What changed in this filing

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Item 1. Financial Statements

2026-05-14 compared with 2025-11-06 · 314 added, 253 removed, 216 unchanged (72% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

September 30,

Current assets:

10 unchanged sentences

Line of credit

Accounts payable

Accounts payable - trade

Accounts payable - construction in progress

Disputed co-manufacturer accounts payable (Note 5)

2 unchanged sentences

Financing agreements - current

Notes payable

Total current liabilities

Financing agreements

Convertible notes, net of $ 619,000 discount at March 31, 2026

Total liabilities

4 unchanged sentences

23,000,000 shares authorized;

and 15,940,261 and 14,746,172 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively

and 16,104,853 and 15,969,281 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively

Additional paid in capital

7 unchanged sentences

Consolidated Statements of Operations

the three and nine months ended September 30, 2025 and 2024

For the three months ended September 30,

For the nine months ended September 30,

the three months ended March 31, 2026 and 2025

For the three months ended March 31,

Cost of revenue

5 unchanged sentences

Loss from operations

( 1,866,000 )

( 1,949,000 )

Interest expense

1 unchanged sentence

$ ( 761,000 )

$ ( 1,931,000 )

$ ( 1,973,000 )

Per share information - basic and fully diluted:

3 unchanged sentences

Food Group Inc.

Consolidated Statements of Cash Flows

the nine months ended September 30, 2025 and 2024

Statements of Cash Flows

the three months ended March 31, 2026 and 2025

For the three months ended March 31,

$ ( 661,000 )

3 unchanged sentences

Depreciation and amortization

Amortization of debt discount

Amortization of financing discounts

Changes in assets and liabilities

Accounts receivable

( 1,660,000 )

Other receivables

Prepaid expenses and other assets

Accounts payable

Accounts payable - trade

( 1,383,000 )

Accrued expenses

1 unchanged sentence

( 2,382,000 )

( 1,544,000 )

Investing activities

5 unchanged sentences

( 4,398,000 )

Issuance of convertible debt

( 1,402,000 )

Issuance of convertible debt and warrants, net of $ 154,000 issuance cost

Repayment of mortgage note

( 2,170,000 )

Financing agreement payments

2 unchanged sentences

Net cash provided by financing activities

Net increase (decrease) in cash

( 1,490,000 )

Net increase in cash

Cash, beginning of period

Cash, end of period

Cash paid for interest

Non-cash financing and investing activities:

Conversion of notes payable to equity

Financed acquisition of long-term assets

Conversion of debt and interest to equity

Convertible notes issued in exchange for trade payables

Cash paid for interest

Accounts payable arising from acquisition of long-term assets

Issuance of warrants to brokers in convertible debt and warrant offering

the accompanying notes to the condensed consolidated financial statements

4 unchanged sentences

25, 2010 in the State of Delaware.

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

beverages, particularly, smoothies, shakes and frappes.

The Company is engaged in the manufacturing and distribution of frozen beverages and food,

including ready-to-drink and ready-to-blend smoothies, shakes, frappes and ice cream mix, and raw and processed milk.

of Presentation

accompanying condensed consolidated financial statements are unaudited.

These unaudited interim condensed consolidated financial statements

have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and

applicable rules and regulations of the U.S.

Securities and Exchange Commission (“SEC”) regarding interim financial reporting.

Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been

condensed or omitted pursuant to such rules and regulations.

Accordingly, these interim condensed consolidated financial statements should

be read in conjunction with the audited consolidated financial statements for the fiscal year ended December 31, 2024 included in the

Company’s Annual Report on Form 10-K, as filed with the SEC on March 27, 2025.

In management’s opinion, the unaudited interim

condensed consolidated financial statements reflect all adjustments, which are of a normal and recurring nature, that are necessary for

a fair presentation of financial results for the interim periods presented.

Operating results for any quarter are not necessarily indicative

of the results for the full fiscal year.

accompanying condensed consolidated financial statements are unaudited, except for the condensed balance sheet as of December 31, 2025.

These unaudited interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally

accepted in the United States of America (“GAAP”) and applicable rules and regulations of the U.S.

Securities and Exchange

Commission (“SEC”) regarding interim financial reporting.

Certain information and footnote disclosures normally included

in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

these interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements

for the fiscal year ended December 31, 2025 included in the Company’s Annual Report on Form 10-K, as filed with the SEC on April

In management’s opinion, the unaudited interim condensed consolidated financial statements reflect all adjustments, which

are of a normal and recurring nature, that are necessary for a fair presentation of financial results for the interim periods presented.

Operating results for any quarter are not necessarily indicative of the results for the full fiscal year.

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.

The consolidated financial statements include the financial statements of

the Company and our wholly-owned subsidiaries, Barfresh Inc.

and Barfresh Corporation Inc.

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

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

3 unchanged sentences

Concentrations

Company is exposed to supply risk as a result of concentration in its vendor base resulting from the use of a limited number of contract

the Acquisition, Arps Dairy has commenced production of virtually all of the Company’s legacy product lines.

Historically, the

Company was exposed to supply risk as a result of concentration in its vendor base resulting from the use of a limited number of contract

manufacturers.

Purchases from the Company’s significant contract manufacturers as a percentage of all finished goods purchased

were as follows:

comparison of production by source is summarized in the table below:

Schedule of Contract Manufacturers Percentage of Finished Goods

For the three months ended September 30,

For the nine months ended September 30,

Three months ended March 31,

Owned production facility

Co-manufactured:

Manufacturer A

Manufacturer B

Other Manufacturers

Concentration percentage

A has notified the Company that it will cease supplying smoothie bottles in February 2026.

Manufacturer B, which makes

smoothie cartons, is currently installing bottling equipment which is expected to be operational in January 2026 with approximately

400% additional capacity of bottles over Manufacturer A.

Manufacturer B will discontinue making smoothie cartons in December 2025 in

preparation for the transition to bottles.

The Company’s acquisition of Arps (Note 8) is expected to mitigate supply risks

associated with co-manufacturing arrangements.

Manufacturer C

Manufacturer D

Concentration risk, percentage

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.

Approximately 30% of our revenue in the quarter ended March 31, 2026 was produced in

2025, prior to the discontinuance.

The commencement of production at Arps Dairy is a significant step towards mitigating the impact

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

of Significant Accounting Policies

have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31,

2024, as filed with the SEC on March 27, 2025 that have had a material impact on our condensed consolidated financial statements and

2025, as filed with the SEC on April 15, 2026 that have had a material impact on our condensed consolidated financial statements and

related notes.

Company’s financial instruments consist of cash, accounts receivable and accounts payable.

The carrying value of the Company’s

financial instruments approximates their fair value.

Company’s financial instruments consist of cash, accounts receivable, accounts payable, the line of credit, financing agreements,

notes payable and convertible notes.

The carrying value of the Company’s financial instruments approximates their fair value.

Receivable and Allowances

6 unchanged sentences

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

As of September 30,

As of March 31, 2026

and December 31, 2025, there was no allowance for credit losses.

There was no credit loss expense for the three and nine months

ended September 30, 2025 and 2024.

There was no credit loss expense for the three months ended March 31,

2026 and 2025.

Company has been awarded a $ 2,400,000 government grant to fund 50% of equipment purchases for the New Facility.

As of March 31, 2026,

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.

Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components

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

The Company determined

that its convertible instruments issued in 2026 did not include embedded derivatives that required bifurcation due to the scope exception

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

5 unchanged sentences

for goods or services that are transferred is probable.

For the Company, the contract is the approved sales order, which may also be

supplemented by other agreements that formalize various terms and conditions with customers.

For the Company, the contract is the approved sales order, which may also

be supplemented by other agreements that formalize various terms and conditions with customers.

the performance obligation in the contract

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

For the Company,

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

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

the transaction price

transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods and

is generally stated on the approved sales order.

transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods

and is generally stated on the approved sales order.

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

6 unchanged sentences

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 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.

and Shipping Costs

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

For the three months ending September 30, 2025

and 2024, storage and outbound freight totaled approximately $ 491,000 and $ 480,000 , respectively.

For the nine months ended September

30, 2025 and 2024, storage and outbound freight totaled approximately $ 1,157,000 and $ 1,061,000 , respectively.

For the three months ending March 31, 2026 and

2025, storage and outbound freight totaled approximately $ 443,000 and $ 391,000 , respectively.

and Development

1 unchanged sentence

The Company incurred approximately

$ 33,000 and $ 52,000 in research and development expense for the three months ended September 30, 2025 and 2024, respectively, and $ 82,000

and $ 99,000 for the nine months ended September 30, 2025 and 2024, respectively.

the three and nine months ended September 30, 2025 and 2024, common stock equivalents have not been included in the calculation of net

loss per share as their effect is anti-dilutive as a result of losses incurred.

$ 24,000 and $ 19,000 in research and development expense for the three months ended March 31, 2026 and 2025, respectively.

the three months ended March 31, 2026 and 2025, common stock equivalents have not been included in the calculation of net loss per share

as their effect is anti-dilutive as a result of losses incurred.

Pronouncements

4 unchanged sentences

Schedule of Inventory

September 30,

Raw materials and packaging

3 unchanged sentences

and equipment, net consist of the following:

Schedule of Property and Equipment, Net

September 30,

Schedule of Property and Equipment

Manufacturing equipment

6 unchanged sentences

Property and equipment, net of depreciation

expense related to these assets was approximately $ 24,000 and $ 55,000 for the three months ended September 30, 2025 and 2024, respectively,

and $ 132,000 and $ 168,000 for the nine months ended September 30, 2025 and 2024, respectively.

Depreciation expense in cost of revenue

was $ 9,000 and $ 6,000 for the three months ended September 30, 2025 and 2024, respectively, and $ 25,000 and $ 19,000 for the nine months

ended September 30, 2025 and 2024, respectively.

Leased assets amounting to $ 454,000 are included in construction in progress at September 30, 2025.

expense related to these assets was approximately $ 72,000 and $ 53,000 for the three-months periods ending March 31, 2026 and 2025, respectively.

Depreciation expense in cost of revenue was $ 55,000 and $ 7,000 for the three-month periods ending March 31, 2026 and 2025, respectively.

subject to financing leases consist of the following:

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

expense related to leased assets amounted to $ 5,000 and $ 2,000 for the three-month periods ending March 31, 2026 and 2025, 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 $ 1,250,000

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

8.2% and 8.7% March 31, 2026 and 2025, respectively.

The Credit Facilities expire on their respective annual anniversaries, and renew

automatically, unless notice is given or received .

of March 31, 2026, there was $ 543,000 drawn under the Credit Facilities, and $ 3,207,000 was available to borrow, subject to available

Unamortized deferred financing discount amounted to $ 16,000 as of March 31, 2026.

Company has entered into financing agreements to purchase equipment and software as a service, with a weighted average imputed or stated

interest of 22 %.

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

of March 31, 2026:

of Financing Agreements

2026 (9 months)

Total payments due

Financing agreements

current portion

Financing agreements

Of Notes Payable

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

February 10, 2026, the Company elected to convert $ 400,000 of the Advances from Arps Dairy former stockholders 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 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

Mortgage Note was repaid in March 2026 with the proceeds of the convertible note and warrant issuance.

Notes and Warrants

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, including $ 230,000 ( 3.1 % ) sold to related parties.

Net proceeds amounted to $ 7,374,000 , after

cash issuance costs of $ 154,000 .

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.

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%.

Interest 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

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

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

The Company may call the Warrants (the “Call”) if the common stock of the registrant trades at or above $ 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.

warrants are legally detachable, separately exercisable and accounted for as equity.

Additionally, the conversion feature meets the scope

exception of ASC 815 and was not bifurcated from the debt host contract.

issuance, the Company allocated $ 484,000 of the net proceeds to the warrants using the relative fair value method.

The warrants were

valued using the Black-Scholes option pricing model, based on the difference between two options, representing the value of the

warrant excluding the value derived from appreciation of the Company’s common stock in excess of the strike price of the Call,

with the following Level 3 inputs:

of Black-scholes Option Pricing Model

Risk-free interest rate

Expected volatility

Expected term (years)

Expected dividends

Exercise price

allocation resulted in a corresponding debt discount of $ 642,000 , inclusive of $ 148,000 in transaction costs, which is being amortized

to interest expense over the term of the note using the effective interest method, resulting in $ 23,000 in interest expense for the three

months ended March 31, 2026.

Commitments and Contingencies

Company leases office space under a non-cancellable operating lease which expired on March

31, 2023 , and was extended

in a series of short-term amendments through March 31, 2026 .

The Company’s periodic lease cost was approximately $ 20,000

for each of the three months ended September 30, 2025 and 2024 and $ 60,000

for each of the nine months ended September 30, 2025 and 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’s periodic lease cost was approximately $ 20,000 for each of the

three-month periods ending March 31, 2026 and 2025.

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

44,000 square feet 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.

The Company is subject to penalties of $ 1,000

per day if it has not vacated and demolished the Existing Facility by September 30, 2026, subject to limitations if delays are caused by a force majeure event

or construction-related delays that are beyond the Company’s reasonable control.

of March 31, 2026, the New Facility expansion is expected to cost $ 6,700,000 ,

including equipment to efficiently manufacture Barfresh legacy products (the “Construction Obligations”).

The Company has incurred $ 4,840,000 ,

including $ 1,861,000

in Accounts Payable – Construction in Progress of which $ 1,782,000 is

owed to the construction contractor.

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.

22 unchanged sentences

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

1 unchanged sentence

The disruption in its supply

resulting from the dispute has adversely impacted the Company’s results of operations and cash flow.

The Company has mitigated

the impact of the supply disruption with the introduction of its single-serve smoothie cartons, the identification of other co-manufacturing

sources, and the acquisition of Arps Dairy, Inc.

(“Arps”), as described in Note 8.

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

3 unchanged sentences

currently the defendant in one legal proceeding for an amount less than $ 100,000 .

Our legal counsel and management believe the probability

of a material unfavorable outcome is remote.

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

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

Under the Facility, the Company may borrow up to 90% of eligible customer account

Amounts outstanding bear interest at a rate prime plus 1.2% and collateral fees of 0.15% and are secured by accounts receivable

and inventory.

The Facility expires on September 5, 2026, and renews automatically, unless notice is given or received.

As of September

30, 2025, there was $ 1,759,000 drawn under the Facility, and $ 12,000 in unamortized discount.

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

weighted average imputed or stated interest of 24 %.

due under the agreements are as follows as of September 30, 2025:

Schedule of Financing Agreements

2025 (3 months)

Total payments due

Financing agreements

current portion

Financing agreements

Commitments under lease financing arrangements amounting

to $ 196,000 and $ 304,000 are included in financing agreements – current and financing agreements, respectively, at September 30,

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

debt offering.

The debt was available to be drawn in 25% increments, maturing on the anniversary of the draw, bearing interest at 10%

per annum for the term, regardless of earlier payment or conversion, and was 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

If the Company had not exercised the mandatory conversion, the holder of the debt had 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, the Company 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.

Finally, on March 27 and 29, 2024 the Company

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

Debt drawdowns included

the non-cash settlement of $ 30,000 and $ 71,000 in 2023 and 2024, respectively.

Our legal counsel and management believe a material

unfavorable outcome to be remote.

Stockholders’ Equity

following are changes in stockholders’ equity for the nine months ended September 30, 2024 and 2025:

following are changes in stockholders’ equity for the three months ended March 31, 2025 and 2026:

Schedule of Changes in Stockholders’ Equity

2 unchanged sentences

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

Shares issued in settlement of former Arps shareholder and manager notes

Issuance of detachable warrants

Equity-based compensation expense

Conversion of debt and interest (Note 5)

Registered issuance of common stock

( 1,973,000 )

Balance September 30, 2024

Balance March 31, 2025

$ ( 64,382,000 )

2 unchanged sentences

$ ( 66,315,000 )

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

Equity-based compensation expense

Registered issuance of common stock

( 1,931,000 )

Balance September 30, 2025

Shares issued in settlement of former Arps shareholder and manager notes

Issuance of detachable warrants

Balance March 31, 2026

$ ( 66,976,000 )

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.

are no warrants outstanding as of September 30, 2025.

association with the issuance of convertible notes (Note 4), 2,375,155 warrants were issued at a weighted average exercise price of $ 3.20

per share and remain outstanding as of March 31, 2026.

The weighted average remaining term of the warrants is 3.9 years as of March 31,

Incentive Plan

of September 30, 2025, the Company has $ 514,000 of total unrecognized share-based compensation expense relative to unvested options,

stock awards and stock units, which is expected to be recognized over the remaining weighted average period of 2.2 years.

following is a summary of stock option activity for the nine months ended September 30, 2025:

of March 31, 2026, the Company has $ 457,000 of total unrecognized share-based compensation expense relative to unvested options, stock

awards and stock units, which is expected to be recognized over the remaining weighted average period of 2.2 years.

following is a summary of stock option activity for the three months ended March 31, 2026:

Schedule of Stock Options Activity

Weighted average

exercise price

1 unchanged sentence

Outstanding on December 31, 2025

Outstanding on September 30, 2025

Exercisable, September 30, 2025

Outstanding on March 31, 2026

Exercisable, March 31, 2026

fair value of the options issued was calculated using the Black-Scholes option pricing model, based on the following:

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

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

Expected term (in years)

3 unchanged sentences

Weighted average grant date fair value per share

following is a summary of restricted stock award and restricted stock unit activity for the nine months ended

Schedule of Restricted Stock Award and Restricted Stock Unit Activity

average grant

date fair value

Unvested at January 1, 2025

Unvested at September 30, 2025

Company issues performance share units (“PSUs”) that represented shares potentially issuable based upon Company and individual

performance in the years of issuance.

following table summarizes the activity for the Company’s unvested PSUs for the nine months ended September 30, 2025:

Schedule of Performance Stock Unit Activity

average grant

date fair value

Unvested January 1, 2025

Unvested at September 30, 2025

Stock and Performance Share Units

has been no change in restricted stock or performance share units since December 31, 2025.

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

2 unchanged sentences

valuation allowance on all tax assets.

As of September 30, 2025, the estimated effective tax rate for 2025 was zero .

As of March 31, 2026, the estimated effective tax rate for 2026 was zero .

are open statutes of limitations for taxing authorities in federal and state jurisdictions to audit our tax returns from 2019 through

1 unchanged sentence

Our policy is to account for income tax related interest and penalties in income tax expense in the statement of

the three and nine months ended September 30, 2025 and 2024, the Company did not incur any interest and penalties associated with tax

As of September 30, 2025, the Company did not have any significant unrecognized uncertain tax positions.

Subsequent Event – Business Combination

Company entered into a stock purchase agreement (the “Purchase Agreement”) dated September 15, 2025, among the Company, Arps,

and the shareholders of Arps (the “Arps Shareholders”).

On October 3, 2025, the Company, Arps and the Arps Shareholders completed

the closing under the Purchase Agreement.

As a result, Arps became a wholly-owned subsidiary of the Company.

Company repaid approximately $ 1.3

million of certain existing debt of Arps, including an asset-based revolving facility, and is in the process of refinancing a $ 2.2

million mortgage loan (the “Mortgage”).

The Company utilized a portion of its secured receivables financing facility, which had been recently

increased to $ 2.5

million, to effect the debt repayment.

To obtain the forbearance agreement from the existing mortgage lender, the Company provided

its guaranty of the Mortgage loan and issued restricted shares of its common stock, valued at $ 100,000 ,

to the Arps Shareholders in exchange for continuing their guarantees with the mortgage lender.

Prior to the closing, the Arps

Shareholders reduced the outstanding balance of the revolving facility as required by the Purchase Agreement.

The Company and Arps

have agreed to repay the advances made by the Arps Shareholders within six months of the Closing, secured by a second mortgage on

real estate owned by Arps.

which currently operates a dairy processing facility in Defiance, Ohio, had commenced construction on a 44,000 -square foot new facility

but was unable to complete construction.

The Company plans to complete construction and installation of the processing equipment in the

new facility in 2026 (the “New Facility”).

In October 2025, the Company incurred additional lease financing of $ 245,000 to

procure equipment.

Company has commenced manufacturing of certain of its own products at Arps’ existing facility and expects to expand production

during the fourth quarter of 2025 and into 2026, thereby eliminating fees previously

paid to third-party manufacturers, reducing freight costs, enabling the more efficient procurement of ingredients, and lowering cold

storage costs.

obtain the forbearance from Arps’ existing mortgage lender, WesBanco Bank, Inc., until January 1, 2026, the Company provided its

guaranty of the Mortgage loan.

The outstanding balance of the Mortgage was $ 2,198,000 as of October 3, 2025.

with the Company’s acquisition of Arps, certain advances to Arps from its former shareholders were formalized with the Company

assuming joint and several responsibility for the obligations.

The Company and Arps issued notes in the aggregate principal amount of

$ 800,000 to the Arps Shareholders, which consisted of $ 400,000 of debt previously owed by Arps (the “Existing Loans”) and

$ 400,000 representing the recent advances used to reduce the outstanding balance of the revolving facility (the “New Advances”).

The Existing Loans are to be repaid by April 3, 2026 and may be convertible into shares of the Company’s common stock at the option

of the Company, using the 15-day volume-weighted average trading price to determine the value of the shares.

If the New Advances are

not paid by January 3, 2026, interest shall accrue at the rate of 7 % per annum from October 3, 2025.

the nine months ended September 30, 2025, the Company used $ 2,173,000 in operations.

As of September 30, 2025, the Company had $ 1,626,000

in working capital, including $ 1,891,000 in cash.

As a result of the Arps acquisition (Note 8), the Company has assumed a $ 2,198,000

Mortgage that must be refinanced by January 1, 2026.

Additionally, the Company has obligations outstanding under finance agreements of

$ 841,000 , including $ 245,000 borrowed in October 2025.

the three months ending March 31, 2026 and 2025, the Company did not incur any interest and penalties associated with tax positions.

As of March 31, 2026, the Company did not have any significant unrecognized uncertain tax positions.

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 (the “Acquisition”).

Arps results of operations have been included in the consolidated statement

of operations since October 4, 2025.

The following unaudited pro forma information presents the consolidated results of operations as

if the acquisition had occurred on January 1, 2025:

of Unaudited Pro Forma Information Presenting Consolidated Results of Operations

For the three months ended March 31,

Pro forma revenue

Pro forma net loss

$ ( 661,000 )

$ ( 1,223,000 )

Pro forma net loss per share, basic and fully diluted

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 above.

Business Segments

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

of Business Combination Reportable Segment

Three months ended March 31,

Frozen beverages and food

Raw and processed milk

Frozen beverages and food

Raw and processed milk

Total operating expenses

( 1,469,000 )

( 1,638,000 )

Interest expense

$ ( 661,000 )

$ ( 761,000 )

the three months ended March 31, 2026, the Company used cash for operations of $ 2,382,000 .

As of March 31, 2026, the Company had $ 1,824,000

cash and net current assets of $ 903,000 , exclusive of disputed co-manufacturer accounts payable (Note 5).

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

As described more fully

in Note 4, the dispute and subsequent contract termination with the Manufacturer has resulted in limitations in the Company’s ability

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

mitigate the impact of procurement constraints, the Company builds inventory in anticipation of third quarter seasonal requirements,

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

October 2025.

The Company has an available receivables-based line of credit of $ 2,500,000 , with $ 1,759,000 in outstanding borrowing as

of September 30, 2025.

Management expects that the cash cycle will shorten as additional contracted and owned capacity improves production

volume and efficiency in the fourth quarter of 2025 and beyond.

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 Note 6, the Company raised $ 3,000,000 through the sale of the Company’s common stock in February 2025.

financial position at September 30, 2025, historical results and obligations incurred in association with the Arps acquisition raise

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

As described, the Company has completed steps to

mitigate dispute related issues and raise capital.

The Company is undertaking steps to refinance the Mortgage on a long-term basis

and complete construction of the New Facility.

The actions taken have resulted in the alleviation of the substantial doubt about the

Company’s ability to continue as a going concern.

in Note 5, the dispute and subsequent contract termination with the Manufacturer has resulted in limitations in the Company’s

ability to procure certain products necessary to achieve our growth projections and in elevated legal costs that were incurred before the Company obtained non-recourse litigation financing in 2025.

The Acquisition is

expected to alleviate the supply constraints.

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 $ 1,250,000 .

February 2026, $ 420,000 of notes payable were converted to equity in accordance with the terms of the note agreements.

March 2026, the Company raised $ 7,528,000 through the sale of convertible promissory notes with a two year term.

The proceeds were used

to retire the Mortgage Note, and $ 646,000 in Construction Obligations incurred, as well fund working capital requirements.

plans to complete construction of the New Facility and pursue long-term real estate and equipment lease financing for the remaining Construction

alleviated, the Company’s financial position at March 31, 2026 and historical results raise substantial doubt about its 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.

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-Q

Item 1. Financial Statements