SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The consolidated financial information presented herein reflects all normal adjustments that are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the periods presented. The Company is responsible for the consolidated financial statements included in this report. Principles of Consolidation The accompanying consolidated financial statements include the accounts of MYOS RENS Technology Inc. and its wholly-owned subsidiary, Atlas Acquisition Corp. All material intercompany balances and transactions have been eliminated. Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, equity and the disclosures of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Making estimates requires management to exercise significant judgment. It is possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future non-conforming events. Accordingly, the actual results could differ significantly from estimates. Significant items subject to such estimates include but are not limited to the valuation of stock-based awards, measurement of allowances for doubtful accounts and inventory reserves, the selection of asset useful lives, fair value estimations used to test long-lived assets, including intangibles, impairments and provisions necessary for assets and liabilities. The Company has recorded minimal sales to its distributors during the past six consecutive quarters, and has only recently launched its Rē Muscle Health portfolio of branded products. Management’s estimates, including evaluation of impairment of long-lived assets and inventory reserves are based in part on forecasted future results. A variety of factors could cause actual results to differ from forecasted results and these differences could have a significant effect on asset carrying amounts. Cash & Cash Equivalents As of December 31, 2015 and 2014, the Company had cash of $879 and $1,567, respectively. The Company considers all highly liquid investments purchased with a maturity of three months or less and money market accounts to be cash equivalents. At December 31, 2015 and 2014, the Company had no cash equivalents. The Company maintains its bank accounts with high credit quality financial institutions and has never experienced any losses related to these bank accounts. The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its financial institutions. The balance at times may exceed federally insured limits. Concentrations of Risk, Significant Customers and Significant Supplier Management regularly reviews accounts receivable, and if necessary, establishes an allowance for doubtful accounts that reflects management’s best estimate of amounts that may not be collectible based on historical collection experience and specific customer information. Bad debt expense recognized as a result of an allowance for doubtful accounts is classified under selling, general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss. Bad debt expense was $390 for the year ended December 31, 2014 relating to the Cenegenics’ receivable. Based primarily on collections, during the year ended December 31, 2015, management determined that the Cenegenics’ allowance for doubtful accounts should be reduced to $0. Accordingly, a reduction in bad debt expense of $390 was recorded for the year ended December 31, 2015. At December 31, 2015 and 2014, the Company had the following concentrations of net accounts receivable with customers: December 31, December 31, 2015 2014 Cenegenics $ 400 $ 1,372 Other 6 - Subtotal 406 1,372 Allowance for doubtful accounts - (390 ) Accounts receivable, net $ 406 $ 982 For the year ended December 31, 2015 and 2014, the Company had the following concentrations of revenues with customers: December 31, December 31, 2015 2014 MHP 36 % 36 % Cenegenics 0 % 63 % The Company currently relies on one third-party manufacturer to produce Fortetropin (see Note 12 – Commitments and Contingencies - Supply Agreement). This manufacturer purchases all the needed raw materials from suppliers and coordinates any additional production steps with third-parties. We have multiple vendors for blending, packaging and labeling. The Company is pursuing other supply alternatives. Inventories, net Inventories are valued at the lower of cost or market, with cost determined on a first in, first-out basis. Fixed Assets Fixed assets are stated at cost and depreciated to their estimated residual value over their estimated useful lives of 3 to 7 years. Leasehold improvements are amortized over the lesser of the asset's useful life or the contractual remaining lease term including expected renewals. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are reversed from the accounts and the resulting gains or losses are included in the Consolidated Statements of Operations and Comprehensive Loss. Depreciation is provided using the straight-line method for all fixed assets. We review our fixed assets for impairment when events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. We use an estimate of future undiscounted net cash flows of the related assets or groups of assets over their remaining lives in measuring whether the assets are recoverable. If the assets are determined to be unrecoverable, an impairment loss is calculated by determining the difference between the carrying values and the estimated fair value. Included in the year ended December 31, 2014, was an impairment charge of $5 to reduce the unrecoverable net carrying value of a capitalized fixed asset to zero. We did not consider any of our fixed assets to be impaired during the year ended December 31, 2015. Intangible Assets The Company’s intangible assets consist primarily of intellectual property pertaining to Fortetropin, including its formula, trademarks, trade secrets, patent application and domain names, which were determined to have a fair value of $2,000 as of December 31, 2011. Based on expansion into new markets and introduction of new formulas, management determined that the intellectual property had a finite useful life of ten (10) years and began amortizing the asset over its estimated useful life beginning April 2014. Based on six consecutive quarters of minimal revenues combined with changes in the sales channels through which the Company sells its products and an inability to predict future orders, if any, from MHP or Cenegenics or to what extent we will be able to secure new distribution arrangements, we tested the intellectual property for impairment in the fourth quarter of 2015 and determined that the asset value was recoverable and therefore no impairment was recognized. This determination was in part based on execution of the Purchase Agreement on December 17, 2015, pursuant to which RENS Technology Inc. agreed to invest $20.25 million in three tranches over twenty-four months in the Company. There were no impairment losses recorded during the years ended December 31, 2015 and 2014. In July 2014, the Company acquired the United States patent application for the manufacture of Fortetropin from Intangible assets also includes patent costs associated with applying for a patent and being issued a patent. Costs to defend a patent and costs to invalidate a competitor’s patent or patent application are expensed as incurred. Upon issuance of the patent, capitalized patent costs are reclassified from intangibles with indefinite lives to intangibles with finite lives and amortized on a straight-line basis over the shorter of the estimated economic life or the initial term of the patent, generally 20 years. Intangible assets at December 31, 2015 and December 31, 2014 consisted of the following: December 31, December 31, (In thousand $) 2015 2014 Intangibles with finite lives: Intellectual property $ 2,101 $ 2,101 Less: accumulated amortization (365 ) (155 ) Total intangibles with finite lives: 1,736 1,946 Intangibles with indefinite lives: Patent costs 44 44 Total intangibles with indefinite lives: 44 44 Total intangible assets, net $ 1,780 $ 1,990 Assuming no additions, disposals or adjustments are made to the carrying values and/or useful lives of the intangible assets, annual amortization expense for intangible assets is estimated to be $210 in each of the next five years. Impairment testing of intangible assets subject to amortization involves comparing the carrying amount of the asset to the forecasted undiscounted future cash flows whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. In the event the carrying value of the asset exceeds the undiscounted future cash flows, the carrying value is considered not recoverable and an impairment exists. An impairment loss is measured as the excess of the asset’s carrying value over its fair value, calculated using a discounted future cash flow method. The computed impairment loss is recognized in the period that the impairment occurs. Assets which are not impaired may require an adjustment to the remaining useful lives for which to amortize the asset. Impairment testing requires the development of significant estimates and assumptions involving the determination of estimated net cash flows, selection of the appropriate discount rate to measure the risk inherent in future cash flow streams, assessment of an asset’s life cycle, competitive trends impacting the asset as well as other factors. Changes in these underlying assumptions could significantly impact the asset’s estimated fair value. Revenue Recognition The Company records revenue from product sales when persuasive evidence of an arrangement exists, product has been shipped or delivered, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. Product sales represent revenue from the sale of products and related shipping amounts billed to customers, net of promotional discounts, rebates, and return allowances. Depending on individual customer agreements, sales are recognized either upon shipment of product to customers or upon delivery. With respect to direct-to-consumer sales, both title and risk of loss transfer to customers upon our delivery to the customer. The Company’s gross product sales may be subject to sales allowances and deductions in arriving at reported net product sales. For example, we may periodically offer discounts and sales incentives to customers to encourage purchases. Sales incentives are treated as a reduction to the purchase price of the related transaction. Reductions from gross sales for customer discounts and rebates have been minimal, and sales allowances for product returns have not been provided, since under our existing arrangements, customers are not permitted to return product except for non-conforming product. Advertising The Company charges the costs of advertising to selling, general and administrative expenses as incurred. Advertising and promotional costs were $247 and $732 for the years ended December 31, 2015 and 2014, respectively. For the year ended December 31, 2015, advertising and promotional costs consisted primarily of marketing costs for our Rē Muscle Health products, and for the year ended December 31, 2014, advertising and promotional costs consisted primarily of co-operative advertising fees payable to MHP. Pursuant to the distribution agreement with MHP, which terminated in March 2015, the Company paid MHP for co-operative advertising. Research and Development Research and development expenses consist primarily of salaries, benefits, and other related costs, including stock-based compensation, for personnel serving in our research and development functions, and other internal operating expenses, the cost of manufacturing our product for clinical study, the cost of conducting clinical studies and the cost of conducting preclinical and research activities. Nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities are initially capitalized and are then recognized as an expense as the related goods are consumed or the services are performed. Shipping and Handling Costs The Company records costs for shipping and handling of products to our customers in cost of sales. These expenses were $10 and $10 for the years ended December 31, 2015 and 2014, respectively. Stock-based Compensation Generally, stock-based payments are measured at their estimated fair value on the date of grant. Stock-based awards to non-employees are re-measured at fair value each financial reporting date until performance is completed. Stock-based compensation expense recognized during a period is based on the estimated number of awards that are ultimately expected to vest. For stock options and restricted stock that do not vest immediately but which contain only a service vesting feature, we recognize compensation cost on the unvested shares and options on a straight-line basis over the remaining vesting period. The Company uses the Black-Scholes option-pricing model to estimate the fair value of options and the market price of our common stock on the date of grant for the fair value of restricted stock issued. Our determination of fair value of stock-based awards is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, and certain other market variables such as the risk-free interest rate. Comprehensive Loss Comprehensive income (loss) includes all changes in equity during a period except those that resulted from investments by, or distributions to, the Company’s stockholders. Other comprehensive income (loss) refers to revenues, expenses, gains and losses that are included in comprehensive income (loss), but excluded from net loss as these amounts are recorded directly as an adjustment to stockholders’ equity. The Company had no other comprehensive income (loss) items for the years ended December 31, 2015 and 2014. Accordingly, the Company's comprehensive loss and net loss are the same for all periods presented. Segment Information Accounting Standards Codification (“ASC”) 280, Disclosures about Segments of an Enterprise and Related Information Fair Value Measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby observable and unobservable inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchy levels of inputs to measure fair value: Level 1 Level 2 Level 3: A financial asset or liability’s classification within the above hierarchy is determined based on the lowest level input that is significant to the fair value measurement. At December 31, 2015 and 2014, the Company’s financial instruments consist primarily of cash, accounts receivable, accounts payable and accrued expenses and short-term debt. Due to their short-term nature, the carrying amounts of the Company’s financial instruments approximated their fair values. Basic and Diluted Loss Per Share Basic net loss per share is computed by dividing net loss available to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss for the period by the weighted average number of common shares outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if potential dilutive securities outstanding had been issued. The Company uses the “treasury stock” method to determine the dilutive effect of common stock equivalents such as options, warrants and restricted stock. For the years ended December 31, 2015 and 2014, the Company incurred a net loss. Accordingly, the Company’s common stock equivalents were anti-dilutive and excluded from the diluted net loss per share computation. The aggregate number of potentially dilutive common stock equivalents outstanding at December 31, 2015 excluded from the diluted net loss per share computation because their inclusion would be anti-dilutive were 1,390,606, which includes warrants to purchase an aggregate 761,878 shares of common stock, options to purchase an aggregate of 400,545 shares of common stock, 209,733 shares issuable upon the conversion of a convertible promissory note (See NOTE 6 – Debt – Convertible Note) and unvested restricted stock awards of 18,450 shares of common stock. The aggregate number of potentially dilutive common stock equivalents outstanding at December 31, 2014 excluded from the diluted net loss per share computation because their inclusion would be anti-dilutive were 1,541,330, which includes up to 193,865 Make-Whole Shares (See NOTE 9 – Warrants), warrants to purchase an aggregate 958,185 shares of common stock, options to purchase an aggregate of 367,080 shares of common stock and unvested restricted stock awards of 22,200 shares of common stock. Income Taxes Income taxes are accounted for under the asset and liability method in accordance with ASC 740, Accounting for Income Taxes The Company follows ASC 740 rules governing uncertain tax positions, which provides guidance for recognition and measurement. This prescribes a threshold condition that a tax position must meet for any of the benefits of the uncertain tax position to be recognized in the financial statements. It also provides accounting guidance on recognition, classification and disclosure of these uncertain tax positions. The Company has no uncertain income tax positions. Interest costs and penalties related to income taxes are classified as interest expense and operating expenses, respectively, in the Company's financial statements. For the years ended December 31, 2015 and 2014, the Company did not recognize any interest or penalty expense related to income taxes. The Company files income tax returns in the U.S. federal jurisdiction and states in which it does business. |