What changed in this filing

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Item 1. Financial Statements

2023-08-14 compared with 2023-04-27 · 172 added, 98 removed, 259 unchanged (51% of the section changed)

Financial Statements.

Barfresh Food Group Inc.

Condensed Consolidated Balance Sheets

Food Group Inc.

Consolidated Balance Sheets

Current assets:

22 unchanged sentences

23,000,000 shares authorized;

13,002,603 and 12,934,741 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

13,002,603 and 12,934,741 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Additional paid in capital

4 unchanged sentences

Total liabilities and stockholders’ equity

the accompanying notes to the condensed consolidated financial statements

the accompanying notes to the consolidated financial statements

Food Group Inc.

Consolidated Statements of Operations

the three months ended March 31, 2023 and 2022

the three and six months ended June 30, 2023 and 2022

For the three months ended June 30,

For the six months ended June 30,

Cost of revenue

6 unchanged sentences

$ ( 716,000 )

$ ( 1,647,000 )

$ ( 1,589,000 )

Per share information - basic and fully diluted:

Weighted average shares outstanding

Weighted average shares outstanding - basic

Net loss per share

the accompanying notes to the condensed consolidated financial statements

Net loss per share - Basic

the accompanying notes to the consolidated financial statements

Food Group Inc.

Consolidated Statements of Cash Flows

the three months ended March 31, 2023 and 2022

Statements of Cash Flows

the six months ended June 30, 2023 and 2022

$ ( 1,647,000 )

$ ( 1,589,000 )

Adjustments to reconcile net loss

to net cash used in operating activities

Adjustments to reconcile net loss to net cash used in operating activities

26 unchanged sentences

Value of shares relinquished in modification of stock-based compensation awards (Note 6)

the accompanying notes to the condensed consolidated financial statements

the accompanying notes to the consolidated financial statements

Food Group Inc.

37 unchanged sentences

of Company’s Contract Manufacturers of Finished Goods

For the three months ended March 31,

For the three months ended June 30,

For the six months ended June 30,

Manufacturer A

1 unchanged sentence

Manufacturer C

Manufacturer D

Manufacturer E

of Significant Accounting Policies

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

each of March 31, 2023 and December 31, 2022, the Company had approximately $ 211,000 in restricted cash related to a co-packing agreement.

December 31, 2022, the Company had approximately $ 211,000 in restricted cash related to a co-packing agreement.

The restrictions were

released in June 2023.

Receivable and Allowances

Accounts receivable are recorded and carried at the original invoiced amount

less allowances for credits and for any potential uncollectible amounts due to credit losses.

We make estimates of the expected credit

and collectability trends for the allowance for credit losses based on our assessment of various factors, including historical experience,

the age of the accounts receivable balances, credit quality of our customers, current economic conditions, and other factors that may

affect our ability to collect from our customers.

Expected credit losses are recorded as general and administrative expenses on our condensed

consolidated statements of operations.

of March 31, 2023 and December 31, 2022, there was no allowance for doubtful accounts.

receivables consist of amounts due from vendors for materials acquired on their behalf for use in manufacturing the Company’s products,

vendor rebates and freight claims.

receivable are recorded and carried at the original invoiced amount less allowances for credits and for any potential uncollectible amounts

due to credit losses.

We make estimates of the expected credit and collectability trends for the allowance for credit losses based on

our assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of our

customers, current economic conditions, and other factors that may affect our ability to collect from our customers.

Expected credit

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

As of June 30, 2023

and December 31, 2022, there was no allowance for expected credit losses.

receivables consist of the Company’s 2021 Employer Retention Tax Credit claim, amounts due from vendors for materials acquired

on their behalf for use in manufacturing the Company’s products, vendor rebates and freight claims.

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

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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 fulfilment costs and presented in distribution, selling and administrative

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

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

Customer sales incentives such as volume-based rebates or

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

Shipping and handling costs are treated as fulfilment

costs and presented in distribution, selling and administrative costs.

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

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

For the three months ending March 31, 2023 and

For the three months ending June 30, 2023 and

2022, storage and outbound freight totaled approximately $ 251,000 and $ 319,000 , respectively.

For the six months ending June 30, 2023

and 2022, storage and outbound freight totaled approximately $ 562,000 and $ 768,000 , respectively.

and Development

1 unchanged sentence

The Company incurred approximately

$ 21,000 and $ 31,000 , in research and development expense for the three months ending March 31, 2023 and 2022, respectively.

the three months ended March 31, 2023 and 2022 common stock equivalents have not been included in the calculation of net loss per share

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

$ 35,000 and $ 96,000 , in research and development expense for the three months ending June 30, 2023 and 2022, respectively.

months ending June 30, 2023 and 2022, the Company incurred approximately $ 56,000 and $ 126,000 , respectively.

the three and six months ended June 30, 2023 and 2022 common stock equivalents have not been included in the calculation of net loss

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

Reclassifications

reclassifications have been made to the 2022 financial statements to conform to the 2023 presentation, namely the presentation of selling

and marketing expense apart from general and administrative expense in the consolidated statement of operations, the reclassification

of materials shipping to cost of revenue, and the presentation of the components of cash used in operations.

reclassifications have been made to the 2022 financial statements to conform to the 2023 presentation, namely the presentation of

selling, marketing and distribution expense apart from general and administrative expense in the consolidated statement of

operations, the reclassification of materials shipping from selling, marketing and distribution to cost of revenue, and the

presentation of the components of cash used in operations.

Pronouncements

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

Restatement of Prior Financial Information

Company’s previously filed unaudited statement of operations and cash flow statement and audited balance sheets have been restated

to correct errors in calculating depreciation.

From a quantitative and qualitative perspective, the Company determined that correcting

the previously filed financial statements would not require amendment to its previously filed reports on Form 10-Q and 10-K.

of the correction of previously issued financial statements is summarized below:

of Prior Financial Information

December 31, 2022

As Previously Reported

Consolidated Balance Sheet

Property, plant and equipment, net of depreciation

Accumulated deficit

$ ( 58,384,000 )

$ ( 57,972,000 )

Total stockholders’ equity

Total liabilities and stockholders’ equity

Three-months ended June 30, 2022

As Previously Reported

Consolidated Statement of Operations

Depreciation and amortization

Total operating expenses

$ ( 737,000 )

$ ( 716,000 )

Six-months ended June 30, 2022

As Previously Reported

Consolidated Statement of Operations

Depreciation and amortization

Total operating expenses

$ ( 1,631,000 )

$ ( 1,589,000 )

Consolidated Statement of Cash Flows

$ ( 1,631,000 )

$ ( 1,589,000 )

Depreciation and amortization

Net cash used in operating activities

$ ( 1,923,000 )

consists of the following:

5 unchanged sentences

of Property and Equipment, Net

Manufacturing and customer equipment

Other property

Manufacturing equipment

Customer equipment

Property and equipment, gross

3 unchanged sentences

Property and equipment, net of depreciation

expense related to these assets was approximately $ 92,000 and $ 145,000 for the three months ended March 31, 2023 and 2022, respectively.

Depreciation expense in cost of revenue was $ 4,000 for the three months ended March 31, 2023.

There was no depreciation expense in cost

of revenue for the three months ended March 31, 2022.

expense related to these assets was approximately $ 87,000 and $ 90,000 each of the three months ended June 30, 2023 and 2022, respectively,

and $ 174,000 and $ 212,000 , respectively, for the six months ended June 30, 2023 and 2022.

Depreciation expense in cost of revenue was

$ 5,000 and $ 10,000 for the three months ended June 30, 2023 and 2022, respectively, and $ 10,000 for each of the six months ended June

30, 2023 and 2022, respectively.

Commitments and Contingencies

Company leases office space under a non-cancellable operating lease which expired on March 31, 2023 , and was extended through June 30,

The Company’s periodic lease cost was approximately $ 20,000 for each of the three months ended March 31, 2023 and 2022.

Company leases office space under a non-cancellable operating lease which expired on March 31, 2023 , and was extended through September

The Company’s periodic lease cost was approximately $ 20,000 for each of the three months ended June 30, 2023 and 2022

and $ 40,000 for each of the six months ended June 30, 2023 and 2022.

Company’s products are produced to its specifications through several contract manufacturers.

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However, on November

2022, in response to a formal proposal of alternate resolutions, the Company received notification from the Manufacturer that it was

denying any responsibility for the defective manufacture of the product.

In response, on November 10, 2022, the Company filed a complaint

in the United States District Court for the Central District of California, Western Division (the “Complaint”), claiming

that the Manufacturer had not met its obligations under the Supply Agreement, and seeking economic damages.

In response, the Manufacturer

terminated the Supply Agreement.

On January 20, 2023, the Company filed a voluntary dismissal of the Complaint which allows the parties

to reach a potential resolution outside of the court system.

However, if the parties are once again unable to come to an agreement, the

Company has the right to refile the Complaint in California State Court.

to the uncertainties surrounding the claim, the Company is not able to predict either the outcome or a range of reasonably possible recoveries

that could result from its actions against the Manufacturer, and no gain contingencies have been recorded.

The disruption in its supply

resulting from the dispute has and will continue to adversely impact its results of operations and cash flow until a suitable resolution

is reached or new sources of reliable supply at sufficient volume can be identified and developed, the timing of which is uncertain.

4, 2022, in response to a formal proposal of alternate resolutions, the Company received notification from the Manufacturer that it

was denying any responsibility for the defective manufacture of the product.

In response, on November 10, 2022, the Company filed a

complaint in the United States District Court for the Central District of California, Western Division (the

“Complaint”), claiming that the Manufacturer had not met its obligations under the Supply Agreement, and seeking

economic damages.

In response, the Manufacturer terminated the Supply Agreement.

On January 20, 2023, the Company filed a voluntary

dismissal of the Complaint which allows the parties to reach a potential resolution outside of the court system.

However, if the

parties are once again unable to come to an agreement, the Company has informed the Manufacturer that it intends to re-file the

Complaint in California State Court by the end of August , 2023.

to the uncertainties surrounding the claim, the Company is not able to predict either the outcome or a range of reasonably possible

recoveries that could result from its actions against the Manufacturer, and no gain contingencies have been recorded.

The disruption

in its supply resulting from the dispute has and will continue to adversely impact the Company’s results of operations and

cash flow until a suitable resolution is reached or new sources of reliable supply at sufficient volume can be identified and

developed, the timing of which is uncertain.

The Company has partially mitigated the impact of the supply disruption with the introduction of its single-serve

smoothie cartons.

legal matters

6 unchanged sentences

Stockholders’ Equity

following are changes in stockholders’ equity for the three months ended March 31, 2022 and 2023:

following are changes in stockholders’ equity for the six months ended June 30, 2022 and 2023:

Schedule of Changes in Stockholders' Equity

4 unchanged sentences

Issuance of stock and options for services

Cash settlement of equity-based compensation

Balance March 31, 2022

( 1,589,000 )

Balance June 30, 2022

$ ( 53,427,000 )

Balance December 31, 2022

$ ( 57,972,000 )

Beginning balance

$ ( 57,972,000 )

3 unchanged sentences

( 1,647,000 )

Balance March 31, 2023

( 1,647,000 )

Ending balance

Balance June 30, 2023

$ ( 59,619,000 )

the three months ended March 31, 2023, 684,639 warrants at a weighted average exercise price of $ 5.85 per share expired.

$ ( 59,619,000 )

the six months ended June 30, 2023, 684,639 warrants at a weighted average exercise price of $ 5.85 per share expired.

Incentive Plan

2022, the Company issued equity awards under the 2015 Equity Incentive Plan (the “2015 Plan”) and outside the Plan.

2023, the Board of Directors adopted the 2023 Equity Incentive Plan (the “2023 Plan”), reserving 650,000 shares for future

issuance, and discontinuing further grants under the 2015 Plan.

of March 31, 2023, the Company has $ 227,000 of total unrecognized share-based compensation expense relative to unvested options, stock

2023, the Company’s stockholders adopted the 2023 Equity Incentive Plan (the “2023 Plan”), reserving 650,000 shares

for future issuance.

The Board of Directors discontinued further grants under the 2015 Plan.

of June 30, 2023, the Company has $ 194,000 of total unrecognized share-based compensation expense relative to unvested options, stock

awards and stock units, which is expected to be recognized over the remaining weighted average period of 1.7 years.

following is a summary of stock option activity for the three months ended March 31, 2023:

following is a summary of stock option activity for the six months ended June 30, 2023:

Summary of Stock Options Activity

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Cancelled/expired

Outstanding on March 31, 2023

Exercisable, March 31, 2023

Outstanding on June 30, 2023

Exercisable, June 30, 2023

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

5 unchanged sentences

Weighted average grant date fair value per share

following is a summary of restricted stock award and restricted stock unit activity for the three months ended March 31, 2023:

following is a summary of restricted stock award and restricted stock unit activity for the six months ended June 30, 2023:

of Restricted Stock Award and Restricted Stock Unit Activity

2 unchanged sentences

Unvested at January 1, 2023

Unvested at March 31, 2023

2022, the Company issued performance share units (“PSUs”) that represented shares potentially issuable based upon Company

and individual performance in 2022.

following table summarizes the activity for the Company’s unvested PSUs for the three months ended March 31, 2023:

Unvested at June 30, 2023

2022 and 2023, the Company issued performance share units (“PSUs”) that represented shares potentially issuable based upon

Company and individual performance in the years of issuance.

following table summarizes the activity for the Company’s unvested PSUs for the three months ended June 30, 2023:

of Performance Stock Unit Activity

3 unchanged sentences

Unvested at January 1, 2023

Unvested at March 31, 2023

Unvested at June 30, 2023

February 2023, the unvested awards issued for individual performance and outstanding at January 1, 2023 were modified to cash-settle

the original grant-date fair value of approximately $ 80,000 ,

resulting in incremental compensation of $ 56,000

after considering the $ 24,000 fair value of the vested shares at the date of the modification.

Additionally, the Company performance

targets were modified to allow approximately 71,000

PSU to vest, with an additional time-based vesting requirement for approximately 26,000

Because the awards did not vest based on the original terms, the modification was considered a new grant, resulting in

in compensation expense in the three-months ended March 31, 2023.

the original grant-date fair value of approximately $ 80,000 , resulting in incremental compensation of $ 56,000 after considering the $ 24,000

fair value of the vested shares at the date of the modification.

Additionally, the Company performance targets were modified to allow

approximately 71,000 PSU to vest, with an additional time-based vesting requirement for approximately 26,000 of the PSU.

awards did not vest based on the original terms, the modification was considered a new grant, resulting in $ 64,000 in compensation expense

in the six-months ended June 30, 2023.

Company adopted a 2023 PSU program in April 2023, granting approximately 211,000 PSUs at target performance.

The results for the three-month

period ended March 31, 2023 include $ 67,000 in stock-based compensation expense as management determined that the service inception date

preceded the grant date.

period ended June 30, 2023 include the reversal of $ 67,000 in stock-based compensation expense recorded in the three months ended March

31, 2023, as management does not anticipate at this time that 2023 performance will be achieved.

The results of operations for the six

months ended June 30, 2023 includes no expense for the 2023 PSU program.

Estimates of expense associated with 2023 performance will be

reassessed each quarter through the performance period.

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

2 unchanged sentences

valuation allowance on all tax assets.

As of March 31, 2023, the estimated effective tax rate for the 2023 was zero .

As of June 30, 2023, the estimated effective tax rate for 2023 was zero .

are open statutes of limitations for taxing authorities in federal and state jurisdictions to audit our tax returns from 2018 through

1 unchanged sentence

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

the three months ended March 31, 2023 and 2022, the Company did not incur any interest and penalties associated with tax positions.

of March 31, 2023, the Company did not have any significant unrecognized uncertain tax positions.

the three months ended March 31, 2023, the Company used cash for operations of $ 1,242,000 .

the three and six months ended June 30, 2023 and 2022, the Company did not incur any interest and penalties associated with tax positions.

As of June 30, 2023, the Company did not have any significant unrecognized uncertain tax positions.

Subsequent Event

August 2023, the Company received subscriptions of approximately $ 1,130,000 of a $ 2,000,000 privately placed convertible debt offering.

The debt may be drawn in 25% increments, matures on the anniversary of the draw, bears interest at 10% per annum for the term, regardless

of earlier payment or conversion, and is mandatorily convertible as to principal and interest into shares of the Company’s common

stock at any time prior to maturity at the greater of $1.20 or 85% of the volume-weighted average price of the common stock for the ten

trading days immediately preceding the written notice of the conversion (the “Conversion Price”).

If the Company has not

exercised the mandatory conversion, the holder of the debt has the option after six months and on up to four occasions to convert all

or any portion of the principal and interest into shares of the Company’s common stock at the Conversion Price.

the six months ended June 30, 2023, the Company used cash for operations of $ 2,067,000 .

The Company has a history of operating losses

4 unchanged sentences

dispute resolution, including litigation, is costly and will require the outlay of cash.

as of March 31, 2023, the Company has $ 1,777,000 of cash and restricted cash and even though management has identified certain indicators,

these indicators do not raise substantial doubt regarding the Company’s ability to continue as a going concern.

However, management

cannot predict, with certainty, the outcome of its potential actions to generate liquidity, including the availability of additional

financing, or whether such actions would generate the expected liquidity as planned.

as of June 30, 2023, the Company has $ 952,000

of cash and in August 2023, obtained a funding commitment of approximately $ 1,130,000

as more fully described in Note 8.

As such, even though management has identified certain indicators, these indicators do not raise

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

However, management cannot predict, with

certainty, the outcome of its potential actions to generate liquidity, including the availability of additional financing, or

whether such actions would generate the expected liquidity as planned.

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

What changed 10-Q

Item 1. Financial Statements