Note 10. Liquidity

During the three months ended March 31, 2026, the Company used cash for operations of $2,382,000. As of March 31, 2026, the Company had $1,824,000 cash and net current assets of $903,000, exclusive of disputed co-manufacturer accounts payable (Note 5).

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 5, the dispute and subsequent contract termination with the Manufacturer has resulted in limitations in the Company’s ability to procure certain products necessary to achieve our growth projections and in elevated legal costs that were incurred before the Company obtained non-recourse litigation financing in 2025. The Acquisition is expected to alleviate the supply constraints.

The Company increased its receivables-based line of credit in September 2025 to $2,500,000. In October 2025, Arps Dairy secured a receivables-based line of credit of $1,250,000.

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

In March 2026, the Company raised $7,528,000 through the sale of convertible promissory notes with a two year term. The proceeds were used to retire the Mortgage Note, and $646,000 in Construction Obligations incurred, as well fund working capital requirements. The Company plans to complete construction of the New Facility and pursue long-term real estate and equipment lease financing for the remaining Construction Obligations.

Although alleviated, the Company’s financial position at March 31, 2026 and historical results raise substantial doubt about its ability to continue as a going concern. As described, the Company has completed steps to improve liquidity. The actions taken have resulted in the alleviation of the substantial doubt about the Company’s ability to continue as a going concern.