What changed in this filing

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Item 1. Financial Statements

2024-08-14 compared with 2024-05-15 · 128 added, 126 removed, 283 unchanged (47% of the section changed)

Financial Statements.

Food Group Inc.

Consolidated Balance Sheets

Barfresh Food Group Inc.

Condensed Consolidated Balance Sheets

Current assets:

21 unchanged sentences

23,000,000 shares authorized;

14,719,875 and 14,420,105 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

14,723,906 and 14,420,105 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

Additional paid in capital

5 unchanged sentences

the accompanying notes to the condensed consolidated financial statements

Food Group Inc.

Consolidated Statements of Operations

the three months ended March 31, 2024 and 2023

Barfresh Food Group Inc.

Condensed Consolidated Statements of Operations

For the three and six months ended June 30, 2024 and 2023

For the three months

ended June 30,

For the six months

ended June 30,

Cost of revenue

6 unchanged sentences

$ ( 742,000 )

$ ( 1,460,000 )

$ ( 1,647,000 )

Per share information - basic and fully diluted:

3 unchanged sentences

Food Group Inc.

Consolidated Statements of Cash Flows

the three months ended March 31, 2024 and 2023

Statements of Cash Flows

the six months ended June 30, 2024 and 2023

$ ( 1,460,000 )

$ ( 1,647,000 )

Adjustments to reconcile net loss to net cash used in operating

Stock-based compensation

Depreciation and amortization

Stock and options issued for services

Changes in assets and liabilities

Accounts receivable

Other receivables

Prepaid expenses and other assets

Accounts payable

Accrued expenses

Net cash used in operating activities

to reconcile net loss to net cash used in operating activities

and amortization

and options issued for services

in assets and liabilities

expenses and other assets

cash used in operating activities

( 1,549,000 )

Financing activities

Issuance of debt (Note 6)

Repurchases from stock compensation program

Net cash provided by (used in) financing activities

Net decrease in cash and restricted cash

( 2,049,000 )

of property and equipment

cash used in investing activities

from stock compensation program

cash provided by (used in) financing activities

decrease in cash

( 1,508,000 )

( 2,067,000 )

Cash, beginning of period

Cash, end of period

Cash paid during the period for:

Amounts included in the measurement of lease liabilities

Non-cash financing and investing activities:

Convertible notes issued in exchange for trade payables

Conversion of debt and interest to equity

Acquisition of long-term software license in exchange for contract payable

Value of shares relinquished in modification of stock-based compensations awards

paid during the period for:

included in the measurement of lease liabilities

financing and investing activities:

notes issued in exchange for trade payables

of debt and interest to equity

of long-term software license in exchange for contract payable

of shares relinquished in modification of stock-based compensations awards

the accompanying notes to the condensed consolidated financial statements

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of Contract Manufacturers Percentage of Finished Goods

For the three months ended June 30,

For the six months ended June 30,

Manufacturer A

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Company’s financial instruments consist of cash, accounts receivable and accounts payable.

The carrying value

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

The carrying value of the Company’s

financial instruments approximates their fair value.

Receivable and Allowances

6 unchanged sentences

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

As of March 31, 2024

As of June 30, 2024

and December 31, 2023, there was no allowance for credit losses.

There was no credit loss expense for the three months ended March 31,

2024 and 2023.

There was no credit loss expense for the three and six months ended

June 30, 2024 and 2023.

receivables consist of the Company’s 2021 Employer Retention Credit “ERC” claim, which the Company collected in March

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

For the three months ending March 31, 2024 and

For the three months ending June 30, 2024 and

2023, storage and outbound freight totaled approximately $ 217,000 and $ 252,000 , respectively.

For the six months ended June 30, 2024

and 2023, storage and outbound freight totaled approximately $ 581,000 and $ 562,000 , respectively.

and Development

1 unchanged sentence

The Company incurred approximately

$ 30,000 and $ 21,000 , in research and development expense for the three months ending March 31, 2024 and 2023, respectively.

the three months ended March 31, 2024 and 2023 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.

$ 17,000 and $ 35,000 in research and development expense for the three months ended June 30, 2024 and 2023, respectively, and $ 47,000

and $ 56,000 for the six months ended June 30, 2024 and 2023, respectively.

the three and six months ended June 30, 2024 and 2023 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

2 unchanged sentences

tax withholding under the Company’s stock compensation program have been reclassified to financing activities in the consolidated

statement of cash flows, with corresponding changes reflected in the statement of stockholders’ equity for the three months ended

March 31, 2023.

statement of cash flows, with corresponding changes reflected in the statement of stockholders’ equity for the six months ended

June 30, 2023.

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 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.

The effect of the correction of previously

issued financial statements is summarized below:

Schedule of Prior Financial Information

Three-months ended March 31, 2023

As Previously

Consolidated Statement of Operations

Depreciation and amortization

Total operating expenses

$ ( 910,000 )

$ ( 889,000 )

Consolidated Statement of Cash Flows

$ ( 910,000 )

$ ( 889,000 )

Depreciation and amortization

Net cash used in operating activities

$ ( 1,224,000 )

consists of the following:

13 unchanged sentences

Property and equipment, net of depreciation

expense related to these assets was approximately $ 59,000 and $ 71,000 each of the three months ended March 31, 2024 and 2023.

expense in cost of revenue was $ 7,000 and $ 4,000 for the three months ended March 31, 2024 and 2023, respectively.

expense related to these assets was approximately $ 56,000 and $ 87,000 for the three months ended June 30, 2024 and 2023, respectively,

and $ 113,000 and $ 174,000 for the six months ended June 30, 2024 and 2023, respectively.

Depreciation expense in cost of revenue was

$ 6,000 and $ 5,000 for the three months ended June 30, 2024 and 2023, respectively, and $ 13,000 and $ 10,000 for the six months ended June

30, 2024 and 2023, respectively.

Commitments and Contingencies

2 unchanged sentences

The Company’s periodic lease cost was approximately $ 20,000 for each of the three months

ended March 31, 2024 and 2023.

ended June 30, 2024 and 2023 and $ 40,000 for each of the six months ended June 30, 2024 and 2023.

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

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the Company re-filed the Complaint in California State Court in August 2023 and continues to progress through the court system.

May 2024, the Company entered into a non-recourse litigation financing arrangement which is expected to be adequate to pursue the Complaint

to conclusion.

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

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the Conversion Price.

October 23, 2023, the Company drew down $ 1,390,000 in

convertible debt and converted a total of $ 1,207,000

of principal into 820,160

shares of common stock.

Additionally, on December 19, 2023, the Company drew down $ 470,000

in convertible debt and converted a total of $ 653,000

of principal and $ 4,000

of accrued interest into 495,331

October 23, 2023, the Company drew down $ 1,390,000 in convertible debt and converted a total of $ 1,207,000 of principal into 820,160

shares of common stock.

Finally, on March 27 and 29, 2024 the Company drew down $ 136,000

in convertible debt and converted the total drawn into 124,208

shares, settling all debt.

Debt drawdowns included the non-cash settlement of $ 30,000

in accounts payable in the year ended December 31, 2023 and the three months ended March 31, 2024, respectively.

Additionally, on December 19, 2023, the Company drew down $ 470,000 in convertible debt and converted a total

of $ 653,000 of principal and $ 4,000 of accrued interest into 495,331 shares of common stock.

Finally, on March 27 and 29, 2024 the Company

drew down $ 136,000 in convertible debt and converted the total drawn into 124,208 shares, settling all debt.

Debt drawdowns included

the non-cash settlement of $ 30,000 and $ 71,000 in 2023 and 2024, respectively.

Stockholders’ Equity

following are changes in stockholders’ equity for the three months ended March 31, 2023 and 2024:

following are changes in stockholders’ equity for the six months ended June 30, 2023 and 2024:

Schedule of Changes in Stockholders' Equity

Balance December 31, 2022

$ ( 57,972,000 )

Issuance of common stock for

equity compensation, net of shares repurchased for income tax withholding

Equity-based compensation

Cash settlement of equity-based

Conversion of debt and interest

Issuance of common stock for equity compensation, net of shares repurchased for income tax withholding

Equity-based compensation expense

Cash settlement of equity-based compensation

Conversion of debt and interest (Note 5)

Issuance of stock for services

Balance March 31, 2023

$ ( 58,861,000 )

Balance June 30, 2023

Balance December 31, 2023

1 unchanged sentence

$ ( 60,796,000 )

Issuance of common stock for

equity compensation, net of shares repurchased for income tax withholding

Equity-based compensation

Conversion of debt and interest

Balance March 31, 2024

Issuance of common stock for equity compensation, net of shares repurchased for income tax withholding

Equity-based compensation expense

Conversion of debt and interest (Note 5)

( 1,460,000 )

the three months ended March 31, 2024, 122,739 warrants at a weighted average exercise price of $ 9.10 per share expired.

Balance June 30, 2024

$ ( 62,256,000 )

the six months ended June 30, 2024, 122,739 warrants at a weighted average exercise price of $ 9.10 per share expired.

Incentive Plan

6 unchanged sentences

an evergreen provision that reserves additional shares depending on future non-plan issuances of common stock.

of March 31, 2024, the Company has $ 77,000 of total unrecognized share-based compensation expense relative to unvested options, stock

of June 30, 2024, the Company has $ 797,000 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 2.5 years.

following is a summary of stock option activity for the three months ended March 31, 2024:

following is a summary of stock option activity for the six months ended June 30, 2024:

Schedule of Stock Options Activity

3 unchanged sentences

Outstanding on December 31, 2023

Outstanding on March 31, 2024

Exercisable, March 31, 2024

Outstanding on June 30, 2024

Exercisable, June 30, 2024

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

Schedule of Fair Value of Options Using Black-Sholes Option Pricing Model

of Fair Value of Options Using Black-Sholes Option Pricing Model

Expected term (in years)

3 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, 2024:

following is a summary of restricted stock award and restricted stock unit activity for the six months ended June 30, 2024:

Schedule of Restricted Stock Award and Restricted Stock Unit Activity

2 unchanged sentences

Unvested at January 1, 2024

Unvested at March 31, 2024

Unvested at June 30, 2024

2023 and 2024, 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 March 31, 2024:

following table summarizes the activity for the Company’s unvested PSUs for the six months ended June 30, 2024:

Schedule of Performance Stock Unit Activity

2 unchanged sentences

Unvested at January 1, 2024

Unvested and expected to vest at March 31, 2024

Unvested and expected to vest at June 30, 2024

February 2023, the unvested awards issued and outstanding for individual performance under the 2022 PSU program were modified to cash-settle

4 unchanged sentences

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 three-months ended March 31, 2023.

Company adopted a 2024 PSU program in March 2024, granting approximately 445,000 PSUs at target performance against company-wide metrics.

The results for the three months ended March 31, 2024 include $ 125,000 in expense for the 2024 PSU program.

Estimates of expense associated

with 2024 performance will be reassessed each quarter through the performance period.

in the six months ended June 30, 2023.

Company adopted a 2024 PSU program in March 2024, granting approximately 429,000 PSUs at target performance against company-wide and

individual performance metrics.

The results for the three and six months ended June 30, 2024 include $ 85,000 and $ 210,000 , respectively,

in expense for the 2024 PSU program.

Estimates of expense associated with 2024 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, 2024, the estimated effective tax rate for 2024 was zero .

As of June 30, 2024, the estimated effective tax rate for 2024 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, 2024 and 2023, the Company did not incur any interest and penalties associated with tax positions.

of March 31, 2024, the Company did not have any significant unrecognized uncertain tax positions.

the three months ended March 31, 2024, the Company used cash for operations of $ 769,000 .

The Company has a history of operating losses

and negative cash flow, which were expected to improve with growth, offset by working capital required to achieve such growth.

more fully in Note 5, the dispute and subsequent contract termination with the Manufacturer has resulted in limitations in our ability

to procure certain products, which has and may continue to inhibit our ability to achieve positive cash flow until we are able to expand

our manufacturing capacity.

Additionally, management has considered that dispute resolution, including litigation, is costly and will

require the outlay of cash.

as of March 31, 2024, the Company has $ 1,167,000 of cash.

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.

the three and six months ended June 30, 2024 and 2023, the Company did not incur any interest and penalties associated with tax positions.

As of June 30, 2024, the Company did not have any significant unrecognized uncertain tax positions.

Subsequent Event

In August 2024, the Company secured a $ 1,500,000

receivables financing facility which bears interest at prime plus 1.2 %

per annum on amounts borrowed.

The facility has a thirteen-month

term that renews annually and is secured by accounts receivable and inventory.

During the six months ended June 30, 2024, the Company

used $ 1,549,000 in operations.

As of June 30, 2024, the Company had $ 1,185,000 of working capital, including $ 383,000 in cash.

The Company has a history of negative cash flow and

operating losses, which were expected to improve with growth.

As described more fully in Note 4, the dispute and subsequent contract

termination with the Manufacturer has resulted in limitations in our ability to procure certain products necessary to achieve our growth

projections and in elevated legal costs.

To mitigate the impact, the Company has built inventory in anticipation of third quarter seasonal

requirements, contributing $ 320,000

to the cash used in operations in the first half of 2024.

The Company expects that the seasonality in its cash flow will ease as additional

contracted capacity commences production in the third and fourth quarters of 2024.

Additionally, in May 2024, the Company obtained non-recourse

litigation financing to allow vigorous pursuit of the complaint against the Manufacturer without further expense to the Company.

The financial position at June 30, 2024 and

historical results raise substantial doubt about the Company’s ability to continue as a going concern, which has been

As described, the Company has taken and partially completed steps to mitigate the dispute related issues.

Additionally,

in August 2024, the Company secured receivables financing of $ 1,500,000 .

Management believes that other potential actions are feasible, including raising additional financing and reducing growth-related

expenditures.

While management cannot predict with certainty whether additional actions would achieve the predicted outcome, the

availability of such options, along with the actions already taken, resulted in the alleviation of the substantial doubt about the

Company’s ability to continue as a going concern.

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