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 to 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 in consolidation. Reclassification of Prior Year Presentation Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications did not have an impact on the reported results of operations. Use of 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 eighteen consecutive quarters. 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 and Cash Equivalents 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, 2018 and 2017, 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. As part of our ongoing liquidity assessments management evaluates our cash, cash equivalents. The amount of funds held in bank can fluctuate due to the timing of receipts and payments in the ordinary course of business and due to other reasons, such as business-development activities so the Company may at times have exposure to cash in excess of FDIC insured limits. Concentrations of Credit 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. Accounts receivable is non-interest bearing. Credit is issued to customers without collateral. If an account becomes delinquent management will review if a write off is appropriate. 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. As part of our ongoing liquidity assessments, management evaluates our cash and cash equivalents. The amount of funds held in the bank can fluctuate due to the timing of receipts and payments during the ordinary course of business and other reasons, such as business-development activities. The Company maintains cash balances, at times, with financial institutions in excess of amounts insured by the FDIC. Management monitors the soundness of these institutions to minimize the Company’s risk. As a result, the Company may have exposure to cash in excess of FDIC insured limits. For the year ended December 31, 2018, the Company had a concentration of revenue with one major customer accounting for 21% of total revenue. For the year ended December 31, 2017, the Company had a concentration of revenue with one major customer accounting for 38 percent of total revenue. A loss of a major customer could have a material adverse effect on future operating results. As of December 31, 2018, accounts receivable from this major customer amounted to approximately 99% of total accounts receivable. For the year ended December 31, 2017 there were no receivables from a major customer. Failure to collect these receivables could have a material adverse effect on our future operating results. For the years ended December 31, 2018 and 2017, the Company purchased its raw material from one third party supplier. The Company believes alternative suppliers could be located in the event of a disruption in availability of goods from this supplier. The Company had the following concentrations of accounts receivable with customers: December 31, 2018 2017 Direct-to-consumer $ 78 $ 4 Related party sale - 59 Subtotal 78 63 Allowance for doubtful accounts - (59 ) Accounts receivable, net $ 78 $ 4 The Company had the following concentrations of revenues with customers: December 31, 2018 2017 Cenegenics - 38 % Vitamin Shoppe 21 % - Inventories, net Inventories are valued at the lower of cost or net realizable value, with cost determined on a first in, first-out basis. Each quarter the Company evaluates the need for a change in the inventory reserve based on sales and expiration dates of products. As of December 31, 2018, all expired product had been fully reserved and removed from inventory. 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. Repairs and maintenance are expensed as incurred. 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. We did not consider any of our fixed assets to be impaired during the years ended December 31, 2018 and 2017. Deferred Offering Costs The Company defers as other assets the direct incremental costs of raising capital until such time as the offering is completed. At the time of the completion of the offering, the costs are charged against the capital raised. Should the offering not be completed, deferred offering costs are charged to operations during the period in accordance with SEC guidance. Since the February 21, 2017 sales agreement expired by June 30, 2018, the remaining deferred offering costs of $96 on the Company’s consolidated balance sheets were recognized and recorded within the Company’s consolidated statements of operations as general and administrative expenses for the year ended December 31, 2018. On July 24, 2018, the Company entered into a new sales agreement, incurring $108 of deferred offering costs as of December 31, 2018 which was recorded as a long term other asset on the accompanying consolidated balance sheet. Intangible Assets The Company’s intangible assets consist primarily of intellectual property pertaining to Fortetropin ® In July 2014, the Company acquired the United States patent application for the manufacture of Fortetropin ® In March 2017, the Company launched a new product line Qurr® and a related website qurr.com. The Company capitalized $380 of the costs to build the website in accordance with U.S. GAAP and initially amortized this asset over 60 month’s useful life to March 2022. As of December 31, 2018 the company accelerated the amortization of this asset to December 31, 2019 to mirror the expiration date of the remaining Qurr® in its inventory. 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, 2018 and December 31, 2017 consisted of the following: December 31, December 31, 2018 2017 Intangibles with finite lives: Intellectual property $ 2,101 $ 2,101 Website - qurr.com 380 380 Less: accumulated amortization - intellectual property (994 ) (784 ) Less: accumulated amortization - website (242 ) (57 ) Total intangibles with finite lives 1,245 1,640 Intangibles with indefinite lives - - Total intangible assets, net $ 1,245 $ 1,640 Amortization expense related to intangible assets for the years ended December 31, 2018 and 2017 was $395 and $267. 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. Based on eighteen 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, we tested the intellectual property for impairment in the fourth quarter of 2018 and determined that the asset value was recoverable and therefore no impairment was recognized. We did not have any impairment losses recorded during the years ended December 31, 2018 and 2017, respectively. 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 as follows: (In thousand $) Years Ended December 31, Amount 2019 $ 345 2020 200 2021 200 2022 200 2023 200 2024 100 Total $ 1,245 Fair Value of Long-Lived Assets We test long-lived assets, including fixed assets and intangibles with finite lives, for recoverability when events or changes in circumstances indicate that the net carrying amount is greater than its fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. We consider historical performance and future estimated results in our evaluation of potential impairment and then compare the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, we measure the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows at the rate we utilize to evaluate potential investments. We estimate fair value based on the information available in making the necessary estimates, judgments and projections. Revenue Effective January 1, 2018, the Company adopted the provisions of Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 (“ASU 2014-09”), as amended, using the modified retrospective method. ASU 2014-09, which is codified in the FASB Accounting Standards Codification as Topic 606, Revenue from Contracts with Customers, The adoption of ASU 2014-09 did not impact the Company’s timing or amounts of revenue recognition. As such, the Company recorded no transition adjustment as of January 1, 2018. However, the additional required qualitative and quantitative disclosures to Topic 606 are provided below. Revenue Recognition Net revenues include products and shipping and handling charges, net of estimates for incentives and other sales allowances or discounts. Our product sales generally do not provide for rights of return. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products. All revenue is recognized when we satisfy our performance obligations under the contract. We recognize revenue by transferring the promised products to the customer, with revenue recognized at the point in time the customer obtains control of the products. We consider charges associated with shipping and handling activities as costs to fulfill our performance obligations. Using probability assessments, we estimate sales incentives expected to be paid over the term of the contract. The majority of our contracts have a single performance obligation and are short term in nature. Sales taxes that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales. Disaggregation of Revenue Our net revenues by product type are presented below for the year ended December 31, 2018 and 2017. Twelve-month Period Product Type December 31, December 31, Qurr® (1) $ 175 $ 164 Yolked® (2) 117 - Myos Canine Muscle Formula® (3) 44 - Physician Muscle Health Formula (4) 24 24 Cenegenics (5) - 200 Egg Yolk Powder (6) - 116 Rē Muscle Health (6) - 22 Total Net Revenues $ 360 $ 526 (1) Qurr® product was launched in March 2017 (2) Yolked® product was launched in March 2018 (3) Myos Canine Muscle Formula® was launched in June 2018 (4) Physician’s Muscle Health Formula was launched in May 2016 (5) Cenegenics is a Fortetropin ® (6) Egg Yolk Powder and Rē Muscle Health products were no longer available after 2017 Advertising The Company charges the costs of advertising to sales and marketing expenses as incurred. Advertising and marketing costs were $308 and $267 for the years ended December 31, 2018 and 2017, respectively. For the year ended December 31, 2018, advertising costs consisted primarily of marketing costs for our new products Yolked® and Myos Canine Muscle Formula®. For the year ended December 31, 2017, advertising costs consisted primarily of marketing costs for our Qurr® line of products. Shipping and Handling Costs The Company records costs for the shipping and handling of products to our customers in cost of sales. These expenses were $48 and $37 for the years ended December 31, 2018 and 2017, respectively. Research and Development Research and development expenses consist primarily of 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. During the years ended December 31, 2018 and 2017, the Company incurred research and development expenses of $417 and $240 respectively. These included payments to DIL for research of $150 and $210 for the years ended December 31, 2018 and 2017. Share-based Compensation Share-based payments are measured at their estimated fair value on the date of grant. Share-based awards to non-employees are re-measured at fair value each financial reporting date until performance is completed. Share-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 the 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. 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 Inputs that utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 Inputs that utilize observable quoted prices for similar assets and liabilities in active markets and observable quoted prices for identical or similar assets in markets that are not very active. Level 3: Inputs that utilize unobservable inputs and include valuations of assets or liabilities for which there is little, if any, market activity. 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, 2018 and 2017, the Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses and other current liabilities. 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, 2018 and 2017, 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, 2018 excluded from the diluted net loss per share computation because their inclusion would be anti-dilutive were 1,083,082, which includes warrants to purchase an aggregate 821,202 shares of common stock, options to purchase an aggregate of 261,880 shares of common stock and rights under the Rights Agreement. The aggregate number of potentially dilutive common stock equivalents outstanding at December 31, 2017 excluded from the diluted net loss per share computation because their inclusion would be anti-dilutive were 1,067,332, which includes warrants to purchase an aggregate 821,202 shares of common stock, options to purchase an aggregate of 244,880 shares of common stock, and unvested restricted stock awards of 1,250 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 Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017. The Tax Act contains several key provisions including, among other things, reducing the U.S. federal corporate tax rate from thirty-five percent to twenty-one percent. Changes in tax law are accounted for in the period of enactment. In addition, Federal net operating losses (“NOL”) generated during future periods will be carried forward indefinitely, but will be subject to an eighty percent utilization against taxable income. The carryback provision has been revoked for NOL after January 1, 2018. 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, 2018 and 2017, 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. The Company continues to evaluate the impact of the Tax Act and analyze additional guidance. |