0001493152-19-012029.txt : 20190812 0001493152-19-012029.hdr.sgml : 20190812 20190812063125 ACCESSION NUMBER: 0001493152-19-012029 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 60 CONFORMED PERIOD OF REPORT: 20190630 FILED AS OF DATE: 20190812 DATE AS OF CHANGE: 20190812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Guardion Health Sciences, Inc. CENTRAL INDEX KEY: 0001642375 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 474428421 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-38861 FILM NUMBER: 191014338 BUSINESS ADDRESS: STREET 1: 15150 AVENUE OF SCIENCE, SUITE 200 CITY: SAN DIEGO STATE: CA ZIP: 92128 BUSINESS PHONE: 858-605-9055 MAIL ADDRESS: STREET 1: 15150 AVENUE OF SCIENCE, SUITE 200 CITY: SAN DIEGO STATE: CA ZIP: 92128 FORMER COMPANY: FORMER CONFORMED NAME: Guardion Health Sciences, LLC DATE OF NAME CHANGE: 20150513 10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

 

OR

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

 

Commission file number: 000-55723

 

GUARDION HEALTH SCIENCES, INC.

(Exact name of Registrant as specified in its charter)

 

Delaware  

15150 Avenue of Science, Suite 200

San Diego, California 92128

Telephone: 858-605-9055

  47-4428421

(State or other jurisdiction of

incorporation or organization)

 

(Address and telephone number

of principal executive offices)

 

(I.R.S. Employer

Identification No.)

 

15150 Avenue of Science, Suite 200

San Diego, California 92128

Telephone: 858-605-9055

(Address and telephone number of principal executive offices)

 

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
Common Stock, par value $0.001 per share   GHSI   The NASDAQ Stock Market LLC

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or Section 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. [X] Yes [  ] No

 

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). [X] Yes [  ] No

 

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 [  ]
Non-accelerated filer [X] Smaller reporting company [X]
  Emerging growth company [X]

 

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 [X] No

 

As of August 9, 2019, there were 22,733,762 shares of the Company’s common stock, par value $0.001 per share, issued and outstanding. The Company’s common stock began trading on the NASDAQ Capital Market on April 5, 2019, under the symbol “GHSI.”

 

 

 

   

 

 

TABLE OF CONTENTS

 

    Page No.
PART I – FINANCIAL INFORMATION  
     
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4
     
  Balance Sheets – As of June 30, 2019 (Unaudited) and December 31, 2018 4
     
  Statements of Operations (Unaudited) – Three and Six Months Ended June 30, 2019 and 2018 5
     
  Statement of Stockholders’ Equity (Unaudited) – Three and Six Months Ended June 30, 2019 and 2018 6
     
  Statements of Cash Flows (Unaudited) – Six Months Ended June 30, 2019 and 2018 7
     
  Notes to Condensed Consolidated Financial Statements (Unaudited) 8
     
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 21
     
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 34
     
ITEM 4. CONTROLS AND PROCEDURES 34
     
PART II – OTHER INFORMATION  
     
ITEM 1. LEGAL PROCEEDINGS 35
     
ITEM 1A. RISK FACTORS 35
     
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 35
     
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 35
     
ITEM 4. MINE SAFETY DISCLOSURES 35
     
ITEM 5. OTHER INFORMATION 35
     
ITEM 6. EXHIBITS 35
     
SIGNATURES   36

 

 2 

 

 

FORWARD LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements contain information about our expectations, beliefs or intentions regarding our product development and commercialization efforts, business, financial condition, results of operations, strategies or 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. These statements may be identified by words such as “expects,” “plans,” “projects,” “will,” “may,” “anticipates,” “believes,” “should,” “intends,” “estimates,” 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.

 

Other unknown or unpredictable factors that could also adversely affect our business, financial condition and results of operations may arise from time to time. Given these risks and uncertainties, the forward-looking statements discussed in this Report may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of the Company’s management as of the date of this Report. 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.

 

Readers are urged to read the risk factors set forth in the Company’s recent filings with the U. S. Securities and Exchange Commission (the “SEC”), including the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and in other documents the Company files with the SEC from time to time. These filings are available at the SEC’s website (www.sec.gov). The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, in each case, except to the extent required by applicable law.

 

 3 

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Guardion Health Sciences, Inc.

Condensed Consolidated Balance Sheets

 

   June 30,   December 31, 
   2019   2018 
   (Unaudited)     
Assets          
           
Current assets          
Cash  $2,368,645   $670,948 
Accounts receivable   35,920    28,203 
Inventories   318,686    357,997 
Prepaid expenses   132,306    47,773 
           
Total current assets   2,855,557    1,104,921 
           
Deposits   11,751    11,751 
Property and equipment, net   303,929    274,804 
Right of use asset, net   595,598    - 
Deferred offering costs   19,000    270,000 
Intangible assets, net   348,786    456,104 
Goodwill   1,563,520    1,563,520 
           
Total assets  $5,698,141   $3,681,100 
           
Liabilities and Stockholders’ Equity          
           
Current liabilities          
Accounts payable and accrued liabilities  $300,239   $413,925 
Accrued expenses and deferred rent   25,000    81,412 
Derivative warrant liability   78,440    - 
Lease liability – current   125,237    - 
Total current liabilities   528,916    495,337 
           
Lease liability – long term   481,137    - 
           
Total liabilities   1,010,053    495,337 
           
Commitments and contingencies          
           
Stockholders’ Equity          
           
Preferred stock, $0.001 par value; 10,000,000 shares authorized   -    - 
Common stock, $0.001 par value; 90,000,000 shares authorized; 22,733,762 and 20,564,328 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively   22,734    20,564 
Additional paid-in capital   43,735,894    37,798,562 
Accumulated deficit   (39,070,540)   (34,633,363)
           
Total stockholders’ equity   4,688,088    3,185,763 
           
Total liabilities and stockholders’ equity  $5,698,141   $3,681,100 

 

See accompanying notes to condensed consolidated financial statements.

 

 4 

 

 

Guardion Health Sciences, Inc.

Condensed Consolidated Statements of Operations

 

  

Three Months Ended

June 30,

  

Six Months Ended

June 30,

 
   2019   2018   2019   2018 
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
Revenue                    
Medical foods  $104,448   $79,993   $204,382   $154,294 
Vision testing diagnostics   150,222    140,785    292,826    259,524 
Other   6,300    -    6,300    - 
Total revenue   260,970    220,778    503,508    413,818 
                     
Cost of goods sold                    
Medical foods   40,681    40,959    78,953    72,238 
Vision testing diagnostics   53,816    46,817    109,036    94,817 
Other   2,559    -    2,559    - 
Total cost of goods sold   97,056    87,776    190,548    167,055 
                     
Gross profit   163,914    133,002    312,960    246,763 
                     
Operating expenses                    
Research and development   77,688    34,320    106,716    194,708 
Sales and marketing   409,409    378,750    764,028    984,464 
General and administrative   2,489,011    1,034,914    3,439,633    2,714,680 
                     
Total operating expenses   2,976,108    1,447,984    4,310,377    3,893,852 
                     
Loss from operations   (2,812,194)   (1,314,982)   (3,997,417)   (3,647,089)
                     
Other (income) expense:                    
Interest expense   234,065    710    251,637    1,545 
Finance cost upon issuance of warrants   229,921    -    415,955    - 
Change in fair value of derivative warrants   (227,832)   -    (227,832)   - 
Costs associated with extension of warrant expiration dates   -    494,391    -    494,391 
                     
Total other (income) expense   236,154    495,101    439,760    495,936 
                     
Net loss  $(3,048,348)  $(1,810,083)  $(4,437,177)  $(4,143,025)
                     
Net loss per common share – basic and diluted  $(0.14)  $(0.09)  $(0.21)  $(0.21)
Weighted average common shares outstanding – basic and diluted   22,537,943    20,164,761    21,628,758    20,161,131 

 

See accompanying notes to condensed consolidated financial statements.

 

 5 

 

 

Guardion Health Sciences, Inc.

Condensed Consolidated Statement of Stockholders’ Equity

(Unaudited)

 

   Common Stock  

Additional

Paid-In

   Accumulated  

Total

Stockholders’

 
   Shares   Amount   Capital   Deficit   Equity 
   Three and Six Months Ended June 30, 2019 
Balance at December 31, 2018   20,564,328   $20,564   $37,798,562   $(34,633,363)  $3,185,763 
Fair value of vested stock options   -    -    56,232    -    56,232 
Issuance of common stock – warrant exercises   292,283    293    30,957    -    31,250 
Net loss   -    -    -    (1,385,099)   (1,385,099)
Balance at March 31, 2019   20,856,611    20,857    37,885,751    (36,018,462)   1,888,146 
Fair value of vested stock options – officer and director   -    -    1,066,159    -    1,066,159 
Fair value of vested stock options   -    -    62,763    -    62,763 
Reclass of warrant liability to equity   -    -    359,683    -    359,683 
Sale of common stock   1,250,000    1,250    3,886,750    -    3,888,000 
Issuance of common stock for services   54,387    55    123,947    -    124,002 
Issuance of common stock – warrant exercises   463,726    463    100,162    -    100,625 
Fair value of common stock – conversion of notes payable and related interest   109,038    109    250,679    -    250,788 
Net loss                  (3,052,078)   (3,052,078)
Balance at June 30, 2019   22,733,762   $22,734   $43,735,894   $(39,070,540)  $4,688,088 

 

  

Three and Six Months Ended June 30, 2018

 
Balance at December 31, 2017   20,091,761   $20,092   $33,716,140   $(26,865,956)  $6,870,276 
Fair value of vested stock options   -    -    777,513    -    777,513 
Issuance of common stock – warrant exercises   73,000    73    1,387    -    1,460 
Net loss   -    -    -    (2,333,461)   (2,333,461)
Balance at March 31, 2018   20,164,761    20,165    34,495,040    (29,199,417)   5,315,788 
Fair value of vested stock options   -    -    277,372    -    277,372 
Costs associated with extension of warrant expiration dates   -    -    494,391    -    494,391 
Net loss   -    -    -    (1,809,564)   (1,809,564)
Balance at June 30, 2018   20,164,761   $20,165   $35,266,803   $(31,008,981)  $4,277,987 

 

See accompanying notes to condensed consolidated financial statements.

 

 6 

 

 

Guardion Health Sciences, Inc.

Condensed Consolidated Statements of Cash Flows

 

  

Six Months Ended

June 30,

 
   2019   2018 
   (Unaudited)   (Unaudited) 
Operating Activities          
Net loss  $(4,437,177)  $(4,143,025)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   137,128    148,560 
Amortization of debt discount   250,000    - 
Accrued interest expense included in notes payable   788    - 
Amortization of right of use asset   61,571    - 
Stock-based compensation   242,996    1,054,885 
Stock-based compensation – officer and director   1,066,159    - 
Non-cash financing costs – derivative liability   415,955    - 
Change in fair value of warrants – derivative liability   (227,832)   - 
Costs associated with extension of warrant expiration dates   -    494,391 
Changes in operating assets and liabilities:          
(Increase) decrease in -          
Accounts receivable   (7,718)   42,928 
Inventories   39,311    (257,627)
Deposits and prepaid expenses   (84,533)   90,053 
Lease liability   (56,844)   - 
Increase (decrease) in -          
Accounts payable and accrued expenses   156,314    146,202 
Accrued expenses and deferred rent   (49,814)   (425)
           
Net cash used in operating activities   (2,493,696)   (2,424,058)
           
Investing Activities          
Purchase of property and equipment   (58,934)   (137,073)
Purchase of intellectual property   -    (50,000)
           
Net cash used in investing activities   (58,934)   (187,073)
           
Financing Activities          
Proceeds from initial public offering   3,888,000    - 
Proceeds from issuance of convertible notes   250,000    - 
Proceeds from issuance of promissory note   100,000    - 
Payments on promissory note   (100,548)   - 
Payments on line of credit   -    (30,535)
Proceeds from exercise of warrants   131,875    1,460 
Deferred financing costs of IPO   (19,000)   - 
Decrease in due to related parties   -    (28,659)
           
Net cash provided by (used in) financing activities   4,250,327    (57,734)
           
Cash:          
Net decrease   1,697,697    (2,668,865)
Balance at beginning of period   670,948    4,735,230 
Balance at end of period  $2,368,645   $2,066,365 
           
Supplemental disclosure of cash flow information:          
Cash paid for-          
Interest  $-   $- 
Income taxes  $-   $- 
           
Non-cash financing activities:          
Fair value of warrant liability issued in connection with issuance of convertible notes  $436,034   $- 
Recording of lease asset and liability upon adoption of ASU 2016-02  $663,218   $- 
Reclass of warrant liability to equity  $359,683   $- 
Fair value of common stock issued upon conversion of common stock and accrued interest  $250,788   $- 
Reclass of deferred offering cost to equity  $270,000   $- 

 

See accompanying notes to condensed consolidated financial statements.

 

 7 

 

 

Guardion Health Sciences, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Six Months Ended June 30, 2019 and 2018

 

1. Organization and Business Operations

 

Organization and Business

 

Guardion Health Sciences, Inc. (the “Company”) was formed in December 2009 as a California limited liability company under the name P4L Health Sciences, LLC. On June 30, 2015, the Company converted from a California limited liability company to a Delaware corporation, changing its name from Guardion Health Sciences, LLC to Guardion Health Sciences, Inc.

 

The Company is a specialty health sciences company that develops, formulates and distributes condition-specific medical foods with an initial medical food product on the market under the brand name Lumega-Z® that replenishes and restores the macular protective pigment. Lumega-Z has been used in IRB-approved patient studies to examine its effectiveness. On May 9, 2019, the Company announced in a press release a recent study that showed statistically significant improvement in visual function (“CSF”) of patients taking Lumega-Z who participated in the study. The study was conducted by research scientists at the Western University College of Optometry to evaluate the visual benefits of Lumega-Z in one group of patients as compared to a group of patients taking AREDS 2 soft gel supplements. Each patient has retinal drusen and is at risk of developing AMD. The results of the study were presented at the Association for Research in Vision and Ophthalmology (“ARVO”) 2019 annual meeting and showed improvements in visual function (“CSF”) in the group of patients taking Lumega-Z that were statistically significant and definitive. The patients taking AREDS 2 showed no statistical change.

 

The Company also developed a proprietary medical device called the MapcatSF® that accurately measures the macular pigment optical density. On July 16, 2019, the Company was notified by the Patents Registry in Hong Kong that it has received a patent from the Government of the Hong Kong Special Administrative Region (Hong Kong Patent No. HK1204758 titled “Apparatus for Use in the Measurement of Macular Pigment Optical Density and/or Lens Optical Density of an Eye”) for the MapcatSF®. On May 30, 2019, the Company was notified by the European Patent Office that it has received a patent from the European Union (European Patent No. 2,811,892 titled “Apparatus for Use in the Measurement of Macular Pigment Optical Density and/or Lens Optical Density of an Eye”) for the MapcatSF®.

 

On September 29, 2017, the Company, through its wholly owned subsidiary VectorVision Ocular Health, Inc. (“VectorVision”), completed its acquisition of substantially all of the assets and certain liabilities of VectorVision, Inc. (an Ohio corporation), a company that specialized in the standardization of contrast sensitivity, glare sensitivity, low contrast acuity, and early treatment diabetic retinopathy study (“ETDRS”) visual acuity testing. VectorVision develops, manufactures and sells equipment and supplies for standardized vision testing. The acquisition expands the Company’s technical portfolio. CSV-1000 and CSV-2000 instruments offer auto-calibrated tests to ensure correct testing luminance and contrast levels for consistent, highly accurate and repeatable results. Recently issued patents the Company received for continuously calibrating the light source will be incorporated into the new CSV-2000, in which the proprietary standardized contrast sensitivity test patterns can be presented to the patient using a computer monitor as opposed to the current calibrated backlit system.

 

In August 2018, the Company created a wholly owned subsidiary, Transcranial Doppler Solutions, Inc. (“TDSI”). TDSI is dedicated to the pursuit of early predictors resulting in, the Company believes, valuable therapeutic intervention for practitioners and their patients, and additional revenue streams generated from the testing and sale of Company products to appropriate customers. The Company has established operations with selected clinics and is focusing on expanding its client base.

 

In November 2018, the Company launched a new medical food product, GlaucoCetinTM, which the Company believes is the first vision-specific medical food designed to support and protect the mitochondrial function of optic nerve cells and improve blood flow in the ophthalmic artery in patients with glaucoma. The Company believes GlaucoCetinTM is the first vision-specific medical food designed to support and protect the mitochondrial function of optic nerve cells and improve blood flow in the ophthalmic artery in patients with glaucoma. The parent compound of GlaucoCetinTM, called “GlaucoHealth,” was designed by Robert Ritch, M.D., one of the Company’s Medical Advisory Board members. Dr. Robert Ritch holds the Shelley and Steven Einhorn Distinguished Chair in Ophthalmology and is surgeon Director Emeritus and Chief of Glaucoma Services at the New York Eye and Ear Infirmary. Dr. Ritch has devoted his career to broadening the understanding of the underlying etiologies and mechanisms of glaucoma. The Company now owns the GlaucoHealth formula. On June 4, 2019, the Company announced in a press release that the formula was used in an IRB-approved patient study conducted at the New York Eye and Ear Infirmary and successfully reversed mitochondrial dysfunction in the optic nerve cells in patients with glaucoma. GlaucoCetinTM is an enhanced formulation of GlaucoHealth. The Company owns both formulas and has a patent application pending on the GlaucoCetinTM formula. The application describes an invention that provides a micro-nutrient composition for a human subject suffering from a glaucomatous disease, wherein the micro-nutrient composition comprises a formulation for reversing mitochondrial dysfunction in glaucomatous disease.

 

 8 

 

 

On April 9, 2019, the Company closed its initial public offering (the “IPO”) and issued 1,250,000 shares of its common stock at a public offering price of $4.00 per share for total gross proceeds of $5.0 million, resulting in net proceeds to the Company of $3,888,000 after deducting underwriting discounts and commissions and other offering costs and expenses payable by Guardion. The shares began trading on the Nasdaq Capital Market on April 5, 2019, under the symbol “GHSI.” In connection with the IPO, the convertible promissory notes previously issued on March 15, 2019 and March 20, 2019 were automatically converted into 109,038 shares of common stock based on a conversion price of $2.30 per share.

 

The Company has had limited operations to date and has been primarily engaged in research and development, product commercialization and capital raising activities.

 

Going Concern and Liquidity

 

The financial statements have been prepared assuming the Company will continue as a going concern. The Company had a net loss of $4,437,177 and utilized cash in operating activities of $2,493,696 during the six months ended June 30, 2019. The Company expects to continue to incur net losses and negative operating cash flows in the near-term. As a result, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the consolidated financial statements are issued.

 

The Company’s independent registered public accounting firm has also included explanatory language in their opinion accompanying the Company’s audited financial statements for the year ended December 31, 2018. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.

 

The Company will continue to incur significant expenses for commercialization activities related to its medical foods, the MapcatSF medical device, VectorVision diagnostic equipment, the TDSI business and with respect to efforts to continue to build the Company’s infrastructure. Development and commercialization of medical foods and medical devices involves a lengthy and complex process. Additionally, the Company’s long-term viability and growth may depend upon the successful development and commercialization of products other than Lumega-Z and the MapcatSF.

 

The Company is seeking to raise additional debt and/or equity capital to fund future operations, but there can be no assurances that the Company will be able to secure such additional financing in the amounts necessary to fully fund its operating requirements on acceptable terms or at all. If the Company is unable to access sufficient capital resources on a timely basis, the Company may be forced to reduce or discontinue its technology and product development programs and curtail or cease operations.

 

Reverse Stock Split

 

On January 30, 2019, following stockholder and Board approval, the Company filed a Certificate of Amendment to its Amended Certificate of Incorporation, as amended (the “Amendment”), with the Secretary of State of the State of Delaware to effectuate a one-for-two (1:2) reverse stock split (the “Reverse Stock Split”) of its common stock, par value $0.001 per share, without any change to its par value. The Amendment became effective on the filing date. The number of shares authorized for common and preferred stock were not affected by the Reverse Stock Split. No fractional shares were issued in connection with the Reverse Stock Split as all fractional shares were “rounded up” to the next whole share. Proportional adjustments for the Reverse Stock Split were made to all share and per share amounts as if the split occurred at the beginning of the earliest period presented.

 

 9 

 

 

2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC. The condensed consolidated balance sheet as of December 31, 2018 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all adjustments contained herein are of a normal recurring nature. 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, 2019.

 

Certain prior period amounts have been reclassified to conform to current period presentation. Such amounts consist of operating segment disclosures, whereby revenue and cost of goods sold have been broken out on the Consolidated Statements of Operations to conform with the Company’s reportable business segments as of June 30, 2019.

 

Use of Estimates

 

The preparation of the financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

 

These estimates and assumptions include estimates for reserves of uncollectible accounts, inventory obsolescence, depreciable lives of property and equipment, analysis of impairments of recorded long-term tangible and intangible assets, realization of deferred tax assets, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services.

 

Intangible Assets

 

In connection with the VectorVision transaction, the Company identified and allocated estimated fair values to intangible assets including goodwill and customer relationships.

 

In accordance with Accounting Standard Codification (“ASC”) 350 – Intangibles – Goodwill and Other, the Company determined whether these assets are expected to have indefinite (such as goodwill) or limited useful lives, and for those with limited lives, the Company established an amortization period and method of amortization. Its goodwill and other intangible assets are subject to periodic impairment testing.

 

The Company utilized the services of an independent third-party valuation firm to assist in identifying intangible assets and in estimating their fair values. The useful lives for the Company’s intangible assets other than goodwill were estimated based on Management’s consideration of various factors, including assumptions that market participants might use about sales expectations as well as potential effects of obsolescence, competition, technological progress and the regulatory environment. Because the future pattern in which the economic benefits of these intangible assets may not be reliably determined, amortization expense is generally calculated on a straight-line basis.

 

Amortization expense for the identifiable intangible assets associated with the VectorVision acquisition is approximately $54,000 per quarter and is included with general and administrative expenses in the Company’s Statements of Operations.

 

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Impairment of Long-Lived Assets

 

The Company reviews long-lived assets, including property and equipment, identifiable intangible assets, and goodwill for impairment at each fiscal year end or when events or changes in circumstances indicate the carrying value of these assets may exceed their current fair values. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the assets. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. The Company has not historically recorded any impairment to its long-lived assets. In the future, if events or market conditions affect the estimated fair value to the extent that a long-lived asset is impaired, the Company will adjust the carrying value of these long-lived assets in the period in which the impairment occurs. As of June 30, 2019 and December 31, 2018, the Company had not deemed any long-lived assets as impaired and was not aware of the existence of any indicators of impairment at such dates.

 

Deferred Offering Costs

 

Deferred offering costs consist principally of legal, accounting, and underwriters’ fees incurred related to the equity financings. These deferred offering costs will be charged against the gross proceeds received during the appropriate period. During the period ended June 30, 2019, $270,000 of offering costs deferred at December 31, 2018 were offset to paid in capital upon completion of our April 2019 offering. As of June 30, 2019, $19,000 of costs have been deferred relating to offerings in process.

 

Revenue Recognition

 

The Company’s revenue is comprised of sales of medical foods and dietary supplements to consumers through a direct sales/credit card process. In addition, the Company sells medical device equipment and supplies to customers both in the U.S. and internationally.

 

Tthe Company recognizes revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09” or “Topic 606”) and all related amendments. The standard provides authoritative guidance clarifying the principles for recognizing revenue and developing a common revenue standard for U.S. generally accepted accounting principles. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in the exchange for those goods or services.

 

Under the guidance, revenue is recognized when control of promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company reviews its sales transactions to identify contractual rights, performance obligations, and transaction prices, including the allocation of prices to separate performance obligations, if applicable. Revenue and costs of sales are recognized once products are delivered to the customer’s control and performance obligations are satisfied.

 

All products sold by the Company are distinct individual products and consist of medical foods, supplemental formulas, medical devices and related supplies. The products 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.

 

Control of products sold transfers to customers upon shipment from the Company’s facilities, and the Company’s performance obligations are satisfied at that 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. Payment for sales of Lumega-Z is generally made by approved credit cards. Payments for medical device sales are generally made by check, credit card, or wire transfer. Historically the Company has not experienced any significant payment delays from customers.

 

The Company provides a 30-day right of return to its retail Lumega-Z customers. A right of return does not represent a separate performance obligation, but because customers are allowed to return products, the consideration to which the Company expects to be entitled is variable. Upon evaluation of historical Lumega-Z and VectorVision product returns, the Company determined that less than one percent of products is returned, and therefore believes it is probable that such returns will not cause a significant reversal of revenue in the future. Due to the insignificant amount of historical returns as well as the standalone nature of the Company’s products and assessment of performance obligations and transaction pricing for the Company’s sales contracts, the Company does not currently maintain a contract asset or liability balance at this time. The Company assesses its contracts and the reasonableness of its conclusions on a quarterly basis.

 

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The following table presents the Company’s revenues disaggregated by segment:

 

   Six Months Ended
June 30,
 
   2019   2018 
Medical foods  $204,382   $154,294 
Vision testing diagnostics   292,826    259,524 
Other   6,300    - 
   $503,508   $413,818 

 

Research and Development Costs

 

Research and development costs consist primarily of fees paid to consultants and outside service providers, patent fees and costs, and other expenses relating to the acquisition, design, development and testing of the Company’s medical foods and related products. Research and development expenditures are expensed as incurred and totaled $106,716 and $194,708 for the six months ended June 30, 2019 and 2018, respectively.

 

Patent Costs

 

The Company is the owner of three issued domestic patents, three pending domestic patent applications, one issued foreign patent in Europe, one issued foreign patent in Hong Kong, and three foreign patent applications in Canada, Europe and Hong Kong. Due to the significant uncertainty associated with the successful development of one or more commercially viable products based on the Company’s research efforts and any related patent applications, patent costs, including patent-related legal fees, filing fees and internally generated costs, are expensed as incurred. During the six months ended June 30, 2019 and 2018, patent costs were $61,482 and $34,298, respectively, and are included in general and administrative costs in the statements of operations.

 

Leases

 

Prior to January 1, 2019, the Company accounted for leases under Accounting Standards Codification (ASC) 840, Accounting for Leases. Effective from January 1, 2019, the Company adopted the guidance of ASU 2016-02 (ASC 842), Leases, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. The Company adopted ASC 842 using a modified retrospective approach. As a result, the comparative financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in effect for those periods. The adoption of ASC 842 on January 1, 2019 resulted in the recognition of operating lease right-of-use assets of $626,667, lease liabilities for operating leases of $635,131, and a zero cumulative-effect adjustment to accumulated deficit. See Note 8 for further information regarding the impact of the adoption of ASC 842 on the Company’s financial statements.

 

Stock-Based Compensation

 

The Company periodically issues stock-based compensation to officers, directors, contractors and consultants for services rendered. Such issuances vest and expire according to terms established at the issuance date.

 

Stock-based payments to officers, directors, and employees, which include grants of employee stock options, are recognized in the financial statements based on their fair values in accordance with Topic 718. Stock option grants, which are generally time vested, will be measured at the grant date fair value and charged to operations on a straight-line basis over the vesting period. The fair value of stock options is determined utilizing the Black-Scholes option-pricing model, which is affected by several variables, including the risk-free interest rate, the expected dividend yield, the expected life of the equity award, the exercise price of the stock option as compared to the fair market value of the common stock on the grant date and the estimated volatility of the common stock over the term of the equity award.

 

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In prior periods, the Company accounted for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the FASB whereby the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. On January 1, 2019, the Company adopted Accounting Standards Update (ASU) 2018-07 which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The Company recognizes the fair value of stock-based compensation within its statements of operations with classification depending on the nature of the services rendered. The adoption of the new standard had no cumulative effect on previously reported amounts.

 

Net Loss per Share

 

The Company’s computation of basic and diluted net loss per common share is measured as net loss divided by the weighted average common shares outstanding during the respective periods, excluding unvested restricted common stock. Shares of restricted stock are included in the basic weighted average number of common shares outstanding from the time they vest. Potential common shares such as from unexercised warrants, options, and shares associated with convertible debt outstanding that have an anti-dilutive effect are excluded from the calculation of diluted net loss per share. The Company’s basic and diluted net loss per share is the same for all periods presented because all shares issuable upon exercise of warrants and conversion of convertible debt outstanding are anti-dilutive as they decrease loss per share.

 

The following table sets forth the number of shares excluded from the computation of diluted loss per share, as their inclusion would have been anti-dilutive:

 

   June 30, 
   2019   2018 
Warrants   261,538    2,656,423 
Options   2,612,500    2,625,000 
    2,874,038    5,281,423 

 

Recent Accounting Pronouncements

 

The Company’s management does not believe that there are any recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s financial statement presentation or disclosures.

 

3. Segment Reporting

 

The Company determined its reporting units in accordance with ASC 280, “Segment Reporting” (“ASC 280”). The Company historically has reported its operating results as a single reportable segment described as the business of developing and commercializing a variety of products that support the detection, intervention and monitoring of a range of eye diseases. The Company’s chief executive officer, who is the Chief Operating Decision Maker (“CODM”), has historically reviewed financial information on an aggregated basis for purposes of allocating resources and evaluating financial performance.

 

In September 2017, the Company, through its wholly-owned subsidiary VectorVision Ocular Health, Inc., acquired substantially all of the assets and certain liabilities of VectorVision, Inc., a company that specialized in the standardization of contrast sensitivity, glare sensitivity, low contrast acuity, and early treatment diabetic retinopathy study (“ETDRS”) visual acuity testing. In August 2018, the Company created a wholly owned subsidiary, Transcranial Doppler Solutions, Inc. (“TDSI”). The Company has established TDSI operations with selected clinics and is focusing on expanding its client base.

 

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Although all of the Company’s products and services target the early detection, intervention and monitoring of a range of eye diseases, the addition of potential new products or services as the Company grows requires management to periodically reevaluate its reporting structure. As sales of our medical food as well as sales of VectorVision products grow, there is an increased need for the CODM to evaluate revenue and gross profit on a product line or group basis for purposes of resource allocation. As of June 30, 2019, the TDSI subsidiary does not meet the required quantitative criteria to be considered a reportable operating segment. Additionally, TDSI does not share similar economic characteristics or a majority of the aggregation criteria set forth in ASC 280, and therefore is included in the category “Other” below. The TDSI business earned $6,300 of service revenue during the quarter ended June 30, 2019 and incurred approximately $121,000 of operating costs during the six months ended June 30, 2019. As of June 30, 2019, based on anticipated growth and the expanding diversity of product and service offerings by the Company, management has concluded that results should be reported in two operating segments: Medical Foods and Vision Testing Diagnostics. The following tables set forth our results of operations by segment (results allocated to Other consist of non-cash stock compensation expense, depreciation and amortization, corporate legal fees, and the TDSI operations):

 

   For the Three Months Ended June 30, 2019 
   Other   Medical Foods   Vision Testing
Diagnostics
   Total 
                 
Revenue  $6,300   $104,448   $150,222   $260,970 
                     
Cost of goods sold   2,559    40,681    53,816    97,056 
                     
Gross profit   3,741    63,767    96,406    163,914 
                     
Operating expenses   1,594,719    1,175,027    206,362    2,976,108 
                     
Loss from operations  $(1,590,978)  $(1,111,260)  $(109,956)  $(2,812,194)

 

   For the Three Months Ended June 30, 2018 
   Other   Medical Foods   Vision Testing
Diagnostics
   Total 
                 
Revenue  $-   $79,993   $140,785   $220,778 
                     
Cost of goods sold   -    40,959    46,817    87,776 
                     
Gross profit   -    39,034    93,968    133,002 
                     
Operating expenses   468,630    893,925    85,429    1,447,984 
                     
Loss from operations  $(468,630)  $(854,891)  $8,539   $(1,314,982)

 

   For the Six Months Ended June 30, 2019 
   Other   Medical Foods   Vision Testing
Diagnostics
   Total 
                 
Revenue  $6,300   $204,382   $292,826   $503,508 
                     
Cost of goods sold   2,559    78,953    109,036    190,548 
                     
Gross profit   3,741    125,429    183,790    312,960 
                     
Operating expenses   1,959,838    2,003,320    347,219    4,310,377 
                     
Loss from operations  $(1,956,097)  $(1,877,891)  $(163,429)  $(3,997,417)

 

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   For the Six Months Ended June 30, 2018 
   Other   Medical Foods   Vision Testing
Diagnostics
   Total 
                 
Revenue  $-   $154,294   $259,524   $413,818 
                     
Cost of goods sold   -    72,238    94,817    167,055 
                     
Gross profit   -    82,056    164,707    246,763 
                     
Operating expenses   1,523,133    2,206,967    163,752    3,893,852 
                     
Loss from operations  $(1,523,133)  $(2,124,911)  $955   $(3,647,089)

 

The following tables set forth our total assets by segment. Intersegment balances and transactions have been removed:

 

   As of June 30, 2019 
   Other   Medical Foods   Vision Testing
Diagnostics
   Total 
Current assets                    
Cash  $13,355   $2,300,973   $54,317   $2,368,645 
Inventories   -    206,876    111,810    318,686 
Other   6,300    129,983    31,943    168,226 
Total current assets   19,655    2,637,832    198,070    2,855,557 
                     
Right to use asset   595,598    -    -    595,598 
Property and equipment, net   -    294,829    9,100    303,929 
Deferred offering   19,000    -    -    19,000 
Intangible assets, net   348,786    -    -    348,786 
Goodwill   1,563,520    -    -    1,563,520 
Other   -    11,751    -    11,751 
                     
Total assets  $2,546,559   $2,944,412   $207,170   $5,698,141 

 

   As of December 31, 2018 
   Other   Medical Foods   Vision Testing
Diagnostics
   Total 
Current assets                    
Cash  $-   $552,613   $118,335   $670,948 
Inventories   -    235,957    122,040    357,997 
Other   -    44,110    31,866    75,976 
Total current assets   -    832,680    272,241    1,104,921 
                     
Property and equipment, net   -    264,178    10,626    274,804 
Deferred offering   270,000    -    -    270,000 
Intangible assets, net   456,104    -    -    456,104 
Goodwill   1,563,520    -    -    1,563,520 
Other   -    11,751    -    11,751 
                     
Total assets  $2,289,624   $1,108,609   $282,867   $3,681,100 

 

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4. Inventories

 

Inventories consisted of the following:

 

   June 30,   December 31, 
   2019   2018 
Raw materials  $248,021   $282,574 
Finished goods   70,665    75,423 
   $318,686   $357,997 

 

5. Property and Equipment, net

 

Property and equipment consisted of the following:

 

   June 30,   December 31, 
   2019   2018 
Leasehold improvements  $98,357   $98,357 
Testing equipment   300,448    249,447 
Furniture and fixtures   171,121    163,186 
Computer equipment   64,976    64,976 
Office equipment   8,193    8,193 
    643,095    584,159 
Less accumulated depreciation and amortization   (339,166)   (309,355)
   $303,929   $274,804 

 

For the six months ended June 30, 2019 and 2018, depreciation and amortization expense was $29,810 and $41,243, respectively, of which $0 and $15,376 was included in research and development expense, $19,065 and $4,138 was included in sales and marketing expense, and $10,745 and $21,729 was included in general and administrative expense, respectively.

 

6. Intangible Assets

 

The Company’s intangible assets, including finite-lived intangible assets and $50,000 of non-amortizable purchased intellectual property, consisted of the following:

 

    June 30,     December 31,  
    2019     2018  
Customer relationships   $ 430,700     $ 430,700  
Technology     161,100       161,100  
Trade Names     115,600       115,600  
Noncompetition     17,000       17,000  
      724,400       724,400  
Less accumulated amortization     (375,614 )     (268,296 )
    $ 348,786     $ 456,104  

 

The Company’s amortization expense on its finite-lived intangible assets was $107,318 and $107,318 for the six months ended June 30, 2019 and 2018, respectively.

 

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The Company estimates future amortization expense on its finite-lived intangible assets as of June 30, 2019 to be as follows:

 

For Years Ended December 31,    
2019  $107,318 
2020   165,320 
2021   16,307 
2022   9,840 
   $298,785 

 

7. Promissory Notes

 

Promissory Note

 

On March 12, 2019, the Company issued a promissory note with principal in the amount of $100,000, simple interest of 10% annually, and with a maturity date of June 10, 2019. On April 11, 2019, the Company repaid the promissory note for a total of $100,548 including accrued interest.

 

Convertible Notes and Related Warrants

 

On March 15, 2019, the Company issued a convertible note with principal in the amount of $100,000, simple interest of 5% annually, and with a maturity date of September 30, 2019. In addition, on March 20, 2019, the Company issued a convertible note with principal in the amount of $150,000, simple interest of 5% annually, and with a maturity date of September 30, 2019. The convertible notes (principal and accrued interest) were mandatorily convertible upon the consummation of the IPO. Concurrent with the issuance of the notes, the Company issued warrants to both note holders equal to the number of shares of common stock that the holders receive in connection with the converted notes. The per share exercise price of the warrants was set at 125% of the conversion price of the notes, defined in the note agreements, as the lower of (a) 75% of the price per share of common stock of the IPO or (b) $2.30. The Company determined that it would have to issue 109,038 warrants based upon the completion of the IPO in April 2019

 

Due to the variable terms of both the exercise price and the number of warrants to be issued, the warrants were accounted for as derivative liabilities at March 31, 2019. The aggregate fair value of the warrants was calculated as $436,034 based on a probability effected Black-Scholes option pricing model with a stock price of $4.00, volatility of 138%, and risk-free rates ranging from 2.34% - 2.39%. The Company recognized a debt discount of $250,000 equal to the face amount of the convertible notes and recorded a financing cost of $186,034 equal to the difference between the fair value of the warrants and the debt discount.

 

The convertible notes and accrued interest with an aggregate balance of $250,788 were mandatorily converted into 109,038 shares of common stock based on a conversion price of $2.30 per share upon the consummation of the IPO in April 2019.and the valuation discount of $250,000 was recognized as interest cost.

 

8. Lease Liabilities

 

In October 2012, the Company entered into a lease agreement for 9,605 square feet of office and warehouse space commencing March 1, 2013. Upon entering into the agreement, the Company paid a deposit of $47,449, of which $36,979 represented prepaid rent. As of June 30, 2019, $11,751 remained on deposit under the lease agreement. The lease (“Lease 1”) was renewed for an additional five years in 2018. As of June 30, 2019, remaining average monthly lease payments under the amended lease agreement were $12,915 through July 2023.

 

In connection with the VectorVision acquisition on September 29, 2017, the Company assumed a lease agreement for 5,000 square feet of office and warehouse space which commenced on October 1, 2017. The lease (“Lease 2”) was renewed for an additional 65 months. As of June 30, 2019, remaining average monthly lease payments are $1,838 through February 2023.

 

In accounting for the leases, the Company adopted ASU 2016-02 - Leases, which requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease initially measured at the present value of the lease payments. The Company classified the leases as operating leases and determined that the fair value of Lease 1 at the inception of the lease was $625,778 using a discount rate of 8.0%. the fair value of Lease 2 at the inception of the lease was $100,742 using a discount rate of 8%. During the six months ended June 30, 2019, the Company made combined payments on both leases of $82,434 towards the lease liabilities. As of June 30, 2019 and December 31, 2018, the lease liability for Lease 1 was $536,672 and $586,082, respectively, and the lease liability for Lease 2 was $69,703 and $77,137, respectively. ASU 2016-02 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. Combined rent expense for both leases for the six months ended June 30, 2019 and 2018 was $87,161 and $10,671, respectively. During the six months ended June 30, 2019 and 2018, the Company reflected amortization of right of use asset of $61,571 and $7,152 related to the leases, respectively, resulting in a net asset balance of $595,598 as of June 30, 2019.

 

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9. Contingencies

 

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 management of the Company, adequate provision has been made in the Company’s financial statements at June 30, 2019 with respect to such matters.

 

10. Stockholders’ Equity (Deficit)

 

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, 2018   1,265,674    0.71    0.29 
Granted   171,538    2.39    3.11 
Forfeitures   -    -    - 
Expirations   (279,424)   (1.96)   - 
Exercised   (896,250)   (1.88)   - 
June 30, 2019, all exercisable   261,538   $2.81    3.35 

 

The exercise prices of warrants outstanding and exercisable as of June 30, 2019 are as follows:

 

Warrants Outstanding and Exercisable (Shares)   Exercise Prices 
 25,000   $0.50 
 65,000    1.50 
 109,038    2.88 
 62,500    5.00 
 261,538      

 

Between February 11, 2019 and May 21, 2019, investors net exercised a total of 632,500 warrants for 492,256 shares of common stock on a cashless basis.

 

Between February 11, 2019 and May 21, 2019, investors exercised warrants for 263,750 shares of common stock. The warrants were exercisable for $0.50 per share, and the Company received $131,875 in cash.

 

As of June 30, 2019, the Company had an aggregate of 261,538 outstanding warrants to purchase shares of its common stock with a weighted average exercise price of $2.81, a weighted average remaining life of 3.35 years and an aggregate intrinsic value of $19,000, based upon a stock valuation of $1.26 per share. The intrinsic value is calculated as the difference between the market value of the underlying common stock and the exercise price of the warrants.

 

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Warrant liability

 

In March 2019, the Company issued warrants to two convertible note holders pursuant to the anticipated completion of the Company’s IPO (the IPO was completed on April 9, 2019). Due to the variable terms of both the exercise price and the number of warrants to be issued, the warrants were accounted for as derivative liabilities at March 31, 2019. At March 31, 2019, the Company estimated that the issuance of 109,038 warrants with an exercise price of $2.88 per share would correspond to the number of shares of common stock that the holders would receive in connection with the completion of the IPO.. The fair value of the warrants at the closing of the IPO was determined to be $359,683 using a Black-Scholes model with a weighted average remaining life of 4.94 years and a stock valuation of $3.30 per share. Upon completion of the IPO, the exercise price and the number of warrants were fixed and the warrants no longer accounted for as liabilities. As such the fair value of the warrant liability of $359,683 was reclassified to equity.

 

On April 4, 2019, the Company issued 62,500 warrants with an exercise price of $5.00 per share to the underwriter (the “Underwriter”) in connection with the Company’s IPO. The Company accounted for these warrants as a derivative liability in the financial statements at June 30, 2019 because they were associated with the IPO, a registered offering, and the settlement provisions contained language that the shares underlying the warrants are required to be registered. The fair value of the warrants is remeasured at each reporting period, and the change in the fair value is recognized in earnings in the accompanying Statements of Operations. The fair value of the warrants at the date of issuance was determined to be $229,291 and was recorded as a finance cost. As of June 30, 2019, the fair value of the warrants was determined to $78,440.

 

The fair value of the warrant liability was determined at the following issuance and reporting dates using the Black-Scholes-Merton option pricing model and the following assumptions:

 

   Convertible Noteholders   Underwriter  

Warrant Liability As of

 
   Upon Issuance   Upon Issuance   June 30, 2019 
Stock price  $4.00   $3.68   $1.26 
Risk free interest rate   2.34 – 2.39%   2.29%   1.71%
Expected volatility   138%   137%   145%
Expected life in years   5.00    5.00    4.76 
Expected dividend yield   0%   0%   0%
Number of warrants   109,038    62,500    62,500 
Fair value of warrants  $436,034   $229,921   $78,440 

 

Stock Options

 

A summary of the Company’s stock option activity is as follows:

 

   Shares  

Weighted

Average
Exercise Price

   Weighted Average Remaining Contractual Term (Years) 
December 31, 2018   1,362,500    2.26    3.78 
Granted   1,250,000    2.11    2.29 
Forfeitures   -    -    - 
Expirations   -    -    - 
Exercised   -    -    - 
June 30, 2019, outstanding   2,612,500   $3.28    4.00 
June 30, 2019, exercisable   1,391,667   $2.41    3.46 

 

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The exercise prices of options outstanding and exercisable as of June 30, 2019 are as follows:

 

Options Outstanding

(Shares)

  

Options Exercisable

(Shares)

   Exercise Prices 
 625,000    625,000   $2.00 
 62,500    62,500    2.30 
 675,000    600,000    2.50 
 1,250,000    104,167    4.40 
 2,612,500    1,391,667      

 

During the six months ended June 30, 2019, the Company granted options to purchase 1,250,000 shares of common stock to the Company’s Chairman and CEO with a grant date fair of $4,122,750. The options will vest on a quarterly basis over three years. The Company accounts share-based payments to employees in accordance with ASC 718 wherein grants are measured at the grant date fair value and charged to operations over the vesting period. During the period ended June 30, 2019, compensation cost of $1, 066,159 was recognized during the period relating the amortization of this award.

 

During the period ended June 30, 2019, option awards were valued based upon the Black-Scholes option-pricing model, with stock price ranging from $3.30 to $4.00 per share, volatility ranging from 115% to 138%, and an average risk-free rate ranging from 2.31% to 2.46%.

 

During the six months ended June 30, 2019 and 2018, we recognized aggregate stock-compensation expense of $1,309,155 and $1,054,885, respectively, based upon stock prices ranging from $3.30 to $4.00 per share, all of which was recorded in general and administrative expense.

 

As of June 30, 2019, the Company had an aggregate of 1,220,833 remaining unvested options outstanding, with a total estimated fair value of $3,132,532, weighted average exercise price of $4.28, and weighted average remaining life of 4.61 years. The aggregate intrinsic value of options outstanding as of June 30, 2019 was $0.

 

11. Related Party Transactions

 

During the six months ended June 30, 2019 and 2018, the Company incurred and paid $150,000 and 137,500, respectively, of salary expense to our Board Chairman and CEO, Mr. Michael Favish. In addition, compensation cost of $1,066,159 was recognized on amortization of stock option awards during the period ended June 30, 2019.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Presentation of Information

 

As used in this Quarterly Report on Form 10-Q, the terms “we,” “us” “our” and the “Company” mean Guardion Health Sciences, Inc. unless the context requires otherwise. The following discussion and analysis should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this report and our audited financing statements for the year ended December 31, 2018, and the notes thereto, which are set forth in the 2018 Form 10-K. All dollar amounts refer to U.S. dollars unless otherwise indicated.

 

Overview

 

Guardion Health Sciences, Inc. (the “Company” or “we”) was formed in December 2009 in California as a limited liability company under the name P4L Health Sciences, LLC, and it subsequently changed its name to Guardion Health Sciences, LLC. On June 30, 2015, the Company converted from a California limited liability company to a Delaware corporation, changing its name to Guardion Health Sciences, Inc.

 

The Company is a specialty health sciences company formed to develop, formulate and distribute condition-specific medical foods with an initial medical food product on the market under the brand name Lumega-Z® that replenishes and restores the macular protective pigment. A depleted macular protective pigment is a modifiable risk factor for retina-based diseases such as age-related macular degeneration (“AMD”), computer vision syndrome (“CVS”) and diabetic retinopathy. The Company believes this risk may be modified by taking Lumega-Z to maintain a healthy macular protective pigment. Additional research has also shown a depleted macular protective pigment to be a biomarker for neurodegenerative diseases such as Alzheimer’s disease and dementia.

 

The Company invented a proprietary technology, embodied in the Company’s medical device, the MapcatSF® that accurately measures the macular pigment optical density (“MPOD”). On November 8, 2016, the United States Patent and Trademark Office (“USPTO”) issued patent number 9,486,136 for the MapcatSF invention. Using the MapcatSF to measure the MPOD allows one to monitor the increase in the density of the macular protective pigment after taking Lumega-Z. The MapcatSF is a non-mydriatic, non-invasive device that accurately measures the MPOD, the lens optical density and lens equivalent age, thereby creating an evidence-based protocol that is shared with the patient. A non-mydriatic device is one that does not require dilation of the pupil for it to function. The MapcatSF is the first medical device using a patented “single fixation” process and “automatic lens density correction” that produces accurate serialized data.

 

In September 2017, the Company, through its wholly-owned subsidiary VectorVision Ocular Health, Inc. (“VectorVision”), acquired substantially all of the assets and certain liabilities of VectorVision, Inc., a company that specialized in the standardization of contrast sensitivity, glare sensitivity, low contrast acuity, and early treatment diabetic retinopathy study (“ETDRS”) visual acuity testing. VectorVision’s standardization system is designed to provide the practitioner or researcher with the ability to delineate very small changes in visual capability, either as compared to the population or from visit to visit. VectorVision develops, manufactures and sells equipment and supplies for standardized vision testing for use by eye doctors in clinical trials, for real-world vision evaluation, and industrial vision testing. The acquisition expanded the Company’s technical portfolio. CSV-1000 and CSV-3000 instruments offer auto-calibrated tests to ensure correct testing luminance and contrast levels for consistent, highly accurate and repeatable results. Recently issued patents the Company received for continuously calibrating the light source will be incorporated into the new CSV-2000, in which the proprietary standardized contrast sensitivity test patterns can be presented to the patient using a computer monitor as opposed to the current calibrated backlit system. The Company believes the acquisition of VectorVision further establishes its position at the forefront of early detection, intervention and monitoring of a range of eye diseases.

 

In August 2018, the Company created a wholly owned subsidiary, Transcranial Doppler Solutions, Inc. (“TDSI”). TDSI is dedicated to the pursuit of early predictors resulting in, the Company believes, valuable therapeutic intervention for practitioners and their patients, and additional revenue streams generated from the testing and sale of Company products to appropriate customers. The Company has established operations with selected clinics and is focusing on expanding its client base.

 

In November 2018, the Company launched a new medical food product, GlaucoCetinTM, which the Company believes is the first vision-specific medical food designed to support and protect the mitochondrial function of optic nerve cells and improve blood flow in the ophthalmic artery in patients with glaucoma. The Company believes GlaucoCetinTM is the first vision-specific medical food designed to support and protect the mitochondrial function of optic nerve cells and improve blood flow in the ophthalmic artery in patients with glaucoma. The parent compound of GlaucoCetinTM, called “GlaucoHealth,” was designed by Robert Ritch, M.D., one of the Company’s Medical Advisory Board members. Dr. Robert Ritch holds the Shelley and Steven Einhorn Distinguished Chair in Ophthalmology and is surgeon Director Emeritus and Chief of Glaucoma Services at the New York Eye and Ear Infirmary. Dr. Ritch has devoted his career to broadening the understanding of the underlying etiologies and mechanisms of glaucoma. The Company now owns the GlaucoHealth formula.

 

The Company has had limited operations to date and has been primarily engaged in research and development, product commercialization and capital raising activities.

 

By combining the MapcatSF medical device, the newly acquired VectorVision standardized vision testing technology and Lumega-Z medical food, the Company has developed, based on Management’s knowledge of the industry, what it believes to be the only reliable three-pronged, evidence-based protocol for replenishing and restoring the macular protective pigment, increasing overall retinal health and measuring the related improvements in visual function.

 

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Recent Developments

 

Initial Public Offering

 

On April 9, 2019, the Company closed its initial public offering (the “IPO”) of 1,250,000 shares of common stock, par value $0.001 per share, at an IPO price to the public of $4.00 per share resulting in net proceeds to the Company of $3,888,000 after all costs and expenses. The shares began trading on the NASDAQ Capital Market on April 5, 2019 under the symbol “GHSI.”

 

Products

 

Lumega-Z has been used in IRB-approved patient studies to examine its effectiveness. On May 9, 2019, the Company announced in a press release a recent study that showed statistically significant improvement in visual function (“CSF”) of patients taking Lumega-Z who participated in the study. The study was conducted by research scientists at the Western University College of Optometry to evaluate the visual benefits of Lumega-Z in one group of patients as compared to a group of patients taking AREDS 2 soft gel supplements. Each patient has retinal drusen and is at risk of developing AMD. The results of the study were presented at the Association for Research in Vision and Ophthalmology (“ARVO”) 2019 annual meeting and showed improvements in visual function (“CSF”) in the group of patients taking Lumega-Z that were statistically significant and definitive. The patients taking AREDS 2 showed no statistical change.

 

On June 4, 2019, the Company announced in a press release that the parent compound of the GlaucoCetinTM formula was used in an IRB-approved patient study conducted at the New York Eye and Ear Infirmary and successfully reversed mitochondrial dysfunction in the optic nerve cells in patients with glaucoma. GlaucoCetinTM is an enhanced formulation of GlaucoHealth. The Company owns both formulas and has a patent application pending on the GlaucoCetinTM formula. The application describes an invention that provides a micro-nutrient composition for a human subject suffering from a glaucomatous disease, wherein the micro-nutrient composition comprises a formulation for reversing mitochondrial dysfunction in glaucomatous disease.

 

Patents

 

On July 16, 2019, the Company was notified by the Patents Registry in Hong Kong that it has received a patent from the Government of the Hong Kong Special Administrative Region (Hong Kong Patent No. HK1204758 titled “Apparatus for Use in the Measurement of Macular Pigment Optical Density and/or Lens Optical Density of an Eye”) for the MapcatSF®.

 

On May 30, 2019, the Company was notified by the European Patent Office that it has received a patent from the European Union (European Patent No. 2,811,892 titled “Apparatus for Use in the Measurement of Macular Pigment Optical Density and/or Lens Optical Density of an Eye”) for the MapcatSF®.

 

Trademarks

 

On April 25, 2019, the Company was notified by the State Intellectual Property Office of the People’s Republic of China (“China”) that the Company has been granted trademark registrations in China for its proprietary medical food, Lumega-Z (Registration No. 27151643), and for its proprietary and patented medical device, the MapcatSF (Registration No. 27151644). The trademark registration for the mark LUMEGA-Z is effective from November 7, 2018 to November 6, 2028. The trademark registration for the mark MAPCAT SF is effective from October 28, 2018 to October 27, 2028.

 

Going Concern

 

The financial statements have been prepared assuming the Company will continue as a going concern. The Company had a net loss of $4,437,177 and utilized cash in operating activities of $2,493,696 during the six months ended June 30, 2019. The Company expects to continue to incur net losses and negative operating cash flows in the near-term. As a result, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued.

 

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The Company’s independent registered public accounting firm has also included explanatory language in their opinion accompanying the Company’s audited financial statements for the year ended December 31, 2018. The Company’s financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.

 

The Company will continue to incur significant expenses for continued commercialization activities related to Lumega-Z, the MapcatSF® medical device, VectorVision products, the TDSI business and with respect to efforts to continue to build the Company’s infrastructure. Development and commercialization of medical foods and medical devices involves a lengthy and complex process. Additionally, the Company’s long-term viability and growth may depend upon the successful development and commercialization of new complementary products or product lines. On April 9, 2019, the Company completed the IPO, resulting in net cash proceeds of $3,888,000 to the Company. The Company is seeking to raise additional debt and/or equity capital to fund future operations, but there can be no assurances that the Company will be able to secure such additional financing in the amounts necessary to fully fund its operating requirements on acceptable terms or at all. If the Company is unable to access sufficient capital resources on a timely basis, the Company may be forced to reduce or discontinue its technology and product development programs and curtail or cease operations.

 

Reverse Stock Split

 

On January 30, 2019, following stockholder and Board approval, the Company filed a Certificate of Amendment to its Amended Certificate of Incorporation, as amended (the “Amendment”), with the Secretary of State of the State of Delaware to effectuate a one-for-two (1:2) reverse stock split (the “Reverse Stock Split”) of its common stock, par value $0.001 per share, without any change to its par value. The Amendment became effective on the filing date. The number of shares authorized for common and preferred stock were not affected by the Reverse Stock Split. No fractional shares were issued in connection with the Reverse Stock Split as all fractional shares were “rounded up” to the next whole share. Proportional adjustments for the Reverse Stock Split were made to the Company’s outstanding common stock, stock options, and warrants as if the split occurred at the beginning of the earliest period presented.

 

Recent Accounting Pronouncements

 

See Note 2 to the condensed consolidated financial statements for the period ended June 30, 2019 for management’s discussion of recent accounting pronouncements.

 

Concentration of Risk

 

Cash balances are maintained at large, well-established financial institutions. At times, cash balances may exceed federally insured limits. Insurance coverage limits are $250,000 per depositor at each financial institution. The Company has never experienced any losses related to these balances.

 

Critical Accounting Policies and Estimates

 

The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of its financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual results could differ from those estimates. The Company’s financial statements included herein include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows.

 

The following critical accounting policies affect the more significant judgments and estimates used in the preparation of the Company’s financial statements.

 

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Intangible Assets

 

In connection with the VectorVision transaction, the Company identified and allocated estimated fair values to intangible assets including goodwill and customer relationships.

 

In accordance with Accounting Standard Codification (“ASC”) 350 – Intangibles – Goodwill and Other, the Company determined whether these assets are expected to have indefinite (such as goodwill) or limited useful lives, and for those with limited lives, the Company established an amortization period and method of amortization. The Company’s goodwill and other intangible assets are subject to periodic impairment testing.

 

The Company utilized the services of an independent third-party valuation firm to assist it in identifying intangible assets and in estimating their fair values. The useful lives for its intangible assets other than goodwill were estimated based on Management’s consideration of various factors, including assumptions that market participants might use about sales expectations as well as potential effects of obsolescence, competition, technological progress and the regulatory environment. Because the future pattern in which the economic benefits of these intangible assets may not be reliably determined, amortization expense is generally calculated on a straight-line basis.

 

The Company reviews all intangible assets for impairment when circumstances indicate that their carrying values may not be recoverable. If the carrying value of an asset group is not recoverable, the Company recognizes an impairment loss for the excess carrying value over the fair value in its consolidated statements of operations. As of June 30, 2019 and December 31, 2018, the Company was not aware of the existence of any indicators of impairment of its intangibles at such dates.

 

Goodwill

 

Goodwill represents the excess of the purchase consideration over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. The Company evaluates goodwill for impairment on an annual basis or whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. The Company conducts its annual impairment analysis in the beginning of the fourth quarter of each fiscal year. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. Estimations and assumptions regarding the number of reporting units, future performances, results of the Company’s operations and comparability of its market capitalization and net book value will be used. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and an impairment loss is measured by the resulting amount. As of June 30, 2019 and December 31, 2018, the Company was not aware of the existence of any indicators of impairment of its goodwill at such dates.

 

Stock-Based Compensation

 

The Company periodically issues stock-based compensation to officers, directors, contractors and consultants for services rendered. Such issuances vest and expire according to terms established at the issuance date.

 

Stock-based payments to officers, directors, and employees, which include grants of employee stock options, are recognized in the financial statements based on their fair values. Stock option grants, which are generally time vested, will be measured at the grant date fair value and charged to operations on a straight-line basis over the vesting period. The fair value of stock options is determined utilizing the Black-Scholes option-pricing model, which is affected by several variables, including the risk-free interest rate, the expected dividend yield, the expected life of the equity award, the exercise price of the stock option as compared to the fair market value of the common stock on the grant date and the estimated volatility of the common stock over the term of the equity award.

 

In prior periods, the Company accounted for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the FASB whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. On January 1, 2019, the Company adopted Accounting Standards Update (ASU) 2018-07 which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. Non-employee stock-based compensation charges generally are amortized over the vesting period using a graded vesting basis. In certain circumstances where there are no future performance requirements by the non-employee, grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.

 

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The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. Until the Company has established a trading market for its common stock, estimated volatility is based on the average historical volatilities of comparable public companies in a similar industry. The expected dividend yield is based on the current yield at the grant date. The Company has never declared or paid dividends on its common stock and has no plans to do so for the foreseeable future.

 

The fair value of common stock was determined based on management’s judgment. Due to the availability of historical data from the Company’s recent preferred stock sales, Management used a valuation of $1.15 for accounting purposes during the first six months of 2018. Management used a valuation $4.00 for the first quarter of 2019. Management considered business and market factors affecting the Company during these periods, including capital raising efforts, its proprietary technology, and other factors. Based on this evaluation, management believes that its valuations are appropriate for accounting purposes during these periods. Closing prices of our common stock ranging from $1.26 to $3.30 were used in our fair value calculations during the second quarter of 2019.

 

The Company recognizes the fair value of stock-based compensation within its statements of operations with classification depending on the nature of the services rendered.

 

Plan of Operations

 

General Overview

 

Based on the availability of sufficient funding, the Company intends to increase its commercialization activities and:

 

  further the commercial production of the MapcatSF;
  expand the Company’s domestic sales and marketing efforts;
  explore sales and marketing opportunities in foreign markets such as Asia and Europe;
  increase production of Lumega-Z and GlaucoCetinTM to support the additional sales resulting from the deployment of additional MapcatSF units and increased marketing and promotional activity;
  commence certain FDA electrical safety testing of the MapcatSF;
  increase focus on intellectual property protection and strategy;
  expand the sales and marketing of the VectorVision product line;
  develop the TDSI business and operations; and
  explore opportunities and channels to enter the expansive market opportunity in China for non-pharmacologic treatments of macular degeneration, glaucoma and diabetic retinopathy.

 

The FDA and other regulatory bodies require electronic medical devices to comply with IEC 60601 standards. The International Electrical Commission (“IEC”) established technical standards for the safety and effectiveness of medical electrical equipment. Adherence to these standards is required for commercialization of electrical medical equipment. As a medical device powered by electricity, the MapcatSF will need to undergo testing to demonstrate compliance with the IEC 60601 standards. This testing is typically conducted by a Nationally Recognized Testing Laboratory (“NRTL”), which is an independent laboratory recognized by the Occupational Safety and Health Administration (“OSHA”) to test products to the specifications of applicable product safety standards. The Company is in discussions with its contract manufacturer of the MapcatSF to engage an NRTL at the appropriate juncture prior to commercialization of the MapcatSF. The relevant predicate device for the MapcatSF is the MPS II, the applicable Class I product code for the MapcatSF is HJW and the applicable Code of Federal Regulation is 886.1050. The FDA does not require test documents to be submitted to the FDA for a Class I medical device, but that the evidence of such testing be placed in a Design History file and be kept internally at the company or manufacturer and readily available should the FDA or other regulatory bodies request to review the testing documents. While the FDA does not require that a Class I medical device have formal validation, the Company expects to complete applicable IEC 60601-1 testing prior to commercialization because the Company believes in marketing a product that has evidence that it is safe and effective.

 

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Results of Operations

 

Through June 30, 2019, the Company had limited operations and has primarily been engaged in product development, commercialization, and raising capital. The Company has incurred and will continue to incur significant expenditures for the development of its products and intellectual property, which includes both medical foods and medical diagnostic equipment for the treatment of various eye diseases. The Company had limited revenue during the six months ended June 30, 2019 and 2018.

 

Comparison of Three Months Ended June 30, 2019 and 2018

 

  

Three Months Ended

June 30,

     
   2019   2018   Change 
Revenue  $260,970   $220,778   $40,192    18%
Cost of goods sold   97,056    87,776    9,280    11%
Gross Profit   163,914    133,002    30,912    23%
Operating Expenses:                    
Research and development   77,688    34,320    43,368    126%
Sales and marketing   409,409    378,750    30,659    8%
General and administrative   2,489,011    1,034,914    1,454,097    141%
Total Operating Expenses   2,976,108    1,447,984    1,528,124    106%
Loss from Operations   (2,812,194)   (1,314,982)   (1,497,212)   114%
Other Expense:                    
Interest expense   234,065    710    233,355    32,867%
Finance cost upon issuance of warrants   229,921    -    229,921    100%
Change in fair value of derivative warrants   (227,832)   -    (227,832)   100%
Costs associated with extension of warrant expiration dates   -    494,391    (494,391)   (100)%
Net Loss  $(3,048,348)  $(1,810,083)  $(1,238,265)   68%

 

Revenue

 

For the three months ended June 30, 2019, revenue from product sales was $260,970 compared to $220,788 for the three months ended June 30, 2018, resulting in an increase of $40,192 or 18%. The increase reflects both an increased customer base for Lumega-Z as the Company expands into new clinics and increased sales of VectorVision products. The Company also earned $6,300 in revenue from its TDSI business during the three months ended June 30, 2019.

 

Cost of Goods Sold

 

For the three months ended June 30, 2019, cost of goods sold was $97,056 compared to $87,776 for the three months ended June 30, 2018, resulting in an increase of $9,280 or 11%. The increase reflects the additional sales recorded in 2018.

 

Gross Profit

 

For the three months ended June 30, 2019, gross profit was $163,914 compared to $133,002 for the three months ended June 30, 2018, resulting in an increase of $30,912 or 23%. Gross profit represented 63% of revenues the three months ended June 30, 2019, versus 60% of revenue for the three months ended June 30, 2018. The increase in gross profit in 2019 was due primarily to pricing and product mix changes in 2019.

 

Research and Development

 

For the three months ended June 30, 2019, research and development costs were $77,688 compared to $34,320 for the three months ended June 30, 2018, resulting in an increase of $43,368 or 126%. The increase was due to engineering development costs associated with the Company’s CSV-2000 product in 2019.

 

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Sales and Marketing

 

For the three months ended June 30, 2019, sales and marketing expenses were $409,409 compared to $378,750 for the three months ended June 30, 2018. The increase in sales and marketing expenses of $30,659 or 8% compared to the prior period was primarily due to increased trade show costs and consulting fees in the current quarter.

 

General and Administrative

 

For the three months ended June 30, 2019, general and administrative expenses were $2,489,011 compared to $1,034,914 for the three months ended June 30, 2018. The increase of $1,454,097 or 141% compared to the prior period was primarily due to an increase in non-cash stock compensation costs during the current period of approximately $976,000. Additionally, expenses for corporate insurance, investor relations, labor, legal and professional fees, and travel have increased versus the prior period.

 

Interest Expense

 

For the three months ended June 30, 2019, interest expense was $234,065 compared to $710 for the three months ended June 30, 2018. The increase of 233,355 compared to the prior period was due primarily to the amortization of the valuation discount of the March 2019 convertible notes of $233,455 that was reflected as an expense when the notes were converted. There were no such costs for the comparable period in 2018.

 

Finance Cost Upon Issuance of Warrants

 

Finance costs for the three months ended June 30, 2019 were $229,921. There were no such costs for the comparable period in 2018. On April 4, 2019, the Company issued 62,500 warrants with an exercise price of $5.00 per share to the underwriter (the “Underwriter”) in connection with the Company’s IPO. The Company accounted for these warrants as a derivative liability in the financial statements at June 30, 2019 because they were associated with the IPO, a registered offering, and the settlement provisions contained language that the shares underlying the warrants are required to be registered. The fair value of the warrants at the date of issuance was determined to be $229,291 and was recorded as a finance cost.

 

Change in Fair Value of Derivative Warrants

 

The change in fair value of the derivative warrant liability was a decrease of $227,832 for the three months ended June 30, 2019. There were no such costs for the comparable period in 2018. In March 2019, the Company issued warrants to two convertible note holders pursuant to the anticipated completion of the Company’s IPO (the IPO was completed on April 9, 2019). Due to the variable terms of both the exercise price and the number of warrants to be issued, the warrants were accounted for as derivative liabilities at March 31, 2019 with a fair value of $436,034. Upon completion of the IPO on April 9, 2019, the exercise price and the number of warrants were fixed and the warrants no longer accounted for as liabilities. As such the fair value of the warrant liability of $359,683 was reclassified to equity and the remaining liability of $76,351 was recorded as a change in fair value of derivative liabilities in the Statements of Operations.

 

On April 4, 2019, the Company issued 62,500 warrants with an exercise price of $5.00 per share to the Underwriter in connection with the Company’s IPO. The Company accounted for these warrants as a derivative liability in the financial statements at June 30, 2019 because they were associated with the IPO, a registered offering, and the settlement provisions contained language that the shares underlying the warrants are required to be registered. The fair value of the warrants will be remeasured at each reporting period, with the change in the fair value recognized in earnings in the accompanying Statements of Operations. The fair value of the warrants at the date of issuance was determined to be $229,291 and was recorded as a finance cost. As of June 30, 2019, the fair value of the warrant liability was determined to be $78,440 and the Company recorded a change in fair value of derivative warrants of $151,481 in the Statements of Operations.

 

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Costs associated with extension of warrant expiration dates

 

During April and May of 2018, the Company offered exercise period extensions to stockholders who held warrants to purchase shares of common stock of the Company that were scheduled to expire on May 1, 2018. The Company recognized expense of $494,391 relating to the extension of the exercise period of the warrants using a Black-Scholes option-pricing model to estimate fair value.

 

Net Loss

 

For the three months ended June 30, 2019, the Company incurred a net loss of $3,048,348, compared to a net loss of $1,810,083 for the three months ended June 30, 2018. The increase in net loss of $1,238,265 or 68% compared to the prior year period was primarily due to an increase in non-cash stock compensation costs of approximately $976,000. In addition, engineering costs as well as corporate operating expenses increased during the current period.

 

Segment Information

 

As of June 30, 2019, Management reported its operating results in two operating segments: Medical Foods, and Vision Testing Diagnostics. As of June 30, 2019, the TDSI subsidiary does not meet the required quantitative criteria to be considered a reportable operating segment.

 

  i. Medical Foods – Our Medical Foods segment develops, formulates and distributes condition-specific medical foods with an initial medical food product on the market under the brand name Lumega-Z® that replenishes and restores the macular protective pigment. We have also invented a proprietary technology, embodied in a medical device, the MapcatSF,® that accurately measures the macular pigment optical density (“MPOD”). Using the MapcatSF to measure the MPOD allows one to monitor the increase in the density of the macular protective pigment after taking Lumega-Z. The Company has also developed a new medical food product, GlaucoCetinTM, which the Company believes is the first vision-specific medical food designed to support and protect the mitochondrial function of optic nerve cells and improve blood flow in the ophthalmic artery in patients with glaucoma. GlaucoCetinTM combines a unique set of ingredients, specifically designed to stop or potentially reverse the underlying cause of optic nerve loss, and ultimately vision loss, in patients with glaucoma.
     
  ii. Vision Testing Diagnostics – Our Vision Testing Diagnostics segment, under the brand name VectorVision, specializes in the standardization of contrast sensitivity, glare sensitivity, low contrast acuity, and early treatment diabetic retinopathy study (“ETDRS”) visual acuity testing. VectorVision’s standardization system is designed to provide the practitioner or researcher with the ability to delineate very small changes in visual capability, either as compared to the population or from visit to visit. VectorVision develops, manufactures and sells equipment and supplies for standardized vision testing for use by eye doctors in clinical trials, for real-world vision evaluation, and industrial vision testing.

 

The following tables set forth our results of operations by segment (results allocated to Other consist of non-cash stock compensation expense, depreciation and amortization, corporate legal fees, and the TDSI operations):

 

   For the Three Months Ended June 30, 2019 
   Other   Medical Foods   Vision Testing
Diagnostics
   Total 
                 
Revenue  $6,300   $104,448   $150,222   $260,970 
                     
Cost of goods sold   2,559    40,681    53,816    97,056 
                     
Gross profit   3,741    63,767    96,406    163,914 
                     
Operating expenses   1,594,719    1,175,027    206,362    2,976,108 
                     
Loss from operations  $(1,590,978)  $(1,111,260)  $(109,956)  $(2,812,194)

 

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   For the Three Months Ended June 30, 2018 
   Other   Medical Foods   Vision Testing
Diagnostics
   Total 
                 
Revenue  $-   $79,993   $140,785   $220,778 
                     
Cost of goods sold   -    40,959    46,817    87,776 
                     
Gross profit   -    39,034    93,968    133,002 
                     
Operating expenses   468,630    893,925    85,429    1,447,984 
                     
Loss from operations  $(468,630)  $(854,891)  $8,539   $(1,314,982)

 

For the three months ended June 30, 2019, revenue from our Medical Foods segment was $104,448 compared to $79,993 for the three months ended June 30, 2018, resulting in an increase of $24,455 or 31%. The increase reflects an increased customer base for Lumega-Z as the Company expands into new clinics. For the three months ended June 30, 2019, revenue from our Vision Testing Diagnostics segment was $150,222 compared to $140,785 for the three months ended June 30, 2018, resulting in an increase of $9,437 or 7%. The increase was due to increased distributor sales in 2019. The Company also earned $6,300 in diagnostic imaging services revenue from its TDSI business during the three months ended June 30, 2019, as shown in the Other category above.

 

Cost of Goods Sold

 

For the three months ended June 30, 2019, cost of goods sold from our Medical Foods segment was $40,681 compared to $40,959 for the three months ended June 30, 2018, resulting in a decrease of $278 or 1%. For the three months ended June 30, 2019, cost of goods sold from our Vision Testing Diagnostics segment was $53,816 compared to $46,817 for the three months ended June 30, 2018, resulting in an increase of $6,999 or 15%. The increase for both segments reflects the additional sales recorded in 2018.

 

Gross Profit

 

For the three months ended June 30, 2019, gross profit from the Medical Foods segment was $63,767 compared to $39,034 for the three months ended June 30, 2018, resulting in an increase of $24,733 or 63%. For the three months ended June 30, 2019, gross profit from the Vision Testing Diagnostics segment was $96,406 compared to $93,968 for the three months ended June 30, 2018, resulting in an increase of $2,438 or 3%. The increase is due to the additional sales recorded for both segments in the current year. Gross profit overall represented 63% of revenues for the three months ended June 30, 2019, versus 60% of revenue for the three months ended June 30, 2018. The increase in 2019 was due increased sales and to pricing and product mix changes in 2019.

 

Comparison of Six Months Ended June 30, 2019 and 2018

 

  

Six Months Ended

June 30,

     
   2019   2018   Change 
Revenue  $503,508   $413,818   $89,690    22%
Cost of goods sold   190,548    167,055    23,493    14%
Gross Profit   312,960    246,763    66,197    27%
Operating Expenses:                    
Research and development   106,716    194,708    (87,992)   (45)%
Sales and marketing   764,028    984,464    (220,436)   (22)%
General and administrative   3,439,633    2,714,680    724,953    27%
Total Operating Expenses   4,310,377    3,893,852    416,525    11%
Loss from Operations   (3,997,417)   (3,647,089)   (350,328)   10%
Other Expense:                    
Interest expense   251,637    1,545    250,092    16,187%
Finance cost upon issuance of warrants   415,955    -    415,955    100%
Change in fair value of derivative warrants   (227,832)   -    (227,832)   100%
Costs associated with extension of warrant expiration dates   -    494,391    (494,391)   (100)%
Net Loss  $(4,437,177)  $(4,143,025)  $(294,152)   7%

 

 29 

 

 

Revenue

 

For the six months ended June 30, 2019, revenue from product sales was $503,508 compared to $413,818 for the six months ended June 30, 2018, resulting in an increase of $86,690 or 22%. The increase reflects both an increased customer base for Lumega-Z as the Company expands into new clinics and increased sales of VectorVision products. The Company also earned $6,300 in revenue from its TDSI business during the three months ended June 30, 2019.

 

Cost of Goods Sold

 

For the six months ended June 30, 2019, cost of goods sold was $190,548 compared to $167,055 for the six months ended June 30, 2018, resulting in an increase of $23,493 or 14%. The increase results primarily from costs associated with the additional sales recorded in 2019 as compared to 2018.

 

Gross Profit

 

For the six months ended June 30, 2019, gross profit was $312,960 compared to $246,763 for the six months ended June 30, 2018, resulting in an increase of $66,197 or 27%. Gross profit represented 62% of revenues for the six months ended June 30, 2019, versus 60% of revenue for the six months ended June 30, 2018. The increase in gross profit in 2019 was due primarily to pricing and product mix changes in 2019.

 

Research and Development

 

For the six months ended June 30, 2019, research and development costs were $106,716 compared to $194,708 for the six months ended June 30, 2018, resulting in a decrease of $87,992 or 45%. The decrease was due to reduced engineering development costs associated with the Company’s MapcatSF medical device during 2019 partially offset by engineering costs associated with the Company’s CSV-2000 product.

 

Sales and Marketing

 

For the six months ended June 30, 2019, sales and marketing expenses were $764,028 compared to $984,464 for the six months ended June 30, 2018. The decrease in sales and marketing expenses of $220,436 or 22% compared to the prior period was primarily due to costs associated with engagement of a third-party contract sales organization in 2018. The contract sales agreement was cancelled during the second quarter of 2018.

 

General and Administrative

 

For the six months ended June 30, 2019, general and administrative expenses were $3,439,633 compared to $2,714,680 for the six months ended June 30, 2018. The increase of $724,953 or 27% compared to the prior period was primarily due to an increase in non-cash stock compensation costs during the current period of approximately $254,000. Additionally, expenses for corporate insurance, investor relations, labor, legal and professional fees, and travel have increased versus the prior period.

 

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Interest Expense

 

For the six months ended June 30, 2019, interest expense was $251,637 compared to $1,545 for the six months ended June 30, 2018. The increase of $250,092 compared to the prior period was due primarily to the amortization of the valuation of the March 2019 convertible notes of $250,000 that was reflected as an expense when the notes were converted. There were no such costs for the comparable period in 2018.

 

Finance Cost Upon Issuance of Warrants

 

Finance costs for the six months ended June 30, 2019 of $415,955 include the following; (I) In March 2019, the Company issued warrants to two convertible note holders pursuant to the anticipated completion of the Company’s IPO (the IPO was completed on April 9, 2019). Due to the variable terms of both the exercise price and the number of warrants to be issued, the warrants were accounted for as derivative liabilities at March 31, 2019.  The fair value of the warrants at the closing of the IPO was determined to be $436,034, of which $250,000 was recorded as a valuation discount, and $186,034 was recorded as a finance cost. (II) On April 4, 2019, the Company issued 62,500 warrants with an exercise price of $5.00 per share to the Underwriter in connection with the Company’s IPO. The Company accounted for these warrants as a derivative liability in the financial statements at June 30, 2019 because they were associated with the IPO, a registered offering, and the settlement provisions contained language that the shares underlying the warrants are required to be registered. The fair value of the warrants at the date of issuance was determined to be $229,291 and was recorded as a finance cost. There were no such costs for the comparable period in 2018.

 

Change in Fair Value of Derivative Warrants

 

The change in fair value of the derivative warrant liability was a decrease of $227,832 for the six months ended June 30, 2019. There were no such costs for the comparable period in 2018. In March 2019, the Company issued warrants to two convertible note holders pursuant to the anticipated completion of the Company’s IPO (the IPO was completed on April 9, 2019). Due to the variable terms of both the exercise price and the number of warrants to be issued, the warrants were accounted for as derivative liabilities at March 31, 2019 with a fair value of $436,034. Upon completion of the IPO on April 9, 2019, the exercise price and the number of warrants were fixed and the warrants no longer accounted for as liabilities. As such the fair value of the warrant liability of $359,683 was reclassified to equity and the remaining liability of $76,351 was recorded as a change in fair value of derivative liabilities in the Statements of Operations.

 

On April 4, 2019, the Company issued 62,500 warrants with an exercise price of $5.00 per share to the Underwriter in connection with the Company’s IPO. The Company accounted for these warrants as a derivative liability in the financial statements at June 30, 2019 because they were associated with the IPO, a registered offering, and the settlement provisions contained language that the shares underlying the warrants are required to be registered. The fair value of the warrants will be remeasured at each reporting period, with the change in the fair value recognized in earnings in the accompanying Statements of Operations. The fair value of the warrants at the date of issuance was determined to be $229,291 and was recorded as a finance cost. As of June 30, 2019, the fair value of the warrant liability was determined to be $78,440 and the Company recorded a change in fair value of derivative warrants of $151,481 in the Statements of Operations.

 

Costs associated with extension of warrant expiration dates

 

During April and May of 2018, the Company offered exercise period extensions to stockholders who held warrants to purchase shares of common stock of the Company that were scheduled to expire on May 1, 2018. The Company recognized expense of $494,391 relating to the extension of the exercise period of the warrants using a Black-Scholes option-pricing model to estimate fair value.

 

Net Loss

 

For the six months ended June 30, 2019, the Company incurred a net loss of $4,437,177, compared to a net loss of $4,143,025 for the six months ended June 30, 2018. The increase in net loss of $294,152 or 7% compared to the prior year period was primarily due to an increase in non-cash stock compensation costs of approximately $254,000. In addition, expenses for corporate insurance, investor relations, labor, legal and professional fees, and travel have increased versus the prior period but were offset by the elimination of costs associated with engagement of a third-party contract sales organization in 2018.

 

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Segment Information

 

The following tables set forth our results of operations by segment (results allocated to Other consist of non-cash stock compensation expense, depreciation and amortization, corporate legal fees, and the TDSI operations):

 

   For the Six Months Ended June 30, 2019 
   Other   Medical Foods   Vision Testing
Diagnostics
   Total 
                 
Revenue  $6,300   $204,382   $292,826   $503,508 
                     
Cost of goods sold   2,559    78,953    109,036    190,548 
                     
Gross profit   3,741    125,429    183,790    312,960 
                     
Operating expenses   1,959,838    2,003,320    347,219    4,310,377 
                     
Loss from operations  $(1,956,097)  $(1,877,891)  $(163,429)  $(3,997,417)

 

   For the Six Months Ended June 30, 2018 
   Other   Medical Foods   Vision Testing
Diagnostics
   Total 
                 
Revenue  $-   $154,294   $259,524   $413,818 
                     
Cost of goods sold   -    72,238    94,817    167,055 
                     
Gross profit   -    82,056    164,707    246,763 
                     
Operating expenses   1,523,133    2,206,967    163,752    3,893,852 
                     
Loss from operations  $(1,523,133)  $(2,124,911)  $955   $(3,647,089)

 

For the six months ended June 30, 2019, revenue from our Medical Foods segment was $204,382 compared to $154,294 for the six months ended June 30, 2018, resulting in an increase of $50,088 or 32%. The increase reflects an increased customer base for Lumega-Z as the Company expands into new clinics. For the six months ended June 30, 2019, revenue from our Vision Testing Diagnostics segment was $292,826 compared to $259,524 for the six months ended June 30, 2018, resulting in an increase of $33,302 or 13%. The increase was due to increased distributor sales in 2019. The Company also earned $6,300 in diagnostic imaging services revenue from its TDSI business during the three months ended June 30, 2019, as shown in the Other category above.

 

Cost of Goods Sold

 

For the six months ended June 30, 2019, cost of goods sold from our Medical Foods segment was $78,953 compared to $72,238 for the six months ended June 30, 2018, resulting in an increase of $6,715 or 9%. For the six months ended June 30, 2019, cost of goods sold from our Vision Testing Diagnostics segment was $109,036 compared to $94,817 for the six months ended June 30, 2018, resulting in an increase of $14,219 or 15%. The increase for both segments results primarily from costs associated with the additional sales recorded in 2019 as compared to 2018.

 

 32 

 

 

Gross Profit

 

For the six months ended June 30, 2019, gross profit from the Medical Foods segment was $125,429 compared to $82,056 for the six months ended June 30, 2018, resulting in an increase of $43,373 or 53%. For the six months ended June 30, 2019, gross profit from the Vision Testing Diagnostics segment was $183,790 compared to $164,707 for the six months ended June 30, 2018, resulting in an increase of $19,083 or 12%. The increase is due to the additional sales recorded for both segments in the current year. Gross profit overall represented 62% of revenues for the six months ended June 30, 2019, versus 60% of revenue for the six months ended June 30, 2018. The increase in 2019 was due increased sales and to pricing and product mix changes in 2019.

 

Liquidity and Capital Resources

 

Since its formation in 2009, the Company has devoted substantial effort and capital resources to the development and commercialization activities related to its lead product Lumega-Z and its MapcatSF medical device. As a result of these and other activities, the Company utilized cash in operating activities of $2,493,696 during the six months ended June 30, 2019. The Company had working capital of $2,326,641 at June 30, 2019. As of June 30, 2019, the Company had cash in the amount of $2,368,645 and no available borrowings. The Company’s financing has historically come primarily from the issuance of convertible notes, promissory notes and from the sale of common and preferred stocks.

 

The financial statements have been prepared assuming the Company will continue as a going concern. The Company expects to continue to incur net losses and negative operating cash flows in the near-term. As a result, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued.

 

The Company’s independent registered public accounting firm has also included explanatory language in their opinion accompanying the Company’s audited financial statements for the year ended December 31, 2018. The Company’s financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.

 

The Company will continue to incur significant expenses for continued commercialization activities related to Lumega-Z, the MapcatSF medical device, VectorVision products, the TDSI business and with respect to efforts to continue to build the Company’s infrastructure. Development and commercialization of medical foods and medical devices involves a lengthy and complex process. Additionally, the Company’s long-term viability and growth may depend upon the successful development and commercialization of new complementary products or product lines. On April 9, 2019, the Company completed the IPO, resulting in net cash proceeds of $3,888,000 to the Company. The Company is seeking to raise additional debt and/or equity capital to fund future operations, but there can be no assurances that the Company will be able to secure such additional financing in the amounts necessary to fully fund its operating requirements on acceptable terms or at all. If the Company is unable to access sufficient capital resources on a timely basis, the Company may be forced to reduce or discontinue its technology and product development programs and curtail or cease operations.

 

Sources and Uses of Cash

 

The following table sets forth the Company’s major sources and uses of cash for each of the following periods:

 

  

Six Months Ended

June 30,

 
   2019   2018 
Net cash used in operating activities  $(2,493,696)  $(2,424,058)
Net cash used in investing activities   (58,934)   (187,073)
Net cash provided by (used in) financing activities   4,250,327    (57,734)
Net increase (decrease) in cash  $1,697,697   $(2,668,865)

 

Operating Activities

 

Net cash used in operating activities was $2,493,696 during the six months ended June 30, 2019, versus $2,424,058 used during the comparable prior year period. Cash in both periods was used for used for engineering, corporate insurance, investor relations, labor, legal and professional fees, travel and other operating costs.

 

 33 

 

 

Investing Activities

 

Net cash used in investing activities was $58,934 for the six months ended June 30, 2019 and $187,073 for the six months ended June 30, 2018. In June 2019, we purchased medical imaging equipment for use in our TDSI business. In January 2018, we acquired the rights to a trademark portfolio for $50,000. In addition, we purchased a trade show booth in February 2018 and have invested in MapCatSF equipment and internal-use software development.

 

Financing Activities

 

Net cash provided by financing activities was $4,250,327 for the six months ended June 30, 2019 was due primarily to the completion of our IPO, which resulted in net proceeds of $3,888,000. In addition, in March 2019, the Company issued $350,000 in promissory and convertible promissory notes and received cash of $131,875 from the exercise of warrants. These proceeds were partially offset by payment of $100,000 to settle a promissory note. Net cash used in financing activities was $57,734 for the six months ended June 30, 2018 was due primarily to our payoff of a line of credit balance that had been assumed during our 2017 VectorVision acquisition.

 

The following table sets forth the Company’s major sources and uses of cash for each of the following periods:

 

   Years Ended
December 31,
 
   2018   2017 
Net cash used in operating activities  $(4,173,831)  $(3,403,696)
Net cash used in investing activities   (310,243)   (32,385)
Net cash provided by financing activities   419,792    8,108,791 
Net (decrease) increase in cash  $(4,064,282)  $4,672,710 

 

Operating Activities

 

Net cash used in operating activities was $4,173,831 during the year ended December 31, 2018, versus $3,403,696 used during the comparable prior year period. The increase in 2018 was due primarily to higher sales, marketing, professional services, and labor costs.

 

Investing Activities

 

Net cash used in investing activities was $310,243 for the year ended December 31, 2018 and $32,385 for the year ended December 31, 2017. In January 2018, we acquired the rights to a trademark portfolio for $50,000. In addition, we purchased a trade show booth in February 2018 and have invested in MapCat equipment and internal-use software development.

 

Financing Activities

 

Net cash provided by financing activities was $419,792 for the year ended December 31, 2018 was due to the sale in November and December of $850,000 in common stock and the exercise of warrants for proceeds of $16,460. These proceeds were partially offset by the payoff of a $30,535 line of credit balance that had been assumed from the VectorVision transaction as well as payment of $146,133 due to related parties. Net cash provided by financing activities was $8,108,791 for the year ended December 31, 2017, consisting of $5,000,001 in proceeds from the issuance of common stock, $3,105,000 in proceeds from the issuance of preferred stock, and proceeds of $100,000 from the issuance of a note payable. Partially offsetting proceeds received were $150,860 of payments on notes payable and $54,650 of payments due to related parties.

 

Off-Balance Sheet Arrangements

 

At June 30, 2019 and December 31, 2018, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 4. CONTROLS AND PROCEDURES

 

As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Accounting Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon this evaluation, the Chief Executive Officer and Chief Accounting Officer each concluded that the Company’s disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that such information has been accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Accounting Officer, in a manner that allows timely decisions regarding required disclosure.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation that occurred during the second quarter ended in 2019 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.

 

 34 

 

 

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 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 an 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. In the opinion of management of the Company, adequate provision has been made in the Company’s condensed consolidated financial statements at June 30, 2019 with respect to such matters.

 

ITEM 1A. RISK FACTORS

 

The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 229.10(f)(1).

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

The following securities were sold pursuant to the exemption afforded under Sections 4(a)(2) and 3(a)(9) of the Securities Act of 1933. There were no placement agents or underwriters for any of the following private placements.

 

On April 9, 2019, the Company granted our CEO, Michael Favish, 1,250,000 common stock shares issuable upon the exercise of a common stock purchase option with a per share exercise price of $4.40 per share and a five-year term. The option vests ratably on the last day of each calendar quarter following the date of grant over a period of three (3) years and is subject to Mr. Favish remaining employed with the Company on the applicable vesting dates.

 

On April 9, 2019, the Company issued 109,038 shares of common stock upon the conversion of promissory notes of $250,000 that were mandatorily convertible upon the completion of the IPO.

 

On April 12, 2019, an investor exercised warrants for 26,250 shares of common stock. The warrants were exercisable for $0.50 per share, and the Company received $13,125 in cash.

 

On April 5 and 17, 2019, investors exercised a total of 275,000 warrants on a cashless basis resulting in the issuance of 229,365 shares of common stock. The warrants were exercisable for $0.50 and $2.00 per share.

 

As compensation for services rendered, the Company issued a total of 54,390 shares of common stock in April, May, and June 2019.

 

On May 6, 2019, an investor exercised warrants for 125,000 shares of common stock. The warrants were exercisable for $0.50 per share, and the Company received $62,500 in cash.

 

On May 20, 2019, an investor exercised a total of 50,000 warrants on a cashless basis resulting in the issuance of 33,108 shares of common stock. The warrants were exercisable for $0.50 per share.

 

On May 21, 2019, an investor exercised warrants for 50,000 shares of common stock. The warrants were exercisable for $0.50 per share, and the Company received $25,000 in cash.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

Not applicable.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

Not applicable.

 

ITEM 6. EXHIBITS

 

A list of exhibits required to be filed as part of this report is set forth in the Index to Exhibits, which is presented elsewhere in this document, and is incorporated herein by reference.

 

 35 
 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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 on the 12th day of August, 2019.

 

Signature   Title   Date
         
/s/ Michael Favish   CEO, President and   August 12, 2019
Michael Favish  

Chairman of the Board

(Principal Executive Officer)

   
         
/s/ John Townsend   Controller and Chief Accounting Officer   August 12, 2019
John Townsend   (Principal Accounting Officer)    

 

INDEX TO EXHIBITS

 

Exhibit No.   Description
31.1   Certification of Chief Executive Officer pursuant to Rule 13a – 14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2   Certification of Chief Accounting Officer pursuant to Rule 13a – 14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*   Certification of Chief Executive Officer and Chief Accounting Officer pursuant to 18.U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
101   The following materials from the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2019, formatted in XBRL (eXtensible Business Reporting Language), (i) Balance Sheets, (ii) Statements of Income, (iii) Statements of Comprehensive Income, (iv) Statements of Cash Flows, (v) Statement of Stockholders’ Equity and (vi) Notes to Financial Statements

 

* A certification furnished pursuant to Item 601(b)(2) of the Regulation S-K will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

 

 36 
 

EX-31.1 2 ex31-1.htm

 

Exhibit 31.1

 

CERTIFICATION

 

I, Michael Favish, 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 12, 2019 /s/ Michael Favish
  Michael Favish
  Chief Executive Officer
  (Principal Executive Officer)

 

   

 

 

EX-31.2 3 ex31-2.htm

 

Exhibit 31.2

 

CERTIFICATION

 

I, John Townsend, 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 12, 2019 /s/ John Townsend
  John Townsend
  Controller and Chief Accounting Officer
  (Principal Accounting Officer)

 

   

 

 

EX-32.1 4 ex32-1.htm

 

Exhibit 32.1

 

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350,

AS ENACTED 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, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of Michael Favish, Chief Executive Officer of the Company, and John Townsend, Controller and 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.

 

August 12, 2019 /s/ Michael Favish
  Michael Favish
  Chief Executive Officer
  (Principal Executive Officer)
   
August 12, 2019 /s/ John Townsend
  John Townsend
  Controller and Chief Accounting Officer
  (Principal Accounting Officer)

 

   

 

 

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Document and Entity Information - shares
6 Months Ended
Jun. 30, 2019
Aug. 09, 2019
Document And Entity Information    
Entity Registrant Name Guardion Health Sciences, Inc.  
Entity Central Index Key 0001642375  
Document Type 10-Q  
Document Period End Date Jun. 30, 2019  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business Flag true  
Entity Emerging Growth Company true  
Entity Ex Transition Period false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   22,733,762
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2019  
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Condensed Consolidated Balance Sheets - USD ($)
Jun. 30, 2019
Dec. 31, 2018
Current assets    
Cash $ 2,368,645 $ 670,948
Accounts receivable 35,920 28,203
Inventories 318,686 357,997
Prepaid expenses 132,306 47,773
Total current assets 2,855,557 1,104,921
Deposits 11,751 11,751
Property and equipment, net 303,929 274,804
Right of use asset, net 595,598
Deferred offering costs 19,000 270,000
Intangible assets, net 348,786 456,104
Goodwill 1,563,520 1,563,520
Total assets 5,698,141 3,681,100
Current liabilities    
Accounts payable and accrued liabilities 300,239 413,925
Accrued expenses and deferred rent 25,000 81,412
Derivative warrant liability 78,440
Lease liability - current 125,237
Total current liabilities 528,916 495,337
Lease liability - long term 481,137
Total liabilities 1,010,053 495,337
Commitments and contingencies
Stockholders' Equity    
Preferred stock, $0.001 par value; 10,000,000 shares authorized
Common stock, $0.001 par value; 90,000,000 shares authorized; 22,733,762 and 20,564,328 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively 22,734 20,564
Additional paid-in capital 43,735,894 37,798,562
Accumulated deficit (39,070,540) (34,633,363)
Total stockholders' equity 4,688,088 3,185,763
Total liabilities and stockholders' equity $ 5,698,141 $ 3,681,100
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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Jun. 30, 2019
Dec. 31, 2018
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 90,000,000 90,000,000
Common stock, shares issued 22,733,762 20,564,328
Common stock, shares outstanding 22,733,762 20,564,328
XML 14 R4.htm IDEA: XBRL DOCUMENT v3.19.2
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Revenue        
Total revenue $ 260,970 $ 220,778 $ 503,508 $ 413,818
Cost of goods sold        
Total cost of goods sold 97,056 87,776 190,548 167,055
Gross profit 163,914 133,002 312,960 246,763
Operating expenses        
Research and development 77,688 34,320 106,716 194,708
Sales and marketing 409,409 378,750 764,028 984,464
General and administrative 2,489,011 1,034,914 3,439,633 2,714,680
Total operating expenses 2,976,108 1,447,984 4,310,377 3,893,852
Loss from operations (2,812,194) (1,314,982) (3,997,417) (3,647,089)
Other (income) expense:        
Interest expense 234,065 710 251,637 1,545
Finance cost upon issuance of warrants 229,921 415,955
Change in fair value of derivative warrants (227,832) (227,832)
Costs associated with extension of warrant expiration dates 494,391 494,391
Total other (income) expense 236,154 495,101 439,760 495,936
Net loss $ (3,048,348) $ (1,810,083) $ (4,437,177) $ (4,143,025)
Net loss per common share - basic and diluted $ (0.14) $ (0.09) $ (0.21) $ (0.21)
Weighted average common shares outstanding - basic and diluted 22,537,943 20,164,761 21,628,758 20,161,131
Medical Foods [Member]        
Revenue        
Total revenue $ 104,448 $ 79,993 $ 204,382 $ 154,294
Cost of goods sold        
Total cost of goods sold 40,681 40,959 78,953 72,238
Vision Testing Diagnostics [Member]        
Revenue        
Total revenue 150,222 140,785 292,826 259,524
Cost of goods sold        
Total cost of goods sold 53,816 46,817 109,036 94,817
Other [Member]        
Revenue        
Total revenue 6,300 6,300
Cost of goods sold        
Total cost of goods sold $ 2,559 $ 2,559
XML 15 R5.htm IDEA: XBRL DOCUMENT v3.19.2
Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - USD ($)
Common Stock [Member]
Additional Paid-In Capital [Member]
Accumulated Deficit [Member]
Total
Balance at Dec. 31, 2017 $ 20,092 $ 33,716,140 $ (26,865,956) $ 6,870,276
Balance, shares at Dec. 31, 2017 20,091,761      
Fair value of vested stock options 777,513 777,513
Issuance of common stock - warrant exercises $ 73 1,387 1,460
Issuance of common stock - warrant exercises, shares 73,000      
Net loss (2,333,461) (2,333,461)
Balance at Mar. 31, 2018 $ 20,165 34,495,040 (29,199,417) 5,315,788
Balance, shares at Mar. 31, 2018 20,164,761      
Balance at Dec. 31, 2017 $ 20,092 33,716,140 (26,865,956) 6,870,276
Balance, shares at Dec. 31, 2017 20,091,761      
Reclass of warrant liability to equity      
Net loss       (4,143,025)
Balance at Jun. 30, 2018 $ 20,165 35,266,803 (31,008,981) 4,277,987
Balance, shares at Jun. 30, 2018 20,164,761      
Balance at Mar. 31, 2018 $ 20,165 34,495,040 (29,199,417) 5,315,788
Balance, shares at Mar. 31, 2018 20,164,761      
Fair value of vested stock options 277,372 277,372
Fair value of warrants - extension of expiration dates 494,391 494,391
Net loss     (1,809,564) (1,810,083)
Balance at Jun. 30, 2018 $ 20,165 35,266,803 (31,008,981) 4,277,987
Balance, shares at Jun. 30, 2018 20,164,761      
Balance at Dec. 31, 2018 $ 20,564 37,798,562 (34,633,363) 3,185,763
Balance, shares at Dec. 31, 2018 20,564,328      
Fair value of vested stock options 56,232 56,232
Issuance of common stock - warrant exercises $ 293 30,957 31,250
Issuance of common stock - warrant exercises, shares 292,283      
Net loss (1,385,099) (1,385,099)
Balance at Mar. 31, 2019 $ 20,857 37,885,751 (36,018,462) 1,888,146
Balance, shares at Mar. 31, 2019 20,856,611      
Balance at Dec. 31, 2018 $ 20,564 37,798,562 (34,633,363) 3,185,763
Balance, shares at Dec. 31, 2018 20,564,328      
Reclass of warrant liability to equity       $ 359,683
Fair value of common stock - conversion of notes payable and related interest, Shares       109,038
Net loss       $ (4,437,177)
Balance at Jun. 30, 2019 $ 22,734 43,735,894 (39,070,540) 4,688,088
Balance, shares at Jun. 30, 2019 22,733,762      
Balance at Mar. 31, 2019 $ 20,857 37,885,751 (36,018,462) 1,888,146
Balance, shares at Mar. 31, 2019 20,856,611      
Fair value of vested stock options 62,763 62,763
Issuance of common stock - warrant exercises $ 463 100,162 100,625
Issuance of common stock - warrant exercises, shares 463,726      
Fair value of vested stock options - officer and director 1,066,159 1,066,159
Reclass of warrant liability to equity 359,683 359,683
Sale of common stock $ 1,250 3,886,750 3,888,000
Sale of common stock, Shares 1,250,000      
Issuance of common stock for services $ 55 123,947 124,002
Issuance of common stock for services, Shares 54,387      
Fair value of common stock - conversion of notes payable and related interest $ 109 250,679 250,788
Fair value of common stock - conversion of notes payable and related interest, Shares 109,038      
Fair value of warrants - extension of expiration dates      
Net loss     (3,052,078) (3,048,348)
Balance at Jun. 30, 2019 $ 22,734 $ 43,735,894 $ (39,070,540) $ 4,688,088
Balance, shares at Jun. 30, 2019 22,733,762      
XML 16 R6.htm IDEA: XBRL DOCUMENT v3.19.2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Operating Activities    
Net loss $ (4,437,177) $ (4,143,025)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 137,128 148,560
Amortization of debt discount 250,000
Accrued interest expense included in notes payable 788
Amortization of right of use asset 61,571
Stock-based compensation 242,996 1,054,885
Stock-based compensation - officer and director 1,066,159
Non-cash financing costs - derivative liability 415,955
Change in fair value of warrants - derivative liability (227,832)
Costs associated with extension of warrant expiration dates 494,391
(Increase) decrease in -    
Accounts receivable (7,718) 42,928
Inventories 39,311 (257,627)
Deposits and prepaid expenses (84,533) 90,053
Lease liability (56,844)
Increase (decrease) in -    
Accounts payable and accrued expenses 156,314 146,202
Accrued expenses and deferred rent (49,814) (425)
Net cash used in operating activities (2,493,696) (2,424,058)
Investing Activities    
Purchase of property and equipment (58,934) (137,073)
Purchase of intellectual property (50,000)
Net cash used in investing activities (58,934) (187,073)
Financing Activities    
Proceeds from initial public offering 3,888,000
Proceeds from issuance of convertible notes 250,000
Proceeds from issuance of promissory note 100,000
Payments on promissory note (100,548)
Payments on line of credit (30,535)
Proceeds from exercise of warrants 131,875 1,460
Deferred financing costs of IPO (19,000)
Decrease in due to related parties (28,659)
Net cash provided by (used in) financing activities 4,250,327 (57,734)
Cash:    
Net decrease 1,697,697 (2,668,865)
Balance at beginning of period 670,948 4,735,230
Balance at end of period 2,368,645 2,066,365
Supplemental disclosure of cash flow information:    
Interest
Income taxes
Non-cash financing activities:    
Fair value of warrant liability issued in connection with issuance of convertible notes 436,034
Recording of lease asset and liability upon adoption of ASU 2016-02 663,218
Reclass of warrant liability to equity 359,683
Fair value of common stock issued upon conversion of common stock and accrued interest 250,788
Reclass of deferred offering cost to equity $ 270,000
XML 17 R7.htm IDEA: XBRL DOCUMENT v3.19.2
Organization and Business Operations
6 Months Ended
Jun. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Business Operations
1. Organization and Business Operations

 

Organization and Business

 

Guardion Health Sciences, Inc. (the “Company”) was formed in December 2009 as a California limited liability company under the name P4L Health Sciences, LLC. On June 30, 2015, the Company converted from a California limited liability company to a Delaware corporation, changing its name from Guardion Health Sciences, LLC to Guardion Health Sciences, Inc.

 

The Company is a specialty health sciences company that develops, formulates and distributes condition-specific medical foods with an initial medical food product on the market under the brand name Lumega-Z® that replenishes and restores the macular protective pigment. Lumega-Z has been used in IRB-approved patient studies to examine its effectiveness. On May 9, 2019, the Company announced in a press release a recent study that showed statistically significant improvement in visual function (“CSF”) of patients taking Lumega-Z who participated in the study. The study was conducted by research scientists at the Western University College of Optometry to evaluate the visual benefits of Lumega-Z in one group of patients as compared to a group of patients taking AREDS 2 soft gel supplements. Each patient has retinal drusen and is at risk of developing AMD. The results of the study were presented at the Association for Research in Vision and Ophthalmology (“ARVO”) 2019 annual meeting and showed improvements in visual function (“CSF”) in the group of patients taking Lumega-Z that were statistically significant and definitive. The patients taking AREDS 2 showed no statistical change.

 

The Company also developed a proprietary medical device called the MapcatSF® that accurately measures the macular pigment optical density. On July 16, 2019, the Company was notified by the Patents Registry in Hong Kong that it has received a patent from the Government of the Hong Kong Special Administrative Region (Hong Kong Patent No. HK1204758 titled “Apparatus for Use in the Measurement of Macular Pigment Optical Density and/or Lens Optical Density of an Eye”) for the MapcatSF®. On May 30, 2019, the Company was notified by the European Patent Office that it has received a patent from the European Union (European Patent No. 2,811,892 titled “Apparatus for Use in the Measurement of Macular Pigment Optical Density and/or Lens Optical Density of an Eye”) for the MapcatSF®.

 

On September 29, 2017, the Company, through its wholly owned subsidiary VectorVision Ocular Health, Inc. (“VectorVision”), completed its acquisition of substantially all of the assets and certain liabilities of VectorVision, Inc. (an Ohio corporation), a company that specialized in the standardization of contrast sensitivity, glare sensitivity, low contrast acuity, and early treatment diabetic retinopathy study (“ETDRS”) visual acuity testing. VectorVision develops, manufactures and sells equipment and supplies for standardized vision testing. The acquisition expands the Company’s technical portfolio. CSV-1000 and CSV-2000 instruments offer auto-calibrated tests to ensure correct testing luminance and contrast levels for consistent, highly accurate and repeatable results. Recently issued patents the Company received for continuously calibrating the light source will be incorporated into the new CSV-2000, in which the proprietary standardized contrast sensitivity test patterns can be presented to the patient using a computer monitor as opposed to the current calibrated backlit system.

 

In August 2018, the Company created a wholly owned subsidiary, Transcranial Doppler Solutions, Inc. (“TDSI”). TDSI is dedicated to the pursuit of early predictors resulting in, the Company believes, valuable therapeutic intervention for practitioners and their patients, and additional revenue streams generated from the testing and sale of Company products to appropriate customers. The Company has established operations with selected clinics and is focusing on expanding its client base.

 

In November 2018, the Company launched a new medical food product, GlaucoCetinTM, which the Company believes is the first vision-specific medical food designed to support and protect the mitochondrial function of optic nerve cells and improve blood flow in the ophthalmic artery in patients with glaucoma. The Company believes GlaucoCetinTM is the first vision-specific medical food designed to support and protect the mitochondrial function of optic nerve cells and improve blood flow in the ophthalmic artery in patients with glaucoma. The parent compound of GlaucoCetinTM, called “GlaucoHealth,” was designed by Robert Ritch, M.D., one of the Company’s Medical Advisory Board members. Dr. Robert Ritch holds the Shelley and Steven Einhorn Distinguished Chair in Ophthalmology and is surgeon Director Emeritus and Chief of Glaucoma Services at the New York Eye and Ear Infirmary. Dr. Ritch has devoted his career to broadening the understanding of the underlying etiologies and mechanisms of glaucoma. The Company now owns the GlaucoHealth formula. On June 4, 2019, the Company announced in a press release that the formula was used in an IRB-approved patient study conducted at the New York Eye and Ear Infirmary and successfully reversed mitochondrial dysfunction in the optic nerve cells in patients with glaucoma. GlaucoCetinTM is an enhanced formulation of GlaucoHealth. The Company owns both formulas and has a patent application pending on the GlaucoCetinTM formula. The application describes an invention that provides a micro-nutrient composition for a human subject suffering from a glaucomatous disease, wherein the micro-nutrient composition comprises a formulation for reversing mitochondrial dysfunction in glaucomatous disease.

 

On April 9, 2019, the Company closed its initial public offering (the “IPO”) and issued 1,250,000 shares of its common stock at a public offering price of $4.00 per share for total gross proceeds of $5.0 million, resulting in net proceeds to the Company of $3,888,000 after deducting underwriting discounts and commissions and other offering costs and expenses payable by Guardion. The shares began trading on the Nasdaq Capital Market on April 5, 2019, under the symbol “GHSI.” In connection with the IPO, the convertible promissory notes previously issued on March 15, 2019 and March 20, 2019 were automatically converted into 109,038 shares of common stock based on a conversion price of $2.30 per share.

 

The Company has had limited operations to date and has been primarily engaged in research and development, product commercialization and capital raising activities.

 

Going Concern and Liquidity

 

The financial statements have been prepared assuming the Company will continue as a going concern. The Company had a net loss of $4,437,177 and utilized cash in operating activities of $2,493,696 during the six months ended June 30, 2019. The Company expects to continue to incur net losses and negative operating cash flows in the near-term. As a result, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the consolidated financial statements are issued.

 

The Company’s independent registered public accounting firm has also included explanatory language in their opinion accompanying the Company’s audited financial statements for the year ended December 31, 2018. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.

 

The Company will continue to incur significant expenses for commercialization activities related to its medical foods, the MapcatSF medical device, VectorVision diagnostic equipment, the TDSI business and with respect to efforts to continue to build the Company’s infrastructure. Development and commercialization of medical foods and medical devices involves a lengthy and complex process. Additionally, the Company’s long-term viability and growth may depend upon the successful development and commercialization of products other than Lumega-Z and the MapcatSF.

 

The Company is seeking to raise additional debt and/or equity capital to fund future operations, but there can be no assurances that the Company will be able to secure such additional financing in the amounts necessary to fully fund its operating requirements on acceptable terms or at all. If the Company is unable to access sufficient capital resources on a timely basis, the Company may be forced to reduce or discontinue its technology and product development programs and curtail or cease operations.

 

Reverse Stock Split

 

On January 30, 2019, following stockholder and Board approval, the Company filed a Certificate of Amendment to its Amended Certificate of Incorporation, as amended (the “Amendment”), with the Secretary of State of the State of Delaware to effectuate a one-for-two (1:2) reverse stock split (the “Reverse Stock Split”) of its common stock, par value $0.001 per share, without any change to its par value. The Amendment became effective on the filing date. The number of shares authorized for common and preferred stock were not affected by the Reverse Stock Split. No fractional shares were issued in connection with the Reverse Stock Split as all fractional shares were “rounded up” to the next whole share. Proportional adjustments for the Reverse Stock Split were made to all share and per share amounts as if the split occurred at the beginning of the earliest period presented.

XML 18 R8.htm IDEA: XBRL DOCUMENT v3.19.2
Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 2019
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC. The condensed consolidated balance sheet as of December 31, 2018 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all adjustments contained herein are of a normal recurring nature. 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, 2019.

 

Certain prior period amounts have been reclassified to conform to current period presentation. Such amounts consist of operating segment disclosures, whereby revenue and cost of goods sold have been broken out on the Consolidated Statements of Operations to conform with the Company’s reportable business segments as of June 30, 2019.

 

Use of Estimates

 

The preparation of the financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

 

These estimates and assumptions include estimates for reserves of uncollectible accounts, inventory obsolescence, depreciable lives of property and equipment, analysis of impairments of recorded long-term tangible and intangible assets, realization of deferred tax assets, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services.

 

Intangible Assets

 

In connection with the VectorVision transaction, the Company identified and allocated estimated fair values to intangible assets including goodwill and customer relationships.

 

In accordance with Accounting Standard Codification (“ASC”) 350 – Intangibles – Goodwill and Other, the Company determined whether these assets are expected to have indefinite (such as goodwill) or limited useful lives, and for those with limited lives, the Company established an amortization period and method of amortization. Its goodwill and other intangible assets are subject to periodic impairment testing.

 

The Company utilized the services of an independent third-party valuation firm to assist in identifying intangible assets and in estimating their fair values. The useful lives for the Company’s intangible assets other than goodwill were estimated based on Management’s consideration of various factors, including assumptions that market participants might use about sales expectations as well as potential effects of obsolescence, competition, technological progress and the regulatory environment. Because the future pattern in which the economic benefits of these intangible assets may not be reliably determined, amortization expense is generally calculated on a straight-line basis.

 

Amortization expense for the identifiable intangible assets associated with the VectorVision acquisition is approximately $54,000 per quarter and is included with general and administrative expenses in the Company’s Statements of Operations.

  

Impairment of Long-Lived Assets

 

The Company reviews long-lived assets, including property and equipment, identifiable intangible assets, and goodwill for impairment at each fiscal year end or when events or changes in circumstances indicate the carrying value of these assets may exceed their current fair values. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the assets. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. The Company has not historically recorded any impairment to its long-lived assets. In the future, if events or market conditions affect the estimated fair value to the extent that a long-lived asset is impaired, the Company will adjust the carrying value of these long-lived assets in the period in which the impairment occurs. As of June 30, 2019 and December 31, 2018, the Company had not deemed any long-lived assets as impaired and was not aware of the existence of any indicators of impairment at such dates.

 

Deferred Offering Costs

 

Deferred offering costs consist principally of legal, accounting, and underwriters’ fees incurred related to the equity financings. These deferred offering costs will be charged against the gross proceeds received during the appropriate period. During the period ended June 30, 2019, $270,000 of offering costs deferred at December 31, 2018 were offset to paid in capital upon completion of our April 2019 offering. As of June 30, 2019, $19,000 of costs have been deferred relating to offerings in process.

 

Revenue Recognition

 

The Company’s revenue is comprised of sales of medical foods and dietary supplements to consumers through a direct sales/credit card process. In addition, the Company sells medical device equipment and supplies to customers both in the U.S. and internationally.

 

Tthe Company recognizes revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09” or “Topic 606”) and all related amendments. The standard provides authoritative guidance clarifying the principles for recognizing revenue and developing a common revenue standard for U.S. generally accepted accounting principles. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in the exchange for those goods or services.

 

Under the guidance, revenue is recognized when control of promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company reviews its sales transactions to identify contractual rights, performance obligations, and transaction prices, including the allocation of prices to separate performance obligations, if applicable. Revenue and costs of sales are recognized once products are delivered to the customer’s control and performance obligations are satisfied.

 

All products sold by the Company are distinct individual products and consist of medical foods, supplemental formulas, medical devices and related supplies. The products 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.

 

Control of products sold transfers to customers upon shipment from the Company’s facilities, and the Company’s performance obligations are satisfied at that 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. Payment for sales of Lumega-Z is generally made by approved credit cards. Payments for medical device sales are generally made by check, credit card, or wire transfer. Historically the Company has not experienced any significant payment delays from customers.

 

The Company provides a 30-day right of return to its retail Lumega-Z customers. A right of return does not represent a separate performance obligation, but because customers are allowed to return products, the consideration to which the Company expects to be entitled is variable. Upon evaluation of historical Lumega-Z and VectorVision product returns, the Company determined that less than one percent of products is returned, and therefore believes it is probable that such returns will not cause a significant reversal of revenue in the future. Due to the insignificant amount of historical returns as well as the standalone nature of the Company’s products and assessment of performance obligations and transaction pricing for the Company’s sales contracts, the Company does not currently maintain a contract asset or liability balance at this time. The Company assesses its contracts and the reasonableness of its conclusions on a quarterly basis.

  

The following table presents the Company’s revenues disaggregated by segment:

 

   Six Months Ended
June 30,
 
   2019   2018 
Medical foods  $204,382   $154,294 
Vision testing diagnostics   292,826    259,524 
Other   6,300    - 
   $503,508   $413,818 

 

Research and Development Costs

 

Research and development costs consist primarily of fees paid to consultants and outside service providers, patent fees and costs, and other expenses relating to the acquisition, design, development and testing of the Company’s medical foods and related products. Research and development expenditures are expensed as incurred and totaled $106,716 and $194,708 for the six months ended June 30, 2019 and 2018, respectively.

 

Patent Costs

 

The Company is the owner of three issued domestic patents, three pending domestic patent applications, one issued foreign patent in Europe, one issued foreign patent in Hong Kong, and three foreign patent applications in Canada, Europe and Hong Kong. Due to the significant uncertainty associated with the successful development of one or more commercially viable products based on the Company’s research efforts and any related patent applications, patent costs, including patent-related legal fees, filing fees and internally generated costs, are expensed as incurred. During the six months ended June 30, 2019 and 2018, patent costs were $61,482 and $34,298, respectively, and are included in general and administrative costs in the statements of operations.

 

Leases

 

Prior to January 1, 2019, the Company accounted for leases under Accounting Standards Codification (ASC) 840, Accounting for Leases. Effective from January 1, 2019, the Company adopted the guidance of ASU 2016-02 (ASC 842), Leases, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. The Company adopted ASC 842 using a modified retrospective approach. As a result, the comparative financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in effect for those periods. The adoption of ASC 842 on January 1, 2019 resulted in the recognition of operating lease right-of-use assets of $626,667, lease liabilities for operating leases of $635,131, and a zero cumulative-effect adjustment to accumulated deficit. See Note 8 for further information regarding the impact of the adoption of ASC 842 on the Company’s financial statements.

 

Stock-Based Compensation

 

The Company periodically issues stock-based compensation to officers, directors, contractors and consultants for services rendered. Such issuances vest and expire according to terms established at the issuance date.

 

Stock-based payments to officers, directors, and employees, which include grants of employee stock options, are recognized in the financial statements based on their fair values in accordance with Topic 718. Stock option grants, which are generally time vested, will be measured at the grant date fair value and charged to operations on a straight-line basis over the vesting period. The fair value of stock options is determined utilizing the Black-Scholes option-pricing model, which is affected by several variables, including the risk-free interest rate, the expected dividend yield, the expected life of the equity award, the exercise price of the stock option as compared to the fair market value of the common stock on the grant date and the estimated volatility of the common stock over the term of the equity award.

  

In prior periods, the Company accounted for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the FASB whereby the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. On January 1, 2019, the Company adopted Accounting Standards Update (ASU) 2018-07 which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The Company recognizes the fair value of stock-based compensation within its statements of operations with classification depending on the nature of the services rendered. The adoption of the new standard had no cumulative effect on previously reported amounts.

 

Net Loss per Share

 

The Company’s computation of basic and diluted net loss per common share is measured as net loss divided by the weighted average common shares outstanding during the respective periods, excluding unvested restricted common stock. Shares of restricted stock are included in the basic weighted average number of common shares outstanding from the time they vest. Potential common shares such as from unexercised warrants, options, and shares associated with convertible debt outstanding that have an anti-dilutive effect are excluded from the calculation of diluted net loss per share. The Company’s basic and diluted net loss per share is the same for all periods presented because all shares issuable upon exercise of warrants and conversion of convertible debt outstanding are anti-dilutive as they decrease loss per share.

 

The following table sets forth the number of shares excluded from the computation of diluted loss per share, as their inclusion would have been anti-dilutive:

 

   June 30, 
   2019   2018 
Warrants   261,538    2,656,423 
Options   2,612,500    2,625,000 
    2,874,038    5,281,423 

 

Recent Accounting Pronouncements

 

The Company’s management does not believe that there are any recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s financial statement presentation or disclosures.

XML 19 R9.htm IDEA: XBRL DOCUMENT v3.19.2
Segment Reporting
6 Months Ended
Jun. 30, 2019
Segment Reporting [Abstract]  
Segment Reporting
3. Segment Reporting

 

The Company determined its reporting units in accordance with ASC 280, “Segment Reporting” (“ASC 280”). The Company historically has reported its operating results as a single reportable segment described as the business of developing and commercializing a variety of products that support the detection, intervention and monitoring of a range of eye diseases. The Company’s chief executive officer, who is the Chief Operating Decision Maker (“CODM”), has historically reviewed financial information on an aggregated basis for purposes of allocating resources and evaluating financial performance.

 

In September 2017, the Company, through its wholly-owned subsidiary VectorVision Ocular Health, Inc., acquired substantially all of the assets and certain liabilities of VectorVision, Inc., a company that specialized in the standardization of contrast sensitivity, glare sensitivity, low contrast acuity, and early treatment diabetic retinopathy study (“ETDRS”) visual acuity testing. In August 2018, the Company created a wholly owned subsidiary, Transcranial Doppler Solutions, Inc. (“TDSI”). The Company has established TDSI operations with selected clinics and is focusing on expanding its client base.

 

Although all of the Company’s products and services target the early detection, intervention and monitoring of a range of eye diseases, the addition of potential new products or services as the Company grows requires management to periodically reevaluate its reporting structure. As sales of our medical food as well as sales of VectorVision products grow, there is an increased need for the CODM to evaluate revenue and gross profit on a product line or group basis for purposes of resource allocation. As of June 30, 2019, the TDSI subsidiary does not meet the required quantitative criteria to be considered a reportable operating segment. Additionally, TDSI does not share similar economic characteristics or a majority of the aggregation criteria set forth in ASC 280, and therefore is included in the category “Other” below. The TDSI business earned $6,300 of service revenue during the quarter ended June 30, 2019 and incurred approximately $121,000 of operating costs during the six months ended June 30, 2019. As of June 30, 2019, based on anticipated growth and the expanding diversity of product and service offerings by the Company, management has concluded that results should be reported in two operating segments: Medical Foods and Vision Testing Diagnostics. The following tables set forth our results of operations by segment (results allocated to Other consist of non-cash stock compensation expense, depreciation and amortization, corporate legal fees, and the TDSI operations):

 

   For the Three Months Ended June 30, 2019 
   Other   Medical Foods   Vision Testing
Diagnostics
   Total 
                 
Revenue  $6,300   $104,448   $150,222   $260,970 
                     
Cost of goods sold   2,559    40,681    53,816    97,056 
                     
Gross profit   3,741    63,767    96,406    163,914 
                     
Operating expenses   1,594,719    1,175,027    206,362    2,976,108 
                     
Loss from operations  $(1,590,978)  $(1,111,260)  $(109,956)  $(2,812,194)

 

   For the Three Months Ended June 30, 2018 
   Other   Medical Foods   Vision Testing
Diagnostics
   Total 
                 
Revenue  $-   $79,993   $140,785   $220,778 
                     
Cost of goods sold   -    40,959    46,817    87,776 
                     
Gross profit   -    39,034    93,968    133,002 
                     
Operating expenses   468,630    893,925    85,429    1,447,984 
                     
Loss from operations  $(468,630)  $(854,891)  $8,539   $(1,314,982)

 

   For the Six Months Ended June 30, 2019 
   Other   Medical Foods   Vision Testing
Diagnostics
   Total 
                 
Revenue  $6,300   $204,382   $292,826   $503,508 
                     
Cost of goods sold   2,559    78,953    109,036    190,548 
                     
Gross profit   3,741    125,429    183,790    312,960 
                     
Operating expenses   1,959,838    2,003,320    347,219    4,310,377 
                     
Loss from operations  $(1,956,097)  $(1,877,891)  $(163,429)  $(3,997,417)

 

   For the Six Months Ended June 30, 2018 
   Other   Medical Foods   Vision Testing
Diagnostics
   Total 
                 
Revenue  $-   $154,294   $259,524   $413,818 
                     
Cost of goods sold   -    72,238    94,817    167,055 
                     
Gross profit   -    82,056    164,707    246,763 
                     
Operating expenses   1,523,133    2,206,967    163,752    3,893,852 
                     
Loss from operations  $(1,523,133)  $(2,124,911)  $955   $(3,647,089)

 

The following tables set forth our total assets by segment. Intersegment balances and transactions have been removed:

 

   As of June 30, 2019 
   Other   Medical Foods   Vision Testing
Diagnostics
   Total 
Current assets                    
Cash  $13,355   $2,300,973   $54,317   $2,368,645 
Inventories   -    206,876    111,810    318,686 
Other   6,300    129,983    31,943    168,226 
Total current assets   19,655    2,637,832    198,070    2,855,557 
                     
Right to use asset   595,598    -    -    595,598 
Property and equipment, net   -    294,829    9,100    303,929 
Deferred offering   19,000    -    -    19,000 
Intangible assets, net   348,786    -    -    348,786 
Goodwill   1,563,520    -    -    1,563,520 
Other   -    11,751    -    11,751 
                     
Total assets  $2,546,559   $2,944,412   $207,170   $5,698,141 

 

   As of December 31, 2018 
   Other   Medical Foods   Vision Testing
Diagnostics
   Total 
Current assets                    
Cash  $-   $552,613   $118,335   $670,948 
Inventories   -    235,957    122,040    357,997 
Other   -    44,110    31,866    75,976 
Total current assets   -    832,680    272,241    1,104,921 
                     
Property and equipment, net   -    264,178    10,626    274,804 
Deferred offering   270,000    -    -    270,000 
Intangible assets, net   456,104    -    -    456,104 
Goodwill   1,563,520    -    -    1,563,520 
Other   -    11,751    -    11,751 
                     
Total assets  $2,289,624   $1,108,609   $282,867   $3,681,100 
XML 20 R10.htm IDEA: XBRL DOCUMENT v3.19.2
Inventories
6 Months Ended
Jun. 30, 2019
Inventory Disclosure [Abstract]  
Inventories
4. Inventories

 

Inventories consisted of the following:

 

   June 30,   December 31, 
   2019   2018 
Raw materials  $248,021   $282,574 
Finished goods   70,665    75,423 
   $318,686   $357,997 

XML 21 R11.htm IDEA: XBRL DOCUMENT v3.19.2
Property and Equipment, Net
6 Months Ended
Jun. 30, 2019
Property, Plant and Equipment [Abstract]  
Property and Equipment, Net
5. Property and Equipment, net

 

Property and equipment consisted of the following:

 

   June 30,   December 31, 
   2019   2018 
Leasehold improvements  $98,357   $98,357 
Testing equipment   300,448    249,447 
Furniture and fixtures   171,121    163,186 
Computer equipment   64,976    64,976 
Office equipment   8,193    8,193 
    643,095    584,159 
Less accumulated depreciation and amortization   (339,166)   (309,355)
   $303,929   $274,804 

 

For the six months ended June 30, 2019 and 2018, depreciation and amortization expense was $29,810 and $41,243, respectively, of which $0 and $15,376 was included in research and development expense, $19,065 and $4,138 was included in sales and marketing expense, and $10,745 and $21,729 was included in general and administrative expense, respectively.

XML 22 R12.htm IDEA: XBRL DOCUMENT v3.19.2
Intangible Assets
6 Months Ended
Jun. 30, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets
6. Intangible Assets

 

The Company’s intangible assets, including finite-lived intangible assets and $50,000 of non-amortizable purchased intellectual property, consisted of the following:

 

    June 30,     December 31,  
    2019     2018  
Customer relationships   $ 430,700     $ 430,700  
Technology     161,100       161,100  
Trade Names     115,600       115,600  
Noncompetition     17,000       17,000  
      724,400       724,400  
Less accumulated amortization     (375,614 )     (268,296 )
    $ 348,786     $ 456,104  

 

The Company’s amortization expense on its finite-lived intangible assets was $107,318 and $107,318 for the six months ended June 30, 2019 and 2018, respectively.

 

The Company estimates future amortization expense on its finite-lived intangible assets as of June 30, 2019 to be as follows:

 

For Years Ended December 31,    
2019  $107,318 
2020   165,320 
2021   16,307 
2022   9,840 
   $298,785 
XML 23 R13.htm IDEA: XBRL DOCUMENT v3.19.2
Promissory Notes
6 Months Ended
Jun. 30, 2019
Debt Disclosure [Abstract]  
Promissory Notes
7. Promissory Notes

 

Promissory Note

 

On March 12, 2019, the Company issued a promissory note with principal in the amount of $100,000, simple interest of 10% annually, and with a maturity date of June 10, 2019. On April 11, 2019, the Company repaid the promissory note for a total of $100,548 including accrued interest.

 

Convertible Notes and Related Warrants

 

On March 15, 2019, the Company issued a convertible note with principal in the amount of $100,000, simple interest of 5% annually, and with a maturity date of September 30, 2019. In addition, on March 20, 2019, the Company issued a convertible note with principal in the amount of $150,000, simple interest of 5% annually, and with a maturity date of September 30, 2019. The convertible notes (principal and accrued interest) were mandatorily convertible upon the consummation of the IPO. Concurrent with the issuance of the notes, the Company issued warrants to both note holders equal to the number of shares of common stock that the holders receive in connection with the converted notes. The per share exercise price of the warrants was set at 125% of the conversion price of the notes, defined in the note agreements, as the lower of (a) 75% of the price per share of common stock of the IPO or (b) $2.30. The Company determined that it would have to issue 109,038 warrants based upon the completion of the IPO in April 2019

 

Due to the variable terms of both the exercise price and the number of warrants to be issued, the warrants were accounted for as derivative liabilities at March 31, 2019. The aggregate fair value of the warrants was calculated as $436,034 based on a probability effected Black-Scholes option pricing model with a stock price of $4.00, volatility of 138%, and risk-free rates ranging from 2.34% - 2.39%. The Company recognized a debt discount of $250,000 equal to the face amount of the convertible notes and recorded a financing cost of $186,034 equal to the difference between the fair value of the warrants and the debt discount.

 

The convertible notes and accrued interest with an aggregate balance of $250,788 were mandatorily converted into 109,038 shares of common stock based on a conversion price of $2.30 per share upon the consummation of the IPO in April 2019.and the valuation discount of $250,000 was recognized as interest cost.

XML 24 R14.htm IDEA: XBRL DOCUMENT v3.19.2
Lease Liabilities
6 Months Ended
Jun. 30, 2019
Leases [Abstract]  
Lease Liabilities
8. Lease Liabilities

 

In October 2012, the Company entered into a lease agreement for 9,605 square feet of office and warehouse space commencing March 1, 2013. Upon entering into the agreement, the Company paid a deposit of $47,449, of which $36,979 represented prepaid rent. As of June 30, 2019, $11,751 remained on deposit under the lease agreement. The lease (“Lease 1”) was renewed for an additional five years in 2018. As of June 30, 2019, remaining average monthly lease payments under the amended lease agreement were $12,915 through July 2023.

 

In connection with the VectorVision acquisition on September 29, 2017, the Company assumed a lease agreement for 5,000 square feet of office and warehouse space which commenced on October 1, 2017. The lease (“Lease 2”) was renewed for an additional 65 months. As of June 30, 2019, remaining average monthly lease payments are $1,838 through February 2023.

 

In accounting for the leases, the Company adopted ASU 2016-02 - Leases, which requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease initially measured at the present value of the lease payments. The Company classified the leases as operating leases and determined that the fair value of Lease 1 at the inception of the lease was $625,778 using a discount rate of 8.0%. the fair value of Lease 2 at the inception of the lease was $100,742 using a discount rate of 8%. During the six months ended June 30, 2019, the Company made combined payments on both leases of $82,434 towards the lease liabilities. As of June 30, 2019 and December 31, 2018, the lease liability for Lease 1 was $536,672 and $586,082, respectively, and the lease liability for Lease 2 was $69,703 and $77,137, respectively. ASU 2016-02 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. Combined rent expense for both leases for the six months ended June 30, 2019 and 2018 was $87,161 and $10,671, respectively. During the six months ended June 30, 2019 and 2018, the Company reflected amortization of right of use asset of $61,571 and $7,152 related to the leases, respectively, resulting in a net asset balance of $595,598 as of June 30, 2019.

XML 25 R15.htm IDEA: XBRL DOCUMENT v3.19.2
Contingencies
6 Months Ended
Jun. 30, 2019
Commitments and Contingencies Disclosure [Abstract]  
Contingencies
9. Contingencies

 

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 management of the Company, adequate provision has been made in the Company’s financial statements at June 30, 2019 with respect to such matters.

XML 26 R16.htm IDEA: XBRL DOCUMENT v3.19.2
Stockholders' Equity (Deficit)
6 Months Ended
Jun. 30, 2019
Equity [Abstract]  
Stockholders' Equity (Deficit)
10. Stockholders’ Equity (Deficit)

 

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, 2018   1,265,674    0.71    0.29 
Granted   171,538    2.39    3.11 
Forfeitures   -    -    - 
Expirations   (279,424)   (1.96)   - 
Exercised   (896,250)   (1.88)   - 
June 30, 2019, all exercisable   261,538   $2.81    3.35 

 

The exercise prices of warrants outstanding and exercisable as of June 30, 2019 are as follows:

 

Warrants Outstanding and Exercisable (Shares)   Exercise Prices 
 25,000   $0.50 
 65,000    1.50 
 109,038    2.88 
 62,500    5.00 
 261,538      

 

Between February 11, 2019 and May 21, 2019, investors net exercised a total of 632,500 warrants for 492,256 shares of common stock on a cashless basis.

 

Between February 11, 2019 and May 21, 2019, investors exercised warrants for 263,750 shares of common stock. The warrants were exercisable for $0.50 per share, and the Company received $131,875 in cash.

 

As of June 30, 2019, the Company had an aggregate of 261,538 outstanding warrants to purchase shares of its common stock with a weighted average exercise price of $2.81, a weighted average remaining life of 3.35 years and an aggregate intrinsic value of $19,000, based upon a stock valuation of $1.26 per share. The intrinsic value is calculated as the difference between the market value of the underlying common stock and the exercise price of the warrants.

  

Warrant liability

 

In March 2019, the Company issued warrants to two convertible note holders pursuant to the anticipated completion of the Company’s IPO (the IPO was completed on April 9, 2019). Due to the variable terms of both the exercise price and the number of warrants to be issued, the warrants were accounted for as derivative liabilities at March 31, 2019. At March 31, 2019, the Company estimated that the issuance of 109,038 warrants with an exercise price of $2.88 per share would correspond to the number of shares of common stock that the holders would receive in connection with the completion of the IPO.. The fair value of the warrants at the closing of the IPO was determined to be $359,683 using a Black-Scholes model with a weighted average remaining life of 4.94 years and a stock valuation of $3.30 per share. Upon completion of the IPO, the exercise price and the number of warrants were fixed and the warrants no longer accounted for as liabilities. As such the fair value of the warrant liability of $359,683 was reclassified to equity.

 

On April 4, 2019, the Company issued 62,500 warrants with an exercise price of $5.00 per share to the underwriter (the “Underwriter”) in connection with the Company’s IPO. The Company accounted for these warrants as a derivative liability in the financial statements at June 30, 2019 because they were associated with the IPO, a registered offering, and the settlement provisions contained language that the shares underlying the warrants are required to be registered. The fair value of the warrants is remeasured at each reporting period, and the change in the fair value is recognized in earnings in the accompanying Statements of Operations. The fair value of the warrants at the date of issuance was determined to be $229,291 and was recorded as a finance cost. As of June 30, 2019, the fair value of the warrants was determined to $78,440.

 

The fair value of the warrant liability was determined at the following issuance and reporting dates using the Black-Scholes-Merton option pricing model and the following assumptions:

 

   Convertible Noteholders   Underwriter  

Warrant Liability As of

 
   Upon Issuance   Upon Issuance   June 30, 2019 
Stock price  $4.00   $3.68   $1.26 
Risk free interest rate   2.34 – 2.39%   2.29%   1.71%
Expected volatility   138%   137%   145%
Expected life in years   5.00    5.00    4.76 
Expected dividend yield   0%   0%   0%
Number of warrants   109,038    62,500    62,500 
Fair value of warrants  $436,034   $229,921   $78,440 

 

Stock Options

 

A summary of the Company’s stock option activity is as follows:

 

   Shares  

Weighted

Average
Exercise Price

   Weighted Average Remaining Contractual Term (Years) 
December 31, 2018   1,362,500    2.26    3.78 
Granted   1,250,000    2.11    2.29 
Forfeitures   -    -    - 
Expirations   -    -    - 
Exercised   -    -    - 
June 30, 2019, outstanding   2,612,500   $3.28    4.00 
June 30, 2019, exercisable   1,391,667   $2.41    3.46 

  

The exercise prices of options outstanding and exercisable as of June 30, 2019 are as follows:

 

Options Outstanding

(Shares)

  

Options Exercisable

(Shares)

   Exercise Prices 
 625,000    625,000   $2.00 
 62,500    62,500    2.30 
 675,000    600,000    2.50 
 1,250,000    104,167    4.40 
 2,612,500    1,391,667      

 

During the six months ended June 30, 2019, the Company granted options to purchase 1,250,000 shares of common stock to the Company’s Chairman and CEO with a grant date fair of $4,122,750. The options will vest on a quarterly basis over three years. The Company accounts share-based payments to employees in accordance with ASC 718 wherein grants are measured at the grant date fair value and charged to operations over the vesting period. During the period ended June 30, 2019, compensation cost of $1, 066,159 was recognized during the period relating the amortization of this award.

 

During the period ended June 30, 2019, option awards were valued based upon the Black-Scholes option-pricing model, with stock price ranging from $3.30 to $4.00 per share, volatility ranging from 115% to 138%, and an average risk-free rate ranging from 2.31% to 2.46%.

 

During the six months ended June 30, 2019 and 2018, we recognized aggregate stock-compensation expense of $1,309,155 and $1,054,885, respectively, based upon stock prices ranging from $3.30 to $4.00 per share, all of which was recorded in general and administrative expense.

 

As of June 30, 2019, the Company had an aggregate of 1,220,833 remaining unvested options outstanding, with a total estimated fair value of $3,132,532, weighted average exercise price of $4.28, and weighted average remaining life of 4.61 years. The aggregate intrinsic value of options outstanding as of June 30, 2019 was $0.

XML 27 R17.htm IDEA: XBRL DOCUMENT v3.19.2
Related Party Transactions
6 Months Ended
Jun. 30, 2019
Related Party Transactions [Abstract]  
Related Party Transactions
11. Related Party Transactions

 

During the six months ended June 30, 2019 and 2018, the Company incurred and paid $150,000 and 137,500, respectively, of salary expense to our Board Chairman and CEO, Mr. Michael Favish. In addition, compensation cost of $1,066,159 was recognized on amortization of stock option awards during the period ended June 30, 2019.

XML 28 R18.htm IDEA: XBRL DOCUMENT v3.19.2
Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2019
Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

 

The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC. The condensed consolidated balance sheet as of December 31, 2018 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all adjustments contained herein are of a normal recurring nature. 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, 2019.

 

Certain prior period amounts have been reclassified to conform to current period presentation. Such amounts consist of operating segment disclosures, whereby revenue and cost of goods sold have been broken out on the Consolidated Statements of Operations to conform with the Company’s reportable business segments as of June 30, 2019.

Use of Estimates

Use of Estimates

 

The preparation of the financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

 

These estimates and assumptions include estimates for reserves of uncollectible accounts, inventory obsolescence, depreciable lives of property and equipment, analysis of impairments of recorded long-term tangible and intangible assets, realization of deferred tax assets, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services.

Intangible Assets

Intangible Assets

 

In connection with the VectorVision transaction, the Company identified and allocated estimated fair values to intangible assets including goodwill and customer relationships.

 

In accordance with Accounting Standard Codification (“ASC”) 350 – Intangibles – Goodwill and Other, the Company determined whether these assets are expected to have indefinite (such as goodwill) or limited useful lives, and for those with limited lives, the Company established an amortization period and method of amortization. Its goodwill and other intangible assets are subject to periodic impairment testing.

 

The Company utilized the services of an independent third-party valuation firm to assist in identifying intangible assets and in estimating their fair values. The useful lives for the Company’s intangible assets other than goodwill were estimated based on Management’s consideration of various factors, including assumptions that market participants might use about sales expectations as well as potential effects of obsolescence, competition, technological progress and the regulatory environment. Because the future pattern in which the economic benefits of these intangible assets may not be reliably determined, amortization expense is generally calculated on a straight-line basis.

 

Amortization expense for the identifiable intangible assets associated with the VectorVision acquisition is approximately $54,000 per quarter and is included with general and administrative expenses in the Company’s Statements of Operations.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

 

The Company reviews long-lived assets, including property and equipment, identifiable intangible assets, and goodwill for impairment at each fiscal year end or when events or changes in circumstances indicate the carrying value of these assets may exceed their current fair values. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the assets. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. The Company has not historically recorded any impairment to its long-lived assets. In the future, if events or market conditions affect the estimated fair value to the extent that a long-lived asset is impaired, the Company will adjust the carrying value of these long-lived assets in the period in which the impairment occurs. As of June 30, 2019 and December 31, 2018, the Company had not deemed any long-lived assets as impaired and was not aware of the existence of any indicators of impairment at such dates.

Deferred Offering Costs

Deferred Offering Costs

 

Deferred offering costs consist principally of legal, accounting, and underwriters’ fees incurred related to the equity financings. These deferred offering costs will be charged against the gross proceeds received during the appropriate period. During the period ended June 30, 2019, $270,000 of offering costs deferred at December 31, 2018 were offset to paid in capital upon completion of our April 2019 offering. As of June 30, 2019, $19,000 of costs have been deferred relating to offerings in process.

Revenue Recognition

Revenue Recognition

 

The Company’s revenue is comprised of sales of medical foods and dietary supplements to consumers through a direct sales/credit card process. In addition, the Company sells medical device equipment and supplies to customers both in the U.S. and internationally.

 

Tthe Company recognizes revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09” or “Topic 606”) and all related amendments. The standard provides authoritative guidance clarifying the principles for recognizing revenue and developing a common revenue standard for U.S. generally accepted accounting principles. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in the exchange for those goods or services.

 

Under the guidance, revenue is recognized when control of promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company reviews its sales transactions to identify contractual rights, performance obligations, and transaction prices, including the allocation of prices to separate performance obligations, if applicable. Revenue and costs of sales are recognized once products are delivered to the customer’s control and performance obligations are satisfied.

 

All products sold by the Company are distinct individual products and consist of medical foods, supplemental formulas, medical devices and related supplies. The products 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.

 

Control of products sold transfers to customers upon shipment from the Company’s facilities, and the Company’s performance obligations are satisfied at that 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. Payment for sales of Lumega-Z is generally made by approved credit cards. Payments for medical device sales are generally made by check, credit card, or wire transfer. Historically the Company has not experienced any significant payment delays from customers.

 

The Company provides a 30-day right of return to its retail Lumega-Z customers. A right of return does not represent a separate performance obligation, but because customers are allowed to return products, the consideration to which the Company expects to be entitled is variable. Upon evaluation of historical Lumega-Z and VectorVision product returns, the Company determined that less than one percent of products is returned, and therefore believes it is probable that such returns will not cause a significant reversal of revenue in the future. Due to the insignificant amount of historical returns as well as the standalone nature of the Company’s products and assessment of performance obligations and transaction pricing for the Company’s sales contracts, the Company does not currently maintain a contract asset or liability balance at this time. The Company assesses its contracts and the reasonableness of its conclusions on a quarterly basis.

 

The following table presents the Company’s revenues disaggregated by segment:

 

   Six Months Ended
June 30,
 
   2019   2018 
Medical foods  $204,382   $154,294 
Vision testing diagnostics   292,826    259,524 
Other   6,300    - 
   $503,508   $413,818 
Research and Development Costs

Research and Development Costs

 

Research and development costs consist primarily of fees paid to consultants and outside service providers, patent fees and costs, and other expenses relating to the acquisition, design, development and testing of the Company’s medical foods and related products. Research and development expenditures are expensed as incurred and totaled $106,716 and $194,708 for the six months ended June 30, 2019 and 2018, respectively.

Patent Costs

Patent Costs

 

The Company is the owner of three issued domestic patents, three pending domestic patent applications, one issued foreign patent in Europe, one issued foreign patent in Hong Kong, and three foreign patent applications in Canada, Europe and Hong Kong. Due to the significant uncertainty associated with the successful development of one or more commercially viable products based on the Company’s research efforts and any related patent applications, patent costs, including patent-related legal fees, filing fees and internally generated costs, are expensed as incurred. During the six months ended June 30, 2019 and 2018, patent costs were $61,482 and $34,298, respectively, and are included in general and administrative costs in the statements of operations.

Leases

Leases

 

Prior to January 1, 2019, the Company accounted for leases under Accounting Standards Codification (ASC) 840, Accounting for Leases. Effective from January 1, 2019, the Company adopted the guidance of ASU 2016-02 (ASC 842), Leases, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. The Company adopted ASC 842 using a modified retrospective approach. As a result, the comparative financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in effect for those periods. The adoption of ASC 842 on January 1, 2019 resulted in the recognition of operating lease right-of-use assets of $626,667, lease liabilities for operating leases of $635,131, and a zero cumulative-effect adjustment to accumulated deficit. See Note 8 for further information regarding the impact of the adoption of ASC 842 on the Company’s financial statements.

Stock-Based Compensation

Stock-Based Compensation

 

The Company periodically issues stock-based compensation to officers, directors, contractors and consultants for services rendered. Such issuances vest and expire according to terms established at the issuance date.

 

Stock-based payments to officers, directors, and employees, which include grants of employee stock options, are recognized in the financial statements based on their fair values in accordance with Topic 718. Stock option grants, which are generally time vested, will be measured at the grant date fair value and charged to operations on a straight-line basis over the vesting period. The fair value of stock options is determined utilizing the Black-Scholes option-pricing model, which is affected by several variables, including the risk-free interest rate, the expected dividend yield, the expected life of the equity award, the exercise price of the stock option as compared to the fair market value of the common stock on the grant date and the estimated volatility of the common stock over the term of the equity award.

 

In prior periods, the Company accounted for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the FASB whereby the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. On January 1, 2019, the Company adopted Accounting Standards Update (ASU) 2018-07 which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The Company recognizes the fair value of stock-based compensation within its statements of operations with classification depending on the nature of the services rendered. The adoption of the new standard had no cumulative effect on previously reported amounts.

Net Loss Per Share

Net Loss per Share

 

The Company’s computation of basic and diluted net loss per common share is measured as net loss divided by the weighted average common shares outstanding during the respective periods, excluding unvested restricted common stock. Shares of restricted stock are included in the basic weighted average number of common shares outstanding from the time they vest. Potential common shares such as from unexercised warrants, options, and shares associated with convertible debt outstanding that have an anti-dilutive effect are excluded from the calculation of diluted net loss per share. The Company’s basic and diluted net loss per share is the same for all periods presented because all shares issuable upon exercise of warrants and conversion of convertible debt outstanding are anti-dilutive as they decrease loss per share.

 

The following table sets forth the number of shares excluded from the computation of diluted loss per share, as their inclusion would have been anti-dilutive:

 

   June 30, 
   2019   2018 
Warrants   261,538    2,656,423 
Options   2,612,500    2,625,000 
    2,874,038    5,281,423 
Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

The Company’s management does not believe that there are any recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s financial statement presentation or disclosures.

XML 29 R19.htm IDEA: XBRL DOCUMENT v3.19.2
Summary of Significant Accounting Policies (Tables)
6 Months Ended
Jun. 30, 2019
Accounting Policies [Abstract]  
Schedule of Disaggregation of Revenue

The following table presents the Company’s revenues disaggregated by segment:

 

   Six Months Ended
June 30,
 
   2019   2018 
Medical foods  $204,382   $154,294 
Vision testing diagnostics   292,826    259,524 
Other   6,300    - 
   $503,508   $413,818 
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

The following table sets forth the number of shares excluded from the computation of diluted loss per share, as their inclusion would have been anti-dilutive:

 

   June 30, 
   2019   2018 
Warrants   261,538    2,656,423 
Options   2,612,500    2,625,000 
    2,874,038    5,281,423 
XML 30 R20.htm IDEA: XBRL DOCUMENT v3.19.2
Segment Reporting (Tables)
6 Months Ended
Jun. 30, 2019
Segment Reporting [Abstract]  
Schedule of Segment Reporting Information, by Segment

The following tables set forth our results of operations by segment (results allocated to Other consist of non-cash stock compensation expense, depreciation and amortization, corporate legal fees, and the TDSI operations):

 

   For the Three Months Ended June 30, 2019 
   Other   Medical Foods   Vision Testing
Diagnostics
   Total 
                 
Revenue  $6,300   $104,448   $150,222   $260,970 
                     
Cost of goods sold   2,559    40,681    53,816    97,056 
                     
Gross profit   3,741    63,767    96,406    163,914 
                     
Operating expenses   1,594,719    1,175,027    206,362    2,976,108 
                     
Loss from operations  $(1,590,978)  $(1,111,260)  $(109,956)  $(2,812,194)

 

   For the Three Months Ended June 30, 2018 
   Other   Medical Foods   Vision Testing
Diagnostics
   Total 
                 
Revenue  $-   $79,993   $140,785   $220,778 
                     
Cost of goods sold   -    40,959    46,817    87,776 
                     
Gross profit   -    39,034    93,968    133,002 
                     
Operating expenses   468,630    893,925    85,429    1,447,984 
                     
Loss from operations  $(468,630)  $(854,891)  $8,539   $(1,314,982)

 

   For the Six Months Ended June 30, 2019 
   Other   Medical Foods   Vision Testing
Diagnostics
   Total 
                 
Revenue  $6,300   $204,382   $292,826   $503,508 
                     
Cost of goods sold   2,559    78,953    109,036    190,548 
                     
Gross profit   3,741    125,429    183,790    312,960 
                     
Operating expenses   1,959,838    2,003,320    347,219    4,310,377 
                     
Loss from operations  $(1,956,097)  $(1,877,891)  $(163,429)  $(3,997,417)

 

   For the Six Months Ended June 30, 2018 
   Other   Medical Foods   Vision Testing
Diagnostics
   Total 
                 
Revenue  $-   $154,294   $259,524   $413,818 
                     
Cost of goods sold   -    72,238    94,817    167,055 
                     
Gross profit   -    82,056    164,707    246,763 
                     
Operating expenses   1,523,133    2,206,967    163,752    3,893,852 
                     
Loss from operations  $(1,523,133)  $(2,124,911)  $955   $(3,647,089)

 

The following tables set forth our total assets by segment. Intersegment balances and transactions have been removed:

 

   As of June 30, 2019 
   Other   Medical Foods   Vision Testing
Diagnostics
   Total 
Current assets                    
Cash  $13,355   $2,300,973   $54,317   $2,368,645 
Inventories   -    206,876    111,810    318,686 
Other   6,300    129,983    31,943    168,226 
Total current assets   19,655    2,637,832    198,070    2,855,557 
                     
Right to use asset   595,598    -    -    595,598 
Property and equipment, net   -    294,829    9,100    303,929 
Deferred offering   19,000    -    -    19,000 
Intangible assets, net   348,786    -    -    348,786 
Goodwill   1,563,520    -    -    1,563,520 
Other   -    11,751    -    11,751 
                     
Total assets  $2,546,559   $2,944,412   $207,170   $5,698,141 

 

   As of December 31, 2018 
   Other   Medical Foods   Vision Testing
Diagnostics
   Total 
Current assets                    
Cash  $-   $552,613   $118,335   $670,948 
Inventories   -    235,957    122,040    357,997 
Other   -    44,110    31,866    75,976 
Total current assets   -    832,680    272,241    1,104,921 
                     
Property and equipment, net   -    264,178    10,626    274,804 
Deferred offering   270,000    -    -    270,000 
Intangible assets, net   456,104    -    -    456,104 
Goodwill   1,563,520    -    -    1,563,520 
Other   -    11,751    -    11,751 
                     
Total assets  $2,289,624   $1,108,609   $282,867   $3,681,100 
XML 31 R21.htm IDEA: XBRL DOCUMENT v3.19.2
Inventories (Tables)
6 Months Ended
Jun. 30, 2019
Inventory Disclosure [Abstract]  
Schedule of Inventories

Inventories consisted of the following:

 

   June 30,   December 31, 
   2019   2018 
Raw materials  $248,021   $282,574 
Finished goods   70,665    75,423 
   $318,686   $357,997 
XML 32 R22.htm IDEA: XBRL DOCUMENT v3.19.2
Property and Equipment, Net (Tables)
6 Months Ended
Jun. 30, 2019
Property, Plant and Equipment [Abstract]  
Schedule of Property, Plant and Equipment

Property and equipment consisted of the following:

 

   June 30,   December 31, 
   2019   2018 
Leasehold improvements  $98,357   $98,357 
Testing equipment   300,448    249,447 
Furniture and fixtures   171,121    163,186 
Computer equipment   64,976    64,976 
Office equipment   8,193    8,193 
    643,095    584,159 
Less accumulated depreciation and amortization   (339,166)   (309,355)
   $303,929   $274,804 
XML 33 R23.htm IDEA: XBRL DOCUMENT v3.19.2
Intangible Assets (Tables)
6 Months Ended
Jun. 30, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of Finite-Lived Intangible Assets

The Company’s intangible assets, including finite-lived intangible assets and $50,000 of non-amortizable purchased intellectual property, consisted of the following:

 

    June 30,     December 31,  
    2019     2018  
Customer relationships   $ 430,700     $ 430,700  
Technology     161,100       161,100  
Trade Names     115,600       115,600  
Noncompetition     17,000       17,000  
      724,400       724,400  
Less accumulated amortization     (375,614 )     (268,296 )
    $ 348,786     $ 456,104  
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

The Company estimates future amortization expense on its finite-lived intangible assets as of June 30, 2019 to be as follows:

 

For Years Ended December 31,    
2019  $107,318 
2020   165,320 
2021   16,307 
2022   9,840 
   $298,785 
XML 34 R24.htm IDEA: XBRL DOCUMENT v3.19.2
Stockholders' Equity (Deficit) (Tables)
6 Months Ended
Jun. 30, 2019
Equity [Abstract]  
Schedule of Warrants Activity

A summary of the Company’s warrant activity is as follows:

 

   Shares  

Weighted Average

Exercise

Price

   Weighted Average Remaining Contractual Term (Years) 
December 31, 2018   1,265,674    0.71    0.29 
Granted   171,538    2.39    3.11 
Forfeitures   -    -    - 
Expirations   (279,424)   (1.96)   - 
Exercised   (896,250)   (1.88)   - 
June 30, 2019, all exercisable   261,538   $2.81    3.35 
Schedule of Exercise Price of Warrants Outstanding and Exercisable

The exercise prices of warrants outstanding and exercisable as of June 30, 2019 are as follows:

 

Warrants Outstanding and Exercisable (Shares)   Exercise Prices 
 25,000   $0.50 
 65,000    1.50 
 109,038    2.88 
 62,500    5.00 
 261,538    
Schedule of Fair Value Assumptions of Warrant Liability

The fair value of the warrant liability was determined at the following issuance and reporting dates using the Black-Scholes-Merton option pricing model and the following assumptions:

 

   Convertible Noteholders   Underwriter  

Warrant Liability As of

 
   Upon Issuance   Upon Issuance   June 30, 2019 
Stock price  $4.00   $3.68   $1.26 
Risk free interest rate   2.34 – 2.39%   2.29%   1.71%
Expected volatility   138%   137%   145%
Expected life in years   5.00    5.00    4.76 
Expected dividend yield   0%   0%   0%
Number of warrants   109,038    62,500    62,500 
Fair value of warrants  $436,034   $229,921   $78,440 
Schedule of Share-based Compensation, Stock Options, Activity

A summary of the Company’s stock option activity is as follows:

 

   Shares   Weighted Average Exercise Price   Weighted Average Remaining Contractual Term (Years) 
December 31, 2018   1,362,500    2.26    3.78 
Granted   1,250,000    2.11    2.29 
Forfeitures   -    -    - 
Expirations   -    -    - 
Exercised   -    -    - 
June 30, 2019, outstanding   2,612,500   $3.28    4.00 
June 30, 2019, exercisable   1,391,667   $2.41    3.46 
Schedule of Exercise Price of Options Outstanding and Exercisable

The exercise prices of options outstanding and exercisable as of June 30, 2019 are as follows:

 

Options Outstanding

(Shares)

  

Options Exercisable

(Shares)

   Exercise Prices 
 625,000    625,000   $2.00 
 62,500    62,500    2.30 
 675,000    600,000    2.50 
 1,250,000    104,167    4.40 
 2,612,500    1,391,667      
XML 35 R25.htm IDEA: XBRL DOCUMENT v3.19.2
Organization and Business Operations (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Apr. 09, 2019
Jan. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Jun. 30, 2018
Mar. 31, 2018
Jun. 30, 2019
Jun. 30, 2018
Net proceeds from offering             $ 3,888,000
Debt conversion, converted instrument, shares issued             109,038  
Net loss     $ (3,048,348) $ (1,385,099) $ (1,810,083) $ (2,333,461) $ (4,437,177) (4,143,025)
Cash utilized in operating activities             $ (2,493,696) $ (2,424,058)
Reverse stock split   one-for-two (1:2) reverse stock split            
Common stock par value   $ 0.001            
IPO [Member]                
Initial public offering number of shares issued 1,250,000              
Shares issued price per share $ 4.00              
Gross proceeds from initial public offering $ 5,000,000              
Net proceeds from offering $ 3,888,000              
Debt conversion, converted instrument, shares issued 109,038              
Debt conversion price $ 2.30              
XML 36 R26.htm IDEA: XBRL DOCUMENT v3.19.2
Summary of Significant Accounting Policies (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Jan. 02, 2019
Dec. 31, 2018
Amortization of intangible assets     $ 107,318 $ 107,318    
Deferred offering costs $ 19,000   19,000      
Research and development costs 77,688 $ 34,320 106,716 194,708    
Patent costs 61,482 $ 34,298 61,482 $ 34,298    
Operating lease right-of-use assets 595,598   595,598   $ 626,667
Lease liabilities for operating leases         635,131  
Cumulative- effect adjustment to accumulated deficit         $ 0  
April 2019 Offering [Member]            
Offering costs deferred offset to additional paid in capital     $ 270,000      
VectorVision, Inc [Member]            
Amortization of intangible assets $ 54,000          
XML 37 R27.htm IDEA: XBRL DOCUMENT v3.19.2
Summary of Significant Accounting Policies - Schedule of Disaggregation of Revenue (Details) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Revenues $ 260,970 $ 220,778 $ 503,508 $ 413,818
Medical Foods [Member]        
Revenues 104,448 79,993 204,382 154,294
Vision Testing Diagnostics [Member]        
Revenues $ 150,222 $ 140,785 292,826 259,524
Other [Member]        
Revenues     $ 6,300
XML 38 R28.htm IDEA: XBRL DOCUMENT v3.19.2
Summary of Significant Accounting Policies - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares
6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Antidilutive securities excluded from computation of earnings per share, amount 2,874,038 5,281,423
Warrants [Member]    
Antidilutive securities excluded from computation of earnings per share, amount 261,538 2,656,423
Options [Member]    
Antidilutive securities excluded from computation of earnings per share, amount 2,612,500 2,625,000
XML 39 R29.htm IDEA: XBRL DOCUMENT v3.19.2
Segment Reporting (Details Narrative)
3 Months Ended 6 Months Ended
Jun. 30, 2019
USD ($)
Jun. 30, 2018
USD ($)
Jun. 30, 2019
USD ($)
Segment
Jun. 30, 2018
USD ($)
Number of segment reporting | Segment     1  
Revenue $ 260,970 $ 220,778 $ 503,508 $ 413,818
Other [Member]        
Revenue $ 6,300 6,300
Operating costs     $ 121,000  
XML 40 R30.htm IDEA: XBRL DOCUMENT v3.19.2
Segment Reporting - Schedule of Segment Reporting Information, by Segment (Details) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Jan. 02, 2019
Dec. 31, 2018
Revenue $ 260,970 $ 220,778 $ 503,508 $ 413,818    
Cost of goods sold 97,056 87,776 190,548 167,055    
Gross profit 163,914 133,002 312,960 246,763    
Operating expenses 2,976,108 1,447,984 4,310,377 3,893,852    
Loss from operations (2,812,194) (1,314,982) (3,997,417) (3,647,089)    
Cash 2,368,645   2,368,645     $ 670,948
Inventories 318,686   318,686     357,997
Other 168,226   168,226     75,976
Total current assets 2,855,557   2,855,557     1,104,921
Right to use asset 595,598   595,598   $ 626,667
Property and equipment, net 303,929   303,929     274,804
Deferred offering 19,000   19,000     270,000
Intangible assets, net 348,786   348,786     456,104
Goodwill 1,563,520   1,563,520     1,563,520
Other 11,751   11,751     11,751
Total assets 5,698,141   5,698,141     3,681,100
Other [Member]            
Revenue 6,300 6,300    
Cost of goods sold 2,559 2,559    
Gross profit 3,741 3,741    
Operating expenses 1,594,719 468,630 1,959,838 1,523,133    
Loss from operations (1,590,978) (468,630) (1,956,097) (1,523,133)    
Cash 13,355   13,355    
Inventories      
Other 6,300   6,300    
Total current assets 19,655   19,655    
Right to use asset 595,598   595,598      
Property and equipment, net      
Deferred offering 19,000   19,000     270,000
Intangible assets, net 348,786   348,786     456,104
Goodwill 1,563,520   1,563,520     1,563,520
Other      
Total assets 2,546,559   2,546,559     2,289,624
Medical Foods [Member]            
Revenue 104,448 79,993 204,382 154,294    
Cost of goods sold 40,681 40,959 78,953 72,238    
Gross profit 63,767 39,034 125,429 82,056    
Operating expenses 1,175,027 893,925 2,003,320 2,206,967    
Loss from operations (1,111,260) (854,891) (1,877,891) (2,124,911)    
Cash 2,300,973   2,300,973     552,613
Inventories 206,876   206,876     235,957
Other 129,983   129,983     44,110
Total current assets 2,637,832   2,637,832     832,680
Right to use asset        
Property and equipment, net 294,829   294,829     264,178
Deferred offering      
Intangible assets, net      
Goodwill      
Other 11,751   11,751     11,751
Total assets 2,944,412   2,944,412     1,108,609
Vision Testing Diagnostics [Member]            
Revenue 150,222 140,785 292,826 259,524    
Cost of goods sold 53,816 46,817 109,036 94,817    
Gross profit 96,406 93,968 183,790 164,707    
Operating expenses 206,362 85,429 347,219 163,752    
Loss from operations (109,956) $ 8,539 (163,429) $ 955    
Cash 54,317   54,317     118,335
Inventories 111,810   111,810     122,040
Other 31,943   31,943     31,866
Total current assets 198,070   198,070     272,241
Right to use asset        
Property and equipment, net 9,100   9,100     10,626
Deferred offering      
Intangible assets, net      
Goodwill      
Other      
Total assets $ 207,170   $ 207,170     $ 282,867
XML 41 R31.htm IDEA: XBRL DOCUMENT v3.19.2
Inventories - Schedule of Inventories (Details) - USD ($)
Jun. 30, 2019
Dec. 31, 2018
Inventory Disclosure [Abstract]    
Raw materials $ 248,021 $ 282,574
Finished goods 70,665 75,423
Inventory, Net $ 318,686 $ 357,997
XML 42 R32.htm IDEA: XBRL DOCUMENT v3.19.2
Property and Equipment, Net (Details Narrative) - USD ($)
6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Depreciation and amortization expense $ 29,810 $ 41,243
Research and Development Expense [Member]    
Depreciation and amortization expense 0 15,376
Sales and Marketing Expense [Member]    
Depreciation and amortization expense 19,065 4,138
General and Administrative Expense [Member]    
Depreciation and amortization expense $ 10,745 $ 21,729
XML 43 R33.htm IDEA: XBRL DOCUMENT v3.19.2
Property and Equipment, Net - Schedule of Property, Plant and Equipment (Details) - USD ($)
Jun. 30, 2019
Dec. 31, 2018
Property, plant and equipment, gross $ 643,095 $ 584,159
Less accumulated depreciation and amortization (339,166) (309,355)
Property, plant and equipment, net 303,929 274,804
Leasehold Improvements [Member]    
Property, plant and equipment, gross 98,357 98,357
Testing Equipment [Member]    
Property, plant and equipment, gross 300,448 249,447
Furniture and Fixtures [Member]    
Property, plant and equipment, gross 171,121 163,186
Computer Equipment [Member]    
Property, plant and equipment, gross 64,976 64,976
Office Equipment [Member]    
Property, plant and equipment, gross $ 8,193 $ 8,193
XML 44 R34.htm IDEA: XBRL DOCUMENT v3.19.2
Intangible Assets (Details Narrative) - USD ($)
6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]    
Non-amortizable purchased intellectual property $ 50,000  
Amortization of intangible assets $ 107,318 $ 107,318
XML 45 R35.htm IDEA: XBRL DOCUMENT v3.19.2
Intangible Assets - Schedule of Finite-Lived Intangible Assets (Details) - USD ($)
Jun. 30, 2019
Dec. 31, 2018
Finite-lived intangible assets, gross $ 724,400 $ 724,400
Less accumulated amortization (375,614) (268,296)
Finite-lived intangible assets, net 298,785 456,104
Customer Relationships [Member]    
Finite-lived intangible assets, gross 430,700 430,700
Technology [Member]    
Finite-lived intangible assets, gross 161,100 161,100
Trade Names [Member]    
Finite-lived intangible assets, gross 115,600 115,600
Noncompetition [Member]    
Finite-lived intangible assets, gross $ 17,000 $ 17,000
XML 46 R36.htm IDEA: XBRL DOCUMENT v3.19.2
Intangible Assets - Schedule of Finite-Lived Intangible Assets, Future Amortization Expense (Details) - USD ($)
Jun. 30, 2019
Dec. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]    
2019 $ 107,318  
2020 165,320  
2021 16,307  
2022 9,840  
Finite-lived intangible assets, net $ 298,785 $ 456,104
XML 47 R37.htm IDEA: XBRL DOCUMENT v3.19.2
Promissory Notes (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Apr. 11, 2019
Apr. 09, 2019
Apr. 04, 2019
Mar. 20, 2019
Mar. 15, 2019
Mar. 12, 2019
Jun. 30, 2019
Mar. 31, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Repayment of promissory note $ 100,548                    
Aggregate fair value of warrants             $ (227,832)   $ (227,832)
Debt conversion, converted instrument, amount             $ 250,788        
Debt conversion, converted instrument, shares issued                   109,038  
Discount recognized as interest cost                   $ 788
Warrants [Member]                      
Aggregate fair value of warrants   $ 359,683 $ 229,291         $ 436,034   $ 78,440  
Stock price   $ 3.30           $ 4.00      
Volatility rate               138.00%      
Risk-free interest rate, minimum               2.34%      
Risk-free interest rate, maximum               2.39%      
IPO [Member]                      
Number of shares entitled for warrants       109,038       109,038      
Debt conversion, converted instrument, amount   $ 250,788                  
Debt conversion, converted instrument, shares issued   109,038                  
Debt conversion price   $ 2.30                  
Discount recognized as interest cost   $ 250,000                  
IPO [Member] | Warrants [Member]                      
Debt instrument conversion rate       125.00%              
Warrants exercise price per share, description       The per share exercise price of the warrants was set at 125% of the conversion price of the notes, defined in the note agreements, as the lower of (a) 75% of the price per share of common stock of the IPO or (b) $2.30.              
Promissory Note [Member]                      
Debt instrument principal amount           $ 100,000          
Debt interest rate           10.00%          
Debt instrument maturity date           Jun. 10, 2019          
Convertible Note [Member]                      
Debt instrument principal amount       $ 150,000 $ 100,000            
Debt interest rate       5.00% 5.00%            
Debt instrument maturity date       Sep. 30, 2019 Sep. 30, 2019            
Debt discount               $ 250,000      
Financing cost               $ 186,034      
XML 48 R38.htm IDEA: XBRL DOCUMENT v3.19.2
Lease Liabilities (Details Narrative)
1 Months Ended 6 Months Ended
Oct. 31, 2012
USD ($)
ft²
Jun. 30, 2019
USD ($)
Jun. 30, 2018
USD ($)
Jan. 02, 2019
USD ($)
Dec. 31, 2018
USD ($)
Sep. 29, 2017
ft²
Lease liability       $ 635,131    
Rent expense   $ 87,161 $ 10,671      
Amortization of right of use asset   61,571 $ 7,152      
Right of use asset, net   595,598   $ 626,667  
Lease 1 [Member]            
Fair value of lease   $ 625,778        
Lease discount rate   8.00%        
Lease liability   $ 536,672     586,082  
Lease 2 [Member]            
Fair value of lease   $ 100,742        
Lease discount rate   8.00%        
Lease liability   $ 69,703     $ 77,137  
Lease 1 & 2 [Member]            
Monthly lease payments   82,434        
Lease Agreement [Member]            
Area of Land | ft² 9,605          
Deposit paid for lease $ 47,449 $ 11,751        
Prepaid rent $ 36,979          
Renewal of lease term   5 years        
Lease Agreement [Member] | VectorVision, Inc [Member]            
Area of Land | ft²           5,000
Renewal of lease term           65 months
Lease Agreement [Member] | Through July 2023 [Member]            
Monthly lease payments   $ 12,915        
Lease Agreement [Member] | Through February 2023 [Member] | VectorVision, Inc [Member]            
Monthly lease payments   $ 1,838        
XML 49 R39.htm IDEA: XBRL DOCUMENT v3.19.2
Stockholders' Equity (Deficit) (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Apr. 09, 2019
Apr. 04, 2019
Jun. 30, 2019
May 21, 2019
Mar. 31, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Mar. 20, 2019
Warrant exercisable price per share   $ 5.00 $ 2.81       $ 2.81    
Proceeds from exercise of warrants             $ 131,875 $ 1,460  
Warrants outstanding     261,538       261,538    
Weighted average remaining life             3 years 4 months 6 days    
Warrants issued   62,500              
Aggregate fair value of warrants     $ (227,832)     $ (227,832)  
Shares, Granted             1,250,000    
Grant date fair value of options granted             $ 4,122,750    
Amortization of stock option awards             1,066,159    
Stock compensation expense             242,996 1,054,885  
Warrants [Member]                  
Weighted average remaining life 4 years 11 months 8 days                
Share price $ 3.30       $ 4.00        
Aggregate fair value of warrants $ 359,683 $ 229,291     $ 436,034   $ 78,440    
Reclassification of fair value of warrant liability to equity $ 359,683                
IPO [Member]                  
Number of shares entitled for warrants         109,038       109,038
Warrant exercisable price per share         $ 2.88        
Stock Option [Member]                  
Share price     $ 1.26       $ 1.26    
Stock compensation expense             $ 1,309,155 $ 1,054,885  
Number of unvested options outstanding     1,220,833       1,220,833    
Number of unvested options outstanding, value     $ 3,132,532       $ 3,132,532    
Unvested options, weighted average exercise price     $ 4.28       $ 4.28    
Unvested options, weighted average remaining life             4 years 7 months 10 days    
Unvested options, aggregate intrinsic value     $ 0       $ 0    
Stock Option [Member] | Maximum [Member]                  
Share price     $ 4.00       $ 4.00    
Volatility             138.00%    
Average risk-free rates             2.46%    
Stock Option [Member] | Minimum [Member]                  
Share price     $ 3.30       $ 3.30    
Volatility             115.00%    
Average risk-free rates             2.31%    
Warrants [Member]                  
Warrants outstanding     62,500       62,500    
Aggregate intrinsic value     $ 19,000       $ 19,000    
Share price     $ 1.26       $ 1.26    
Volatility             145.00%    
Average risk-free rates             1.71%    
Investors [Member] | Warrants One [Member]                  
Number of warrants exercised       632,500          
Investors [Member] | Warrants Two [Member]                  
Number of warrants exercised       263,750          
Investors [Member] | Warrants [Member]                  
Number of shares entitled for warrants       492,256          
Warrant exercisable price per share       $ 0.50          
Proceeds from exercise of warrants       $ 131,875          
XML 50 R40.htm IDEA: XBRL DOCUMENT v3.19.2
Stockholders' Equity (Deficit) - Schedule of Warrants Activity (Details) - Warrants [Member]
6 Months Ended
Jun. 30, 2019
$ / shares
shares
Shares, Beginning Balance | shares 1,265,674
Shares, Granted | shares 171,538
Shares, Forfeitures | shares
Shares, Expirations | shares (279,424)
Shares, Exercised | shares (896,250)
Shares, Ending Balance | shares 261,538
Weighted Average Exercise Price, Beginning Balance | $ / shares $ 0.71
Weighted Average Exercise Price, Granted | $ / shares 2.39
Weighted Average Exercise Price, Forfeitures | $ / shares
Weighted Average Exercise Price, Expirations | $ / shares (1.96)
Weighted Average Exercise Price, Exercised | $ / shares (1.88)
Weighted Average Exercise Price, Ending Balance | $ / shares $ 2.81
Weighted Average Remaining Contractual Term (Years), Beginning Balance 3 months 15 days
Weighted Average Remaining Contractual Term (Years), Granted 3 years 1 month 9 days
Weighted Average Remaining Contractual Term (Years), Ending Balance 3 years 4 months 6 days
XML 51 R41.htm IDEA: XBRL DOCUMENT v3.19.2
Stockholders' Equity (Deficit) - Schedule of Exercise Price of Warrants Outstanding and Exercisable (Details) - $ / shares
Jun. 30, 2019
Apr. 04, 2019
Dec. 31, 2018
Exercise Prices $ 2.81 $ 5.00  
Warrant One [Member]      
Warrants Outstanding and Exercisable (Shares) 25,000    
Exercise Prices $ 0.50    
Warrant Two [Member]      
Warrants Outstanding and Exercisable (Shares) 65,000    
Exercise Prices $ 1.50    
Warrant Three [Member]      
Warrants Outstanding and Exercisable (Shares) 109,038    
Exercise Prices $ 2.88    
Warrant Four [Member]      
Warrants Outstanding and Exercisable (Shares) 62,500    
Exercise Prices $ 5.00    
Warrants [Member]      
Warrants Outstanding and Exercisable (Shares) 261,538   1,265,674
XML 52 R42.htm IDEA: XBRL DOCUMENT v3.19.2
Stockholders' Equity (Deficit) - Schedule of Fair Value Assumptions of Warrant Liability (Details)
6 Months Ended
Jun. 30, 2019
USD ($)
$ / shares
shares
Number of warrants 261,538
Warrants [Member]  
Stock price | $ / shares $ 1.26
Risk free interest rate 1.71%
Expected volatility 145.00%
Expected life in years 4 years 9 months 3 days
Expected dividend yield 0.00%
Number of warrants 62,500
Fair value of warrants | $ $ 78,440
Convertible Noteholders Upon Issuance [Member]  
Stock price | $ / shares $ 4.00
Risk free interest rate, minimum 2.34%
Risk free interest rate, maximum 2.39%
Expected volatility 138.00%
Expected life in years 5 years
Expected dividend yield 0.00%
Number of warrants 109,038
Fair value of warrants | $ $ 436,034
Underwriter LLC Upon Issuance [Member]  
Stock price | $ / shares $ 3.68
Risk free interest rate 2.29%
Expected volatility 137.00%
Expected life in years 5 years
Expected dividend yield 0.00%
Number of warrants 62,500
Fair value of warrants | $ $ 229,921
XML 53 R43.htm IDEA: XBRL DOCUMENT v3.19.2
Stockholders' Equity (Deficit) - Schedule of Share-based Compensation, Stock Options, Activity (Details)
6 Months Ended
Jun. 30, 2019
$ / shares
shares
Equity [Abstract]  
Shares Outstanding, Beginning Balance | shares 1,362,500
Shares, Granted | shares 1,250,000
Shares, Forfeitures | shares
Shares, Expirations | shares
Shares, Exercised | shares
Shares Outstanding, Ending Balance | shares 2,612,500
Shares Exercisable, Ending Balance | shares 1,391,667
Weighted Average Exercise Price Outstanding, Beginning Balance | $ / shares $ 2.26
Weighted Average Exercise Price, Granted | $ / shares 2.11
Weighted Average Exercise Price, Forfeitures | $ / shares
Weighted Average Exercise Price, Expirations | $ / shares
Weighted Average Exercise Price, Exercised | $ / shares
Weighted Average Exercise Price Outstanding, Ending Balance | $ / shares 3.28
Weighted Average Exercise Price Exercisable, Ending Balance | $ / shares $ 2.41
Weighted Average Remaining Contractual Term (Years) Outstanding, Beginning Balance 3 years 9 months 11 days
Weighted Average Remaining Contractual Term (Years), Granted 2 years 3 months 15 days
Weighted Average Remaining Contractual Term (Years) Outstanding, Ending Balance 4 years
Weighted Average Remaining Contractual Term (Years) Exercisable, Ending Balance 3 years 5 months 16 days
XML 54 R44.htm IDEA: XBRL DOCUMENT v3.19.2
Stockholders' Equity (Deficit) - Schedule of Exercise Price of Options Outstanding and Exercisable (Details)
Jun. 30, 2019
$ / shares
shares
Options Outstanding (Shares) 2,612,500
Options Exercisable (Shares) 1,391,667
Exercise Price One [Member]  
Options Outstanding (Shares) 625,000
Options Exercisable (Shares) 625,000
Exercise Prices | $ / shares $ 2.00
Exercise Price Two [Member]  
Options Outstanding (Shares) 62,500
Options Exercisable (Shares) 62,500
Exercise Prices | $ / shares $ 2.30
Exercise Price Three [Member]  
Options Outstanding (Shares) 675,000
Options Exercisable (Shares) 600,000
Exercise Prices | $ / shares $ 2.50
Exercise Price Four [Member]  
Options Outstanding (Shares) 1,250,000
Options Exercisable (Shares) 104,167
Exercise Prices | $ / shares $ 4.40
XML 55 R45.htm IDEA: XBRL DOCUMENT v3.19.2
Related Party Transactions (Details Narrative) - USD ($)
6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Amortization of stock option awards $ 1,066,159  
Board Chairman And Chief Executive Officer [Member] | Michael Favish [Member]    
Officers compensation $ 150,000 $ 137,500
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