and (2) involved especially challenging, subjective or complex judgments.

The communication

of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are

not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matter or on the accounts

or disclosures to which they relate.

of Convertible Debt and Related Conversion

discussed in Note 6 to the consolidated financial statements, in 2023 the Company executed subscription agreements for $1,880,000 of

a $2,000,000 privately placed convertible debt offering.

The complexity of the accounting treatment (especially the derivative

considerations related to the conversion) requires management to make significant judgements which impacts the overall calculation

and conversion of the debt.

identified the valuation of the convertible debt and related conversion as a critical audit matter.

Auditing the complex judgments involves

especially challenging auditor judgment due to the nature and extent of audit evidence and effort required to address these matters.

primary procedures we performed to address this critical audit matter included:

an understanding of management’s processes, controls and methodology related to the convertible debt issued and related derivative

considerations.

the completeness, accuracy and relevance of the underlying data which includes the principal, interest, and volume weighted average

stock price (conversion price) used in determining the proper accounting treatment of the convertible debt and related issuance of

common stock.

cash receipts related to the issuance of the convertible debt.

common stock issued in relation to the conversion of the convertible debt.

the adequacy of the disclosure related to the convertible debt and related equity.

have served as Barfresh Food Group Inc.’s auditor since 2012.

/s/ Eide Bailly LLP

March 22, 2024

Food Group Inc.

Consolidated Balance Sheets

Balance Sheets

Current assets:

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Accounts payable

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

Disputed co-manufacturer accounts payable (Note 7)

Accrued expenses

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Total current liabilities

Long term liabilities:

Accrued interest

Lease liability, net of current portion

Total liabilities

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the accompanying notes to the consolidated financial statements

Barfresh Food Group Inc.

Consolidated Statements of Operations

For the years ended December 31, 2022 and 2021

Food Group Inc.

Statements of Operations

the years ended December 31, 2023 and 2022

Cost of revenue

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Total operating expenses

Operating loss

$ ( 2,824,000 )

$ ( 6,134,000 )

Other (income)/expenses

Gain from derivative liability

Gain from debt extinguishment - Paycheck Protection Program

( 1,136,000 )

Loss on debt extinguishment

Total other income

$ ( 6,219,000 )

$ ( 1,265,000 )

Per share information - basic and fully diluted:

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Net loss per share

See the accompanying notes

to the consolidated financial statements

the accompanying notes to the consolidated financial statements

Food Group Inc.

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the years ended December 31, 2023 and 2022

Balance December 31, 2020

Balance December 31, 2021 (as restated)

$ ( 51,838,000 )

Issuance of stock for capital raise

Conversion of debt and accrued interest

Interest paid in shares

Shares issued for warrant exercise

Issuance of stock and options for services

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( 57,972,000 )

Shares issued for warrant exercise

( 57,972,000 )

Equity-based compensation

Cash settlement of equity-based compensation

Issuance of stock and options for services

Conversion of debt and interest (Note 6)

Conversion of debt and interest

( 2,824,000 )

2 unchanged sentences

$ ( 60,796,000 )

the accompanying notes to the consolidated financial statements.

Barfresh Food Group Inc.

Consolidated Statements of Cash Flows

For the years ended December 31 2022 and 2021

$ ( 60,796,000 )

$ ( 1,265,000 )

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

Asset impairment

Depreciation and amortization

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

( 1,136,000 )

Gain on derivative

Changes in assets and liabilities

Accounts receivable

Other receivables

Prepaid expenses and other assets

the accompanying notes to the consolidated financial statements.

Food Group Inc.

Statements of Cash Flows

the years ended December 31 2023 and 2022

to reconcile net loss to net cash used in operating activities

on asset disposal

and amortization

and options issued for services

in assets and liabilities

expenses and other assets

accounts payable

Disputed accounts payable

Accrued expenses

Advanced payments

Accrued interest

Net cash used in operating activities

( 2,648,000 )

( 1,861,000 )

Investing activities

Purchase of property and equipment

Net cash used in investing activities

Financing activities

Proceeds from issuance of stock

Proceeds from note payable

Repayment of convertible notes

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

cash used in operating activities

of property and equipment

cash used in investing activities

from issuance of stock

from convertible notes

cash from financing activities

change in cash and restricted cash

and restricted cash, beginning of year

and restricted cash, end of year

the accompanying notes to the consolidated financial statements.

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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

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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

Schedule of Company’s Contract Manufacturers of Finished Goods

December 31, 2022, the Company had $ 211,000 in restricted cash related to a contract manufacturing agreement.

The restricted cash was

released in 2023.

Value Measurement

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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.

Accounts receivable totaled $ 821,000 and

of December 31, 2023 and 2022, respectively.

Allowances for credit losses are considered when an undisputed balance is

greater than 90 days past due.

There was no allowance

for credit losses as of December 31, 2023 and 2022.

There was no credit loss expense for the years ended December 31, 2023 and 2022.

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

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Manufacturing

equipment and customer equipment

years to 7 years

accordance with ASC 606, Revenue from Contracts with Customers, revenue is recognized when a customer obtains ownership of promised goods.

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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.

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

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the asset is used.

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.

Lease expense is recognized on a straight-line

basis over the lease term.

As a lessee, the Company leases office space.

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.

Lease expense is recognized on a straight-line basis over the lease term.

As a lessee, the Company

leases office space.

provision for income taxes is determined in accordance with the provisions of ASC Topic 740, Accounting for Income Taxes (“ASC

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of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.”

The result of this accounting treatment is that the fair value of any derivative is marked-to-market each balance sheet date and recorded

as a liability.

In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of

operations as gain/loss from derivative liability.

Upon conversion or exercise of a derivative instrument, the instrument is marked to

fair value at the conversion date and then that fair value is reclassified to equity.

We analyzed the derivative financial instruments

in accordance with ASC 815.

The objective is to provide guidance for determining whether an equity-linked financial instrument is indexed

to an entity’s own stock.

This determination is needed for a scope exception which would enable a derivative instrument to be accounted

for under the accrual method.

The classification of a non-derivative instrument that falls within the scope of ASC 815-40-05 “Accounting

for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” also hinges on whether

the instrument is indexed to an entity’s own stock.

A non-derivative instrument that is not indexed to an entity’s own stock

cannot be classified as equity and must be accounted for as a liability.

There is a two-step approach in determining whether an instrument

or embedded feature is indexed to an entity’s own stock.

First, the instrument’s contingent exercise provisions, if any,

must be evaluated, followed by an evaluation of the instrument’s settlement provisions.

The Company utilized the fair value standard

set forth by the Financial Accounting Standards Board, defined as the amount at which the assets (or liability) could be bought (or incurred)

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

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

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

The Company determined that its convertible instruments issued in 2023 did not include any embedded derivatives that require bifurcation.

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

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have been anti-dilutive as we had losses for the years then ended.

Extinguishment

Company evaluates its convertible instruments in accordance with ASC 470-50, “Debt Modifications and Extinguishments.” For

all extinguishments of debt, ASC 470-50 requires 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) to be recognized as a gain or loss when the debt is

extinguished.

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

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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

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impact of recently issued standards that are not yet effective will have an impact on our results of operations and financial position.

Restatement of Prior Financial Information

Company’s previously filed audited balance sheet and statement of operations and cash flow statement have been restated to correct

errors in calculating depreciation.

From a quantitative and qualitative perspective, the Company determined that correcting the previously

filed financial statements would not require amendment to its previously filed reports on Form 10-Q and 10-K.

The restatement reduced the accumulated deficit by $ 327,000 as of December

The effect of the correction

of previously issued financial statements is summarized below:

Schedule of Prior Financial Information

As Previously

December 31, 2022

As Previously

Consolidated Balance Sheet

Property, plant and equipment, net of depreciation

Accumulated deficit

$ ( 58,384,000 )

$ ( 57,972,000 )

Total stockholders’ equity

Total liabilities and stockholders’ equity

As Previously

Year ended December 31, 2022

As Previously

Consolidated Statement of Operations

Depreciation and amortization

Total operating expenses

$ ( 6,219,000 )

$ ( 6,134,000 )

Consolidated Statement of Cash Flows

$ ( 6,219,000 )

$ ( 6,134,000 )

Depreciation and amortization

Net cash used in operating activities

$ ( 2,648,000 )

consists of the following at December 31:

Schedule of Inventory

Raw materials

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

of Major Classes of Property and Equipment

Manufacturing and customer equipment

Other property

Schedule of Property and Equipment, Net

Manufacturing equipment

Customer equipment

Property and equipment, gross

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( 2,234,000 )

Property and equipment

Equipment not yet placed in service

Property and equipment, net of depreciation

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.

recorded depreciation expense related to these assets of $ 339,000 and $ 380,000 for the years ended December 31, 2023 and 2022, respectively.

Depreciation expense in cost of revenue was $ 18,000 and $ 29,000 for the years ended December 31, 2023 and 2022 respectively.

Intangible Assets

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future amortization expense related to patents as of December 31, 2023, is as follows:

of Estimated Future Amortization Expense Related to Intangible Property

Years ending December 31,

Intangible asset, net of amortization

Related Parties

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

Paycheck Protection Program (PPP) Loan

PPP was established to provide federally guaranteed, uncollateralized loans to assist businesses during the Covid-10 pandemic.

are administered by a Small Business Administration (SBA) approved partners.

May 7, 2020 the Company was granted a $ 568,000 loan which was to mature in two years .

On January 27, 2021, the Company was granted a

second $ 568,000 loan which was to mature in five years .

The Company was eligible for loan forgiveness of up to 100% of the loans, upon

meeting certain requirements.

May 20, 2021 and December 22, 2021, respectively, the loans were legally released and forgiven by the SBA.

Loan forgiveness income of

$ 1,136,000 has been recorded for the year ended December 31, 2021.

Convertible Notes (Related and Unrelated Party)

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

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 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

Derivative Liabilities

II Convertible Notes (Note 7) contained variable conversion provisions based on the future price of the Company’s common stock,

resulting in the potential issuance of an indeterminate number of shares of common stock upon conversion.

The Company measured the fair

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

The change in fair value was recorded

in the accompanying consolidated statements of operations.

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

Upon extinguishment, the derivative liability was revalued to $ 25,000 ,

which resulted in a gain of $ 16,000 for the year ended December 31, 2021.

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 Derivative Liability

Expected life

Volatility (based on comparable company)

Risk free interest rate

Dividend yield

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

at fair value on a recurring basis using Level 3 inputs:

of Derivative Liability Measured at Fair Value on a Recurring Basis

Fair value, December 31, 2020

Extinguishment of derivative upon debt settlement

Net gain from change in fair value

Fair value, December 31, 2021

Schedule of Estimated Future Amortization Expense Related to Intangible Property

ending December 31,

asset, net of amortization

Convertible Notes

July to October of 2023, the Company executed subscription agreements for $ 1,880,000 of a $ 2,000,000 privately placed convertible debt

The debt may be drawn in 25% increments, matures on the anniversary of the draw, bears interest at 10% per annum for the term,

regardless of earlier payment or conversion, and is mandatorily convertible as to principal and interest into shares of the Company’s

common stock at any time prior to maturity at the greater of $1.20 or 85% of the volume-weighted average price of the common stock for

the ten trading days immediately preceding the written notice of the conversion (the “Conversion Price”).

If the Company

has not exercised the mandatory conversion, the holder of the debt has the option after six months and on up to four occasions to convert

all or any portion of the principal and interest into shares of the Company’s common stock at the Conversion Price.

October 23, 2023, we drew down $ 1,390,000 in convertible debt and converted a total of $ 1,207,000 of principal into 820,160 shares of

common stock.

Additionally, on December 19, 2023, the Company drew down $ 470,000 in convertible debt and converted a total of $ 653,000

of principal and $ 4,000 of accrued interest into 495,331 shares of common stock, settling all debt.

Debt drawdowns included the non-cash

settlement of $ 30,000 in accounts payable.

Commitments and Contingencies

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

our borrowing rate).

The remaining term on the lease is 0.25 years.

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.

Company leases office space under a non-cancelable operating lease which expired on March 31, 2023 and has been extended multiple times,

most recently through September 30, 2024 .

The Company incurred lease expense of $ 80,000 for the years ended December 31, 2023 and 2022, respectively.

Due to the short-term nature of the extensions, there is no right of use asset or related liability as of December 31, 2023.

As of December

31, 2022, the right of use asset and related liability were $ 18,000 and $ 20,000 , respectively.

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

One of the Company’s contract

manufacturers (the “Manufacturer”) 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.

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.

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 had 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 allowed the parties

to reach a potential resolution outside of the court system.

However, as the parties were once again unable to come to an agreement,

the Company re-filed the Complaint in California State Court in August 2023 and continues to progress through the court system.

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 has and will continue to adversely impact the Company’s 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.

The Company has mitigated the impact of the supply disruption with the introduction of its single-serve smoothie

however the product format has not been accepted by some customers or as a substitute for the bottle product in all use cases.

legal matters

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

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Stockholders’ Equity

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

proceeds of $ 6,000,000 .

2021, holders of debt converted a total of $ 399,000 in principal and $ 234,410 in interest into 133,991 shares of common stock, and debt

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

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

2021, the Company issued a warrant to purchase 10,550 shares of common stock at exercise prices ranging from $ 3.25 - $ 5.46 (weighted

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 .

2022, the Company issued 986 shares of common stock due to the exercise of a warrant at an exercise price of $ 5.07 .

2023, the Company issued 1,315,491 shares of common stock pursuant to the conversion of debt and accrued interest, as more fully described

2023, the Company issued 165,779 shares of common stock for equity-based compensation.

Additionally, 4,094 shares of common stock valued

between $ 1.45 - $ 4.00 were issued for services.

following is a summary of changes in warrants outstanding for the years ended December 31, 2023 and 2022:

of Changes in Warrants Outstanding

Summary of Changes in Warrants Outstanding

Outstanding at December 31,2021

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following is a summary of all outstanding warrants as of December 31, 2023:

of Outstanding Warrants

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

Summary of Outstanding Warrants

issuance event

of deferred compensation

Incentive Plan

the 2015 Equity Incentive Plan (the “2015 Plan”), the Company has reserved 1,153,846 shares for equity incentive awards for

issuance to employees, members of the board of directors and other service providers.

Awards may take the form of options, restricted

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

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.

2022, the Company issued equity incentive awards under the 2015 Equity Incentive Plan (the “2015 Plan”) and outside the Plan.

In June 2023, the Company’s stockholders adopted the 2023 Equity Incentive Plan (the “2023 Plan”), reserving 650,000

shares for future issuance.

The Board of Directors discontinued further grants under the 2015 Plan.

may be granted to employees, members of the Board of Directors and consultants, and may take the form of options, restricted stock, restricted

stock units, performance shares and stock appreciation rights.

The Company has issued options with no intrinsic value, stock awards and

stock units through December 31, 2023, and issues new shares upon exercise of options or vesting of stock awards and stock units.

Company has reserved approximately 493,000 and 43,000 respectively for awards outstanding under the 2015 Plan and 2023 Plan, and 162,000

shares for equity awards issued outside either of the Company’s equity incentive plans.

As of December 31, 2023, 607,000 shares

remain available for the issuance of awards under the 2023 Plan.

Total shares reserved for awards that are outstanding and expected to

vest or available for issuance is 1,305,000 as of December 31, 2023.

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

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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

term (in years)

Weighted average expected

average risk-free interest rate

average grant date fair value per share

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

of Restricted Stock Award and Restricted Stock Unit Activity

Summary of Restricted Stock Award and Restricted Stock Unit Activity

average grant

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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.

Unvested at December 31, 2023

2023 and 2022, the Company issued performance share units (“PSUs”) that represent shares potentially issuable based upon

achievement of Company and individual performance targets.

The grantees have the ability to earn 0 % and, in some cases, up to 200 % of

the PSU target award.

The awards also included various time-based service requirements.

following is a summary of PSU activity:

of Performance Stock Unit Activity

Summary of Performance Stock Unit Activity

average grant

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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.

Unvested and expected to vest at December 31, 2023

February 2023, the awards granted for 2022 were modified to pay the original grant-date fair value of the shares expected to vest in

Additionally, the Company performance targets were modified to allow approximately 77,000 shares to vest that would have otherwise

been forfeited, and were not included in the total unvested at December 31, 2022.

As a result of the modifications, the Company recorded

an additional $ 218,000 in compensation expense in 2023.

tax provision (benefit) for the years ended December 31, 2023 and 2022 is summarized below:

of Income Tax Provision (Benefit)

( 1,002,000 )

Summary of Income Tax Provision (Benefit)

Change in valuation allowance

2 unchanged sentences

The sources and tax effect of the differences are as follows:

of Statutory Federal Income Tax Rate Before Provision for Income Taxes

Summary of Statutory Federal Income Tax Rate Before Provision for Income Taxes

Statutory federal income tax rate

Permanent differences

Change in valuation allowance

1 unchanged sentence

of the net deferred income tax assets at December 31, 2023 and 2022 were as follows:

of Components of Net Deferred Income Tax Assets

Schedule of Components of Net Deferred Income Tax Assets

Net operating loss carryover

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31, 2023 and 2022, 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 $ 1,279,000 resulting for current year tax losses.

The increase in the valuation allowance for the current period is $ 619,000 resulting from current year tax losses net of adjustments

to finalize the 2022 tax loss upon filing the tax returns.

of December 31, 2023, the Company has a net operating loss carry forward to offset future taxable income of approximately $ 52,056,000 ,

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

March 27, 2020, the U.S.

government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) to provide

certain relief as a result of the COVID-19 pandemic.

The CARES Act provides tax relief, along with other stimulus measures, including

a provision for an Employee Retention Credit (“ERC”), which allows for employers to claim a refundable tax credit against

the employer share of Social Security tax equal to 70% of the qualified wages paid to employees from the start of the COVID-19 pandemic

through September 30, 2021.

The ERC was designed to encourage businesses to keep employees on the payroll during the COVID-19 pandemic.

there is no authoritative guidance under U.S.

GAAP on accounting for government assistance to for-profit business entities, the Company

accounts for the ERC by analogy to International Accounting Standard (“IAS”) 20, Accounting for Government Grants and Disclosure

of Government Assistance.

In accordance with IAS 20, management determined based upon receipt of confirmation of the claim made by its

co-employment partner and review of the calculations provided that it has reasonable assurance for receipt of the ERC and recorded the

ERC benefit of $ 92,000

within general and administrative expenses in

the accompanying consolidated statement of operations for the year ended December 31, 2023.

The Company recorded a corresponding receivable

for the benefit expected to be received within other receivables on the consolidated balance sheet as of December 31, 2023.

received the refund in March 2024.

claims can be made in a variety of circumstances with varying degrees of subjectivity and clear authoritative guidance.

Paid claims are

subject to IRS inspection which may occur prior to expiration of the statute of limitations.

The Company’s ERC claim was based

on objectively calculated declines in revenue using methods that are clearly defined in the CARES Act and various regulations and interpretations

Business Segments and Customer Concentrations

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December 31, 2023 and 2022:

of Revenue by Major Customers by Reporting Segments

Schedule of Revenue by Major Customers by Reporting Segments

Supplemental Cash Flow Information

cash flow information is as follows:

of Cash Flow Supplemental Information

Schedule of Cash Flow Supplemental Information

Cash paid during the year for:

1 unchanged sentence

Non-cash financing and investing activities:

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

Convertible note issued in exchange for trade payables

Conversion of debt and interest to equity

Value of shares relinquished in modification of stock-based compensation awards (Note 8)

the years ended December 31, 2023 and 2022, the Company used cash for operations of $ 2,958,000 and $ 2,648,000 , respectively.

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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.

as of December 31, 2023, we have $ 1,891,000 of 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