UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For
the quarterly period ended
OR
For the transition period from ____ to ____
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The
|
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. ☒
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes
As of July 31, 2024, the Company had shares of common stock issued and outstanding.
TABLE OF CONTENTS
| 2 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This Quarterly Report on Form 10-Q contains “forward-looking statements” which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements contain information about our expectations, beliefs, plans or intentions regarding our product development and commercialization efforts, research and development efforts, business, financial condition, results of operations, strategies and prospects, and other similar matters. These forward-looking statements are based on management’s current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict and that may individually or materially impact the matters discussed herein for a variety of reasons that are outside the control of the Company, including, but not limited to, the completion of the Company’s Plan of Liquidation and Dissolution, the use of the proceeds received from the sale of the Viactiv business, the Company’s decision to continue to fund or wind-down its operations subsequent to the sale of the Viactiv business, the sale or other disposition of the Company’s ocular healthcare business, the exploration, timing and feasibility of alternatives to the Company’s Plan of Liquidation and Dissolution, supply chain disruptions, a potential recession and the condition of the economy in general, the Company’s ability to successfully market its remaining products and inventory, and the Company’s ability to maintain compliance with Nasdaq’s continued listing requirements. These statements may be identified by words such as “expects,” “plans,” “projects,” “will,” “may,” “anticipates,” “believes,” “should,” “intends,” “estimates,” “hopes” and other words of similar meaning.
Actual results could differ materially from those contained in forward-looking statements. Many factors could cause actual results to differ materially from those in forward-looking statements, including those matters discussed below. Readers are urged to read the risk factors set forth in our recent filings with the U.S. Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and in other documents we file with the SEC from time to time.
Other unknown or unpredictable factors that could also adversely affect our business, financial condition and results of operations may arise from time to time. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, the forward-looking statements discussed in this Quarterly Report on Form 10-Q may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of our management as of the date of this Quarterly Report on Form 10-Q. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results or expectations, except as required by law. We qualify all the information presented in this Quarterly Report on Form 10-Q, and particularly our forward-looking statements, by these cautionary statements.
This Quarterly Report on Form 10-Q may include market data and certain industry data and forecasts, which we may obtain from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications, articles and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third-party sources.
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PART I – FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Guardion Health Sciences, Inc.
Condensed Consolidated Balance Sheets
| June 30 | December 31 | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Current assets of discontinued operations | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Warrant redemption payable | ||||||||
| Current liabilities of discontinued operations | ||||||||
| Total current liabilities | ||||||||
| Warrant derivative liability – long-term | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock, $ par value; shares authorized | ||||||||
| Common stock, $ par value; shares authorized; shares and shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities, preferred stock and stockholders’ equity | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
| 4 |
Guardion Health Sciences, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | ||||||||||||||||
| Ocular products | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Ocular products | ||||||||||||||||
| Gross profit (loss) | ( | ) | ||||||||||||||
| Operating expenses | ||||||||||||||||
| Research and development | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Loss on disposal of fixed assets | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Change in fair value of warrant derivative liability | ( | ) | ( | ) | ( | ) | ||||||||||
| Cost related to settlement of placement agent warrants | ( | ) | ( | ) | ||||||||||||
| Interest income, net | ||||||||||||||||
| Other income (expense), net | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Discontinued operations | ||||||||||||||||
| Income from discontinued operations | ||||||||||||||||
| Transaction costs related
to sale of discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on sale of discontinued operations | ||||||||||||||||
| Total income from discontinued operations | ||||||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Earnings (loss) per share - basic | ||||||||||||||||
| Loss per share from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Income per share from discontinued operations | ||||||||||||||||
| Net income (loss) per share - basic | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Weighted average common shares outstanding – basic | ||||||||||||||||
| Earnings (loss) per share - diluted | ||||||||||||||||
| Loss per share from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Income per share from discontinued operations | ||||||||||||||||
| Net income (loss) per share - diluted | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Weighted average common shares outstanding - diluted | ||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
| 5 |
Guardion Health Sciences, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
| Three Months and Six Months Ended June 30, 2024 | ||||||||||||||||||||
| Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Fair value of vested stock options | - | |||||||||||||||||||
| Fair value of vested restricted stock | - | |||||||||||||||||||
| Common stock issued upon exercise of warrants | ( | ) | ||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance at March 31, 2024 | ( | ) | ||||||||||||||||||
| Fair value of vested stock options | - | |||||||||||||||||||
| Fair value of vested restricted stock | - | |||||||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Three Months and Six Months Ended June 30, 2023 | ||||||||||||||||||||
| Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Fair value of vested stock options | - | |||||||||||||||||||
| Fair value of vested restricted stock | - | |||||||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance at March 31, 2023 | ( | ) | ||||||||||||||||||
| Fair value of vested stock options | - | ( | ) | ( | ) | |||||||||||||||
| Fair value of vested restricted stock | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to condensed consolidated financial statements.
| 6 |
Guardion Health Sciences, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Operating Activities | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Income from discontinued operations | ( | ) | ( | ) | ||||
| Transaction costs related to sale of discontinued operations | ||||||||
| Gain on sale of discontinued operations | ( | ) | ||||||
| Net loss from continuing operations | ( | ) | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Loss on disposal of fixed asset | ||||||||
| Fair value of vested stock options | ( | ) | ||||||
| Fair value of vested restricted common stock | ||||||||
| Change in fair value of warrant derivative liability | ( | ) | ||||||
| Cost related to settlement of placement agent warrants | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease in: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Increase (decrease) in: | ||||||||
| Accounts payable | ( | ) | ||||||
| Operating lease liability | ( | ) | ||||||
| Accrued expenses | ( | ) | ||||||
| Net cash used in operating activities of continuing operations | ( | ) | ( | ) | ||||
| Net cash provided by operating activities of discontinued operations | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing Activities | ||||||||
| Purchase of equipment | ( | ) | ||||||
| Proceeds from sale of discontinued operations | ||||||||
| Net cash provided by (used in) investing activities of continuing operations | ( | ) | ||||||
| Financing Activities | ||||||||
| Redemption of warrants | ( | ) | ||||||
| Redemption of preferred stock | ( | ) | ||||||
| Net cash used in financing activities of continuing operations | ( | ) | ( | ) | ||||
| Cash and cash equivalents: | ||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Balance at beginning of period | ||||||||
| Balance at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for: | ||||||||
| Income taxes | $ | $ | ||||||
| Interest | $ | $ | ||||||
| Non-cash financing activities: | ||||||||
| Warrant redemption payable | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
| 7 |
Guardion Health Sciences, Inc.
Notes to Condensed Consolidated Financial Statements
For the Three Months and Six Months Ended June 30, 2024 and 2023
(Unaudited)
1. Organization and Business Operations
Business
Guardion Health Sciences, Inc. (the “Company”) offers science-based, clinically supported products designed for consumer ocular health.
Special Meeting of Stockholders
On May 23, 2024, the Company held a special meeting of stockholders (the “Special Meeting”). At the Special Meeting, the Company’s stockholders considered the following proposals: (i) the sale of all of the outstanding equity interests (the “Transaction”) of Activ Nutritional, LLC (“Activ”), a Delaware limited liability company which owned the Viactiv® brand and business and was the wholly-owned subsidiary of Viactiv Nutritionals, Inc. (“Viactiv”), a Delaware corporation and a wholly-owned subsidiary of the Company, pursuant to an equity purchase agreement with Doctor’s Best Inc., a Delaware corporation (“Doctor’s Best”), dated January 30, 2024 (the “Purchase Agreement”); and (ii) the grant of discretionary authority to the Board of Directors of the Company to adjourn the Special Meeting to a later date, to allow for the solicitation of additional proxies only in the event that there were insufficient shares present virtually or represented by proxy voting in favor of the Transaction or the voluntary dissolution and liquidation of the Company pursuant to a Plan of Dissolution.
The Company’s stockholders approved the sale of its Viactiv® brand and business at the Special Meeting. Following this approval, the Company then adjourned the Special Meeting to May 31, 2024 in order to give the Company’s management additional time to solicit proxies from its stockholders to vote in favor of the proposal to adopt the Company’s Plan of Liquidation and Dissolution. On May 31, 2024, the Company convened and held its previously-adjourned Special Meeting of the stockholders, at which the Company’s stockholders approved a proposal for the voluntary dissolution and liquidation of the Company (the “Dissolution”) pursuant to a Plan of Dissolution (the “Plan of Dissolution”), which authorizes the Company to liquidate and dissolve the Company in accordance with the Plan of Dissolution, but subject to the Company’s ability to abandon or delay the Plan of Dissolution in accordance with the terms thereof.
Sale of Activ Nutritional, LLC
On
May 31, 2024, the Company completed its sale of all of the outstanding equity interests of Activ to Doctor’s Best. The Transaction
closed in accordance with the terms and conditions of the Purchase Agreement, pursuant to which Doctor’s Best acquired all of the
outstanding equity interests of Activ from Viactiv for aggregate cash consideration to the Company of $
Nasdaq Listing and Reverse Stock Split
The
Company’s common stock is traded on the Nasdaq Capital Market (“Nasdaq”) under the symbol “GHSI”. On January
6, 2023, the Company effected a
Liquidity
During
the six months ended June 30, 2024, the Company completed the sale of its Viactiv® brand and business for gross cash proceeds of
$
| 8 |
For
the six months ended June 30, 2024, the Company recorded net income of $
As
of June 30, 2024, the Company had $
Accordingly, the Company’s condensed consolidated financial statements have been presented on the basis that it will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The condensed consolidated financial statements also do not reflect any adjustments relating to the recoverability and reclassifications of assets and liabilities that might be necessary if the Company is unable to continue as a going concern or it adopts the liquidation basis of accounting.
In addition, this determination is based on management’s current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict, and which involve unknown risks and uncertainties that may individually or materially impact the matters discussed herein for a variety of reasons that are outside the control of the Company.
2. Summary of Significant Accounting Policies
Basis of Presentation
The unaudited condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) pursuant to the applicable rules and regulations of the SEC for interim financial information. The unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements for the year ended December 31, 2023 and, in the opinion of management, reflect all adjustments, which consist of normal recurring adjustments, considered necessary for a fair presentation of the periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2024. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC. The condensed consolidated balance sheet as of December 31, 2023 was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.
On May 31, 2024, the Company completed the sale of all of the outstanding equity interests of Activ (see Note 3). The operations of Activ are reported as discontinued operations for all periods presented in the accompanying condensed consolidated financial statements.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Viactiv Nutritionals, Inc. and NutriGuard Formulations, Inc. Viactiv Nutritionals, Inc. was dissolved effective July 22, 2024. All intercompany balances and transactions have been eliminated in consolidation.
Segment Information
As a result of the disposition of the Viactiv® brand and business effective May 31, 2024 (see Note 3), at June 30, 3024, the Company operates and reports in one segment, which consists of the development and distribution of clinically supported dietary supplements for ocular health. The Company’s operating segment is reported in a manner consistent with the internal reporting provided to the Company’s Chief Operating Decision Maker, which is the Company’s President and Chief Executive Officer.
| 9 |
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates and if deemed appropriate, those estimates are adjusted. Significant estimates include those related to assumptions used in valuing stock-based compensation, the valuation allowance for deferred tax assets, accruals for potential liabilities, and assumptions used in the determination of the Company’s liquidity. Actual results could differ materially from those estimates.
Revenue Recognition
Revenue and costs of sales are recognized when control of the products transfers to our customer, which generally occurs upon delivery to the customer. The Company’s performance obligations are satisfied at that time. The Company does not have any significant contracts with customers requiring performance beyond delivery, and contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time. Shipping and handling activities are performed before the customer obtains control of the goods and therefore represent a fulfillment activity rather than a promised service to the customer.
All products sold by the Company are distinct individual products and are offered for sale as finished goods only, and there are no performance obligations required post-shipment for customers to derive the expected value from them. Contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time.
Historically the Company has not experienced any significant payment delays from customers.
In certain circumstances, returns of products are allowed. Due to the insignificant amount of historical returns, the stand-alone nature of our products, and our assessment of performance obligations and transaction pricing for our sales contracts the Company does not currently maintain a contract asset or liability balance for obligations. The Company assesses its contracts and the reasonableness of our conclusions on a quarterly basis.
At
June 30, 2024 and December 31, 2023, the allowance for doubtful accounts was $
Third-Party Outsourcing
The Company derives substantially all of its revenue from the sale of products using a third-party fulfillment center to provide order processing and sales fulfillment, customer invoicing and collections, and product warehousing. Substantially all of the Company’s products are shipped through the third-party fulfillment center to the customer. Shipping charges to customers are included in revenues. In addition, the Company uses the third-party fulfillment center to provide sales and inventory management, and certain marketing and promotional services.
The Company outsources the production of substantially all of its products with a third party that manufactures and packages the finished products under a product supply agreement.
Costs
incurred related to third-party outsourcing, which includes manufacturing, order processing and fulfillment, and warehousing, were $
Cost of Goods Sold
Cost of goods sold is comprised of the costs for third-party contract manufacturing, packaging, manufacturing fees, and in-bound freight charges.
Shipping Costs
Shipping
costs associated with product distribution after manufacture are included as part of cost of goods sold. Shipping and handling expense
totaled $
| 10 |
Advertising Costs
Advertising
costs are expensed as incurred and are included in sales and marketing expense. Advertising costs were $
Concentration of Risk
Vendor
costs. During the three months ended June 30, 2024,
the Company utilized one vendor for its corporate legal advice. Costs associated with this vendor
accounted for approximately
Accounts
payable. As of June 30, 2024,
three vendors accounted for
Cash
and cash equivalents. Cash and cash equivalents consist of funds deposited with BMO Harris Bank (“BMO”), a major, established,
high quality financial institution in short-term (original maturity of generally 60 days or less) liquid investments in money market
deposit accounts. Cash equivalents are classified as Level 1 in the GAAP valuation hierarchy and are valued using the net asset value
(“NAV”) per share of the money market fund. The Company has an overnight investment feature established with BMO whereby
the Company’s cash is swept into a Money Market Mutual Fund managed by Goldman Sachs Asset Management. This fund invests solely
in high quality U.S. government issued securities. As of June 30, 2024, $
The
Company routinely has cash balances in financial institutions in excess of the FDIC and SIPC insurance limits of $
Stock-Based Compensation
Stock-based awards for stock options and restricted stock awards to employees and non-employees are accounted for using the fair value method in accordance with ASC 718, Compensation – Stock Compensation. The estimated fair value of stock options granted to employees in exchange for services is measured at the grant date, using a fair value-based method, such as a Black-Scholes option valuation model, and is recognized as an expense on a straight-line basis over the requisite service periods. The assumptions used in the Black-Scholes option pricing model such as risk-free interest rates, expected volatility, expected life, and future dividends could materially affect compensation expense recorded in future periods. The fair value of restricted stock units is measured at the grant date based on the closing market price of the Company’s common stock on the date of grant and is recognized as an expense on a straight-line basis over the requisite service periods. Recognition of compensation expense for non-employees is accounted for in the same period and manner as if the Company had paid cash for the services.
Basic income (loss) per share is computed by dividing net loss by the weighted-average common shares outstanding during the period, excluding shares of unvested restricted common stock outstanding. Diluted earnings per share is computed based on the weighted-average common shares outstanding plus the effect of dilutive potential common shares outstanding during the period calculated using the treasury stock method. Shares of vested restricted stock are included in the diluted weighted average number of common shares outstanding from the date they are vested. Dilutive potential common shares include shares from unexercised warrants and options. Potential common share equivalents have been excluded where their inclusion would be antidilutive.
| 11 |
| Three Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Number of common shares - basic | ||||||||
| Effect of dilutive securities: | ||||||||
| Warrants | ||||||||
| Options | ||||||||
| Restricted stock awards | ||||||||
| Number of common shares - diluted | ||||||||
| Number of potentially dilutive securities excluded from calculation due to antidilutive impact | ||||||||
| Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Number of common shares - basic | ||||||||
| Effect of dilutive securities: | ||||||||
| Warrants | ||||||||
| Options | ||||||||
| Restricted stock awards | ||||||||
| Number of common shares - diluted | ||||||||
| Number of potentially dilutive securities excluded from calculation due to antidilutive impact | ||||||||
Antidilutive securities include outstanding stock options with exercise prices and average unrecognized compensation cost more than the average fair market value of common stock for the related period. Antidilutive securities also include restricted stock awards with average unrecognized compensation cost in excess of the average fair market value of the common stock for the related period. Antidilutive options and restricted stock awards were excluded from the calculation of diluted net income per share and could become dilutive in future periods.
The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share:
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Warrants | ||||||||
| Options | ||||||||
Fair Value of Financial Instruments
Accounting standards require certain assets and liabilities to be reported at fair value in financial statements and provide a framework for establishing that fair value. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which it transacts and considers assumptions that market participants would use when pricing the asset or liability. The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value:
Level 1 – Quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date.
| 12 |
Level 2 – Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.
Level 3 – Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions.
The Company determines the level in the fair value hierarchy within which each fair value measurement falls in its entirety, based on the lowest level input that is significant to the fair value measurement in its entirety. In determining the appropriate levels, the Company performs an analysis of the assets and liabilities at each reporting period end.
The following table sets forth by level, within the fair value hierarchy, the Company’s financial assets at fair value as of June 30, 2024 and December 31, 2023:
| June 30, 2024 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets | $ | - | $ | - | $ | - | $ | - | ||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
| Liabilities | ||||||||||||||||
| Warrant derivative liability | $ | $ | $ | $ | ||||||||||||
| Total liabilities | $ | $ | $ | $ | ||||||||||||
| December 31, 2023 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets | $ | - | $ | - | $ | - | $ | - | ||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
| Liabilities | ||||||||||||||||
| Warrant derivative liability | $ | $ | $ | $ | ||||||||||||
| Total liabilities | $ | $ | $ | $ | ||||||||||||
The following table provides a roll-forward of the warrant derivative liability measured at fair value on a recurring basis using unobservable level 3 inputs for the six months ended June 30, 2024:
Six Months Ended June 30, 2024 | ||||
| Balance as of beginning of period – December 31, 2023 | $ | |||
| Change in fair value of warrant derivative liability | ||||
| Fair value of warrants redeemed for cash settlement | ( | ) | ||
| Fair value of warrant redemption payable | ( | ) | ||
| Balance as of end of period – June 30, 2024 | $ | |||
As of June 30, 2024 and December 31, 2023, the Company’s outstanding warrants (except for placement agent warrants) were treated as derivative liabilities and changes in the fair value were recognized in the statement of operations (see Note 5).
The Company believes the carrying amounts of certain financial instruments, including cash, accounts receivable, and accounts payable and accrued liabilities, approximate fair value due to the short-term nature of such instruments and are excluded from the fair value tables above.
| 13 |
Recent Accounting Pronouncements
In July 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-03, Presentation of Financial Statements (Topic 205), Income Statement — Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation — Stock Compensation (Topic 718) Presentation of Financial Statements (“ASU 2023-03”). ASU 2023-03 amends the FASB Accounting Standards Codification to include Amendments to SEC Paragraphs pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and SEC Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 — General Revision of Regulation S-X: Income or Loss Applicable to Common Stock. As ASU 2023-03 did not provide any new guidance, there was no transition or effective date associated with its adoption. Accordingly, the Company adopted ASU 2023-03 immediately upon its issuance. The adoption of ASU 2023-03 did not have any impact on the Company’s consolidated financial statements, including their presentation and related disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories that are regularly provided to the chief operating decision maker and included in each reported measure of a segment’s profit or loss. ASU-2023-07 also requires all annual disclosures about a reportable segment’s profit or loss and assets to be provided in interim periods and for entities with a single reportable segment to provide all the disclosures required by ASC 280, Segment Reporting, including the significant segment expense disclosures. The Company adopted ASU 2023-07 effective January 1, 2024.The adoption of ASU 2023-07 did not have any impact on the Company’s consolidated financial statements, including their presentation and related disclosures.
Other recent accounting pronouncements and guidance issued by FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.
3. Discontinued Operations
Activ
owns the Viactiv® brand and business and is the wholly-owned subsidiary of Viactiv Nutritionals, Inc., a wholly-owned subsidiary
of the Company. On May 31, 2024 the Company completed the sale of Activ to Doctor’s Best
Inc. (see Note 1). The transaction closed in accordance with the terms and conditions of the Purchase Agreement, pursuant to which Doctor’s
Best acquired all of the outstanding equity interests of Activ for aggregate cash consideration paid to the Company at closing of $
The
Company received net proceeds at closing of $
The foregoing information with respect to the transaction referred to herein is summarized as follows:
| Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | |||||||
| Base purchase price | $ | $ | ||||||
| Less: Carrying amount of net assets sold | ( | ) | ( | ) | ||||
| Gain on sale before transaction costs | ||||||||
| Less: Transaction costs paid at closing | ( | ) | ( | ) | ||||
| Gain on sale, per statement of operations | ||||||||
| Other transaction costs incurred during 2024 | ( | ) | ( | ) | ||||
| Net gain on sale | $ | $ | ||||||
| 14 |
The operations of Activ are reported for all periods as discontinued operations in the Company’s condensed consolidated financial statements. The following table summarizes the results of discontinued operations in the Company’s condensed consolidated statements of operations:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Research and development | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Income from operations | ||||||||||||||||
| Other income (loss): | ||||||||||||||||
| Transaction costs related to sale of discontinued
operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on sale of discontinued operations | ||||||||||||||||
| Total other income (loss) | ( | ) | ( | ) | ||||||||||||
| Income from discontinued operations | $ | $ | $ | $ | ||||||||||||
The table below provides a reconciliation of the carrying amounts of the major classes of assets and liabilities of discontinued operations at May 31, 2024 and December 31, 2023. The total current assets and total current liabilities of discontinued operations are presented separately in the accompanying consolidated balance sheet at December 31, 2023:
| May 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Accounts receivable, net | $ | $ | ||||||
| Inventories, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets of discontinued operations | ||||||||
| Liabilities | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Total current liabilities of discontinued operations | ||||||||
| Net assets of discontinued operations | $ | $ | ||||||
4. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or net realizable value and consisted of the following at June 30, 2024 and December 31, 2023:
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Raw materials | $ | $ | ||||||
| Finished products | ||||||||
| $ | $ | |||||||
5. Operating Leases
The
Company leases its corporate office space located in Houston, Texas, pursuant to a short-term lease with payments of approximately $
| 15 |
6. Warrant Derivative Liability
In
February 2022, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company
issued and sold shares of the Company’s common stock and warrants to purchase shares of the Company’s common stock. Included
in the offering were
The Series A and Series B warrants contained certain antidilution provisions, including a down round provision and certain cash redemption rights. In addition, the warrants contained a provision which required that the exercise price of such warrants be adjusted to the volume weighted average price of the Company’s common stock for the five trading days immediately following effectiveness of a reverse stock split if such calculation resulted in an exercise price below the then-current exercise price. The Company determined that this provision represented a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under ASC 815-40, and thus the warrants were not considered indexed to the Company’s own stock and not eligible for an exception from derivative accounting. Accordingly, these warrants were classified as a derivative liability.
During
2023, Series B Warrants were exercised into shares of common stock and the remainder of the
In
addition,
The
fair value of the warrant liability at June 30, 2024 and at December 31, 2023 was $
| Series A Warrants | ||||||||
June 30, 2024 | December 31, 2023 | |||||||
| Common stock market price | $ | $ | ||||||
| Exercise price | ||||||||
| Expected term (in years) | ||||||||
| Expected volatility | % | % | ||||||
| Expected dividend yield | ||||||||
| Risk-free interest rate | % | % | ||||||
| Total fair value | $ | $ | ||||||
| 16 |
7. Redeemable Preferred Stock (Classified as Temporary Equity, redeemed in full in February 2023)
On
November 29, 2022, the Company issued and sold, in a private placement,
8. Stockholders’ Equity
Common Stock
The Company is authorized to issue shares of common stock, par value $ per share. As of June 30, 2024 and December 31, 2023, there were shares and shares, respectively, of common stock issued and outstanding.
Warrants
A summary of the Company’s warrant activity is as follows:
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | ||||||||||
| December 31, 2023 | $ | |||||||||||
| Granted | - | |||||||||||
| Forfeitures | - | |||||||||||
| Expirations | ( | ) | - | |||||||||
| Redemptions | ( | ) | - | |||||||||
| June 30, 2024, all exercisable | $ | |||||||||||
The exercise prices of warrants outstanding and exercisable as of June 30, 2024 are as follows:
Warrants Outstanding and Exercisable (Shares) | Exercise Prices | ||||
| $ | |||||
| $ | |||||
During
the six months ended June 30, 2024,
| 17 |
Stock Options
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | ||||||||||
| December 31, 2023 | $ | |||||||||||
| Granted | - | |||||||||||
| Forfeitures | - | |||||||||||
| Expirations | - | |||||||||||
| Exercised | - | |||||||||||
| June 30, 2024, outstanding | $ | |||||||||||
| June 30, 2024, exercisable | $ | |||||||||||
Options Outstanding (Shares) | Options Exercisable (Shares) | Exercise Prices | |||||||
| $ | |||||||||
The Company accounts for share-based payments in accordance with ASC 718, Compensation – Stock Compensation, wherein grants are measured at the grant date fair value and charged to operations ratably over the vesting periods.
During the six months ended June 30, 2024, there were grants of options to purchase shares of common stock.
During the six months ended June 30, 2023, the Company granted options to purchase an aggregate of shares of common stock to the independent members of the Company’s Board of Directors in connection with the compensation plan for such directors with grant date fair values of $, using a Black-Scholes option pricing model based on the following assumptions: (i) a volatility rate of %, (ii) a discount rate of % (iii) expected dividend yield, and (iv) an expected life of years. The options have an exercise price of $ per share, respectively. The options vest on a quarterly basis over two years from the grant date, with the first tranche vesting on September 30, 2023.
During the six months ended June 30, 2023, the Company granted options to purchase shares of common stock to the Company’s Chief Executive Officer (“CEO”) with a grant date fair value of $ using a Black-Scholes option pricing model based on the following assumptions: (i) a volatility rate of %, (ii) a discount rate of%, (iii) expected dividend yield, and (iv) an expected life of years. The options vest on a quarterly basis thereafter over .
The Company’s former CEO resigned effective June 9, 2023. All options issued to the former CEO that were not vested at the time of resignation were forfeited. Compensation expense previously recorded related to the unvested options was reversed, resulting in a reduction of stock compensation expense of $() during the three months and six months ended June 30, 2023.
| 18 |
The Company computes stock price volatility over expected terms based on its historical common stock trading prices. The risk-free interest rate was based on rates established by the Federal Reserve Bank. The expected dividend yield was based on the fact that the Company has not paid dividends to its common stockholders in the past and does not expect to pay dividends to its common stockholders in the future. The expected life of the stock options granted is estimated using the “simplified” method, whereby the expected term equals the average of the vesting term and the original contractual term of the stock option.
For the six months ended June 30, 2024 and 2023, the Company recognized aggregate share-based compensation expense (income) of $ and $, respectively, related to the fair value of vested options.
As of June 30, 2024, the Company had an aggregate of remaining unvested options outstanding, with a remaining fair value of approximately $ to be amortized over an average of year. Based on the closing price of the Company’s common stock on June 28, 2024, the last trading day of the quarter, of $ per share, the aggregate intrinsic value of options outstanding as of June 30, 2024 was $.
Restricted Common Stock
During the six months ended June 30, 2024 and 2023, there were grants of restricted common stock.
During the six months ended June 30, 2024 and 2023, the Company recognized share-based compensation expense of $ and $, respectively, related to vested restricted shares.
The following table summarizes restricted common stock activity for the six months ended June 30, 2024:
| Number of shares | Fair value of shares | |||||||
| Non-vested shares, December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ||||||||
| Non-vested shares, June 30, 2024 | $ | |||||||
9. Income Taxes
During the three months and six months ended June 30, 2024 and 2023, the Company did not record any provision for income taxes, as the Company incurred losses for income tax reporting during such periods.
On
May 31, 2024, the Company completed its sale of all the outstanding equity interests of Activ Nutritional, LLC (“Activ”)
for $
Deferred tax assets and liabilities reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company has recorded a full valuation allowance against its deferred tax assets (including the capital losses described above) as the Company currently believes it is more likely than not that the deferred tax assets will not be realized.
10. Commitments and Contingencies
Legal Proceedings
The Company is periodically the subject of various pending or threatened legal actions and claims arising out of its operations in the normal course of business. In the opinion of the management of the Company, adequate provision has been made in the Company’s consolidated financial statements at June 30, 2024 and December 31, 2023 with respect to any such matters.
The Company is not currently a party to any material legal proceedings and is not aware of any pending or threatened legal proceeding against the Company that the Company believes could have a material adverse effect on its business, operating results, cash flows or financial condition.
11. Subsequent Events
The Company performed an evaluation of subsequent events through the date of filing of these condensed consolidated financial statements with the SEC. Other than as disclosed herein, there were no material subsequent events which affected, or could affect, the amounts or disclosures in the condensed consolidated financial statements.
| 19 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as may be amended, supplemented or superseded from time to time by other reports we file with the SEC. All amounts in this report are in U.S. dollars, unless otherwise noted.
As used in this Quarterly Report on Form 10-Q, the terms “we,” “us” “our” and the “Company” mean Guardion Health Sciences, Inc., individually, or as the context requires, collectively with its subsidiaries.
Overview
Guardion Health Sciences, Inc. (the “Company”) is a clinical nutrition company that offers science-based, clinically supported products, including GlaucoCetin and Lumega-Z, designed for consumer ocular health. Both products are available on guardionhealth.com.
To support the Company’s consumer ocular business, the Company reformulated and relaunched Lumega-Z in March 2024 as a drink mix powder at a lower retail price versus the prior liquid formulation for the Company’s current customers and to appeal to new customers. The Company has implemented an email marketing campaign to raise awareness of the formulation change and to drive sales of both Lumega-Z and GlaucoCetin on guardionhealth.com.
Recent Developments
Special Meeting of Stockholders
On May 23, 2024, the Company held a special meeting of stockholders (the “Special Meeting”). At the Special Meeting, the Company’s stockholders considered the following proposals: (i) the sale of all of the outstanding equity interests (the “Transaction”) of Activ Nutritional, LLC (“Activ”), a Delaware limited liability company which owned the Viactiv® brand and business and was the wholly-owned subsidiary of Viactiv Nutritionals, Inc. (“Viactiv”), a Delaware corporation and a wholly-owned subsidiary of the Company, pursuant to an equity purchase agreement with Doctor’s Best Inc., a Delaware corporation (“Doctor’s Best”), dated January 30, 2024 (the “Purchase Agreement”); and (ii) the grant of discretionary authority to the Board of Directors of the Company to adjourn the Special Meeting to a later date, to allow for the solicitation of additional proxies only in the event that there were insufficient shares present virtually or represented by proxy voting in favor of the Transaction or the voluntary dissolution and liquidation of the Company pursuant to a Plan of Dissolution.
The Company’s stockholders approved the sale of its Viactiv® brand and business at the Special Meeting. Following this approval, the Company then adjourned the Special Meeting to May 31, 2024 in order to give the Company’s management additional time to solicit proxies from its stockholders to vote in favor of the proposal to adopt the Company’s Plan of Liquidation and Dissolution. On May 31, 2024, the Company convened and held its previously-adjourned Special Meeting of the stockholders, at which the Company’s stockholders approved a proposal for the voluntary dissolution and liquidation of the Company (the “Dissolution”) pursuant to a Plan of Dissolution (the “Plan of Dissolution”), which authorizes the Company to liquidate and dissolve the Company in accordance with the Plan of Dissolution, but subject to the Company’s ability to abandon or delay the Plan of Dissolution in accordance with the terms thereof.
Sale of Activ Nutritional, LLC
On May 31, 2024, as previously disclosed, the Company completed its sale of all of the outstanding equity interests of Activ to Doctor’s Best. The Transaction closed in accordance with the terms and conditions of the Purchase Agreement, pursuant to which Doctor’s Best acquired all of the outstanding equity interests of Activ from Viactiv for aggregate cash consideration to the Company of $17,200,000. Doctor’s Best is a wholly-owned subsidiary of Kingdomway USA Corp., the U.S. subsidiary holding company of Xiamen Kingdomway Group Company, which is listed on the Shenzhen Stock Exchange.
| 20 |
Current Business Plans
As of June 30, 2024, the Company had $14,822,826 of cash, and working capital (including cash) of $14,374,922. The Board of Directors is in the process of determining whether or not to declare, and the timing of, one or more cash distributions to the Company’s stockholders in the near-term. The Company expects to make this determination during the quarter ending September 30, 2024.
Nasdaq Listing and Reverse Stock Split
The Company’s common stock is traded on the Nasdaq Capital Market (“Nasdaq”) under the symbol “GHSI”. On January 6, 2023, the Company effected a 1-for-50 reverse split of its outstanding shares of common stock in order to remain in compliance with the $1.00 minimum closing bid price requirement of Nasdaq. However, there can be no assurances that the Company will be able to remain in compliance with the $1.00 minimum closing bid price requirement of Nasdaq over time, or that it will be successful in maintaining compliance with any of the other continued listing requirements of Nasdaq.
Concentration of Risk
Information with respect to concentration of risk is provided at Note 2 to the condensed consolidated financial statements for the three months and six months ended June 30, 2024 and 2023 included elsewhere in this document.
Cybersecurity
The Company’s Board of Directors is responsible for overseeing our risk management and strategy and cybersecurity is a critical element of this strategy. Management is responsible for the day-to-day administration of the Company’s risk management strategy and its cybersecurity policies, processes, and practices. Management does not believe that there are currently any known risks from cybersecurity threats that are reasonably likely to materially affect the Company or its operations, business strategy, results of operations or financial condition. The Company’s IT policies, including cybersecurity, have been developed in conjunction with independent third parties that specialize in cybersecurity, cloud, and digital infrastructure. Likewise, the Company’s cyberattack response plan has been developed in conjunction with independent third parties that specialize in cybersecurity, cloud, and digital infrastructure.
For more information on the Company’s cybersecurity risk management and strategy, see “Item 1C. Cybersecurity” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in valuing inventories at net realizable value, assumptions used in valuing stock-based compensation, the valuation allowance for deferred tax assets, accruals for potential liabilities, and assumptions used in the determination of the Company’s liquidity. There were no changes to the Company’s critical accounting policies described in the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 that impacted the condensed consolidated financial statements and related notes included herein.
| 21 |
Recent Accounting Pronouncements
Information with respect to recent accounting pronouncements is provided at Note 2 to the condensed consolidated financial statements for the three months and six months ended June 30, 2024 and 2023 included elsewhere in this document.
Results of Operations
The Company’s condensed consolidated statements of operations as discussed herein are presented below.
Comparison of Three Months Ended June 30, 2024 and 2023
Three Months Ended June 30, | Change | |||||||||||||||
| 2024 | 2023 | $ | % | |||||||||||||
| Revenue | $ | 72,918 | $ | 79,633 | $ | (6,715 | ) | (8.4 | )% | |||||||
| Cost of goods sold | 36,572 | 86,574 | (50,002 | ) | (57.8 | )% | ||||||||||
| Gross profit (loss) | 36,346 | (6,941 | ) | 43,287 | 623.6 | % | ||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing | 8,088 | 7,672 | 416 | 5.4 | % | |||||||||||
| General and administrative | 1,395,721 | 1,405,771 | (10,050 | ) | (0.7 | )% | ||||||||||
| Loss on disposal of fixed assets | 13,863 | - | 13.863 | 100 | % | |||||||||||
| Research and development | - | - | - | 0 | % | |||||||||||
| Total operating expenses | 1,417,672 | 1,413,443 | 4,229 | 0.3 | % | |||||||||||
| Loss from operations | (1,381,326 | ) | (1,420,384 | ) | 39,058 | 2.7 | % | |||||||||
| Other income (expense): | ||||||||||||||||
| Change in fair value of warrant derivative liability | (549,320 | ) | (255,300 | ) | (294,020 | ) | (115.2 | )% | ||||||||
| Cost related to settlement of placement agent warrants | (319,625 | ) | - | (319,625 | ) | 100 | % | |||||||||
| Interest income, net | 117,245 | 95,534 | 21,711 | 22.7 | % | |||||||||||
| Other income (expense), net | (751,700 | ) | (159,766 | ) | (591,934 | ) | (370.5 | )% | ||||||||
| Loss from continuing operations | (2,133,026 | ) | (1,580,150 | ) | (552,876 | ) | (35.0 | )% | ||||||||
| Discontinued operations: | ||||||||||||||||
| Income from discontinued operations | 200,923 | 463,837 | (262,914 | ) | (56.7 | )% | ||||||||||
| Transaction costs related to sale of discontinued operations | (485,952 | ) | (56,098 | ) | (429,854 | ) | (766.3 | )% | ||||||||
| Gain on sale of discontinued operations | 12,742,385 | - | 12,742,385 | 100 | % | |||||||||||
| Total income from discontinued operations | 12,457,356 | 407,739 | 12,049,617 | 2,955.2 | % | |||||||||||
| Net income (loss) | $ | 10,324,330 | $ | (1,172,411 | ) | $ | 11,496,741 | 980.6 | % | |||||||
Revenue
For the three months ended June 30, 2024, revenue from ocular product sales was $72,918, as compared to $79,633 for the three months ended June 30, 2023, a decrease of $6,715 or 8.4%. The primary reason for the decrease in revenue for the three months ended June 30, 2024 was reduced sales of the Lumega-Z product due to the formulation change to powder that retails at a lower retail price point.
Cost of Goods Sold
For the three months ended June 30, 2024, cost of goods sold was $36,572, as compared to $86,574 for the three months ended June 30, 2023, a decrease of $50,002 or 57.8%. The decrease was primarily a result of the write-down in the carrying value of inventory of $22,183 during the three months ended June 30, 2023.
| 22 |
Gross Profit (Loss)
For the three months ended June 30, 2024, gross profit was $36,346, as compared to a gross loss of $(6,941) for the three months ended June 30, 2023.
Sales and Marketing
For the three months ended June 30, 2024, sales and marketing expenses were $8,088, as compared to $7,672 for the three months ended June 30, 2023.
General and Administrative
For the three months ended June 30, 2024, general and administrative expenses were $1,395,721, as compared to $1,405,771 for the three months ended June 30, 2023, a decrease of $10,050 or 0.7%. Major components of the decrease in general and administrative expenses for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, consisted of increases of approximately $210,000 in compensation costs and approximately $117,000 in Delaware franchise tax costs, offset by a decrease of approximately $315,000 in corporate legal fees.
Loss on Disposal of Fixed Assets
For the three months ended June 30, 2024, the loss on disposal of fixed assets was $13,863, as compared to $0 for the three months ended June 30, 2023.
Loss from Operations
Loss from operations for the three months ended June 30, 2024 was $(1,381,326), as compared to $(1,420,384) for the three months ended June 30, 2023.
Change in Fair Value of Warrant Derivative Liability
For the three months ended June 30, 2024, the change in the fair value of warrant derivative liability related to the Series A Warrants was a loss of $549,320, as compared to a loss of $255,300 for the three months ended June 30, 2023.
Costs Related to Settlement of Placement Agent Warrants
For the three months ended June 30, 2024, the cost for the settlement of the placement agent warrants was $319,625.
Interest Income, Net
For the three months ended June 30, 2024, interest income was $117,245, as compared to $95,534 for the three months ended June 30, 2023.
Loss from Continuing Operations
Loss from continuing operations for the three months ended June 30, 2024 was $(2,133,026), as compared to $(1,580,150) for the three months ended June 30, 2023.
Income from Discontinued Operations
Income from discontinued operations for the three months ended June 30, 2024 was $200,923, as compared to $463,837 for the three months ended June 30, 2023.
Transaction Costs Related to Sale of Discontinued Operations
Transaction costs related to the sale of discontinued operations for the three months ended June 30, 2024 were $485,952, as compared to $56,098 for the three months ended June 30, 2023.
| 23 |
Gain on Sale of Discontinued Operations
The gain on sale of discontinued operations recognized during the three months ended June 30, 2024 was $12,742,385.
Total Income from Discontinued Operations
Total income from discontinued operations for the three months ended June 30, 2024 was $12,457,356, as compared to $407,739 for the three months ended June 30, 2023.
Net Income (Loss)
For the three months ended June 30, 2024, the Company had net income of $10,324,330, as compared to a net loss of $(1,172,411) for the three months ended June 30, 2023.
Comparison of Six Months Ended June 30, 2024 and 2023
Six Months Ended June 30, | Change | |||||||||||||||
| 2024 | 2023 | $ | % | |||||||||||||
| Revenue | $ | 154,037 | $ | 173,874 | $ | (19,837 | ) | (11.4 | )% | |||||||
| Cost of goods sold | 80,738 | 155,134 | (74,396 | ) | (48.0 | )% | ||||||||||
| Gross profit | 73,299 | 18,740 | 54,558 | 291.1 | % | |||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing | 11,961 | 38,547 | (26,586 | ) | (69.0 | )% | ||||||||||
| General and administrative | 2,826,754 | 3,106,585 | (279,831 | ) | (9.0 | )% | ||||||||||
| Loss on disposal of fixed assets | 17,229 | - | 17,229 | 100 | % | |||||||||||
| Research and development | - | 5,183 | (5,183 | ) | (100.0 | )% | ||||||||||
| Total operating expenses | 2,855,944 | 3,150,315 | (294,371 | ) | (9.3 | )% | ||||||||||
| Loss from operations | (2,782,645 | ) | (3,131,575 | ) | 348,930 | 11.1 | % | |||||||||
| Other income (expense): | ||||||||||||||||
| Change in fair value of warrant derivative liability | (3,817,908 | ) | 1,642,800 | (5,460,708 | ) | (332.4 | )% | |||||||||
| Cost related to settlement of placement agent warrants | (319,625 | ) | - | (319,625 | ) | 100 | % | |||||||||
| Interest income, net | 192,890 | 194,533 | (1,643 | ) | (0.8 | )% | ||||||||||
| Other income (expense), net | (3,944,643 | ) | 1,837,333 | (5,781,976 | ) | (314.7 | )% | |||||||||
| Loss from continuing operations | (6,727,288 | ) | (1,294,242 | ) | (5,433,046 | ) | (419.8 | )% | ||||||||
| Discontinued operations: | ||||||||||||||||
| Income from discontinued operations | 578,132 | 798,688 | (220,556 | ) | (27.6 | )% | ||||||||||
| Transaction costs related to sale of discontinued operations | (1,015,642 | ) | (143,766 | ) | (871,876 | ) | (606.5 | )% | ||||||||
| Gain on sale of discontinued operations | 12,742,385 | - | 12,742,385 | 100 | % | |||||||||||
| Total income from discontinued operations | 12,304,875 | 654,922 | ||||||||||||||