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What changed in BARFRESH FOOD GROUP INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of BARFRESH FOOD GROUP INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+107 added−127 removedSource: 10-K (2025-03-27) vs 10-K (2024-03-22)

Top changes in BARFRESH FOOD GROUP INC.'s 2024 10-K

107 paragraphs added · 127 removed · 77 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

5 edited+2 added−3 removed15 unchanged
Biggest changeManufacturing Barfresh utilizes contract manufacturers to manufacture all of its products in the United States. Research and Development The Company incurred approximately $115,000 and $382,000 in research and development expenses for the years ended December 31, 2023 and 2022, respectively.
Biggest changeResearch and Development The Company incurred approximately $132,000 and $115,000 in research and development expenses for the years ended December 31, 2024 and 2023, 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.
Before entering into any manufacturing contracts, the Company determines that the manufacturer meets all government requirements. 5 Environmental Laws The Company does not believe that it is subject to any environmental laws, either state or federal. Compliance with any laws concerning manufacturing is the responsibility of the contract manufacturer.
Before entering into any manufacturing contracts, the Company determines that the manufacturer meets all government requirements. Environmental Laws The Company does not believe that it is subject to any environmental laws, either state or federal. Compliance with any laws concerning manufacturing is the responsibility of the contract manufacturer.
The current portfolio of products includes smoothies, shakes and frappes. 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 Products Products are packaged in three distinct formats.
The current portfolio of products includes smoothies, shakes and frappes. 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 Products Products are packaged in four distinct formats.
Employees As of March 18, 2024, the Company has 10 employees and 3 consultants.
Employees As of March 24, 2025, the Company has 11 employees and 3 consultants. 5
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. 4 Distribution The Company conducts sales through several channels, including National Accounts, Regional Accounts, and Broadline Distributors.
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.
Removed
The Company’s single-serve format features portion controlled and ready-to-blend beverage ingredient packs or “beverage packs”.
Added
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.
Removed
Research and Development expenses in 2022 were primarily attributable to the launch of the Company’s Twist & Go™ cartons, as well as costs incurred to investigate the quality issues experienced with the Manufacturer, more fully described in Item 7. Competition There is significant competition in the smoothie market at both the institutional and consumer purchasing level.
Added
Pop & Go ™ contains 4 oz of juice, no added sugars, preservatives or artificial flavors or colors, and comes in five flavors. 4 Distribution The Company conducts sales through several channels, including National Accounts, Regional Accounts, and Broadline Distributors. Manufacturing Barfresh utilizes contract manufacturers to manufacture all of its products in the United States.
Removed
The Company distributes products institutionally primarily through distributors to school districts.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

35 edited+12 added−24 removed77 unchanged
Biggest changeIf we are unable to pass on any increased costs, our gross margin will decrease. Our experience with the Manufacturer demonstrates how our reliance on a limited number of manufacturers and suppliers further increases 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.
Biggest changeMost 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.
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 we are going to use to can be affected by a variety of factors, such as weather, seasonal fluctuations, demand, politics and economics in the producing countries.
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 we are going to use can be affected by a variety of factors, such as weather, seasonal fluctuations, demand, politics and economics in the producing countries.
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. 9 Our litigation with Manufacturer was voluntarily withdrawn from the court system in January 2023 and refiled in August 2023, as we were unable to reach a suitable resolution.
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. 9 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.
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 the research and reports that securities or industry analysts publish about our business or us.
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.
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. 11 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.
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.
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. 8 Increases in costs of packaging, ingredients and contract manufacturing tolling fees may have an adverse impact on our gross margin.
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. Increases in costs of packaging, ingredients and contract manufacturing tolling fees may have an adverse impact on our gross margin.
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. 14 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.
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. 13 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.
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. 13 Our common stock is subject to price volatility unrelated to our operations.
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. 12 Our common stock is subject to price volatility unrelated to our operations.
At present, members of our board of directors and/or their affiliated entities control over 60% of the outstanding shares of voting stock, and therefore have the power to control all matters requiring the approval of our stockholders, including the election of directors and the approval of mergers and other significant corporate transactions.
At present, members of our board of directors and/or their affiliated entities control over 50% of the outstanding shares of voting stock, and therefore have the power to control all matters requiring the approval of our stockholders, including the election of directors and the approval of mergers and other significant corporate transactions.
Shared service centers managed by third parties provide an increasing number of services important to conducting our business, including accounting, internal control, human resources and computing functions.
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.
Our success will 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 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.
These risks could be magnified since the number of employees, contractors and others working outside of offices increased since the COVID-19 pandemic. Additionally, continued geopolitical turmoil, including the ongoing war in Ukraine, has heightened the risk of cyberattacks.
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 Israel, has heightened the risk of cyberattacks.
In addition to the accounting impact, we must obtain suitable replacement contract manufacturers and regain the confidence of our customers and investing public, all while seeking a resolution with the Manufacturer.
In addition to the financial damage from the product withdrawal, we must obtain suitable replacement contract manufacturers and regain the confidence of our customers and investing public, all while seeking a resolution with the Manufacturer.
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.
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. 11 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.
In May 2023, we received a letter from Nasdaq indicating that we were not in compliance with Nasdaq Listing Rule 5550(b)(1), which requires companies listed on The Nasdaq Stock Market to maintain a minimum of $2,500,000 in stockholders’ equity for continued listing.
In 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.
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.
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.
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.
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.
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. 10 We have identified a material weakness in our disclosure controls and procedures and internal control over financial reporting.
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. 10 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.
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.
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. 6 A worsening of economic conditions or a decrease in consumer spending may adversely impact our ability to implement our business strategy.
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.
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.
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.
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.
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.
We may be required to seek financing through the issuance of equity or convertible securities 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.
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.
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. Issues with a manufacturer have resulted in significant losses, as well as other negative impacts.
While we believe that that our claims have merit, there is no assurance of a favorable outcome to this case. Our inability to protect our intellectual property rights may force us to incur unanticipated costs.
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.
These tasks have required substantial amounts of personnel and capital resources in 2023 with ongoing activities expected in 2024. 6 We may need additional financing in the future, which may not be available when needed or may be costly and dilutive. We may require additional financing to support our working capital needs in the future.
These tasks have required substantial amounts of personnel and capital resources in 2023 and 2024, including production trial and other start-up costs, with ongoing activities expected in 2025. We may need additional financing in the future, which may not be available when needed or may be costly and dilutive.
Shortages in inventory levels, supply of raw materials or other key supplies could negatively affect us. 7 Disruption within our supply chain, contract manufacturing or distribution channels could have an adverse effect on our business, financial condition and results of operations.
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. Disruption within our supply chain, contract manufacturing or distribution channels could have an adverse effect on our business, financial condition and results of operations.
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.
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.
Failure to take adequate steps to protect against or mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, could adversely affect our business, financial condition and results of operations.
Failure to take adequate steps to protect against or mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, could adversely affect our business, financial condition and results of operations. 7 Our experience with the Manufacturer demonstrates how our reliance on a limited number of manufacturers and suppliers further increases this risk.
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 higher storage costs, increased trade spending and the risk of inventory spoilage.
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.
Issues with a manufacturer have resulted in a significant loss for 2022 and 2023, 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.
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.
Further, it takes a newly engaged manufacturer typically up to nine months of retrofitting/ preparation before it can begin producing our products. We have contracts in place to produce sufficient units to meet projected demand; however, if one of our manufacturers fails to perform, we would be faced with a significant interruption in our supply chain.
In 2023 and 2024 we did not have contracts in place to produce sufficient units to meet projected demand. If one of our manufacturers fails to perform, we would be faced with a significant interruption in our supply chain.
A worsening of economic conditions or a decrease in consumer spending may adversely impact our ability to implement our business strategy. Our success depends to a significant extent on discretionary consumer spending, which is influenced by general economic conditions and the availability of discretionary income.
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.
We compete with many well-established companies, food service and otherwise, on the basis of taste, quality and price of product offered, customer service, atmosphere, location and overall guest 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.
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.
Incurring net losses going forward may cause us to fail to meet Nasdaq listing standards and result in our common stock only being tradable in the over-the-counter markets. Our use of information technology and third-party service providers exposes us to cybersecurity breaches and other business disruptions.
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.
In our quarterly report on Form 10-Q for the period ended March 31, 2023, we reported stockholders’ equity of $1,845,000, thereby failing to satisfy Listing Rule 5550(b)(1). While we recently regained compliance with this Rule, our stockholders’ equity at December 31, 2023 was only $2,503,000.
While we regained compliance with this Rule in 2023, our stockholders’ equity at December 31, 2024 was only $578,000. We have instead maintained compliance based on the $35,000,000 minimum market value requirement.
Removed
Complaints from customers led us to withdraw product from the market and destroy existing inventory. The results for 2022 reflect the estimated accounting impact of these actions, including $493,000 in refunds and administrative fees due to customers and $932,000 to dispose of unsaleable inventory.
Added
We may require additional financing to support our working capital needs in the future.
Removed
Any material decline in the amount of discretionary spending, leading cost-conscious consumers to be more selective in restaurants visited, could have a material adverse effect on our revenue, results of operations, business and financial condition. The challenges of competing with the many food services businesses may result in reductions in our revenue and operating margins.
Added
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.
Removed
We compete with other smoothie and juice bar retailers, specialty coffee retailers, yogurt and ice cream shops, bagel shops, fast-food restaurants, delicatessens, cafés, take-out food service companies, supermarkets and convenience stores. Our competitors change with each of the four day parts, ranging from coffee bars and bakery cafés to casual dining chains.
Added
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.
Removed
Additionally, our larger distributors and partners may make orders that are larger than we have historically been required to fill.
Added
We cannot assure you that we will be able to secure our fruit supply. 8 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.
Removed
During the fourth quarter of 2023, the beverage industry began experiencing a shortage of 4-ounce and 8-ounce cartons, directly impacting our “Twist & Go”™ product. As of the date of this report, the shortage is continuing and could impair the ability of our manufacturers to fulfill orders that we place with them and/or increase our costs.
Added
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.
Removed
If not remediated, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our financial condition and the trading price of our common stock.
Added
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.
Removed
Maintaining effective internal control over financial reporting and effective disclosure controls and procedures are necessary for us to produce reliable financial statements.
Added
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”).
Removed
As discussed in Item 9A – “Controls and Procedures” of this Form 10-K, we have re-evaluated our internal control over financial reporting and our disclosure controls and procedures and concluded that they were not effective as of December 31, 2023.
Added
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.
Removed
A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Added
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.
Removed
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. The Company is committed to remediating its material weaknesses as promptly as possible. Implementation of the Company’s remediation plans has commenced , including adding appropriate staffing and implementing an improved information system.
Added
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.
Removed
Remediation is being overseen by the audit committee. However, there can be no assurance as to when these material weaknesses will be remediated or that additional material weaknesses will not arise in the future. Even effective internal control can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.
Added
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.
Removed
Any failure to remediate the material weaknesses or the development of new material weaknesses in our internal control over financial reporting, could result in material misstatements in our financial statements, which in turn could have a material adverse effect on our financial condition and the trading price of our common stock and we could fail to meet our financial reporting obligations.
Added
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.
Removed
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.
Removed
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.
Removed
Shared service centers managed by third parties provide an increasing number of services important to conducting our business, including accounting, internal control, human resources and computing functions. 12 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.
Removed
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.
Removed
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.
Removed
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.
Removed
These risks could be magnified since the number of employees, contractors and others working outside of offices increased since the COVID-19 pandemic. Additionally, continued geopolitical turmoil, including the ongoing war in Ukraine, has heightened the risk of cyberattacks.
Removed
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.
Removed
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.
Removed
Furthermore, the rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity risks.
Removed
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.
Removed
We intend to continue to seek financing through the issuance of equity or convertible securities to fund our operations. In the future, we may also issue additional equity securities resulting in the dilution of the ownership interests of our present shareholders.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

8 edited+0 added−1 removed2 unchanged
Biggest changeWe expect to implement a risk-based approach to identifying, preventing and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner.
Biggest changeWe have implemented a risk-based approach to identifying, preventing and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner. 14 We also rely on information technology and third-party vendors to support our operations, including our secure processing of personal, confidential, sensitive, proprietary and other types of information.
While we have not experienced any material cybersecurity threats or incidents in recent years, there can be no guarantee that we will not be the subject of future threats or incidents. Additional information on cybersecurity risks we face can be found in Item 1A, Risk Factors , which should be read in conjunction with the foregoing information. 15
While we have not experienced any material cybersecurity threats or incidents in recent years, there can be no guarantee that we will not be the subject of future threats or incidents. Additional information on cybersecurity risks we face can be found in Item 1A, Risk Factors , which should be read in conjunction with the foregoing information.
Our Management Leadership Team, with oversight from the Board of Directors, plans to implement a comprehensive cybersecurity program, including incident response process, aligned with the National Institute of Standards and Technology (NIST) Cybersecurity Framework and NIST Computer Security Incident Handling Guide (NIST SP 800-61) to assess, identify, address and manage risks from cybersecurity threats that may result in material adverse effects on the confidentiality, integrity and availability of our business and information systems.
Our Management Leadership Team, with oversight from the Board of Directors, has implement ed a comprehensive cybersecurity program, including incident response process, aligned with the National Institute of Standards and Technology (NIST) Cybersecurity Framework and NIST Computer Security Incident Handling Guide (NIST SP 800-61) to assess, identify, address and manage risks from cybersecurity threats that may result in material adverse effects on the confidentiality, integrity and availability of our business and information systems.
We anticipate that our Board, in coordination with the Audit Committee, will oversee the Company’s enterprise risks arising from cybersecurity threats and will periodically review the measures we have implemented to identify and mitigate data protection and cybersecurity risks.
Our Board, in coordination with the Audit Committee, will oversee the Company’s enterprise risks arising from cybersecurity threats and will periodically review the measures we have implemented to identify and mitigate data protection and cybersecurity risks.
We anticipate that our Director of Technology will update the Chief Financial Officer and Chief Executive Officer on these matters and work closely with these Senior Executives to oversee compliance with legal, regulatory, and contractual security requirements with the guidance of outside counsel.
We anticipate that our outsourced services will update the Chief Financial Officer and Chief Executive Officer on these matters and work closely with these Senior Executives to oversee compliance with legal, regulatory, and contractual security requirements with the guidance of outside counsel.
We do not currently have a Cybersecurity Incident Response Plan (“CSIRP”) to provide the organizational and operational structure, processes, and procedures for investigating, containing, documenting and mitigating cybersecurity incidents.
We have a Cybersecurity Incident Response Plan (“CSIRP”) to provide the organizational and operational structure, processes, and procedures for investigating, containing, documenting and mitigating cybersecurity incidents.
Our Director of Technology reports to our Chief Financial Officer and has operational responsibility for our information security programs, protections, and efforts, along with leading efforts for implementing, monitoring, and maintaining cybersecurity and data security strategy, policy, standards, architecture, and practices across our business.
Our Chief Financial Officer has operational responsibility for oversight of our outsourced information technology services, our information security programs, protections, and efforts, along with leading efforts for implementing, monitoring, and maintaining cybersecurity and data security strategy, policy, standards, architecture, and practices across our business .
In that regard, we have increased our investment in information systems by hiring a Director of Technology in 2024 to replace limited outsourced services previously utilized.
In that regard, we have increased our investment in information systems by upgrading outsourced services and technology platforms previously utilized.
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We also rely on information technology and third-party vendors to support our operations, including our secure processing of personal, confidential, sensitive, proprietary and other types of information.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. Our principal executive offices are located at 3600 Wilshire Boulevard Suite 1720, Los Angeles, 90010. Beginning in April 2019, we leased this office space pursuant to a direct lease for approximately $80,000 annually through March 31, 2023. The Company extended its lease multiple times, most recently through September 2024, while management evaluates options for renewal or relocation.
Biggest changeItem 2. Properties. Our principal executive offices are located at 3600 Wilshire Boulevard Suite 1720, Los Angeles, 90010. Beginning in April 2019, we leased this office space pursuant to a direct lease for approximately $80,000 annually through March 31, 2023. The Company extended its lease multiple times, most recently through March 2025, while management evaluates options for renewal or relocation.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings As described in Note 7, 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.
Biggest changeItem 3. Legal Proceedings As described in Note 6, 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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurities 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.
Biggest changePurchases of Equity Securities by the Company There were no purchases of equity securities made by the Company in the period covered by this report. 15 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.
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.
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 None.
Dallas Parkway, Suite 380, Plano, Texas 75093, and its telephone number is (469) 633-0101. Item 6. [Reserved]
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]
Holders On March 18, 2024, there were 14,507,146 shares of our common stock outstanding. Our shares of common stock are held by 89 stockholders of record.
Holders On March 24, 2025, there were 15,810,080 shares of our common stock outstanding. Our shares of common stock are held by 85 stockholders of record.
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Recent Sales of Unregistered Securities On October 9, 2023, the Company drew down $1,390,000 in convertible debt and converted a total of $1,207,000 of principal into 820,160 shares of common stock.
Removed
Additionally, on December 19, 2023, the Company drew down $470,000 in convertible debt and converted a total of $653,000 of principal and $4,000 of accrued interest into 495,331 shares of common stock.
Removed
The registrant relied upon the exemption from registration contained in Rule 506(b) and 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 prospective investors and existing debt holders, (ii) each offer was made through direct communication with the offerees by the registrant, (iii) each of the offerees had the requisite sophistication and financial ability to bear risks of investing in the registrant’s common stock, (iv) the registrant provided extensive disclosure to the offerees, and (v) there was no general solicitation and no commission or remuneration was paid in connection with the offers. 16 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.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [Reserved] 17 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 17 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 21 Item 8. Financial Statements and Supplementary Data 21 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 21 Item 9A. Controls and Procedures 22
Biggest changeItem 6. [Reserved] 16 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 16 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 20 Item 8. Financial Statements and Supplementary Data 20 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 20 Item 9A. Controls and Procedures 21 Item 9B.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeIf we are unable to generate sufficient cash flow from operations with the capital raised we will be required to raise additional funds either in the form of equity or in the form of debt. There are no assurances that we will be able to generate the necessary capital to carry out our current plan of operations.
Biggest changeOur operations to date have been financed by the sale of securities, the issuance of convertible debt and the issuance of short-term debt. If we are unable to generate sufficient cash flow from operations with the capital raised we will be required to raise additional funds either in the form of equity or in the form of debt.
Our liquidity needs will depend on how quickly we are able to profitably ramp up sales, as well as our ability to control and reduce variable operating expenses, and to continue to control and reduce fixed overhead expense.
Our liquidity needs will depend on how quickly we are able to profitably ramp up sales, as well as our ability to control and reduce variable operating expenses, and to continue to control fixed overhead expense.
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 that will be transferred to the customer.
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.
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. 17 Domestic and international patents and patents pending are owned by Barfresh, as well as related trademarks for all of the single serve products.
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. Domestic and international patents are owned by Barfresh, as well as related trademarks for all of the single serve products.
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. Overview The Company’s products are packaged in three distinct formats.
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. Overview The Company’s products are packaged in four distinct formats.
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, 2023 and 2022. The financial statements of Barfresh were prepared and presented in accordance with generally accepted accounting principles in the United States.
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, 2024 and 2023. The financial statements of Barfresh were prepared and presented in accordance with generally accepted accounting principles in the United States.
Provisions for refunds and other adjustments 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 our contracts contain a single performance obligation, delivery of frozen beverages, 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 frozen beverages when title and risk of loss passes and the customer accepts the goods, which generally occurs at the time of delivery to a customer warehouse.
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 frozen beverages, 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 frozen beverages when title and risk of loss passes and the customer accepts the goods, which generally occurs at the time of delivery to a customer warehouse.
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 $141,000 (-11%) from approximately $1,340,000 in 2022 to $1,199,000 in 2023.
Personnel cost represents the cost of employees including salaries, bonuses, employee benefits and employment taxes and continues to be our largest cost. Personnel cost increased by approximately $51,000 (4%) from $1,199,000 in 2023 to $1,250,000 in 2024.
Shipping and handling costs are treated as fulfilment costs and presented in distribution, selling and administrative costs. 18 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.
The Company evaluated the requirement to disaggregate revenue and concluded that substantially all of its revenue comes from a single product, frozen beverages. 17 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.
Patent rights have been granted in 13 jurisdictions including the United States. In addition, the Company has purchased all of the trademarks related to the patented products. The Company conducts sales through several channels, including National Accounts, Regional Accounts, and Broadline Distributors. Currently we have 10 employees and 3 consultants.
Patent rights have been maintained in two jurisdictions including the United States. The patents expire in 2025. The Company conducts sales through several channels, including National Accounts, Regional Accounts, and Broadline Distributors. Currently we have 10 employees and 3 consultants.
Barfresh utilizes contract manufacturers to manufacture all of the products in the United States. Critical Accounting Policies Our financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Revenue Recognition In accordance with ASC 606, “Revenue from Contracts with Customers”, revenue is recognized when a customer obtains ownership of promised goods.
Barfresh utilizes contract manufacturers to manufacture all of the products in the United States. 16 Critical Accounting Policies Our financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
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, settling all debt. Debt drawdowns included the non-cash settlement of $30,000 in accounts payable. During the year ended December 31, 2023, we used $2,958,000 in operations.
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.
Adjusted comparative gross margin improvement is a result of favorable product mix, pricing actions, and a slight improvement in the cost of supply chain components.
Excluding production relocation costs, our gross profit was $3,951,000 in 2024 (37%). The improvement in gross margin is a result of favorable product mix, pricing actions, and a slight improvement in the cost of supply chain components.
The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods.
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.
While the introduction of our carton packaging format has mitigated the loss of supply, the product offering has not been accepted by some customers or as a substitute for the bottle product in all use cases. Further, as discussed in Item 1A, Risk Factors , we may be adversely affected by a carton shortage currently impacting the beverage industry.
While the introduction of our carton packaging format in 2023 has mitigated the loss of supply, the product offering has not been accepted by some customers or as a substitute for the bottle product in all use cases. We have contracted with a co-manufacturer for additional smoothie bottle manufacturing capacity.
Selling, marketing and distribution expense Year ended December 31, Year ended December 31, 2023 2022 Change Percent Sales and marketing $ 1,336,000 $ 1,394,000 $ (58,000 ) -4 % Storage and outbound freight 1,278,000 1,467,000 (189,000 ) -13 % $ 2,614,000 $ 2,861,000 $ (247,000 ) -9 % Selling, marketing and distribution expense decreased approximately $247,000 (-9%) from approximately $2,861,000 in 2022 to $2,614,000 in 2023.
Selling, marketing and distribution expense Year ended December 31, 2024 2023 Change Percent Sales and marketing $ 1,666,000 $ 1,336,000 $ 330,000 25 % Storage and outbound freight 1,473,000 1,278,000 195,000 15 % $ 3,139,000 $ 2,614,000 $ 525,000 20 % Selling, marketing and distribution expense increased approximately $525,000 (20%) from $2,614,000 in 2023 to $3,139,000 in 2024.
Customer sales incentives such as volume-based rebates or discounts are treated as a reduction of sales at the time the sale is recognized.
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. Payments that are received before performance obligations are recorded are shown as current liabilities.
Liquidity and Capital Resources On October 23, 2023, we drew down $1,390,000 in convertible debt and converted a total of $1,207,000 of principal into 820,160 shares of common stock.
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.
Expense for PSUs is recognized based on expected performance against targets. Results of Operations Revenue and cost of revenue Revenue was $8,127,000 in 2023 compared to $9,162,000 in 2022, a decrease of $1,035,000, or 11%. Revenue in 2022 was negatively impacted by the $630,000 claims estimate resulting from the market withdrawal of product purchased from the Manufacturer.
Expense for PSUs is recognized based on expected performance against targets. Results of Operations Revenue and cost of revenue Revenue was $10,717,000 in 2024 compared to $8,127,000 in 2023, an increase of $2,590,000, or 32%.
The decrease in personnel cost resulted primarily from the confirmation and recognition of our 2021 COVID-related tax credit, partially offset by bonus expense from the 2023 decision to cash settle a portion of the 2022 performance stock units. Additionally, salaries were lower due to a decrease in headcount. Legal, professional and consulting fees decreased by $189,000 (-38%).
The increase in personnel cost resulted primarily from the non-recurring confirmation and recognition of our 2021 COVID-related tax credit in 2023, partially offset by a reduction in cash bonus expense. Stock-based compensation increased by approximately $241,000 (44%) from $543,000 in 2023 to $784,000 in 2024.
Our recent business developments with the Manufacturer impact our supply chain and will result in increased legal cost and are expected to have a negative impact on our financial position, results of operations and cash flow.
Our current dispute with the Manufacturer and the resulting loss of product supply and legal expense have negatively impacted our financial position, results of operations and cash flow.
In 2022, we recorded impairment charges of $746,000 related to idle equipment resulting from overcapacity for single-serve products and equipment that is held at the Manufacturer. No impairment charges were recorded in 2023. 20 Net loss We had net losses of approximately $2,824,000 and $6,134,000 for the years ended December 31, 2023 and 2022, respectively.
The increase of $44,000 is a result of securing a receivables-based line of credit in 2024, as well as equipment and software financing. Net loss We had net losses of approximately $2,825,000 and $2,824,000 for the years ended December 31, 2024 and 2023, respectively.
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Excluding the refund claims estimate, revenue was $9,655,000 in 2022 and therefore decreased by $1,528,000 in 2023, or 16% based on product shipped. Our revenues have been adversely impacted as a result of lost customers and supply constraints resulting from the product issues and related dispute with the Manufacturer.
Added
Our revenue in 2024 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, continued acceptance of Twist & Go smoothies provided in cartons, and improvements in bulk sales due to the reintroduction of our WHIRLZ 100% juice product in the fourth quarter of 2023.
Removed
We have identified and are actively working to develop additional smoothie bottle manufacturing capacity. We had expected expanded capacity to become available in early 2024, but were unable to complete the contracting process with the potential partner that had been identified.
Added
Cost of revenue was $7,049,000 in 2024 compared to $5,243,000 in 2023, an increase of $1,806,000, or 34%. Cost of revenue increased at a slightly higher rate compared to revenue due to $283,000 in cost incurred to relocate our single-serve smoothie pouch production line. Our gross profit was $3,668,000 (34%) and $2,884,000 (36%) for 2024 and 2023, respectively.
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We believe we will expand capacity in 2024, however, there can be no assurances regarding our ability to identify and contract with a suitable partner. Cost of revenue was $5,243,000 in 2023 compared to $7,722,000 in 2022, a decrease of $2,479,000, or 32%.
Added
Sales and marketing expense increased approximately $330,000 (25%) from approximately $1,336,000 in 2023 to $1,666,000 in 2024. The increase is a result of higher personnel costs, travel and broker commission due to expansion of the broker network.
Removed
Cost of revenue in 2022 was negatively impacted by the $932,000 inventory write-off related to the product withdrawal. Excluding the inventory write-off, cost of revenue was $6,790,000 in 2022, and therefore decreased by $1,547,000 in 2023, or 23% based on product shipped.
Added
Storage and outbound freight expense increased approximately $195,000 (15%) from $1,278,000 in 2023 to $1,473,000 in 2024, primarily because of the 32% increase in revenue over the same period, partially offset by freight efficiencies, and lower storage and inventory management cost in 2024. 18 General and administrative expense Year ended December 31, 2024 2023 Change Percent Personnel costs $ 1,250,000 $ 1,199,000 $ 51,000 4 % Stock based compensation 784,000 543,000 241,000 44 % Legal, professional and consulting fees 282,000 310,000 (28,000 ) -9 % Research and development 132,000 115,000 17,000 15 % Other general and administrative expenses 595,000 519,000 76,000 15 % $ 3,043,000 $ 2,686,000 $ 357,000 13 % General and administrative expense increased approximately $357,000 (13%) from $2,686,000 in 2023 to $3,043,000 in 2024.
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Excluding the impact of the product withdrawal, cost of revenue declined due to lower revenue, and lower product cost due to a shift in product mix resulting from the limited supply of smoothie bottles. Our gross profit was $2,884,000 (36%) and $1,440,000 (16%) for 2023 and 2022, respectively. Adjusted for the product withdrawal, our 2022 gross profit was $2,865,000 (30%).
Added
The increase is due to higher attainment under performance awards and the modification of expiring options issued to our board of directors to extend the term through December 2026. Legal, professional and consulting fees decreased by approximately $28,000 (-9%). We reduced outside services and obtained non-recourse litigation financing to conserve working capital.
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Sales and marketing expense decreased approximately $58,000 (4%) from approximately $1,394,000 in 2022 to $1,336,000 in 2023. We reduced labor costs in 2023.
Added
Research and development expense increased by approximately $17,000 (15%) from $115,000 in 2023 to $132,000 in 2024. Expense related to optimization of our carton format and the re-launch of our bulk concentrate products in 2023, and the launch of our Pop & Go product in 2024, as well as reformulations to meet specific market or manufacturing requirements.
Removed
These reductions were partially offset by additional expense for product sampling of smoothie carton products, equipment maintenance incurred to relaunch bulk product sales in locations that had been non-operational as a result of COVID shutdowns and subsequent labor shortages, and broker commissions as we engaged numerous regional K-12 specialists to expand our geographic reach in the third quarter of 2022, and thus incurred a full year of expense in 2023 compared to a partial year in 2022. 19 Storage and outbound freight expense decreased approximately $189,000 (-13%) from approximately $1,467,000 in 2022 to $1,278,000.
Added
Other general and administrative expenses increased approximately $76,000 (15%) from $519,000 in 2023 to $595,000 in 2024 primarily due to recruiting fees incurred to broaden the capabilities of our management team. Interest expense Interest expense was $52,000 in 2024 compared to $8,000 in 2023.
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Adjusted for freight cost related to aforementioned product withdrawal credit memos, freight expense was $1,274,000 in 2022. The volume-related decrease in expense from the decline in revenue was offset by higher costs resulting from product mix and inefficiencies due to production transitions.
Added
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.
Removed
General and administrative expense Year ended December 31, Year ended December 31, 2023 2022 Change Percent Personnel costs $ 1,199,000 $ 1,340,000 $ (141,000 ) -11 % Stock-based compensation and payment for outside services 543,000 559,000 (16,000 ) -3 % Legal, professional and consulting fees 310,000 499,000 (189,000 ) -38 % Director fees paid in cash - 100,000 (100,000 ) -100 % Research and development 115,000 382,000 (267,000 ) -70 % Other general and administrative expenses 527,000 669,000 (142,000 ) -21 % $ 2,694,000 $ 3,549,000 $ (855,000 ) -24 % General and administrative expense decreased approximately $855,000 (-24%) from approximately $3,549,000 in 2022 to $2,694,000 in 2023.
Added
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”).
Removed
We reduced outside services in an effort to conserve working capital. Research and development expense decreased approximately $267,000 (-70%) from approximately $382,000 in 2022 to $115,000 in 2023. Expense was elevated in 2022 as we incurred pre-production expense related to the launch of our carton format, while 2023 expense was limited as activities were minimized to conserve working capital.
Added
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.
Removed
Certain director fees previously paid in cash were paid in stock in 2023 in order to conserve working capital.
Added
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. 19 During the year ended December 31, 2024, we used $2,229,000 in operations.
Removed
Other general and administrative expenses decreased approximately $142,000 (-21%) from approximately $669,000 in 2022 to $527,000 in 2023 primarily as a result of non-recurring costs related to our uplisting to the NASDAQ stock exchange in 2022, partially offset by licensing and development costs for information technology improvements.
Added
Our net loss adjusted for non-cash operating expenses was a loss of $1,752,000, while changes in non-cash current assets and liabilities consumed $477,000 primarily because we invested in inventory for production trials and ramp, and our accounts payable decreased as we improved adherence with vendor terms.
Removed
Asset Impairment 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.
Added
As of December 31, 2024, we had working capital of $606,000 compared with $2,345,000 at December 31, 2023, both excluding disputed accounts payable of $499,000 resulting from our dispute with the Manufacturer. The decrease in working capital is primarily due to losses incurred in 2024, partially offset by borrowing under our receivables-based line of credit.
Removed
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.
Added
Expanded capacity became available in the fourth quarter of 2024, and we expect that capacity to increase and become more efficient in 2025, subject to the risks and uncertainties associated with production activities.
Removed
The decrease in net loss of approximately $3,296,000, was the result of the non-recurrence of the estimated refund claims and inventory disposal costs associated with the product withdrawal, improved margins, and a reduction of approximately $1,106,000 in operating expenses due to cost saving measures, reduced volume of product shipped, and the recognition of our COVID-related tax credit and the non-recurrence of the $746,000 asset impairment.
Added
Additionally, we have taken other measures to reduce our liquidity requirements, including compensating our directors and employees with equity to reduce cash compensation requirements, obtaining non-recourse litigation financing, securing receivables financing in the third quarter of 2024, and the sale of an aggregate of 1,052,793 shares of common stock to raise $3,000,000 in February 2025.
Removed
As of December 31, 2023, we had working capital of $1,846,000 compared with $1,801,000 at December 31, 2022. Cash received from our debt issuance of $1,830,000 offset our operating loss of $1,848,000, net of $990,000 in non-cash expenses.
Added
There are no assurances that we will be able to generate the necessary capital to carry out our current plan of operations.
Removed
Our cash balance declined by $1,128,000 as receivables rebounded to reflect the 34% increase in revenue for the quarter ended December 31, 2023 compared to the same period of 2022, in addition to the settlement of credit memo reserves resulting from the 2022 product withdrawal.
Removed
Additionally, we settled accrued payroll, with the repayment reinvested by management in our debt offering, and reduced liabilities for cash director fees and franchise taxes associated with our 2021 reverse split. We intend to compensate directors in stock or options until our liquidity and financial position improve.
Removed
Our operations to date have been financed by the sale of securities, the issuance of convertible debt and the issuance of short-term debt, including related party advances.

Other BRFH 10-K year-over-year comparisons