Nature of Business and Significant Accounting Policies

3 Months Ended

Mar. 30, 2013

Nature Of Business And Significant Accounting Policies

Note 2. Nature of Business and Significant Accounting Policies [Text Block]

Nature of business:  The Company is a natural products company that provides proprietary, science-based solutions and ingredients to the dietary supplement, food and beverage, animal health, cosmetic and pharmaceutical industries. The Company supplies ingredients, phytochemical reference standards and related phytochemical products and services. On December 3, 2012, the Company acquired Spherix Consulting, Inc. (“Spherix”), which provides scientific and regulatory consulting to the clients in the food, supplement and pharmaceutical industries to manage potential health and regulatory risks.  The Company provides these products and services at various terms.

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

Trade accounts receivable:  Trade accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on monthly and quarterly reviews of all outstanding amounts.  Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts.  The allowances for doubtful accounts for the periods ended March 30, 2013 and December 29, 2012 were $18,000 and $450,000, respectively.  Of the allowance amount of $450,000 for the period ended December 29, 2012, $433,000 represents a hold on the receivables placed by a retailer that carried our BluScience retail consumer line.  The hold was placed by the retailer as an offset in the event of future returns of our products and the hold was treated as a reduction of revenue. On March 28, 2013, we sold the BluScience retail consumer line to NeutriSci International Inc. (“NeutriSci”) and the related trade accounts receivable including the allowance have been transferred to NeutriSci. Trade accounts receivable are written off when deemed uncollectible.  Recoveries of trade accounts receivable previously written off are recorded when received.

Inventories:  Inventories are comprised of raw materials, work-in-process and finished goods.  They are stated at the lower of cost, determined by the first-in, first-out method (FIFO) method, or market.  The inventory on the balance sheet is recorded net of valuation allowances of $217,000 and $366,000 for the periods ended March 30, 2013 and December 29, 2012, respectively.  Labor and overhead has been added to inventory that was manufactured or characterized by the Company.  On March 28, 2013, the Company sold the BluScience retail consumer line to NeutriSci and related dietary supplements inventory have been transferred to NeutriSci.  The amounts of major classes of inventory as of March 30, 2013 and December 29, 2012 are as follows:

	March 30, 2013		December 29, 2012
Reference standards	$	1,598,277	$	1,614,755
Bulk ingredients		192,175		432,230
Dietary supplements – raw materials		-		401,809
Dietary supplements – work in process		-		465,253
Dietary supplements – finished goods		-		2,657,257
		1,790,452		5,571,304
Less valuation allowance		217,000		366,000
	$	1,573,452	$	5,205,304

Earnings per share: Potentially dilutive common shares consist of the incremental common shares issuable upon the exercise of common stock options and warrants for all periods.   For the three-month period ended March 31, 2012, the basic and diluted shares reported are equal because the common share equivalents are anti-dilutive due to the net loss. Below is a tabulation of the potentially dilutive securities that were “in the money” for the three- month periods ended March 30, 2013 and March 31, 2012.

	Three Months Ended
	March 30, 2013		March 31, 2012
Basic weighted average common shares outstanding		94,626,120		84,706,196
Warrants and options in the money, net		3,298,337		6,583,163
Weighted average common shares outstanding assuming dilution		97,924,457		91,289,359

Total warrants and options that were not “in the money” at March 30, 2013 and March 31, 2012 were 12,338,106 and 18,579,518, respectively.