UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For
the quarterly period ended
OR
For the transition period from ____ to ____
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The
|
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. ☒
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes
As of July 31, 2024, the Company had shares of common stock issued and outstanding.
TABLE OF CONTENTS
| 2 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This Quarterly Report on Form 10-Q contains “forward-looking statements” which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements contain information about our expectations, beliefs, plans or intentions regarding our product development and commercialization efforts, research and development efforts, business, financial condition, results of operations, strategies and prospects, and other similar matters. These forward-looking statements are based on management’s current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict and that may individually or materially impact the matters discussed herein for a variety of reasons that are outside the control of the Company, including, but not limited to, the completion of the Company’s Plan of Liquidation and Dissolution, the use of the proceeds received from the sale of the Viactiv business, the Company’s decision to continue to fund or wind-down its operations subsequent to the sale of the Viactiv business, the sale or other disposition of the Company’s ocular healthcare business, the exploration, timing and feasibility of alternatives to the Company’s Plan of Liquidation and Dissolution, supply chain disruptions, a potential recession and the condition of the economy in general, the Company’s ability to successfully market its remaining products and inventory, and the Company’s ability to maintain compliance with Nasdaq’s continued listing requirements. These statements may be identified by words such as “expects,” “plans,” “projects,” “will,” “may,” “anticipates,” “believes,” “should,” “intends,” “estimates,” “hopes” and other words of similar meaning.
Actual results could differ materially from those contained in forward-looking statements. Many factors could cause actual results to differ materially from those in forward-looking statements, including those matters discussed below. Readers are urged to read the risk factors set forth in our recent filings with the U.S. Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and in other documents we file with the SEC from time to time.
Other unknown or unpredictable factors that could also adversely affect our business, financial condition and results of operations may arise from time to time. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, the forward-looking statements discussed in this Quarterly Report on Form 10-Q may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of our management as of the date of this Quarterly Report on Form 10-Q. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results or expectations, except as required by law. We qualify all the information presented in this Quarterly Report on Form 10-Q, and particularly our forward-looking statements, by these cautionary statements.
This Quarterly Report on Form 10-Q may include market data and certain industry data and forecasts, which we may obtain from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications, articles and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third-party sources.
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PART I – FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Guardion Health Sciences, Inc.
Condensed Consolidated Balance Sheets
| June 30 | December 31 | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Current assets of discontinued operations | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Warrant redemption payable | ||||||||
| Current liabilities of discontinued operations | ||||||||
| Total current liabilities | ||||||||
| Warrant derivative liability – long-term | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock, $ par value; shares authorized | ||||||||
| Common stock, $ par value; shares authorized; shares and shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities, preferred stock and stockholders’ equity | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
| 4 |
Guardion Health Sciences, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | ||||||||||||||||
| Ocular products | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Ocular products | ||||||||||||||||
| Gross profit (loss) | ( | ) | ||||||||||||||
| Operating expenses | ||||||||||||||||
| Research and development | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Loss on disposal of fixed assets | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Change in fair value of warrant derivative liability | ( | ) | ( | ) | ( | ) | ||||||||||
| Cost related to settlement of placement agent warrants | ( | ) | ( | ) | ||||||||||||
| Interest income, net | ||||||||||||||||
| Other income (expense), net | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Discontinued operations | ||||||||||||||||
| Income from discontinued operations | ||||||||||||||||
| Transaction costs related
to sale of discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on sale of discontinued operations | ||||||||||||||||
| Total income from discontinued operations | ||||||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Earnings (loss) per share - basic | ||||||||||||||||
| Loss per share from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Income per share from discontinued operations | ||||||||||||||||
| Net income (loss) per share - basic | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Weighted average common shares outstanding – basic | ||||||||||||||||
| Earnings (loss) per share - diluted | ||||||||||||||||
| Loss per share from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Income per share from discontinued operations | ||||||||||||||||
| Net income (loss) per share - diluted | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Weighted average common shares outstanding - diluted | ||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
| 5 |
Guardion Health Sciences, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
| Three Months and Six Months Ended June 30, 2024 | ||||||||||||||||||||
| Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Fair value of vested stock options | - | |||||||||||||||||||
| Fair value of vested restricted stock | - | |||||||||||||||||||
| Common stock issued upon exercise of warrants | ( | ) | ||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance at March 31, 2024 | ( | ) | ||||||||||||||||||
| Fair value of vested stock options | - | |||||||||||||||||||
| Fair value of vested restricted stock | - | |||||||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Three Months and Six Months Ended June 30, 2023 | ||||||||||||||||||||
| Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Fair value of vested stock options | - | |||||||||||||||||||
| Fair value of vested restricted stock | - | |||||||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance at March 31, 2023 | ( | ) | ||||||||||||||||||
| Fair value of vested stock options | - | ( | ) | ( | ) | |||||||||||||||
| Fair value of vested restricted stock | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to condensed consolidated financial statements.
| 6 |
Guardion Health Sciences, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Operating Activities | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Income from discontinued operations | ( | ) | ( | ) | ||||
| Transaction costs related to sale of discontinued operations | ||||||||
| Gain on sale of discontinued operations | ( | ) | ||||||
| Net loss from continuing operations | ( | ) | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Loss on disposal of fixed asset | ||||||||
| Fair value of vested stock options | ( | ) | ||||||
| Fair value of vested restricted common stock | ||||||||
| Change in fair value of warrant derivative liability | ( | ) | ||||||
| Cost related to settlement of placement agent warrants | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease in: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Increase (decrease) in: | ||||||||
| Accounts payable | ( | ) | ||||||
| Operating lease liability | ( | ) | ||||||
| Accrued expenses | ( | ) | ||||||
| Net cash used in operating activities of continuing operations | ( | ) | ( | ) | ||||
| Net cash provided by operating activities of discontinued operations | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing Activities | ||||||||
| Purchase of equipment | ( | ) | ||||||
| Proceeds from sale of discontinued operations | ||||||||
| Net cash provided by (used in) investing activities of continuing operations | ( | ) | ||||||
| Financing Activities | ||||||||
| Redemption of warrants | ( | ) | ||||||
| Redemption of preferred stock | ( | ) | ||||||
| Net cash used in financing activities of continuing operations | ( | ) | ( | ) | ||||
| Cash and cash equivalents: | ||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Balance at beginning of period | ||||||||
| Balance at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for: | ||||||||
| Income taxes | $ | $ | ||||||
| Interest | $ | $ | ||||||
| Non-cash financing activities: | ||||||||
| Warrant redemption payable | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
| 7 |
Guardion Health Sciences, Inc.
Notes to Condensed Consolidated Financial Statements
For the Three Months and Six Months Ended June 30, 2024 and 2023
(Unaudited)
1. Organization and Business Operations
Business
Guardion Health Sciences, Inc. (the “Company”) offers science-based, clinically supported products designed for consumer ocular health.
Special Meeting of Stockholders
On May 23, 2024, the Company held a special meeting of stockholders (the “Special Meeting”). At the Special Meeting, the Company’s stockholders considered the following proposals: (i) the sale of all of the outstanding equity interests (the “Transaction”) of Activ Nutritional, LLC (“Activ”), a Delaware limited liability company which owned the Viactiv® brand and business and was the wholly-owned subsidiary of Viactiv Nutritionals, Inc. (“Viactiv”), a Delaware corporation and a wholly-owned subsidiary of the Company, pursuant to an equity purchase agreement with Doctor’s Best Inc., a Delaware corporation (“Doctor’s Best”), dated January 30, 2024 (the “Purchase Agreement”); and (ii) the grant of discretionary authority to the Board of Directors of the Company to adjourn the Special Meeting to a later date, to allow for the solicitation of additional proxies only in the event that there were insufficient shares present virtually or represented by proxy voting in favor of the Transaction or the voluntary dissolution and liquidation of the Company pursuant to a Plan of Dissolution.
The Company’s stockholders approved the sale of its Viactiv® brand and business at the Special Meeting. Following this approval, the Company then adjourned the Special Meeting to May 31, 2024 in order to give the Company’s management additional time to solicit proxies from its stockholders to vote in favor of the proposal to adopt the Company’s Plan of Liquidation and Dissolution. On May 31, 2024, the Company convened and held its previously-adjourned Special Meeting of the stockholders, at which the Company’s stockholders approved a proposal for the voluntary dissolution and liquidation of the Company (the “Dissolution”) pursuant to a Plan of Dissolution (the “Plan of Dissolution”), which authorizes the Company to liquidate and dissolve the Company in accordance with the Plan of Dissolution, but subject to the Company’s ability to abandon or delay the Plan of Dissolution in accordance with the terms thereof.
Sale of Activ Nutritional, LLC
On
May 31, 2024, the Company completed its sale of all of the outstanding equity interests of Activ to Doctor’s Best. The Transaction
closed in accordance with the terms and conditions of the Purchase Agreement, pursuant to which Doctor’s Best acquired all of the
outstanding equity interests of Activ from Viactiv for aggregate cash consideration to the Company of $
Nasdaq Listing and Reverse Stock Split
The
Company’s common stock is traded on the Nasdaq Capital Market (“Nasdaq”) under the symbol “GHSI”. On January
6, 2023, the Company effected a
Liquidity
During
the six months ended June 30, 2024, the Company completed the sale of its Viactiv® brand and business for gross cash proceeds of
$
| 8 |
For
the six months ended June 30, 2024, the Company recorded net income of $
As
of June 30, 2024, the Company had $
Accordingly, the Company’s condensed consolidated financial statements have been presented on the basis that it will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The condensed consolidated financial statements also do not reflect any adjustments relating to the recoverability and reclassifications of assets and liabilities that might be necessary if the Company is unable to continue as a going concern or it adopts the liquidation basis of accounting.
In addition, this determination is based on management’s current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict, and which involve unknown risks and uncertainties that may individually or materially impact the matters discussed herein for a variety of reasons that are outside the control of the Company.
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 SEC for interim financial information. The unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements for the year ended December 31, 2023 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, 2024. 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC. The condensed consolidated balance sheet as of December 31, 2023 was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.
On May 31, 2024, the Company completed the sale of all of the outstanding equity interests of Activ (see Note 3). The operations of Activ are reported as discontinued operations for all periods presented in the accompanying condensed consolidated financial statements.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Viactiv Nutritionals, Inc. and NutriGuard Formulations, Inc. Viactiv Nutritionals, Inc. was dissolved effective July 22, 2024. All intercompany balances and transactions have been eliminated in consolidation.
Segment Information
As a result of the disposition of the Viactiv® brand and business effective May 31, 2024 (see Note 3), at June 30, 3024, the Company operates and reports in one segment, which consists of the development and distribution of clinically supported dietary supplements for ocular health. The Company’s operating segment is reported in a manner consistent with the internal reporting provided to the Company’s Chief Operating Decision Maker, which is the Company’s President and Chief Executive Officer.
| 9 |
Use of Estimates
The preparation of 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 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.
Historically the Company has not experienced any significant payment delays from customers.
In certain circumstances, returns of products are allowed. Due to the insignificant amount of historical returns, the stand-alone nature of our products, and our assessment of performance obligations and transaction pricing for our sales contracts the Company does not currently maintain a contract asset or liability balance for obligations. The Company assesses its contracts and the reasonableness of our conclusions on a quarterly basis.
At
June 30, 2024 and December 31, 2023, the allowance for doubtful accounts was $
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 certain 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, and warehousing, were $
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 $
| 10 |
Advertising Costs
Advertising
costs are expensed as incurred and are included in sales and marketing expense. Advertising costs were $
Concentration of Risk
Vendor
costs. During the three months ended June 30, 2024,
the Company utilized one vendor for its corporate legal advice. Costs associated with this vendor
accounted for approximately
Accounts
payable. As of June 30, 2024,
three vendors accounted for
Cash
and cash equivalents. Cash and cash equivalents consist of funds deposited with BMO Harris Bank (“BMO”), a major, established,
high quality financial institution in short-term (original maturity of generally 60 days or less) liquid investments in money market
deposit accounts. Cash equivalents are classified as Level 1 in the GAAP valuation hierarchy and are valued using the net asset value
(“NAV”) per share of the money market fund. The Company has an overnight investment feature established with BMO whereby
the Company’s cash is swept into a Money Market Mutual Fund managed by Goldman Sachs Asset Management. This fund invests solely
in high quality U.S. government issued securities. As of June 30, 2024, $
The
Company routinely has cash balances in financial institutions in excess of the FDIC and SIPC insurance limits of $
Stock-Based Compensation
Stock-based awards for stock options and restricted stock awards to employees and non-employees are accounted for using the fair value method in accordance with ASC 718, Compensation – Stock Compensation. The estimated fair value of stock options granted to employees in exchange for services is measured at the grant date, using a fair value-based method, such as a Black-Scholes option valuation model, and is recognized as an expense on a straight-line basis over the requisite service periods. The assumptions used in the Black-Scholes option pricing model such as risk-free interest rates, expected volatility, expected life, and future dividends could materially affect compensation expense recorded in future periods. The fair value of restricted stock units is measured at the grant date based on the closing market price of the Company’s common stock on the date of grant and is recognized as an expense on a straight-line basis over the requisite service periods. Recognition of compensation expense for non-employees is accounted for in the same period and manner as if the Company had paid cash for the services.
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 antidilutive.
| 11 |
| Three Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Number of common shares - basic | ||||||||
| Effect of dilutive securities: | ||||||||
| Warrants | ||||||||
| Options | ||||||||
| Restricted stock awards | ||||||||
| Number of common shares - diluted | ||||||||
| Number of potentially dilutive securities excluded from calculation due to antidilutive impact | ||||||||
| Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Number of common shares - basic | ||||||||
| Effect of dilutive securities: | ||||||||
| Warrants | ||||||||
| Options | ||||||||
| Restricted stock awards | ||||||||
| Number of common shares - diluted | ||||||||
| Number of potentially dilutive securities excluded from calculation due to antidilutive impact | ||||||||
Antidilutive securities include outstanding stock options with exercise prices and average unrecognized compensation cost more than the average fair market value of common stock for the related period. Antidilutive securities also include restricted stock awards with average unrecognized compensation cost in excess of the average fair market value of the common stock for the related period. Antidilutive options and restricted stock awards were excluded from the calculation of diluted net income per share and could become dilutive in future periods.
The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share:
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Warrants | ||||||||
| Options | ||||||||
Fair Value of Financial Instruments
Accounting standards require certain assets and liabilities to be reported at fair value in 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 – Quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date.
| 12 |
Level 2 – Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.
Level 3 – Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions.
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 June 30, 2024 and December 31, 2023:
| June 30, 2024 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets | $ | - | $ | - | $ | - | $ | - | ||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
| Liabilities | ||||||||||||||||
| Warrant derivative liability | $ | $ | $ | $ | ||||||||||||
| Total liabilities | $ | $ | $ | $ | ||||||||||||
| December 31, 2023 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets | $ | - | $ | - | $ | - | $ | - | ||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
| Liabilities | ||||||||||||||||
| Warrant derivative liability | $ | $ | $ | $ | ||||||||||||
| Total liabilities | $ | $ | $ | $ | ||||||||||||
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 six months ended June 30, 2024:
Six Months Ended June 30, 2024 | ||||
| Balance as of beginning of period – December 31, 2023 | $ | |||
| Change in fair value of warrant derivative liability | ||||
| Fair value of warrants redeemed for cash settlement | ( | ) | ||
| Fair value of warrant redemption payable | ( | ) | ||
| Balance as of end of period – June 30, 2024 | $ | |||
As of June 30, 2024 and December 31, 2023, the Company’s outstanding warrants (except for placement agent warrants) were treated as derivative liabilities and changes in the fair value were recognized in the statement of operations (see Note 5).
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.
| 13 |
Recent Accounting Pronouncements
In July 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-03, Presentation of Financial Statements (Topic 205), Income Statement — Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation — Stock Compensation (Topic 718) Presentation of Financial Statements (“ASU 2023-03”). ASU 2023-03 amends the FASB Accounting Standards Codification to include Amendments to SEC Paragraphs pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and SEC Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 — General Revision of Regulation S-X: Income or Loss Applicable to Common Stock. As ASU 2023-03 did not provide any new guidance, there was no transition or effective date associated with its adoption. Accordingly, the Company adopted ASU 2023-03 immediately upon its issuance. The adoption of ASU 2023-03 did not have any impact on the Company’s consolidated financial statements, including their presentation and related disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories that are regularly provided to the chief operating decision maker and included in each reported measure of a segment’s profit or loss. ASU-2023-07 also requires all annual disclosures about a reportable segment’s profit or loss and assets to be provided in interim periods and for entities with a single reportable segment to provide all the disclosures required by ASC 280, Segment Reporting, including the significant segment expense disclosures. The Company adopted ASU 2023-07 effective January 1, 2024.The adoption of ASU 2023-07 did not have any impact on the Company’s consolidated financial statements, including their presentation 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 consolidated financial statements.
3. Discontinued Operations
Activ
owns the Viactiv® brand and business and is the wholly-owned subsidiary of Viactiv Nutritionals, Inc., a wholly-owned subsidiary
of the Company. On May 31, 2024 the Company completed the sale of Activ to Doctor’s Best
Inc. (see Note 1). The transaction closed in accordance with the terms and conditions of the Purchase Agreement, pursuant to which Doctor’s
Best acquired all of the outstanding equity interests of Activ for aggregate cash consideration paid to the Company at closing of $
The
Company received net proceeds at closing of $
The foregoing information with respect to the transaction referred to herein is summarized as follows:
| Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | |||||||
| Base purchase price | $ | $ | ||||||
| Less: Carrying amount of net assets sold | ( | ) | ( | ) | ||||
| Gain on sale before transaction costs | ||||||||
| Less: Transaction costs paid at closing | ( | ) | ( | ) | ||||
| Gain on sale, per statement of operations | ||||||||
| Other transaction costs incurred during 2024 | ( | ) | ( | ) | ||||
| Net gain on sale | $ | $ | ||||||
| 14 |
The operations of Activ are reported for all periods as discontinued operations in the Company’s condensed consolidated financial statements. The following table summarizes the results of discontinued operations in the Company’s condensed consolidated statements of operations:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Research and development | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Income from operations | ||||||||||||||||
| Other income (loss): | ||||||||||||||||
| Transaction costs related to sale of discontinued
operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on sale of discontinued operations | ||||||||||||||||
| Total other income (loss) | ( | ) | ( | ) | ||||||||||||
| Income from discontinued operations | $ | $ | $ | $ | ||||||||||||
The table below provides a reconciliation of the carrying amounts of the major classes of assets and liabilities of discontinued operations at May 31, 2024 and December 31, 2023. The total current assets and total current liabilities of discontinued operations are presented separately in the accompanying consolidated balance sheet at December 31, 2023:
| May 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Accounts receivable, net | $ | $ | ||||||
| Inventories, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets of discontinued operations | ||||||||
| Liabilities | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Total current liabilities of discontinued operations | ||||||||
| Net assets of discontinued operations | $ | $ | ||||||
4. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or net realizable value and consisted of the following at June 30, 2024 and December 31, 2023:
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Raw materials | $ | $ | ||||||
| Finished products | ||||||||
| $ | $ | |||||||
5. Operating Leases
The
Company leases its corporate office space located in Houston, Texas, pursuant to a short-term lease with payments of approximately $
| 15 |
6. Warrant Derivative Liability
In
February 2022, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company
issued and sold shares of the Company’s common stock and warrants to purchase shares of the Company’s common stock. Included
in the offering were
The Series A and Series B warrants contained certain antidilution provisions, including a down round provision and certain cash redemption rights. In addition, the warrants contained a provision which required that the exercise price of such warrants be adjusted to the volume weighted average price of the Company’s common stock for the five trading days immediately following effectiveness of a reverse stock split if such calculation resulted in an exercise price below the then-current exercise price. The Company determined that this provision represented a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under ASC 815-40, and thus the warrants were not considered indexed to the Company’s own stock and not eligible for an exception from derivative accounting. Accordingly, these warrants were classified as a derivative liability.
During
2023, Series B Warrants were exercised into shares of common stock and the remainder of the
In
addition,
The
fair value of the warrant liability at June 30, 2024 and at December 31, 2023 was $
| Series A Warrants | ||||||||
June 30, 2024 | December 31, 2023 | |||||||
| Common stock market price | $ | $ | ||||||
| Exercise price | ||||||||
| Expected term (in years) | ||||||||
| Expected volatility | % | % | ||||||
| Expected dividend yield | ||||||||
| Risk-free interest rate | % | % | ||||||
| Total fair value | $ | $ | ||||||
| 16 |
7. Redeemable Preferred Stock (Classified as Temporary Equity, redeemed in full in February 2023)
On
November 29, 2022, the Company issued and sold, in a private placement,
8. Stockholders’ Equity
Common Stock
The Company is authorized to issue shares of common stock, par value $ per share. As of June 30, 2024 and December 31, 2023, there were shares and shares, respectively, of common stock issued and outstanding.
Warrants
A summary of the Company’s warrant activity is as follows:
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | ||||||||||
| December 31, 2023 | $ | |||||||||||
| Granted | - | |||||||||||
| Forfeitures | - | |||||||||||
| Expirations | ( | ) | - | |||||||||
| Redemptions | ( | ) | - | |||||||||
| June 30, 2024, all exercisable | $ | |||||||||||
The exercise prices of warrants outstanding and exercisable as of June 30, 2024 are as follows:
Warrants Outstanding and Exercisable (Shares) | Exercise Prices | ||||
| $ | |||||
| $ | |||||
During
the six months ended June 30, 2024,
| 17 |
Stock Options
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | ||||||||||
| December 31, 2023 | $ | |||||||||||
| Granted | - | |||||||||||
| Forfeitures | - | |||||||||||
| Expirations | - | |||||||||||
| Exercised | - | |||||||||||
| June 30, 2024, outstanding | $ | |||||||||||
| June 30, 2024, exercisable | $ | |||||||||||
Options Outstanding (Shares) | Options Exercisable (Shares) | Exercise Prices | |||||||
| $ | |||||||||
The Company accounts for share-based payments in accordance with ASC 718, Compensation – Stock Compensation, wherein grants are measured at the grant date fair value and charged to operations ratably over the vesting periods.
During the six months ended June 30, 2024, there were grants of options to purchase shares of common stock.
During the six months ended June 30, 2023, the Company granted options to purchase an aggregate of shares of common stock to the independent members of the Company’s Board of Directors in connection with the compensation plan for such directors with grant date fair values of $, using a Black-Scholes option pricing model based on the following assumptions: (i) a volatility rate of %, (ii) a discount rate of % (iii) expected dividend yield, and (iv) an expected life of years. The options have an exercise price of $ per share, respectively. The options vest on a quarterly basis over two years from the grant date, with the first tranche vesting on September 30, 2023.
During the six months ended June 30, 2023, the Company granted options to purchase shares of common stock to the Company’s Chief Executive Officer (“CEO”) with a grant date fair value of $ using a Black-Scholes option pricing model based on the following assumptions: (i) a volatility rate of %, (ii) a discount rate of%, (iii) expected dividend yield, and (iv) an expected life of years. The options vest on a quarterly basis thereafter over .
The Company’s former CEO resigned effective June 9, 2023. All options issued to the former CEO that were not vested at the time of resignation were forfeited. Compensation expense previously recorded related to the unvested options was reversed, resulting in a reduction of stock compensation expense of $() during the three months and six months ended June 30, 2023.
| 18 |
The Company computes stock price volatility over expected terms based on its historical common stock trading prices. The risk-free interest rate was based on rates established by the Federal Reserve Bank. The expected dividend yield was based on the fact that the Company has not paid dividends to its common stockholders in the past and does not expect to pay dividends to its common stockholders in the future. The expected life of the stock options granted is estimated using the “simplified” method, whereby the expected term equals the average of the vesting term and the original contractual term of the stock option.
For the six months ended June 30, 2024 and 2023, the Company recognized aggregate share-based compensation expense (income) of $ and $, respectively, related to the fair value of vested options.
As of June 30, 2024, the Company had an aggregate of remaining unvested options outstanding, with a remaining fair value of approximately $ to be amortized over an average of year. Based on the closing price of the Company’s common stock on June 28, 2024, the last trading day of the quarter, of $ per share, the aggregate intrinsic value of options outstanding as of June 30, 2024 was $.
Restricted Common Stock
During the six months ended June 30, 2024 and 2023, there were grants of restricted common stock.
During the six months ended June 30, 2024 and 2023, the Company recognized share-based compensation expense of $ and $, respectively, related to vested restricted shares.
The following table summarizes restricted common stock activity for the six months ended June 30, 2024:
| Number of shares | Fair value of shares | |||||||
| Non-vested shares, December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ||||||||
| Non-vested shares, June 30, 2024 | $ | |||||||
9. Income Taxes
During the three months and six months ended June 30, 2024 and 2023, the Company did not record any provision for income taxes, as the Company incurred losses for income tax reporting during such periods.
On
May 31, 2024, the Company completed its sale of all the outstanding equity interests of Activ Nutritional, LLC (“Activ”)
for $
Deferred tax assets and liabilities reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company has recorded a full valuation allowance against its deferred tax assets (including the capital losses described above) as the Company currently believes it is more likely than not that the deferred tax assets will not be realized.
10. Commitments and Contingencies
Legal Proceedings
The Company is periodically the subject of various pending or threatened legal actions and claims arising out of its operations in the normal course of business. In the opinion of the management of the Company, adequate provision has been made in the Company’s consolidated financial statements at June 30, 2024 and December 31, 2023 with respect to any such matters.
The Company is not currently a party to any material legal proceedings and is not aware of any pending or threatened legal proceeding against the Company that the Company believes could have a material adverse effect on its business, operating results, cash flows or financial condition.
11. Subsequent Events
The Company performed an evaluation of subsequent events through the date of filing of these condensed consolidated financial statements with the SEC. Other than as disclosed herein, there were no material subsequent events which affected, or could affect, the amounts or disclosures in the condensed consolidated financial statements.
| 19 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as may be amended, supplemented or superseded from time to time by other reports we file with the SEC. All amounts in this report are in U.S. dollars, unless otherwise noted.
As used in this Quarterly Report on Form 10-Q, the terms “we,” “us” “our” and the “Company” mean Guardion Health Sciences, Inc., individually, or as the context requires, collectively with its subsidiaries.
Overview
Guardion Health Sciences, Inc. (the “Company”) is a clinical nutrition company that offers science-based, clinically supported products, including GlaucoCetin and Lumega-Z, designed for consumer ocular health. Both products are available on guardionhealth.com.
To support the Company’s consumer ocular business, the Company reformulated and relaunched Lumega-Z in March 2024 as a drink mix powder at a lower retail price versus the prior liquid formulation for the Company’s current customers and to appeal to new customers. The Company has implemented an email marketing campaign to raise awareness of the formulation change and to drive sales of both Lumega-Z and GlaucoCetin on guardionhealth.com.
Recent Developments
Special Meeting of Stockholders
On May 23, 2024, the Company held a special meeting of stockholders (the “Special Meeting”). At the Special Meeting, the Company’s stockholders considered the following proposals: (i) the sale of all of the outstanding equity interests (the “Transaction”) of Activ Nutritional, LLC (“Activ”), a Delaware limited liability company which owned the Viactiv® brand and business and was the wholly-owned subsidiary of Viactiv Nutritionals, Inc. (“Viactiv”), a Delaware corporation and a wholly-owned subsidiary of the Company, pursuant to an equity purchase agreement with Doctor’s Best Inc., a Delaware corporation (“Doctor’s Best”), dated January 30, 2024 (the “Purchase Agreement”); and (ii) the grant of discretionary authority to the Board of Directors of the Company to adjourn the Special Meeting to a later date, to allow for the solicitation of additional proxies only in the event that there were insufficient shares present virtually or represented by proxy voting in favor of the Transaction or the voluntary dissolution and liquidation of the Company pursuant to a Plan of Dissolution.
The Company’s stockholders approved the sale of its Viactiv® brand and business at the Special Meeting. Following this approval, the Company then adjourned the Special Meeting to May 31, 2024 in order to give the Company’s management additional time to solicit proxies from its stockholders to vote in favor of the proposal to adopt the Company’s Plan of Liquidation and Dissolution. On May 31, 2024, the Company convened and held its previously-adjourned Special Meeting of the stockholders, at which the Company’s stockholders approved a proposal for the voluntary dissolution and liquidation of the Company (the “Dissolution”) pursuant to a Plan of Dissolution (the “Plan of Dissolution”), which authorizes the Company to liquidate and dissolve the Company in accordance with the Plan of Dissolution, but subject to the Company’s ability to abandon or delay the Plan of Dissolution in accordance with the terms thereof.
Sale of Activ Nutritional, LLC
On May 31, 2024, as previously disclosed, the Company completed its sale of all of the outstanding equity interests of Activ to Doctor’s Best. The Transaction closed in accordance with the terms and conditions of the Purchase Agreement, pursuant to which Doctor’s Best acquired all of the outstanding equity interests of Activ from Viactiv for aggregate cash consideration to the Company of $17,200,000. Doctor’s Best is a wholly-owned subsidiary of Kingdomway USA Corp., the U.S. subsidiary holding company of Xiamen Kingdomway Group Company, which is listed on the Shenzhen Stock Exchange.
| 20 |
Current Business Plans
As of June 30, 2024, the Company had $14,822,826 of cash, and working capital (including cash) of $14,374,922. The Board of Directors is in the process of determining whether or not to declare, and the timing of, one or more cash distributions to the Company’s stockholders in the near-term. The Company expects to make this determination during the quarter ending September 30, 2024.
Nasdaq Listing and Reverse Stock Split
The Company’s common stock is traded on the Nasdaq Capital Market (“Nasdaq”) under the symbol “GHSI”. On January 6, 2023, the Company effected a 1-for-50 reverse split of its outstanding shares of common stock in order to remain in compliance with the $1.00 minimum closing bid price requirement of Nasdaq. However, there can be no assurances that the Company will be able to remain in compliance with the $1.00 minimum closing bid price requirement of Nasdaq over time, or that it will be successful in maintaining compliance with any of the other continued listing requirements of Nasdaq.
Concentration of Risk
Information with respect to concentration of risk is provided at Note 2 to the condensed consolidated financial statements for the three months and six months ended June 30, 2024 and 2023 included elsewhere in this document.
Cybersecurity
The Company’s Board of Directors is responsible for overseeing our risk management and strategy and cybersecurity is a critical element of this strategy. Management is responsible for the day-to-day administration of the Company’s risk management strategy and its cybersecurity policies, processes, and practices. Management does not believe that there are currently any known risks from cybersecurity threats that are reasonably likely to materially affect the Company or its operations, business strategy, results of operations or financial condition. The Company’s IT policies, including cybersecurity, have been developed in conjunction with independent third parties that specialize in cybersecurity, cloud, and digital infrastructure. Likewise, the Company’s cyberattack response plan has been developed in conjunction with independent third parties that specialize in cybersecurity, cloud, and digital infrastructure.
For more information on the Company’s cybersecurity risk management and strategy, see “Item 1C. Cybersecurity” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in valuing inventories at net realizable value, 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. There were no changes to the Company’s critical accounting policies described in the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 that impacted the condensed consolidated financial statements and related notes included herein.
| 21 |
Recent Accounting Pronouncements
Information with respect to recent accounting pronouncements is provided at Note 2 to the condensed consolidated financial statements for the three months and six months ended June 30, 2024 and 2023 included elsewhere in this document.
Results of Operations
The Company’s condensed consolidated statements of operations as discussed herein are presented below.
Comparison of Three Months Ended June 30, 2024 and 2023
Three Months Ended June 30, | Change | |||||||||||||||
| 2024 | 2023 | $ | % | |||||||||||||
| Revenue | $ | 72,918 | $ | 79,633 | $ | (6,715 | ) | (8.4 | )% | |||||||
| Cost of goods sold | 36,572 | 86,574 | (50,002 | ) | (57.8 | )% | ||||||||||
| Gross profit (loss) | 36,346 | (6,941 | ) | 43,287 | 623.6 | % | ||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing | 8,088 | 7,672 | 416 | 5.4 | % | |||||||||||
| General and administrative | 1,395,721 | 1,405,771 | (10,050 | ) | (0.7 | )% | ||||||||||
| Loss on disposal of fixed assets | 13,863 | - | 13.863 | 100 | % | |||||||||||
| Research and development | - | - | - | 0 | % | |||||||||||
| Total operating expenses | 1,417,672 | 1,413,443 | 4,229 | 0.3 | % | |||||||||||
| Loss from operations | (1,381,326 | ) | (1,420,384 | ) | 39,058 | 2.7 | % | |||||||||
| Other income (expense): | ||||||||||||||||
| Change in fair value of warrant derivative liability | (549,320 | ) | (255,300 | ) | (294,020 | ) | (115.2 | )% | ||||||||
| Cost related to settlement of placement agent warrants | (319,625 | ) | - | (319,625 | ) | 100 | % | |||||||||
| Interest income, net | 117,245 | 95,534 | 21,711 | 22.7 | % | |||||||||||
| Other income (expense), net | (751,700 | ) | (159,766 | ) | (591,934 | ) | (370.5 | )% | ||||||||
| Loss from continuing operations | (2,133,026 | ) | (1,580,150 | ) | (552,876 | ) | (35.0 | )% | ||||||||
| Discontinued operations: | ||||||||||||||||
| Income from discontinued operations | 200,923 | 463,837 | (262,914 | ) | (56.7 | )% | ||||||||||
| Transaction costs related to sale of discontinued operations | (485,952 | ) | (56,098 | ) | (429,854 | ) | (766.3 | )% | ||||||||
| Gain on sale of discontinued operations | 12,742,385 | - | 12,742,385 | 100 | % | |||||||||||
| Total income from discontinued operations | 12,457,356 | 407,739 | 12,049,617 | 2,955.2 | % | |||||||||||
| Net income (loss) | $ | 10,324,330 | $ | (1,172,411 | ) | $ | 11,496,741 | 980.6 | % | |||||||
Revenue
For the three months ended June 30, 2024, revenue from ocular product sales was $72,918, as compared to $79,633 for the three months ended June 30, 2023, a decrease of $6,715 or 8.4%. The primary reason for the decrease in revenue for the three months ended June 30, 2024 was reduced sales of the Lumega-Z product due to the formulation change to powder that retails at a lower retail price point.
Cost of Goods Sold
For the three months ended June 30, 2024, cost of goods sold was $36,572, as compared to $86,574 for the three months ended June 30, 2023, a decrease of $50,002 or 57.8%. The decrease was primarily a result of the write-down in the carrying value of inventory of $22,183 during the three months ended June 30, 2023.
| 22 |
Gross Profit (Loss)
For the three months ended June 30, 2024, gross profit was $36,346, as compared to a gross loss of $(6,941) for the three months ended June 30, 2023.
Sales and Marketing
For the three months ended June 30, 2024, sales and marketing expenses were $8,088, as compared to $7,672 for the three months ended June 30, 2023.
General and Administrative
For the three months ended June 30, 2024, general and administrative expenses were $1,395,721, as compared to $1,405,771 for the three months ended June 30, 2023, a decrease of $10,050 or 0.7%. Major components of the decrease in general and administrative expenses for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, consisted of increases of approximately $210,000 in compensation costs and approximately $117,000 in Delaware franchise tax costs, offset by a decrease of approximately $315,000 in corporate legal fees.
Loss on Disposal of Fixed Assets
For the three months ended June 30, 2024, the loss on disposal of fixed assets was $13,863, as compared to $0 for the three months ended June 30, 2023.
Loss from Operations
Loss from operations for the three months ended June 30, 2024 was $(1,381,326), as compared to $(1,420,384) for the three months ended June 30, 2023.
Change in Fair Value of Warrant Derivative Liability
For the three months ended June 30, 2024, the change in the fair value of warrant derivative liability related to the Series A Warrants was a loss of $549,320, as compared to a loss of $255,300 for the three months ended June 30, 2023.
Costs Related to Settlement of Placement Agent Warrants
For the three months ended June 30, 2024, the cost for the settlement of the placement agent warrants was $319,625.
Interest Income, Net
For the three months ended June 30, 2024, interest income was $117,245, as compared to $95,534 for the three months ended June 30, 2023.
Loss from Continuing Operations
Loss from continuing operations for the three months ended June 30, 2024 was $(2,133,026), as compared to $(1,580,150) for the three months ended June 30, 2023.
Income from Discontinued Operations
Income from discontinued operations for the three months ended June 30, 2024 was $200,923, as compared to $463,837 for the three months ended June 30, 2023.
Transaction Costs Related to Sale of Discontinued Operations
Transaction costs related to the sale of discontinued operations for the three months ended June 30, 2024 were $485,952, as compared to $56,098 for the three months ended June 30, 2023.
| 23 |
Gain on Sale of Discontinued Operations
The gain on sale of discontinued operations recognized during the three months ended June 30, 2024 was $12,742,385.
Total Income from Discontinued Operations
Total income from discontinued operations for the three months ended June 30, 2024 was $12,457,356, as compared to $407,739 for the three months ended June 30, 2023.
Net Income (Loss)
For the three months ended June 30, 2024, the Company had net income of $10,324,330, as compared to a net loss of $(1,172,411) for the three months ended June 30, 2023.
Comparison of Six Months Ended June 30, 2024 and 2023
Six Months Ended June 30, | Change | |||||||||||||||
| 2024 | 2023 | $ | % | |||||||||||||
| Revenue | $ | 154,037 | $ | 173,874 | $ | (19,837 | ) | (11.4 | )% | |||||||
| Cost of goods sold | 80,738 | 155,134 | (74,396 | ) | (48.0 | )% | ||||||||||
| Gross profit | 73,299 | 18,740 | 54,558 | 291.1 | % | |||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing | 11,961 | 38,547 | (26,586 | ) | (69.0 | )% | ||||||||||
| General and administrative | 2,826,754 | 3,106,585 | (279,831 | ) | (9.0 | )% | ||||||||||
| Loss on disposal of fixed assets | 17,229 | - | 17,229 | 100 | % | |||||||||||
| Research and development | - | 5,183 | (5,183 | ) | (100.0 | )% | ||||||||||
| Total operating expenses | 2,855,944 | 3,150,315 | (294,371 | ) | (9.3 | )% | ||||||||||
| Loss from operations | (2,782,645 | ) | (3,131,575 | ) | 348,930 | 11.1 | % | |||||||||
| Other income (expense): | ||||||||||||||||
| Change in fair value of warrant derivative liability | (3,817,908 | ) | 1,642,800 | (5,460,708 | ) | (332.4 | )% | |||||||||
| Cost related to settlement of placement agent warrants | (319,625 | ) | - | (319,625 | ) | 100 | % | |||||||||
| Interest income, net | 192,890 | 194,533 | (1,643 | ) | (0.8 | )% | ||||||||||
| Other income (expense), net | (3,944,643 | ) | 1,837,333 | (5,781,976 | ) | (314.7 | )% | |||||||||
| Loss from continuing operations | (6,727,288 | ) | (1,294,242 | ) | (5,433,046 | ) | (419.8 | )% | ||||||||
| Discontinued operations: | ||||||||||||||||
| Income from discontinued operations | 578,132 | 798,688 | (220,556 | ) | (27.6 | )% | ||||||||||
| Transaction costs related to sale of discontinued operations | (1,015,642 | ) | (143,766 | ) | (871,876 | ) | (606.5 | )% | ||||||||
| Gain on sale of discontinued operations | 12,742,385 | - | 12,742,385 | 100 | % | |||||||||||
| Total income from discontinued operations | 12,304,875 | 654,922 | 11,649,953 | 1,778.8 | % | |||||||||||
| Net income (loss) | $ | 5,577,587 | $ | (639,320 | ) | $ | 6,216,907 | 972.4 | % | |||||||
Revenue
For the six months ended June 30, 2024, revenue was $154,037, as compared to $173,874 for the six months ended June 30, 2023, a decrease of $19,837 or 11.4%. The primary reason for the decrease in revenue for the six months ended June 30, 2024 was reduced sales of the Lumega-Z product due to the formulation change to powder that retails at a lower retail price point.
Cost of Goods Sold
For the six months ended June 30, 2024, cost of goods sold was $80,738 as compared to $155,134 for the six months ended June 30, 2023, a decrease of $74,396 or 48.0%. The decrease was primarily the result of the write-down in the carrying value of inventory of $32,778 during the six months ended June 30, 2023.
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Gross Profit
For the six months ended June 30, 2024, gross profit was $73,298 as compared to $18,740 for the six months ended June 30, 2023.
Sales and Marketing
For the six months ended June 30, 2024, sales and marketing expenses were $11,961, as compared to $38,547 for the six months ended June 30, 2023.
General and Administrative
For the six months ended June 30, 2024, general and administrative expenses were $2,826,754, as compared to $3,106,585 for the six months ended June 30, 2023, a decrease of $279,831 or 9.0%. Major components of the decrease in general and administrative expenses for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, consisted of decreases of approximately $143,000 in other professional fees and approximately $137,000 in corporate legal fees.
Loss on Disposal of Fixed Assets
For the six months ended June 30, 2024, the loss on disposal of fixed assets was $17,229.
Research and Development
For the six months ended June 30, 2024, research and development expenses were $0, as compared to $5,183 for the six months ended June 30, 2023.
Loss from Operations
Loss from operations for the six months ended June 30, 2024 was $(2,782,645), as compared to $(3,131,575), for the six months ended June 30, 2023.
Change in Fair Value of Warrant Derivative Liability
For the six months ended June 30, 2024, the change in the fair value of warrant derivative liabilities related to the Series A Warrants was a loss of $3,817,908 as compared to a gain of $1,642,800 for the six months ended June 30, 2023.
Costs Related to Settlement of Placement Agent Warrants
For the six months ended June 30, 2024 the cost for the settlement of the placement agent warrants was $319,625.
Interest Income, Net
For the six months ended June 30, 2024, interest income was $192,890, as compared to $194,533 for the six months ended June 30, 2023.
Loss from Continuing Operations
Net loss from continuing operations for the six months ended June 30, 2024 was $(6,727,289), as compared to $(1,294,242) for the six months ended June 30, 2023.
Income from Discontinued Operations
Income from discontinued operations for the six months ended June 30, 2024 was $578,132, as compared to $798,688 for the six months ended June 30, 2023.
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Transaction Costs Related to Sale of Discontinued Operations
Transaction costs related to the sale of discontinued operations for the six months ended June 30, 2024 were $1,015,642, as compared to $143,766 for the six months ended June 30, 2023.
Gain on Sale of Discontinued Operations
The gain on sale of discontinued operations for the six months ended June 30, 2024 was $12,742,385.
Total Income from Discontinued Operations
Total income from discontinued operations for the six months ended June 30, 2024 was $12,304,875, as compared to $654,922 for the six months ended June 30, 2023.
Net Income (Loss)
For the six months ended June 30, 2024, the Company had net income of $5,577,587, as compared to a net loss of $639,320 for the six months ended June 30, 2023.
Liquidity and Capital Resources
Liquidity
During the six months ended June 30, 2024, the Company completed the sale of its Viactiv® brand and business for gross cash proceeds of $17,200,000 and net cash proceeds at closing of $16,250,000.
As of June 30, 2024, the Company had $14,822,826 of cash, and working capital (including cash) of $14,374,922. The Board of Directors is continuing to evaluate whether or not to declare, and the timing of, one or more cash distributions to the Company’s stockholders in the near-term. The Company expects to make this determination during the quarter ending September 30, 2024.
Accordingly, the Company’s condensed consolidated financial statements have been presented on the basis that it will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The condensed consolidated financial statements also do not reflect any adjustments relating to the recoverability and reclassifications of assets and liabilities that might be necessary if the Company is unable to continue as a going concern or it adopts the liquidation basis of accounting.
In addition, this determination is based on management’s current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict, and which involve unknown risks and uncertainties that may individually or materially impact the matters discussed herein for a variety of reasons that are outside the control of the Company.
Sources and Uses of Cash and Cash Equivalents
The following table sets forth the Company’s major sources and uses of cash and cash equivalents for each of the following periods:
Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash used in operating activities | $ | (1,834,766 | ) | $ | (2,285,712 | ) | ||
| Net cash provided by (used in) investing activities | 16,250,000 | (3,791 | ) | |||||
| Net cash used in financing activities | (5,952,054 | ) | (5,250,000 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | $ | 8,463,180 | $ | (7,539,503 | ) | |||
Operating Activities
Net cash used in operating activities was $1,834,766 during the six months ended June 30, 2024, as compared $2,285,712 for the six months ended June 30, 2023, reflecting cash used in operating activities of continuing operations of $1,947,962 for the six months ended June 30, 2024, as compared to $3,209,417 for the six months ended June 30, 2023, and cash provided by operating activities of discontinued operations of $113,196 for the six months ended June 30, 2024, as compared to $923,705 for the six months ended June 30, 2023.
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Investing Activities
Net cash provided by investing activities was $16,250,000 for the six months ended June 30, 2024, as compared to net cash used in investing activities of $3,791 for the six months ended June 30, 2023. Cash provided during the six months ended June 30, 2024 was from the proceeds from the sale of the Activ Nutritional, LLC business and assets effective May 31, 2024. Cash used in investing activities during the six months ended June 30, 2023 was for the purchase of property and equipment.
Financing Activities
Net cash used in financing activities was $5,952,054 for the six months ended June 30, 2024 and related to the redemption of the Series A Warrants and the placement agent warrants as a result of the sale of Activ Nutritional, LLC effective May 31, 2024. Net cash used in financing activities for the six months ended June 30, 2023 was $5,250,000 and reflected the repayment in full of the Company’s Preferred Stock issued in November 2022.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As we are a “smaller reporting company”, as defined in Rule 12b-2 of the Exchange Act we are not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Under the supervision and with the participation of our senior management, consisting of our Chief Executive Officer and Chief Accounting Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report (the “Evaluation Date”). Based on that evaluation, the Company’s management concluded that as of June 30, 2024, our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during our most recent six months ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently a party to any material legal proceedings and is not aware of any pending or threatened legal proceeding or claim against the Company that the Company believes could have a material adverse effect on its business, operating results, cash flows or financial condition. The Company is periodically the subject of various pending or threatened legal actions and claims arising out of its operations in the normal course of business. Regardless of the outcome, such proceedings or claims can have a material adverse impact on the Company because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained.
ITEM 1A. RISK FACTORS
Risk factors that affect our business and financial results are discussed in Part I, Item 1A “Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC (“Annual Report”). There have been no material changes in our risk factors from those previously disclosed in our Annual Report, other than as described herein and below. You should carefully consider the risks described in our Annual Report, which could materially affect our business, financial condition or future results. The risks described in our Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.
Risks Related to the Company’s Business
Since the Transaction was approved and consummated, Nasdaq may delist our shares from trading on its exchange, which could limit our stockholders’ ability to make transactions in our shares and subject us to additional trading restrictions.
We are required to demonstrate compliance with Nasdaq’s continued listing requirements in order to maintain the listing of our shares on Nasdaq. Such continued listing requirements for our shares include, among other things, having at least 300 shareholders, 500,000 publicly held shares and a market value of our listed publicly held shares of $1,000,000. In addition, a Nasdaq-listed company must meet at least one of the following standards: (i) stockholders equity of at least $2,500,000; (ii) market value of listed shares of at least $35,000,000; or (iii) net income from continuing operations of $500,000 in the latest fiscal year or in two of the last three fiscal years. We cannot assure you that our shares will be able to meet any of Nasdaq’s continued listing requirements. If our shares do not meet the Nasdaq’s continued listing requirements, Nasdaq may delist our shares from trading on its exchange, which could limit investors’ ability to make transactions in our shares and subject us to additional trading restrictions.
If our shares do not meet Nasdaq’s continued listing requirements, Nasdaq may delist our shares from trading on its exchange. If Nasdaq delists any of our shares from trading on its exchange and we are not able to list such shares on another approved national securities exchange, we expect that such shares could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including: (i) a limited availability of market quotations for our shares, (ii) reduced liquidity for our shares, (iii) a determination that our shares are “penny stocks” which will require brokers trading in our shares to adhere to more stringent rules, including being subject to the depository requirements of Rule 419 of the Securities Act, and possibly result in a reduced level of trading activity in the secondary trading market for our shares, (iv) a decreased ability to issue additional shares or obtain additional financing in the future, (v) a less attractive acquisition vehicle to a target business in connection with an initial business combination, (vi) our ability to complete an initial business combination with a target company contemplating a Nasdaq listing, and (vii) a limited amount of news and analyst coverage.
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as covered securities. Our shares qualify as covered securities under such statute. If we were no longer listed on Nasdaq, our shares would not qualify as covered securities under such statute and we would be subject to regulation in each state in which we offer our shares.
If we are delisted from Nasdaq, but obtain a substitute listing for our common stock, it will likely be on a market with less liquidity, and therefore potentially experience more price volatility than our common stock experienced on Nasdaq. Stockholders may not be able to sell their shares of common stock on any such substitute market in the quantities, at the times, or at the prices that could potentially be available on a more liquid trading market. As a result of these factors, if our common stock is delisted from Nasdaq, the value and liquidity of our common stock and warrants would likely be significantly adversely affected. A delisting of our common stock from Nasdaq could also adversely affect our ability to obtain financing for our operations and/or result in a loss of confidence by investors, employees and/or business partners.
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The Company will not have any material business or operations following the consummation of the Transaction.
The Viactiv® brand and business accounted for 97.2% and 96.3% of our revenues for the years ended December 31, 2023 and 2022, respectively. As a result, the sale of Activ to Doctor’s Best constituted a sale of substantially all of our assets and revenue-generating operations, and following the consummation of the Transaction, the remaining ocular products business is not material.
Risk Factors Related to the Plan of Dissolution
We cannot determine at this time the exact amount or timing of any distributions to stockholders because there are many factors, some of which are outside of our control, which could affect our ability to make such distributions in the future.
At the closing of the Transaction, we received aggregate cash consideration of $16,250,000. At the closing, an additional $225,000 was deposited into a third-party escrow account pending the calculation of the Company’s working capital at closing in accordance with the terms of the Purchase Agreement. If the adjustment amount, as finally determined, is less than the estimated adjustment amount plus $100,000, Doctor’s Best will receive from the escrow account the amount of such shortfall. If the adjustment amount, as finally determined, equals or exceeds the estimated adjustment amount plus $100,000, Doctor’s Best will pay us any excess in an amount not to exceed $225,000.
Since the Plan of Dissolution was approved by stockholders, and is subject to the possibility that the Board may abandon or delay the effectiveness of the Plan of Dissolution in favor of a separate subsequent transaction involving the Company that the Board determines to be in the best interest of the Company and its stockholders, we plan to distribute, in an initial distribution (with potential subsequent distributions thereafter), a portion of the net proceeds from the Transaction, which may include a portion of the Company’s other cash on its balance sheet, subject to the Company’s obligations to warrant holders and a contingency reserve for remaining costs and liabilities, after the filing of the Certificate of Dissolution with the Delaware Secretary of State. The amount and timing of the distributions to stockholders will be determined by the Board in its sole discretion, subject to the provisions of the Plan of Dissolution. Subsequent distributions would be made in such amounts and at such times as determined by the Board in its sole discretion in accordance with the Plan of Dissolution. However, there can be no assurance as to the timing and amount of distributions to stockholders, even if all of our remaining assets are sold because there are many factors, some of which are outside of our control, that could affect our ability to make such distributions in the future. Further, the Board may, in its sole discretion, take into account the timing of liquidating distributions or potential transactions when determining whether to make a distribution to stockholders following the consummation of the Transaction, if approved. If the Board, in its sole discretion, determines to promptly proceed with liquidating the Company’s assets pursuant to the Plan of Dissolution, then the Board may, in its sole discretion, elect not to proceed with initial distributions prior to such liquidating distributions due to the administrative costs and burdens involved. However, if the Board expects to engage in a potential transaction, rather than proceeding with the dissolution of the Company, the Board may elect, in its sole discretion, to make interim distributions to the Company’s stockholders.
In addition, we will continue to incur claims, liabilities and expenses from operations (including various operating costs, salaries, directors and officers insurance, payroll and local taxes, legal and accounting fees, and miscellaneous office and operating expenses) as we seek to effect the Dissolution. Our estimates regarding our expense levels may be inaccurate. Any unexpected claims, liabilities or expenses that arise prior to the liquidation and final dissolution of the Company or any claims, liabilities or expenses that exceed our estimates could leave us with less cash than is necessary to pay liabilities and expenses and would likely reduce the amount of cash available for ultimate distribution to our stockholders.
For the foregoing reasons, there can be no assurance as to the timing and amount of distributions to stockholders, even if all of our remaining asset are sold or otherwise disposed of; provided that the Company must complete the distribution of all of its properties and assets to its stockholders as provided in the Plan of Distribution as soon as practicable following the filing of the Certificate of Dissolution with the Delaware Secretary of State and in any event on or before the tenth anniversary of such filing.
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Our Board may abandon or delay implementation of the Plan of Dissolution even though it was approved by our stockholders.
Our stockholders approved our Plan of Dissolution for the Dissolution of the Company. Pursuant to the Plan of Dissolution, the Board has reserved the right, in its sole discretion, to abandon or delay implementation of the Plan of Dissolution if as a result of the Plan of Dissolution (i) we would be insolvent or unable to pay our debts as they come due, (ii) we would have remaining liabilities in excess of the Company’s remaining assets, (iii) we would otherwise be unable to satisfy in full all valid claims against the Company (iv) the Board determined to invest the cash received from the Transaction in another operating business, or (v) the Board abandons or delays the effectiveness of the Plan of Dissolution in favor of a separate subsequent transaction involving the Company that the Board determines to be in the best interest of the Company and its stockholders. The Board may also conclude either that its fiduciary obligations require it to pursue business opportunities that present themselves or that abandoning the Plan of Dissolution is otherwise in our best interests and the best interests of our stockholders. If the Board elects to pursue any alternative to the Plan of Dissolution, the value of our common stock may decline.
Our stock transfer books will close on the date we file the Certificate of Dissolution with the Secretary of State of the State of Delaware, after which it will not be possible for stockholders to trade our stock.
We will close our stock transfer books and discontinue recording transfers of our common stock at the close of business on the date we file the Certificate of Dissolution with the Secretary of State of the State of Delaware, which is referred to herein as the final record date. Thereafter, certificates representing shares of our common stock will not be assignable or transferable on our books. The proportionate interests of all of our stockholders will be fixed on the basis of their respective stock holdings at the close of business on the final record date, and, after the final record date, any distributions made by us shall be made solely to the stockholders of record at the close of business on the final record date.
We will continue to incur claims, liabilities and expenses and a delay in the consummation of the Transaction and/or Dissolution will reduce the amount available for distribution to stockholders.
Claims, liabilities and expenses from operations, such as operating costs, salaries, insurance, payroll and local taxes, legal, accounting and consulting fees and miscellaneous expenses, will continue to be incurred as we wind down. These expenses will reduce the amount of assets available for ultimate distribution to stockholders.
If the Company is not dissolved, the SEC could classify the Company as a shell company, which could result in certain negative consequences, including a delisting of our common stock on Nasdaq.
If the Company is not dissolved, then the SEC could take the position that the Company is a shell company. Recently, the SEC has exercised heightened scrutiny in classifying companies as “shell companies” under Rule 405 of the Securities Act. This classification by the SEC would prohibit the Company from using Form S-3 “shelf registration” to register securities for public offerings until 12 months after it has ceased to be a shell company. Further, the Company would no longer be able to use Rule 144 for 12 months after it ceases to be a shell company, among other rules and regulations of which we would not be able to take advantage. Shell company status could dissuade certain parties from looking to acquire the Company in a change in control transaction in an effort to avoid SEC scrutiny and potentially onerous reporting requirements. In addition to the scrutiny and obligations the Company would have pursuant to federal securities laws and regulations as a result of such a classification by the SEC, we could be delisted from Nasdaq.
We are required to demonstrate compliance with Nasdaq’s continued listing requirements in order to maintain the listing of our securities on Nasdaq. Such continued listing requirements for our securities include, among other things, having at least 300 shareholders, 500,000 publicly held shares and a market value of our listed publicly held securities of $1,000,000. We cannot assure you that our shares will be able to meet any of Nasdaq’s continued listing requirements. If our securities do not meet the Nasdaq’s continued listing requirements, including as a result of the Company’s potential shell company status following the consummation of the Transaction, Nasdaq may delist our securities from trading on its exchange, which could limit the ability of investors to make transactions in our securities and subject us to additional trading restrictions.
If our securities do not meet Nasdaq’s continued listing requirements, Nasdaq may delist our securities from trading on its exchange. If Nasdaq delists any of our securities from trading on its exchange and we are not able to list such securities on another approved national securities exchange, we expect that such securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including: (i) a limited availability of market quotations for our securities, (ii) reduced liquidity for our securities, (iii) a determination that our shares are “penny stocks” which will require brokers trading in our shares to adhere to more stringent rules, including being subject to the depository requirements of Rule 419 of the Securities Act, and possibly result in a reduced level of trading activity in the secondary trading market for our securities, (iv) a decreased ability to issue additional securities or obtain additional financing in the future, (v) a less attractive acquisition vehicle to a target business in connection with an initial business combination, (vi) our ability to complete an initial business combination with a target company contemplating a Nasdaq listing, including the Business Combination and (vii) a limited amount of news and analyst coverage.
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The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as covered securities. Our shares qualify as covered securities under such statute. If we were no longer listed on Nasdaq, our securities would not qualify as covered securities under such statute and we would be subject to regulation in each state in which we offer our securities under each states respective “blue sky” securities laws.
Risks Related to the Company’s Common Stock
We are currently listed on The Nasdaq Capital Market. If we are unable to maintain listing of our securities on Nasdaq or any stock exchange, our stock price could be adversely affected and the liquidity of our stock and our ability to obtain financing could be impaired and it may be more difficult for our shareholders to sell their securities.
Although our common stock is currently listed on The Nasdaq Capital Market, we may not be able to continue to meet the exchange’s minimum listing requirements or those of any other national exchange. If we are unable to maintain listing on Nasdaq or if a liquid market for our common stock does not develop or is sustained, our common stock may remain thinly traded.
The Listing Rules of Nasdaq require listing issuers to comply with certain standards in order to remain listed on its exchange. If, for any reason, we should fail to maintain compliance with these listing standards and Nasdaq should delist our securities from trading on its exchange and we are unable to obtain listing on another national securities exchange, a reduction in some or all of the following may occur, each of which could have a material adverse effect on our shareholders:
| ● | the liquidity of our common stock; | |
| ● | the market price of our common stock; | |
| ● | our ability to obtain financing for the continuation of our operations; | |
| ● | the number of investors that will consider investing in our common stock; | |
| ● | the number of market makers in our common stock; | |
| ● | the availability of information concerning the trading prices and volume of our common stock; and | |
| ● | the number of broker-dealers willing to execute trades in shares of our common stock. |
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
During
the six months ended June 30, 2024, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company
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ITEM 6. EXHIBITS
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Guardion Health Sciences, Inc. | ||
| (Registrant) | ||
| Date: August 13, 2024 | By: | /s/ Jan Hall |
| Jan Hall | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: August 13, 2024 | By: | /s/ Katie Cox |
| Katie Cox | ||
| Chief Accounting Officer | ||
| (Principal Financial and Accounting Officer) | ||
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Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER OF GUARDION HEALTH SCIENCES, INC.
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jan Hall, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Guardion Health Sciences, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 13, 2024 | /s/ Jan Hall |
| Jan Hall | |
Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER OF GUARDION HEALTH SCIENCES, INC. PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Katie Cox, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Guardion Health Sciences, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 13, 2024 | /s/ Katie Cox |
| Katie Cox | |
| Chief Accounting Officer | |
| (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATIONS OF
PRINCIPAL EXECUTIVE OFFICER
AND PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Guardion Health Sciences, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2024 (the “Report”) as filed with the Securities and Exchange Commission on the date hereof, each of Jan Hall, Chief Executive Officer of the Company, and Katie Cox, Chief Accounting Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: August 13, 2024 | /s/ Jan Hall |
| Jan Hall | |
| Chief Executive Officer | |
| (Principal Executive Officer) | |
| Date: August 13, 2024 | /s/ Katie Cox |
| Katie Cox | |
| Chief Accounting Officer | |
| (Principal Financial and Accounting Officer) |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Jun. 30, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Preferred stock, par value | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
| Common stock, par value | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 250,000,000 | 250,000,000 |
| Common stock, shares issued | 1,284,156 | 1,275,238 |
| Common stock, shares outstanding | 1,284,156 | 1,275,238 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2024 |
Jun. 30, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
|
| Revenue | ||||
| Ocular products | $ 72,918 | $ 79,633 | $ 154,037 | $ 173,874 |
| Cost of goods sold | ||||
| Ocular products | 36,572 | 86,574 | 80,738 | 155,134 |
| Gross profit (loss) | 36,346 | (6,941) | 73,299 | 18,740 |
| Operating expenses | ||||
| Research and development | 5,183 | |||
| Sales and marketing | 8,088 | 7,672 | 11,961 | 38,547 |
| General and administrative | 1,395,721 | 1,405,771 | 2,826,754 | 3,106,585 |
| Loss on disposal of fixed assets | 13,863 | 17,229 | ||
| Total operating expenses | 1,417,672 | 1,413,443 | 2,855,944 | 3,150,315 |
| Loss from operations | (1,381,326) | (1,420,384) | (2,782,645) | (3,131,575) |
| Other income (expense) | ||||
| Change in fair value of warrant derivative liability | (549,320) | (255,300) | (3,817,908) | 1,642,800 |
| Cost related to settlement of placement agent warrants | (319,625) | (319,625) | ||
| Interest income, net | 117,245 | 95,534 | 192,890 | 194,533 |
| Other income (expense), net | (751,700) | (159,766) | (3,944,643) | 1,837,333 |
| Loss from continuing operations | (2,133,026) | (1,580,150) | (6,727,288) | (1,294,242) |
| Discontinued operations | ||||
| Income from discontinued operations | 200,923 | 463,837 | 578,132 | 798,688 |
| Transaction costs related to sale of discontinued operations | (485,952) | (56,098) | (1,015,642) | (143,766) |
| Gain on sale of discontinued operations | 12,742,385 | 12,742,385 | ||
| Total income from discontinued operations | 12,457,356 | 407,739 | 12,304,875 | 654,922 |
| Net income (loss) | $ 10,324,330 | $ (1,172,411) | $ 5,577,587 | $ (639,320) |
| Earnings (loss) per share - basic | ||||
| Loss per share from continuing operations | $ (1.66) | $ (1.25) | $ (5.25) | $ (1.02) |
| Income per share from discontinued operations | 9.70 | 0.32 | 9.60 | 0.52 |
| Net income (loss) per share - basic | $ 8.04 | $ (0.93) | $ 4.35 | $ (0.50) |
| Weighted average common shares outstanding – basic | 1,284,156 | 1,267,340 | 1,282,241 | 1,267,340 |
| Earnings (loss) per share - diluted | ||||
| Loss per share from continuing operations | $ (1.64) | $ (1.25) | $ (5.22) | $ (1.02) |
| Income per share from discontinued operations | 9.60 | 0.32 | 9.54 | 0.52 |
| Net income (loss) per share - diluted | $ 7.96 | $ (0.92) | $ 4.33 | $ (0.50) |
| Weighted average common shares outstanding - diluted | 1,297,638 | 1,268,103 | 1,289,566 | 1,268,366 |
Pay vs Performance Disclosure - USD ($) |
3 Months Ended | 6 Months Ended | ||||
|---|---|---|---|---|---|---|
Jun. 30, 2024 |
Mar. 31, 2024 |
Jun. 30, 2023 |
Mar. 31, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
|
| Pay vs Performance Disclosure [Table] | ||||||
| Net Income (Loss) | $ 10,324,330 | $ (4,746,744) | $ (1,172,411) | $ 533,091 | $ 5,577,587 | $ (639,320) |
Insider Trading Arrangements |
6 Months Ended |
|---|---|
Jun. 30, 2024 | |
| Trading Arrangements, by Individual [Table] | |
| Rule 10b5-1 Arrangement Adopted | false |
| Non-Rule 10b5-1 Arrangement Adopted | false |
| Rule 10b5-1 Arrangement Terminated | false |
| Non-Rule 10b5-1 Arrangement Terminated | false |
Organization and Business Operations |
6 Months Ended |
|---|---|
Jun. 30, 2024 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Organization and Business Operations | 1. Organization and Business Operations
Business
Guardion Health Sciences, Inc. (the “Company”) offers science-based, clinically supported products designed for consumer ocular health.
Special Meeting of Stockholders
On May 23, 2024, the Company held a special meeting of stockholders (the “Special Meeting”). At the Special Meeting, the Company’s stockholders considered the following proposals: (i) the sale of all of the outstanding equity interests (the “Transaction”) of Activ Nutritional, LLC (“Activ”), a Delaware limited liability company which owned the Viactiv® brand and business and was the wholly-owned subsidiary of Viactiv Nutritionals, Inc. (“Viactiv”), a Delaware corporation and a wholly-owned subsidiary of the Company, pursuant to an equity purchase agreement with Doctor’s Best Inc., a Delaware corporation (“Doctor’s Best”), dated January 30, 2024 (the “Purchase Agreement”); and (ii) the grant of discretionary authority to the Board of Directors of the Company to adjourn the Special Meeting to a later date, to allow for the solicitation of additional proxies only in the event that there were insufficient shares present virtually or represented by proxy voting in favor of the Transaction or the voluntary dissolution and liquidation of the Company pursuant to a Plan of Dissolution.
The Company’s stockholders approved the sale of its Viactiv® brand and business at the Special Meeting. Following this approval, the Company then adjourned the Special Meeting to May 31, 2024 in order to give the Company’s management additional time to solicit proxies from its stockholders to vote in favor of the proposal to adopt the Company’s Plan of Liquidation and Dissolution. On May 31, 2024, the Company convened and held its previously-adjourned Special Meeting of the stockholders, at which the Company’s stockholders approved a proposal for the voluntary dissolution and liquidation of the Company (the “Dissolution”) pursuant to a Plan of Dissolution (the “Plan of Dissolution”), which authorizes the Company to liquidate and dissolve the Company in accordance with the Plan of Dissolution, but subject to the Company’s ability to abandon or delay the Plan of Dissolution in accordance with the terms thereof.
Sale of Activ Nutritional, LLC
On May 31, 2024, the Company completed its sale of all of the outstanding equity interests of Activ to Doctor’s Best. The Transaction closed in accordance with the terms and conditions of the Purchase Agreement, pursuant to which Doctor’s Best acquired all of the outstanding equity interests of Activ from Viactiv for aggregate cash consideration to the Company of $17,200,000. Doctor’s Best is a wholly-owned subsidiary of Kingdomway USA Corp., the U.S. subsidiary holding company of Xiamen Kingdomway Group Company, which is listed on the Shenzhen Stock Exchange (see Note 3).
Nasdaq Listing and Reverse Stock Split
The Company’s common stock is traded on the Nasdaq Capital Market (“Nasdaq”) under the symbol “GHSI”. On January 6, 2023, the Company effected a 1-for-50 reverse split of its outstanding shares of common stock in order to remain in compliance with the $1.00 minimum closing bid price requirement of Nasdaq. However, there can be no assurances that the Company will be able to remain in compliance with the $1.00 minimum closing bid price requirement of Nasdaq over time, or that it will be successful in maintaining compliance with any of the other continued listing requirements of Nasdaq.
Liquidity
During the six months ended June 30, 2024, the Company completed the sale of its Viactiv® brand and business for gross cash proceeds of $17,200,000 and net cash proceeds of $16,250,000.
For the six months ended June 30, 2024, the Company recorded net income of $5,577,587, which included income from discontinued operations of $12,304,875 (consisting of a net gain on sale of discontinued operations of $11,726,743 and income from discontinued operations of $578,132) and used cash in operating activities of $(1,834,766).
As of June 30, 2024, the Company had $14,822,826 of cash, and working capital (including cash) of $14,374,922. Although the Company has a history of operating losses and negative cash flows, management has concluded that it is probable that the Company will be able to fund its current operating plan and meet all of its obligations due within one year from the date that these condensed consolidated financial statements are issued. This determination is subject to a decision by the Board of Directors as to whether or not to declare, and the timing of, one or more cash distributions to the Company’s stockholders in the near-term. The Company expects to make this determination during the quarter ending September 30, 2024.
Accordingly, the Company’s condensed consolidated financial statements have been presented on the basis that it will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The condensed consolidated financial statements also do not reflect any adjustments relating to the recoverability and reclassifications of assets and liabilities that might be necessary if the Company is unable to continue as a going concern or it adopts the liquidation basis of accounting.
In addition, this determination is based on management’s current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict, and which involve unknown risks and uncertainties that may individually or materially impact the matters discussed herein for a variety of reasons that are outside the control of the Company.
|
Summary of Significant Accounting Policies |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 SEC for interim financial information. The unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements for the year ended December 31, 2023 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, 2024. 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC. The condensed consolidated balance sheet as of December 31, 2023 was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.
On May 31, 2024, the Company completed the sale of all of the outstanding equity interests of Activ (see Note 3). The operations of Activ are reported as discontinued operations for all periods presented in the accompanying condensed consolidated financial statements.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Viactiv Nutritionals, Inc. and NutriGuard Formulations, Inc. Viactiv Nutritionals, Inc. was dissolved effective July 22, 2024. All intercompany balances and transactions have been eliminated in consolidation.
Segment Information
As a result of the disposition of the Viactiv® brand and business effective May 31, 2024 (see Note 3), at June 30, 3024, the Company operates and reports in one segment, which consists of the development and distribution of clinically supported dietary supplements for ocular health. The Company’s operating segment is reported in a manner consistent with the internal reporting provided to the Company’s Chief Operating Decision Maker, which is the Company’s President and Chief Executive Officer.
Use of Estimates
The preparation of 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 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.
Historically the Company has not experienced any significant payment delays from customers.
In certain circumstances, returns of products are allowed. Due to the insignificant amount of historical returns, the stand-alone nature of our products, and our assessment of performance obligations and transaction pricing for our sales contracts the Company does not currently maintain a contract asset or liability balance for obligations. The Company assesses its contracts and the reasonableness of our conclusions on a quarterly basis.
At June 30, 2024 and December 31, 2023, the allowance for doubtful accounts was $0 and $0, respectively.
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 certain 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, and warehousing, were $26,499 and $61,809 for the three months ended June 30, 2024, respectively, and $64,475 and $87,309 for the six months ended June 30, 2024 and 2023, respectively.
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 $7,572 and $8,972 for the three months ended June 30, 2024 and 2023, respectively, and $17,616 and $22,175 for the six months ended June 30, 2024 and 2023, respectively.
Advertising Costs
Advertising costs are expensed as incurred and are included in sales and marketing expense. Advertising costs were $0 and $400 for the three months ended June 30, 2024 and 2023, respectively, and $0 and $1,657 for the six months ended June 30, 2024 and 2023, respectively.
Concentration of Risk
Vendor costs. During the three months ended June 30, 2024, the Company utilized one vendor for its corporate legal advice. Costs associated with this vendor accounted for approximately 48% of total costs during the three months ended June 30, 2024, and approximately 31% of total costs during the three months ended June 30, 2023. One other vendor the Company used for insurance purposes accounted for approximately 42% of total costs during the three months ended June 30, 2023. No other vendors accounted for more than 10% of total costs during the three months ended June 30, 2024 and 2023.
Accounts payable. As of June 30, 2024, three vendors accounted for 75% of total accounts payable. One vendor accounted for 35%, a second vendor accounted for 27% and a third vendor accounted for 13% of the accounts payable at June 30, 2024. As of December 31, 2023, three vendors accounted for 81% of the total accounts payable. One vendor accounted for 55%, a second vendor accounted for 14% and a third vendor accounted for 12% of the accounts payable at December 31, 2023. No other vendor accounted for more than 10% of accounts payable as of June 30, 2024 and December 31, 2023.
Cash and cash equivalents. Cash and cash equivalents consist of funds deposited with BMO Harris Bank (“BMO”), a major, established, high quality financial institution in short-term (original maturity of generally 60 days or less) liquid investments in money market deposit accounts. Cash equivalents are classified as Level 1 in the GAAP valuation hierarchy and are valued using the net asset value (“NAV”) per share of the money market fund. The Company has an overnight investment feature established with BMO whereby the Company’s cash is swept into a Money Market Mutual Fund managed by Goldman Sachs Asset Management. This fund invests solely in high quality U.S. government issued securities. As of June 30, 2024, $14,822,826 included in cash and cash equivalents was held in the Goldman Sachs Financial Square Government Institutional Fund, a fund that is not insured by the Federal Deposit Insurance Corporation (the “FDIC”).
The Company routinely has cash balances in financial institutions in excess of the FDIC and SIPC insurance limits of $250,000 and $500,000, respectively. The Company believes that no significant concentration of credit risk exists with respect to its cash balances because of its assessment of the creditworthiness and financial viability of the financial institutions that hold such cash balances. The Company has not experienced any losses to date resulting from this policy.
Stock-Based Compensation
Stock-based awards for stock options and restricted stock awards to employees and non-employees are accounted for using the fair value method in accordance with ASC 718, Compensation – Stock Compensation. The estimated fair value of stock options granted to employees in exchange for services is measured at the grant date, using a fair value-based method, such as a Black-Scholes option valuation model, and is recognized as an expense on a straight-line basis over the requisite service periods. The assumptions used in the Black-Scholes option pricing model such as risk-free interest rates, expected volatility, expected life, and future dividends could materially affect compensation expense recorded in future periods. The fair value of restricted stock units is measured at the grant date based on the closing market price of the Company’s common stock on the date of grant and is recognized as an expense on a straight-line basis over the requisite service periods. Recognition of compensation expense for non-employees is accounted for in the same period and manner as if the Company had paid cash for the services.
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 antidilutive.
Antidilutive securities include outstanding stock options with exercise prices and average unrecognized compensation cost more than the average fair market value of common stock for the related period. Antidilutive securities also include restricted stock awards with average unrecognized compensation cost in excess of the average fair market value of the common stock for the related period. Antidilutive options and restricted stock awards were excluded from the calculation of diluted net income per share and could become dilutive in future periods.
The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share:
Fair Value of Financial Instruments
Accounting standards require certain assets and liabilities to be reported at fair value in 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 – Quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date.
Level 2 – Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.
Level 3 – Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions.
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 June 30, 2024 and December 31, 2023:
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 six months ended June 30, 2024:
As of June 30, 2024 and December 31, 2023, the Company’s outstanding warrants (except for placement agent warrants) were treated as derivative liabilities and changes in the fair value were recognized in the statement of operations (see Note 5).
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 July 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-03, Presentation of Financial Statements (Topic 205), Income Statement — Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation — Stock Compensation (Topic 718) Presentation of Financial Statements (“ASU 2023-03”). ASU 2023-03 amends the FASB Accounting Standards Codification to include Amendments to SEC Paragraphs pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and SEC Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 — General Revision of Regulation S-X: Income or Loss Applicable to Common Stock. As ASU 2023-03 did not provide any new guidance, there was no transition or effective date associated with its adoption. Accordingly, the Company adopted ASU 2023-03 immediately upon its issuance. The adoption of ASU 2023-03 did not have any impact on the Company’s consolidated financial statements, including their presentation and related disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories that are regularly provided to the chief operating decision maker and included in each reported measure of a segment’s profit or loss. ASU-2023-07 also requires all annual disclosures about a reportable segment’s profit or loss and assets to be provided in interim periods and for entities with a single reportable segment to provide all the disclosures required by ASC 280, Segment Reporting, including the significant segment expense disclosures. The Company adopted ASU 2023-07 effective January 1, 2024.The adoption of ASU 2023-07 did not have any impact on the Company’s consolidated financial statements, including their presentation 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 consolidated financial statements.
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Discontinued Operations |
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| Discontinued Operations and Disposal Groups [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Discontinued Operations | 3. Discontinued Operations
Activ owns the Viactiv® brand and business and is the wholly-owned subsidiary of Viactiv Nutritionals, Inc., a wholly-owned subsidiary of the Company. On May 31, 2024 the Company completed the sale of Activ to Doctor’s Best Inc. (see Note 1). The transaction closed in accordance with the terms and conditions of the Purchase Agreement, pursuant to which Doctor’s Best acquired all of the outstanding equity interests of Activ for aggregate cash consideration paid to the Company at closing of $17,200,000 (the “Base Purchase Price”). The carrying amount of the net assets sold (consisting of current assets minus current liabilities) totaled $3,732,615, and the aggregate costs of the transaction incurred during 2024 totaled $1,740,642, resulting in a net gain of $11,726,743 from the sale of Activ for the six months ended June 30, 2024.
The Company received net proceeds at closing of $16,250,000, consisting of the Base Purchase Price less transaction costs paid at closing of $725,000, and $225,000 that was withheld and deposited in a third-party escrow account that was established at closing. At June 30, 2024, the $225,000 is included in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheet. The amount ultimately receivable by the Company from the escrow account is subject to final post-closing adjustments, if any, as determined by the Company and Doctor’s Best pursuant to the Purchase Agreement.
The foregoing information with respect to the transaction referred to herein is summarized as follows:
The operations of Activ are reported for all periods as discontinued operations in the Company’s condensed consolidated financial statements. The following table summarizes the results of discontinued operations in the Company’s condensed consolidated statements of operations:
The table below provides a reconciliation of the carrying amounts of the major classes of assets and liabilities of discontinued operations at May 31, 2024 and December 31, 2023. The total current assets and total current liabilities of discontinued operations are presented separately in the accompanying consolidated balance sheet at December 31, 2023:
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Inventories |
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| Inventories | 4. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or net realizable value and consisted of the following at June 30, 2024 and December 31, 2023:
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Operating Leases |
6 Months Ended |
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Jun. 30, 2024 | |
| Operating Leases | |
| Operating Leases | 5. Operating Leases
The Company leases its corporate office space located in Houston, Texas, pursuant to a short-term lease with payments of approximately $3,000 per month. Leases with the duration of less than 12 months are not recognized on the balance sheet and are expensed on a straight-line basis over the lease term as incurred.
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Warrant Derivative Liability |
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| Warrant Derivative Liability | 6. Warrant Derivative Liability
In February 2022, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company issued and sold shares of the Company’s common stock and warrants to purchase shares of the Company’s common stock. Included in the offering were 740,000 Series A Warrants and 740,000 Series B Warrants.
The Series A and Series B warrants contained certain antidilution provisions, including a down round provision and certain cash redemption rights. In addition, the warrants contained a provision which required that the exercise price of such warrants be adjusted to the volume weighted average price of the Company’s common stock for the five trading days immediately following effectiveness of a reverse stock split if such calculation resulted in an exercise price below the then-current exercise price. The Company determined that this provision represented a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under ASC 815-40, and thus the warrants were not considered indexed to the Company’s own stock and not eligible for an exception from derivative accounting. Accordingly, these warrants were classified as a derivative liability.
During 2023, Series B Warrants were exercised into shares of common stock and the remainder of the 732,351 Series B Warrants expired on August 24, 2023. As of December 31, 2023, the Company had 740,000 Series A Warrants, which expire in February 2027. During the six months ended June 30, 2024, 49,900 Series A Warrants were exercised on a cashless basis, which resulted in the issuance of shares of common stock. The closing of the sale of Activ represented a “Fundamental Transaction” pursuant to the terms of the Company’s Series A Warrants. As a result, within 30 days after the closing of the sale of Activ, each Series A Warrant holder had the option to elect to have its Series A Warrants redeemed, in whole or in part, for a cash payment based on a calculation of the defined Black-Scholes value of each warrant as prescribed in the Series A Warrant agreement. Accordingly, during June and July 2024, the Company paid a total of $5,632,429 and $7,325, respectively, to warrant holders who exercised their redemption rights, in the settlement and redemption of 621,300 Series A warrants. As the Series A Warrants were recorded as a derivative liability upon issuance in 2022, the change in the Black-Scholes value upon final settlement was recorded as part of the change in fair value of warrant derivative liability in the accompanying condensed consolidated statements of operations for the three months and six months ended June 30, 2024. At June 30, 2024, there were 68,800 Series A Warrants that were not redeemed and remained outstanding.
In addition, 37,000 warrants were issued in February 2022 to the placement agent for the February 2022 securities offering. The placement agent warrants had the same “Fundamental Transaction” provisions as described above. However, the placement agent warrants did not contain a provision that required that the exercise price of such warrants be adjusted following effectiveness of a reverse stock split. Accordingly, the placement agent warrants, contrary to the accounting for the Series A Warrants, were not recorded as a derivative liability upon issuance. The Company paid the Black-Scholes value of the placement agent warrants of $319,625 to the placement agent, which was recorded as a cost related to the settlement of the warrants in the accompanying condensed consolidated statement of operations for the three months and six months ended June 30, 2024.
The fair value of the warrant liability at June 30, 2024 and at December 31, 2023 was $631,254 and $2,453,100, respectively. The estimated fair value of the warrants was determined using Level 3 inputs. Inherent in a binomial lattice model are assumptions related to expected probability of event occurrence, including stock splits, stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock warrants based on the Company’s historical volatility. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant or valuation date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the Company’s historical rate, which the Company anticipates remaining at zero. The derivative liabilities were valued using a binomial lattice model with the following assumptions:
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Redeemable Preferred Stock (Classified as Temporary Equity, redeemed in full in February 2023) |
6 Months Ended |
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Jun. 30, 2024 | |
| Equity [Abstract] | |
| Redeemable Preferred Stock (Classified as Temporary Equity, redeemed in full in February 2023) | 7. Redeemable Preferred Stock (Classified as Temporary Equity, redeemed in full in February 2023)
On November 29, 2022, the Company issued and sold, in a private placement, 495,000 shares of the Company’s Series C Convertible Redeemable Preferred Stock (the “Series C Preferred Stock”), and 5,000 shares of the Company’s Series D Redeemable Preferred Stock (the “Series D Preferred Stock,” and together with the Series C Preferred Stock, the “Preferred Stock”). During the three months ended March 31, 2023, the Preferred Stock was redeemed in full for $5,250,000 cash, consisting of $4,750,000 in gross proceeds from the issuance of the Preferred Stock, plus an additional $500,000 to fund a 105% redemption price. There were no conversions of the Preferred Stock into common stock.
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Stockholders’ Equity |
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| Stockholders’ Equity | 8. Stockholders’ Equity
Common Stock
The Company is authorized to issue shares of common stock, par value $ per share. As of June 30, 2024 and December 31, 2023, there were shares and shares, respectively, of common stock issued and outstanding.
Warrants
A summary of the Company’s warrant activity is as follows:
The exercise prices of warrants outstanding and exercisable as of June 30, 2024 are as follows:
During the six months ended June 30, 2024, 49,900 Series A Warrants were exercised on a cashless basis, resulting in the issuance of shares of common stock, and warrants were cash settled for $5,959,379. Based on the closing price of the Company’s common stock on June 30, 2024 of $10.10 per share, the aggregate intrinsic value of warrants outstanding as of June 30, 2024 was $.
Stock Options
The Company accounts for share-based payments in accordance with ASC 718, Compensation – Stock Compensation, wherein grants are measured at the grant date fair value and charged to operations ratably over the vesting periods.
During the six months ended June 30, 2024, there were grants of options to purchase shares of common stock.
During the six months ended June 30, 2023, the Company granted options to purchase an aggregate of shares of common stock to the independent members of the Company’s Board of Directors in connection with the compensation plan for such directors with grant date fair values of $, using a Black-Scholes option pricing model based on the following assumptions: (i) a volatility rate of %, (ii) a discount rate of % (iii) expected dividend yield, and (iv) an expected life of years. The options have an exercise price of $ per share, respectively. The options vest on a quarterly basis over two years from the grant date, with the first tranche vesting on September 30, 2023.
During the six months ended June 30, 2023, the Company granted options to purchase shares of common stock to the Company’s Chief Executive Officer (“CEO”) with a grant date fair value of $ using a Black-Scholes option pricing model based on the following assumptions: (i) a volatility rate of %, (ii) a discount rate of%, (iii) expected dividend yield, and (iv) an expected life of years. The options vest on a quarterly basis thereafter over .
The Company’s former CEO resigned effective June 9, 2023. All options issued to the former CEO that were not vested at the time of resignation were forfeited. Compensation expense previously recorded related to the unvested options was reversed, resulting in a reduction of stock compensation expense of $() during the three months and six months ended June 30, 2023.
The Company computes stock price volatility over expected terms based on its historical common stock trading prices. The risk-free interest rate was based on rates established by the Federal Reserve Bank. The expected dividend yield was based on the fact that the Company has not paid dividends to its common stockholders in the past and does not expect to pay dividends to its common stockholders in the future. The expected life of the stock options granted is estimated using the “simplified” method, whereby the expected term equals the average of the vesting term and the original contractual term of the stock option.
For the six months ended June 30, 2024 and 2023, the Company recognized aggregate share-based compensation expense (income) of $ and $, respectively, related to the fair value of vested options.
As of June 30, 2024, the Company had an aggregate of remaining unvested options outstanding, with a remaining fair value of approximately $ to be amortized over an average of year. Based on the closing price of the Company’s common stock on June 28, 2024, the last trading day of the quarter, of $ per share, the aggregate intrinsic value of options outstanding as of June 30, 2024 was $.
Restricted Common Stock
During the six months ended June 30, 2024 and 2023, there were grants of restricted common stock.
During the six months ended June 30, 2024 and 2023, the Company recognized share-based compensation expense of $ and $, respectively, related to vested restricted shares.
The following table summarizes restricted common stock activity for the six months ended June 30, 2024:
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Income Taxes |
6 Months Ended |
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Jun. 30, 2024 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | 9. Income Taxes
During the three months and six months ended June 30, 2024 and 2023, the Company did not record any provision for income taxes, as the Company incurred losses for income tax reporting during such periods.
On May 31, 2024, the Company completed its sale of all the outstanding equity interests of Activ Nutritional, LLC (“Activ”) for $17,200,000, resulting in a gain for financial reporting purposes of $12,742,385 (see Note 3). For federal and state income tax reporting purposes, the Company will record a loss on the sale of Activ. Most of the loss for income tax purposes is allocable to the sale of intangibles assets, which were previously recorded as goodwill and intangible assets for financial reporting purposes and written off entirely in 2021 and 2022. For income tax reporting purposes, intangibles were not written off and were required to be amortized over a 15-year period. Accordingly, the tax basis for the intangibles exceeded the sale price, resulting in a loss for income tax purposes. For income tax reporting purposes, the loss on sale of the intangibles is a capital loss. The Company has no capital gains during the current year or the three years preceding, as a result of which the net capital loss will carry forward until 2029.
Deferred tax assets and liabilities reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company has recorded a full valuation allowance against its deferred tax assets (including the capital losses described above) as the Company currently believes it is more likely than not that the deferred tax assets will not be realized.
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Commitments and Contingencies |
6 Months Ended |
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Jun. 30, 2024 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies | 10. Commitments and Contingencies
Legal Proceedings
The Company is periodically the subject of various pending or threatened legal actions and claims arising out of its operations in the normal course of business. In the opinion of the management of the Company, adequate provision has been made in the Company’s consolidated financial statements at June 30, 2024 and December 31, 2023 with respect to any such matters.
The Company is not currently a party to any material legal proceedings and is not aware of any pending or threatened legal proceeding against the Company that the Company believes could have a material adverse effect on its business, operating results, cash flows or financial condition.
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Subsequent Events |
6 Months Ended |
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Jun. 30, 2024 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | 11. Subsequent Events
The Company performed an evaluation of subsequent events through the date of filing of these condensed consolidated financial statements with the SEC. Other than as disclosed herein, there were no material subsequent events which affected, or could affect, the amounts or disclosures in the condensed consolidated financial statements. |
Summary of Significant Accounting Policies (Policies) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | 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 SEC for interim financial information. The unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements for the year ended December 31, 2023 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, 2024. 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC. The condensed consolidated balance sheet as of December 31, 2023 was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.
On May 31, 2024, the Company completed the sale of all of the outstanding equity interests of Activ (see Note 3). The operations of Activ are reported as discontinued operations for all periods presented in the accompanying condensed consolidated financial statements.
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| Principles of Consolidation | Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Viactiv Nutritionals, Inc. and NutriGuard Formulations, Inc. Viactiv Nutritionals, Inc. was dissolved effective July 22, 2024. All intercompany balances and transactions have been eliminated in consolidation.
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| Segment Information | Segment Information
As a result of the disposition of the Viactiv® brand and business effective May 31, 2024 (see Note 3), at June 30, 3024, the Company operates and reports in one segment, which consists of the development and distribution of clinically supported dietary supplements for ocular health. The Company’s operating segment is reported in a manner consistent with the internal reporting provided to the Company’s Chief Operating Decision Maker, which is the Company’s President and Chief Executive Officer.
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| Use of Estimates | Use of Estimates
The preparation of 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 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.
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| Revenue Recognition | 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.
Historically the Company has not experienced any significant payment delays from customers.
In certain circumstances, returns of products are allowed. Due to the insignificant amount of historical returns, the stand-alone nature of our products, and our assessment of performance obligations and transaction pricing for our sales contracts the Company does not currently maintain a contract asset or liability balance for obligations. The Company assesses its contracts and the reasonableness of our conclusions on a quarterly basis.
At June 30, 2024 and December 31, 2023, the allowance for doubtful accounts was $0 and $0, respectively.
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 certain 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, and warehousing, were $26,499 and $61,809 for the three months ended June 30, 2024, respectively, and $64,475 and $87,309 for the six months ended June 30, 2024 and 2023, respectively.
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| Cost of Goods Sold | 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.
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| Shipping Costs | Shipping Costs
Shipping costs associated with product distribution after manufacture are included as part of cost of goods sold. Shipping and handling expense totaled $7,572 and $8,972 for the three months ended June 30, 2024 and 2023, respectively, and $17,616 and $22,175 for the six months ended June 30, 2024 and 2023, respectively.
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| Advertising Costs | Advertising Costs
Advertising costs are expensed as incurred and are included in sales and marketing expense. Advertising costs were $0 and $400 for the three months ended June 30, 2024 and 2023, respectively, and $0 and $1,657 for the six months ended June 30, 2024 and 2023, respectively.
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| Concentration of Risk | Concentration of Risk
Vendor costs. During the three months ended June 30, 2024, the Company utilized one vendor for its corporate legal advice. Costs associated with this vendor accounted for approximately 48% of total costs during the three months ended June 30, 2024, and approximately 31% of total costs during the three months ended June 30, 2023. One other vendor the Company used for insurance purposes accounted for approximately 42% of total costs during the three months ended June 30, 2023. No other vendors accounted for more than 10% of total costs during the three months ended June 30, 2024 and 2023.
Accounts payable. As of June 30, 2024, three vendors accounted for 75% of total accounts payable. One vendor accounted for 35%, a second vendor accounted for 27% and a third vendor accounted for 13% of the accounts payable at June 30, 2024. As of December 31, 2023, three vendors accounted for 81% of the total accounts payable. One vendor accounted for 55%, a second vendor accounted for 14% and a third vendor accounted for 12% of the accounts payable at December 31, 2023. No other vendor accounted for more than 10% of accounts payable as of June 30, 2024 and December 31, 2023.
Cash and cash equivalents. Cash and cash equivalents consist of funds deposited with BMO Harris Bank (“BMO”), a major, established, high quality financial institution in short-term (original maturity of generally 60 days or less) liquid investments in money market deposit accounts. Cash equivalents are classified as Level 1 in the GAAP valuation hierarchy and are valued using the net asset value (“NAV”) per share of the money market fund. The Company has an overnight investment feature established with BMO whereby the Company’s cash is swept into a Money Market Mutual Fund managed by Goldman Sachs Asset Management. This fund invests solely in high quality U.S. government issued securities. As of June 30, 2024, $14,822,826 included in cash and cash equivalents was held in the Goldman Sachs Financial Square Government Institutional Fund, a fund that is not insured by the Federal Deposit Insurance Corporation (the “FDIC”).
The Company routinely has cash balances in financial institutions in excess of the FDIC and SIPC insurance limits of $250,000 and $500,000, respectively. The Company believes that no significant concentration of credit risk exists with respect to its cash balances because of its assessment of the creditworthiness and financial viability of the financial institutions that hold such cash balances. The Company has not experienced any losses to date resulting from this policy.
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| Stock-Based Compensation | Stock-Based Compensation
Stock-based awards for stock options and restricted stock awards to employees and non-employees are accounted for using the fair value method in accordance with ASC 718, Compensation – Stock Compensation. The estimated fair value of stock options granted to employees in exchange for services is measured at the grant date, using a fair value-based method, such as a Black-Scholes option valuation model, and is recognized as an expense on a straight-line basis over the requisite service periods. The assumptions used in the Black-Scholes option pricing model such as risk-free interest rates, expected volatility, expected life, and future dividends could materially affect compensation expense recorded in future periods. The fair value of restricted stock units is measured at the grant date based on the closing market price of the Company’s common stock on the date of grant and is recognized as an expense on a straight-line basis over the requisite service periods. Recognition of compensation expense for non-employees is accounted for in the same period and manner as if the Company had paid cash for the services.
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| 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 antidilutive.
Antidilutive securities include outstanding stock options with exercise prices and average unrecognized compensation cost more than the average fair market value of common stock for the related period. Antidilutive securities also include restricted stock awards with average unrecognized compensation cost in excess of the average fair market value of the common stock for the related period. Antidilutive options and restricted stock awards were excluded from the calculation of diluted net income per share and could become dilutive in future periods.
The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share:
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| Fair Value of Financial Instruments | Fair Value of Financial Instruments
Accounting standards require certain assets and liabilities to be reported at fair value in 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 – Quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date.
Level 2 – Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.
Level 3 – Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions.
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 June 30, 2024 and December 31, 2023:
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 six months ended June 30, 2024:
As of June 30, 2024 and December 31, 2023, the Company’s outstanding warrants (except for placement agent warrants) were treated as derivative liabilities and changes in the fair value were recognized in the statement of operations (see Note 5).
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.
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements
In July 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-03, Presentation of Financial Statements (Topic 205), Income Statement — Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation — Stock Compensation (Topic 718) Presentation of Financial Statements (“ASU 2023-03”). ASU 2023-03 amends the FASB Accounting Standards Codification to include Amendments to SEC Paragraphs pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and SEC Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 — General Revision of Regulation S-X: Income or Loss Applicable to Common Stock. As ASU 2023-03 did not provide any new guidance, there was no transition or effective date associated with its adoption. Accordingly, the Company adopted ASU 2023-03 immediately upon its issuance. The adoption of ASU 2023-03 did not have any impact on the Company’s consolidated financial statements, including their presentation and related disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories that are regularly provided to the chief operating decision maker and included in each reported measure of a segment’s profit or loss. ASU-2023-07 also requires all annual disclosures about a reportable segment’s profit or loss and assets to be provided in interim periods and for entities with a single reportable segment to provide all the disclosures required by ASC 280, Segment Reporting, including the significant segment expense disclosures. The Company adopted ASU 2023-07 effective January 1, 2024.The adoption of ASU 2023-07 did not have any impact on the Company’s consolidated financial statements, including their presentation 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 consolidated financial statements. |
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Summary of Significant Accounting Policies (Tables) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Reconcile the Number of Shares of Common Stock Utilized in the Earnings Per Share |
The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share:
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| Schedule of Assets and Liabilities at Fair Value | The following table sets forth by level, within the fair value hierarchy, the Company’s financial assets at fair value as of June 30, 2024 and December 31, 2023:
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| Schedule of Warrant Derivative Liability Measured at Fair Value | 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 six months ended June 30, 2024:
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Discontinued Operations (Tables) |
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Jun. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Transaction | The foregoing information with respect to the transaction referred to herein is summarized as follows:
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| Summarizes Discontinued Operations of Condensed Consolidated Statements of Operations | The operations of Activ are reported for all periods as discontinued operations in the Company’s condensed consolidated financial statements. The following table summarizes the results of discontinued operations in the Company’s condensed consolidated statements of operations:
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| Summarizes Discontinued Operations of Consolidated Balance Sheet | The table below provides a reconciliation of the carrying amounts of the major classes of assets and liabilities of discontinued operations at May 31, 2024 and December 31, 2023. The total current assets and total current liabilities of discontinued operations are presented separately in the accompanying consolidated balance sheet at December 31, 2023:
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Inventories (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Inventories | Inventories are stated at the lower of cost (first-in, first-out) or net realizable value and consisted of the following at June 30, 2024 and December 31, 2023:
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Warrant Derivative Liability (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Warrant Derivative Liability |
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Stockholders’ Equity (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Warrants Activity | A summary of the Company’s warrant activity is as follows:
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| Schedule of Exercise Price of Warrants Outstanding and Exercisable | The exercise prices of warrants outstanding and exercisable as of June 30, 2024 are as follows:
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| Schedule of Share-based Compensation, Stock Options, Activity |
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| Schedule of Exercise Price of Options Outstanding and Exercisable |
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| Schedule of Non Vested Restricted Common Stock Activity | The following table summarizes restricted common stock activity for the six months ended June 30, 2024:
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Organization and Business Operations (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|
May 31, 2024 |
Jan. 06, 2023 |
Jun. 30, 2024 |
Mar. 31, 2024 |
Jun. 30, 2023 |
Mar. 31, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||
| Proceeds from Divestiture of Businesses | $ 17,200,000 | $ 17,200,000 | ||||||
| Reverse stock split | 1-for-50 | |||||||
| Minimum closing bid price | $ 1.00 | |||||||
| Net cash proceeds | 16,250,000 | |||||||
| Net income (loss) | $ 10,324,330 | $ (4,746,744) | $ (1,172,411) | $ 533,091 | 5,577,587 | $ (639,320) | ||
| Income from discontinued operations | 12,457,356 | $ 407,739 | 12,304,875 | 654,922 | ||||
| Gain on sale of discontinued operations | 11,726,743 | |||||||
| Income from discontinued operations | 578,132 | |||||||
| Net cash used in operating activities | 1,834,766 | $ 2,285,712 | ||||||
| Cash | 14,822,826 | 14,822,826 | ||||||
| Working capital | $ 14,374,922 | $ 14,374,922 | ||||||
Schedule of Reconcile the Number of Shares of Common Stock Utilized in the Earnings Per Share (Details) - shares |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2024 |
Jun. 30, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
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| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
| Number of common shares - basic | 1,284,156 | 1,267,340 | 1,282,241 | 1,267,340 |
| Number of common shares - diluted | 1,297,638 | 1,268,103 | 1,289,566 | 1,268,366 |
| Anti-dilutive securities | 88,240 | 1,549,074 | 91,182 | 1,548,808 |
| Warrant [Member] | ||||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
| Warrants | 10,093 | 4,669 | 693 | |
| Anti-dilutive securities | 73,261 | 1,526,301 | ||
| Options [Member] | ||||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
| Options | 3,390 | 430 | 2,656 | |
| Anti-dilutive securities | 17,921 | 22,507 | ||
| Restricted Stock [Member] | ||||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
| Restricted stock awards | 333 | 333 | ||
Schedule of Warrant Derivative Liability Measured at Fair Value (Details) - USD ($) |
1 Months Ended | 6 Months Ended |
|---|---|---|
Jun. 30, 2024 |
Jun. 30, 2024 |
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| Accounting Policies [Abstract] | ||
| Warrant derivative liability, beginning balance | $ 2,453,100 | |
| Change in fair value of warrant derivative liability | 3,817,908 | |
| Fair value of warrants redeemed for cash settlement | $ 5,632,429 | (5,632,429) |
| Fair value of warrant redemption payable | (7,325) | |
| Warrant derivative liability, ending balance | $ 631,254 | $ 631,254 |
Schedule of Transaction (Details) - USD ($) |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
May 31, 2024 |
Jun. 30, 2024 |
Jun. 30, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
|
| Discontinued Operations and Disposal Groups [Abstract] | |||||
| Base purchase price | $ 17,200,000 | $ 17,200,000 | $ 17,200,000 | ||
| Less: Carrying amount of net assets sold | (3,732,615) | (3,732,615) | (3,732,615) | ||
| Gain on sale before transaction costs | 13,467,385 | 13,467,385 | |||
| Less: Transaction costs paid at closing | (725,000) | (725,000) | |||
| Gain on sale, per statement of operations | $ 12,742,385 | 12,742,385 | 12,742,385 | ||
| Other transaction costs incurred during 2024 | (485,952) | (56,098) | (1,015,642) | (143,766) | |
| Net gain on sale | $ 12,256,433 | $ (56,098) | $ 11,726,743 | $ (143,766) | |
Summarizes Discontinued Operations of Condensed Consolidated Statements of Operations (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2024 |
Jun. 30, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
|
| Discontinued Operations and Disposal Groups [Abstract] | ||||
| Revenue | $ 1,889,472 | $ 2,710,184 | $ 4,807,998 | $ 5,801,631 |
| Cost of goods sold | 1,138,504 | 1,453,976 | 2,914,982 | 3,235,803 |
| Research and development | 77,200 | 3,168 | 134,750 | |
| Sales and marketing | 330,618 | 407,408 | 688,653 | 975,189 |
| General and administrative | 219,427 | 307,763 | 623,063 | 657,201 |
| Income from operations | 200,923 | 463,837 | 578,132 | 798,688 |
| Other income (loss): | ||||
| Transaction costs related to sale of discontinued operations | (485,952) | (56,098) | (1,015,642) | (143,766) |
| Gain on sale of discontinued operations | 12,742,385 | 12,742,385 | ||
| Net gain on sale | 12,256,433 | (56,098) | 11,726,743 | (143,766) |
| Income from discontinued operations | $ 12,457,356 | $ 407,739 | $ 12,304,875 | $ 654,922 |
Summarizes Discontinued Operations of Consolidated Balance Sheet (Details) - USD ($) |
Jun. 30, 2024 |
May 31, 2024 |
Dec. 31, 2023 |
|---|---|---|---|
| Discontinued Operations and Disposal Groups [Abstract] | |||
| Accounts receivable, net | $ 1,912,252 | $ 2,265,072 | |
| Inventories, net | 2,628,194 | 2,579,469 | |
| Prepaid expenses and other current assets | $ 225,000 | 215,753 | 11,214 |
| Total current assets of discontinued operations | 4,756,199 | 4,855,755 | |
| Accounts payable | 900,424 | 591,626 | |
| Accrued expenses | 123,160 | 205,808 | |
| Total current liabilities of discontinued operations | 1,023,584 | 797,434 | |
| Net assets of discontinued operations | $ 3,732,615 | $ 4,058,321 |
Discontinued Operations (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | ||||
|---|---|---|---|---|---|---|
May 31, 2024 |
Jun. 30, 2024 |
Jun. 30, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
Dec. 31, 2023 |
|
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||
| Base purchase price | $ 17,200,000 | $ 17,200,000 | $ 17,200,000 | |||
| Carrying amount of net assets sold | 3,732,615 | 3,732,615 | 3,732,615 | |||
| Transaction costs related to sale | 485,952 | $ 56,098 | 1,015,642 | $ 143,766 | ||
| Net gain on sale | 12,256,433 | $ (56,098) | 11,726,743 | $ (143,766) | ||
| Net cash proceeds | 16,250,000 | |||||
| Transaction costs | 725,000 | 725,000 | ||||
| Escrow deposit | 225,000 | 225,000 | ||||
| Prepaid and other assets current | $ 215,753 | $ 225,000 | 225,000 | $ 11,214 | ||
| Purchase Agreement [Member] | ||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||
| Transaction costs related to sale | $ 1,740,642 | |||||
Schedule of Inventories (Details) - USD ($) |
Jun. 30, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Raw materials | $ 34,400 | $ 35,404 |
| Finished products | 43,397 | 62,240 |
| Inventories, net | $ 77,797 | $ 97,644 |
Operating Leases (Details Narrative) |
6 Months Ended |
|---|---|
|
Jun. 30, 2024
USD ($)
| |
| Operating Leases | |
| Operating lease payments | $ 3,000 |
Redeemable Preferred Stock (Classified as Temporary Equity, redeemed in full in February 2023) (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Nov. 29, 2022 |
Mar. 31, 2023 |
|
| Class of Stock [Line Items] | ||
| Preferred stock redemption amount | $ 5,250,000 | |
| Proceeds from issuance of preferred stock | 4,750,000 | |
| Proceeds from issuance of preferred stock additional | $ 500,000 | |
| Redemption price percentage | 105.00% | |
| Series C Convertible Redeemable Preferred Stock [Member] | Private Placement [Member] | ||
| Class of Stock [Line Items] | ||
| Series D convertible redeemable preferred stock, shares | 495,000 | |
| Series D Redeemable Preferred Stock [Member] | Private Placement [Member] | ||
| Class of Stock [Line Items] | ||
| Series D convertible redeemable preferred stock, shares | 5,000 |
Schedule of Warrants Activity (Details) |
6 Months Ended |
|---|---|
|
Jun. 30, 2024
$ / shares
shares
| |
| Accumulated Other Comprehensive Income (Loss) [Line Items] | |
| Shares, Ending Balance | 77,930 |
| Warrant [Member] | |
| Accumulated Other Comprehensive Income (Loss) [Line Items] | |
| Shares, Beginning Balance | 786,701 |
| Weighted Average Exercise Price, Beginning Balance | $ / shares | $ 8.96 |
| Weighted Average Remaining Contractual Term (Years), Beginning Balance | 3 years 1 month 13 days |
| Shares, Granted | |
| Weighted Average Exercise Price, Granted | $ / shares | |
| Shares, Forfeitures | |
| Weighted Average Exercise Price, Forfeitures | $ / shares | |
| Shares, Expirations | (571) |
| Weighted Average Exercise Price, Expirations | $ / shares | |
| Shares, Exercised | (708,200) |
| Weighted Average Exercise Price, Exercised | $ / shares | |
| Shares, Ending Balance | 77,930 |
| Weighted Average Exercise Price, Ending Balance | $ / shares | $ 22.36 |
| Weighted Average Remaining Contractual Term (Years), Ending Balance | 2 years 4 months 17 days |
Schedule of Exercise Price of Warrants Outstanding and Exercisable (Details) |
Jun. 30, 2024
$ / shares
shares
|
|---|---|
| Accumulated Other Comprehensive Income (Loss) [Line Items] | |
| Warrants Outstanding and Exercisable (Shares) | 77,930 |
| Warrant One [Member] | |
| Accumulated Other Comprehensive Income (Loss) [Line Items] | |
| Warrants Outstanding and Exercisable (Shares) | 68,800 |
| Exercise Prices | $ / shares | $ 7.57 |
| Warrant Two [Member] | |
| Accumulated Other Comprehensive Income (Loss) [Line Items] | |
| Warrants Outstanding and Exercisable (Shares) | 9,130 |
| Exercise Prices | $ / shares | $ 133.82 |
Schedule of Share-based Compensation, Stock Options, Activity (Details) - $ / shares |
6 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2024 |
Dec. 31, 2023 |
|
| Equity [Abstract] | ||
| Shares Outstanding, Beginning Balance | 20,577 | |
| Weighted Average Exercise Price Outstanding, Beginning Balance | $ 77.72 | |
| Weighted Average Remaining Contractual Term (Years) Outstanding, Ending Balance | 7 years 4 months 20 days | 7 years 7 months 6 days |
| Shares, Granted | ||
| Weighted Average Exercise Price, Granted | ||
| Shares, Forfeitures | ||
| Weighted Average Exercise Price, Forfeitures | ||
| Shares, Expirations | ||
| Weighted Average Exercise Price, Expirations | ||
| Shares, Exercised | ||
| Weighted Average Exercise Price, Exercised | ||
| Shares Outstanding, Ending Balance | 20,577 | 20,577 |
| Weighted Average Exercise Price Outstanding, Ending Balance | $ 77.72 | $ 77.72 |
| Shares Exercisable, Ending Balance | 14,905 | |
| Weighted Average Exercise Price Exercisable, Ending Balance | $ 104.93 | |
| Weighted Average Remaining Contractual Term (Years) Exercisable, Ending Balance | 6 years 2 months 15 days |
Income Taxes (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
May 31, 2024 |
Jun. 30, 2024 |
Jun. 30, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
|
| Income Tax Disclosure [Abstract] | |||||
| Base purchase price | $ 17,200,000 | $ 17,200,000 | $ 17,200,000 | ||
| Gain on sale of discontinued operations | $ 12,742,385 | $ 12,742,385 | $ 12,742,385 | ||