Barfresh(BRFH) - 2020 Q2 - Quarterly Report

PART I Financial Statements This section presents the unaudited condensed consolidated financial statements for Q2 and H1 2020, detailing financial performance impacted by COVID-19 and balance sheet changes from financing activities Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2020 ($) | December 31, 2019 ($) | | :--- | :--- | :--- | | Total Current Assets | 4,637,376 | 2,028,394 | | Total Assets | 7,435,635 | 5,125,805 | | Total Current Liabilities | 1,091,040 | 1,882,057 | | Total Liabilities | 2,039,142 | 3,289,934 | | Total Stockholders' Equity | 4,353,549 | 283,724 | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2020 ($) | Three Months Ended June 30, 2019 ($) | Six Months Ended June 30, 2020 ($) | Six Months Ended June 30, 2019 ($) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 506,276 | 1,382,665 | 1,240,156 | 2,217,199 | | Gross Profit | 115,306 | 851,046 | 512,105 | 1,285,750 | | Operating Loss | (1,122,234) | (1,089,848) | (2,100,008) | (2,860,565) | | Net Loss | (1,179,520) | (573,916) | (1,922,586) | (3,421,178) | | Net Loss Per Share | (0.01) | 0.00 | (0.01) | (0.03) | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2020 ($) | Six Months Ended June 30, 2019 ($) | | :--- | :--- | :--- | | Net Cash Used for Operating Activities | (1,930,045) | (2,354,225) | | Net Cash Used for Investing Activities | (38,658) | (319,339) | | Net Cash from Financing Activities | 4,275,605 | 3,900,310 | | Net Change in Cash | 2,306,902 | 1,226,746 | | Cash and Restricted Cash, End of Period | 3,398,276 | 2,268,315 | - The company received a $568,131 loan under the Paycheck Protection Program (PPP), which is eligible for forgiveness, with no forgiveness income recorded as of June 30, 2020[66] - In March 2020, the company completed a $3.825 million private placement of common stock and restructured its convertible notes, converting some to equity and extending maturities on others[67][71][76] - The company's business was significantly impacted by COVID-19, as dining bans at restaurants and school closures directly affected sales channels for its single-serve and bulk products[103] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant operational and financial impacts of COVID-19, including revenue decline and successful cost-cutting measures, alongside strategic actions like capital raises and debt restructuring to mitigate liquidity concerns - The company's business focuses on ready-to-blend frozen beverages, with products supplied to over 400 school locations and over 150 military bases[107][108] - In March 2020, the company raised $3.825 million through a private placement of common stock and restructured its convertible notes to improve its capital structure[117][118] - The company has a history of operating losses and negative cash flow, but management believes substantial doubt about its ability to continue as a going concern was mitigated by recent financing and debt restructuring[170] - As of June 30, 2020, the company had $3.4 million in cash and restricted cash and had reduced G&A expenses by 39% in H1 2020 compared to H1 2019 through cost reduction measures, including reduced headcount[171] Results of Operations (Q2 2020 vs Q2 2019) Q2 2020 revenue decreased by 63% to $506,276 due to COVID-19, with gross margin falling to 22.8%, while general and administrative expenses were reduced by 39%, leading to an increased net loss Q2 Revenue and Gross Profit Comparison (2020 vs. 2019) | Metric | Q2 2020 ($) | Q2 2019 ($) | Change ($) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | 506,276 | 1,382,665 | (876,389) | (63%) | | Gross Profit | 115,306 | 851,046 | (735,740) | (86%) | | Gross Margin | 22.8% | 61.6% | - | - | Q2 General & Administrative Expense Breakdown (2020 vs. 2019) | Expense Category | Q2 2020 ($) | Q2 2019 ($) | Change ($) | | :--- | :--- | :--- | :--- | | Personnel costs | 427,500 | 687,994 | (260,494) | | Marketing and selling | 57,837 | 146,106 | (88,269) | | Travel | 12,917 | 99,108 | (86,191) | | Shipping and Storage | 96,425 | 192,628 | (96,203) | | Total G&A | 1,084,040 | 1,785,820 | (701,780) | Results of Operations (H1 2020 vs H1 2019) H1 2020 revenue decreased by 44% to $1,240,156 due to COVID-19, but a 39% reduction in general and administrative expenses significantly improved the net loss to $1,922,586 H1 Revenue and Gross Profit Comparison (2020 vs. 2019) | Metric | H1 2020 ($) | H1 2019 ($) | Change ($) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | 1,240,156 | 2,217,199 | (977,043) | (44%) | | Gross Profit | 512,105 | 1,285,750 | (773,645) | (60%) | | Gross Margin | 41% | 58% | - | - | H1 General & Administrative Expense Breakdown (2020 vs. 2019) | Expense Category | H1 2020 ($) | H1 2019 ($) | Change ($) | | :--- | :--- | :--- | :--- | | Personnel costs | 847,680 | 1,646,860 | (799,180) | | Marketing and selling | 136,812 | 305,535 | (168,723) | | Travel | 51,836 | 210,867 | (159,031) | | Total G&A | 2,308,465 | 3,789,264 | (1,480,799) | - Net loss for the six-month period improved significantly to $1,922,586 in 2020 from $3,421,178 in 2019, largely due to reduced operating expenses[168] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide market risk disclosures - Disclosure is not required because Barfresh Food Group Inc is a smaller reporting company[174] Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of June 30, 2020, due to a material weakness in internal control over financial reporting related to inadequate segregation of duties - Management concluded that as of June 30, 2020, the company's disclosure controls and procedures were not effective[176] - A material weakness was identified in internal controls: Inadequate Segregation of Duties due to an insufficient number of personnel[177][178] - There were no changes in the company's internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[180] PART II - OTHER INFORMATION Legal Proceedings The company reports no material pending legal proceedings involving itself or its subsidiaries - The Company is not party to any material pending legal proceedings[183] Risk Factors As a smaller reporting company, Barfresh Food Group Inc is not required to provide risk factor disclosures - Disclosure is not required because the company is a smaller reporting company[185] Unregistered Sales of Equity Securities and Use of Proceeds The company did not issue or sell any unregistered equity securities during the period not previously reported on a Form 8-K - No unregistered equity securities were issued or sold during the period that were not previously reported on a Form 8-K[186] Defaults Upon Senior Securities The company reports no defaults upon senior securities - None reported[188] Mine Safety Disclosures This item is not applicable to the company's business - Not applicable[190] Other Information The company reports no other information for this item - None reported[192] Exhibits This section lists exhibits filed with the Form 10-Q, including certifications by executive officers and XBRL data files - The exhibits include certifications from the Principal Executive Officer and Principal Accounting Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[195] - XBRL (Extensible Business Reporting Language) data files are also included as exhibits[195]