| Summary of Significant Accounting Policies | 2.
Summary of Significant Accounting Policies Basis
of Presentation The
unaudited condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the
United States of America (“GAAP”) pursuant to the applicable rules and regulations of the Securities and Exchange Commission
(“SEC”) for interim financial information. The unaudited condensed consolidated financial statements have been prepared on
the same basis as the Company’s annual financial statements for the year ended December 31, 2022 and, in the opinion of management,
reflect all adjustments, which consist of normal recurring adjustments, considered necessary for a fair presentation of the periods presented.
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, 2023. These unaudited condensed consolidated financial statements should be read in conjunction
with the Company’s audited consolidated financial statements and accompanying notes, included in the Company’s 2022 Annual
Report on Form 10-K, filed with the SEC on April 17, 2023. The condensed consolidated balance sheet as of December 31, 2022, was derived
from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes, required by
GAAP. The
unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company
transactions and balances have been eliminated in consolidation. In
accordance with the “Segment Reporting” Topic of the Accounting Standards Codification, the Company’s chief operating
decision maker (the Company’s Chief Executive Officer) determined that the Company has only one Reverse
Stock Split On
January 6, 2023, the Company filed a Certificate of Amendment to its Certificate of Incorporation, as amended, with the Secretary of
State of the State of Delaware to effectuate a one-for-fifty (1:50) 2023 Reverse Stock Split 35,281 Accordingly,
all common shares, stock options, stock warrants and per share amounts in these consolidated financial statements have been adjusted
retroactively to reflect the reverse stock splits as if the split occurred at the beginning of the earliest period presented in this
quarterly report. Use
of Estimates The
preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States
of America (“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 materially from those estimates. Revenue
Recognition Revenue
and costs of sales are recognized when control of the products transfers to our customer, which generally occurs upon delivery to the
customer. The Company’s performance obligations are satisfied at that time. The Company does not have any significant contracts
with customers requiring performance beyond delivery, and 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. 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. 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. At
March 31, 2023 and December 31, 2022, the allowance for doubtful accounts was $ 0 1,996 Revenue
by product: Schedule
of Revenues by Product
2023 2022
Three Months Ended March 31,
2023 2022
Clinical Nutrition $ 3,185,689 $ 2,365,900
Other - 18,719
Revenue $ 3,185,689 $ 2,384,619 The
Company’s revenues earned during the three months ended March 31, 2023 and 2022, are derived primarily from retail customers in
North America. Revenues
by geographical area are as follows: Schedule
of Revenue by Geographical Area
2023 2022
Three Months Ended March 31,
2023 2022
North America $ 3,185,689 $ 2,365,720
Europe - 18,899
Total revenue $ 3,185,689 $ 2,384,619 Third-Party
Outsourcing The
Company derives substantially all of its revenue from the sale of products using a third-party fulfillment center to provide order processing
and sales fulfillment, customer invoicing and collections, and product warehousing. Substantially all of the Company’s products
are shipped through the third-party fulfillment center to the customer. Shipping charges to customers are included in revenues. In addition,
the Company uses the third-party fulfillment center to provide sales and inventory management, and marketing and promotional services. The
Company outsources the production of substantially all of its products with a third-party that manufactures and packages the finished
products under a product supply agreement. Costs
incurred related to third-party outsourcing, which includes manufacturing, order processing and fulfillment, customer invoicing, collections
and warehousing, were approximately $ 1,937,000 1,847,000 Cost
of Goods Sold Cost
of goods sold is comprised of the costs for third-party contract manufacturing, packaging, manufacturing fees, and in-bound freight charges. Shipping
Costs Shipping
costs associated with product distribution after manufacture are included as part of cost of goods sold. Shipping and handling expense
totaled $ 146,820 135,423 Advertising
Costs Advertising
costs are expensed as incurred and are included in sales and marketing expense. Advertising costs were $ 479,866 587,361 Concentrations Revenue. 80 59 11 10 59 10 Accounts
receivable March 31, 2023 ,
the Company had accounts receivable from one customer which comprised approximately 67 , the Company had accounts receivable from one customer which comprised approximately 88 10 and
December 31, 2022. Purchases
from vendors three months ended March
31, 2023 , the Company utilized one manufacturer for most of its production and packaging of its
clinical nutrition products. Total purchases from this manufacturer accounted for approximately 49 . The Company utilized a firm to manage and handle media and
advertising of its clinical nutrition products. Total purchases from this vendor accounted for approximately 13 , the
Company’s largest vendor accounted for approximately 41 10 and 2022. Accounts
payable March 31, 2023 ,
two vendors accounted for 80 70 10 one vendor accounted for 88 10 and
December 31, 2022. Cash
and cash equivalents. 8,774,626 The
Company routinely has cash balances in financial institutions in excess of the FDIC and SIPC insurance limits of $ 250,000 500,000 Stock-Based
Compensation Stock-based
awards for stock options and restricted stock awards to employees and non-employees are accounted using the fair value method in accordance
with ASC 718 , Share-Compensation – Stock Compensation Income
(Loss) per Common Share Basic
income (loss) per share is computed by dividing net loss by the weighted-average common shares outstanding during the period, excluding
shares of unvested restricted common stock outstanding. 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.
Shares of vested restricted stock are included in the diluted weighted average number of common shares outstanding from the date they
are vested. 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. For the periods presented in this Quarterly Report on Form 10-Q, the
Company had net income for the three months ended March 31, 2023 and a net loss for the three months ended March 31, 2022. Although the
Company reported net income for the three months ended March 31, 2023, using the treasury stock method, for the period from January 1,
2023 to the redemption of the preferred stock on February 8, 2023, under the most advantageous pricing approach, there was no material
change to the diluted net income per share as reported. The
following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share: Schedule
of Anti-dilutive Securities Excluded from Computation of Earnings Per Share
2023 2022
March 31,
2023 2022
Warrants 1,526,701 1,526,701
Options 12,459 17,062
Unvested restricted common stock 667 1,000
Anti-dilutive securities 1,539,827 1,544,763 Fair
Value of Financial Instruments Accounting
standards require certain assets and liabilities to 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 the sale of an asset or paid to transfer
a liability in an orderly transaction between market participants on 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
following table sets forth by level, within the fair value hierarchy, the Company’s financial assets at fair value as of March
31, 2023 and December 31, 2022: Schedule
of Assets and Liabilities at Fair Value
Level 1 Level 2 Level 3 Total
March 31, 2023
Level 1 Level 2 Level 3 Total
Assets $ - $ - $ - $ -
Total assets $ - $ - $ - $ -
Liabilities
Warrant derivative liability $ - $ - $ 4,539,900 $ 4,539,900
Total liabilities $ - $ - $ 4,539,900 $ 4,539,900
Level 1 Level 2 Level 3 Total
December 31, 2022
Level 1 Level 2 Level 3 Total
Assets $ - $ - $ - $ -
Total assets $ - $ - $ - $ -
Liabilities
Warrant derivative liability $ - $ - $ 6,438,000 $ 6,438,000
Total liabilities $ - $ - $ 6,438,000 $ 6,438,000 The
following table provides a roll-forward of the warrant derivative liability measured at fair value on a recurring basis using unobservable
level 3 inputs for the three months ended March 31, 2023 as follows: Schedule
of Warrant Derivative Liability
March 31, 2023
Warrant derivative liability
Balance as of beginning of period – December 31, 2022 $ 6,438,000
Change in fair value of warrant derivative liability (1,898,100 )
Balance as of end of period – March 31, 2023 $ 4,539,900 As
of March 31, 2023 and December 31, 2022, the Company’s outstanding warrants were treated as derivative liabilities and changes
in the fair value were recognized in earnings (see Note 6). The
Company believes the carrying amounts of certain financial instruments, including cash, accounts receivable, and accounts payable and
accrued liabilities, approximate fair value due to the short-term nature of such instruments and are excluded from the fair value tables
above. Recent
Accounting Pronouncements In
September 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 was effective for the Company beginning January 1, 2023, with early adoption permitted. The Company adopted this
standard effective January 1, 2023 and there was no material impact of adopting this standard on the Company’s financial statements
and related disclosures. Other
recent accounting pronouncements and guidance issued by FASB, its Emerging Issues Task Force, the American Institute of Certified Public
Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future
financial statements. |
