| Summary of Significant Accounting Policies | Note
1. Summary of Significant Accounting Policies Barfresh
Food Group Inc., (“we,” “us,” “our,” and the “Company”) was incorporated on February
25, 2010 in the State of Delaware. We are engaged in the manufacturing and distribution of ready-to-drink and ready-to-blend beverages,
particularly, smoothies, shakes and frappes. Basis
of Presentation The
accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the
United States of America (“GAAP”). Certain reclassifications have been made to the 2020 consolidated statement of cash flows
to conform to the 2021 presentation. Reverse
Stock Split Effective
December 29, 2021, the Company amended its certificate of incorporation to implement a 1-for-13 reverse stock split of its issued and
outstanding shares of common stock. All the share numbers, share prices, exercise prices and other per share information throughout these
financial statements have been adjusted, on a retroactive basis, to reflect the 1-for-13 reverse stock split. Principles
of Consolidation The
consolidated financial statements include the financial statements of the Company and our wholly owned subsidiaries, Barfresh Inc. and
Barfresh Corporation Inc. (formerly known as Smoothie, Inc.). All inter-company balances and transactions among the companies have been
eliminated upon consolidation. Use
of Estimates The
preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities in the balance sheets and revenues and expenses during the years reported. Actual results may differ
from these estimates. Concentration
of Credit Risk The
amount of cash on deposit with financial institutions exceeds the $ 250,000 250,000 Restricted
Cash At
both December 31, 2021 and 2020, the Company had $ 142,382 Barfresh
food Group Inc. Notes
to Consolidated Financial Statements Fair
Value Measurement Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements
and Disclosures Level
1 - Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and
liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the
New York Stock Exchange. Level
2 - Pricing inputs are other than quoted prices in active markets but are either directly or indirectly observable as of the reported
date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts or priced
with models using highly observable inputs. Level
3 - Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level
3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts
used to determine the fair value of financial transmission rights. Our
financial instruments consist of cash, accounts receivable, accounts payable, advanced payments, derivative liabilities, convertible
notes, restricted cash, and Paycheck Protection Plan (“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. Accounts
Receivable Accounts
receivable are typically unsecured. The Company’s credit policy calls for payment generally within 30 days. The credit worthiness
of a customer is evaluated prior to a sale. As of December 31, 2021, and 2020, the Company’s allowance for doubtful accounts
was $ 121,230 and $ 133,424
respectively. There was ($7,000)
of bad debt recoveries recorded for the year
ended December 31, 2021, and $ 133,424 of
bad debt expense for the year ended December 31, 2020. The allowance was applied to certain receivable accounts which are over 95 days. Inventory Inventory
consists of finished goods and is carried at the lower of cost or net realizable value on a first in first out basis. The Company
monitors the remaining useful life of its inventory and establishes a reserve of obsolescence where appropriate. Intangible
Assets Intangible
assets are comprised of patents, net of amortization and trademarks. The patent costs are being amortized over the life of the patent,
which is twenty years Intangibles - Goodwill and
Other In
accordance with ASC 350 legal costs related to trademarks have been capitalized. We have determined that trademarks have an indeterminable
life and therefore are not being amortized. Long-Lived
Assets and Other Acquired Intangible Assets We
evaluate the recoverability of property and equipment and finite-lived intangible assets for possible impairment whenever events or circumstances
indicate that the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable
cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a
comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates
that the carrying amount of property and equipment and intangible assets is not recoverable, the carrying amount of such assets is reduced
to fair value. We have not recorded any impairment charges during the years presented. Barfresh
food Group Inc. Notes
to Consolidated Financial Statements Property,
Plant, and Equipment Property,
plant, and equipment is stated at cost less accumulated depreciation and accumulated impairment loss, if any. Depreciation is calculated
on a straight-line basis over the estimated useful lives of the assets. Leasehold improvements are being amortized over the shorter of
the useful life of the asset or the lease term that includes any expected renewal periods that are deemed to be reasonably assured. The
estimated useful lives used for financial statement purposes are: Summary
of Estimated Useful Lives of Assets
Furniture
and fixtures: 5
Manufacturing
equipment and customer equipment: 3 7
Vehicles: 5 Revenue
Recognition In
accordance with ASC 606, Revenue from Contracts with Customers, revenue is recognized when a customer obtains ownership of promised goods.
The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these
goods. The Company applies the following five steps:
1) Identify
the contract with a customer
A
contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s
rights, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration
for goods or services that are transferred is probable. For the Company, the contract is the approved sales order, which may also
be supplemented by other agreements that formalize various terms and conditions with customers.
2) Identify
the performance obligation in the contract
Performance
obligations promised in a contract are identified based on the goods or services that will be transferred to the customer. For the
Company, this consists of the delivery of frozen beverages, which provide immediate benefit to the customer.
3) Determine
the transaction price
The
transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods
and is generally stated on the approved sales order. Variable consideration, which typically includes volume-based rebates or discounts,
are estimated utilizing the most likely amount method.
4) Allocate
the transaction price to performance obligations in the contract Since
our contracts contain a single performance obligation, delivery of frozen beverages, the transaction price is allocated to that single
performance obligation.
5) Recognize
Revenue when or as the Company satisfies a performance obligation
The
Company recognizes revenue from the sale of frozen beverages when title and risk of loss passes and the customer accepts the goods,
which generally occurs at the time of delivery to a customer warehouse. 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. Payments
that are received before performance obligations are recorded are shown as current liabilities.
The
company evaluated the requirement to disaggregate revenue and concluded that substantially all of its revenue comes from a single
product, frozen beverages. Barfresh
food Group Inc. Notes
to Consolidated Financial Statements Research
and Development Expenditures
for research activities relating to product development and improvement are charged to expense as incurred. We incurred $ 244,609 515,145 Shipping
and Storage Costs Shipping
and Storage costs are included in general and administrative expenses. For the years ended December 31, 2021 and 2020, shipping
and handling costs totaled $ 1,054,182 and $ 488,465 ,
respectively. Leases We
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. Lease expense is recognized on a straight-line
basis over the lease term. As a lessee, the Company leases office space. Income
Taxes The
provision for income taxes is determined in accordance with the provisions of ASC Topic 740, Accounting for Income Taxes ASC
740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements,
uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the
financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax
positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% ASC
740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of evidence, it is more than likely
than not that some portion or all of the deferred tax assets will not be recognized. For
the years ended December 31, 2021 and 2020 we did not have any interest and penalties or any significant unrecognized uncertain tax positions. Derivative
Liability The
Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components
of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.”
The result of this accounting treatment is that the fair value of any derivative is marked-to-market each balance sheet date and recorded
as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of
operations as gain/loss from derivative liability. Upon conversion or exercise of a derivative instrument, the instrument is marked to
fair value at the conversion date and then that fair value is reclassified to equity. We analyzed the derivative financial instruments
in accordance with ASC 815. The objective is to provide guidance for determining whether an equity-linked financial instrument is indexed
to an entity’s own stock. This determination is needed for a scope exception which would enable a derivative instrument to be accounted
for under the accrual method. The classification of a non-derivative instrument that falls within the scope of ASC 815-40-05 “Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” also hinges on whether
the instrument is indexed to an entity’s own stock. A non-derivative instrument that is not indexed to an entity’s own stock
cannot be classified as equity and must be accounted for as a liability. There is a two-step approach in determining whether an instrument
or embedded feature is indexed to an entity’s own stock. First, the instrument’s contingent exercise provisions, if any,
must be evaluated, followed by an evaluation of the instrument’s settlement provisions. The Company utilized the fair value standard
set forth by the Financial Accounting Standards Board, defined as the amount at which the assets (or liability) could be bought (or incurred)
or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale. Barfresh
food Group Inc. Notes
to Consolidated Financial Statements Earnings
per Share We
calculate net loss per share in accordance with ASC Topic 260, Earnings per Share Debt
Extinguishment The
Company evaluates its convertible instruments in accordance with ASC 470-50, “Debt Modifications and Extinguishments.” For
all extinguishments of debt, ASC 470-50 requires 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) to be recognized as a gain or loss when the debt is
extinguished. Accordingly, the Company recorded a net loss of $ 193,562
and net gain of $ 379,200 ,
respectively, non-cash gain/loss on extinguishment of debt in its statements of operations for the years ended December 31, 2021
and 2020, respectively. Stock
Based Compensation We
calculate stock compensation in accordance with ASC Topic 718, Compensation-Stock Based Compensation Recent
pronouncements From
time to time, new accounting pronouncements are issued that we adopt as of the specified effective date. 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 position. Subsequent
events None. |
