Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2023

Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and disclosures as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on various factors, including historical experience, and on various other assumptions that are believed to be reasonable under the circumstances, when these carrying values are not readily available from other sources. Significant items subject to estimates and assumptions include useful lives of property and equipment, valuation of stock option, warrants and senior secured convertible notes measured at fair value, undiscounted cash flows used for an impairment testing of intangible assets, inventory losses and sales return. Actual results may differ from these estimates.

Segments

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the chief operating decision maker (the “CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer is the Company’s CODM. The CODM reviews financial information prepared on the basis of accounting policy disclosed in its annual financial statement for purposes of making operating decisions, allocating resources, and evaluating financial performance of the Company. As such, the Company has determined that it operates as one operating segment.

The revenues from external customers or long-term assets are based or located in Taiwan.

Cash and Cash Equivalents

As of December 31, 2023 and 2022, cash and cash equivalents consist of cash on hand and cash in bank which is potentially subject to concentration of credit risk. Such balance is maintained at financial institutions that management determines to be of high-credit quality. Cash accounts at each institution are insured by the Federal Deposit Insurance Corporation in the U.S.A or Central Deposit Insurance Corporation in Taiwan up to certain limits. At times, such deposits may be in excess of the insurance limit. The Company has not experienced any losses on its deposits.

Allowances for Doubtful Accounts

The allowances for doubtful accounts represent management’s best estimate of the expected future credit losses from the Company’s accounts receivable. Determination of the allowances requires management to exercise judgment about the timing, frequency and severity of credit losses that could materially affect the provision for credit losses and, therefore, net loss. The Company regularly performs detailed reviews of its portfolios to determine if an impairment has occurred and evaluates the collectability of receivables based on a combination of various financial and qualitative factors that may affect customers’ ability to pay. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations, a specific reserve is recorded against amounts due to reduce the recognized receivable to the amount reasonably expected to be collected. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional reserves would be required. The Company has not experienced significant customer payment defaults, or identified other significant collectability concerns at December 31, 2023 and 2022.

Inventory

Inventories are stated at the lower of cost or net realizable value. Cost including amounts related to materials, labor and overhead is determined on a first-in, first-out basis for COVID-19 POCT or weighted-average basis for VELDONA Pet cytoprotein supplements. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation. The valuation of inventory requires management to estimate excess and obsolete inventory. Reserves for excess and obsolete inventory are primarily based on management’s estimates of forecasted sales, usage levels and expiration dates. The Company records inventory loss for excess and obsolete inventory within cost of revenues.

Intangible Assets

Intangible assets, mainly consisting of patents are initially recorded at fair value and stated net of accumulated amortization and, if applicable, impairments. The Company amortizes its intangible assets that have finite lives using the straight-line method. Amortization is recorded over the estimated useful lives ranging from 5 to 19 years.

The Company evaluates the recoverability of its definite lived intangible assets together with property and equipment whenever events or changes in circumstances or business conditions indicate that the carrying value of these assets may not be recoverable based on expectations of future undiscounted cash flows for each asset group in accordance with ASC 360-10, Property, Plant and Equipment—Impairment or Disposal of Long-Lived Assets (ASC 360-10). If the carrying value of an asset or asset group exceeds its undiscounted cash flows, the Company estimates the fair value of the assets using market participant assumptions pursuant to ASC 820, Fair Value Measurements.

During the fourth quarter of 2023, the Company reassessed its short-term and long-term commercial plans for its VOC POCT related products which is identified as an asset group being assigned the major intangible assets and identified that an impairment testing is warranted for the intangible assets. As a result, the Company performed an undiscounted cash flow analysis pursuant to ASC 360-10 to determine if the cash flows expected to be generated by the VOC POCT products over the estimated remaining useful life of its primary assets were sufficient to recover the carrying value of the asset group. Based on this analysis, the undiscounted cash flows were sufficient to recover the carrying value of the long-lived assets. Thus, no impairment loss is needed.

To estimate the undiscounted cash flow of the asset group, the Company used assumptions requiring significant judgment, including judgment about when the in-development product can be commercialized, estimated selling price and sales volume of the in-development product and the amount and timing of other cash outflows required to complete the development, commercialization and sales of the product. The forecasted cash flows were based on the Company's most recent strategic plan and for periods beyond the strategic plan, the Company's estimates were based on assumed growth rates expected as of the measurement date. The Company believes its assumptions were consistent with the strategic plans and business goals.

Property and Equipment

Property and equipment are stated on the basis of historical cost less accumulated depreciation and impairment. Expenditures which materially increase value or extend useful lives of assets are capitalized, while maintenance and repairs which do not improve or extend the lives of the respective assets are charged to operations when incurred. Gains and losses on the retirement or disposal of individual assets are included in the results of operations. Depreciation is provided using the straight-line method over estimated useful lives of assets including 3 to 6 years for machinery and equipment and 2 to 5 years for furniture and fixture.

Fair Value Option

ASC 825-10, Financial Instruments, provides a fair value option (the “FVO”) election that allows companies an irrevocable election to use fair value as the initial and subsequent accounting measurement attribute for certain financial assets and liabilities. ASC 825-10 permits entities to elect to measure eligible financial assets and liabilities at fair value on an ongoing basis. Unrealized gains and losses on items for which the FVO has been elected are reported in earnings, except for the effect of changes in own credit, which are recognized in other comprehensive income/loss. The decision to elect the FVO is determined on an instrument-by-instrument basis, must be applied to an entire instrument and is irrevocable once elected. Assets and liabilities measured at fair value pursuant to ASC 825-10 are required to be reported separately from those instruments measured using another accounting method.

The Company elected to account for the senior secured convertible notes issued to Lind Global Fund II LP (the “Lind Note”) using FVO, which allows for valuing the Lind Note at fair value in its entirety versus bifurcation of the embedded derivatives (see Note 6). The fair value of the Lind Note is determined using a binomial lattice valuation model, which is widely used for valuing convertible notes. The significant assumption used in the model is volatility of the Company's common stock. If different assumptions are used, the fair value of the convertible notes and the change in estimated fair value could be materially different. A significant increase in the volatility of the market price of the Company’s common stock, in isolation, would result in a significantly higher fair value; and a significant decrease in volatility would result in a significantly lower fair value.

Foreign Currency Translation

Assets and liabilities of a foreign entity whose functional currency is the local currency are translated to U.S. dollar at the exchange rate in effect at each balance sheet date. Before translation, the Company re-measures foreign currency denominated assets and liabilities into the functional currency of the respective entity, resulting in unrealized gains or losses recorded in the Statements of Operations. Revenues and expenses are translated using average exchange rates during the respective period. Foreign currency translation adjustments are accumulated as a component of accumulated other comprehensive income (loss), which is a separate component of stockholders’ equity.

Revenue Recognition

The Company accounts for revenue pursuant to ASC 606, Revenue from Contracts with Customer (ASC 606) and generates revenue from the sale of its products, primarily COVID-19 POCT and VELDONA Pet cytoprotein supplements in Taiwan.

The Company considers revenue to be earned when all of the following criteria are met: the Company has a contract with a customer that creates enforceable rights and obligations; promised products or services are identified; the transaction price, or the amount the Company expects to receive, including an estimate of uncertain amounts subject to a constraint to ensure revenue is not recognized in an amount that would result in a significant reversal upon resolution of the uncertainty, is determinable; and the Company has transferred control of the promised items to the customer. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in the contract. The transaction price for the contract is measured as the amount of consideration the Company expects to receive in exchange for the goods and services expected to be transferred. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, control of the distinct good or service is transferred. Transfer of control for the Company's products is generally at shipment or delivery, depending on contractual terms. As such, the Company has one performance obligation related to product sales which is satisfied at a point in time.

The Company recognizes a receivable when it has an unconditional right to payment. Payment terms are typically 30 to 60 days based on the contractual term.

Shipping and Handling Costs

Shipping and handling costs represent those costs incurred in operating and staffing fulfillment, including costs attributable to receiving, inspecting, picking, packaging, and preparing customer orders for shipment, and outbound freight costs associated with shipping orders to customers. Shipping generally occurs prior to the transfer of control to the customer and is therefore accounted for as a fulfillment expense. Shipping and handling fees billed to the customers are recorded as revenue.

Research and Development

Costs incurred for the research and development (the “R&D”) of the Company’s products are expensed as incurred. Clinical trial costs incurred by third parties are expensed as the contracted work is performed. Nonrefundable advance payments for goods or services to be received in the future by the Company for use in R&D activities are deferred. The deferred costs are expensed as the related goods are delivered or the services are performed.

Advertising Costs

Costs associated with the Company’s advertising is expensed as incurred and are included in selling, general and administrative expenses in the Statements of Operations. During the years ended December 31, 2023 and 2022, the Company expensed $59,123 and nil, respectively, for advertising costs, which is comprised primarily of producing costs, print and internet advertising fees.

General and Administrative

General and administrative expenses mainly include compensation costs, share-based compensation expense and professional service fees. For the years ended December 31, 2023 and 2022, the compensation costs and professional service fees were $1,950,612 and $1,594,637, respectively. As of December 31, 2023 and 2022, the accrued compensation cost and professional service fees were $1,077,941 and $889,987, respectively, which were presented in the Accrued expenses and other current liabilities on the Balance Sheets.

Share-Based Compensation

Share-based compensation expense is recorded in accordance with ASC 718, Compensation – Stock Compensation, for stock, RSUs and stock options awarded in return for services rendered. The expense is measured at the grant-date fair value of the award and recognized as compensation expense on a straight-line basis over the service period, which is the vesting period. The Company has adopted the simplified method to account for forfeitures of employee awards as they occur and as a result, the Company records compensation cost assuming all grantees will complete the requisite service period. If an employee forfeits an award because they fail to complete the requisite service period, the Company will reverse compensation cost previously recognized in the period the award is forfeited.

Fair Value of Financial Instruments

The fair value of financial instruments is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company measures financial instruments at fair value at each reporting period using a fair value hierarchy that requires to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Other inputs that are directly or indirectly observable in the marketplace.

Level 3 - Unobservable inputs that are supported by little or no market activity.

The carrying value of cash and cash equivalents, accounts receivable, accounts payable, convertible notes payable, current, and other notes payable, current, approximate their fair value because of their short-term nature. The carrying value of long-term debt related to noncurrent convertible notes payable, other notes payable and accrued interest expense approximates its fair value after calculating present value at observable market interest rate.

In addition, the Company elected FVO to measure the senior secured convertible notes using Level 3 inputs on issuance and at each reporting date. Significant unobservable inputs used in the binominal lattice valuation model is the expected volatility of the Company’s common stock. The use of different assumptions and/or estimation methodologies could have a material effect on the estimated fair values. The following table sets forth a reconciliation of senior secured convertible notes measured as  Level 3 financial instrument: (nil as of December 31, 2022).

	December 31, 2023
Beginning of year	$	-
Issue		3,000,000
Conversion into common stock		(254,237	)
Change in fair value – gain		(94,207	)
End of year	$	2,651,556

Income Taxes

The asset and liability approach is used to account for income taxes by recognizing deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. The Company records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized.

The Company recognizes a tax benefit from uncertain tax positions only if it is more likely than not that the position is sustainable, based solely on its technical merits and consideration of the relevant taxing authorities’ administrative practices and precedents. The tax benefits recognized from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being recognized upon settlement. The Company did not recognize any tax benefits from uncertain tax positions during the years ended December 31, 2023 and 2022. The Company recognizes tax-related interest and penalties, if any, as a component of income tax expense.

Net Loss Per Common Share

Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period, without consideration of common stock equivalents. Diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders since the effect of potentially dilutive securities is anti-dilutive given the net loss of the Company.

Recent Accounting Pronouncements Adopted

On January 1, 2023, the Company adopted Accounting Standards Update (the “ASU”) 2016-13 (the “ASU 2016-13”), Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which the Financial Accounting Standards Board (the “FASB”) issued in June 2016. The new standard changes the accounting for credit losses for financial assets and certain other instruments, including trade receivables and contract assets that are not measured at fair value through net income. Under legacy standards, the Company recognizes an impairment of receivables when it was probable that a loss had been incurred. Under the new standard pursuant to ASU 2016-13, the Company is required to recognize estimated credit losses expected to occur over the estimated life or remaining contractual life of an asset (which includes losses that may be incurred in future periods) using a broader range of information including reasonable and supportable forecasts about future economic conditions. The guidance is effective for smaller reporting companies (the “SRC”) as defined by the SEC for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years with early adoption permitted. The Company’s adoption of this new guidance did not have a material impact on the Company’s financial statements and related disclosure.

On January 1, 2023, the Company early adopted ASU 2020-06 (the “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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 as issued by FASB in August 2020 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for SRC’s fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company’s early adoption of this new guidance did not have a material impact on its financial statements and related disclosures.

Accounting Standards Issued but Not Yet Adopted

No other new accounting pronouncement issued or effective has had, or is expected to have, a material impact on the Company’s financial statements.