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Item 9A. Controls and Procedures

2021-04-14 compared with 2020-04-13 · 672 added, 709 removed, 744 unchanged (65% of the section changed)

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Controls and Procedures

the supervision and with the participation of our management, including our Chief Executive Officer and our Vice President Finance,

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

of 1934 Rules 13a-15(f).

Based on this evaluation, our Chief Executive Officer and our Vice President Finance concluded that the

Company’s disclosure controls and procedures were not effective as of December 31, 2019, due to inadequate segregation

the supervision and with the participation of our management, including our Chief Executive Officer (who is presently also serving

as our interim principal financial officer) and our Controller, we conducted an evaluation of our disclosure controls and procedures,

as such term is defined under Securities and Exchange Act of 1934 Rule 15(d)-15(e).

Based on this evaluation, our Chief Executive

Officer and our Controller concluded that the Company’s disclosure controls and procedures were not effective as of December

31, 2020, due to inadequate segregation of duties.

Management’s

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management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is

defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for the Company.

defined in Rule 15d-15(f) under the Exchange Act, for the Company.

control over financial reporting includes those policies and procedures that:

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issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)

the supervision and with the participation of our management, including our Chief Executive Officer and our Vice President Finance,

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

of 1934 Rules 13a-15(f).

Based on this evaluation, our Chief Executive Officer and our Vice President Finance concluded that the

Company’s disclosure controls and procedures were not effective as of December 31, 2019.

the supervision and with the participation of our management, including our Chief Executive Officer and our Controller, we conducted

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

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

controls and procedures were not effective as of December 31, 2020.

has identified the following material weakness in our internal control over financial reporting:

Segregation of Duties:

We have an inadequate number of personnel to properly implement internal controls over financial reporting.

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 assessment of the effectiveness of our internal control over financial reporting did identify material weaknesses, management

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

engage additional financial personnel to help ensure that we are able to properly implement internal control procedures.

hire additional financial personnel to help ensure that we are able to properly implement internal control procedures.

report shall not be deemed to be filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities

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in Internal Control over Financial Reporting

the fourth quarter of the year ended December 31, 2019, there was a significant reduction in headcount, specifically in the areas

of finance, operations and administration.

The decrease in staffing gave rise to a material weakness over our internal control

over financial reporting.

The Company will evaluate the staffing necessary to reinstate the documentation standards sufficient

to ensure proper implementation of internal control procedures over the coming quarters.

addition, we note that a different person was identified as our principal financial officer in each of our last three annual reports

on Form 10-K.

This lack of continuity and institutional knowledge has also affected internal control over financial reporting.

Other Information.

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Chief Executive Officer and Chairman

President Finance

Delle Coste has been the Chairman of our board of directors, President and Chief Executive Officer since January 10, 2012.

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production, establishment of the manufacturing facilities that have all necessary accreditations, technology development, product

improvement and R&D with new product launches.

Delle Coste also has over five years of investment banking experience.

Delle Coste attended Macquarie University, Sydney, Australia while studying for a Bachelor of Commerce for 3.5 years but left

to pursue business interests before receiving a degree.

improvement and research and development with new product launches.

Delle Coste also has over five years of investment banking

Delle Coste attended Macquarie University, Sydney, Australia while studying for a Bachelor of Commerce for 3.5

years but left to pursue business interests before receiving a degree.

Qualifications :

Delle Coste has 17 years of experience within retail, hospitality and dairy manufacturing.

Loussararian joined Barfresh as Vice President, Finance on July 29, 2019.

He was appointed as the Principal Accounting

Officer on September 11, 2019.

Loussararian has 29 years of progressive finance and accounting experience.

Most recently,

Loussararian served in the role of Vice President of Finance and consulted for various beverage brands including Diabolo Beverage

2011- 2019 and Neurobrands from 2009- 2011.

Prior to that, Mr.

Loussararian served as Vice President Finance and Controller for

LegalZoom 2006-2008 and eBay Rent.com from 2005-2006.

Loussararian began his career at Ernst & Young from 1991-1995.

Loussararian holds a B.S.

in Accounting and Finance from California State University, Northridge.

Loussararian is a Certified

Public Accountant in the State of California.

Qualifications :

Loussararian has over 29 years of experience in corporate finance leadership positions.

Lang was appointed as Director of the Company on January 10, 2012.

He has also served as Secretary of Barfresh NV since

its inception.

Prior to joining Barfresh NV, from 2003 to 2007, Mr.

Lang was a director of Vericap Finance Limited, a company that specializes in providing advice to and investing in Australian

companies with international growth potential.

From 1990 to 1999, he served as a director of Babcock & Brown’s Australian

operations where he was responsible for international structured finance transactions.

Lang received a Bachelor of Commerce

and a Bachelor of Laws from the University of New South Wales in 1976 and a Master of Laws from the University of Sydney in 1984.

He has been a member of the Institute of Chartered Accountants in Australia and was licensed to practice foreign law in New York.

Lang was a director of Vericap Finance Limited, a company

that specializes in providing advice to and investing in Australian companies with international growth potential.

1999, he served as a director of Babcock & Brown’s Australian operations where he was responsible for international

structured finance transactions.

Lang received a Bachelor of Commerce and a Bachelor of Laws from the University of New South

Wales in 1976 and a Master of Laws from the University of Sydney in 1984.

He has been a member of the Institute of Chartered Accountants

in Australia and was licensed to practice foreign law in New York.

Qualifications :

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Tinter founded Corporate Finance Group, Inc., a consulting firm located in Denver, Colorado, in 1992, and is its President.

Corporate Finance Group, Inc., is involved in financial consulting in the areas of strategic planning, mergers and acquisitions

and capital formation.

He has been the chief financial officer and a director of other public companies:

From 2012 to 2016, LifeApps

Digital Media Inc.

and Arvana Inc.

From 2006 to 2010 he was the chief financial officer of Spicy Pickle Franchising, Inc.

of the companies his responsibilities included oversight of all accounting functions, including SEC reporting, strategic planning

and capital formation.

From May 2015 to the present, he served as chief financial officer of Bambu Franchising LLC,

LLC, a privately held company that is a franchisor of Vietnamese themed shoppes that serve drinks and deserts.

Prior to 1990,

Tinter was chief executive officer of Source Venture Capital, a holding company with investments in the gaming, printing and

retail industries.

Finance Group, Inc., is involved in financial consulting in the areas of strategic planning, mergers and acquisitions and capital

He has been the chief financial officer and a director of other public companies In all of the companies his responsibilities

included oversight of all accounting functions, including SEC reporting, strategic planning and capital formation.

Since May 2015,

he has served as chief financial officer of Bambu Franchising LLC, LLC, a privately held company that is a franchisor of Vietnamese-themed

shoppes that serve drinks and desserts.

Prior to 1990, Mr.

Tinter was chief executive officer of Source Venture Capital, a holding

company with investments in the gaming, printing and retail industries.

Tinter received a B.S.

degree in Accounting in 1967 from C.W.

Post College, Long Island University, and

is licensed as a Certified Public Accountant in Colorado.

degree in Accounting in 1967

Post College, Long Island University, and is licensed as a Certified Public Accountant in Colorado.

Qualifications:

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Cugine was appointed as Director of the Company on July 29, 2014 and on April 27, 2015, was appointed president of

our wholly owned subsidiary, Smoothie Inc.

Cugine is the owner and president of Cugine Foods and JC Restaurants, a franchisee

of Taco Bell and Pizza Hut in New York.

our wholly owned subsidiary, Barfresh Corporation, Inc.

Cugine is the owner and president of Cugine Foods and JC Restaurants,

a franchisee of Taco Bell and Pizza Hut in New York.

He is also president and owner of Restaurant Consulting Group LLC.

Prior to owning and

operating his own firms, Mr.

Cugine held a series of leadership roles with PepsiCo, lastly as chief customer officer and senior

vice president of PepsiCo’s Foodservice division.

Cugine also serves on the board of directors of The Chef’s Warehouse,

Inc., a publicly traded specialty food products distributor in the U.S., as well as Ridgefield Playhouse and R4 Technology.

received his B.S.

to owning and operating his own firms, Mr.

Cugine held a series of leadership roles with PepsiCo, lastly as chief customer officer

and senior vice president of PepsiCo’s Foodservice division.

Cugine also serves on the board of directors of The Chef’s

Warehouse, Inc., a publicly traded specialty food products distributor in the U.S., as well as Ridgefield Playhouse and R4 Technology.

He received his B.S.

degree from St.

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Since September 2018, Mr.

Ware has served as

President of Foodsby, Inc., a fast-growing meal ordering platform for office buildings.

Previously, Mr.

Ware served as the

Interim President, Executive Vice President & Chief Financial Officer of Buffalo Wild Wings from 2016 to 2018.

Ware was Executive Chairman of MStar Holding Corporation.

Ware served as Interim Chief Executive Officer for

MStar Holding Corporation in 2013.

Prior to his time at MStar, he served as a Senior Advisor and previously as Executive Vice

President of Strategic Development of Pohlad Companies, a family office, from 2010 to 2015.

Starting in 1994, he served in

increasing capacities at PepsiCo, then PepsiAmericas, Inc.

culminating as Executive Vice President & Chief Financial

Officer from 2005 to 2010.

Previously, he was a Senior Associate at Booz Allen Hamilton, Inc.

from 1990-1994.

received his Bachelor of Arts degree in Economics from Hampden-Sydney College and his Master of Business Administration from

the Darden Graduate School of Business at University of Virginia.

Ware currently serves on the board of MStar Holding

Corporation and on the advisory board of Stonearch Capital.

Ware has served as President

of Foodsby, Inc., a fast-growing meal ordering platform for office buildings.

Previously, he served as Interim President, Executive

Vice President and Chief Financial Officer of Buffalo Wild Wings from October 2016 to 2018.

From 2012 through 2016, Mr.

Executive Chairman of MStar Holding Corporation (MicroStar), and had served as Interim Chief Executive Officer in 2013.

to MicroStar, he served as a Senior Advisor and previously as Executive Vice President of Strategic Development of Pohlad Companies,

a family office, from 2010 to 2015.

Starting in 1994, he served in increasing capacities at PepsiCo, then PepsiAmericas, Inc.

culminating as Executive Vice President and Chief Financial Officer from 2005 to 2010.

Previously, he was a Senior Associate at

Booz Allen Hamilton, Inc.

from 1990 to 1994.

Ware received his Bachelor of Arts degree in Economics from Hampden-Sydney College

and his Master of Business Administration from the Darden Graduate School of Business at University of Virginia.

In addition to

Barfresh, Mr.

Ware currently serves on the board of MStar Holding Corporation and on the advisory board of Stonearch Capital.

Qualifications :

Ware brings over 30 years of experience in leadership, strategic planning and business portfolio management.

April 27, 2015, Smoothie, Inc.

entered into an executive employment agreement with Riccardo Delle Coste, its Chief Executive Officer

and director.

Delle Coste is also the Chief Executive Officer and Chairman of the Company.

Pursuant to the employment agreement,

he will receive a base salary of $350,000 and performance bonuses of 75% of his base salary based on mutually agreed upon performance

In addition, Mr.

Delle Coste will receive up to an additional 500,000 performance options, on an annual basis.

granted under the employment agreement are subject to the Company’s 2015 Equity Incentive Plan.

April 27, 2015, Smoothie, Inc.

entered into an executive employment agreement with Joseph M.

Cugine to serve as President of Smoothie,

Pursuant to the employment agreement, Mr.

Cugine will receive a base salary of $300,000 and performance bonuses of 75% of

his base salary based on mutually agreed upon performance targets.

In addition, Mr.

Cugine will receive 8-year options to purchase

up to 600,000 shares of Barfresh, one-half vesting on each of the second and third anniversaries of the date of Mr.

Cugine’s

employment agreement.

In addition, he will receive up to an additional 500,000 performance options, on an annual basis.

Cugine has agreed to reduce his salary to $25,000 annually, waived his rights to automatic performance bonuses and options not

yet to be granted.

All options granted under the employment agreement are subject to the Company’s 2015 Equity Incentive

Company entered into an executive employment agreement with Raffi Loussararian on July 29, 2019, to which he agreed to serve as

Vice President, Finance.

Pursuant to the employment agreement, Mr.

Loussararian received a base salary of $175,000 and performance

bonuses of 25% of his base salary, based upon performance targets determined by the Board of Directors.

Ware has specific and relevant industry experience in the production and marketing of beverages as well as the operations

and management of restaurants.

In addition, Mr.

was granted 3-year options to purchase up to 150,000 shares of common stock of Barfresh.

Option grants vest ratably according

to the option schedule on each anniversary of the date of commencement of Mr.

Loussararian’s employment.

All options granted

under the employment agreement are subject to the Company’s 2015 Equity Incentive Plan.

Ware has knowledge in the areas of strategic and financial planning, corporate

development, personnel management, resource allocation and distribution.

Borus was appointed as a Director of the Company on April 29, 2020.

Borus has approximately 20 years of capital markets

He has been the Chief Investment Officer of Ibex Investors, LLC, a firm focused on niche, differentiated strategies

including microcap companies for over 10 years.

Prior to joining Ibex, he worked in both the private equity and investment banking

groups at Bear, Stearns & Co.

in New York and London.

Borus has served on the Board of Directors of several non-profits

including the Anti-Defamation League and Colorado Public Radio.

Qualifications:

Borus brings over 20 years of capital markets expertise.

are appointed for a one-year term to hold office until the next annual general meeting of shareholders or until removed from office

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judgment in carrying out the responsibilities of a director.

We determined, as of December 31, 2018, that five of our seven directors

are independent, which constitutes a majority.

One of our directors, Alice Elliot, resigned effective April 1, 2019, reducing

the current number of directors to six, four of which are independent.

We have determined that four of our seven directors are independent,

which constitutes a majority.

currently have an audit committee, a compensation committee and a nominating and governance committee.

The members of the

audit committee are Arnold Tinter, Steven Lang, and Alexander Ware.

The audit committee is primarily responsible for

reviewing the services performed by our independent auditors and evaluating our accounting policies and our system of

internal controls.

Steven Lang, Arnold Tinter, and Alex Ware are independent members of the audit committee, as defined

The members of the

compensation committee are Arnold Tinter, Joe Cugine, and Riccardo Delle Coste.

The compensation committee is primarily

responsible for reviewing and approving our salary and benefits policies (including stock options) and other compensation of

our executive officers.

The members of the nominating committee are Arnold Tinter, Steven Lang, and Isabelle Ortiz-Cachet.

The nominating and governance committee is primarily responsible for overseeing corporate governance and for identifying,

evaluating and recommending individuals to serve as directors of the company.

The members of the audit

committee are Arnold Tinter, Steven Lang and Alexander Ware.

The audit committee is primarily responsible for reviewing the services

performed by our independent auditors and evaluating our accounting policies and our system of internal controls.

Arnold Tinter, and Alexander Ware are independent members of the audit committee, as defined below.

The members of the compensation

committee are Arnold Tinter, Joe Cugine, and Riccardo Delle Coste.

The compensation committee is primarily responsible for reviewing

and approving our salary and benefits policies (including stock options) and other compensation of our executive officers.

members of the nominating committee are Arnold Tinter, Steven Lang, and Isabelle Ortiz-Cochet.

The nominating and governance committee

is primarily responsible for overseeing corporate governance and for identifying, evaluating and recommending individuals to serve

as directors of the company.

the best of our knowledge, none of our executive officers or directors are parties to any material proceedings adverse to the

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or decrees required to be disclosed.

Chief Executive Officer, and our Vice President Finance are bound by a Code of Ethics that complies with Item 406 of Regulation

S-K of the Exchange Act.

Chief Executive Officer, and our Controller are bound by a Code of Ethics that complies with Item 406 of Regulation S-K of the

Exchange Act.

16(a) Beneficial Ownership Reporting Compliance

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during our most recent fiscal year and Forms 5 and amendments thereto furnished to Barfresh with respect to our most recent fiscal

year, we believe that during the fiscal year ended December 31, 2019 our directors, executive officers and persons who

own more than 10% of our common stock complied with all Section 16(a) filing requirements with the exception of the following:

year, we believe that during the fiscal year ended December 31, 2020 our directors, executive officers and persons who own more

than 10% of our common stock complied with all Section 16(a) filing requirements with the exception of the following:

Cugine, late filing of Form 4

Tesoriero, late filing of Form 4

Ortiz-Cochet, late filing of Form 4

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Executive Compensation.

Name and Principal

Incentive Plan Compensation ($)

in Pension Value and Nonqualified Deferred Compensation Earnings ($)

following table sets forth information about the remuneration of our principal executive officer for services rendered during

our fiscal years ended December 31, 2020 and 2019, and our other executive officers that had total compensation of $100,000 or

more for our last completed full fiscal year (the “Named Officers”).

Certain tables and columns have been omitted

as no information was required to be disclosed under those tables or columns.

COMPENSATION TABLE

and Principal Position

other compensation ($)

Riccardo Delle Coste, Chief Executive

Raffi Loussararian Vice President Finance

Joseph Tesoriero, Chief Financial Officer

the salary earned, in 2019 $232,835 was paid and $117,165 was deferred and in 2018 $164,096 was paid and $185,904 was deferred.

a stock option grant 250,000 options shares issued 5/20/19 with an exercise price of $0.45, which vest ratably according to

the option schedule on each anniversary over the next three years and are exercisable until 5/20/27.

a stock option grant 250,000 options shares issued 7/25/18 with an exercise price of $0.52, which vest ratably according to

the option schedule on each anniversary over the next three years and are exercisable until 7/25/26.

Executive Officer

Loussararian,

President Finance

the salary earned in 2020, $213,648 was paid and $136,352 was deferred.

In 2019 $232,835 was paid and $117,165 was deferred.

a stock option grant of 250,000 option shares issued 04/27/2020 with an exercise price

of $0.38, which vests in equal increments on each of the first, second and third anniversaries

of the date of grant.

the car allowance paid to Mr.

a stock option grant 150,000 shares issued 7/29/19 with an exercise price of .45 which vest ratably according to the option

schedule on each anniversary over the next three years and are exercisable until 7/29/27.

Of the salary earned, in 2019 $105,738 was paid and in 2018 $142,379

was paid and $147,621was deferred.

Represents a stock option grant 250,000 options shares issued 7/25/2018

with an exercise price of $0.52, which vest ratably according to the option schedule on each anniversary over the next three years

and are exercisable until 7/25/2026.

Equity Awards at Fiscal Year-End Table

Option Awards

unexercised options

(#) exercisable

Riccardo Delle Coste

Raffi Loussararian

Joseph Tesoriero

ratably in equal increments on 9/15/18, 9/15/19 and 9/15/20.

ratably in equal increments on 7/26/19, 7/26/20, and 7/26/21.

ratably in equal increments on 5/20/20, 5/20/21, and 5/20/22.

ratably in equal increments on 7/29/20, 7/29/21, and 7/29/22.

following table summarizes the compensation paid to our directors that were not employees for the fiscal year ended December 31,

A director who is a Company employee does not receive any compensation for service as a director.

The compensation received

by directors that are employees of the Company is shown above in the summary compensation table.

We reimburse all directors for

expenses incurred in their capacity as directors.

Incentive Plan

Arnold Tinter

Isabelle Ortiz-Cochet

consulting fees paid to Mr.

Elliot resigned from the Board on April 1, 2019

April 27, 2015, The Company entered into an executive employment agreement with Riccardo Delle Coste, its Chief Executive Officer

a stock option grant of 250,000 options shares issued 5/20/19 with an exercise price of $0.45, which vests in equal increments

on each of the first, second and third anniversaries of the date of grant.

a stock option grant of 100,000 shares issued 01/06/2020 with an exercise price of $0.37,

which vests 3 years after the date of grant (cliff vesting).

a stock option grant of 150,000 shares issued 7/29/19 with an exercise price of $0.45 which vests ratably according to the

option schedule on each anniversary over the next three years and are exercisable until 7/29/27.

April 27, 2015, Smoothie, Inc.

entered into an executive employment agreement with Riccardo Delle Coste, its Chief Executive Officer

and director.

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Pursuant to the employment agreement,

he will receive a base salary of $350,000 and performance bonuses of 75% of his base salary based on mutually agreed upon performance

In addition, Mr.

Delle Coste will receive up to an additional 500,000 performance options, on an annual basis.

granted under the employment agreement are subject to the Company’s 2015 Equity Incentive Plan.

April 27, 2015, Smoothie entered into an executive employment agreement with Joseph M.

Cugine to serve as President of Smoothie,

Pursuant to the employment agreement, Mr.

Cugine will receive a base salary of $300,000 and performance bonuses of 75% of

his base salary based on mutually agreed upon performance targets.

he receives a base salary of $350,000 and performance bonuses of 75% of his base salary based on mutually agreed upon performance

In addition, Mr.

Cugine will receive 8-year options to purchase

up to 600,000 shares of Barfresh, one-half vesting on each of the second and third anniversaries of the date of Mr.

Cugine’s

employment agreement.

In addition, he will receive up to an additional 500,000 performance options, on an annual basis.

Delle Coste receives up to an additional 500,000 performance options, on an annual basis.

granted under the employment agreement are subject to the Company’s 2015 Equity Incentive Plan.

Cugine has agreed

to reduce his salary to $25,000 and waive his rights to automatic performance bonuses and options not yet granted.

Company entered into an executive employment agreement with Raffi Loussararian on July 29, 2019, to which he agreed to serve as

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to the Company’s 2015 Equity Incentive Plan.

Loussararian left the Company in January 2021.

following table sets forth information with respect to outstanding equity awards for the Named Officers:

EQUITY AWARDS AT FISCAL YEAR-END

of securities underlying unexercised options (#) exercisable

of securities underlying unexercised options (#) unexercisable

exercise price ($)

expiration date

ratably in equal increments on the first, second and third anniversary of the date of grant of the option.

on the third anniversary of date of grant of the option.

following table summarizes the compensation paid to our directors that were not employees for the fiscal year ended December 31,

A director who is a Company employee does not receive any compensation for service as a director.

The compensation received

by directors that are employees of the Company is shown above in the summary compensation table.

We reimburse all directors for

expenses incurred in their capacity as directors.

earned or paid in

Borus became a director on April 29, 2020.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Ownership of Certain Beneficial Owners and Management

following table sets forth certain information regarding our shares of common stock beneficially owned as of April 2, 2020 for

following table sets forth certain information regarding our shares of common stock beneficially owned as of March 15, 2021 for

(i) each shareholder known to be the beneficial owner of 5% or more of our outstanding shares of common stock, (ii) each named

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of any shares of common

stock that such person has the right to acquire within 60 days of April 6, 2020.

As of April 6, 2020, the Company had 143,247,603

stock that such person has the right to acquire within 60 days of March 15, 2021.

As of March 15, 2021, the Company had 149,133,372

shares of common stock outstanding.

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each person or group of persons named above, any shares that such person or persons has the right to acquire within 60 days of

April 6, 2020 is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership

March 15, 2021 is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership

of any other person.

The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial

following table sets forth certain information regarding our shares of common stock beneficially owned as of April 6, 2020 for

(i) each shareholder known to be the beneficial owner of 5% or more of our outstanding shares of common stock, (ii) each named

executive officer and director, and (iii) all executive officers and directors as a group.

A person is considered to beneficially

own any shares:

(i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii)

of which such person has the right to acquire beneficial ownership at any time within 60 days through an exercise of stock options

or warrants or otherwise.

Unless otherwise indicated, voting and investment power relating to the shares shown in the table for

our directors and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s

spouse or children.

Name and address of beneficial owner (1)

Amount and nature

and address of beneficial owner (1)

of beneficial

Riccardo Delle Coste (2) (3) (4) (5) (6)

Steven Lang (7) (8) (9) (10) (11)

Joseph Tesoriero (12) (13) (14)

Arnold Tinter (15)

Joe Cugine (16) (17) (18)

Alexander Ware (19) (20) (21)

Isabelle Ortiz-Cochet

Delle Coste (2) (3) (4) (5) (6)

Lang (7) (8) (9) (10) (11)

Cugine (13) (14) (15)

Ware (16) (17) (18)

2 Allee De Longchamp Suresnes, France (19) (20)

Raffi Loussararian (24)

Alice Elliot (25) (26) (27) (28)

All directors and officers as a group (8 persons)

Unibel 2 Allee De Longchamp Suresnes, France 92150 (29) (30) (31)

IBEX Investors LLC (fka) Lazarus Investment Partners LLLP (32) (33)

Borus (21) (22) (23)

directors and officers as a group (8 persons)

2 Allee De Longchamp Suresnes, France 92150 (24) (25) (26)

Investors LLC (fka) Lazarus Investment Partners LLLP (27)

Cherry Creek South Drive Suite 670 Denver, CO 80209

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and of which Riccardo Delle Coste is deemed to be a beneficial owner.

624,999 shares underlying options granted.

154,788 shares underlying warrants issued in connection with promissory notes the holder of which is R.D.

Capital Holdings

and of which Riccardo Delle Coste is deemed to be a beneficial owner.

Also includes 26,614 shares underlying warrants

issued in connection with the conversion of debt.

50,000 shares underlying convertible debt

1,541,667 shares issuable under exercisable options granted.

131,679 shares underlying warrants issued in connection with promissory notes, the holder of which is Riccardo Delle Coste

Capital Holdings PTY Ltd., and of which Riccardo Delle Coste is deemed to be a beneficial owner.

50,000 shares underlying convertible debt held by R.D.

Capital Holdings PTY Ltd.

Lang is a Director of the Company.

19,127,177 shares owned by Sidra Pty Limited of which Steven Lang is deemed to be a beneficial owner.

553,136 shares underlying options granted.

190,170 shares underlying warrants issued in connection with a promissory note the holder of which is Sidra PTY Limited.

includes 159,683 shares underlying warrants issued in connection with the conversion of debt.

300,000 shares underlying convertible debt.

Tesoriero was formerly the Chief Financial Officer of the Company.

19,127,177 shares owned by Sidra Pty Limited and 516,236 shares owned by Hodumo Pty Ltd, of which Steven Lang is deemed to

be a beneficial owner.

456,237 shares underlying options granted.

76,629 shares underlying warrants issued in connection with a promissory note and conversion thereof.

722,371 and 44,082 shares underlying warrants issued in connection with promissory notes, the holder of which is Hodumo Pty

Ltd and Sidra Pty Ltd, respectively, of which Steven Lang is deemed to be a beneficial owner.

300,000 shares underlying convertible debt held by Hodumo Pty Ltd.

Tinter is the Secretary and a Director of the Company.

Cugine is President of a subsidiary of the Company and a Director.

1,183,791 shares underlying options granted.

Cugine is a Director of the Company.

1,350,458 shares issuable under exercisable options granted.

409,030 shares underlying warrants issued in connection with purchase of common shares.

Also includes 62,614 shares underlying

warrants issued in connection with the conversion of debt.

Ware is a Director of the Company.

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Ware is deemed to be a beneficial owner.

78,125 shares underlying warrants issued to The Alexander Ware Revocable Trust in connection with purchase of common

78,125 shares underlying warrants issued to The Alexander Ware Revocable Trust in connection with purchase of common shares.

Ortiz-Cochet was a Director of the Company

473,342 shares underlying options granted.

Loussararian is the Principal Financial Officer of the Company.

Elliot was a Director of the Company.

She resigned effective March 31, 2019.

360,000 shares owned by Elliot-Herbst LP of which Alice Elliot is deemed to be a beneficial owner.

64,599 shares owned by Elliot-Herbst Family LLC of which Ms.

Elliot is deemed to be a beneficial owner

368,210 shares underlying options granted.

Borus is a Director of the Company.

14,442,776 shares owned by Ibex Investors LLC and 3,000 shares owned by Lazarus Macro Micro Partners LLLP, of which Justin

Borus is the manager of the investment manager and general partner, respectively, and deemed to be a beneficial owner.

1,800,000 shares underlying warrants issued to Ibex Investors LLC and 2,142,857 shares underlying warrants issued to Mr.

7,812,500 shares underlying warrants issued in connection with the purchase of common stock.

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1,252,274 shares underlying warrants issued in connection with the purchase of common stock

2,633,333 and 1,500,000 shares underlying warrants issued in connection with the purchase of common stock.

3,000,000 shares owned personally by Justin Borus, who serves as manager of Ibex Investments LLC.

1,800,000 shares underlying warrants issued in connection with the purchase of common stock.

Certain Relationships and Related Transactions, and Director Independence.

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2019 were as follows.

Audit related fees

All other fees

defined by the SEC, (i) “audit fees”

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Item 15(a) (2) above.

Form 10-K Summary.

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report

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Executive Officer and Director

Executive Officer)

Raffi Loussararian

President Finance

Financial Officer)

Executive Officer and interim Principal Financial Officer)

Eric Narimatsu

Accounting Officer)

Arnold Tinter

Isabelle Ortiz-Cochet

Share Exchange Agreement dated January 10, 2012 by and among Moving Box Inc., Andreas Wilcken, Jr., Barfresh Inc.

and the shareholders of Barfresh Inc.

(incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K as filed January 17, 2012

Certificate of Incorporation of Moving Box Inc.

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333-333-215322) as filed December 23, 2016)

of Debt Agreement dated July 26, 2018 by and between Barfresh Food Group, Inc.

and Ibex Investors LLC (incorporated by

reference to Exhibit 4.16 to Registration Statement on Form S-1, No.

of Series L Warrant (incorporated by reference to Exhibit 4.17 to Registration Statement on Form S-1, No.

of 10% Convertible Promissory Note dated March 5, 2018 issued by Barfresh Food Group Inc.

in favor of Ibex Investors LLC

(incorporated by reference to Exhibit 4.18 to Registration Statement on Form S-1, No.

of 12% Convertible Promissory Note issued by Barfresh Food Group, Inc.

in favor of certain investors in February 2018

(incorporated by reference to Exhibit 4.19 to Registration Statement on Form S-1, No.

Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934, as amended.

Form of Series O Warrant*

Repayment of Debt Agreement dated July 26, 2018 by and between Barfresh Food Group, Inc.

and Ibex Investors LLC (incorporated by reference to Exhibit 4.16 to Registration Statement on Form S-1, No.

Form of Series L Warrant (incorporated by reference to Exhibit 4.17 to Registration Statement on Form S-1, No.

Form of 10% Convertible Promissory Note dated March 5, 2018 issued by Barfresh Food Group Inc.

in favor of Ibex Investors LLC (incorporated by reference to Exhibit 4.18 to Registration Statement on Form S-1, No.

Form of 12% Convertible Promissory Note issued by Barfresh Food Group, Inc.

in favor of certain investors in February 2018 (incorporated by reference to Exhibit 4.19 to Registration Statement on Form S-1, No.

Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934, as amended (incorporated by reference to Exhibit 4.20 to Annual Report on Form 10-K for the year ended December 31, 2019, as filed April 13, 2020)

Form of Series O Warrant (incorporated by reference to Exhibit 4.21 to Annual Report on Form 10-K for the year ended December 31, 2019, as filed April 13, 2020)

Form of Registration Rights Agreement dated February 16, 2016 (incorporated by reference to Exhibit 10.1 to Registration Statement on Form S-1 (Registration No.

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333-211019) as filed April 29, 2016)

of Investor Rights Agreement dated November 23, 2016 by and between Barfresh Food Group, Inc.

and Unibel (Incorporated by

reference to Exhibit 10.4 to Registration Statement on Form S-1 No.

Form of Investor Rights Agreement dated November 23, 2016 by and between Barfresh Food Group, Inc.

and Unibel (Incorporated by reference to Exhibit 10.4 to Registration Statement on Form S-1 No.

Form of Securities Purchase Agreement dated November 23, 2016 by and between Barfresh Food Group, Inc.

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Form of Series D Warrant Exercise Offer dated July 25, 2018 (incorporated by reference to Exhibit 10.13 to Registration Statement on Form S-1, No.

of Securities Purchase Agreement dated February 14, 2018 by and between Barfresh Food Group, Inc.

and certain investors

(incorporated by reference to Exhibit 10.14 to Registration Statement on Form S-1, No.

Form of Securities Purchase Agreement dated February 14, 2018 by and between Barfresh Food Group, Inc.

and certain investors (incorporated by reference to Exhibit 10.14 to Registration Statement on Form S-1, No.

Form of Securities Purchase Agreement dated March 15, 2020 by and between Barfresh Food Group, Inc.

and certain investors*

Subsidiaries *

Certification of Principal Executive Officer, pursuant to 18 U.S.C.

Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)*

Certification of Principal Financial Officer pursuant to 18 U.S.C.

Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)*

Certification of Principal Executive Officer of the Company, pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

Certification of Principal Financial Officer of the Company, pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

and certain investors (incorporated by reference to Exhibit 10.14 to Annual Report on 10-K for the year ended December 31, 2019, filed April 13, 2020)

Subsidiaries (incorporated by reference to Exhibit 21.1 to Annual Report on Form 10-K for the year ended December 31, 2019, filed April 13 2020)

15d-14(a) Certification*

Certification

Pursuant to 18 U.S.C.

Section 1350*

Presentation.

accordance with SEC Release 33-8238, Exhibit 32.1 and 32.2 are being furnished and not filed.

accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not filed.

XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement

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to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2019 and 2018

Consolidated Statements of Operations for the Years Ended December 31, 2019 and 2018

Consolidated Statements of Stockholders’

Equity (Deficit) for the Years Ended December 31, 2019 and 2018

Consolidated Statements of Cash Flows for the Years Ended December 31, 2019 and 2018

Notes to Consolidated Financial Statements

of Independent Registered Public Accounting Firm

Balance Sheets as of December 31, 2020 and 2019

Statements of Operations for the Years Ended December 31, 2020 and 2019

Statements of Stockholders’

Equity for the Years Ended December 31, 2020 and 2019

Statements of Cash Flows for the Years Ended December 31, 2020 and 2019

to Consolidated Financial Statements

the accompanying notes to the consolidated financial statements.

of Independent Registered Public Accounting Firm

the Board of Directors and Stockholders

Barfresh Food Group, Inc.

Los Angeles, California

Food Group, Inc.

Angeles, California

on the Consolidated Financial Statements

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stockholders’

equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to

as the “financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material

respects, the financial position of Barfresh Food Group, Inc.

as of December 31, 2019 and 2018, and the results of its operations

and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States

equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial

statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial

position of Barfresh Food Group, Inc.

as of December 31, 2020 and 2019, and the results of its operations and its cash flows for

the years then ended, in conformity with accounting principles generally accepted in the United States of America.

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

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We believe that our audits provide a reasonable basis for our opinion.

critical audit matter communicated below is a matter arising from the current period audit of the 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 financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of

critical audit matters does not alter in any way our opinion on the 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.

and Equity Transactions

discussed in Notes 7, 8 and 10 to the consolidated financial statements, the Company has entered into debt and equity agreements

which include stock-based compensation, debt modification and derivative liabilities.

These agreements include transactions, including

the issuance of warrants and stock options, that are required to be recorded at estimated fair value.

These transactions resulted

in recording of stock-based compensation expense of $276,641 and a gain on debt extinguishment of $379,200 for the year ended

December 31, 2020, and the recording of a derivative liability of $41,475 as of December 31, 2020.

Company’s determination of the estimated fair value involves the identification of related financial instruments and a clear

understanding of the terms of the agreements.

Auditing management’s estimates of fair value requires a high degree of auditor

judgment and an increased extent of effort, including the need to carefully examine to understand the true nature of the related

audit procedures related to determination of the estimated fair values of these debt and equity transactions included the following,

among others:

gained an understanding of management’s process and methodology to develop the estimates

examined signed contracts and amendments.

evaluated the reasonableness of the inputs and assumptions used by management in developing the estimates.

evaluated the adequacy of the disclosures related to these fair value measurements.

Eide Bailly LLP

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31, 2020 and 2019

receivable, net

expenses and other current assets

current assets

Restricted cash

Accounts receivable, net

Inventory, net

Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net of depreciation

Operating lease right-of-use assets, net

Intangible assets, net of amortization

Liabilities and Stockholders’

Equity (Deficit)

plant and equipment, net of depreciation

lease right-of-use assets, net

assets, net of amortization

And Stockholders’

payable –

Paycheck Protection Program

note, net of discount

current liabilities

Accounts payable

Accrued expenses

Accrued payroll

Accrued vacation

Accrued interest

Lease liability

Convertible note, net of discount

Total current liabilities

Long term liabilities:

Accrued interest

Lease liability less current portion

Convertible note - related party, net of discount

Convertible note, net of discount

Derivative liabilities

Total liabilities

Commitments and contingencies (Note 7,8,9 and 14)

term liabilities:

payable –

Paycheck Protection Program

note - related party, net of discount

note, net of discount

and contingencies (Note 6,7,8 and 13)

Stockholders’

equity (deficit):

Preferred stock, $0.000001 par value, 5,000,000 shares authorized, none issued or outstanding

Common stock, $0.000001 par value;

stock, $0.000001 par value, 5,000,000 shares authorized, none issued or outstanding

stock, $0.000001 par value;

295,000,000 shares authorized;

130,341,737 and 122,770,960 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively

Additional paid in capital

Accumulated deficit

(46,747,122 )

149,133,372 and 130,341,737 shares issued and outstanding

at December 30, 2020and 2019, respectively

paid in capital

(50,899,628 )

Total stockholders’

equity (deficit)

Total Liabilities and Stockholders’

Equity (Deficit)

stockholders’

Liabilities and Stockholders’

the accompanying notes to the consolidated financial statements.

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Cost of revenue

Depreciation of manufacturing equipment

of manufacturing equipment

and administrative

and amortization

operating expenses

General and administrative

Depreciation and amortization

Total operating expenses

Operating loss

Other expenses

Other (income) loss from derivative liability

Warrant modification

Total other expense

(income)/expenses

from derivative liability

from debt extinguishment

other (income) expense

$ (4,152,506 )

$ (5,593,302)

Per share information - basic and fully diluted:

Weighted average shares outstanding

Net (loss) per share

share information - basic and fully diluted:

average shares outstanding

(loss) per share

the accompanying notes to the consolidated financial statements.

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of Stockholders’

the Period from January 1, 2018 to December 31, 2019

Balance January 1, 2018

the Years ended December 31, 2020 and 2019

January 1, 2019

$ (41,153,820 )

Exercise of warrants

Cashless exercise of options

Conversion of notes payable

Issuance of stock for services

Equity based compensation

Discount on convertible notes (warrants)

Warrant modification

Net (loss) for the year

of stock and options for services

based compensation

issued to Management

of stock for capital raise

(loss) for the year

Balance December

(46,747,122 )

Exercise of warrants

Issuance of stock and options for services

Equity based compensation

Warrants issued to Management

Issuance of stock for capital raise

Warrant modification

Net (loss) for the year

Balance December 31, 2019

of stock for capital raise, net of offering costs of $27,200

paid in shares

of stock for services

based compensation

issued to management

issued for note extension

stock issuance

(loss) for the year

December 31, 2020

$ (50,899,628 )

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the Years ended December 31, 2020 and 2019

$ (5,593,302 )

$ (7,322,823 )

Adjustments to reconcile net income

to net cash from operating activities

Amortization of ROU Asset

Bad debt expense

Change in Inventory Reserve

Interest expense related to debt discount

Warrant Modification Expense

Adjustments to reconcile net loss to net cash

used for operating activities

Amortization of right

Change in allowance

for doubtful accounts

Change in inventory

Interest expense

related to debt discount

Warrant modification

Stock-based compensation

Loss on Derivative

Gain on sale of assets

Stock and options issued for Services

Stock and options

issued for services

Gain on derivative

Gain on debt extinguishment

Changes in assets and liabilities

Receivables - trade

Prepaid expenses & Other assets

Accounts receivable

Prepaid expenses

and other assets

Accounts payable

Accrued expenses

Accrued Interest

Deferred rent

Advanced payments

Net Cash (used for) operating activities

Investing Activities

Purchase of property and equipment

Proceeds from sale of equipment

Purchase of Intangibles

Purchase of property

and equipment

of intangibles

Net Cash (used for) investing activities

Financing Activities

Cash received for Warrant Exercises

Cash paid for debt offering costs

Cash received for Stock

Issuance of convertible notes

Repayment of short-term debt

Payments of operating leases

Cash received for

warrant exercises

Cash received for

stock, net of offering costs

Repayments of convertible

Proceeds from note

Debt issuance costs

of operating leases

Net Cash from financing activities

Net change in cash and restricted cash

Cash and Restricted Cash, Beginning of Year

Cash and Restricted Cash, End of Year

Cash and restricted

cash, beginning of year

Cash and restricted

cash, end of year

Cash payments

Non-cash financing and investing activities

Total property and equipment included in accounts payable

Discount on convertible notes

Convertible notes principal and interest settled through warrant exercise

Operating lease right-of-use asset

Deferred compensation settled through issuance of warrants

the accompanying notes to the financial statements

property and equipment included in accounts payable

Debt discount

warrant and derivative liability

notes principal and interest settled through warrant exercise

lease right-of-use asset

compensation settled through issuance of warrants

carrying value of convertible notes and accrued interest settled through issuance of stock (debt extinguishment)

interest settled through issuance of stock

the accompanying notes to the consolidated financial statements.

food Group Inc.

to Consolidated Financial Statements

Summary of Significant Accounting Policies

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smoothies, shakes and frappes.

accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United

States of America (“GAAP”).

accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted

in the United States of America (“GAAP”).

of Consolidation

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of loss is minimal.

the third quarter of 2019, the Company adopted FASB ASU No.

2016-18, Statement of Cash Flows (Topic 230):

Restricted Cash (“ASU

2016-18”), which enhances and clarifies the guidance on the classification and presentation of restricted cash in the statement

of cash flows and requires additional disclosures about restricted cash balances.

At December 31, 2019, the Company had $91,385

in restricted cash related to our co-packing agreement with Yarnell Operations, LLC.

December 31, 2020, the Company had $142,382 and $91,385, respectively, in restricted cash related to our co-packing agreement.

Value Measurement

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and forecasts used to determine the fair value of financial transmission rights.

financial instruments consist of cash, accounts receivable, accounts payable, accrued expenses, derivative liabilities, and convertible

The carrying value of our financial instruments approximates their fair value, except for the derivative liability in which

carrying value is fair value.

food Group Inc.

to Consolidated Financial Statements

financial instruments consist of cash, accounts receivable, accounts payable, advanced payments, derivative liabilities, convertible

notes, restricted cash, and PPP loan payable.

The carrying value of our financial instruments approximates their fair value,

except for the derivative liability in which carrying value is fair value.

receivable are typically unsecured.

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and $141,788 respectively.

There was $89,397 of bad debt expense recorded for the year ended December 31, 2019 and $61,788 of bad

debt expense for the year ended December 31, 2018.

There was $133,424 of bad debt expense recorded for the year ended December 31, 2020 and $89,397 of

bad debt expense for the year ended December 31, 2019.

The allowance was applied to certain receivable accounts which are over

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years to 7 years

improvements:

food Group Inc.

to Consolidated Financial Statements

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

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Revenue when or as the Company satisfies a performance obligation

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

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

Customer sales incentives such as volume-based

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

Shipping and handling costs are

treated as fulfillment costs and presented in distribution, selling and administrative costs.

Company recognizes revenue from the sale of frozen beverages when title and risk of loss

passes and the customer accepts the goods, which generally occurs at the time of delivery

to a customer warehouse.

Customer sales incentives such as volume-based rebates or discounts

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

handling costs are treated as fulfillment costs and presented in distribution, selling

and administrative costs.

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

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

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and handling costs totaled $488,465 and $751,237, respectively.

of January 1, 2019, the Company adopted ASC 842.

ASC 842 replaced the prior lease accounting guidance in its entirety.

in Note 7, we entered into a new office space lease that took effect on April 1, 2019 and recorded a right-of-use asset and corresponding

liability for amounts that approximate our future commitments of $241,555.

Lease expense for finance leases consists of the amortization

of the ROU asset on a straight-line basis over the asset’s estimated useful life and is included in operating expenses in

the consolidated statement of income.

food Group Inc.

to Consolidated Financial Statements

determine if an arrangement is a lease upon inception.

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

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

The right to control the use of an

asset includes the right to obtain substantially all of the economic benefits of the underlying asset and the right to direct

how and for what purpose the asset is used.

After adoption of ASU 2016-02 and related standards, 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.

expense is recognized on a straight-line basis over the lease term.

As a lessee, the Company leases office space.

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

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sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.

food Group Inc.

to Consolidated Financial Statements

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

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At December 31, 2020

and 2018 any equivalents would have been anti-dilutive as we had losses for the periods then ended.

and 2019 any equivalents would have been anti-dilutive as we had losses for the years then ended.

Based Compensation

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time to time, new accounting pronouncements are issued that we adopt as of the specified effective date.

We believe that the impact

of recently issued standards that are not yet effective may have an impact on our results of operations and financial position.

February 2016, the FASB issued ASU No.

2016-02, “Leases”, to improve financial reporting about leasing transactions.

This ASU will require organizations that lease assets (“lessees”) to recognize a lease liability and a right-of-use

asset on its balance sheet for all leases with terms of more than twelve months.

A lease liability is a lessee’s obligation

to make lease payments arising from a lease, measured on a discounted basis and a right-of-use asset represents the lessee’s

right to use, or control use of, a specified asset for the lease term.

The amendments in this ASU leaves the accounting for the

organization that own the assets leased to the lessee (“lessor”) largely unchanged except for targeted improvements

to align it with the lessee accounting model and Topic 606, “Revenue from Contracts with Customers”.

Company has evaluated the effect of the standard on our financial statements.

Based on our evaluation, we have one material lease

subject to adoption of this standard, effective January 1, 2019.

As disclosed in Note 8, we entered into a new office space lease

that took effect on April 1, 2019 and recorded a right-of-use asset and corresponding liability for amounts that approximate our

future commitments of $241,555.

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

consists of the following at December 31:

Raw materials

Finished goods, net of reserve

Capitalized equipment depreciation

Inventory, net

Company has recorded a reserve for slow moving and potentially obsolete inventory.

The reserve at December 31, 2019 and 2018 was

$100,651 and $31,237 respectively.

Property Plant and Equipment

classes of property and equipment at December 31, 2020 and 2019 consist of the following:

Furniture and fixtures

Manufacturing Equipment and customer equipment

Leasehold Improvements

Manufacturing

Equipment and customer equipment

accumulated depreciation

Equipment not yet placed in service

Property and equipment, net of depreciation

not yet placed in service

and equipment, net of depreciation

food Group Inc.

to Consolidated Financial Statements

recorded depreciation expense related to these assets of $529,385 and $586,237 for the years ended December 31, 2020 and 2019,

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future amortization expense related to patents as of December 31, 2020, is as follows:

Total Amortization

Years ending December 31,

ending December 31,

Related Parties

disclosed below in Note 7, members of management and directors invested in company’s convertible notes;

and in Note 9, members

of management and directors have received shares of stock and options in exchange for services.

and in Note 10,

members of management and directors have received shares of stock and options in exchange for services.

Paycheck Protection Program (PPP) loan

Company was granted a $568,131 loan under the PPP administered by a Small Business Administration (SBA) approved partner.

loan, which matures in two years, is uncollateralized and is fully guaranteed by the Federal government.

The Company is eligible

for loan forgiveness of up to 100% of the loan, upon meeting certain requirements.

The Company has recorded a note payable and

will record the forgiveness upon being legally released from the loan obligation by the SBA.

No forgiveness income has been recorded

for the year ended December 31, 2020.

The Company will be required to repay any remaining balance, plus interest accrued at 1

percent, in monthly payments commencing upon notification that the loan will not be forgiven or only partially forgiven.

has applied for and anticipates the loan to be forgiven in 2021.

food Group Inc.

to Consolidated Financial Statements

Convertible Notes (Related and Unrelated Party)

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model using the following assumptions:

Expected life (in years)

Volatility (based on a comparable company)

Risk Free interest rate

Dividend yield (on common stock)

life (in years)

(based on a comparable company)

Free interest rate

yield (on common stock)

value of $220,548 was recorded as a debt discount related to the issuance of the warrants.

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model using the following assumptions:

Expected life (in years)

Volatility (based on a comparable company)

Risk Free interest rate

Dividend yield (on common stock)

life (in years)

(based on a comparable company)

Free interest rate

yield (on common stock)

value of $105,199 was recorded as a debt discount related to the issuance of the warrants as using the fair value would cause

the debt discount to exceed the gross proceeds received.

November and December 2018, three investors elected to convert their convertible note issued on March 14, 2018 into stock.

total debt converted was $453,000 and $30,459 accrued interest into 804,396 shares of stock.

food Group Inc.

to Consolidated Financial Statements

March 2019, an investor elected to exercise I-Warrants by using part of the investor’s convertible note.

1 unchanged sentence

settled was $350,634 of principal and $33,929 of accrued interest.

convertible notes consist of the following components as of the year-end:

Convertible notes

March 20, 2020, we completed a Private Placement offering of $3,825,000 of common stock.

In connection with the transaction, the

Company offered the Convertible Noteholders of Series CN Note 1 and 2 to participate in the equity offering.

A total of $720,000

principal balance of Series CN 1 was converted into common stock [$630,000 from related parties].

The Series CN Note 1 Noteholders

were offered bonus interest equivalent to 20% of their outstanding principal which was converted to common stock.

For $1,071,000

of the remaining $1,186,167 Series CN Note 1 Noteholders that chose not to participate in the equity offering, the terms of the

Series CN Note 1 were amended to increase the interest rate to 15% per annum and to extend the maturity of the outstanding principal

balance by 24 months to March 20, 2022.

The notes are convertible at any time prior to the maturity into our common stock at a

conversion price of $0.50 per share.

If the six month price is less than the $0.50 per share, the principal conversion price will

be automatically reduced to the $0.50 per share, but in no event less than $0.35 per Share, in which case the Company shall issue

to each purchaser, based on such purchaser’s investment, (a) shares in a quantity that equals the difference between the

number of Shares issued to such purchaser at closing and the number of Shares that would have been issued to such purchaser at

closing at the $0.50 per share and (b) warrants in a quantity that equals fifty percent (50%) of the difference between the number

of shares issued to such Purchaser at closing and the number of shares that would have been issued to such purchaser at closing

at the $0.50 per share, with an exercise price that equals the sum of $0.10 per share and the $0.50 per share, but in no event

less than $0.45 per share.

The exercise price per share for the Convertible Note Warrants and the Bonus Warrant issued at closing

will automatically adjust as well to the sum of $0.10 per share and the Six Month Price, but in no event less than $0.45 per share.

There were 864,000 O warrants issued to the Series CN Note 1 Noteholders for participating in the common stock offering.

March 20, 2020, 1,082,727 of the original L Warrants related to the Series CN Note 1 Noteholders had their terms modified, whereby

the exercise price was reduced from $0.70 to $0.50 per share.

In addition, the Series CN Note 1 Noteholders that chose to extend

their notes for 24 months were granted 1,071,000 Series P warrants.

The fair value of the warrants, ($92,266 in the aggregate

which consists of the L and P Warrants), were calculated using the Black-Scholes option pricing model using the following assumptions:

life (in years)

Free interest rate

yield (on common stock)

food Group Inc.

to Consolidated Financial Statements

on the relative fair value, we recorded a debt discount of $75,184 related to the issue of P Warrants to CN 1 and CN 2 Noteholders.

The modification of the L Warrants resulted in an incremental increase in fair value of $17,082, which was recorded as a debt

convertible notes consist of the following components as of December 31, 2020 and December 31, 2019:

Debt discount (warrant value)

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Debt discount (issuance costs paid)

Note conversion

Note repayments/conversion

Debt discount amortization

total of $1,808,371 shown in the table above at December 31, 2019, plus the total of $932,190 from the table below equals the

total presented in the balance sheet of Long Term Liabilities:

Convertible Note –

related party net of discount, of $1,181,942,

Convertible Note –

net of Discount of $1,407,877, and Current Liabilities:

Convertible Note –

net of Discount 150,742.

The total of $1,741,107 in the table above at December 31, 2018, plus the total of $468,216 from the table below ($2,209,323)

agrees to the total presented in the balance sheet of Long Term Liabilities:

Convertible note –

related party, net of discount

of $841,836, and Convertible Note, net of discount, of $1,367,487.

December 2018, we closed an offering of $1,363,200 in convertible notes, Series CN 2 of 2, of which, management, directors and

14 unchanged sentences

model using the following assumptions:

Expected life (in years)

Volatility (based on a comparable company)

Risk Free interest rate

Dividend yield (on common stock)

life (in years)

(based on a comparable company)

Free interest rate

yield (on common stock)

value of $212,763 was recorded as a debt discount related to the issuance of the warrants.

convertible notes consist of the following components as of the year-end:

Convertible notes

March 20, 2020, a total of $1,128,000 principal balance of Series CN Note 2 was converted into common stock [$560,000 from related

The Noteholders were offered bonus interest equivalent to 20% of their outstanding principal and converted their accrued

interest into common stock.

For $168,000 of the remaining $235,200 Series CN Note 2 Noteholders that chose not to participate

in the equity offering, the terms of the Series CN Note 2 were amended to extend the maturity of the outstanding principal balance

by 12 months to November 30, 2021.

The notes are convertible at any time prior to the maturity into our common stock at a conversion

price of $0.60 per share.

There were 1,501,012 O warrants issued to the Series CN Note 2 Noteholders for participating in the

common stock offering.

fair value of the modified L warrants, ($4,279 prior to modification, and $6,096 post modification), was calculated using the

Black-Scholes option pricing model using the following assumptions:

life (in years)

Free interest rate

yield (on common stock)

incremental value of $1,817 was recorded as a debt discount related to the modification of existing L warrants.

food Group Inc.

to Consolidated Financial Statements

convertible notes consist of the following components as of December 31, 2020 and December 31, 2019:

Debt discount (warrant value)

1 unchanged sentence

Debt discount (issuance costs paid)

Note repayments

Debt discount amortization

total shown in the above table of $932,190 at December 31, 2019, plus the total from table above $1,808,371 agrees to the total

presented in the balance sheet of Long Term Liabilities:

Convertible Note –

related party net of discount, of $1,181,942,

Convertible Note –

total of the two tables above at December 31, 2020, net of discount, equals $1,167,042 which is presented on the consolidated

balance sheet as, $158,243 Convertible Note, net of discount, Current Liabilities, $197,804 Convertible Note, Related Party, Net

of Discount, Long-Term Liabilities and $810,995 Convertible Note, Net of Discount, Long-term Liabilities.

The total of $2,740,561

shown in the two tables above at December 31, 2019, are presented in the balance sheet as Long-Term Liabilities:

Convertible Note

related party net of discount, of $1,181,942, Convertible Note –

net of Discount of $1,407,877, and Current Liabilities:

Convertible Note –

net of discount of 150,742.

The total in the first table above of $1,741,107 at December 31, 2018, plus the total from the second table above of $468,216

($2,209,323) agrees to the total presented in the balance sheet of Long Term Liabilities:

Convertible note –

related party,

net of discount of $841,836, and Convertible Note, net of discount, of $1,367,487.

of December 31, 2019, the outstanding balances due of the Series CN Notes, net of all related debt discount, total $2,740,561.

The Long Term Liabilities of related party convertible notes (net) and unrelated party convertible notes (net) represent $1,181,942

and $1,407,877, respectively as of December 31, 2019.

The Current Liabilities of Convertible Notes, (net) represent 150,742 as

of December 31, 2019.

Per Note 14, Subsequent Events, the Company restructured its Milestone I and II Convertible Notes through

both conversion and extension.

The remaining principal balance outstanding as of March 23, 2020 is $1,407,000.

net of Discount $150,742.

maturity of convertible notes at face value before effect of all discount, are as follow:

Total Convertible

Years ending December 31,

Ending December 31,

Convertible Notes

March 20, 2020, the Company and the Holders of the Series CN Note 1 and Note 2 mutually agreed to amend its terms to change the

maturity date to March 20, 2022 and November 30, 2021, respectively.

The Company accounted for the modification in accordance

with ASC 470-50, Modifications and Extinguishments, which states that for all extinguishments of debt, the difference between

the reacquisition price (including any premium) and the net carrying amount of the debt being extinguished (including any deferred

debt issuance costs) should be recognized as a gain or loss when the debt is extinguished.

Accordingly, the Company recorded a

net gain on extinguishment of debt of $379,200 which was comprised of a gain of $437,201, offset by a loss of $58,001.

of $437,201 related to the portion of Convertible Notes that were converted to common stock on March 20, 2020.

The loss on extinguishment

of debt of $58,001 related to the portion of Convertible Notes that were extended by either 24 months for CN I, or 12 months for

Derivative Liabilities

discussed in Note 6, Convertible Notes, the Company issued Series CN Note acceleration offer convertible notes payable that provide

variable conversion provisions.

The conversion terms of the convertible notes are variable based on certain factors, such as the

future price of the Company’s common stock.

The number of shares of common stock to be issued is based on the future price

of the Company’s common stock, therefore the number of shares of common stock issuable upon conversion of the promissory

note is indeterminate.

discussed in Note 7, Convertible Notes, the Company issued Series CN Note acceleration offer convertible notes payable

that provide variable conversion provisions.

The conversion terms of the convertible notes are variable based on certain factors,

such as the future price of the Company’s common stock.

The number of shares of common stock to be issued is based on the

future price of the Company’s common stock, therefore the number of shares of common stock issuable upon conversion of the

promissory note is indeterminate.

fair values of the Company’s derivative liabilities are estimated at the issuance date and are revalued at each subsequent

reporting date.

The Company recognized a derivative liability and debt discount of $569,588 at March 14, 2018 related to the Series

CN Convertible notes 1 of 2;

$69,400 at April 11, 2018 related to the Series CN Notes Warrant Acceleration;

and $697,186 at November

30, 2018 related to the Series CN Convertible note 2 of 2.

The derivative liability was revalued at December 31, 2019 and 2018

with a value of $211,028 and $1,325,653.

The Company recorded a net gain of $1,114,625 and a net loss of $87,630 for the years

ended December 31, 2019 and 2018 respectively related to the derivative liability.

The 2018 net loss consists of a $110,829 gain

for a portion of the derivative liability being settled upon a noteholders decision to convert their outstanding principal to

equity under the terms of the convertible note agreement, and a loss of $198,459 from the change in fair value.

fair value of the derivative liability for CN Convertible Note 1 of 2 and CN Note Warrant Acceleration was calculated using the

The derivative liability was revalued at December 31, 2019 with a value of $211,028, which resulted in a gain

of $1,114,625 for the year then ended.

food Group Inc.

to Consolidated Financial Statements

discussed in Note 7, there was a portion of the CN1 and CN2 notes that was not modified.

The Company continued to revalue the

derivative liability for each reporting period in 2020.

At December 31, 2020, there was no value as the Company settled the derivative

liability through repayment of the outstanding principal upon maturity.

On March 20, 2020, the Company determined the fair value

of the derivative liability related to CN1 and CN2 notes that were converted and extended.

The derivative liability values of

$23,100 (CN converted) and $3,440 (CN extended) were used to determine the debt extinguishment gain or loss.

fair value of the derivative liability for CN notes that were converted and CN notes that were extended was calculated using the

Black-Scholes model using the following assumptions:

Expected life

Volatility (based on comparable company)

Risk Free interest rate

Dividend yield (on common stock)

fair value of the derivative liability for CN Convertible Note 2 of 2 was calculated using the Black-Scholes model using the following

Expected life

Volatility (based on comparable company)

Risk Free interest rate

Dividend yield (on common stock)

life (in years)

Risk Free interest

Dividend yield (on

common stock)

the variable conversion provisions were not modified for $168,000 of CN2 notes that were extended to November 2021, the Company

valued the derivative liability as of March 20, 2020.

As of March 20, 2020, the initial value of the derivative liability was

fair value of the derivative liability for CN2 notes that were extended was calculated using the Black-Scholes model using the

following assumptions:

life (in years)

Risk Free interest

Dividend yield (on

common stock)

fair value of the derivative liabilities for CN Convertible Note 2 of 2 was calculated using the Black-Scholes model using the

following assumptions.

Free interest rate

yield (on common stock)

Reconciliation

1 unchanged sentence

3) from December 31, 2018 to December 31, 2019:

January 1, 2018

Initial value - March 14, 2018

Initial value - April 18, 2018

Initial value –

November 30, 2018

Fair value of settlement from debt conversion

Loss from change in value

For the period ended December 31, 2018

Loss from change in value

For the period ended December 31, 2019

from change in value

the period ended December 31, 2019

food Group Inc.

to Consolidated Financial Statements

Reconciliation

of the derivative liabilities measured at fair value on a recurring basis with the use of significant unobservable inputs (level

3) from December 31, 2019 to December 31, 2020:

Extinguishment

change in derivative from conversion

Extinguishment

change in derivative from extension

Initial derivative

value –

March 20, 2020

gain from change in value

the period ended December 31, 2020

following table presents the Company’s fair value hierarchy for applicable assets and liabilities measured at fair value

as of December 31, 2019 and December 31, 2020:

Derivative Liability December 2019

Derivative Liability December 2018

Liability December 31, 2019

Liability December 31, 2020

Commitments and Contingencies

8 unchanged sentences

following table presents the future operating lease payment as of December 31, 2020.

Total Lease payments

Lease payments

imputed interest

Total lease liability

lease liability

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.

food Group Inc.

to Consolidated Financial Statements

Stockholders’

1 unchanged sentence

We also issued 91,653

shares of our common stock, with a value of $100,000, to certain members of our Board of Directors in lieu of cash payments for

Director fees.

Also, we have 786,890 shares issued in connection with formerly issued restricted stock grants that vested during

In addition, we issued 227,111 options to purchase our common stock to certain members of the Board of Directors in lieu

of cash payments for Director fees, valued at $100,000.

The exercise price of the options ranged from $0.50 to $0.595 per share,

vest immediately, and are exercisable for periods of 8 years.

In addition, we issued 1,315,000 options to purchase our common

stock to employees and executives.

The exercise price of the options is $0.52 per share, vest after 3 years, and are exercisable

for periods of 8 years.

fair value of the options issued ($543,550, in the aggregate) was calculated using the Black-Sholes option pricing model, based

on the criteria shown below.

Expected life (in years)

Volatility (based on a comparable company)

59.82%-70.29 %

Risk Free interest rate

Dividend yield (on common stock)

the year ended December 31, 2019, we issued 282,944 shares of common stock, valued at $169,040 for services.

We also issued 91,653

shares of our common stock, with a value of $50,000, to a member of our Board of Directors in lieu of cash payments for Director

13 unchanged sentences

yield (on common stock)

shares of our common stock were valued at the trading price on the date of grant, $0.45 and $0.73 per share

the same period, we cancelled 1,387,333 options to purchase our common stock, which was primarily driven by the resignation

of executives.

Holders of 2,841,454 I warrants elected to exercise those warrant on a cash basis of $1,320,313 and cashless basis of $384,563

to offset convertible note and accrued interest;

the same period, we cancelled 1,387,333 options to purchase our common stock, which was primarily driven by the resignation of

Holders of 2,841,454 warrants elected to exercise those warrant on a cash basis of $1,320,313 and cashless basis of $384,563 to

offset convertible note and accrued interest;

and received 2,841,454 shares of our common stock.

Holder of 300,000 G warrants elected to exercise those warrant on a cash basis of $180,000 and received 300,000 shares of our

common stock.

the first quarter of 2019, the Company completed additional funding including a Private Placement Offering for common

shares priced at $0.60 per share, resulting in the receipt of proceeds in the amount of $2.4 million and the issuance of 4,000,000

the first quarter of 2019, the Company settled certain Executive Deferred Compensation payments with a combination of cash and

The total amount of Deferred Executive compensation settled is $771,113.

One-third of that total or $243,623, was paid

The remaining balance of $487,246 was settled by granting the Executives warrants exercisable for five years to purchase

the Company’s stock at an exercise price of $0.70 per share.

total amount of equity-based compensation included in additional paid in capital for the years ended December 31, 2019 and 2018

was 225,026 and $598,768, respectively,

Holder of 300,000 warrants elected to exercise those warrant on a cash basis of $180,000 and received 300,000 shares of our common

the year ended December 31, 2019, the Company completed additional funding including a Private Placement Offering for common shares

priced at $0.60 per share, resulting in the receipt of proceeds in the amount of $2.4 million and the issuance of 4,000,000 shares.

addition, the Company settled certain Executive Deferred Compensation payments with a combination of cash and warrants.

amount of Deferred Executive compensation settled is $771,113.

One-third of that total or $243,623, was paid in cash.

The remaining

balance of $487,246 was settled by granting the Executives warrants exercisable for five years to purchase the Company’s

stock at an exercise price of $0.70 per share.

the year ended December 31, 2020, the Company completed a funding, including a Private Placement Offering for common shares priced

at $0.50 per share (subject to adjustment) in the amount of $3,825,000 and the issuance of 7,650,000 shares.

The investors of

this Private Placement Offering were granted O warrants to be eligible to purchase an additional 0.50 shares for every share issued

to each purchaser, exercisable for a period of 3 years at an exercise price of $0.60 per share (subject to adjustment).

volume-weighted average trading price for the 20 consecutive trading days that conclude upon 6 months after the initial closing

(the “Six Month Price”) exceeds or equals $0.50 per share (the “Target Price”), the per share purchase

price will not be adjusted.

If the Six Month Price is less than the Target Price, the per share purchase price will be automatically

reduced to the Six Month Price, but in no event less than $0.35 per share, in which case the Company shall issue to each investor,

pro-rata based on such investor’s investment:

(a) shares in a quantity that equals the difference between the number of

shares issued to such purchaser at closing and the number of shares that would have been issued to such purchaser at closing at

the Six Month Price;

and (b) a warrant for a number of shares of common stock equal to 50% of the difference between the number

of shares issued to such investor at closing and the number of shares that would have been issued to such investor at closing

at the Six Month Price, with an exercise price equal to the sum of $0.10 per share and the Six Month Price, but in no eventless

than $0.45 per share.

The exercise price per share for each warrant will automatically adjust to the sum of $0.10 per share and

the Six-Month Price, but in no event less than $0.45 per share.

food Group Inc.

to Consolidated Financial Statements

September 28, 2020, the Company determined the volume-weighted average price was below the $0.35 per share and consequently issued

5,322,868 additional shares in accordance with provisions of the Private Placement Offering.

Similarly, the Company issued an

additional 2,652,868 Warrants to investors that contributed capital or exercised the conversion of their convertible note.

the Company issued an additional 459,000 Warrants for convertible noteholders that extended their convertible notes.

addition, at the Company’s option, we issued 654,651 shares of our Common Stock to pay interest due of $392,789.

issued 272,559 shares of our Common Stock for services rendered.

The shares of our common stock were valued between $0.25 - $0.50

the year ended December 31, 2020, we issued 870,000 options to purchase our common stock to employees and 199,358 options to a

Board Member.

The exercise price of the options was between $0.34 and $0.44 per share, with both cliff and graded vesting over

3 years, and are exercisable for a period of 8 years.

fair value of the options issued ($217,650, in the aggregate) was calculated using the Black-Sholes option pricing model,

based on the criteria shown below.

life (in years)

(based on a comparable company)

Free interest rate

yield (on common stock)

the year ended December 31, 2020, 625,423 options expired or were cancelled.

the first quarter of 2020, the Company settled certain Executive Deferred Compensation payments with the issuance of 1,573,988

The fair value of the warrants totaled $251,837.

The total executive Deferred Compensation that was settled with the

issuance of the warrants was $167,892.

The difference between the fair value of the warrants and the Executive Deferred Compensation

settled of $83,945 was recorded as stock-based compensation during the year ended December 31, 2020.

total amount of equity-based compensation included in additional paid in capital was $276,641 and $225,026 for the years

ended December 31, 2020 and 2019.

following is a summary of outstanding stock options issued to employees and directors as of December 31, 2020:

remaining term

intrinsic value

Outstanding January 1, 2018

Outstanding December 31, 2018

Outstanding December 31, 2019

Exercisable, December 31 2019

of December 31, 2019, the Company has $967,826 of total unrecognized share-based compensation expense related to unvested options,

which is expected to be amortized over the remaining weighted average period of 4.55 years.

term in years

value at date

January 1, 2019

December 31, 2019

Cancelled/Expired

December 31, 2020

December 31 2020

of December 31, 2020, the Company has $175,847 of total unrecognized share-based compensation expense related to unvested

options, which is expected to be amortized over the remaining weighted average period of 1.51 years.

food Group Inc.

to Consolidated Financial Statements

Outstanding Warrants

following is a summary of all outstanding warrants as of December 31, 2020:

remaining term

intrinsic value

at date of grant

Warrants issued in connection with private placements of common stock

$ 0.53 - $1.00

Warrants issued in connection with private placement of notes

Warrants issued in connection with convertible note

Warrants issued in connection with settlement of deferred compensation

issued in connection with private placements of common stock

issued in connection with private placement of notes

issued in connection with settlement of deferred compensation

tax provision (benefit) for the years ended December 31, 2020 and 2019 is summarized below:

Total current

Total deferred

Change in valuation allowance

in valuation allowance

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

1 unchanged sentence

The sources and tax effect of the differences are as follows:

Income tax provision at the federal statutory rate

State income taxes, net of federal benefit

Permanent Difference

Effect of rate change

Effect of change in valuation allowance

tax provision at the federal statutory rate

income taxes, net of federal benefit

of rate change

of change in valuation allowance

of the net deferred income tax assets at December 31, 2020 and 2019 were as follows:

Net operating loss carryover

Valuation allowance

operating loss carryover

(11,345,000 )

(10,395,000 )

food Group Inc.

to Consolidated Financial Statements

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

8 unchanged sentences

If not used, this carry forward will expire as follows:

of December 31, 2019, we did not have any significant unrecognized uncertain tax positions.

The 2019 net operating loss carry

forward of $4,464,500 does not expire under the Tax Cut and Job Act of 2017.

2020 and 2019 net operating loss carry forward of $3,404,600 and $4,464,500 does not expire under the Tax Cut and Job Act of 2017.

Business Segments and Customer Concentrations.

2 unchanged sentences

following is a breakdown of customers representing more than 10% of sales for the year ended December 31, 2019:

have a history of operating losses and negative cash flow.

As our operations grow, we expect to experience significant increases

in our working capital requirements.

These conditions raise substantial doubt over the Company’s ability to meet all of

its obligations over the twelve months following the filing of this Form 10-K.

Management has evaluated these conditions, and

concluded that current plans will alleviate this concern.

As of December 31, 2019, we had $1,091,374 of cash on the balance sheet.

We have continued to significantly reduce core operating expenses, reducing total General and Administrative Expense in 2019 by

$962,859, or 12%, as compared with 2018.

In addition, in the first quarter of 2020, the Company completed $3.825 million of funding.

These financings included a Private Placement Offering for common shares priced at $0.50 cents per share.

March 23, 2020 the Company obtained extensions or conversion of its Milestone I and II Convertible Notes as described in Note

food Group Inc.

to Consolidated Financial Statements

have a history of operating losses and negative cash flow from operations.

These conditions raise substantial doubt over the Company’s

ability to meet all of its obligations over the twelve months following the filing of this Form 10-K.

Management has evaluated

these conditions, and concluded that current plans will alleviate this concern.

As of December 31, 2020, we had $1,959,269 of

cash and restricted cash on the balance sheet.

We have continued to significantly reduce core operating expenses, reducing total

General and Administrative Expense in 2020 by $2,470,590 or 36%, as compared with 2019.

In January 2021, the company secured $568,131

in proceeds from the second PPP loan.

Company is expecting an increase in revenue bouncing back from Covid-19 and its new Twist & Go products.

believes this will provide sufficient cash to cover operating expenses and $1,139,000 in debt due over the next 12 months.

there are not sufficient cash flows to cover the debt repayment the company believes that the debt could be satisfied through

refinancing including conversion, raising additional proceeds through issuance of stock or new debt.

With the lean initiatives

implemented by the business in 2020, liquidity is expected to remain stable with very little change from 2020.

has concluded that these actions have alleviated the substantial doubt of our ability to continue as a going concern.

2 unchanged sentences

Subsequent Events

March 23, 2020, the Company completed additional funding including a Private Placement Offering for common shares priced at $0.50

per share (subject to adjustment), resulting in the receipt of proceeds in the amount of $3.825 million and the issuance

of 7,650,000 shares.

The investors of this Private Placement Offering will be granted O warrants to be eligible to purchase an

additional 0.50 shares for every share issued to each purchaser, exercisable for a period of 3 years at an exercise price of $0.60

per share, (subject to adjustment).

If the volume-weighted average trading price for the 20 consecutive trading days

that conclude upon 6 months after the initial closing (the “Six Month Price”) exceeds or equals $0.50 per share (the

“Target Price”), the per share purchase price will not be adjusted.

If the Six Month Price is less than the Target

Price, the per share purchase price will be automatically reduced to the Six Month Price, but in no event less than $0.35 per

share, in which case the Company shall issue to each investor, pro-rata based on such investor’s investment:

in a quantity that equals the difference between the number of shares issued to such purchaser at closing and the number of shares

that would have been issued to such purchaser at closing at the Six Month Price;

and (b) a warrant for a number of shares of common

stock equal to 50% of the difference between the number of shares issued to such investor at closing and the number of shares

that would have been issued to such investor at closing at the Six Month Price, with an exercise price equal to the sum of $0.10

per share and the Six Month Price, but in no eventless than $0.45 per share.

The exercise price per share for each warrant will

automatically adjust to the sum of $0.10 per share and the Six-Month Price, but in no event less than $0.45 per share.

addition, the Company obtained a 24 month extension on $1,071,000 in principal, and conversion of $720,000 of principal of the

Milestone I Convertible Notes at a conversion price of $0.50 per share.

The remaining $110,166 was extended for thirty days.

interest rate on the principal balance of the extended Milestone I Convertible Notes was amended to 15%.

Furthermore, the Company

obtained a 12 month extension on $168,000 in principal, and conversion of $1,128,000 in principal of the Milestone II Convertible

The remaining $67,200 was extended for thirty days.

The Convertible Noteholders of the Milestone I and II Convertible Notes

were granted additional interest depending upon their election to convert or extend their Convertible Notes.

impact of COVID-19 on the Company is evolving rapidly with events unfolding on a daily and weekly basis.

The direct impact to

our operations has begun to take affect at the close of the first quarter ended March 31, 2020.

Specifically, our business has

been impacted by dining bans targeted at restaurants to reduce the size of public gatherings.

We have noted restaurant chains

have closed operations and furloughed employees which would preclude our single serve products from being served at those establishments

for a number of weeks.

Furthermore, many school districts have closed regular attendance which could conceivably last to the end

of the school year.

This will directly impact the sales of our Bulk Product into that sales channel.

Our headquarters are located

in Los Angeles, California, where the entire state has been issued a “shelter in place”

order from the Governor of

Consequently, our staff in the headquarter office are working remotely until further notice.

At this point, we have

not experienced a disruption in the supply chain for manufacturing our products.

The developments surrounding COVID-19 remain

fluid and dynamic, and consequently, will require the Company to continue to monitor news headlines from government and health

officials, as well as, the business community.

January 27, 2021, the Company was granted a $568,131 loan under the PPP administered by a Small Business Administration (SBA)

approved partner.

The loan, which matures in five years, at an interest rate of 1%, and is uncollateralized and is fully guaranteed

by the Federal government.

The deferral period is 24 weeks plus 10 months from the loan note date.

The Company is eligible for

loan forgiveness of up to 100% of the loan, upon meeting certain requirements.

The Company has recorded a note payable and will

record the forgiveness upon being legally released from the loan obligation by the SBA.

The Company will be required to repay

any remaining balance, plus interest accrued at 1 percent, in monthly payments commencing upon notification that the loan will

not be forgiven or only partially forgiven.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures