| Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis
of Presentation The
accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable
rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information
and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant
to the rules and regulations of the SEC. Accordingly, these interim condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2020, as filed with the SEC. The condensed consolidated balance sheet as of December 31, 2020 included herein
was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes,
required by GAAP. In
the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to
fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all
adjustments contained herein are of a normal recurring nature. The results of operations for the interim periods presented are not necessarily
indicative of the results of operations to be expected for the full fiscal year ending December 31, 2021. Reverse
Stock Split On
March 1, 2021, following stockholder and board approval, the Company effectuated a 1-for-6
reverse split of its issued and outstanding
shares of common stock, without any change to its par value. The authorized number of shares of common stock were not affected by the
reverse stock split. No fractional shares were issued in connection with the reverse stock split, as all fractional shares were rounded
up to the next whole share. Accordingly,
all share and per share amounts presented herein with respect to common stock have been retroactively adjusted to reflect the above-described
reverse stock split for all periods presented. Principles
of Consolidation The
consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, VectorVision Ocular Health,
Inc., NutriGuard Formulations, Inc., Transcranial Doppler Solutions, Inc, and Activ Nutritional, LLC. All intercompany balances and transactions
have been eliminated in consolidation. Use
of Estimates The
preparation of our financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results
could differ from those estimates. On an ongoing basis, management reviews its estimates and if deemed appropriate, those estimates are
adjusted. Significant estimates include those related to assumptions used in valuing inventories at net realizable value, assumptions
used in valuing assets acquired in business acquisitions, impairment testing of goodwill and other long-term assets, assumptions used
in valuing stock-based compensation, the valuation allowance for deferred tax assets, accruals for potential liabilities, and assumptions
used in the determination of the Company’s liquidity. Actual results could differ from those estimates. Revenue
Recognition The
Company generates its revenue from two business segments:
● Clinical
Nutrition
● Diagnostics
Equipment The
Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with
Customers All
products sold by the Company are distinct individual products and are offered for sale as finished goods only, and there are no performance
obligations required post-shipment for customers to derive the expected value from them. Contracts with customers contain no incentives
or discounts that could cause revenue to be allocated or adjusted over time. Shipping
and handling activities are performed before the customer obtains control of the goods and therefore represent a fulfillment activity
rather than a promised service to the customer. Historically the Company has not experienced any significant payment delays from customers. In
certain circumstances, returns of products are allowed. A right of return does not represent a separate performance obligation, but because
customers are allowed to return products, the consideration to which the Company expects to be entitled is variable. Upon evaluation
of historical product returns, the Company determined it is probable that such returns will not cause a significant reversal of revenue
in the future. Due to the insignificant amount of historical returns, as well as the standalone nature of the Company’s products
and assessment of performance obligations and transaction pricing for the Company’s sales contracts, the Company does not currently
maintain a contract asset or liability balance at this time. The Company assesses its contracts and the reasonableness of its conclusions
on a quarterly basis. Revenues
by segment are as follows: Schedule of Revenues by Segment
Three Months Ended Six Months Ended
2021 2020 2021 2020
Clinical nutrition $ 1,171,445 $ 1,152,894 $ 1,333,588 $ 1,304,028
Diagnostics equipment 52,275 35,315 123,429 126,505
Other - 2,700 - 6,100
$ 1,223,720 $ 1,190,909 $ 1,457,017 $ 1,436,633 The
Company’s Clinical Nutrition revenues earned during the three months and six months ended June 30, 2021 and 2020 are derived from
distributors and individual retail customers in North America. Diagnostics Equipment revenues are derived from a worldwide customer base
consisting of both retail customers and distributors. Sales to distributors were approximately 81% 58% Revenues
by geographical area are as follows: Schedule of Revenue by Geographical Area
Three Months Ended Six Months Ended
2021 2020 2021 2020
North America $ 1,176,608 $ 270,664 $ 1,348,748 $ 505,023
Malaysia - 890,000 - 890,000
Asia - other 29,787 22,990 88,049 25,790
Europe and other 17,325 7,255 20,220 15,820
$ 1,223,720 $ 1,190,909 $ 1,457,017 $ 1,436,633 Business
Combinations The
Company accounts for its business combinations using the acquisition method of accounting where the purchase consideration is allocated
to the tangible and intangible assets acquired, and liabilities assumed, based on their respective fair values as of the acquisition
date. The excess of the fair value of the purchase consideration over the estimated fair values of the net assets acquired is recorded
as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and
assumptions, especially with respect to intangible assets. Critical estimates in valuing intangible assets include, but are not limited
to, expected future cash flows, which includes consideration of future growth and margins, future changes in technology, brand awareness
and discount rates. Fair value estimates are based on the assumptions that management believes a market participant would use in pricing
the asset or liability. Investments Short-term
investments as of June 30, 2021, consist of a U.S. Treasury Bill, which is classified as held-to-maturity. The Company’s U.S. Treasury
Bill matured July 29, 2021 and the proceeds were reinvested into another U.S. Treasury Bill that is scheduled to mature approximately
30 days from the date of purchase. Unrealized gains and losses were de minimus. As of June 30, 2021, the carrying value of the Company’s
U.S. Treasury Bill approximates its fair value due to its short-term maturity. Accounts
Receivable Accounts
receivable are recorded net of an allowance for expected losses. Management evaluates the collectability of its trade accounts
receivable and determines an allowance for doubtful accounts based on historical write-offs, known or expected trends, and the identification
of specific balances deemed uncollectible based on a customer’s financial condition, credit history and the current economic conditions. There
was no allowance
Inventories Inventories
are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out (“FIFO”) basis. The
Company records adjustments to its inventory for estimated obsolescence or diminution in net realizable value equal to the difference
between the cost of the inventory and the estimated net realizable value. When evidence exists that the net realizable value of inventory
is lower than its cost, the difference is recognized as a loss in the period in which it occurs. Once inventory has been written down,
it creates a new cost basis for inventory that may not subsequently written up. For the three months and six months ended June 30, 2021
and 2020, there were no Intangible
Assets Amortizable
finite-lived identifiable intangible assets consist of a trade name and customer relationships acquired in the acquisition of Activ effective
June 1,2021 (See Note 3), and are stated at cost less accumulated amortization. The trade name and customer relationships are being amortized
over a period of 10 no At
June 30, 2021 and December 31, 2020, the Company has a trademark for $ 50,000 Goodwill Goodwill
consists of the excess of the cost of Activ (see Note 3) over the fair value of amounts assigned to assets acquired and liabilities assumed.
Under the guidance of ASC 350, goodwill is not amortized, rather it is tested for impairment annually, and will be tested for impairment
between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. An impairment
loss generally would be recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value
of the reporting unit and would be measured as the excess carrying value of goodwill over the derived fair value of goodwill. The Company’s
policy is to perform an annual impairment testing for its reporting units on December 31 of each fiscal year. Concentrations During
the three months ended June 30, 2021, two customers accounted for approximately 39%
13 of the Company’s sales.
No other customer accounted for more than 10%
of sales during the three months ended June 30,
2021 or 2020. During
the six months ended June 30, 2021, two customers accounted for approximately 33 11 10%
of sales during the six months ended June 30,
2021 or 2020. Cash
balances are maintained at large, well-established financial institutions. At times, cash balances exceed federally insured limits. Insurance
coverage limits are $ 250,000 Research
and Development Costs Research
and development costs consist primarily of fees paid to consultants and outside service providers, and other expenses relating to the
acquisition, design, development and testing of the Company’s Clinical Nutrition products. Research and development expenditures
are expensed as incurred and totaled $ 16,756 44,581 37,364 75,769 Patent
Costs The
Company is the owner of four issued domestic patents, two pending domestic patent applications and one granted patent in Canada. Due
to the significant uncertainty associated with the successful development of one or more commercially viable products based on the Company’s
research efforts and any related patent applications, patent costs, including patent-related legal fees, filing fees and internally generated
costs, are expensed as incurred. During the six months ended June 30, 2021, and 2020, patent costs were $ 34,940
and $ 60,501 Stock-Based
Compensation The
Company periodically issues stock-based compensation to employees and non-employees in non-capital raising transactions for services
and for financing costs. Such grants vest and expire according to terms established at the issuance date. The Company accounts for such
grants issued and vesting based on ASC 718, Compensation-Stock Compensation The
fair value of stock options granted is estimated using the Black-Scholes option-pricing model, which uses certain assumptions related
to risk-free interest rates, expected volatility, expected life, and future dividends. The assumptions used in the Black-Scholes option
pricing model could materially affect compensation expense recorded in future periods. Loss
per Common Share Basic
loss per share is computed by dividing net loss by the weighted-average common shares outstanding during a period. Diluted earnings per
share is computed based on the weighted-average common shares outstanding plus the effect of dilutive potential common shares outstanding
during the period calculated using the treasury stock method. Dilutive potential common shares include shares from unexercised warrants
and options. Potential common share equivalents have been excluded where their inclusion would be anti-dilutive. The Company’s
basic and diluted net loss per share is the same for all periods presented the Company had a net loss for all periods presented and all
shares issuable upon exercise of warrants and options would therefore be anti-dilutive. The
following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share: Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share
June 30,
2021 2020
Warrants 485,067 2,578,390
Options 978,087 486,524
1,463,154 3,064,914 Fair
Value of Financial Instruments Accounting
standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing
that fair value. Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. When determining fair value, the Company considers the principal
or most advantageous market in which it transacts and considers assumptions that market participants would use when pricing the asset
or liability. The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used
to measure fair value: Level
1 - Level
2 - Level
3 - The
Company determines the level in the fair value hierarchy within which each fair value measurement falls in its entirety, based on the
lowest level input that is significant to the fair value measurement in its entirety. In determining the appropriate levels, the Company
performs an analysis of the assets and liabilities at each reporting period end. The
Company believes the carrying amount of its financial instruments (consisting of cash, short-term investments, accounts receivable, and
accounts payable and accrued liabilities) approximates fair value due to the short-term nature of such instruments. At
December 31, 2020, the Company’s balance sheets included Level 2 liabilities comprised of the fair value of warrant liabilities
of $ 25,978 (see
Note 9). At June 30, 2021, the Company had no
warrant liabilities. Recent
Accounting Pronouncements In
June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13,
Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The standard significantly changes
how entities will measure credit losses for most financial assets, including accounts and notes receivables. The standard will replace
today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances
based on expected rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect adjustment
to retained earnings as of the beginning of the first reporting period in which the guidance is effective. As a smaller reporting company,
ASU 2016-13 will be effective for the Company beginning January 1, 2023, with early adoption permitted. The Company is currently assessing
the impact of adopting this standard on the Company’s financial statements and related disclosures. In
January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment
(“ASU 2017-04”). ASU 2017-04 eliminates Step 2 of the two-step goodwill impairment test, under which a goodwill impairment
loss was measured by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill.
ASU 2017-04 requires only a one-step quantitative impairment test, whereby a goodwill impairment loss is measured as the excess of a
reporting unit’s carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). Entities
are required to apply ASU 2017-04 on a prospective basis. ASU 2017-04 was effective January 1, 2020. The adoption of ASU 2017-04 did
not have any impact on the Company’s consolidated financial statement presentation or disclosures. In
December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”).
ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions and enhances and simplifies various aspects of
the income tax accounting guidance in ASC 740. ASU 2019-12 was effective January 1, 2021. The adoption of ASU 2019-12 did not have any
impact on the Company’s consolidated financial statement presentation or disclosures. In
August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts
in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). ASU 2020-06 reduces the number of accounting models for convertible
debt instruments by eliminating the cash conversion and beneficial conversion models. As a result, a convertible debt instrument will
be accounted for as a single liability measured at its amortized cost as long as no other features require bifurcation and recognition
as derivatives. For contracts in an entity’s own equity, the type of contracts primarily affected by this update are freestanding
and embedded features that are accounted for as derivatives under the current guidance due to a failure to meet the settlement conditions
of the derivative scope exception. This update simplifies the related settlement assessment by removing the requirements to (i) consider
whether the contract would be settled in registered shares, (ii) consider whether collateral is required to be posted, and (iii) assess
shareholder rights. ASU 2020-06 is effective January 1, 2024, for the Company and the provisions of this update can be adopted using
either the modified retrospective method or a fully retrospective method. Early adoption is permitted, but no earlier than January 1,
2021. At
December 31, 2020, the Company had recorded a derivative liability of $25,978 related to 10,417 warrants issued in 2019 because the settlement
provisions of the warrants contained language that the shares underlying the warrants are required to be registered. Effective January
1, 2021, the Company early adopted ASU 2020-06 using the modified retrospective approach. ASU 2020-06 removed the requirement to consider
if the warrants would be settled in registered shares, and accordingly, the adoption of ASU 2020-06 resulted in a decrease to accumulated
deficit of $ 25,978 25,978 In
May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50),
Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic
815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU
2021-04”). ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions or an
exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains classified after modification or exchange
as an exchange of the original instrument for a new instrument. An issuer should measure the effect of a modification or exchange as
the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification
or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment
for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination
or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods
within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring
on or after the effective date. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects
to early adopt ASU 2021-04 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes
that interim period. The adoption of ASU 2021-04 is not expected to have any impact on the Company’s consolidated financial statement
presentation or disclosures. Other
recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants,
and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s
present or future financial statements. |
