Significant Accounting Policies (Policy) | 12 Months Ended |
Jan. 03, 2015 |
Accounting Policies [Abstract] | |
Basis of presentation | Basis of presentation: The financial statements and accompanying notes have been prepared on a consolidated basis and reflect the consolidated financial position of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated from these financial statements. The Company’s fiscal year ends on the Saturday closest to December 31. The fiscal year ended January 3, 2015 (referred to as 2014) consisted of 53 weeks and the fiscal year ended December 28, 2013 (referred to as 2013) consisted of 52 weeks. Every fifth or sixth fiscal year, the inclusion of an extra week occurs due to the Company’s floating year-end date. The fiscal year 2015 will include 52 weeks. |
Use of and Changes in Accounting estimates | Use of accounting estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. |
|
Changes in accounting estimates: During the year ended January 3, 2015, the Company evaluated assumptions for estimating the fair value of the Company’s stock options. The Company uses the Black-Scholes based option valuation model, which requires assumptions on (i) volatility, (ii) expected dividends, (iii) expected term and (iv) risk-free rate. While evaluating the assumptions on volatility, the Company determined that the historical volatility the Company’s common stock needs to be considered when estimating the expected volatility. Previously, the Company calculated expected volatility based principally on the volatility rates of similarly situated publicly held companies, as the historical measurement period that was available to compute the volatility rate of the Company’s common stock was shorter than the expected life of the options. |
|
For stock options granted during the year ended January 3, 2015, the Company calculated expected volatility rate based on the combined volatility of publicly held companies in similar industries and volatility of the Company’s common stock. Based on the expected term of stock options, a 20~75% weight was assigned to the volatility of the Company’s common stock as the historical volatility of the Company’s common stock from June 2008 through April 2010 was exceptionally high due to a thinly traded market. Below table illustrates the Company’s historical volatility and the average daily trading volume of the Company’s common stock from June 2008 through April 2010 and from April 2010 through December 2014. |
|
Period | | Volatility | | | Average Daily | | | | | | | | | | | |
Trading Volume | | | | | | | | | | |
6/20/2008 ~ 4/19/2010 | | | 402 | % | | | 11,455 | | | | | | | | | | | |
4/20/2010 ~ 1/2/2015 | | | 77 | % | | | 155,111 | | | | | | | | | | | |
|
The weighted average expected volatility for the stock options granted during the twelve-month period ended January 3, 2015 following the update to our estimate is approximately 75%. The weighted average expected volatility would have been approximately 30%, had we computed solely based on the volatility rates of similarly situated public companies. For the year ended December 28, 2013, the weighted average expected volatility the Company used to estimate the fair value of the Company’s stock options granted was approximately 33%. |
|
The following is a pro-forma disclosure of our historical calculation of estimated volatility over the expected term based on a grant with an expected term of 6 years: |
|
Fiscal Year 2013 | | | Fiscal Year 2013 | |
Name | | Use | | | Volatility | | | Name | | Use | | | Volatility | |
Covance, Inc. | | | 50 | % | | | 35 | % | | ChromaDex Corp. | | | 20 | % | | | 243 | % |
Sigma-Aldrich Corp. | | | 50 | % | | | 30 | % | | Covance Inc. | | | 40 | % | | | 35 | % |
| | | | | | | | | | Sigma-Aldrich Corp. | | | 40 | % | | | 30 | % |
Weighted Average | | | | | | | 33 | % | | Weighted Average | | | | | | | 75 | % |
|
The change in our estimate of volatility did not result to a material additional expense to our statement of operations. |
Revenue recognition | Revenue recognition: The Company recognizes sales and the related cost of sales at the time the merchandise is shipped to customers or service is performed, when each of the following conditions have been met: an arrangement exists, delivery has occurred, there is a fixed price, and collectability is reasonably assured. Discounts, returns and allowances related to sales, including an estimated reserve for the returns and allowances, are recorded as reduction of revenue. |
|
Shipping and handling fees billed to customers and the cost of shipping and handling fees billed to customers are included in net sales. For the year ending in January 3, 2015, shipping and handling fees billed to customers were approximately $115,000 and the cost of shipping and handling fees billed to customers was approximately $130,000. For the year ending in December 28, 2013, shipping and handling fees billed to customers were approximately $110,000 and the cost of shipping and handling fees billed to customers was approximately $128,000. Shipping and handling fees not billed to customers are recognized as cost of sales. |
|
Taxes collected from customers and remitted to governmental authorities are excluded from revenue, which is presented on a net basis in the statement of operations. |
Cash concentration | Cash concentration: The Company maintains substantially all of its cash in three different accounts in one bank. |
Trade accounts receivable | Trade accounts receivable: Trade accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on monthly and quarterly reviews of all outstanding amounts. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Trade accounts receivable are written off when deemed uncollectible. Recoveries of trade accounts receivable previously written off are recorded when received. |
Other receivables | Other receivables: Other receivables are amounts due for payment to the Company other than the Company’s normal customer invoices for merchandise shipped or services performed. The other receivable amount as of December 28, 2013 was from a legal settlement agreement, which the settlement was reached at arbitration form a lawsuit for the violation of the Company’s trademarks. The counterparty had already remitted the payment to a third party escrow agent prior to December 28, 2013. This payment was deposited by the Company on January 14, 2014. The other receivable amount was recorded as a gain in general and administrative expenses in the statement of operations for the period ended December 28, 2013. |
Inventories | Inventories: Inventories are comprised of raw materials, work-in-process and finished goods. They are stated at the lower of cost, determined by the first-in, first-out method (FIFO) method, or market. The inventory on the balance sheet is recorded net of valuation allowances. Labor and overhead has been added to inventory that was manufactured or characterized by the Company. The amounts of major classes of inventory for the periods ended January 3, 2015 and December 28, 2013 are as follows: |
|
| | 2014 | | | 2013 | | | | | | | | | | | |
Reference standards | | $ | 1,760,305 | | | $ | 1,769,160 | | | | | | | | | | | |
Bulk ingredients | | | 2,298,036 | | | | 694,965 | | | | | | | | | | | |
| | | 4,058,341 | | | | 2,464,125 | | | | | | | | | | | |
Less valuation allowance | | | 324,000 | | | | 260,000 | | | | | | | | | | | |
| | $ | 3,734,341 | | | $ | 2,204,125 | | | | | | | | | | | |
|
Our normal operating cycle for reference standards is currently longer than one year. The Company has approximately 5,000 defined standards and holds a lot of these standards as inventory in small quantities, mostly in grams and milligrams. Due to the large number of different items we carry, certain groups of these reference standards have sales frequency that is slower than others and varies greatly year to year. In addition, for certain reference standards, the cost saving is advantageous when purchased in larger quantities and we have taken advantage of such opportunities when available. Such factors have resulted in an operating cycle to be more than one year on average. The Company gains competitive advantage through the broad offering of reference standards and it is critical for the Company to continue to expand its library of reference standards it offers for the growth of business. Nevertheless, the Company has recently made changes in its reference standards inventory purchasing practice, which the management believes will result in an improved turnover rate and shorter operating cycle without impacting our competitive advantage. |
|
The Company regularly reviews inventories on hand and records a provision for slow-moving and obsolete inventory, inventory not meeting quality standards and inventory subject to expiration. The provision for slow-moving and obsolete inventory is based on current estimates of future product demand, market conditions and related management judgment. Any significant unanticipated changes in future product demand or market conditions that vary from current expectations could have an impact on the value of inventories. |
|
|
Intangible assets | Intangible assets: Intangible assets include licensing rights and are accounted for based on the fair value of consideration given or the fair value of the net assets acquired, whichever is more reliable. Intangible assets with finite useful lives are amortized using the straight-line method over a period of 10 years, or, for licensed patent rights, the remaining term of the patents underlying licensing rights (considered to be the remaining useful life of the license). |
Leasehold improvements and equipment | Leasehold improvements and equipment: Leasehold improvements and equipment are carried at cost and depreciated on the straight-line method over the lesser of the estimated useful life of each asset or lease term. Leasehold improvements and equipment are comprised of leasehold improvements, laboratory equipment, furniture and fixtures, and computer equipment. Depreciation on equipment under capital lease is included with depreciation on owned assets. Maintenance and repairs are charged to operating expenses as they are incurred. Improvements and betterments, which extend the lives of the assets, are capitalized. Useful lives of leasehold improvements and equipment for each of the category are as follows: |
|
| Useful Life | | | | | | | | | | | | | | | | | |
Leasehold improvements | Until the end of the lease term | | | | | | | | | | | | | | | | | |
Computer equipment | 3 to 5 years | | | | | | | | | | | | | | | | | |
Furniture and fixtures | 7 years | | | | | | | | | | | | | | | | | |
Laboratory equipment | 10 years | | | | | | | | | | | | | | | | | |
|
Long-lived assets are reviewed for impairment on a periodic basis and when changes in circumstances indicate the possibility that the carrying amount may not be recoverable. Long-lived assets are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets. If the forecast of undiscounted future cash flows is less than the carrying amount of the assets, an impairment charge would be recognized to reduce the carrying value of the assets to fair value. If a possible impairment is identified, the asset group’s fair value is measured relying primarily on a discounted cash flow methodology. |
Long-term investment in affiliate | Long-term investment in affiliate: The Company accounts for its investment in affiliate under the equity method. The Company records equity method adjustments in gains (losses) on equity method investments, net, and may do so with up to a three-month lag, pending on the timely availability of financial information of the investee. Equity method adjustments include: our proportionate share of investee income or loss, gains or losses resulting from investee capital transactions, and other adjustments required by the equity method. The long-term investment in affiliate is subject to a periodic impairment review and is considered to be impaired when a decline in carrying value is judged to be other-than-temporary. Evidence of a loss in value might include (i) absence of an ability to recover the carrying amount of the investment or (ii) inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment. |
Customer deposits and other | Customer deposits and other: Customer deposits and other represent either (i) cash received from customers in advance of product shipment or delivery of services; or (ii) cash received from government as research grants, which the Company has yet to complete the research activities. |
|
The cash received from government as research grants is recognized as a liability until the research is performed. Other than a nominal management fee, which the Company is entitled to earn when the research is performed, the research activities related to the grants are excluded from revenue and are presented on a net basis in the statement of operations. |
Income taxes | Income taxes: Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. |
|
The Company has not recorded a reserve for any tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The Company files tax returns in all appropriate jurisdictions, which include a federal tax return and various state tax returns. Open tax years for these jurisdictions are 2011 to 2014, which statutes expire in 2015 to 2018, respectively. When and if applicable, potential interest and penalty costs are accrued as incurred, with expenses recognized in general and administrative expenses in the statements of operations. As of January 3, 2015, the Company has no liability for unrecognized tax benefits. |
Research and development costs | Research and development costs: Research and development costs consist of direct and indirect costs associated with the development of the Company’s technologies. These costs are expensed as incurred. Research and development costs for the periods ended January 3, 2015 and December 28, 2013 were approximately $514,000 and $134,000, respectively. |
Advertising | Advertising: The Company expenses the production costs of advertising the first time the advertising takes place. Advertising expense for the periods ended January 3, 2015 and December 28, 2013 were approximately $171,000 and $355,000, respectively. |
Share-based compensation | Share-based compensation: The Company has an Equity Incentive Plan under which the Board of Directors may grant restricted stock or stock options to employees and non-employees. For employees, share-based compensation cost is recorded for all option grants and awards of non-vested stock based on the grant date fair value of the award, and is recognized over the period the employee is required to provide services for the award. For non-employees, share-based compensation cost is recorded for all option grants and awards of non-vested stock and is remeasured over the vesting term as earned. The expense is recognized over the period the non-employee is required to provide services for the award. |
|
The Company recognizes compensation expense over the requisite service period using the straight-line method for option grants without performance conditions. For stock options that have both service and performance conditions, the Company recognizes compensation expense using the graded attribution method. Compensation expense for stock options with performance conditions is recognized only for those awards expected to vest. |
|
From time to time, the Company awards shares of its common stock to non-employees for services provided or to be provided. The fair value of the awards are measured either based on the fair market value of stock at the date of grant or the value of the services provided, based on which is more reliably measureable. Since these stock awards are fully vested and non-forfeitable, upon issuance the measurement date for the award is usually reached on the date of the award. |
Fair Value Measurement | Fair Value Measurement: The Company follows the provisions of the accounting standard which defines fair value, establishes a framework for measuring fair value and enhances fair value measurement disclosure. Under these provisions, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. |
|
The standard establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use on unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is described below: |
|
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. |
|
Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. |
|
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. |
|
Financial instruments | Financial instruments: The estimated fair value of financial instruments has been determined based on the Company’s assessment of available market information and appropriate valuation methodologies. The Company’s financial instruments that are included in current assets and current liabilities are recorded at cost in the consolidated balance sheets. The estimated fair value of these financial instruments approximates their carrying value due to their short-term nature. |
|
The carrying amounts reported in the balance sheet for capital lease obligations are present values of the obligations, excluding the interest portion. Capital lease obligations with maturities less than one year are classified as current liabilities. |
|
The carrying amounts reported in the balance sheet for loan payable are present values net of discount, excluding the interest portion. The carrying value of long-term portion of the loan payable approximates fair value because the Company’s interest rate yield based on the credit rating of the Company is believed to be near current market rates. The long-term portion of the Company’s loan payable is considered a Level 3 liability within the fair value hierarchy. Loan payable with maturities less than one year are classified as current liabilities. |
Recent accounting standards: | Recent accounting standards: In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is effective for us in our first quarter of fiscal 2018 using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09. We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements. |
|
In August 2014, the FASB issued ASU 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) - Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this ASU provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this ASU are effective for public and nonpublic entities for annual periods ending after December 15, 2016. Early adoption is permitted. On September 27, 2014, the Company early adopted ASU 2014-15. The adoption of ASU 2014-15 had no impacts on the Company’s consolidated financial statements. |
|
|