Nature of Business and Significant Accounting Policies

9 Months Ended

Oct. 01, 2011

Notes to Financial Statements

Note 2.Nature of Business and Significant Accounting Policies

Nature of business:  The Company is a natural products company that provides proprietary, science-based solutions and ingredients to the dietary supplement, food and beverage, cosmetic and pharmaceutical industries. The Company supplies ingredients, phytochemical reference standards, and related phytochemical products and services. The Company recently launched its BluScience retail consumer line based on its proprietary ingredients. The Company provides these products and services at various terms with payment terms of primarily net 30 days.

Basis of presentation:  The financial statements and accompanying notes have been prepared on a consolidated basis and reflect the consolidated financial position of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated from these financial statements. The Company's fiscal year ends on the Saturday closest to December 31, and the Company’s normal fiscal quarters end on the Saturday 13 weeks after the last fiscal year end or fiscal quarter end.  Every fifth or sixth fiscal year, the inclusion of an extra week occurs due to the Company’s floating year-end date.  The fiscal year 2014 will include 53 weeks instead of the normal 52 weeks.

Advertising: The Company expenses the production costs of advertising the first time the advertising takes place.  Advertising expense for the nine month periods ended October 1, 2011 and October 2, 2010 were $215,003 and $88,938, respectively.

Earnings per share: Potentially dilutive common shares consist of the incremental common shares issuable upon the exercise of common stock options and warrants for all periods.   For all periods presented, the basic and diluted shares reported are equal because the common shares equivalents are anti-dilutive. Below is a tabulation of the potentially dilutive securities that were “in the money” for the periods ended October 1, 2011 and October 2, 2010.

	Three Months Ending				Nine Months Ending
	October 1, 2011		October 2, 2010		October 1, 2011		October 2, 2010
Basic average common shares outstanding		70,625,913		60,118,183		66,190,731		44,193,266
Warrants and options in the money, net		7,673,885		18,713,678		7,891,916		17,825,933
Weighted average common shares outstanding assuming dilution		78,299,798		78,831,861		74,082,647		62,019,199

Total warrants and options that were not “in the money” at October 1, 2011 and October 2, 2010 were 17,095,835 and 13,636,832 respectively.