UNITED STATES
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FORM
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| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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DOCUMENTS INCORPORATED BY REFERENCE
BARFRESH FOOD GROUP INC.
FORM 10-K
TABLE OF CONTENTS
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION
This Annual Report on Form 10-K (“Annual Report”), the other reports, statements, and information that we have previously filed or that we may subsequently file with the Securities and Exchange Commission (“SEC”) and public announcements that we have previously made or may subsequently make include, may include, incorporate by reference or may incorporate by reference certain statements that may be deemed to be forward-looking statements. The forward-looking statements included or incorporated by reference in this Annual Report and those reports, statements, information and announcements address activities, events or developments that Barfresh Food Group Inc., a Delaware corporation (hereinafter referred to as “we”. “us”, “our”, “Company” or “Barfresh”), expects or anticipates will or may occur in the future. Any statements in this document about expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as “may”, “should”, “could”, “predict”, “potential”, “believe”, “will likely result”, “expect”, “will continue”, “anticipate”, “seek”, “estimate”, “intend”, “plan”, “projection”, “would”, “outlook” and similar expressions. Accordingly, these statements involve estimates, assumptions and uncertainties, which could cause actual results to differ materially from those expressed in them. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this document. All forward-looking statements concerning economic conditions, rates of growth, rates of income or values as may be included in this document are based on information available to us on the dates noted, and we assume no obligation to update any such forward-looking statements.
Management cautions that forward-looking statements are qualified by their terms and/or important factors, many of which are outside of our control, involve a number of risks, uncertainties and other factors that could cause actual results and events to differ materially from the statements made, including, but not limited to, the following risk factors. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.
Certain risks and uncertainties could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us, and you should not place undue reliance on any such forward-looking statements. Actual results or outcomes may differ materially from those expressed in any forward-looking statements made by us, and you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made and we do not undertake any obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. See “Risk Factors” set forth in Item 1A.
AVAILABLE INFORMATION
We are subject to the information reporting requirements of the Securities Exchange Act of 1934, as amended, and we file quarterly reports on Form 10-Q, Annual Reports on Form 10-K, Current Reports on Form 8-K, proxy statements and other required information and reports with the SEC.
You can read our SEC filings, including the registration statement, over the Internet at the SEC’s website at www.sec.gov at no cost. You may also request a copy of these filings, at no cost, by writing us at 12100 Wilshire Boulevard, 8th Floor, Los Angeles, California, 90025 or calling us at (310) 598-7113.
We also maintain a website at www.barfresh.com/us/, at which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on or accessible through our website is not a part of this report, and the inclusion of our website address in this report is an inactive textual reference only.
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PART I
Item 1. Business.
Corporate History and Background
The Company is engaged in the manufacturing and distribution of ready-to-drink and ready-to-blend frozen beverages and food, including smoothies, shakes, frappes and juice pops. The current operation was established following a 2012 reverse merger into an inactive Delaware corporation, formed on February 25, 2010.
On October 3, 2025, we acquired Arps Dairy, Inc., an Ohio corporation (“Arps Dairy”), which operates a 15,000- square foot dairy processing facility to be replaced in 2026 by a new 44,000-square foot facility under construction nearby (the “New Facility”), thereby obtaining manufacturing capability that we did not previously have. Unless otherwise expressly stated or the context otherwise requires, the description of our business included or incorporated by reference in this prospectus reflects our business after giving effect to the Arps Dairy acquisition (the “Acquisition”).
Accordingly, we have two direct subsidiaries: Barfresh Corporation, Inc. (formerly known as Smoothie, Inc.) and Arps Dairy, Inc. and Barfresh, Inc. Our corporate office is located at 12100 Wilshire Boulevard, 8th Floor, Los Angeles, California, 90025. Our telephone number is (310) 598-7113 and our website is www.barfresh.com.
Business Overview
Barfresh is a leader in the creation, manufacturing and distribution of ready-to-drink and ready-to-blend frozen beverages and food. The current portfolio of products includes smoothies, shakes, frappes and juice pops.
Some of the key benefits of the products for the end consumers that drink the products include:
| ● | From as little as 125-130 calories (per serving) | |
| ● | Real fruit in every smoothie | |
| ● | Dairy free options | |
| ● | Kosher approved | |
| ● | Gluten Free |
Following the Acquisition, we are also engaged in providing raw and processed milk to a single significant customer. This legacy Arps Dairy activity is strategic from the standpoint of our supply chain and capacity utilization.
Products
Barfresh legacy products are packaged in four distinct formats.
The Company’s ready-to-drink smoothie, “Twist & Go”™, has initially been focused towards the USDA national school meal program, including the School Breakfast Program, the National School Lunch Program and Smart Snacks in Schools Program. This sweet fruit and creamy yogurt smoothie contains four ounces of yogurt and a half-cup of fruit/fruit juice and comes in three different flavors: strawberry banana, peach, and mango pineapple. The product was originally launched in a bottled packaging format. The Company introduced Twist & Go™ cartons in 2022. Twist & Go™ contains no added sugars, preservatives, artificial flavors or colors. At only 125 -130 calories and with 5 grams of protein, it makes the perfect start to any day or on-the-go snack.
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The Company’s bulk “Easy Pour” format, which contains all the ingredients necessary to make the beverage, is packaged in gallon containers in a concentrated formula that is mixed in beverage dispensing equipment 1:1 with water. The Company has a “no sugar added” version of the bulk “Easy Pour” format that is specifically targeted for the aforementioned USDA national school meal programs. In addition, the Company received approval from the United States Defense Logistics Agency (“USDLA”) to sell its smoothie products into all branches of the U.S. Armed Forces and is currently in contract with and selling its bulk Easy Pour products into over one hundred military bases in the United States and abroad. Additionally, the Company offers WHIRLZ 100% Juice concentrate, which is sold at ambient temperatures and mixed in beverage dispensing equipment on a 5:1 ratio.
The Company’s single-serve format features portion controlled and ready-to-blend beverage ingredient packs or “beverage packs”. The beverage packs contain all the ingredients necessary to make the beverage, including the base (either sorbet, frozen yogurt, or ice cream), real fruit pieces, juices, and ice – five ounces of water are added before blending.
In 2024, the Company introduced its ready-to-eat juice pop, “Pop & Go” ™, with initial shipments in the fourth quarter of 2024. The product will initially be focused towards the National School Lunch and Smart Snacks in Schools Programs. Pop & Go ™ contains 4 oz of juice, no added sugars, preservatives or artificial flavors or colors, and comes in five flavors.
Distribution
The Company conducts sales through several channels, including National Accounts, Regional Accounts, and Broadline Distributors.
Raw and processed milk is sold directly to the single customer for these products.
Manufacturing
In the past, Barfresh has relied solely on contract manufacturers to manufacture all of its products in the United States. With the acquisition of Arps Dairy, Barfresh will now be able to control the quantity and quality of its own production, as well as eliminating fees previously paid to third-party manufacturers, reducing freight costs, enabling the more efficient procurement of ingredients, and lowering cold storage costs.
As described in Risk Factors, by bringing the majority of its manufacturing in-house, Barfresh gains greater control over its supply chain and positions the Company for accelerated growth and expanded market opportunities. The manufacturing facility acquisition provides Barfresh with the operational foundation and cost efficiencies necessary to scale its business profitably. In the fourth quarter of 2025, the acquired manufacturing facility produced 18% of supply.
Research and Development
The Company incurred approximately $128,000 and $132,000 in research and development expenses for the years ended December 31, 2025 and 2024, respectively.
Competition
There is significant competition in the smoothie market at both the institutional and consumer purchasing level.
The Company distributes products to institutional customers primarily through distributors to school districts. The Company has recently launched its Twist & Go ready-to-drink smoothie as well as a “no sugar added” version of the bulk “Easy Pour” format, WHIRLZ 100% Juice Concentrates, both of which are specifically targeted for the USDA national school meal program, including the School Breakfast Program, the National School Lunch Program, and Smart Snacks in Schools Program. At the institutional level, the Company competes with other food and beverage manufacturers, many of which have significantly greater financial resources and distribution reach.
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The competition at the consumer level is primarily between specialized juice bars (e.g. Jamba Juice) and major fast casual and fast-food restaurant chains (such as McDonalds). Barfresh does not compete specifically at this level but intends to supply its product to customers that fall within these segments to enable them to compete for consumer demand. The Company believes that its single serve products afford a very significant competitive advantage based on ease of use, portion control, premium quality, and minimal capital investment required to enable a customer to begin to carry Barfresh beverage products. The Company also believes that its bulk “Easy Pour” product represents an attractive alternative delivery method for customers that serve high volume locations, where speed of service over extended periods is a critical requirement.
There may also be new entrants to the smoothie market that may alter the current competitor landscape.
Intellectual Property
Barfresh owned the domestic and international property rights to its products’ sealed pack of ingredients used in its single serve products. Patents in the United States and Australia expired in 2025.
Governmental Approval and Regulation
While the Company is not aware of the need for any governmental approvals to manufacture or distribute its products, manufacturing products which meet the criteria of the USDA’S national school meal program is critical to the Company’s business plan.
As a dairy processor, Arps Dairy is heavily regulated, primarily by the U.S. Food and Drug Administration (FDA), the U.S. Department of Agriculture (USDA), and state health departments, requiring compliance with the Pasteurized Milk Ordinance, Food Safety Modernization Act (FSMA) for sanitation, pasteurization standards, and regular inspections. Key areas include raw milk pricing, licensing, structural sanitation, mandatory pasteurization, and temperature controls.
Key regulatory areas for dairy processors include the following:
| ● | Federal Regulatory Oversight: The FDA governs food safety, while the USDA Agricultural Marketing Service oversees Federal Milk Marketing Orders (FMMOs), which establish minimum prices for raw milk. | |
| ● | Pasteurized Milk Ordinance: This is the national standard for Grade A milk products, covering production, transportation, and processing. | |
| ● | Food Safety Modernization Act: Requires comprehensive food safety plans, hazard analysis, and risk-based preventive controls. | |
| ● | Pasteurization and Equipment Standards: Strict requirements for pasteurizer design, including temperature recording devices (thermograph charts) to be kept for 2 years. | |
| ● | State Licensing and Inspections: The Ohio Department of Agriculture Division of Dairy issues manufacturing licenses, mandates that raw milk come from approved sources, and conducts sanitation inspections. | |
| ● | Operational Requirements: Regulations demand proper cleaning facilities, hand-washing stations, ventilation, waste disposal, and approved milk storage tanks. Processors must ensure all equipment, such as recording thermometers and flow diversion devices, is calibrated and sealed by regulatory agencies. |
Environmental Laws
Regulation is conducted at both the federal and state level by the Environmental Protection Agency and by the Ohio Environmental Protection Agency with respect to the following:
| ● | Clean Water Act (CWA), specifically the Dairy Products Processing Effluent Guidelines: Establishes effluent guidelines for dairy product processing, restricting pollutants in wastewater directly or indirectly discharged into U.S. waters. | |
| ● | EPA National Pollutant Discharge Elimination System (NPDES) permits: Required for direct discharges to ensure compliance with water quality standards. | |
| ● | Pretreatment Standards: Regulates indirect dischargers who send wastewater to municipal treatment plants. |
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Employees
As of April 13, 2026, the Company has 32 employees and 3 consultants.
Financial information about segments and geographic areas
As a result of the Acquisition, we operate in two reportable segments: Frozen Beverages and Food, and Raw and Processed Milk. All products are predominately sold within the United States. Additional information about our product segments is available in Note 9 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
Item 1A. Risk Factors
An investment in the Company’s securities involves significant risks, including the risks described below. The risks included below are not the only ones that the Company faces. Additional risks presently unknown to us or that we currently consider immaterial or unlikely to occur could also impair our operations. If any of the risks or uncertainties described below or any such additional risks and uncertainties actually occur, our business, prospects, financial condition or results of operations could be negatively affected.
Risks Related to Our Business
We have a history of operating losses.
We have a history of operating losses and may not achieve or sustain profitability. These operating losses have been generated while we market to potential customers. We cannot guarantee that we will become profitable. Even if we achieve profitability, given the competitive and evolving nature of the industry in which we operate, we may be unable to sustain or increase profitability and our failure to do so would adversely affect the Company’s business, including our ability to raise additional funds.
If we continue to suffer losses from operations, our working capital may be insufficient to support our ability to expand our business operations as rapidly as we would deem necessary at any time, unless we are able to obtain additional financing. There can be no assurance that we will be able to obtain such financing on acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to pursue our business objectives and would be required to reduce our level of operations, including reducing infrastructure, promotions, sales and marketing programs, personnel and other operating expenses. These events could adversely affect our business, results of operations and financial condition. If adequate funds are not available or if they are not available on acceptable terms, our ability to fund the growth of our operations, take advantage of opportunities, develop products or services or otherwise respond to competitive pressures, could be significantly limited.
We completed our first acquisition in the fourth quarter of 2025. Growth by acquisitions involves risks, and we may not be able to effectively integrate the business we acquired to achieve the objectives of the acquisition or implement the contract manufacturing agreement.
We completed the acquisition of Arps Dairy in October 2025. The Acquisition is subject to various risks and uncertainties and could have a negative impact on our business, financial condition, and/or results of operations. These risks include the inability to integrate effectively the operations, products, and personnel of the acquired company which is located a significant distance from our existing business, the inability to complete construction that was in progress on the New Facility at the time of the Acquisition within the anticipated timeframe and budget, the inability to achieve anticipated cost savings or operating synergies, the management of risks associated with manufacturing operations including product quality and safety, and the risk we may not be able to effectively manage our operations at an increased scale of operations resulting from the Acquisition.
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By acquiring Arps Dairy, we are now exposed to operational risk in dairy processing.
Operating a dairy processing plant involves significant operational, regulatory, and market-related risks. The plant is highly dependent on a consistent supply of raw milk, which may be affected by factors outside of our control. In addition, dairy processing facilities must comply with stringent food safety, environmental, and occupational health regulations; failure to maintain compliance could result in fines, recalls, suspension of operations, or reputational damage. Equipment breakdowns, labor shortages, or disruptions in energy and water supply could materially impact production capacity and increase costs. Moreover, given the perishable nature of dairy products, disruptions in transportation or refrigeration systems pose heightened risks of spoilage and product loss. These factors, individually or in combination, may adversely affect the plant’s operational performance, profitability, and long-term viability.
Our operations depend on the consistent availability and quality of raw milk.
The supply and cost of raw milk are influenced by factors outside of our control, including seasonal fluctuations, weather conditions, feed and fuel costs, disease outbreaks, and general agricultural market conditions. Interruptions in raw milk supply or significant increases in input costs could materially and adversely affect our ability to produce and sell dairy products, and could negatively impact our operating results.
Dairy processing facilities are subject to extensive regulation.
Our dairy processing facility will need to comply with regulations by federal, state, and local authorities, including requirements related to food safety, sanitation, labeling, environmental protection, and occupational health and safety. Failure to comply with applicable laws and regulations could result in fines, mandatory product recalls, product seizures, suspension of operations, reputational harm, and liability for damages. Compliance costs may also increase over time as regulations become more stringent. Any such outcomes could have a material adverse effect on our business and financial performance.
Our dairy processing operations are dependent on reliable performance of our equipment.
The operations at Arps Dairy rely on specialized processing equipment, refrigeration systems, and a reliable supply of utilities such as water and energy. Equipment breakdowns, malfunctions, or prolonged utility outages could disrupt our production and distribution activities, cause product spoilage, and increase operating costs. Because dairy products are perishable, even brief disruptions in equipment or infrastructure can result in significant product loss and revenue reduction.
We require reliable and trained personnel for our dairy operations.
Our success depends on maintaining a trained and reliable workforce to operate our dairy processing facilities. Labor shortages, increased wage pressures, or work stoppages could impair our ability to operate efficiently. In addition, recruiting and retaining qualified personnel in rural or specialized markets may be difficult. Labor-related challenges could increase costs, reduce production capacity, or negatively impact product quality and safety.
It is difficult to predict the timing and amount of our sales because our distributors and national accounts may not be required to place minimum orders with us.
Our distributors are not required to place minimum monthly or annual orders for our products. Accordingly, we cannot predict the timing or quantity of purchases by any of our independent distributors or whether any of our distributors will continue to purchase products from us in the same frequencies and volumes as they may have done in the past. Additionally, our larger distributors and partners may make orders that are larger than we have historically been required to fill. Shortages in inventory levels, supply of raw materials or other key supplies could negatively affect us.
As an increasing portion of our sales is coming from school districts, our business is becoming more seasonal, which presents certain challenges with respect to cash flow.
With sales to school districts representing an increasing percentage of our total sales, we require a significant amount of working capital to fund the production of inventory during the third calendar quarter. Revenues from sales to school districts generally are reflected in our first quarter and third quarter results. We continue efforts to have less fluctuation with respect to working capital – for example by developing a frozen juice pop product which we expect to be more popular during warmer months of the year – but such efforts require time to be accepted in the marketplace.
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Issues with a manufacturer have resulted in significant losses, as well as other negative impacts.
As described more fully in Item 7, we experienced product quality issues with a contract manufacturer (the “Manufacturer”) that provided approximately 52% of our products in the year ended December 31, 2022. Complaints from customers led us to withdraw product from the market and destroy existing inventory.
In addition to the financial damage from the product withdrawal, we were forced to obtain suitable replacement contract manufacturers and regain the confidence of our customers and investing public, all while seeking a resolution with the Manufacturer. These tasks required substantial amounts of personnel and capital resources in 2023, 2024, and 2025, including production trial and other start-up costs.
Disruption within our supply chain, contract manufacturing or distribution channels has had and may continue to have an adverse effect on our business, financial condition and results of operations.
Our ability, through our suppliers, business partners, contract manufacturers, independent distributors and retailers, to produce, transport, distribute and sell products is critical to our success.
In the past, damage or disruption to our suppliers or to manufacturing or distribution capabilities due to weather, natural disaster, fire or explosion, terrorism, pandemics such as COVD-19 and influenza, labor strikes or other reasons, has impaired the manufacture, distribution and sale of our products. Many of these events were outside of our control.
Our experience with the Manufacturer demonstrated how our reliance on a limited number of manufacturers and suppliers increased this risk. Most of our suppliers and manufacturers produce similar products for other companies, and our products may represent a small portion of their businesses. Further, it takes a newly engaged manufacturer typically up to nine months of retrofitting/ preparation before it can begin producing our products. Starting in 2023 and continuing through the third quarter of 2025 we did not have contracts in place to produce sufficient units to meet projected demand. If one of our manufacturers failed to perform, we were faced with a significant interruption in our supply chain. If one of our manufacturers or suppliers failed to perform or deliver products, for any reason, our sales and results of operations were adversely affected, and led to the possible loss of customers.
Our contract manufacturer that supplied 54% of our product in 2024 and 43% in 2025 (“Manufacturer A”) gave notice that it would not renew our contract when it concluded in February 2026. Additionally, in December 2025, our manufacturer that supplied 38% of our product in 2024 and 40% in 2025 (“Manufacturer B”) discontinued manufacturing our products.
The Acquisition is a significant step towards protecting against or mitigating the likelihood or potential impact of such events, and their adverse effect on our business, financial condition and results of operations. Since the Acquisition, Arps Dairy is now producing virtually all of our product lines, manufacturing 18% of cases produced in the fourth quarter of 2025.
If we do not adequately manage our inventory levels, our operating results could be adversely affected.
We need to maintain adequate inventory levels to be able to deliver products to distributors on a timely basis. Our inventory supply depends on our ability to correctly estimate demand for our products. Our ability to estimate demand for our products is imprecise, particularly for new products, seasonal promotions and new markets. If we materially underestimate demand for our products or are unable to maintain sufficient inventory, we might not be able to satisfy demand on a short-term basis. If we overestimate distributor or retailer demand for our products, we may end up with too much inventory, resulting in increased working capital requirements, higher storage costs, increased trade spending and the risk of inventory spoilage. If we fail to manage our inventory to meet demand, we could damage our relationships with our distributors and retailers and could delay or lose sales opportunities, which would unfavorably impact our future sales and adversely affect our operating results. In addition, if the inventory of our products held by our distributors and retailers is too high, they will not place orders for additional products, which would also unfavorably impact our sales and adversely affect our operating results.
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We need financing to complete the New Facility and may need additional financing in the future, which may not be available when needed or may be costly and dilutive.
Completion of the New Facility, including the installation of equipment and the buildout of production lines is required in the near term.
We may require additional financing to support our capital expenditure and working capital needs in the future. The amount of additional capital we may require, the timing of our capital needs and the availability of financing to fund those needs will depend on a number of factors, including our strategic initiatives and operating plans, the performance of our business and the market conditions for debt or equity financing. Additionally, the amount of capital required will depend on our ability to meet our case sales goals and otherwise successfully execute our operating plan. We believe it is imperative to meet these sales objectives in order to lessen our reliance on external financing in the future. Although we believe various debt and equity financing alternatives will be available to us to support our capital expenditure and working capital needs, financing arrangements on acceptable terms may not be available to us when needed. Additionally, these alternatives may require significant cash payments for interest and other costs or could be highly dilutive to our existing shareholders. Any such financing alternatives may not provide us with sufficient funds to meet our long-term capital requirements. If necessary, we may explore strategic transactions that we consider to be in the best interest of the Company and our shareholders, which may include, without limitation, public or private offerings of debt or equity securities, and other strategic alternatives; however, these options may not ultimately be available or feasible.
Failure to complete the New Facility within the projected budget and timeframe will likely impact negatively our projected new revenue and adjusted EBITDA estimates.
Our ability to achieve our projected growth, including the timing of new revenue and adjusted EBITDA estimates, depends in large part on the successful execution of the completion of the New Facility and installation of the production lines. These projects involve significant capital expenditures and are subject to numerous risks, many of which are outside of our control.
Construction costs may exceed current estimates due to factors such as labor shortages, increased wage rates, supply chain disruptions, availability and pricing of materials, changes in scope, contractor performance issues, or unforeseen site conditions. In addition, delays or complications in obtaining required zoning approvals, building permits, inspections, or other governmental approvals could adversely affect project timelines and increase costs. Project schedules may also be impacted by adverse weather conditions, labor availability, contractor capacity, or logistical challenges, any of which could delay completion or commencement of operations. If construction is delayed or costs exceed budgeted amounts, we may be required to deploy additional capital, defer or modify other planned investments, or seek alternative financing on less favorable terms.
Any material delays in project completion or cost overruns could postpone the realization of anticipated revenues, reduce near-term margins, and negatively impact the Company’s projected or guided adjusted EBITDA. There can be no assurance that current cost estimates, construction schedules, or expected financial returns will be achieved, and any such variances could have a material adverse effect on the Company’s financial condition, results of operations, and cash flows.
A worsening of economic conditions or a decrease in consumer spending may adversely impact our ability to implement our business strategy.
Our success depends largely on government funding of school nutrition programs, which is influenced by government policy, and to a lesser extent on discretionary consumer spending, which is influenced by general economic conditions and the availability of discretionary income. There is no certainty regarding economic conditions in the United States, and credit and financial markets and confidence in economic conditions could deteriorate at any time. Accordingly, we may experience declines in revenue during economic turmoil or during periods of uncertainty including uncertainty resulting from war, terrorism or contagious disease.
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The challenges of competing with the many food services businesses may result in reductions in our revenue and operating margins.
We compete with many well-established companies, food service and otherwise, on the basis of taste, quality and price of product offered, customer service, and overall experience. Our success depends, in part, upon the popularity of our products and our ability to develop new menu items that appeal to consumers across all four day parts. Shifts in consumer preferences away from our products, our inability to develop new menu items that appeal to consumers across all day parts, or changes in our menu that eliminate items popular with some consumers could harm our business. We compete primarily with other food manufacturers that participate in the K-12 market. Many of our competitors or potential competitors have substantially greater financial and other resources than we do, which may allow them to react to changes in the market more quickly than we can. In addition, aggressive pricing by our competitors or the entrance of new competitors into our markets, could reduce our revenue and operating margins. We also compete with other employers in our markets for workers and may become subject to higher labor costs as a result of such competition.
Increases in costs of packaging, ingredients and contract manufacturing tolling fees may have an adverse impact on our gross margin.
Packaging costs such as paper and aluminum cans have experienced industry-wide price increases in the past and there is always the risk that the Company may be unable to pass on these costs, thereby significantly impacting the gross margin.
Fluctuations in various food and supply costs, particularly fruit and dairy, could adversely affect our operating results.
Supplies and prices of the various ingredients that are used in the manufacture of our products can be affected by a variety of factors, such as weather, seasonal fluctuations, demand, politics and economics in the producing countries.
These factors subject us to shortages or interruptions in product supplies, which could adversely affect our revenue and profits. In addition, the prices of fruit and dairy, which are the main ingredients in our products, can be highly volatile. The fruit of the quality we seek tends to trade on a negotiated basis, depending on supply and demand at the time of the purchase. An increase in pricing of any fruit that we are going to use in our products could have a significant adverse effect on our profitability. We cannot assure you that we will be able to secure our fruit supply.
Our business depends substantially on the continuing efforts of our senior management and other key personnel, and our business may be severely disrupted if we lose their services.
Our future success heavily depends on the continued service of our senior management and other key employees. If one or more of our senior executives is unable or unwilling to continue to work for us in his or her present position, we may have to spend a considerable amount of time and resources searching, recruiting, and integrating a replacement into our operations, which would substantially divert management’s attention from our business and severely disrupt our business. This may also adversely affect our ability to execute our business strategy.
We may be unable to attract and retain qualified, experienced, highly skilled personnel, which could adversely affect the implementation of our business plan.
Our success depends to a significant degree upon our ability to attract, retain and motivate skilled and qualified personnel. As we become a more mature company in the future, we may find recruiting and retention efforts more challenging. If we do not succeed in attracting, hiring and integrating excellent personnel, or retaining and motivating existing personnel, we may be unable to grow effectively. Our inability to attract highly skilled personnel with sufficient experience in our industries could harm our business.
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Product liability exposure may expose us to significant liability.
We may face an inherent business risk of exposure to product liability and other claims and lawsuits in the event that the development or use of our technology or prospective products is alleged to have resulted in adverse effects. We may not be able to avoid significant liability exposure. Although we believe our insurance coverage to be adequate, we may not have sufficient insurance coverage, and we may not be able to obtain sufficient coverage at a reasonable cost. An inability to obtain product liability insurance at acceptable cost or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of our products. A product liability claim could hurt our financial performance. Even if we ultimately avoid financial liability for this type of exposure, we may incur significant costs in defending ourselves that could hurt our financial performance and condition.
Litigation or legal proceedings could expose us to significant liabilities and damage our reputation.
We may become party to litigation claims and legal proceedings. Litigation involves significant risks, uncertainties and costs, including distraction of management attention away from our business operations. We evaluate litigation claims and legal proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these assessments and estimates, we establish reserves and disclose the relevant litigation claims or legal proceedings, as appropriate. These assessments and estimates are based on the information available to management at the time and involve a significant amount of management judgment. Actual outcomes or losses may differ materially from those envisioned by our current assessments and estimates. Our policies and procedures require strict compliance by our employees and agents with all U.S. and local laws and regulations applicable to our business operations, including those prohibiting improper payments to government officials. Nonetheless, our policies and procedures may not ensure full compliance by our employees and agents with all applicable legal requirements. Improper conduct by our employees or agents could damage our reputation or lead to litigation or legal proceedings that could result in civil or criminal penalties, including substantial monetary fines, as well as disgorgement of profits.
Our litigation with the Manufacturer was voluntarily withdrawn from the court system in January 2023 and refiled in August 2023, as we were unable to reach a suitable resolution. While we believe that that our claims have merit, there is no assurance of a favorable outcome to this case. In 2024, we obtained litigation financing to pursue our claims without risk to our financial position or operating results.
Our inability to protect our intellectual property rights may force us to incur unanticipated costs.
Our success may depend, in part, on our ability to obtain and maintain protection in the United States and internationally for certain intellectual property incorporated into our products. Our intellectual property rights may be challenged, narrowed, invalidated or circumvented, which could limit our ability to prevent competitors from marketing similar solutions that limit the effectiveness of our patent protection and force us to incur unanticipated costs. In addition, existing laws of some countries in which we may provide services or solutions may offer only limited protection of our intellectual property rights.
Our products may infringe the intellectual property rights of third parties, and third parties may infringe our proprietary rights, either of which may result in lawsuits, distraction of management and the impairment of our business.
As the number of patents, copyrights, trademarks and other intellectual property rights in our industry increases, products based on our technology may increasingly become the subject of infringement claims. Third parties could assert infringement claims against us in the future. Infringement claims with or without merit could be time consuming, result in costly litigation, cause product shipment delays or require us to enter into royalty or licensing agreements. Royalty or licensing agreements, if required, might not be available on terms acceptable to us, or at all. We may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Litigation to determine the validity of any claims, whether or not the litigation is resolved in our favor, could result in significant expense to us and divert the efforts of our technical and management personnel from productive tasks. If there is an adverse ruling against us in any litigation, we may be required to pay substantial damages, discontinue the use and sale of infringing products and expend significant resources to develop non-infringing technology or obtain licenses to infringing technology. Our failure to develop or license a substitute technology could prevent us from selling our products.
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We will continue to incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to compliance initiatives and corporate governance practices.
As a public company, we will continue to incur significant legal, accounting and other expenses. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to continue to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and make some activities more time-consuming and costly.
We cannot predict or estimate the amount of additional costs we may incur to continue to operate as a public company, nor can we predict the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
Failure to maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our financial condition and the trading price of our common stock.
Our management is responsible for establishing and maintaining effective internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, as amended. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with generally accepted accounting principles in the United States (“GAAP”). Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that we would prevent or detect a misstatement of our financial statements or fraud. Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud. The identification of a material weakness could indicate a lack of controls adequate to generate accurate financial statements that, in turn, could cause a loss of investor confidence and a decline in the market price of our common stock. We cannot assure you that we will be able to timely remediate any material weaknesses that may be identified in future periods or maintain all of the controls necessary for continued compliance. Likewise, we cannot assure you that we will be able to retain sufficient skilled finance and accounting personnel, especially in light of the increased demand for such personnel among publicly traded companies.
Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.
As a Delaware corporation, we are subject to the United States Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Some foreign companies, including some that may compete with our Company, may not be subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices may occur from time to time in countries in which we conduct our business. However, our employees or other agents may engage in conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.
Our use of information technology and third-party service providers exposes us to cybersecurity breaches and other business disruptions.
We use information technology and third-party service providers to support our business processes and activities, including supporting critical business operations such as manufacturing and distribution; communicating with our suppliers, customers and employees; maintaining effective accounting processes and financial and disclosure controls; executing corporate transactions; conducting research and development activities; and meeting regulatory, legal and tax requirements. Shared service centers managed by third parties provide an increasing number of services important to conduct our business, including accounting, internal control, human resources and computing functions.
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Continuity of business applications and services has been, and may in the future be, disrupted by events such as infection by viruses or malware; other cybersecurity attacks; issues with or errors in systems’ maintenance or security; power outages; hardware or software failures; denial of service attacks; telecommunication failures; natural disasters; terrorist attacks; and other catastrophic occurrences. Our use of new and emerging technologies such as cloud-based services and mobile applications continues to evolve, presenting new and additional risks in managing access to our data, relying on third parties to manage and safeguard data, ensuring access to our systems and availability of third-party systems. In addition, we are experiencing new and more frequent attempts by third parties to gain access to our systems, such as through increased email phishing of our workforce
We leverage third parties for various technology and business services who may experience cybersecurity breaches, whether from circumvention of security systems, denial-of-service attacks or other cyberattacks such as hacking, phishing attacks, computer viruses, ransomware or malware, cyber extortion, employee or insider error, malfeasance, social engineering, physical breaches or other actions or attempts to exploit vulnerabilities may cause confidential information or Personally Identifiable Information belonging to us or our employees, customers, consumers, partners, suppliers, or governmental or regulatory authorities to be misused or breached. These risks could be magnified since the number of employees, contractors and others working outside of offices increased since the COVID-19 pandemic. Additionally, continued geopolitical turmoil, including the ongoing wars in Ukraine and the Middle East, has heightened the risk of cyberattacks. When risks such as these materialize, the need for us to coordinate with various third-party service providers and for third-party service providers to coordinate amongst themselves might increase challenges and costs to resolve related issues. Our information security program includes capabilities designed to evaluate and mitigate cyber risks arising from third-party service providers. Cyber threats to externally hosted technology and business services are beyond our control. Additionally, new initiatives, such as those related to digital commerce and direct sales, that increase the amount of confidential information that we process and maintain increase our potential exposure to a cybersecurity breach. Furthermore, the rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity risks. If our controls, disaster recovery and business continuity plans or those of our third-party providers do not effectively respond to or resolve the issues related to any such disruptions in a timely manner, our product sales, financial condition, results of operations and stock price may be materially and adversely affected, and we might experience delays in reporting our financial results, loss of intellectual property and damage to our reputation or brands.
Risks Related to Ownership of Our Common Stock
If we are unable to adequately fund our operations, we may be forced to voluntarily file for deregistration of our common stock with the SEC.
Compliance with the periodic reporting requirements required by the SEC consumes a considerable amount of both internal, as well external, resources and represents a significant cost for us. If we are unable to continue to devote adequate funding and the resources needed to maintain such compliance, while continuing our operations, we could be forced to deregister with the SEC. After the deregistration process, our common stock would only be tradable on the “Pink Sheets” and could suffer a decrease in or absence of liquidity.
We may not be able to continue to comply with Nasdaq listing standards.
Nasdaq Listing Rule 5550 requires companies that list on The Nasdaq Stock Market to maintain certain financial metrics. In May 2023, we received a letter from Nasdaq indicating that we were not in compliance with Nasdaq Listing Rule 5550(b), which requires companies listed on The Nasdaq Stock Market with a history of losses to maintain either a minimum market value of listed securities of $35,000,000 or a minimum of $2,500,000 in stockholders’ equity. While we regained compliance with this Rule in 2023, our stockholders’ equity at December 31, 2025 was only $1,330,000. We have instead maintained compliance based on the $35,000,000 minimum market value requirement. Unless and until we are able to achieve and maintain annual net income from continuing operations of $500,000, fluctuations in the market value of our listed securities may cause us to fail to meet Nasdaq listing standards and result in our common stock only being tradable in the over-the-counter markets.
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If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our share price and trading volume could decline.
The trading market for our common stock may be impacted, in part, by research and reports that securities or industry analysts publish about our business or us. There can be no assurance that analysts will cover us, continue to cover us or provide favorable coverage. If one or more analysts downgrade our stock or change their opinion of our stock, our share price may decline. In addition, if one or more analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.
Because we became public by means of a “reverse merger”, we may not be able to attract the attention of major brokerage firms.
Additional risks may exist since we became public through a “reverse merger”. Securities analysts of major brokerage firms may not provide coverage of us since there is little incentive to brokerage firms to recommend the purchase of our common stock. We cannot assure you that brokerage firms will want to conduct any secondary offerings on behalf of our Company in the future.
Future sales of our common stock in the public market could lower the price of our common stock and impair our ability to raise funds in future securities offerings.
Future sales of a substantial number of shares of our common stock in the public market, or the perception that such sales may occur, could adversely affect the then prevailing market price of our common stock and could make it more difficult for us to raise funds in the future through a public offering of our securities.
Our common stock is subject to price volatility unrelated to our operations.
The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting the Company’s competitors or the Company itself.
Because we do not intend to pay dividends, shareholders will benefit from an investment in our common stock only if it appreciates in value.
We have never declared or paid any cash dividends on our preferred stock or common stock. For the foreseeable future, it is expected that earnings, if any, generated from our operations will be used to finance the growth of our business, and that no dividends will be paid to holders of the Company’s common stock. As a result, the success of an investment in our common stock will depend upon any future appreciation in its value. There can be no guarantee that our common stock will appreciate in value.
The price of our common stock may become volatile, which could lead to losses by investors and costly securities litigation.
The trading price of our common stock is likely to be highly volatile and could fluctuate in response to factors such as:
| ● | actual or anticipated variations in our operating results; | |
| ● | announcements of developments by us or our competitors; | |
| ● | announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; | |
| ● | adoption of new accounting standards affecting our industry; |
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| ● | additions or departures of key personnel; | |
| ● | introduction of new products by us or our competitors; | |
| ● | sales of our common stock or other securities in the open market; and | |
| ● | other events or factors, many of which are beyond our control. |
The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been initiated against such a company. Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our management’s attention and Company resources, which could harm our business and financial condition.
Investors may experience dilution of their ownership interests because of future issuances of additional shares of our common stock.
We recently obtained financing through the issuance of convertible debt securities and warrants to fund our operations. We may also issue additional shares of our common stock or other securities that are convertible into or exercisable for our common stock in connection with hiring or retaining employees, future acquisitions or for other business purposes. The future issuance of any such additional shares of common stock will result in dilution to our shareholders and may create downward pressure on the trading price of our common stock.
Provisions in our Company charter documents and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our certificate of incorporation and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of our Company that stockholders may consider favorable, including transactions in which they might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
Our board of directors controls a significant percentage of the outstanding shares of voting stock.
At present, members of our board of directors and/or their affiliated entities control approximately 37% of the outstanding shares of voting stock, and therefore have significant power to influence all matters requiring the approval of our stockholders, including the election of directors and the approval of mergers and other significant corporate transactions.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 1C. Cybersecurity.
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Item 2. Properties.
Our principal executive offices are located at 12100 Wilshire Boulevard, 8th Floor, Los Angeles, California, 90025. Our lease of our former executive offices at 3600 Wilshire Boulevard, Suite 1720, Los Angeles, California, 90010 expired on March 31, 2026 and was not renewed.
Arps Dairy is currently operating a dairy processing plant consisting of approximately 15,000 square feet, located at 220 N. Clinton Drive, in Defiance, Ohio (the “Existing Facility”). It is also in the process of constructing the New Facility, a 44,000-square-foot state-of-the-art manufacturing facility at 136 Fox Run Drive in Defiance, Ohio. We plan to complete construction and install processing equipment during 2026, creating a modern production hub that will serve as a cornerstone of the Company’s expanded manufacturing strategy. In addition, Arps Dairy has been given a $2.4 million government grant to be used towards the equipment installation at the New Facility. Arps Dairy will vacate the Existing Facility once the New Facility is ready for operations in late 2026.
Item 3. Legal Proceedings
As described in Note 6 of the Notes to Consolidated Financial Statements, the Company has an on-going dispute with the Manufacturer, the outcome of which cannot be predicted at this time.
From time to time, various lawsuits and legal proceedings may arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these, or other matters may arise from time to time that may harm our business. We are currently the defendant in one legal proceeding for an amount less than $100,000. Our legal counsel and management believe a material unfavorable outcome to be remote.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock is currently traded on the Nasdaq’s Capital Market under the symbol “BRFH”. Our common stock had been quoted on the Nasdaq’s Capital Market since January 20, 2022.
Holders
On April 13, 2026, there were 16,104,853 shares of our common stock outstanding. Our shares of common stock are held by 82 stockholders of record. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers and registered clearing agencies.
Recent Sales of Unregistered Securities
During the quarter ended December 31, 2025, the Company issued 29,020 shares of common stock to the former owners of Arps Dairy for continuing debt guarantees valued at $97,000.
The Company relied upon the exemption from registration contained in Section 4(a)(2) of the Securities Act, and corresponding provisions of state securities laws, on the basis that (i) offers were made to a limited number of persons, (ii) each offer was made through direct communication with the offerees by the Company, (iii) each of the offerees had the requisite sophistication and financial ability to bear risks of investing in the Company’s common stock, (iv) the Company provided disclosure to the offerees, and (v) there was no general solicitation and no commission or remuneration was paid in connection with the offers.
Purchases of Equity Securities by the Company
There were no purchases of equity securities made by the Company in the period covered by this report.
Securities Authorized for Issuance Under Equity Compensation Plans
For equity compensation plan information, refer to Item 12. Security Ownership of Certain Beneficial Owners and Related Stockholder Matters of this Annual Report on Form 10-K.
Transfer Agent
Our transfer agent, Securities Transfer Corporation, is located at 2901 N. Dallas Parkway, Suite 380, Plano, Texas 75093, and its telephone number is (469) 633-0101.
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The information and financial data discussed below is derived from the audited financial statements of Barfresh for its fiscal years ended December 31, 2025 and 2024. The financial statements of Barfresh were prepared and presented in accordance with generally accepted accounting principles in the United States. The information and financial data discussed below is only a summary and should be read in conjunction with the historical financial statements and related notes of Barfresh contained elsewhere in this Annual Report. This discussion and analysis may contain forward-looking statements based on assumptions about our future business. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors. See “Cautionary Note Regarding Forward Looking Statements” above for a discussion of forward-looking statements and the significance of such statements in the context of this Annual Report.
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Overview
The Company is primarily engaged in selling frozen beverages and food. As a result of the Acquisition, the Company sells raw and processed milk to a single customer. Continuation of the raw and processed milk business is strategic from the standpoint of our supply chain and capacity utilization.
The Company’s legacy products are packaged in four distinct formats.
The Company’s ready-to-drink smoothie, Twist & Go™, has initially been focused towards the USDA national school meal program, including the School Breakfast Program, the National School Lunch Program and Smart Snacks in Schools Program. This sweet fruit and creamy yogurt smoothie contains four ounces of yogurt and a half-cup of fruit/fruit juice and comes in three different flavors: strawberry banana, peach, and mango pineapple. The product was originally launched in a bottled packaging format. The Company introduced Twist & Go™ cartons in 2022. “Twist & Go”™ contains no added sugars, preservatives, artificial flavors or colors. At only 125 -130 calories and with 5 grams of protein, it makes the perfect start to any day or on-the-go snack.
The Company’s bulk “Easy Pour” format, which contains all the ingredients necessary to make the beverage, is packaged in gallon containers in a concentrated formula that is mixed 1:1 with water. The Company has a “no sugar added” version of the bulk “Easy Pour” format that is specifically targeted for the aforementioned USDA national school meal programs. In addition, the Company received approval from the United States Defense Logistics Agency (“DLA”) to sell its smoothie products into all branches of the U.S. Armed Forces and is currently in contract with and selling its bulk Easy Pour products into over one hundred military bases in the United States and abroad.
The Company’s single-serve format features portion controlled and ready-to-blend beverage ingredient packs or “beverage packs”. The beverage packs contain all the ingredients necessary to make the beverage, including the base (either sorbet, frozen yogurt, or ice cream), real fruit pieces, juices, and ice – five ounces of water are added before blending.
In 2024, the Company introduced its ready-to-eat juice pop, “Pop & Go” ™, with initial shipments in the fourth quarter of 2024. The product will initially be focused towards the National School Lunch and Smart Snacks in Schools Programs. Pop & Go ™ contains 4 oz of juice, no added sugars, preservatives or artificial flavors or colors, and comes in five flavors.
The Company conducts sales through several channels, including National Accounts, Regional Accounts, and Broadline Distributors.
The raw and processed milk is sold directly to a single customer.
As of April 13, we have 32 employees and 3 consultants.
In 2025, Barfresh utilized contract manufacturers to manufacture the predominate majority of all of the products in the United States. Barfresh anticipates that it will manufacture the majority of its products in 2026.
Critical Accounting Policies
Our financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
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Revenue Recognition
Revenue Recognition
In accordance with ASC 606, Revenue from Contracts with Customers, revenue is recognized when a customer obtains ownership of promised goods. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods. The Company applies the following five steps:
| 1) | Identify the contract with a customer | |
| A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights, (ii) the contract has commercial substance and (iii) the Company determines that collection of substantially all consideration 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. | ||
| 2) | Identify the performance obligation in the contract | |
| Performance 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 products, which provide immediate benefit to the customer. | ||
| 3) | Determine the transaction price | |
| The 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 utilizing the most likely amount method. Provisions for refunds are generally provided for in the period the related sales are recorded, based on management’s assessment of historical and projected trends. | ||
| 4) | Allocate the transaction price to performance obligations in the contract
Since the Company’s contracts contain a single performance obligation, delivery of products, the transaction price is allocated to that single performance obligation. | |
| 5) | Recognize revenue when or as the Company satisfies a performance obligation | |
The 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. |
Stock-based Compensation
We account for share-based employee compensation plans under the fair value recognition and measurement provisions in accordance with applicable accounting standards, which require all share-based payments to employees, including grants of stock options and restricted stock units (RSUs) and performance stock units (PSUs), to be measured based on the grant date fair value of the awards, with the resulting expense generally recognized on a straight-line basis over the period during which the employee is required to perform service in exchange for the award. Expense for PSUs is recognized based on expected performance against targets.
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Results of Operations
Revenue and cost of revenue
We determined that we operate in two reportable segments: Frozen Beverages and Food, and Raw and Processed Milk. The following table summarizes revenue and gross profit by segment for the years ended December 31, 2025 and 2024:
| 2025 | 2024 | Change | Percent | |||||||||||||
| Revenue | ||||||||||||||||
| Frozen beverages and food | $ | 11,460,000 | $ | 10,717,000 | $ | 743,000 | 7 | % | ||||||||
| Raw and processed milk | 2,748,000 | - | 2,748,000 | nm | ||||||||||||
| Revenue | $ | 14,208,000 | $ | 10,717,000 | $ | 3,491,000 | 33 | % | ||||||||
| Gross profit | ||||||||||||||||
| Frozen beverages and food | $ | 2,977,000 | $ | 3,668,000 | $ | (691,000 | ) | -19 | % | |||||||
| Raw and processed milk | 137,000 | - | 137,000 | nm | ||||||||||||
| Gross profit | $ | 3,114,000 | $ | 3,668,000 | $ | (554,000 | ) | -15 | % | |||||||
Revenue was $14,208,000 in 2025 compared to $10,717,000 in 2024, an increase of $3,491,000, or 33%. Arps Dairy contributed $2,852,000 to revenue, including $2,748,000 in raw and processed milk sales. Our revenue in 2025 benefited from increased sales of our bottled Twist & Go smoothies due to improved availability resulting from inventory built over the months prior to the commencement of the school year and growth of our Pop & Go juice pops, introduced in the fourth quarter of 2024, partially offset by declining revenue from our bulk, single serve and smoothie carton products.
Cost of revenue was $11,094,000 in 2025 compared to $7,049,000 in 2024, an increase of $4,045,000, or 57%. Cost of revenue increased at a higher rate compared to revenue due to the inclusion of the raw and processed milk operations after the Acquisition. Products in this segment are generally commodities with commensurate margins, but provide a strategic milk supply to the business and contribute to fixed overhead costs. Cost of revenue in the frozen beverages and food segment, which consisted primarily of Barfresh legacy products in 2025, increased 20%. The rate of increase in cost of revenue exceeded revenue growth due to start up costs at Arps Dairy, provisions for anticipated expirations of bulk product inventory, and provisions for ingredient related cost obligations to conclude our multi-year co-manufacturing agreements.
Our gross profit was $3,114,000 (22%) and $3,668,000 (34%) for 2025 and 2024, respectively. Excluding production relocation cost and ingredient contract obligations, our gross profit was $3,177,000 in 2025 (22%) and $3,951,000 in 2024 (37%).
Gross profit from frozen beverages and food was $2,977,000 in 2025 (26%) compared to $3,668,000 in 2024 (34%). The decrease is due to product mix, as bulk, single serve and smoothie carton products have generally sold at a higher gross margin compared to smoothie bottles. Additionally, gross profit was impacted by the increase in cost of revenue from start-up costs and inventory provisions.
Gross profit from raw and processed milk was $137,000 in 2025 (5%).
Selling, marketing and distribution expense
| 2025 | 2024 | Change | Percent | |||||||||||||
| Sales and marketing | $ | 1,652,000 | $ | 1,666,000 | $ | (14,000 | ) | -1 | % | |||||||
| Storage and outbound freight | 1,530,000 | 1,473,000 | 57,000 | 4 | % | |||||||||||
| $ | 3,182,000 | $ | 3,139,000 | $ | 43,000 | 1 | % | |||||||||
Selling, marketing and distribution expense increased approximately $43,000 (1%) from $3,139,000 in 2024 to $3,182,000 in 2025.
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Sales and marketing expense decreased approximately $14,000 (1%) from approximately $1,666,000 in 2024 to $1,652,000 in 2025.
Storage and outbound freight expense increased approximately $57,000 (4%) from $1,473,000 in 2024 to $1,530,000 in 2025, primarily because of the 7% increase in frozen beverage and food revenue over the same period, partially offset by freight efficiencies, and lower storage and inventory management cost in 2024. We incurred $99,000 in outbound freight in 2025 for processed milk deliveries.
General and administrative expense
| 2025 | 2024 | Change | Percent | |||||||||||||
| Personnel costs | $ | 1,213,000 | $ | 1,250,000 | $ | (37,000 | ) | -3 | % | |||||||
| Stock based compensation | 536,000 | 784,000 | (248,000 | ) | -32 | % | ||||||||||
| Legal, professional and consulting fees | 221,000 | 282,000 | (61,000 | ) | -22 | % | ||||||||||
| Research and development | 128,000 | 132,000 | (4,000 | ) | -3 | % | ||||||||||
| Other general and administrative expenses | 570,000 | 595,000 | (25,000 | ) | -4 | % | ||||||||||
| Business acquisition expense | 518,000 | - | 518,000 | nm | ||||||||||||
| $ | 3,186,000 | $ | 3,043,000 | $ | 143,000 | 5 | % | |||||||||
General and administrative expense increased approximately $143,000 (5%) from $3,043,000 in 2024 to $3,186,000 in 2025.
Personnel cost represents the cost of employees including salaries, bonuses, employee benefits and employment taxes and continues to be our largest cost. Personnel cost decreased by approximately $37,000 (3%) from $1,250,000 in 2024 to $1,213,000 in 2025. The decrease in personnel cost resulted primarily from a reduction in co-manufacturing administration headcount, partially offset by the addition of general and administrative personnel at Arps Dairy.
Stock-based compensation decreased by $248,000 (32%) from $784,000 in 2024 to $536,000 in 2025. The decrease is due to lower attainment under performance awards and the non-recurrence of the two-year extension of expiring board of director options in December 2024.
Legal, professional and consulting fees decreased by approximately $61,000 (22%) due to non-recourse litigation funding secured in May of 2024. Legal, professional and consulting fees associated with the Acquisition are included in business acquisition expense.
Other general and administrative expenses decreased approximately $25,000 (4%) from $595,000 in 2024 to $570,000 in 2025.
Business acquisition expense of $518,000 represents legal, accounting, and consulting fees, as well as travel associated with the Acquisition.
Interest expense
Interest expense was $217,000 in 2025 compared to $52,000 in 2024. The increase of $165,000 is a result of utilization of receivables financing throughout the year, and mortgage debt, notes and lease financing related to the Acquisition and the purchase of equipment required for the New Facility.
Net loss
We had net losses of approximately $2,694,000 and $2,825,000 for the years ended December 31, 2025 and 2024, respectively.
| 22 |
Liquidity and Capital Resources
From July 2023 to March 2024, we 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 our common stock at any time prior to maturity at the greater of $1.20 or 85% of the volume-weighted average price of the common stock for the ten trading days immediately preceding the written notice of the conversion (the “Conversion Price”). If we 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 our common stock at the Conversion Price. On October 23, 2023, we issued $1,390,000 of convertible notes pursuant to the subscription agreements, and immediately converted $1,207,000 of principal and interest into approximately 820,000 shares of common stock. Additionally, on December 19, 2023, we 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, we drew down $136,000 in convertible debt and converted the total drawn into 124,208 shares, settling all debt.
On February 5, 2025, we 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, raising $2,974,000.
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.
In order to consummate the Acquisition, we paid $1,223,000, net of cash acquired, to purchase 100% of Arps Dairy stock. Additionally, we incurred $518,000 in acquisition costs in 2025. In order to finance the Acquisition, we increased our receivables-based line of credit in September 2025 to $2,500,000. As a result of the Acquisition, $5,251,000 of mortgage debt, construction related payables and advances from former shareholders payable by Arps Dairy became short-term financial commitments of the Company. The Acquisition was structured to allow us to take control of Arps Dairy manufacturing operations ahead of completing all necessary long-term financing activities.
Following the Acquisition, Arps Dairy secured a receivables-based line of credit of $1,500,000.
We acquired $728,000 of equipment through leasing transactions in 2025. In December 2025, we were granted $2,400,000 to fund up to 50% of the cost of new equipment purchases and installation for the New Facility.
During the year ended December 31, 2025, we used $1,666,000 in operations. Our net loss adjusted for non-cash operating expenses was a loss of $2,839,000, while changes in current assets and liabilities provided $1,173,000 primarily because of delayed payments to co-manufacturers who discontinued providing product in December 2025 and January 2026.
As of December 31, 2025, we had negative working capital of $6,303,000, including $2,170,000 of mortgage debt and $2,433,000 of construction payables, compared with working capital $606,000 on December 31, 2024. Disputed accounts payable due to the Manufacturer of $499,000 are excluded from both December 31, 2025 and 2024 working capital amounts.
In February 2026, $400,000 of Arps selling shareholder advances were converted into shares of our common stock.
In March 2026, we raised $7,528,000 through the sale of convertible promissory notes. The proceeds were used to retire $2,541,000 in mortgage debt and construction payables, and are expected to be used to repay remaining construction related payables as well as complete construction of the New Facility in 2026.
| 23 |
Our operations to date have been financed by the sale of securities, the issuance of convertible and short-term debt and equipment leasing. Our liquidity needs will depend on careful management of the construction of the New Facility, as well as how quickly we are able to profitably ramp up sales, achieve manufacturing cost synergies anticipated as a result of the Acquisition, control and reduce variable operating expenses, and control fixed overhead expense. There are no assurances that the grant received in December 2025 and the proceeds from the sale of convertible promissory notes in March 2026 will be sufficient to carry out our current plan of operations. We anticipate that we will have additional sources of liquidity, if required, through mortgage financing supported by the guarantee of the United States Department of Agriculture, and equipment lease financing, among other options. However, there are no assurances that these funds will be available. If we are unable to generate sufficient cash flow from operations, control construction costs, or raise additional capital through debt issuances, we may be required to raise additional funds in the form of equity.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable because we are a smaller reporting company.
Item 8. Financial Statements and Supplementary Data.
Our consolidated financial statements are included beginning immediately following the signature page to this report. See Item 15 for a list of the consolidated financial statements included herein.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Management’s Annual Report on Internal Control over Financial Reporting
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, 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(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, 2025.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act, for the Company.
Internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of its management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
| 24 |
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025. The framework used by management in making that assessment was the criteria set forth in the document entitled “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013.
Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, 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(c). Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 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.
This 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 section, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Changes in Internal Control over Financial Reporting
None
Item 9B. Other Information.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None
| 25 |
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Information required by this Item regarding our directors and executive officers, corporate governance, including our audit committee and code of ethics, and compliance with Section 16(a) of the Exchange Act is incorporated by reference to our proxy statement to be filed with the SEC in connection with our 2026 Annual Meeting of Stockholders (the “Proxy Statement”).
Item 11. Executive Compensation.
Information required by this Item regarding executive compensation is incorporated by reference to our Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information required by this item regarding securities authorized for issuance under our equity compensation plans is incorporated by reference to the information set forth under the caption “Executive Compensation” in our Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information required by this Item regarding certain relationships and related transaction is incorporated by reference to our Proxy Statement.
Item 14. Principal Accounting Fees and Services.
Information required by this Item regarding principal accounting fees and services is incorporated by reference to our Proxy Statement.
| 26 |
PART IV
Item 15. Exhibits and Financial Statements.
| (a) | 1. Financial Statements |
See Index to Financial Statements in Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference.
2. Financial Statement Schedules
All other financial statement schedules have been omitted because they are either not applicable or the required information is shown in the financial statements or notes thereto.
3. Exhibits
See the Exhibit Index, which follows the signature page of this Annual Report on Form 10-K, which is incorporated herein by reference.
(b) Exhibits
See Item 15(a) (3) above.
(c) Financial Statement Schedules
See Item 15(a) (2) above.
Item 16. Form 10-K Summary.
None.
| 27 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BARFRESH FOOD GROUP INC. | ||
| Date: April 15, 2026 | By: | /s/ Riccardo Delle Coste |
| Riccardo Delle Coste | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Capacity | Date | ||
| /s/ Riccardo Delle Coste | Chief Executive Officer and Director | April 15, 2026 | ||
| Riccardo Delle Coste | (Principal Executive Officer | |||
| /s/ Lisa Roger | Chief Financial Officer | April 15, 2026 | ||
| Lisa Roger | (Principal Financial Officer) | |||
| /s/ Steven Lang | Director | April 15, 2026 | ||
| Steven Lang | ||||
| /s/ Joseph M. Cugine | Director | April 15, 2026 | ||
| Joseph M. Cugine | ||||
| /s/ Marc Panvier | Director | April 15, 2026 | ||
| Marc Panvier | ||||
| /s/ Alexander Ware | Director | April 15, 2026 | ||
| Alexander Ware | ||||
| /s/ Timothy Trant | Director | April 15, 2026 | ||
| Timothy Trant |
| 28 |
Exhibit Index
| 29 |
| 10.9 | First Amendment to Arps Dairy, Inc. and WesBanco Bank, Inc. Forbearance and Loan Modification Agreement dated January 20, 2026* | |
| 10.10 | Form of Indemnification Agreement with directors and executive officers* | |
| 21.1 | Subsidiaries* | |
| 23.2 | Consent of Independent Registered Public Accounting Firm* | |
| 31.1 | Rule 13a-14(a) Certification of Principal Executive Officer* | |
| 31.2 | Rule 13a-14(a) Certification of Principal Financial Officer* | |
| 32.1 | Certification Pursuant to 18 U.S.C. Section 1350* | |
| 32.2 | Certification Pursuant to 18 U.S.C. Section 1350* | |
| 97.1 | Compensation Recovery Policy (incorporated by reference to Exhibit 97.1 to Annual Report on Form 10-K for the year ended December 31, 2023, filed March 22, 2024) | |
| 101.INS | Inline XBRL Instance. | |
| 101.XSD | Inline XBRL Schema. | |
| 101.PRE | Inline XBRL Presentation. | |
| 101.CAL | Inline XBRL Calculation. | |
| 101.DEF | Inline XBRL Definition. | |
| 101.LAB | Inline XBRL Label. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| * | Filed herewith | |
| + | Compensatory plan |
In accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not filed.
Furnished herewith. XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
| 30 |
Barfresh Food Group Inc.
Index to Consolidated Financial Statements
| F-1 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
Barfresh Food Group Inc.
Los Angeles, California
Opinion on the Consolidated Financial Statements
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. 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 the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company 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.
Our audits included performing procedures to assess the risk of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.
Business Combination
As 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.
We 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.
The primary procedures we performed to address this critical audit matter included:
| ● | Obtaining an understanding of management’s processes, controls and methodology used to determine the fair value of assets acquired and liabilities assumed; | |
| ● | Evaluating the competence, capabilities, and objectivity of management’s valuation specialists and the reasonableness of the work performed; | |
| ● | Assessing 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; | |
| ● | Testing the completeness and accuracy of the underlying data used in management’s fair value estimates; and | |
| ● | Testing the mathematical accuracy of the valuation models and related calculations. |
We have served as Barfresh Food Group Inc.’s auditor since 2012.
/s/
April 15, 2026
| F-2 |
Barfresh Food Group Inc.
Consolidated Balance Sheets
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Trade accounts receivable, net | ||||||||
| Other receivables | ||||||||
| Inventory, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net of depreciation | ||||||||
| Intangible assets, net of amortization | ||||||||
| Other non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Line of credit | $ | $ | ||||||
| Accounts payable - trade | ||||||||
| Accounts payable - construction in progress | ||||||||
| Disputed co-manufacturer accounts payable (Note 6) | ||||||||
| Accrued expenses | ||||||||
| Accrued payroll and employee related expenses | ||||||||
| Financing agreements - current | ||||||||
| Debt | ||||||||
| Total current liabilities | ||||||||
| Financing agreements | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $ par value, shares authorized, issued or outstanding | ||||||||
| Common stock, $ par value; shares authorized; and and shares issued and outstanding at December 31, 2025 and December 31, 2024, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See the accompanying notes to the consolidated financial statements
| F-3 |
Barfresh Food Group Inc.
Consolidated Statements of Operations
For the years ended December 31, 2025 and 2024
| 2025 | 2024 | |||||||
| Revenue | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling, marketing and distribution | ||||||||
| General and administrative | ||||||||
| Depreciation and amortization | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Bargain purchase (Note 11) | ( | ) | ||||||
| Debt guarantee expense (Note 5) | ||||||||
| Interest expense | ||||||||
| Net loss before benefit of income tax | $ | ( | ) | $ | ( | ) | ||
| Benefit of income tax | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Per share information - basic and fully diluted: | ||||||||
| Weighted average shares outstanding | ||||||||
| Net loss per share | $ | ) | $ | ) | ||||
See the accompanying notes to the consolidated financial statements
| F-4 |
Barfresh Food Group Inc.
Consolidated Statements of Stockholders’ Equity
For the years ended December 31, 2025 and 2024
| Additional | ||||||||||||||||||||
| Common Stock | paid in | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | (Deficit) | Total | ||||||||||||||||
| Balance December 31, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Issuance of common stock for equity compensation, net of shares repurchased for income tax withholding | ( | ) | ( | ) | ||||||||||||||||
| Equity-based compensation expense | - | |||||||||||||||||||
| Conversion of debt and interest (Note 5) | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance December 31, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| 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) | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance December 31, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See the accompanying notes to the consolidated financial statements
| F-5 |
Barfresh Food Group Inc.
Consolidated Statements of Cash Flows
For the years ended December 31 2025 and 2024
| 2025 | 2024 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| 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 | ||||||||
| Shares issued in exchange for continuing guarantees | ||||||||
| Amortization of line of credit discount | ||||||||
| Changes in assets and liabilities | ||||||||
| Accounts receivable | ( | ) | ||||||
| Other receivables | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Accounts payable - trade | ( | ) | ||||||
| Accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing activities | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Acquisition of Arp’s Dairy, Inc. net of cash acquired (Note 11) | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing activities | ||||||||
| Borrowings under line of credit | ||||||||
| Repayment of line of credit | ( | ) | ( | ) | ||||
| Issuance of convertible debt | ||||||||
| Mortgage Note payments | ( | ) | ||||||
| Financing agreement payments | ( | ) | ( | ) | ||||
| Issuance of common stock, net of $ | ||||||||
| Shares repurchased for income tax withholding under stock compensation program | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash, beginning of year | ||||||||
| Cash, end of year | $ | $ | ||||||
See the accompanying notes to the consolidated financial statements
| F-6 |
Barfresh Food Group Inc.
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Barfresh Food Group Inc., (“we,” “us,” “our,” and the “Company”) was incorporated on February 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.
On
October 3, 2025, we acquired
Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
Principles of Consolidation
The consolidated financial statements include the financial statements of the Company and our wholly owned subsidiaries, Barfresh Corporation Inc. (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.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the years reported. Actual results may differ from these estimates.
Vendor Concentrations
The 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 manufacturers. Purchases from the Company’s significant contract manufacturers as a percentage of all finished goods purchased were as follows:
| 2025 | 2024 | |||||||
| Manufacturer A | % | % | ||||||
| Manufacturer B | % | % | ||||||
| Manufacturer C | % | % | ||||||
| Other Manufacturers | % | % | ||||||
Manufacturer 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.
| F-7 |
Concentration of Credit Risk
The following customers accounted for 10% or more of the Company’s accounts receivable balance at December 31:
| 2025 | 2024 | |||||||
| Customer A | % | % | ||||||
| Customer B | % | % | ||||||
| Customer C | % | % | ||||||
| Customer D | % | % | ||||||
| Customer E | % | % | ||||||
Financial Instruments
Our financial instruments consist of cash, accounts receivable, accounts payable, and the line of credit and financing agreements. The carrying value of our financial instruments approximates their fair value.
Accounts Receivable
Accounts
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 operations. As of December 31, 2025 and
2024, there was
Inventory
Inventory 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 monitors the remaining useful life of its inventory and establishes a reserve of obsolescence where appropriate.
Intangible Assets
In 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.
Long-Lived Assets and Other Acquired Intangible Assets
We evaluate the recoverability of property and equipment and finite-lived intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of property and equipment and intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. There was no impairment in 2025 or 2024.
| F-8 |
Property, Plant, and Equipment
Property, plant, and equipment is stated at cost less accumulated depreciation and accumulated impairment loss, if any. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets. Leasehold improvements are being amortized over the shorter of the useful life of the asset or the lease term that includes any expected renewal periods that are deemed to be reasonably assured. The estimated useful lives used for financial statement purposes are (in years):
| Building | |
| Manufacturing equipment | |
| Customer equipment |
Government Grant
The Company has been awarded a $
Revenue Recognition
In accordance with ASC 606, Revenue from Contracts with Customers, revenue is recognized when a customer obtains ownership of promised goods. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods. The Company applies the following five steps:
| 1) | Identify the contract with a customer | |
| A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration 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. | ||
| 2) | Identify the performance obligation in the contract | |
| Performance 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 products, which provide immediate benefit to the customer. | ||
| 3) | Determine the transaction price | |
| The 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 utilizing the most likely amount method. Provisions for refunds are generally provided for in the period the related sales are recorded, based on management’s assessment of historical and projected trends. | ||
| 4) | Allocate the transaction price to performance obligations in the contract
Since the Company’s contracts contain a single performance obligation, delivery of products, the transaction price is allocated to that single performance obligation. | |
| 5) | Recognize revenue when or as the Company satisfies a performance obligation | |
The 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. |
| F-9 |
Research and Development
Expenditures
for research activities relating to product development and improvement are charged to expense as incurred. The Company incurred $
Storage and Shipping Costs
Storage
and outbound freight costs are included in selling, marketing and distribution expense. For the years ended December 31, 2025 and 2024,
storage and outbound freight amounted to $
Leases
We determine if an arrangement is a lease upon inception. 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.
Income Taxes
The provision for income taxes is determined in accordance with the provisions of ASC Topic 740, Accounting for Income Taxes (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC
740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements,
uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the
financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax
positions must initially and subsequently be measured as the largest amount of tax benefit that has a
ASC 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.
For
the years ended December 31, 2025 and 2024 we did
Derivative Liability
The 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 Topic 815, “Derivatives and Hedging.” The Company determined that its convertible instruments issued in 2024 and 2023 did not include any embedded derivatives that require bifurcation.
We 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, 2025 and 2024 any common stock equivalents would have been anti-dilutive as we had losses for the years then ended.
| F-10 |
The Company calculates stock compensation in accordance with ASC Topic 718, Compensation-Stock Based Compensation (“ASC 718”). ASC 718 requires that the cost resulting from all share-based payment transactions be recognized in the financial statements and establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement method in accounting for share-based payment transactions with employees.
Recent pronouncements
From time to time, new accounting pronouncements are issued that we adopt as of the specified effective date. We have not determined if the impact of recently issued standards that are not yet effective will have an impact on our results of operations and financial position.
Note 2. Inventory
Inventory consists of the following at December 31:
| 2025 | 2024 | |||||||
| Raw materials and packaging | $ | $ | ||||||
| Finished goods | ||||||||
| Inventory, net | $ | $ | ||||||
Note 3. Property Plant and Equipment
Major classes of property and equipment consist of the following at December 31:
| 2025 | 2024 | |||||||
| Land | $ | $ | ||||||
| Building | ||||||||
| Manufacturing equipment | ||||||||
| Customer equipment | ||||||||
| Construction in progress | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net of depreciation | $ | $ | ||||||
The
Company recorded depreciation expense related to these assets of $
Assets subject to financing leases consist of the following at December 31:
| 2025 | 2024 | |||||||
| Manufacturing equipment | $ | $ | ||||||
| Customer equipment | ||||||||
| Construction in progress | ||||||||
| Less: accumulated depreciation | ( | ) | ||||||
| Property and equipment, net of depreciation | $ | $ | ||||||
Depreciation expense related to leased assets amounted
to $
| F-11 |
Note 4. Intangible Assets
Intangible assets consist of the following at December 31:
| 2025 | 2024 | |||||||
| Patent costs, subject to amortization | $ | $ | ||||||
| Less: accumulated amortization | ( | ) | ||||||
| Patent costs, net | ||||||||
| Trademarks, not subject to amortization | ||||||||
| Total | $ | $ | ||||||
The
amounts carried on the balance sheet represent cost to acquire, legal fees and similar costs relating to the patents incurred by the
Company. Amortization is recorded through the expiration date of the patent. The amount charged to expenses for amortization of the patent
costs was $
Note 5. Debt
Line of Credit
In
August 2024, the Company secured receivables financing of $
As
of December 31, 2025, there was $
Financing Agreements
In
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
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Total payments due | ||||
| Less: interest | ( | ) | ||
| Less: current portion | ( | ) | ||
| Financing agreements | $ |
| F-12 |
Interest
expense related to financing agreements
amounted to $
Debt
The Company’s debt consists of amounts owed by Arps Dairy prior to the Acquisition, and includes the following:
| 2025 | ||||
| Manager note | $ | |||
| Advances from Arps Dairy former stockholders | ||||
| Mortgage Note payable to bank in monthly installments of $ | ||||
| Total payments due | ||||
| Less: current portion | ( | ) | ||
| Long-term portion | $ | |||
Manager Note
The 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.
Advances from Former Stockholders
Prior
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. The
Company issued notes in the aggregate principal amount of $
Mortgage Note
Prior
to the Acquisition, Arps Dairy was out of compliance with the financial covenants of its Mortgage Note held by a commercial bank. In
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
$
| F-13 |
Barfresh
issued shares valued at approximately $
On 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.
Convertible Notes
From
July 2023 to March 2024, the Company executed subscription agreements for substantially all of a $
On
October 23, 2023, the Company drew down $
Note 6. Commitments and Contingencies
Lease Commitments, Construction and Demolition
The
Company leases headquarters office space under a non-cancelable operating lease which expired on
During
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
In
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). The
Company is subject to penalties of $
| F-14 |
The
New Facility expansion is expected to cost $
The
Company is liable for the demolition of the Existing Facility, once it has vacated the premises. The Company has been awarded a $
Legal Proceedings
Schreiber Dispute
The
Company’s products are produced to its specifications through several contract manufacturers. One of the Company’s contract
manufacturers (the “Manufacturer”) provided approximately
Over
the course of 2022, the Company experienced numerous quality issues with the case packaging utilized by the Manufacturer. In addition,
in July of 2022, the Company began receiving customer complaints about the texture of the Company’s smoothie products produced
by the Manufacturer. In response, the Company withdrew product from the market and destroyed on-hand inventory, withholding $
The Company attempted to resolve the issues based on the contractual procedures described in the Supply Agreement. However, on November 4, 2022, in response to a formal proposal of alternate resolutions, the Company received notification from the Manufacturer that it was denying any responsibility for the defective manufacture of the product. In response, on November 10, 2022, the Company filed a complaint in the United States District Court for the Central District of California, Western Division (the “Complaint”), claiming that the Manufacturer had not met its obligations under the Supply Agreement, and seeking economic damages. In response, the Manufacturer terminated the Supply Agreement. On January 20, 2023, the Company filed a voluntary dismissal of the Complaint which allowed the parties to reach a potential resolution outside of the court system. However, as the parties were once again unable to come to an agreement, the Company re-filed the Complaint in California State Court in August 2023 and continues to progress through the court system.
In May 2024, the Company entered into a non-recourse litigation financing arrangement which is expected to be adequate to pursue the Complaint to conclusion.
In 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.
Due to the uncertainties surrounding the claim, the Company is not able to predict either the outcome or a range of reasonably possible recoveries that could result from its actions against the Manufacturer, and no gain contingencies have been recorded. The disruption in its supply resulting from the dispute has and will continue to adversely impact the Company’s results of operations and cash flow until a suitable resolution is reached or new sources of reliable supply at sufficient volume can be identified and developed, the timing of which is uncertain. The Company has mitigated the impact of the supply disruption with the introduction of its single-serve smoothie cartons; however, the product format has not been accepted by some customers or as a substitute for the bottle product in all use cases.
Other legal matters
From
time to time, various lawsuits and legal proceedings may arise in the ordinary course of business. However, litigation is subject to
inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are
currently the defendant in one legal proceeding for an amount less than $
| F-15 |
Note 7. Stockholders’ Equity
In 2024, the Company issued shares of common stock pursuant to the conversion of debt and accrued interest, as more fully described in Note 5.
In 2024, the Company issued shares of common stock for equity-based compensation.
On February 5, 2025, the Company entered into securities purchase agreements with several investors, pursuant to which the Company sold an aggregate of shares of common stock at a price of $ per share in a registered direct offering.
On October 3, 2025, in connection with continuing guarantees on the Mortgage Note, shares of common stock were granted to the selling stockholders of Arps Dairy. See Note 5.
In 2025, the Company issued shares of common stock for equity-based compensation.
Warrants
The following is a summary of changes in warrants outstanding for the years ended December 31, 2025 and 2024:
| Number of | ||||
| warrants | ||||
| Outstanding at December 31, 2023 | ||||
| Expired | ( | ) | ||
| Outstanding at December 31, 2024 | ||||
| Expired | ( | ) | ||
| Outstanding at December 31, 2025 | ||||
Equity Incentive Plan
Through 2022, the Company issued equity incentive awards under the 2015 Equity Incentive Plan (the “2015 Plan”) and outside the Plan. In June 2023, the Company’s stockholders adopted the 2023 Equity Incentive Plan (the “2023 Plan”), reserving shares for future issuance, subject to adjustment under the plan’s evergreen provision. The Board of Directors discontinued further grants under the 2015 Plan.
Awards may be granted to employees, members of the Board of Directors and consultants, and may take the form of options, restricted stock, restricted stock units, performance shares and stock appreciation rights. The Company has issued options with no intrinsic value, stock awards and stock units through December 31, 2025, and issues new shares upon exercise of options or vesting of stock awards and stock units.
The Company has reserved approximately and , respectively for awards outstanding under the 2015 Plan and 2023 Plan, and shares for equity awards issued outside either of the Company’s equity incentive plans. As of December 31, 2025, shares remain available for the issuance of awards under the 2023 Plan. Total shares reserved for awards that are outstanding and expected to vest or available for issuance are 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 % 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 shares for issuance under the ESPP.
| F-16 |
Stock-Based Compensation
The total amount of equity-based compensation included in general and administrative expense in the accompanying consolidated statements of operations was $ and $ for the years ended December 31, 2025 and 2024.
As of December 31, 2024, the Company has $ of total unrecognized share-based compensation expense related to unvested options, stock awards and stock units, which is expected to be amortized over the remaining weighted average period of years.
Stock Options
| Number of Options | Weighted average exercise price per share | Remaining term in years | ||||||||||
| Outstanding on December 31, 2023 | $ | |||||||||||
| Granted | $ | |||||||||||
| Forfeited | ( | ) | $ | |||||||||
| Expired | ( | ) | $ | |||||||||
| Outstanding on December 31, 2024 | $ | |||||||||||
| Granted | $ | |||||||||||
| Expired | ( | ) | $ | |||||||||
| Outstanding on December 31, 2025 | $ | |||||||||||
| Exercisable, December 31, 2025 | $ | |||||||||||
In December 2024, the Company modified options that were expected to expire from As a result of the modification, the Company recorded $ of stock compensation expense, representing the fair value of the re-issued options compared to the fair value of the expiring options immediately prior to the modification.
| 2025 | 2024 | |||||||
| Expected term (in years) | ||||||||
| Expected volatility | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected dividends | $ | $ | ||||||
| Weighted average grant date fair value per share | $ | $ | ||||||
| F-17 |
Restricted Stock
| Number of shares | Weighted average grant date fair value | |||||||
| Unvested at December 31, 2023 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited | ( | ) | $ | |||||
| Unvested at December 31, 2024 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited | ( | ) | $ | |||||
| Unvested at December 31, 2025 | $ | |||||||
Performance Stock Units
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 % and, in some cases, up to % of the PSU target award. The awards also included various time-based service requirements.
| Number of shares | Weighted average grant date fair value | |||||||
| Unvested at December 31, 2023 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited | ( | ) | $ | |||||
| Unvested January 1, 2025 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited | ( | ) | $ | |||||
| Unvested at December 31, 2025 | $ | |||||||
| F-18 |
Note 8. Income Taxes
Income tax provision (benefit) for the years ended December 31, 2025 and 2024 is summarized below:
| 2025 | 2024 | |||||||
| Current: | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Total | ||||||||
| Deferred: | ||||||||
| Federal | ( | ) | ( | ) | ||||
| State | ||||||||
| Change in valuation allowance | ( | ) | ( | ) | ||||
| Total | ( | ) | ||||||
| Benefit of income taxes | $ | ( | ) | $ | ||||
The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate before provision for income taxes. The sources and tax effect of the differences are as follows:
| 2025 | 2024 | |||||||||||
| Statutory federal income tax rate | $ | ( | ) | % | % | |||||||
| State tax | ( | ) | ||||||||||
| Permanent differences | ( | ) | ||||||||||
| Change in valuation allowance | ( | ) | ( | ) | ||||||||
| Net benefit of income taxes | $ | ( | ) | % | % | |||||||
Components of the net deferred income tax assets at December 31, 2025 and 2024 were as follows:
| 2025 | 2024 | |||||||
| Deferred tax asset - Net operating loss carryover | $ | $ | ||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | ||||||||
| Deferred tax liability - depreciation | ( | ) | ||||||
| Net deferred tax asset | $ | $ | ||||||
The
Company recognized an income tax benefit of $
| F-19 |
As
of December 31, 2025, the Company has a net operating loss carry forward to offset future taxable income of approximately $
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.
CARES Act
On
March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) to provide
certain relief as a result of the COVID-19 pandemic. The CARES Act provides tax relief, along with other stimulus measures, including
a provision for an Employee Retention Credit (“ERC”), which allows for employers to claim a refundable tax credit against
the employer share of Social Security tax equal to 70% of the qualified wages paid to employees from the start of the COVID-19 pandemic
through September 30, 2021. The ERC was designed to encourage businesses to keep employees on the payroll during the COVID-19 pandemic.
The Company received a refund of $
ERC claims were permitted in a variety of circumstances with varying degrees of subjectivity and clear authoritative guidance. Paid claims 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.
Note 9. Business Segments and Major Customers
As 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. The CODM 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:
| 2025 | 2024 | |||||||
| Revenue | ||||||||
| Frozen Beverages and Food | $ | $ | ||||||
| Raw and Processed Milk | ||||||||
| Revenue | $ | $ | ||||||
| Gross profit | ||||||||
| Frozen Beverages and Food | $ | $ | ||||||
| Raw and Processed Milk | ||||||||
| Gross profit | ||||||||
| Unallocated: | ||||||||
| Total operating expenses | ( | ( | ) | |||||
| Bargain purchase | ||||||||
| Debt guarantee expense | ( | ) | ||||||
| Interest expense | ( | ) | ( | ) | ||||
| Net loss before benefit of income tax | $ | ( | ) | $ | ( | ) | ||
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.
Sales to the following customers represented more than 10% of total sales for the years ended December 31, 2025 and 2024:
| 2025 | 2024 | |||||||
| Customer A– Frozen Beverages and Food | % | % | ||||||
| Customer B– Raw and Processed Milk | % | % | ||||||
| Customer C– Frozen Beverages and Food | % | % | ||||||
| Customer D– Frozen Beverages and Food | % | % | ||||||
| F-20 |
Note 10. Supplemental Cash Flow Information
Supplemental cash flow information is as follows:
| 2025 | 2024 | |||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | $ | ||||||
| Non-cash financing and investing activities: | ||||||||
| Financed acquisition of long-term assets | $ | $ | ||||||
| Accounts payable arising from acquisition of long-term assets | $ | $ | ||||||
| Conversion of debt and interest to equity | $ | $ | ||||||
| Convertible notes issued in exchange for trade payables | $ | $ | ||||||
Note 11. Business Combination
On 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.
The 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:
| Acquisition consideration | ||||
| Cash paid to retire Arps Dairy debt | $ | |||
| Fair value of assets and liabilities | ||||
| Cash | $ | |||
| 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 $
The
Company incurred $
| F-21 |
The
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 $
| 2025 | 2024 | |||||||
| (unaudited) | (unaudited) | |||||||
| Pro forma revenue | $ | $ | ||||||
| Pro forma net loss | $ | ( | ) | $ | ( | ) | ||
| Pro forma net loss per share, basic and fully diluted | $ | ) | $ | ) | ||||
Note 12. Liquidity
During
the years ended December 31, 2025 and 2024, the Company used cash for operations of $
The Company has a history of operating losses and negative cash flow, which are expected to improve with growth. As described more fully in Note 6, 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. The Acquisition is expected to alleviate the supply constraints.
The
Company paid $
The
Company increased its receivables-based line of credit in September 2025 to $
Although 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 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.
| F-22 |
Note 13. Subsequent Events
On 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.
On
February 10, 2026, the Company elected to convert the $
On
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
Beginning
on March 5, 2026 and through March 23, 2026, the Company obtained subscriptions for unsecured senior convertible promissory notes in
the aggregate amount of $
Purchasers
of the Notes were issued
Should
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
The
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
On March 6, 2026, the Mortgage Note was repaid in full.
| F-23 |