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Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies (Policies)
 3 Months Ended
Mar. 31, 2022
Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

 

The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the fiscal year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K, as filed with the SEC on March 10, 2022. In management’s opinion, the unaudited interim condensed consolidated financial statements reflect all adjustments, which are of a normal and recurring nature, that are necessary for a fair presentation of financial results for the interim periods presented. Operating results for any quarter are not necessarily indicative of the results for the full fiscal year.

 
Reverse Stock Split

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

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

Use of Estimates

 

The preparation of consolidated 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.

 
Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

 

There have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 10, 2022 that have had a material impact on our condensed consolidated financial statements and related notes.

 

 
Fair Value Measurement

Fair Value Measurement

 

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), provides a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements. Specifically, ASC 820 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. ASC 820 defines the hierarchy as follows:

 

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.

 

Our financial instruments consist of cash, accounts receivable, accounts payable, advanced payments, restricted cash, as well as our PPP loan, convertible notes, and derivative liabilities which were settled in 2021. The carrying value of our financial instruments on March 31, 2022, December 31, 2021 and March 31, 2021 approximates their fair values, except for the derivative liability, which was carried at fair value prior to its extinguishment.

 
Restricted Cash

Restricted Cash

 

At March 31, 2022 and December 31, 2021, the Company had approximately $250,000 and $142,000, respectively, in restricted cash related to a co-packing agreement.

 
Accounts Receivable

Accounts Receivable

 

As of each of March 31, 2022 and December 31, 2021, the Company’s allowance for doubtful accounts was approximately $121,000. The allowance was estimated based on evaluation of collectability of outstanding accounts receivable.

 
Other Receivables

Other Receivables

 

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

 
Revenue Recognition

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 smoothie beverages.

 
Shipping and Storage Costs

Shipping and Storage Costs

 

Shipping and handling costs are included in general and administrative expenses. For the three months ending March 31, 2022 and 2021, shipping and handling costs totaled approximately $437,000 and $144,000, respectively.

 
Research and Development

Research and Development

 

Expenditures for research activities relating to product development and improvement are charged to expense as incurred. The Company incurred approximately $31,000 and $68,000, in research and development expenses for the three months ending March 31, 2022 and 2021, respectively.

 
Loss Per Share

Loss Per Share

 

At March 31, 2022 and 2021 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.

 
Recent Pronouncements

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.