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Item 9A. Controls and Procedures

2026-04-15 compared with 2025-03-27 · 495 added, 254 removed, 534 unchanged (58% of the section changed)

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we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Securities and Exchange Act of 1934

Rule 13a-15(e).

Rule 13a-15(c).

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

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we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Securities and Exchange Act of 1934

Rule 13a-15(e).

Rule 13a-15(c).

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

disclosure controls and procedures were effective as of December 31, 2024.

disclosure controls and procedures were not effective as of December 31, 2025.

Management has identified the

following material weakness in our internal control over financial reporting:

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, including accounting for the business combination consummated in 2025 and information technology control activities.

Management recognizes that there

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

provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect material misstatements.

In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions,

such as those that occurred as a result of the business combination, or due to deterioration in the degree of compliance with our established

policies and procedures.

In an effort to remediate the identified material weakness and enhance our internal control over financial reporting,

we will fully engage our information technology personnel to help ensure that we are able to properly implement internal control procedures

and seek external qualified resources to assist with complex and significant transaction.

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.

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

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Certain Relationships and Related Transactions, and Director Independence.

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

required by this Item regarding certain relationships and related transaction is incorporated by reference to our Proxy Statement.

Principal Accounting Fees and Services.

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

required by this Item regarding principal accounting fees and services is incorporated by reference to our Proxy Statement.

Exhibits and Financial Statements.

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FOOD GROUP INC.

March 27, 2025

April 15, 2026

Riccardo Delle Coste

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Financial Officer)

Isabelle Ortiz-Cochet

Alexander Ware

Timothy Trant

Stock Purchase Agreement dated September 15, 2025 (incorporated by reference to Exhibit 2.1 from the Current Report on Form 8-K filed September 18, 2025)

Certificate of Incorporation of Moving Box Inc.

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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 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)

Barfresh Food Group Inc.

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Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 from the Current Report on Form 8-K filed February 6, 2025)

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)

Commercial Guaranty to WesBanco Bank, Inc.

(incorporate by reference to Exhibit 10.1 from the Current Report on Form 8-K filed October 7, 2025)

Form of Amended and Restated Note to Arps Dairy Shareholders dated March 5, 2026*

Arps Dairy, Inc.

and WesBanco Bank, Inc.

Forbearance and Loan Modification Agreement dated October 1, 2025*

First Amendment to Arps Dairy, Inc.

and WesBanco Bank, Inc.

Forbearance and Loan Modification Agreement dated January 20, 2026*

Form of Indemnification Agreement with directors and executive officers*

Subsidiaries*

Consent of Independent Registered Public Accounting Firm*

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(the “Company”) as of December 31,

2024 and 2023, 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,

2024 and 2023, 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.

2025 and 2024, 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 the Company as of December 31, 2025 and 2024, 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.

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

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We are a public accounting firm registered with the Public Company Accounting

Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to Barfresh Food Group, Inc.

accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and

Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

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reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Barfresh Food Group Inc.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose

of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting.

Accordingly, we express

no such opinion.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing

an opinion on the effectiveness of the entity’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risk of material misstatement of the consolidated financial statements, whether due

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or disclosures to which they relate.

Valuation of Inventories

As discussed in Note 1 to the

Company’s consolidated financial statements, adjustments are made to reduce the cost of inventory to its net realizable value for

estimated excess or obsolete balances.

The Company values its inventories at the lower of cost or net realizable value, with cost being

determined using the first-in, first-out method.

Management monitors inventory quantities on hand and records adjustments for estimated

excess or obsolete items based on estimated future demand for product.

We identified the valuation of inventories as a critical audit matter.

The principal considerations for our determination

that performing procedures relating to valuation of inventories is a critical audit matter are related to the significant assumptions

used by management when determining the future demand of the inventory.

Auditing the significant assumptions involves especially challenging

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

described in Note 11 to the Company’s consolidated financial statements, on October 3, 2025, the Company completed the acquisition

of Arps Dairy, Inc.

The Company accounted for the Arps Dairy, Inc., acquisition as a business combination and, accordingly, allocated

the purchase price to the assets acquired and liabilities assumed based on their respective estimated fair values as of the date of acquisition.

Management’s estimates of fair value included assumptions related to the value of property and equipment acquired.

identified the accounting for the business combination as a critical audit matter because of the valuation of acquired property and equipment

required especially challenging and subjective auditor judgement, involved the use of valuation specialists and the evaluation of significant

management assumptions.

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

Obtained management’s analysis and gained an understanding of management’s processes, controls and methodology

to develop the estimate for excess and obsolete inventory.

Evaluated the reasonableness of assumptions used by management in determining the estimated future demand for product,

including examining the historical accuracy of the Company’s prior estimates, and sales and return activity in 2025.

Tested the completeness, accuracy and relevance of the underlying data used in management’s estimate.

Tested the mathematical accuracy and computations related to the application of the methodology.

an understanding of management’s processes, controls and methodology used to determine

the fair value of assets acquired and liabilities assumed;

the competence, capabilities, and objectivity of management’s valuation specialists

and the reasonableness of the work performed;

the valuation methodologies and significant assumptions used to estimate the fair value of

the acquired property and equipment, including the involvement of our valuation specialists;

the completeness and accuracy of the underlying data used in management’s fair value estimates;

the mathematical accuracy of the valuation models and related calculations.

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

Eide Bailly LLP

April 15, 2026

Food Group Inc.

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Line of credit

Accounts payable

Accounts payable - trade

Accounts payable - construction in progress

Disputed co-manufacturer accounts payable (Note 6)

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23,000,000 shares authorized;

14,746,172 and 14,420,105 shares issued and outstanding at December 31, 2024 and 2023, respectively

and 15,969,281 and 14,746,172 shares issued and outstanding at December 31, 2025 and December 31, 2024, respectively

Additional paid in capital

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Total liabilities and stockholders’ equity

See the accompanying notes to the consolidated financial statements

the accompanying notes to the consolidated financial statements

Food Group Inc.

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( 2,773,000 )

Bargain purchase (Note 11)

Debt guarantee expense (Note 5)

Interest expense

Net loss before benefit of income tax

$ ( 2,979,000 )

$ ( 2,825,000 )

Benefit of income tax

$ ( 2,694,000 )

$ ( 2,825,000 )

Per share information - basic and fully diluted:

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$ ( 60,796,000 )

Conversion of debt and interest (Note 5)

Issuance of common stock for equity compensation, net of shares repurchased for income tax withholding

Equity-based compensation expense

Value of shares relinquished in modification of stock-based compensation awards (Note 7)

Issuance of stock for services

Conversion of debt and interest (Note 5)

( 2,825,000 )

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$ ( 63,621,000 )

Conversion of debt and interest (Note 5)

Conversion of debt and interest

Issuance of common stock for equity compensation, net of shares repurchased for income tax withholding

Equity-based compensation expense

Registered issuance of common stock

Shares issued in exchange for continuing guarantees (Note 5)

( 2,694,000 )

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

Bargain purchase of Arp’s Dairy, Inc.

Deferred tax provision

Stock-based compensation

Depreciation and amortization

Loss on asset disposal

Shares issued in exchange for continuing guarantees

Amortization of line of credit discount

Stock and options issued for services

Changes in assets and liabilities

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Prepaid expenses and other assets

Accounts payable

Accounts payable - trade

Accrued expenses

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Purchase of property and equipment

Acquisition of Arp’s Dairy, Inc.

net of cash acquired (Note 11)

( 1,223,000 )

Net cash used in investing activities

( 1,346,000 )

Financing activities

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( 8,580,000 )

( 2,208,000 )

Issuance of convertible debt

Mortgage Note payments

Financing agreement payments

Repurchases from stock compensation program

Net cash provided by (used in) financing activities

Net decrease in cash

( 1,656,000 )

Issuance of common stock, net of $ 26,000 issuance cost

Shares repurchased for income tax withholding under stock compensation program

Net cash provided by financing activities

Net increase (decrease) in cash

( 1,656,000 )

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Cash, end of year

See the accompanying notes to the consolidated financial statements

the accompanying notes to the consolidated financial statements

Food Group Inc.

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beverages, particularly smoothies, shakes and frappes.

October 3, 2025, we acquired 100 % of the stock (the “Acquisition”) of Arps Dairy, Inc., an Ohio corporation (“Arps

of Presentation

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of Consolidation

consolidated financial statements include the financial statements of the Company and our wholly owned subsidiaries, Barfresh Inc.

Barfresh Corporation Inc.

(formerly known as Smoothie, Inc.).

All inter-company balances and transactions among the companies have been

eliminated upon consolidation.

consolidated financial statements include the financial statements of the Company and our wholly owned subsidiaries, Barfresh Corporation

(formerly known as Smoothie, Inc.), Arps Dairy, Inc., and Barfresh Inc.

All inter-company balances and transactions among the companies

have been eliminated upon consolidation.

preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported

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Manufacturer B

Manufacturer C

Other Manufacturers

A gave notice that it would not renew our contract when it concluded in February 2026.

Additionally, in December 2025, Manufacturer B

discontinued manufacturing our products.

The Acquisition is a significant step towards protecting against or mitigating the impact of

these losses, and the adverse effect on our business, financial condition and results of operations.

Since the Acquisition, Arps Dairy

has commenced production of virtually all of the Company’s legacy product lines, manufacturing 18% of cases produced in the fourth

quarter of 2025.

Concentration

of Credit Risk

amount of cash on deposit with financial institutions exceeds the $ 250,000 federally insured limit at December 31, 2023.

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

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

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value of our financial instruments approximates their fair value.

receivable are recorded and carried at the original invoiced amount less allowances for credits and for any potential uncollectible

amounts due to credit losses.

receivable are recorded and carried at the original invoiced amount less allowances for credits and for any potential uncollectible amounts

due to credit losses.

Accounts 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 an initial sale and is updated

periodically based on payment performance.

We make estimates of the expected credit and collectability trends for the allowance for

credit losses based on our assessment of various factors, including historical experience, the age of the accounts receivable

balances, credit quality of our customers, current economic conditions, and other factors that may affect our ability to collect

from our customers.

Expected credit losses are recorded as general and administrative expenses on our consolidated statements of

As of December 31, 2024 and 2023, there was no

allowance for credit losses.

credit loss expense for the years ended December 31, 2024 and 2023.

Accounts receivable amounted to $ 126,000 on January 1, 2023.

consists of packaging, raw materials and finished goods and is carried at the lower of cost or net realizable value on a first

in first out basis.

The Company’s credit policy calls for payment

generally within 30 days.

The credit worthiness of a customer is evaluated prior to an initial sale and is updated periodically based

on payment performance.

We make estimates of the expected credit and collectability trends for the allowance for credit losses based

on our assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of

our customers, current economic conditions, and other factors that may affect our ability to collect from our customers.

Expected credit

losses are recorded as general and administrative expenses on our consolidated statements of operations.

As of December 31, 2025 and

2024, there was no allowance for credit losses.

There was no credit loss expense for the years ended December 31, 2025 and 2024.

receivable amounted to $ 821,000 on January 1, 2024.

consists of packaging, raw materials and finished goods and is carried at the lower of cost or net realizable value on a first in first

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.

The patent costs are being amortized over the life of the patent,

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.

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

to patents have been capitalized.

accordance with ASC 350 legal costs related to trademarks have been capitalized.

We have determined that trademarks have an indeterminable

life and therefore are not being amortized.

accordance with ASC Topic 350 Intangibles – Goodwill and Other Intangibles (“ASC 350”) , legal costs related

to trademarks have been capitalized.

We have determined that trademarks have an indeterminable life and therefore are not being amortized.

Patent costs capitalized pursuant to ASC 350 became fully amortized in 2025.

Assets and Other Acquired Intangible Assets

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the useful life of the asset or the lease term that includes any expected renewal periods that are deemed to be reasonably assured.

estimated useful lives used for financial statement purposes are:

estimated useful lives used for financial statement purposes are (in years):

Summary of Estimated Useful Lives of Assets

Manufacturing

Government Grant

The Company has been awarded a $ 2,400,000 government

grant to fund 50% of equipment purchases for the New Facility.

As of December 31, 2025, there have been no assets acquired that are eligible

for reimbursement under the grant.

The Company expects to early adopt the Financial Accounting Standards Board’s Accounting Standards

Update 2025-10, Government Grants.

Grant proceeds will reduce the value of the assets acquired and the resulting depreciation expense

over the estimated useful lives of the assets acquired.

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

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obligations promised in a contract are identified based on the goods or services that will be transferred to the customer.

Company, this consists of the delivery of frozen beverages, which provide immediate benefit to the customer.

Company, this consists of the delivery of products, which provide immediate benefit to the customer.

the transaction price

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the transaction price to performance obligations in the contract

the Company’s 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 products, the transaction price is allocated to

that single performance obligation.

revenue when or as the Company satisfies a performance obligation

Company recognizes revenue from the sale of frozen beverages when title and risk of loss passes and the customer accepts the goods,

which generally occurs at the time of delivery to a customer warehouse.

Customer sales incentives such as volume-based rebates or

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

Shipping and handling costs are treated as fulfilment

costs and presented in distribution, selling and administrative costs.

that are received before performance obligations are recorded are shown as current liabilities.

Company evaluated the requirement to disaggregate revenue and concluded that substantially all of its revenue comes from a single

product, frozen beverages.

Company recognizes revenue from the sale of products when title and risk of loss passes and the customer accepts the goods, which

generally occurs at the time of delivery to a customer warehouse.

Customer sales incentives such as volume-based rebates or discounts

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

Shipping and handling costs are treated as fulfilment costs

and presented in distribution, selling and administrative costs.

and Development

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The Company incurred $ 128,000

and $ 115,000 ,

in research and development expenses for the years ended December 31, 2024 and 2023, respectively, which is included in general and administrative

expense in the accompanying consolidated statements of operations.

and $ 132,000 , in research and development expenses for the years ended December 31, 2025 and 2024, respectively, which is included in

general and administrative expense in the accompanying consolidated statements of operations.

and Shipping Costs

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determine if an arrangement is a lease upon inception.

A contract is or contains a lease if the contract conveys the right to control

the use of an identified asset for a period of time in exchange for consideration.

The right to control the use of an asset includes

the right to obtain substantially all of the economic benefits of the underlying asset and the right to direct how and for what purpose

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.

The Company classifies an arrangement as a finance lease if the lease

transfers ownership at the end of the term, contains a purchase option that the Company is reasonably certain to exercise, covers

the major part of the asset’s remaining economic life, or the present value of lease payments equals or exceeds substantially

all of the asset’s fair value.

Other arrangements are classified as operating leases.

Assets acquired under finance leases and

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.

Depreciation of property and equipment acquired under finance leases is recorded on a straight-line basis, and

interest is recognized on the lease liability using the effective interest method.

Lease expense for operating leases is recognized

on a straight-line basis over the lease term.

Leases with an initial or extended term of twelve months or less are not recorded on

the balance sheet.

As a lessee, the Company leases office space, machinery and equipment.

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

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

Basic net loss per share is computed by

dividing net loss by the weighted average number of shares of common stock outstanding for the period, and diluted earnings per

share is computed by including common stock equivalents outstanding for the period in the denominator.

At December 31, 2024 and 2023

any common stock equivalents would have been anti-dilutive as we had losses for the years then ended.

Basic net loss per share is computed by dividing

net loss by the weighted average number of shares of common stock outstanding for the period, and diluted earnings per share is computed

by including common stock equivalents outstanding for the period in the denominator.

At December 31, 2025 and 2024 any common stock equivalents

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

Based Compensation

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

Reclassifications

reclassifications have been made to the 2023 financial statements to conform to the 2024 presentation, namely stock-based compensation

paid to the Company’s directors has been reclassified from stock and options issued for services and shares repurchased for employee

tax withholding under the Company’s stock compensation program have been reclassified to financing activities in the consolidated

statement of cash flows, with corresponding changes reflected in the statement of stockholders’ equity.

expense has been reclassified from general and administrative expense in the 2023 financial statements to conform to the 2024 presentation.

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.

February 5, 2025, the Company entered into securities purchase agreements with several investors, pursuant to which the Company sold

an aggregate of 1,052,793 shares of common stock at a price of $ 2.85 per share in a registered direct offering.

consists of the following at December 31:

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

Schedule of Property and Equipment, Net

Schedule of Property and Equipment

Manufacturing equipment

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Depreciation expense in cost of revenue was $ 76,000 and $ 25,000 for the years ended December 31, 2025 and 2024 respectively.

subject to financing leases consist of the following at December 31:

Schedule of Assets Subject to Finance Leases

Manufacturing equipment

Customer equipment

Construction in progress

Property and equipment, gross

accumulated depreciation

Property and equipment, net of depreciation

Depreciation expense related to leased assets amounted

to $ 93,000 in 2025.

There was no depreciation expense related to leased assets in 2024.

Intangible Assets

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Amortization is recorded through the expiration date of the patent.

The amount charged to expenses for amortization of the

patent costs was $ 63,000 for each of the years ended December 31, 2024 and 2023, respectively.

The Company expects to record $ 54,000 in amortization expense in 2025.

August 2024, the Company secured receivables financing of $ 1,500,000 (the “Facility”).

Under the Facility, the Company may

borrow up to 90% of eligible customer account balances.

Amounts outstanding bear interest at a rate prime plus 1.2% (8.70% as of December

31, 2024) and collateral fees of 0.15% and are secured by accounts receivable and inventory.

The Facility expires on September 5,

2025, and renews automatically, unless notice is given or received.

As of December 31, 2024, borrowings under the Facility amounted to

$ 620,000 and $ 880,000 was available to borrow, subject to available collateral.

Unamortized deferred financing cost amounted to $ 11,000

as of December 31, 2024.

2024, the Company entered into financing agreements to purchase equipment and software as a service, with imputed or stated interest

of 15 - 19 %.

Amounts due under the agreements are as follows as of December 31, 2024:

Schedule of Financing Agreements

The amount charged to expenses for amortization of the patent

costs was $ 54,000 and $ 63,000 for the years ended December 31, 2025 and 2024, respectively.

August 2024, the Company secured receivables financing of $ 1,500,000 (the “Barfresh Facility”), and amended the facility

in September 2025 to increase the available financing to $ 2,500,000 .

In October 2025, the Company secured receivables financing of $ 1,500,000

for Arps Dairy (together with the Barfresh Facility, the “Credit Facilities”).

the Credit Facilities, the Company may borrow up to 90% of eligible customer account balances.

Amounts outstanding bear interest at a

rate based on the prime rate plus collateral fees, and are secured by accounts receivable and inventory.

The weighted average rate was

8.35% and 8.70% on December 31, 2025 and 2024, respectively.

The Credit Facilities expire on their respective annual anniversaries, and

renew automatically, unless notice is given or received .

of December 31, 2025, there was $ 1,149,000 drawn under the Credit Facilities, and $ 2,851,000 was available to borrow, subject to available

Unamortized deferred financing discount amounted to $ 25,000 as of December 31, 2025.

2024 and 2025, the Company entered into financing agreements to purchase equipment and software as a service, with a weighted

average imputed or stated interest of 23 %.

Amounts due under the agreements are due over a weighted average period of 28 months, with maturities as follows as of December 31,

of Financing Agreements

Total payments due

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Financing agreements

expense related to financing a greement s

amounted to $ 62,000 and $ 24,000 in 2025 and 2024, respectively.

Company’s debt consists of amounts owed by Arps Dairy prior to the Acquisition, and includes the following:

Advances from Arps Dairy former stockholders

Mortgage Note payable to bank in monthly installments of $ 22,000 including interest at 6.85 % with a balloon payment due January 1, 2026;

secured by real property and personal guarantees of Arps’ former stockholders.

Total payments due

current portion

( 3,031,000 )

Long-term portion

balance represents amounts due to a manager who was an Arps Dairy stockholder preceding the selling shareholders in the Acquisition (the

“Manager Note”).

The manager agreed to forgive one-half of the note payable in connection with the Acquisition, establishing

the fair value of the note as of the Acquisition date (Note 11).

The remaining balance was modified to require quarterly payments in

either cash or Barfresh Shares, at Barfresh’ election, commencing no later than April 3, 2026, with full repayment due no later

than October 3, 2026.

from Former Stockholders

to the Acquisition, Arps Dairy shareholders made advances from time to time to support working capital requirements.

Concurrently with

the close of the Acquisition, the advances were formalized and the Company assumed joint and several liability for the obligations.

Company issued notes in the aggregate principal amount of $ 800,000 to the selling shareholders, which consist of $ 400,000 of debt previously

owed by Arps Dairy (the “Existing Loans”) and $ 400,000 representing advances used to reduce the outstanding balance of the

revolving line of credit to $ 800,000 (the “New Advances”).

The Existing Loans are non-interest bearing, and were converted

into shares of the Barfresh’ common stock on February 10, 2026, prior to their maturity on April 3, 2026 .

Because New Advances

were not paid by January 3, 2026, interest accrues at the rate of 7 % per annum from October 3, 2025 through the April 3, 2026 maturity

On March 5, 2026, the maturity date of the New Advances was extended to the earlier of October 1, 2026 or the receipt of financing

secured by real estate owned by the Company.

Additionally, the amendments provide that holder may elect to have interest paid in cash

or shares valued at a 10 % discount to the volume-weighted average price of the common stock over the ten trading days immediately preceding

to the Acquisition, Arps Dairy was out of compliance with the financial covenants of its Mortgage Note held by a commercial bank.

association with and contingent upon the closing of the Acquisition, Barfresh and Arps Dairy entered into a Forbearance and Loan Modification

Agreement (the “Forbearance”) with the bank.

As a result of the Forbearance, the bank agreed that it will not exercise its

legal or contractual rights and remedies against the Company, collateral or the guarantors through January 1, 2026.

Additionally, the

bank consented to the sale and transfer of ownership of the Company to Barfresh and required Barfresh to become a guarantor of the Mortgage

Note on a joint and several basis with the former stockholders.

The Forbearance obligated the Company to repay Arps Dairy’s revolving

line of credit, and an equipment note as a condition to close the Acquisition.

The Company paid loan modification and legal fees of approximately

$ 25,000 for the Forbearance.

issued 29,020 shares valued at approximately $ 97,000 in consideration for the continuing guarantee of the former Arps Dairy stockholders

through the term of the Forbearance.

The expense is included in interest expense in the accompanying statement of operations for the

year ended December 31, 2025.

January 20, 2026, effective January 1, 2026, the parties agreed to extend the Forbearance through February 1, 2026, with an option to

further extend through March 1, 2026.

The option was exercised, and the Company repaid the Mortgage Note on March 6, 2026, releasing

all guarantor obligations of the former shareholders.

July 2023 to March 2024, the Company executed subscription agreements for substantially all of a $ 2,000,000 privately placed convertible

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

Finally, between March 27 and 29, 2024 the Company drew down

Finally, between March 27 and 29, 2024 the Company drew

$ 136,000 in convertible debt and converted the total drawn into 124,208 shares, settling all debt.

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Commitments and Contingencies

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 March 31, 2025.

The Company incurred lease expense of $ 85,000 and $ 80,000 for the years ended December 31, 2024

Commitments, Construction and Demolition

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

multiple times, most recently through March 31, 2026 .

The Company incurred lease expense of $ 85,000 for the years ended December 31,

2025 and 2024, respectively.

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

31, 2024 and 2023.

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

December 31, 2025 and 2024.

The lease was not extended on March 31, 2026, and new commitments for headquarters facilities are leased

on a month-to-month basis.

2023, the Arps Dairy sold its manufacturing facility (the “Existing Facility”) and purchased a different facility, executing

both transactions with the same counterparty.

Following the exchange, Arps Dairy commenced to expand the acquired property to provide

a 44,000 square foot of production and office space (the “New Facility”).

Arps Dairy continues to operate at the Existing

Facility under a leasing arrangement.

The initial lease term was 18 months, and the lease was classified as an operating lease.

Additionally,

the counterparty leases space at the New Facility.

Neither party pays rent for the space that it occupies.

connection with the Acquisition, the lease on the Existing Facility was extended until September 30, 2026 to permit the completion of

the New Facility.

Right of use assets and lease liabilities related to the free rent periods for the Existing Facility and New Facility

were considered immaterial at the Acquisition date and were not considered in accounting for the business combination (Note 11).

Company is subject to penalties of $ 1,000 per day if it has not vacated the Existing Facility by September 30, 2026.

New Facility expansion is expected to cost $ 6,000,000 , of which $ 3,706,000 was incurred prior to the Acquisition (the “Construction

Obligations”).

As of December 31, 2025, Arps Dairy had incurred $ 4,388,000 , $ 1,782,000 of which was construction related.

In conjunction

with the Acquisition, the contractor agreed to forebear from filing a mechanics lien against the building through December 2, 2025.

Additionally,

the agreement with the contractor stipulates that if any portion of the balance remains outstanding after December 31, 2025, it will

accrue interest at 8 % per annum from day sixty-one until repayment is received, subject to rate adjustment for scope modifications.

Company is liable for the demolition of the Existing Facility, once it has vacated the premises.

The Company has been awarded a $ 100,000

grant to pay for the demolition, which expires on December 31, 2026 .

No liability is currently recorded for the demolition as management

believes the grant is sufficient to cover the liability.

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

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to conclusion.

2025, the California State Court heard on the merits of fraud claims included in the complaint and determined that there was sufficient

evidence to allow the claims to be heard.

A trial date has been set for April 2027.

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

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2024, the Company issued 201,859 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.

2024, the Company issued 124,208 shares of common stock pursuant to the conversion of debt and accrued interest, as more fully described

February 5, 2025, the Company entered into securities purchase agreements with several investors, pursuant to which the Company sold

an aggregate of 1,052,793 shares of common stock at a price of $ 2.85 per share in a registered direct offering.

October 3, 2025, in connection with continuing guarantees on the Mortgage Note, 29,020 shares of common stock were granted to the selling

stockholders of Arps Dairy.

2025, the Company issued 141,296 shares of common stock for equity-based compensation.

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Outstanding at December 31, 2025

following is a summary of all outstanding warrants as of December 31, 2024:

Summary of Outstanding Warrants

Warrant issuance event

Number of warrants

Exercise price per share

Remaining term in years

Intrinsic value at date of grant

Settlement of deferred compensation

Incentive Plan

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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.

shares for future issuance, subject to adjustment under the plan’s evergreen provision.

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

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vest or available for issuance are 1,687,000 as of December 31, 2025.

Employee Stock Purchase Plan

In 2024, the Company adopted an Employee Stock Purchase Plan (the “ESPP”)

which permits employees to defer compensation to purchase shares at a 15 % discount to the lower of the market price at the beginning or

end of the deferment period.

Stock Purchase Plan

2024, the Company adopted an Employee Stock Purchase Plan (the “ESPP”) which permits employees to defer compensation to purchase

shares at a 15 % discount to the lower of the market price at the beginning or end of the deferment period.

There were no deferrals in

2025 or 2024.

The Company reserved 1,400,000 shares for issuance under the ESPP.

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Summary of Stock Options Activity

Number of Options

Weighted average exercise price per share

Remaining term in years

average exercise

price per share

term in years

Outstanding on December 31, 2023

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Schedule of Restricted Stock Award and Restricted Stock Unit Activity

Number of shares

Weighted average grant date fair value

Unvested at January 1, 2023

average grant

date fair value

Unvested at December 31, 2023

Unvested at December 31, 2024

The Company issues 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.

Unvested at December 31, 2025

Company issues 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.

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Schedule of Performance Stock Unit Activity

Number of shares

Weighted average grant date fair value

average grant

date fair value

Unvested at December 31, 2023

Unvested January 1, 2025

Unvested at December 31, 2025

Unvested and expected to vest at December 31, 2024

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, 2025 and 2024 is summarized below:

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Change in valuation allowance

Provision for income taxes

Benefit of income taxes

$ ( 285,000 )

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

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

Statutory federal income tax rate

Permanent differences

Change in valuation allowance

Total Income tax

federal income tax rate

$ ( 632,000 )

in valuation allowance

benefit of income taxes

$ ( 285,000 )

of the net deferred income tax assets at December 31, 2025 and 2024 were as follows:

Schedule of Components of Net Deferred Income Tax Assets

Net operating loss carryover

Deferred tax asset - Net operating loss carryover

Valuation allowance

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( 13,923,000 )

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

than not that some portion or all of the deferred tax assets will not be recognized.

After consideration of all the evidence, both positive

and negative, management has determined that a $ 13,923,000 and $ 14,567,000 allowance at December

31, 2024 and 2023, respectively, is necessary to reduce the deferred tax assets to the amount that will more likely than not be realized.

The decrease in the valuation allowance for the current period is $ 644,000 resulted from a lower blended state tax rate, partially offset

by current year tax losses and the adjustments to finalize the 2023 tax loss upon filing the tax returns.

Net deferred tax asset

Deferred tax liability - depreciation

Net deferred tax asset

Company recognized an income tax benefit of $ 285,000 related to the release of valuation allowance as a result of the Acquisition

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

is more likely than not that some portion or all of the deferred tax assets will not be recognized.

After consideration of all the

evidence, both positive and negative, management has determined that a 100 % valuation allowance,

amounting to $ 13,635,000 and $ 13,923,000 at December 31, 2025 and 2024, respectively, is necessary to reduce the net deferred tax assets

to the amount that will more likely than not be realized.

The decrease in valuation allowance of $ 288,000 and $ 644,000 in 2025 and 2024,

respectively, resulted from a lower blended state tax rate, partially offset by current year tax losses, and in 2025, deferred tax liabilities

recognized in the Acquisition and adjustments to finalize the 2024 tax loss upon filing the tax returns.

of December 31, 2025, the Company has a net operating loss carry forward to offset future taxable income of approximately $ 58,603,000 ,

$ 28,482,000 of which begins to expire in 2033.

Net operating loss carry forwards of $ 26,554,000 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.

Net operating loss carryforwards of $ 30,122,000 may be carried forward indefinitely.

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.

March 27, 2020, the U.S.

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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.

The Company 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

Company operates in one business segment.

The Chief Executive Officer is the chief operating decision maker whom assesses

performance and allocates resources based on actual and projected operating results.

Sales to the following customers represented

more than 10% of total sales for the years ended December 31, 2024 and 2023:

The Company received a refund of $ 92,000 in March 2024.

claims were permitted in a variety of circumstances with varying degrees of subjectivity and clear authoritative guidance.

are subject to IRS inspection which may occur at any time prior to expiration of the statute of limitations, generally two years from

the date the refund was paid.

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 thereof.

Business Segments and Major Customers

a result of the Acquisition, the Company operates in two business segments.

The Chief Executive Officer is the chief operating decision

maker (“CODM”) who assesses performance and allocates resources based on actual and projected operating results.

reviews revenue and gross profit in evaluating the efficiency of strategies within each segment, ensuring that financial and operational

resources are optimized and aligned with the Company’s overall strategic objectives.

The tables below present selected segment data for

the years ended December 31, 2025 and 2024:

of Business Combination Reportable Segment

Frozen Beverages and Food

Raw and Processed Milk

Frozen Beverages and Food

Raw and Processed Milk

Total operating expenses

( 6,546,000 )

Bargain purchase

Debt guarantee expense

Interest expense

Net loss before benefit of income tax

$ ( 2,979,000

$ ( 2,825,000 )

Assets are not regularly allocated to segments or

considered by the CODM in assessing the performance of segments as there is a high degree of commonality in the assets utilized by the

Company’s segments.

Therefore, assets by segment are not presented.

to the following customers represented more than 10% of total sales for the years ended December 31, 2025 and 2024:

Schedule of Revenue by Major Customers by Reporting Segments

Customer A– Frozen Beverages and Food

Customer B– Raw and Processed Milk

Customer C– Frozen Beverages and Food

Customer D– Frozen Beverages and Food

Supplemental Cash Flow Information

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Cash paid during the year for:

Amounts included in the measurement of lease liabilities

Non-cash financing and investing activities:

Financed acquisition of long-term assets

Convertible note issued in exchange for trade payables

Accounts payable arising from acquisition of long-term assets

Conversion of debt and interest to equity

Value of shares relinquished in modification of stock-based compensation awards (Note 7)

Convertible notes issued in exchange for trade payables

Business Combination

October 3, 2025, the Company acquired all of the outstanding stock of Arps Dairy, a dairy processing company, in a stock purchase accounted

for as a business combination.

Our continuing dispute with the Manufacturer and the resulting loss of product supply in 2022 negatively impacted

our financial position, results of operations and cash flow.

Subsequently, we contracted with a co-manufacturer for additional smoothie

bottle manufacturing capacity.

While expanded capacity became available in the fourth quarter of 2024, we were notified in 2025 that other

co-manufacturers elected to discontinue production of smoothie cartons and smoothie bottles in December 2025 and January 2026, respectively.

The Acquisition was undertaken to resolve constrained capacity experienced since 2022 under the co-manufacturing business model.

purchase price of Arps Dairy stock is allocated to the identified assets and liabilities based on their estimated

respective fair values as of October 3, 2025, with the difference recorded as a bargain purchase in the accompanying consolidated

statement of operations for the year ended December 31, 2025:

of Business Acquisition

Acquisition consideration

Cash paid to retire Arps Dairy debt

Fair value of assets and liabilities

Accounts receivable

Other current assets

Property, plant and equipment

Total assets acquired

Accounts payable and accrued expenses

Accounts payable - construction in progress

Mortgage Note

Stockholder advances

Manager note payable

Deferred tax liability

Total liabilities assumed

Bargain purchase

Purchase price allocation

The Company recognized a bargain purchase of $ 767,000

which is recognized as a non-operational gain in the accompanying consolidated statement of operations for the year ended December 31,

The Company believes that the bargain purchase is a result of the financial distress experienced by Arps Dairy, the condition of

Old Facility, and the lack of progress on the New Facility due to financing constraints.

Company incurred $ 518,000 in transaction costs related to the Acquisition during the year ended December 31, 2025.

The costs are classified

as general and administrative expense in the accompanying consolidated statement of operations.

The results of operations for Arps Dairy

have been included in the Company’s consolidated statement of operations since the closing date of the Acquisition on October 3,

Arps Dairy’s total revenues and loss for the year ended December 31, 2025 amounted to $ 2,852,000 and $ 921,000 , respectively.

following unaudited pro forma financial information shows the combined results of operations of the Company and Arps Dairy, as if the

Acquisition had occurred as of the beginning of the years presented.

Pro forma net loss for 2025 excludes $ 767,000 bargain purchase gain,

$ 285,000 income tax benefit, $ 518,000 of transaction costs, and $ 97,000 of debt guarantee expense accounted for as a separate transaction

and expensed over the guarantee period (Note 5), as all are directly attributable to the Acquisition.

The pro forma data is presented

for informational purposes only and does not purport to be indicative of the results of future operations or of the results that would

have occurred had the Acquisition taken place in the periods noted below.

of Business Combination Pro Forma Information

Pro forma revenue

Pro forma net loss

$ ( 3,961,000 )

$ ( 3,309,000 )

Pro forma net loss per share, basic and fully diluted

the years ended December 31, 2025 and 2024, the Company used cash for operations of $ 1,666,000 and $ 2,229,000 , respectively.

As of December

31, 2024, the Company had $ 235,000 of cash.

31, 2025, the Company had $ 325,000 cash and its current liabilities exceeded current assets by $ 6,802,000 .

Company has a history of operating losses and negative cash flow, which are expected to improve with growth.

2 unchanged sentences

to procure certain products necessary to achieve our growth projections and in elevated legal costs.

mitigate the impact of procurement constraints, the Company built and paid for inventory in anticipation of third quarter seasonal requirements,

and invested in materials necessary to carry out trials and initial production runs at new co-manufacturers.

The Company secured a receivables-based

line of credit in August 2024 of $ 1,500,000 , with $ 880,000 available to borrow as of December 31, 2024.

Management expects that the cash

cycle will shorten as additional contracted capacity improves in production volume and efficiency in 2025.

Additionally, in May 2024,

the Company obtained non-recourse litigation financing to allow vigorous pursuit of the complaint against the Manufacturer without further

expense to the Company.

Finally, as described in Note1, the Company raised $ 3,000,000 through the sale of the Company’s common

stock in February 2025.

alleviated, the financial position at December 31, 2024 and historical results raise substantial doubt about the Company’s ability

The Acquisition is expected to alleviate

the supply constraints.

Company paid $ 1,223,000 , net of cash acquired, to purchase the Arps Dairy stock, and incurred $ 518,000 in acquisition costs.

Additionally,

the Arps Dairy Mortgage Note of $ 2,262,000 , Construction Obligations for previously incurred services of $ 2,189,000 , Existing Loans of

$ 400,000 and New Advances of $ 400,000 became short-term financial commitments of the Company upon consummation of the Acquisition.

Company increased its receivables-based line of credit in September 2025 to $ 2,500,000 .

In October 2025, Arps Dairy secured a receivables-based line of credit of $ 1,500,000 .

In December 2025, the Company was granted $ 2,400,000

to fund up to 50 %

of the cost of new equipment purchases and installation.

In February 2026, New Advances of $ 400,000

were converted into shares of the Company’s common stock.

Finally, in March 2026, the Company raised $ 7,528,000

through the sale of convertible promissory notes.

were used to retire the Mortgage Note and are expected to be used to repay the Construction Obligations incurred, as well as complete

construction of the New Facility.

alleviated, the Company’s financial position at December 31, 2025 and historical results raise substantial doubt about its ability

to continue as a going concern.

As described, the Company has completed steps to mitigate dispute related issues and raise capital.

actions taken have resulted in the alleviation of the substantial doubt about the Company’s ability to continue as a going concern.

As described, the Company has completed steps to improve liquidity.

The actions taken have resulted in

the alleviation of the substantial doubt about the Company’s ability to continue as a going concern.

Subsequent Events

January 20, 2026, effective January 1, 2026, the parties agreed to extend the Forbearance through February 1, 2026, with an option to

further extend through March 1, 2026.

The option was exercised, and the Company repaid the Mortgage Note on March 6, 2026, releasing

all guarantor obligations of the former shareholders.

February 10, 2026, the Company elected to convert the $ 400,000 balance of the Existing Loans and $ 20,000 of the Manager Note into 129,032

and 6,540 of the Company’s common stock, respectively.

March 5, 2026, the maturity date of the New Advances to Arps Dairy former stockholders was extended to the earlier of October 1, 2026

or the receipt of financing secured by real estate owned by the Company.

Additionally, the amendments provide that holder may elect to

have interest paid in cash or shares valued at a 10 % discount to the volume-weighted average price of the common stock over the ten trading

days immediately preceding the payment.

on March 5, 2026 and through March 23, 2026, the Company obtained subscriptions for unsecured senior convertible promissory notes in

the aggregate amount of $ 7,528,000 (the “Notes”) from accredited investors.

Net proceeds amounted to $ 7,387,000 , after issuance

costs of $ 141,000 .

The Notes bear interest at 10 % per annum for the first 12 months of the 24-month term, regardless of earlier payment

or conversion (the “Minimum Interest”), and are mandatorily convertible as to principal and interest into shares of the Company’s

common stock at any time prior to maturity at the conversion price of $ 2.90 per share (the “Conversion Price”), if the common

stock of the registrant trades at $ 4.35 per share (150% of the Conversion Price) for 20 out of the preceding 30 consecutive trading days.

The holders of the Notes have the option on up to 10 occasions to convert all or any portion of the principal and interest into shares

of the registrant’s common stock at the Conversion Price.

The registrant may prepay the Notes at any time prior to maturity, subject

to payment of the Minimum Interest, any other accrued but unpaid interest, and a prepayment penalty of 5% if the amount of the Note principal

that is prepaid does not exceed 50% or a prepayment of 10% if the amount of the Note principal that is prepaid exceeds 50%.

is to be paid quarterly in arrears beginning April 1, 2026 and can be paid in either cash or shares of the registrant’s common

stock at the election of the Company.

If paid in stock, the shares must be registered and valued at a 10% discount to the 10-day volume-weighted

average price.

of the Notes were issued 2,352,500 detachable warrants to purchase common stock (the “Warrants’) at a price of $ 3.20 per

share (the “Exercise Price”) for a 4 -year term from date of issuance in an amount equal to 100 % of their investment amounts.

The Company may call the Warrants if the common stock of the registrant trades at $ 4.80 per share ( 150 % of the Exercise Price) for 20

out of the preceding 30 consecutive trading days.

Additionally, 22,655 broker warrants were issued at an exercise price of $ 3.48 per

share for a 3 -year term, expiring March 10, 2029.

the Company sell any of its securities in a capital-raising transaction at a price lower than the Conversion Price while any Notes are

outstanding, the Conversion Price will adjust to that lower price.

The Warrant Exercise Price will adjust to a 10 % premium to the new

Note conversion price.

Company has agreed to file a registration statement covering the shares underlying the Notes, interest on the Notes, and the Warrants

by May 4, 2026.

Failure to file the registration statement within such period would result in a penalty of 1 % per month for every month

that the registration statement is not so filed.

On March 6, 2026, the Mortgage Note was repaid in

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