UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

xFORM 10-K

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

For the fiscal year ended December 31, 2017

OR2020

¨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)

15150 Avenue of Science, Suite 200

San Diego, California 92128

Telephone: 858-605-9055

Telecopier: (858) 630-5543

(Address and telephone number of principal executive offices)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE EXCHANGE ACT:

None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT:

Common Stock, $0.001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.¨ Yes x No

Indicate by check mark if the registrant is not required to file reportsregistered pursuant to Section 13 or Section 15(d)12(b) of the Exchange Act.¨ Yes x NoAct:

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 [X] Yes ¨[  ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).x [X] Yes ¨[  ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x

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.

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).¨

[  ] Yes x[X] No

Registrants’On June 30, 2020, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value (based on the closing per share sales price of its common stock is not yet publicly traded.on that date) of the voting stock held by non-affiliates of the registrant was approximately $37.5 million.

As of February 23, 2018,March 25, 2021, there were issued and outstanding 40,329,47524,426,993 shares of the issuer’sregistrant’s common stock, par value $0.001 par value.

DOCUMENTS INCORPORATED BY REFERENCE: None. per share, issued and outstanding.

TABLE OF CONTENTS

Introductory Comment

Throughout this Annual Report on Form 10-K, the terms “we,” “us,” “our,” “our company,” “Guardion” the “Company” and the “Registrant” refer to Guardion Health Sciences, Inc. and its subsidiaries.

FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K for the fiscal year ended December 31, 2020 contains “forward-looking statements” within the meaning of the Securities Act of 1933, as amended (the “Annual Report”“Securities Act”) contains, and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements.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 relate to future events or future predictions, including events or predictions relating to our future financial performance, and are based on management’s current expectations estimates, forecasts and projectionsassumptions about us, our future performance, our beliefs and management’s assumptions.  Theyevents, which are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “feel,” “confident,” “estimate,” “intend,” “predict,” “forecast,” “potential” or “continue” or the negative of such terms or other variations on these words or comparable terminology.  These statements are only predictions and involve known and unknowninherently subject to uncertainties, risks uncertainties and other factors, including the risks described under “Risk Factors” that may cause the Company’s or its industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.  In addition to the risks described in Risk Factors, important factors to consider and evaluate in such forward-looking statements include: (i) general economic and political conditions and changes in the external competitive marketcircumstances 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 which might impact the Company’scould cause actual results to differ materially from those in forward-looking statements, including those matters discussed below, as well as those listed in Item 1A. Risk Factors.

Other unknown or unpredictable factors that could also adversely affect our business, financial condition and results of operations; (ii) unanticipated working capital or other cash requirements including those created by the failure of the Companyoperations may arise from time to adequately anticipate the costs associated with acquisitions and other critical activities; and (iii) changes in the Company’s corporate strategy or an inability to execute its strategy due to unanticipated changes. As a result oftime. Given these risks and uncertainties, many of which are described in greater detail elsewhere in the “Risk Factors” section of this Annual Report, there can be no assurance that the forward-looking statements containeddiscussed in this Annual Report will in fact transpire.

Although the Company believes that the expectations reflected in thereport may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, are reasonable,which only reflect the Company cannot guarantee future results, levelsviews of activity, performance or achievements.  The Company willthe Company’s management as of the date of this report. We undertake no obligation to update or revise the forward-looking statements to reflect changed assumptions, the extentoccurrence of unanticipated events or changes to future operating results or expectations, except as required by applicable law.

PART I

ITEM 1. BUSINESS

Throughout this Annual Report on Form 10-K, the terms “we,” “us,” “our,” “our company,” “Guardion” the “Company” and the “Registrant” refer to Guardion Health Sciences, Inc. and its consolidated subsidiaries.

Overview

The Company is a specialty health sciences company formed to develop, formulate and distribute condition-specific(1) that has developed medical foods with an initialand medical food product ondevices in the market underocular health space and (2) that is developing nutraceuticals that 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. This risk may be modified by taking Lumega-ZCompany believes will provide supportive health benefits 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.consumers.

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 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 acquisition expands our technical portfolio and we believe it further establishes ourMedical Foods:

Medical Devices:

Nutraceuticals:

Recent Developments

January and February 2021 At the Market Offerings

On January 8, 2021, we filed a prospectus supplement pursuant to which we could sell up to $10,000,000 worth of shares of our common stock in an “at the market” offering (the “January 2021 1st ATM Offering”). On January 15, 2021, we completed the January 2021 1st ATM Offering, pursuant to which we sold an aggregate of 2,559,834 shares of our common stock, raised gross proceeds of approximately $10,000,000 and net proceeds of approximately $9,500,000.

On January 28, 2021, we filed a prospectus supplement pursuant to which we could sell up to $25,000,000 worth of shares of our common stock in an “at the market” offering (the “January 2021 2nd ATM Offering”). On February 10, 2021, we completed the January 2021 2nd ATM Offering, pursuant to which we sold an aggregate of 5,006,900 shares of our common stock, raised gross proceeds of approximately $25,000,000 and net proceeds of approximately $24,100,000.

In addition, in January and February 2021, the Company issued an aggregate of 1,647,691 shares of common stock upon the exercise of warrants and received cash proceeds of $3,608,509.

Appointment of New CEO

Effective as of January 6, 2021, the Board of Directors appointed Bret Scholtes as President and Chief Executive Officer and as a director of the Company.

Prior to his appointment, Mr. Scholtes, age 51, served as the President and Chief Executive Officer of Omega Protein Corporation (“Omega”) since 2012 and as a director of Omega since 2013. Omega was listed on The New York Stock Exchange until January 2018 when it was sold. Prior to his selection as Chief Executive Officer of Omega, Mr. Scholtes served as the Omega’s Senior Vice President-Corporate Development from April 2010 to December 2010 and as Omega’s Executive Vice President and Chief Financial Officer from January 2011 to December 2011. From 2006 to April 2010, Mr. Scholtes served as a Vice President at GE Energy Financial Services, a global energy investment firm. Prior to that, Mr. Scholtes held positions with two publicly traded energy companies. Mr. Scholtes also has five years of public accounting experience. Mr. Scholtes holds an MBA degree in Finance from New York University and a degree in Accounting from the University of Missouri – Columbia.

Reverse Stock Split and Nasdaq Compliance

On September 20, 2019, we received notice from the Listing Qualifications staff (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of the Company’s common stock for the previous 30 consecutive business days, the Company no longer satisfied the requirement to maintain a minimum bid price of $1.00 per share, as required by Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”). In accordance with the Nasdaq Listing Rules, the Company was afforded 180 days, or until March 18, 2020, to regain compliance with the Bid Price Rule by evidence of a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days. Thereafter, the Company had been afforded a second 180-calendar day compliance period (which 180-day period was extended due to circumstances related to COVID-19), or until November 30, 2020, to regain compliance with the Bid Price Rule.

The Company has had limited commercial operationswas unable to date, and has primarily been engaged in research, development, commercialization, and capital raising.regain compliance with the Bid Price Rule by November 30, 2020. Accordingly, on December 1, 2020, the Company received a letter from the Staff notifying it that its Common Stock would be subject to delisting from Nasdaq unless the Company timely appealed Nasdaq’s determination to a Nasdaq Listing Qualifications Panel (the “Panel”). The Company timely appealed Nasdaq’s determination to the Panel.

TheOn January 26, 2021, the Company inventedreceived written notification that the Panel granted the Company an extension for continued listing through March 15, 2021. 

On March 1, 2021, the Company filed a proprietary technology, embodied inCertificate of Amendment to its Certificate of Incorporation, as amended, with the MapcatSF^®that accurately measuresSecretary of State of the macular pigment optical density (“MPOD”). On November 8, 2016, the United States Patent and Trademark Office (“USPTO”State of Delaware to effectuate a one-for-six (1:6) reverse stock split (the “Reverse Stock Split”) issued patent number 9,486,136of its common stock without any change to its par value. Proportional adjustments for the MapcatSF invention. UsingReverse Stock Split were made to the MapcatSF to measureCompany’s outstanding common stock, stock options, and warrants as if the MPOD allows one to monitorsplit occurred at the increase in the densitybeginning of the macular protective pigment after taking Lumega-Z. The MapcatSF isearliest period presented in this Annual Report.

On March 15, 2021, we received a non-mydriatic, non-invasive deviceletter from the Staff notifying us that accurately measures the MPOD, the lens optical density and lens equivalent age, thereby creating an evidence-based protocol that is sharedwe had regained compliance with the patient. A non-mydriatic device is oneBid Price Rule. The letter stated the staff had determined that does not require dilationfor the prior 10 consecutive business days, from March 1, 2021 to March 12, 2021, the closing bid price of the pupil for it to function.Company’s common stock had been at $1.00 per share or greater and that accordingly, the Company had regained compliance under the Bid Price Rule, and that the matter was closed.

For the past three years, the clinical prototypes of the MapcatSF have been tested on patients, allowing for frequent modifications of the device’s algorithms and retesting for accuracy, as well as to provide the inclusion of additional features not previously found in the initial prototype. The alpha prototype, which is the pre-commercial production version, was unveiled for the first time in July 2013 in Cambridge, United Kingdom, to researchers and scientists from around the world. The MapcatSF is manufactured and assembled in Irvine, California, and will be distributed from our national headquarters in San Diego. The marketing of the device will be implemented through continuing education presentations conducted by key opinion leaders in the industry. The MapcatSF device is a Class I medical device under the U.S. Food and Drug Administration (“FDA”) classification scheme for medical devices, which the Company has determined does not require pre-market approval.Background

Lumega-Z is a medical food product that has a patent-pending formula that replenishes and restores the macular protective pigment simultaneously delivering critical and essential nutrients to the eye. Management believes, based on review of products on the market and knowledge of the industry, that Lumega-Z is the first liquid ocular health formula to be classified as a medical food (as defined in Section 5(b) of the “Orphan Drug Act”). However, the FDA has not monitored nor approved Lumega-Z as a medical food. Formulated by Dr. Sheldon Hendler in 2010, modifications were made over a two-year period to improve the taste and method of delivery. The current formulation has been delivered to patients and used in clinics since 2014.Medical Foods

Medical foods are not considered to be either dietary or nutritional supplements.regulated as foods under the federal Food, Drug, and Cosmetic Act. The Company believes that there is an increasing level of acceptance of medical foods as a primary therapy by patients and healthcare providers to treatmanage pain syndromes, sleep and cognitive disorders, obesity, hypertension, and viral infection. In clinical practice, medical foods are being prescribed as both a standalone therapy and as an adjunct therapy to low doses of commonly prescribed drugs. The Company believes that medical foods will continue to grow in importance over the coming years.

Lumega-Z is a regulated medical food and therefore must be administered under the supervision of a physician or professional healthcare provider. In order to reach the large, expanding AMD patient population, the Company primarily marketshas marketed Lumega-Z to patients through ophthalmologists and optometrists. The Company intends to also market Lumega-Z through direct-to-consumer strategies such as, television, social media and paid search advertising.

Over 1,900 patients have been treated with Lumega-Z since^® has published two peer-review scientific articles, demonstrating its beneficial efficacy, in 2020. Both articles were published in the Company began sellingjournal Nutrients. The first published study assessed the formulation in October 2011. The patients come from a combinationlevel of absorption of the three initial testing sites, healthcare provider sites where the MapcatSF has been demonstrated, patients that have foundcarotenoids in Lumega-Z online and through other patient referrals, healthcare provider sites administering Lumega-Zcompared to their patients without useabsorption of the MapcatSF,carotenoids in the industry leading eye vitamin, PreserVision^TM (AREDS 2 formula sold by Bausch and MapcatSF devices recently placedLomb), and determined whether an elevated level of carotenoid absorption leads to increased MPOD. The study found that despite only a 2.3-fold higher carotenoid concentration than PreserVision^TM, Lumega-Z supplementation provides approximately 3–4-fold higher absorption, which leads to a significant elevation of MPOD levels (Nutrients 2020, 12, 132: Published May 2, 2020).The second study evaluated the visual benefits in additional healthcare facilities. Patients takea group of patients taking Lumega-Z under the supervisioncompared to a group of their physician. Lumega-Z is typically ingested by the patient onpatients taking AREDS 2 (PreserVision^TM) soft gel supplements, as well as a daily basis. Patients are typically between 50third control group taking no supplementation.. Each study participant had retinal drusen, significantly delayed dark adaptation recovery time and 80 years old. Patients are mixed ethnically and socioeconomically. Patients typically have insurance, whether private insurance or Medicare. Physicians have determined that the patient is experiencing or iswas at a high risk of developing retinal disease and decide based on their medical determination thatvision loss from AMD. The results showed significant improvements in visual function, as measured by contrast sensitivity, in the patient is a candidate for Lumega-Z.

As the MapcatSF is specifically designed to measure the MPOD, the Company and the physicians that utilize the MapcatSF are able to observe changes in that density ingroup of patients who are taking Lumega-Z. The Company encourages sites usingpatients taking PreserVision^TM showed a trend toward an improvement, but no statistical change, while the MapcatSF^®control group showed no change. (Nutrients 2020, 12, 3271: Published October 26, 2020).

Sales of Lumega Z remained flat throughout 2020, as many eye doctor offices were closed, or operating with limited capacity, due to provide us anonymized data onCOVID-19 related “shelter at home” orders.

GlaucoCetin is the MPOD readings. Anecdotal reports from physicians indicate improvements in their patients such as increased visualCompany’s second medical food. It offers a patent-pending formula that is designed to support proper mitochondrial function a noticeable halt in the progressionoptic nerve cells of glaucoma patients. Loss of optic nerve cells is thought to be the primary cause of vision loss in glaucoma patients. Like Lumega-Z, GlaucoCetin has also been distributed primarily through eye doctors, however, the Company plans to offer direct-to-consumer marketing programs. GlaucoCetin sales grew by 112% during 2020. The Company believes this growth rate, despite COVID-19 related issues affecting patient access to eye doctor offices, is due to limited competition for glaucoma related nutritional products and a wider acceptance by clinicians of the patient’s AMD, improvement in glare and contrast sensitivity, and stabilization and improvement of vision. No adverse effects of taking Lumega-Z have been reported by anypotential efficacy of the physicians administering Lumega-Z to their patients.nutritional therapies.

The number of patients regularly ordering Lumega-Z has steadily increased as new healthcare providers have begun working with the Company, withVision loss from eye disease is a concurrent rise in patients set on an auto-ship program for delivery every four weeks. Automatic shipment has an added benefit in that it aids physicians because it increases patient compliance in using Lumega-Z on a regular basis. The Company’s operations, to date, indicate that each MapcatSF deployed in a clinic generates an average of 75 new customers for our Lumega-Z product over a period of approximately 90 days when a MapcatSF is deployed in a small, low volume clinic. A larger, higher volume clinic is expected to generate a larger number of patients in a shorter period of time. All of the Company’s medical food revenue is derived from a limited number of individual customers.

AMD is the leading cause of blindness in the world. More than 10 million peoplerapidly growing problem in the United States suffer from various formsand across the globe. The National Academics of this incurable disease, accordingSciences, Engineering, and Medicine projects that “every four minutes, one American will experience partial or complete loss of sight.” According to The Lancet, AMD cases in the American Macular Degeneration Foundation. AsUS are projected to pass 18 million in 2017, and 20 million by 2022. According to an EpiCast Report, the population ages, that number of glaucoma patents is expected to triplegrow yearly by 2025. Congress,15% and for there to be 15.7 million cases worldwide by 2023, with most of these cases in the United States and Japan.

The US Food and Drug Administration the Center for Medicare & Medicaid Services and private insurance companies are focusing increased efforts on pharmacovigilance (the branch of the pharmaceutical industry which assesses and monitors the safety of drugs either in the development pipeline or which have already been approved for marketing) to measure and reduce these adverse health consequences.

The Company believes that there is an increasing level of acceptance of medical foods as a primary therapy by patients and healthcare providers to treat pain syndromes, sleep and cognitive disorders, obesity, hypertension, and viral infection. In clinical practice, medical foods are being prescribed as both a standalone therapy and as an adjunct therapy to low doses of commonly prescribed drugs. From a regulatory standpoint, the FDA(FDA) took steps in 1988 to encourage the development of medical foods by regulating this productcreating a regulatory category for medical foods under the Orphan Drug Act. The term “medical food” as defined in Section 5(b) of the Orphan Drug Act is a “food which is formulated to be consumed or administered internallyenterally (by mouth) under the supervision of a physician and which is intended for the specific dietary management of a disease or condition for which distinctive nutritional requirements, based on recognized scientific principles, are established by medical evaluation.” This definition was incorporated by reference into the Nutrition Labeling and Education Act of 1990.

These regulatory changes have reduced the costs and time associated with bringing medical foods to market. Until 1972, medical foods were categorized as drugs and then until 1988 as “foods for special dietary purposes.” The field of candidates for development into medical foods is expanding due to continuing advances in the understanding of the science of nutrition and disease, coupled with advances in food technology thereby increasing the number of products that can be formulated and commercialized.

The Company distributes its medical food products through E-commerce in an online store that is operated atwww.guardionhealth.com. www.guardionhealth.com. Information about VectorVision products can be found at www.vectorvision.com. Information about NutriGuard Formulations products can be found at www.vectorvision.comwww.nutriguard.com.

Competitive Advantage

By combining the Company’s MapcatSF medical device and Lumega-Z medical food, Management believes the Company has developed the only reliable two-pronged evidence-based protocol for replenishing and restoring the macular protective pigment and increasing overall retinal health. The MapcatSF is intended to be the first device to use a patented “single fixation” process and “automatic lens density correction” that produces accurate serialized data. Historically, a number of specialized densometers used by research groups within the medical community have been known to produce unreliable data; due in part to the fact that they are not Troxler-free. The Troxler effect is an optical illusion affecting visual perception where an unchanging stimulus away from a fixation point will fade away and disappear as one stares at a fixation point consistently. A device that is Troxler-free does not have this fading of images that otherwise would occur as a result of the Troxler effect. Being Troxler-free is thought to be an important function in being able to accurately complete the testing using these devices.

The MapcatSF has been installedCompany also distributes its medical foods products through E-commerce in several teaching and ocular research facilities, such as the Illinois College of Optometry (“ICO”), the New York Eye and Ear Infirmary, and the Rosenberg School of Optometryan online store that is operated at the University of the Immaculate Word. While these collaborative relationships help further validate the MapcatSF and Lumega-Z, these relationships are not material to the Company because none of these relationships is exclusive. There are many potential collaborative partners available.www.guardionhealth.com. The Company is freeplans to enter into other collaborative relationships as needed. No sales of Lumega-Z are generated directly from Illinois College of Optometry because the MapcatSF is part ofexpand its teaching curriculum and not used for direct patient care. However, the other collaborative relationships, as a result of using the MapcatSF on patients, periodically put patients on Lumega-Z if a physician determines it appropriate to do so. The majority of sales of Lumega-Z primarily come from clinicians outside of these collaborative relationships.

VectorVision specializesE-commerce capabilities in the standardization of vision tests, specifically, contrast sensitivity, glare testing and early treatment diabetic retinopathy study, or ETDRS, acuity. The variability in test lighting has caused the FDA and other agencies to require standardized test lighting for vision tests. We believe that VectorVision is the only company that offers fully standardized vision testing products that ensure consistent, repeatable and highly accurate results. These qualities are why the VectorVision instruments can detect and quantify subtle changes in vision, and why our VectorVision CSV-1000 instrument is used worldwide by eye doctors in more than 60 countries to accomplish contrast sensitivity testing. We believe the CSV-1000 is the standard of care for clinical trials. There is a training requirement in incorporating the CSV-1000 device into clinical practice, which we plan to provide as part of our commercialization strategy.

Similarly, we believe that our ESV-3000 device will become the worldwide standard for ETDRS visual acuity testing. The CSV-1000 and ESV-3000 use self-calibrated test lighting. The self-calibrated test lighting is proprietary, and the test faces of the CSV-1000 are proprietary and protected intellectual property. Both CSV-1000 and ESV-3000 are currently sold worldwide, and we expect this global distribution to continue. We believe the acquisition of VectorVision, adding the CSV-1000 and ESV-3000 to our product portfolio, further establishes our position at the forefront of early detection, intervention and monitoring of a range of eye diseases.

Medical Foods Products Industry Overview

The science of nutrition was long overlooked and underdeveloped and has now shown that the sick and elderly have special nutritional needs that cannot be met by traditional adult diets. Medical nutrition has emerged today as an attractive segment in the food industry.

A number of diseases are associated with metabolic imbalances, and patients in treatment for such diseases have specific nutritional requirements. Some examples are ocular health, pain syndromes, insomnia, cognitive disorders, IBS, and heart disease. Many older Americans have or will develop chronic diseases that are amenable to the dietary management benefits of medical foods. Medical foods help address these diseases and conditions in a drug-free way with food-based ingredients, yet are still considered a medical product that should be taken under supervision by a physician. The term “medical foods” does not pertain to all foods fed to sick patients. Medical foods are foods that are specially formulated and processed (as opposed to a naturally occurring foodstuff used in a natural state) for patients who are seriously ill or who require the product as a major treatment modality according to FDA regulations.2021.

Medical foods consist of food-based ingredients that are part of the normal human diet and are Generally Recognized as Safe (“GRAS”) under FDA standards. Medical foods must make disease claims for which there is scientific evidence that nutrient deficiencies cannot be corrected by normal diet. Medical foods are intended for a vulnerable population suffering from a particular chronic disease and therefor have special, extra-rigorous guarantees of safety. All ingredients must be designated GRAS and used in therapeutic concentrations to address the particular nutritional needs of the patient. Medical foods are taken under the supervision of a physician or professional healthcare provider who monitors and adjusts the food ‘dosage.’ In addition, under FDA guidelines and congressionally approved laws, medical foods do not require FDA preapproval but undergo continuous FDA monitoring and approval of label claims. Even though pre-market FDA approval is not required for a medical food, the official requirements and responsibilities for the manufacturer, in terms of safety, are greater than for dietary supplements, including solid scientific support for the formula as a whole. For these reasons, medical foods have greater guarantees of efficacy. In contradistinction, dietary supplements, such as vitamins, minerals and botanicals, do not require FDA preapproval, cannot make disease claims, are intended for normal people without disease or a condition and cannot claim that they prevent, mitigate or treat a given disease.disease or condition. Dietary supplements do not require physician supervision and can be administered to a person that can self-administer the supplementself-administered without supervision.

Based on the advice of intellectual property counsel and regulatory affairs consultants, theThe Company believes that Lumega-Z isand GlaucoCetin are properly categorized as a medical food.foods. While the Company believes it is unlikely the FDA would conclude otherwise, if the FDA were to determinedetermines Lumega-Z or GlaucoCetin should not be defined as a medical food, the Company would need to relabel and rebrand that product. The Company believes there would be minimal impact on its operations and financial condition if it were required to change labeling and packaging back to that of a dietary supplement. While reclassification and the subsequent relabeling and rebranding would be an added cost to operations, it would not change the use or effectiveness of Lumega-Z or GlaucoCetin, although there is a chance that certain physicians may choose not to recommend Lumega-Z or GlaucoCetin to their patients or that certain consumers may choose not to buy Lumega-Z or GlaucoCetin if it isthey are not classified as a medical food.foods.

Vision Testing Industry OverviewMedical Devices

We believeThe Company believes that consistent, repeatable consistentand accurate results for visual acuity testing isare of paramount importance for effective eye health care and for accurately establishing and enforcing the vision performance criteria required for certain professions. Variance in test lighting is a major cause of inconsistency in vision testing results. Standards for testing luminance, have been in place for more than three decades. However, recently, vision testing has evolved from the use of projection systems and charts to the use of digital displays. We believeThe Company believes that the variance in luminance provided by digital displays is large, and clinicians are now obtaining highly inconsistent results from practice to practice. Conservatively, we believethe Company believes more than 250,000 eye care examination rooms are in use in the United States today.

The variability described above has caused the FDA and other agencies to require standardized test lighting for vision tests. Because VectorVision specializes in the standardization of vision tests, VectorVision is the only company that offers fully standardized vision testing products that ensure consistent, repeatable and highly accurate results using automated light calibration systems. The CSV-1000 device offers auto-calibrated tests to ensure the correct testing luminance and contrast levels for consistent, highly accurate and repeatable results, which is why the VectorVision instruments can detect and quantify subtle changes in vision. Consistency, repeatability and accuracy are also why the VectorVision CSV-1000 instrument is used worldwide by eye doctors in more than 60 countries to accomplish contrast sensitivity testing. The Company’s research has revealed there are no competing products that offer auto-calibration of ambient illumination or test lighting. Competitive devices do not correct for variations in test light levels, resulting in variability of test results. The CSV-1000 uses self-calibrated test lighting. The self-calibrated test lighting is proprietary. For the CSV-2000, the follow-on computerized device for the CSV-1000, the self-calibrated test lighting technology is a proprietary and patented technology known as AcQviz, which constantly measures the luminance of the CSV-2000 computer screen and automatically adjusts screen luminance to a fixed standard light level for vision testing. The test faces of the CSV-1000 are proprietary, and their intellectual property is protected under copyright and trade secret law. CSV-1000 is currently sold worldwide, and the Company expects this global distribution to continue. The first sale of the CSV-2000 occurred in Q1, 2020 and the Company believes this product will also be sold worldwide. There is a training requirement for incorporating the CSV-1000 and the CSV-2000 device into clinical practice, which the Company plans to provide as part of its commercialization strategy.

The MapcatSF device offers a proprietary technology to effectively evaluate the MPOD, which is a measure of the health of the macular pigment. The MapcatSF device is used primarily in eye doctor’s offices as a means to demonstrate to patients the current status of their MPOD and the potential benefits of Lumega-Z after treatment. The first MapcatSF was sold in 2020. No major sales and marketing strategy is currently planned for the direct sales of the device, as it will be used more as a measurement tool to educate patients and their eye doctors about the need for taking Lumega-Z to replenish the macular pigment. The MapcatSF will be sold to doctors or researchers upon request.

Nutraceutical Industry Overview

A dietary supplement is a defined in the Dietary Supplement Health and Education Act, enacted in 1994 (“DSHEA”), as “a product (other than tobacco) intended to supplement the diet that bears or contains one or more of the following dietary ingredients: vitamins, minerals, amino acids, herbs or other botanicals; a concentrate, metabolite, constituent, extract or combination of the ingredients listed above. Dietary supplements are intended to be taken orally and are labeled on the front panel as being a dietary supplement.

DSHEA places dietary supplements in a special category under the general umbrella of “foods,” not drugs, and requires the product to be labeled as a “dietary supplement.” The terms “dietary supplement” and “nutraceutical” are often used interchangeably.

Under DSHEA, a company is responsible for determining that the dietary supplements it manufactures or distributes are safe and that any representations or claims made about them are substantiated by adequate evidence to show that they are not false or misleading. Dietary supplements do not need approval from FDA before they are marketed, although “new dietary ingredients” do require premarket review by FDA. This allows companies to bring products to market in less time and with less cost than is required for drug approval from the FDA.

Competitive Advantage and Strategy

Medical Foods

There are no research-validated pharmaceutical solutions for slowing the progression of adult dry macular degeneration (“AMD”). As a result, physicians often recommend Age-Related Eye Disease Study (“AREDS”)-based supplements to early AREDS-based AMD patients. However, more than 90% of all AREDS-based nutritional products currently on the market are in tablet, capsule or gel capsule form, which have a low efficiency of absorption.

Lumega-Z is a medical food designed to enhance the bioavailability of “difficult to absorb” ingredients like carotenoids. In contrast to other formulations, Lumega-Z is a liquid formulated using a proprietary molecular micronization process (“MMP”) to maximize efficiency of absorption and to minimize compatibility issues. The MMP is a proprietary homogenization process whereby the particle size of the ingredients is reduced to facilitate more efficient absorption into the body. As noted earlier, clinical studies have shown Lumega-Z offers significantly higher absorption of carotenoids, than the leading AREDS-based formula PreserVision^TM (Nutrients, 12, 1321: Published May 2, 2020). In a subsequent study, Lumega-Z was also found to provide significantly better vision benefit than the AREDS-based formula in patients with drusen and at risk of vision loss from AMD, as measured by contrast sensitivity (Nutrients 12, 3271: Published October 26, 2020). The Company believes we have a competitive advantage with Lumega-Z because of these two published studies showing superiority over the leading formula, PreserVision^TM, and because a growing body of evidence, particularly the results from the AREDS studies, that has demonstrated the importance of supplementation with carotenoids to offset vision loss in patients with macular degeneration. Lumega-Z has demonstrated in studies to have higher absorption of carotenoids, which the Company believes leads to better visual outcomes, and a superiority over the competitive formulas.

GlaucoCetin is a medical food designed to support mitochondrial function in the optic nerve cells of glaucoma patients. For glaucoma, the primary risk factor for disease progression has been thought to be elevated intraocular pressure which in turn damages the optic nerve cells leading to vision loss. As such, the primary means for treating the disease, to slow or stop vision loss, is to lower the intraocular pressure through pharmaceutical or surgical means. However, new studies suggest that many glaucoma patients do not exhibit elevated intraocular pressure. Further, many patients who have displayed high intraocular pressure and have been treated to lower the pressure, continue to lose vision. These trends have led clinicians and researchers to suggest that other mechanisms of disease progression are occurring, one of which is mitochondrial dysfunction of optic nerve cells. The Company believes we have a competitive advantage with GlaucoCetin because it is the first to market medical food specifically designed to offset the mitochondrial dysfunction of cells in glaucoma patients.

Medical Devices

VectorVision specializes in the standardization of vision tests, specifically, contrast sensitivity, glare testing and early treatment diabetic retinopathy study, or ETDRS, acuity. The variability described abovein test lighting has caused the FDA and other agencies to require standardized test lighting for vision tests. Contrast sensitivity testing measures how people see in the real world. A depleted macular pigment greatly affects contrast sensitivity. Research suggests that contrast sensitivity is a better measure than standard acuity tests for real-world vision applications such as military pilots and highway driving. The Company believes that VectorVision is the only company that offers fully standardized vision testing products that ensure consistent, repeatable and highly accurate results. The CSV-1000 and ESV-3000 devices offer auto-calibrated tests to ensure the correct testing luminance and contrast levels for consistent, highly accurate and repeatable results, which isThese qualities are why the VectorVision instruments can detect and quantify subtle changes in vision, and why the VectorVision CSV-1000 instrument is used worldwide by eye doctors in more than 60 countries to accomplish contrast sensitivity testing. ForOn July 10, 2018, the same reasons,USPTO issued US Patent No. 10,016,128, titled Method and Apparatus for Visual Acuity Testing. This patent describes an invention pertaining to automatic light calibration of the display screens used for vision testing. The Company has acquired the exclusive rights to this patent, and its VectorVision CSV-2000 device embodies this invention. On July 17, 2018, the USPTO issued US Patent No. 10,022,045, also titled Method and Apparatus for Visual Acuity Testing, which describes a methodology to continuously calibrate display monitors to automatically hold display luminance constant for vision testing. This second patent also covers a methodology to compensate for other testing factors, such as room illumination and when patients view the vision test through a mirror, which is a common practice in eye doctors’ offices worldwide. The Company also acquired the rights to this patent. The Company’s new AcQviz device embodies this invention, which is now used in conjunction with the VectorVision CSV-2000 device.

The Company believes that the ESV-3000 ETDRSCSV-1000 is the current standard of care for testing device will become the worldwide standard for ETDRS visual acuity testing.contrast sensitivity in clinical practice. The Company’s research has revealed no competing products that offers auto-calibration of ambient illumination. Competitive devices do not allow for variations in ambient light levels, resulting in variability of test results due to the environment in which the testing is performed. The CSV-1000 and ESV-3000 use self-calibrated test lighting. The self-calibrated test lighting is proprietary, and the test facesfirst sale of the CSV-1000 are proprietary and the intellectual property is protected under copyright and trade secret law. Both CSV-1000 and ESV-3000 are currently sold worldwide, and the Company expects this global distribution to continue.CSV-2000 was made in February 2020. There is a training requirement in incorporating the CSV-1000 and CSV-2000 device into clinical practice, which the Company plans to provide as part of its commercialization strategy.

Competitive Strategy

SinceThe CSV-1000 and CSV-2000 offer self-calibrated test lighting for vision testing. The self-calibrated test lighting technology for both instruments is proprietary to the Company. The patented technology known as AcQviz, applies to the CSV-2000. It constantly measures the luminance of the display monitor of the CSV-2000 and automatically adjusts screen luminance to a fixed standard light level for vision testing. Although the CSV-1000 will continue to be sold, the Company plans to put a greater focus on sales and marketing efforts on the new CSV-2000. There can be no assurances that the marketing efforts will be successful, and sales of the CSV-2000 will be comparable or exceed sales of the CSV-1000. The Company believes we have a competitive advantage because of the unique and proprietary vision testing luminance standardization technologies employed by the CSV-1000 and CSV-2000. This standardization has led to the publication of many research studies showing the accuracy of the contrast sensitivity testing protocol used in both the CSV-1000 and CSV-2000, and to the publication of population normal ranges for contrast sensitivity. The Company believes that there are no research-validated pharmaceutical solutionsother devices with published normative values for slowing the progression of adult macular degeneration (“AMD”), it is necessary for physicians to recommend Age-Related Eye Disease Study (“AREDS”)-based supplements to AREDS-based AMD patients. However, more than 90% of all AREDS-based nutritional products currently on the market are in tablet, capsule and gel capsule form. As previously discussed, tablets, capsules and gel capsules have a low efficiency of absorption. For this reason, some doctors may hesitate to prescribe tablet, capsule and gel capsule form AREDS-based nutraceuticals despite the fact that these are currently the only options available to them.contrast sensitivity.

Nutraceuticals

The competitive landscapeCompany intends to build a portfolio, in addition to the current product line, of supplements is crowdednutraceutical products under the NutriGuard brand by developing or acquiring new condition-specific formulations. NutriGuard markets these products to patients directly through direct-to-consumer (“DTC”) channels. The Company also intends to conduct research and confusing for physicians andpublish papers demonstrating the efficacy of the NutriGuard products, which the Company believes will also lead to distribution of products to patients looking to obtain an appropriate product for eye care. These supplement products all have varying ingredients, varying levels of similar ingredients, varying claims regardingthrough recommendations by their effects, and varying price points.physicians.

Lumega-Z addresses this concern. In contrast, Lumega-Z isNutriGuard intends to formulate high quality scientifically credible nutraceuticals with a liquid formulated usinggoal to become a proprietary molecular micronization process (“MMP”) to maximize efficiency of absorptionglobally respected and safetyphysician-preferred nutraceuticals brand. The Company believes its nutraceuticals can play an important role in optimizing, preserving and to minimize compatibility issues. The MMP is a proprietary homogenization process whereby the molecular structure of the ingredients is reduced in size to facilitate more efficient absorption in the body.restoring health.

An important part of our competitive strategy lies in combining Lumega-Z with technology to demonstrate its effects.  As well as our proprietary MapcatSF device, VectorVision provides a second opportunity to baseline the vision of patients, and monitor changes in vision performance over time while administering Lumega-Z.  The VectorVision CSV-1000 is a highly accurate means of measuring and monitoring contrast sensitivity, a vision performance parameter that can be improved by increasing levels of macular pigment in the eye.

Growth Strategy

The Company believes that marketing its products is critical in ensuring its success. The Company has several marketing initiatives and will implement them according to the success and product feedback that the Company and products create. Marketing initiatives will include not only distribution through eye doctor recommendation, but also direct-to-consumer programs. The Company will also considerexplore acquiring other companies, product lines and intellectual property that may be complementary or supplementary as part of its future efforts to expand the business, which acquisitions could be for cash, stock or a combination thereof.

Management believes that there isSales Force

The Company plans to use a combination of digital strategies, virtual communication, direct-to-consumer campaigns and direct sales activity with eye doctors to promote its products. At the end of 2020, the Company had two highly experienced sales personnel, both Doctors of Naturopathy. During 2021, the Company intends to add sales team members in the field to conduct direct sales activities for eye doctors, to perform virtual educational campaigns for practice follow-up with doctors and their staffs and to support the direct-to-consumer campaigns. The Company also intends to initiate significant unmet needfollow-on communication activity with patients who have begun taking the nutritional products, to spur higher compliance and patient retention.

International Expansion Strategy

The Company intends to continue to pursue strategies for distribution of its existing products and unique nutritional formulations in everyday clinical practice to provideAsian markets. In the quarter ended March 31, 2020, the Company received its first order for a novel immune support product from the Malaysian company, Ho Wah Genting Berhad “HWGB.” The order was subsequently delivered in the quarter ended June 30, 2020. The total order value was $890,000. The Company also has several products under development for the U.S. market, most notably a vision assessment protocol that improves uponsupport and energy drink known as EPIQ-V, which the current standard of visual acuity. Contrast sensitivity with the VectorVision CSV-1000 is a highly sensitive and repeatable method of measuring vision performance, and can be utilized to monitor the vision performance of patients undergoing treatment with Lumega-Z, as well as for the general patient population. The CSV-1000 is currently the worldwide standard for contrast sensitivity testing in clinical trials, and there is a growing understanding of the importance of contrast sensitivity in general clinical practice. The Company’s intention is to penetrate the market by promotion of the CSV-1000 as the leading contrast sensitivity device available. The Company believes it can grow its business using the following sales and marketing strategies:may be successfully distributed in Asia.

Ocular Care

Sales and Marketing

Based on management’s knowledge of the industry, the Company believes that Lumega-Z isand GlaucoCetin are the only medical foodfoods in the ocular health space. The most analogous products on the market are dietary supplements. While the medical food category is well established and growing for certain diseases or disorders (for example, inborn errors of metabolism, metabolic syndrome, gastrointestinal disorders, and neurological disorders), there are currently no medical foods other than Lumega-Z specifically addressing ocular health. Thus, with regard to the ocular health market no such data is available regarding medical foods. The most comparable industry is dietary supplements. In an attempt to effectively illustrate the market potential for Lumega-Z and GlaucoCetin, the Company has examined ocular health products in the dietary supplement market as the closest appropriate data set available. The use of dietary supplements to enhance health and well-being is a longstanding and increasing trend. According to industry sources, up to 52%the Council for Responsible Nutrition, 73% of adults in the United States have reported taking nutritional supplements. Worldwidedietary supplements in 2020. According to Global Newswire, worldwide sales of supplements surpassed $132is estimated to reach $230.73 billion in 2016.by 2027. Supplementation has recently generated much interest among eye health professionals, in a relatively new area,due largely to the prevention and slowingpublication of the AREDS study, which was supported by the prestigious US National Eye Institute, showing nutrition can potentially slow the AMD epidemic.

U.S. Statistics

Worldwide Statistics

Worldwide Statistics

Due to an aging population, the AMD, Glaucoma and Cognitive Decline epidemics are growing, creating a significant market for the Company’s products.

Marketing Lumega-Z to Practitioners

In order to reach the large, expanding AMD patient population, the Company willhas primarily marketmarketed Lumega-Z and GlaucoCetin to the patients through ophthalmologists and optometrists. In the U.S. alone, there are more than 18,51519,216 ophthalmologists and over 34,00044,000 optometrists currently practicing. There are overmore than 213,000 ophthalmologists worldwide. This marketing reach will be achieved through a combination of collaboration with industry-specific publishers, peer-to-peer promotion using key opinion leader clinicians, organic and paid search engine optimization and marketing, and other content-driven & educational approaches.

The MapcatSF^® has demonstrated itself to be an effective tool to promote Lumega-Z. The Company has determined that the value of the MapcatSF is through this utilization. The Company intends, as part of its efforts to directly target eye doctors as part of its marketing strategies, to continue to deploy the MapcatSF in this fashion, with a focus of assigning the MapcatSF to clinics to build and maintain relationships with the clinics and assist the physicians in making a determination to recommend Lumega-Z to their patients. The Company believes that continued deployment of MapcatSF devices in this fashion will build effective relationships with physicians and their clinics, expand the awareness of the Company’s products and increase sales of Lumega-Z.

As noted earlier, these marketing efforts targeting eye doctors will be supplemented by a variety of direct-to-consumer campaigns and the use of more efficient and cost-effective virtual strategies for educating and connecting with consumers.

Marketing the CSV-1000 and CSV-2000 to Practitioners

Contrast sensitivity is currently one of the standard tests for clinical trials relating to ocular surgeries and treatments, and the CSV-1000 is considered the benchmark for these applications. In addition, there is an increasing need for functional vision assessment in everyday clinical practice, as a means of measuring the effect of disorders such as cataract and macular degeneration on the patient’s functional vision, and the impact of treatment of these conditions on the patient’s vision. The Company will concentrate its efforts on increasing the use of contrast sensitivity in everyday clinical practice, as a means of targeting the optometry and ophthalmology markets, which consists of over 34,000 and over 18,000 doctors, respectively, in US.

Sales Channel

Lumega-Z is a regulated medical food and therefore must be administered under the supervision of a physician or professional healthcare provider. Once the healthcare provider has determined that the patient requires Lumega-Z, they will follow the following procedures:

The Company will support the clinicians by making available Online Ocular Nutrition courses to train their technicians.

Development of Sales ForceUnited States.

The Company expects to continue to sell the CSV-1000 for the foreseeable future and add the CSV-2000 to these marketing efforts. The CSV-2000 is investing in a direct sales force comprised of a field-based team of account managers located in key geographical locations based on high population density areas with demographics that match the Company’s target markets. Each account manager will have responsibility for a pre-defined geographical area, and will be expected to travel extensively to support the needs of customers. The account managers will be tasked with prospecting for new accounts, closing leads generatednot yet approved by the Company’s marketing efforts, and generating revenue through account management activities including physician and staff training, and implementation of patient education resources. The account managers will also participate in national and regional trade shows and events, including supporting professional optometric and ophthalmological societies at a State level. Each account manager will be tasked with a quota that includes units of Lumega-Z sold, as well as sales of the MapcatSF, CSV-1000 and ESV-3000. Commissions will be paid based on performance and achievement of quota. Training of the direct sales force is expected to commence in March 2018.

International Expansion Strategy

Retinal diseases that include macular degeneration, glaucoma and diabetic retinopathy are not exclusivelocal organizations equivalent to the United States. We believe there is great interest internationallyFDA in many countries, and this process can take up to find non-pharmacologic treatments for these diseases.one or more years. The largest market opportunity is China where some of these diseases are at substantial levels.CSV-1000 will continue to be sold exclusively in those countries during that time period. The Company intends to explore opportunitiessold its first CSV-2000 in February of 2020 and channels to enter this expansive market.sold two units for the year ended December 31, 2020.

Proprietary Technology and Intellectual Property

Patents

The Company currently owns and has exclusive rights to the following4 U.S. patents and 2 U.S. patent applications and pending3 foreign patent applications:applications covering its products and product candidates.

DOMESTIC

FOREIGN

The MapcatSF^® patent describes an apparatus for use in the measurement of the optical density of the macular protective pigment in the human eye, as well as an apparatus for the use in measuring the lens optical density of a human eye. The apparatus is particularly applicable to flicker photometers, which are used to measure the macular protective pigment in the human eye. On November 8, 2016, the United States Patent and Trademark Office (“USPTO”) issued patent number 9,486,136 for the MapcatSF invention. The foreign counterpart patent applications describe the same invention.

The Lumega-Z^® patent filing describes a daily liquid supplement for ocular and body health containing at least one of the following: lutein, zeaxanthin, meso-zeaxanthin and astaxanthin for a human subject and for nutritionally supplementing macular pigments in the human eye. The micronized nutrients in a lipid based emulsion described in the patent application are more efficiently absorbed into the bloodstream than conventional supplement formulations resulting in higher serum levels and increased macular protective pigment.

Patent Application 15277849 describes a methodology to calibrate display monitors to automatically hold display luminance constant for vision testing. The method includes a measurement device that is placed on the peripheral areas of the display monitor and feedback software to communicate with a computer and automatically control display luminance. Manual control of luminance based on the output of the measurement device is also included.

Patent Application 15445586 describes a methodology to continuously calibrate display monitors to automatically hold display luminance constant for vision testing. The method includes a measurement device that is placed on the peripheral areas of the display monitor and feedback software to communicate with a computer and automatically control display luminance. Manual control of luminance based on the output of the measurement device is also included. Calibration of the luminance provided by mirrors, if patients view the display monitors through mirrors, is also embodied in the invention.

Trade Secrets

The MapcatSF^® device employs a proprietary algorithm for correcting macular pigment optical density measurements with respect to lens density effects. More particularly, the proprietary algorithm adjusts the photopic luminosity function for the age equivalence of the subject’s lens using a relationship disclosed by Sagawa and Takahashi (J. Opt. Soc. Am. 18, 2659-2667). The algorithm is embedded in an integrated circuit block designed in such a way as to make it difficult to reverse engineer.

VectorVision’s CSV-1000 has proprietary testing charts that are not only copyright protected but can only be reproduced accurately by using special lithographs. These lithographs are kept secure, with very limited access, and are closely guarded trade secrets.

The AcQviz technology, the basis for vision test standardization for the CSV-2000 product line, is protected by two ITUS patents.

The formulations for Lumega-Z and GlaucoCetin have been submitted for US patent protection.

Trademarks

The Company utilizes trademarks on all current products and believes that having distinguishing marks is an important factor in marketing its products. The Company has threefive U.S. registered trademarks on the principal register at the USPTO. These marks are listed below. The Company has not sought anythree foreign trademark protectionregistered trademarks for its products orand product candidates at this time butand is evaluating whether additional foreign trademark protection is appropriate. U.S. trademark registrations are generally for fixed, but renewable, terms.

The Company also currently owns and has exclusivecommon law trademark rights for the use of its marks, including common law trademark rights to the following registered trademarks:NUTRIGUARD mark. Other trademarks include Lumega-Z, GlaucoCetin, VectorVision, CSV-1000 and CSV-2000.

Copyrights

In addition to patent and trademark protection, VectorVision relies on copyright protectionhas three copyrights registered with the U.S. Copyright Office relating to the CSV-1000 and CSV-2000 medical devices. VectorVision also has common law copyright protection on the testing charts contained in the CSV-1000 and CSV-2000 medical devices, which includes Vision Testing Chart #1, Vision Testing Chart #2 and Vision Testing Chart #3.

Medical Foods and Medical DeviceProducts Manufacturing and Sources and Availability of Raw Materials

The Company outsources the manufacturing of its medical food products, nutraceutical product line and medical devices to contract manufacturers. The Company processes orders through purchase orders and invoices with each manufacturer. Healthy Solutions, LLCThe Company believes that there are multiple alternative sources, suppliers and manufacturers available for its products in Scottsdale, Arizona manufactures Lumega-Z for the Company. Device Labs in Irvine, California manufactures the MapcatSF for the Company.event of a termination or a disagreement with any current vendor.

Government Regulation

Medical Food Statutory Definition and One FDA RegulationFoods

Under the Federal Food, Drug, and Cosmetic Act of 1938 (“FDCA”), products are regulated on the basis of their intended use. Their intended use is determined by the objective factors surrounding their use. Numerous categories and subcategories of products exist under the FDCA that could relate to ourthe Company’s products, such as foods, food food additive,additives, dietary supplement,supplements, GRAS food component,components, new drug,drugs, GRAS and Effective (“GRAS/E”) drugdrugs for over the counter use, and GRAS/E drugdrugs for use under the supervision of a physician. The categories overlap and products can fall within more than one category depending on their intended use.

The FDA has provided little guidance on the regulation ofis primarily responsible for regulating medical foods, as itfoods. A medical food is still a relatively new and evolving category of productdefined under the FDCA.

Our medical food products are defined and regulated by the FDA. The term medical food isFDCA as a “food which is formulated to be consumed or administered enterally or by mouth, under the supervision of a physician and which is intended for the specific dietary management of a disease or condition for which distinctive nutritional requirements, based on recognized scientific principles, are established by medical evaluation.”

The FDA advises that it considers the statutory definition of medical foods to “narrowly” constrain the types of products that fit within the category of food (see May 2007 Guidance, and Food Labeling; Reference Daily Intakes and Daily Reference Values; Mandatory Status of Nutrition Labeling and Nutrition Content Revision proposed rule.) This is a Final Rule and binding regulation on nutrition labeling for conventional foods.

The onlyfood. FDA regulation pertaining toregulations further describe medical foods exempts them from the nutrition labeling requirements that apply to conventional foods, but they are subject to special labeling requirements, as noted in the following excerpt:

(j) The following foods are exempt from this section or are subject to special labeling requirements:

(8) Medical foods as defined in section 5(b) of the Orphan Drug Act. A medical food is a food which is formulated to be consumed or administered enterally, or by mouth, under the supervision of a physician and which is intended for the specific dietary management of a disease or condition for which distinctive nutritional requirements, based on recognized scientific principles, are established by medical evaluation. A food is subject to this exemption only if:product that: (i) It is a specially formulated and processed product (as opposed to a naturally occurring foodstuff used in its natural state) for the partial or exclusive feeding of a patient by means of oral intake or enteral feeding by tube; (ii) It is intended for the dietary management of a patient who, because of therapeutic or chronic medical needs, has limited or impaired capacity to ingest, digest, absorb, or metabolize ordinary foodstuffs or certain nutrients, or who has other special medically determined nutrient requirements, the dietary management of which cannot be achieved by the modification of the normal diet alone; (iii) It provides nutritional support specifically modified for the management of the unique nutrient needs that result from the specific disease or condition, as determined by medical evaluation; (iv) It is intended to be used under medical supervision; and (v) It is intended only for a patient receiving active and ongoing medical supervision wherein the patient requires medical care on a recurring basis for, among other things, instructions on the use of the medical food.

Unlike regulationMedical foods do not require approval or review by FDA prior to marketing. FDA does not require pre-market safety or efficacy studies (similar to or comparable to Phase 2 & 3 trials for drugs and for dietary supplements, there is no overall regulatory scheme for medical foods, or even a pending proposed rule, meaning that no FDA rulemaking is in progress.prescription drugs). However, a very detailed Advanced Notice of Proposed Rulemaking (“ANPR”) entitled “Regulation of Medical Foods,” was published in the Federal Register on Nov. 29, 1996 (“ANPR 1996”). This ANPR never progressedcompany must have data to a proposed rule, or through the Notice and Comment procedure, or to an eventual Final Rule (binding regulation). However, the ANPR, in conjunction with the May 2007 and August 2013 Draft Guidance still represents the FDA’s position and policy on medical foods. This ANPR was in effect withdrawn, because on April 22, 2003, the FDA published a proposal to withdraw numerous long-pending proposed rules, including this ANPR. The FDA cited as its reasons for withdrawal, first, that the subjects are not a regulatory priority, and agency resources are limited; second, the proposed rules have become outdated due to advances in science or changes in the products or the industry regulated, or changes in legal or regulatory contexts; and, third, to eliminate uncertainty, so that the FDA or the private sector may resolve underlying issues in ways other than those in the proposals. In May 2007, the FDA issued its Guidance to Industry relating to medical foods (“2007 Guidance”), presumably because the medical foods sector was growing, but it did not engage in a formal rulemaking procedure, either because it did not have the resources and/or because the medical foods category is still lower priority than drugs and medical devices. A third draft guidance was issued in August 2013 further attempting to clarify the FDA’s position on medical foods (“August 2013 Draft Guidance”). Although the guidance has not been formalized, the Company maintains compliance with this draft guidance.

Medical Food Regulatory Requirements

Overview:  Medical foods are FDA-regulated, but there is no complete set or scheme of regulations. There is no pre-market approval, or even pre-market notification required. Rather, it is the responsibility of the manufacturer and marketer to test for safety and efficacy before marketing and selling. The developer of a medical food must adhere closely to the statutory definition, and to the descriptions of a medical food in the sole FDA regulation regarding exemption from nutrition labeling, and in the 2007 Guidance and the August 2013 Draft Guidance.

Threshold Issue: The manufacturer must demonstrate that the formula, when taken as directed, meets the distinctive nutritional requirements of the particular disease or conditioncondition.

Like any evolving area, especially where no premarket approval is required, the FDA reserves the right to be targeted, scientificallyraise questions about the qualification of products within any category. The Company and medically, is a disease with distinctive or unique nutritional requirements. The FDA has stated that this is a “narrow category,” and that whether a product is valid for this category depends on the published medical science of the disease and its origins. The targeted disease or condition may be, or caused by, a metabolic imbalance or deficiency or the accelerated requirements for a certain nutrient caused by a disease state. We and our Scientific Advisory Board examine the distinctive nutritional requirements of a disease.

Formulation: AThe labeling for medical foods must comply with all applicable food may notlabeling requirements, except for those specific requirements from which medical foods are exempt. Medical foods are exempt, for example, from the labeling requirements for nutrient content claims and health claims under the Nutrition Labeling and Education Act of 1990 (see 21 U.S.C. 343(r)(5)(A)). As with all food labels, printing must be legible, and many required elements must be conspicuous, such as a single ingredient formula. Otherwise, that product would be a dietary supplement for a nutrient deficiency. A medical food formula must go beyond a mere modificationstatement of identity, which is the name of the diet. The formula must meetfood; the statement: “Must be administered under the supervision of a physician or professional healthcare provider;” the quantity; the ingredients listing; the name and satisfyaddress of the distinctive nutritional requirements, not merely ameliorate the symptoms. For example, Glucosamine or MSM, or an herb’s “active” constituent may indeed help osteoarthritis. One must demonstrate that these nutrients are the distinctive nutritional requirements for osteoarthritis.distributor, among other requirements.

Safety: There is no particular or mandated FDA pre-market safety studies required of the formula as a whole. However, allAll ingredients in medical foods must be either GRASgenerally recognized as safe (GRAS) or approved food-additives. Since medical foods are typically taken with prescription drugs, the developer must assess whether any medical food/drug interactions pose a risk. Many ingredients have been determined by the FDA to be GRAS and are listed as such by regulation. Other ingredients may achieve self-affirmed GRAS status through a panel of experts on that particular substance that author a GRAS Report. The standard for an ingredient to achieve GRAS status requires not only technical demonstration of non-toxicity and safety, but also general recognition and agreement on that safety by experts in the field. All ingredients used in the Company’s medical foods are either FDA-approved food additives or have GRAS status. The GRAS requirement for ingredients is arguablyBecause medical foods are typically taken with prescription drugs, the developer must assess whether any medical food/drug interactions pose a higher safety standard than the risk/benefit analysis required for pharmaceuticals. Like any evolving area, especially where no premarket approval is required, the FDA reserves the right to raise questions about the qualification of products within any category as well as the labeling and manufacturing safety of those products.risk.

Efficacy: No particularMedical foods manufacturers must register with FDA pre-market efficacy studies are required bypursuant to the FDABioterrorism Act before producing foods. Manufacturers of foods also must follow current Good Manufacturing Practice (“cGMP”) regulations. Entities that manufacture, package, label or by statute, similar to or comparable to Phase 2 & 3 trials for prescription drugs. However, a companyhold food products must have data to demonstratefollow applicable cGMP regulations. These regulations focus on practices that the formula, when taken as directed, meets the distinctive nutritional requirementsensure sanitary and cleanly conditions of the particular disease.

Manufacturing: There are no GMP regulations for medical foods in particular. Drug GMPs are not required, nor are the relatively new dietary supplement GMPs required; only food GMPs are required. The manufacture of the Company’s medical foods is outsourced in its entirety.manufacturing facilities. The Company engages state of the art facilities that manufacture only nutritional supplements andcontract manufacturers to manufactures its medical foods. .

Labeling: As for all food labels, printing must be legible, and many required elements must be conspicuous, such as a statement of identity, which is the name of the food; the statement: “Must be administered under the supervision of a physician or professional healthcare provider;” the quantity; the ingredients listing; the name and address of the distributor among other requirements.

Marketing: A medical food is a food product, thus the FDA does not regulate advertisements and promotional activities according to the pharmaceutical statutes and regulations; there is no side effects disclaimer or fair balancing required, as in direct to consumer (“DTC”) advertising of drugs on television. However, the FDA has a very broad definition of “labeling”; thus all promotional materials, including websites, are under the authority, monitoring and enforcement of FDA. The Federal Trade Commission (“FTC”) also has joint jurisdiction withprimarily responsibility to regulate the FDA over food products, per a 1983 Memorandumadvertising of Understanding. Thus,foods, including medical foods. Under the FTC Act, all advertising claims, both express and implied, must be true, accurate, well-substantiated,truthful, non-misleading, and not misleading.substantiated.

Enforcement: Enforcement by the regulators is post-market, mostly via annual FDA inspections of food facilities, including packaging, distribution facilities, and fulfillment houses, as well as the manufacturer. The FDA and FTC also gathers material at trade shows and conferences and examinesexamine websites.

Nutraceutical Regulation

The FTC has joint jurisdiction,FDA regulates nutraceuticals as “dietary supplements” under the Dietary Supplement, Health and performs sophisticated Internet searches, both randomlyEducation Act of 1994 (“DSHEA”) as a separate regulatory category of food. Under DSHEA, a company is responsible for determining that the dietary supplements it manufactures or distributes are safe and atthat any representations or claims made about them are substantiated by adequate evidence to show that they are not false or misleading. Dietary supplements do not need approval from FDA before they are marketed. Except in the requestcase of a “new dietary ingredient,” where pre-market review for safety data and other information is required by law, a firm does not have to provide FDA with the evidence it relies on to substantiate safety or effectiveness before or after marketing a product.

Dietary supplement manufacturers must register with FDA pursuant to the Bioterrorism Act before producing supplements. Manufacturers of dietary supplements also must follow current Good Manufacturing Practice (“cGMP”) regulations. Entities that manufacture, package, label or hold dietary supplement products must follow applicable cGMP regulations. These regulations focus on practices that ensure the identity, purity, quality, strength and composition of dietary supplements.

Congress defined the term “dietary supplement” in DSHEA as “a product (other than tobacco) intended to supplement the diet that bears or contains one or more of the following dietary ingredients: vitamins, minerals, amino acids, herbs or other botanicals; a concentrate, metabolite, constituent, extract or combination of the ingredients listed above.” A dietary supplement is a product taken by mouth that contains a “dietary ingredient” intended to supplement the diet. The “dietary ingredients” in these products may include vitamins, minerals, herbs or other botanicals, amino acids, and substances such as enzymes, organ tissues, glandulars, and metabolites and can also be extracts or concentrates. Dietary supplements are produced in the form of tablets, capsules, softgels, gelcaps, liquids, or powders.

According to the FDA, a drug is an article intended to diagnose, cure, mitigate, treat or prevent disease. While nutraceuticals are not intended to cure or treat disease, both dietary supplements and drugs may be intended to affect the structure or function of the body. Dietary supplements that contain structure/function claims on their labels must bear the disclaimer: “This statement has not been evaluated by the FDA. This product is not intended to diagnose, treat, cure, or prevent any disease.” The manufacturer is responsible for ensuring the accuracy and truthfulness of these claims; they are not approved by FDA. Moreover, dietary supplements are supposed to enhance the diet, not be used as a conventional food or as the sole item of a competitor.meal or diet, and not supposed to be taken alone as a substitute for any food or medicine.

The DSHEA requires that a manufacturer or distributor notify FDA if it intends to market a dietary supplement in the U.S. that contains a “new dietary ingredient.” A new dietary ingredient is an ingredient marketed after October 15, 1994. The manufacturer must demonstrate to FDA that the new ingredient is reasonably expected to be safe for use in a dietary supplement. There is no authoritative list of dietary ingredients that were marketed before October 15, 1994. Therefore, manufacturers are responsible for determining if a dietary ingredient is “new.”

Under DSHEA, a company is responsible for determining that the dietary supplements it manufactures or distributes are safe and that any representations or claims made about them are substantiated by adequate evidence to show that they are not false or misleading. Dietary supplements must meet all applicable regulations for food labeling. The DSHEA also requires certain disclaimers if structure/function or other health claims are made on the product label.

Medical Device Regulatory Requirements

To fall within the purview of the FDA, a product must first meet the definition of a medical device, whereby it is then subject to regulation before and after it is marketed.“device” under the FDCA.. Section 201(h) of the FDCA defines a device as “an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including any component, part, or accessory, which is ... intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals.” If the product in question is not a medical device, then no regulation applies. If it is a medical device, then one must evaluate applicable regulation.

Since 1976, the FDA’s paradigm has categorizedFDA categorizes medical devices in three distinct classes based on the potential health risks to the public – Class I, Class II, and Class III. Device classifications are determined by the FDA based on the risk the medical device presents to the patient and the level of regulatory control required to ensure the safety and effectives of the device. Medical devices are assigned a classificationclassified as Class I, II or III based onupon the level of control needed in ordercontrols necessary to provide the FDAa reasonable assurance of the product’s safety and effectiveness. If aeffectiveness of the device, represents a very lowand factors relevant to this determination include the device’s intended use, technological characteristics, and the risk of injury, it is considered Class I and does not require any premarket approval. While mostto patients if the device were to fail. Class I devices, which are exempt from premarket notification requirements and regulations for good manufacturing practices, there are somesubject only to general controls, that companies must conduct such as registeringgenerally represent the company withlowest-risk category of devices, while Class III devices, which are subject to general controls and premarket approval, generally represent the FDA, listing the device, paying an annual registration fee and tracking device activity.

Devices that present an intermediate level of risk of injury to people are considered Class II. The FDA’s perspective is that forhighest-risk devices. Class II devices “general controls alone are insufficienttypically require premarket notification to assure safetyFDA and effectiveness.” In addition to general controls, Class II devices also require special controls such as specified content on labels, adherence to performance standards and surveillance of the product in the marketplace. Some medical devices are also subject to a “Premarket Notification”clearance under Section 510(k) of the FDCA. Most Class IFDCA prior to marketing (unless an exemption applies).

The FDA also regulates the labeling and some Class IImanufacturing of medical devices. Medical device manufacturers must register the facilities and list their devices with the FDA. Manufacturers are exempt fromsubject the 510(k) Premarket Notification requirement. If a Class II device iscurrent good manufacturing practice (cGMP) regulations, which govern activities such as the design, processing, testing, packaging, distribution, and storage of devices. Manufacturers are subject to periodic inspection by the 510(k) requirement, the manufacturer must file a premarket notification withFDA.

While the FDA to demonstrate thatgoverns the device is “substantially similar” to another Class II device already onlabels and labeling of medical devices, the market. Establishing substantial similarity providesFTC governs the FDA reasonable assurance thatadvertising of most devices. Under the device is safeFTC Act, all advertising claims, both express and effective.implied, must be truthful, non-misleading, and substantiated.

High risk devices are Class III. These are devices that either sustain human life or present an unreasonable risk of injury to humans. Because of the risks involved, the FDA does not believe that general or special controls are sufficient to assure safety and effectiveness. The FDA requires general controls and premarket approval (“PMA”) for Class III devices.

VectorVisionCompany is registered with the FDA and the CSV-1000 and the ESV-3000as a medical devices aredevice manufacturer under registration number 3010367547. The MapcatSF is listed with the FDA as a Class I medical devices. As Class I medical devices, the CSV-1000 and the ESV-3000 are safe medical devices each with a very low potential risk of injury to a patient. These devices do not require any premarket approval.

device. With the assistance of regulatory affairs consultants, the Company has determined the relevant predicate device for the MapcatSF is the MPS II, the applicable product code for the MapcatSF is HJW and the applicable Code of Federal Regulation is 886.1050. The FDA has determined that this particular predicate device, and related product code, is a Class I medical device. Based on this, the Company believes the MapcatSF is correctly classified as a Class I medical device is a safe medical device with a very low potential risk of injury to a patient and does not require any premarket approval.

VectorVision is registered with the FDA as a medical device manufacturer under registration number 1527853. The CSV-1000, CSV-2000 and the ESV-3000 medical devices are listed with the FDA as Class I medical devices. The applicable product code for these devices is HOX and the applicable Code of Federal Regulation is 886.1150. As Class I medical devices, the CSV-1000, CSV-2000 and the ESV-3000 devices do not require premarket approval.

Stark IILaw

Congress enacted significant prohibitions against physician self-referrals in the Omnibus Budget Reconciliation Act of 1993. This law and its supporting regulations, which have been amended and expanded substantially, are commonly referred to as the “Stark II,Law,” appliesand prohibit a physician from making any referral of a Stark Designated Health Service (“DHS”) to an entity with which the physician dispensinghas any kind of financial relationship, unless all of the requirements of a statutory or regulatory exception are met. Stark covered DHS include both outpatient prescription drugs and diagnostic testing that are reimbursable by Medicare or Medicaid. Our product,Many states have similar laws, some of which can apply to all payors and not just governmental payors. While the Company believes that its arrangements with its customers are in compliance with the federal and any state Stark Laws, the Stark Laws present different levels of risks as to the Company’s two lines of business: (1) sale of the Company’s medical food, Lumega-Z, and medical device, the MapcatSF; and (2) the Company’s performance of TCD testing.

These products are neither prescription drugs nor are they reimbursable under any federal program at present. The federal Stark Law is thus inapplicable. Further, the Company’s believes that these products are also not a prescription drug, nor do we participate in Medicare, Medicaid orcovered under any otherpotentially applicable state Stark Laws. The federal or state-funded reimbursement program. Stark II,Law, however, includes an exception for the provision of in-office ancillary services, including a physician’s dispensing of outpatient prescription drugs, provided that the physician meets specified requirements. To the requirements ofextent that the exception. We are mindful that if our Lumega-Z product becomes eligible for reimbursement from any such reimbursementproducts might become reimbursable under a federal program, or ifotherwise become covered under the Stark Law, the Company believes that the physicians who use the Company’s medical device, the MapcatSF, purchase the CSV-1000, CSV-2000 or ESV-3000, or recommend its medical foods, Lumega-Z and GlaucoCetin, to their patients are aware of these requirements. However, the Company does not monitor their compliance and has no assurance that the physicians are in material compliance with Stark II. If it were deemed to be a prescription drug,determined that the physicians who use the Company’s medical device or prescribe medical foods purchased from the Company were not in compliance with Stark lawsII, it could potentially become applicable with regard to Lumega-Z.have an adverse effect on the Company’s business, financial condition and results of operations.

Anti-Kickback Statute and HIPAA Criminal Laws

While we doThe federal anti-kickback statute (the “AKS”) applies to Medicare, Medicaid and other state and federal programs. AKS prohibits the solicitation, offer, payment or receipt of remuneration in return for referrals or the purchase, or in return for recommending or arranging for the referral or purchase, of goods, including drugs, covered by the federal health care programs. At present, the Company does not yet participate in any federal programs and its products are not reimbursed by Medicare, Medicaid or state-funded reimbursement programs, weany other state or federal program. The AKS is a criminal statute with criminal penalties, as well as potential civil and administrative penalties. The AKS, however, provides a number of statutory exceptions and regulatory “safe harbors” for particular types of transactions. Many states have similar fraud and abuse laws and their own anti-kickback laws, some of which can apply to all payors, and not just governmental payors. While the Company believes that it is in material compliance with both federal and state AKS laws, the AKS laws present different levels of risks as to the Company’s two lines of business: (1) sale of the Company’s medical foods, Lumega-Z and GlaucoCetin, and medical device, the MapcatSF; and (2) the Company’s performance of TCD testing.

At present, the Company’s products are mindfulnot reimbursable under any federal program. If, however, that should we participatechanges in the future and it were determined that the Company was not in compliance with the AKS, the Company could be subject to liability, and its operations could be curtailed. Moreover, if the activities of its customers or other entity with which the Company has a business relationship were found to constitute a violation of the AKS and the Company, as a result of the provision of products or services to such customer or entity, were found to have knowingly participated in such activities, the Company could be subject to sanctions or liability under such laws, including civil and/or criminal penalties, as well as exclusion from government health programs. As a result of exclusion from government health programs, or should our customers receive reimbursement or subsidy from a federal or state healthcare program, certain laws may become applicableneither products nor services could be provided to us. The federal Anti-Kickback Statute makes it illegal for any person, including a pharmaceutical, biologic, or medical device company (or a party acting on its behalf), to knowingly and willfully solicit, offer, receive or paybeneficiaries of any remuneration, directly or indirectly, in exchange for, or to induce, the referral of business, including the purchase, ordering or prescription of a particular item or service, or arranging for the purchase, ordering, or prescription of a particular item or service for which payment may be made under federal healthcare programs such as Medicare and Medicaid. In 1996, under the Health Insurance Portability and Accountability Act (“HIPAA”), the Anti-Kickback Statute was expanded to be made applicable to most federal and state-funded health care programs.program.

HIPAA Compliance and Privacy Protection

HIPAA established comprehensive federal protection for the privacy and security of health information. The HIPAA standards apply to three types of organizations, or “Covered Entities”: (1) health plans, (2) health care clearing houses, and (3) health care providers who conduct certain health care transactions electronically. Covered Entities must have in place administrative, physical and technical standards to guard against the misuse of individually identifiable health information. Additionally, some state laws impose privacy protections more stringent than HIPAA’s. There are also international privacy laws, such as the European Data Directive, that impose restrictions on the access, use, and disclosure of health information. All of these laws may impact the Company’s business in the future.

HITECH Act

The Health Information Technology for Economic and Clinical Health (“HITECH”) Act promotes the adoption and meaningful use of health information technology. The HITECH Act addresses the privacy and security concerns associated with the electronic transmission of health information, in part, through several provisions that strengthen the civil and criminal enforcement of the HIPAA rules.

Physician Sunshine Act

Health Care Reform Law provision, generally referred to as the Physician Payment Sunshine Act or Open Payments Program, has imposed new reporting and disclosure requirements for drug and device manufacturers with regard to payments or other transfers of value made to certain practitioners (including physicians, dentists and teaching hospitals), and for such manufacturers and for group purchasing organizations, with regard to certain ownership interests held by physicians in the reporting entity. The Centers for Medicine and Medicaid Services (“CMS”) publishes information from these reports on a publicly available website, including amounts transferred and physician, dentist and teaching hospital identities.

Under the Physician Payment Sunshine Act applicable organizations are required to collect and report detailed information regarding certain financial relationships they have with physicians, dentists and teaching hospitals. The Physician Payment Sunshine Act preempts similar state reporting laws, although some companies may also be required to report under certain state transparency laws that address circumstances not covered by the Physician Payment Sunshine Act, and some of these state laws, as well as the federal law, are ambiguous. Because ourthe Company’s medical devices are Class I, not subject to premarket approval, and not reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program the Company believes it is not currently subject to the Physician Payment Sunshine Act requirements. As the Company pursues commercialization of the MapcatSF^® and considers introducing new products,its medical devices, these requirements will be reevaluated to determine their applicability to the Company’s activities.

The Federal False Claims Act

The Federal False Claims Act provides for the imposition of extensive financial penalties (including treble damages and fines of over $22,000 for every false claim) if a provider submits false claims to any governmental health program either knowingly or in reckless disregard or in deliberate ignorance of the truth or falsity of the claims at issue. Liability under the False Claims Act can arise from patterns of deficient documentation, coding and billing, as well as for billing for services that are deemed not to have been medically necessary for the treatment of the patient. Many states have their own False Claims Acts as well. The Company was billing governmental health care programs for the TCD testing, and the False Claims Act is thus potentially applicable to the Company’s operations. The Company put in place a fraud and abuse compliance program that was designed to ensure that the Company’s documentation, coding and billing for TCD tests were accurate and compliant. Any patterns of uncorrected deficiencies in documenting, coding and billing for TCD tests, however, may result in fines and other liabilities, which may adversely affect the Company’s results of operations.

State Regulatory Requirements

Each state has its own regulations concerning physician dispensing, restrictions on the corporate practiceCorporate Practice of medicine,Medicine (“CPOM”), anti-kickback and false claim regulations. In addition, each state has a board of pharmacy that regulates the sale and distribution of drugs and other therapeutic agents. Some states require that a physician obtain a license to dispense prescription products. When considering the commencement of business in a new state, the Company consults with healthcare counsel regarding the expansion of operations and utilizes local counsel when necessary.

Many states prohibit or otherwise regulate under CPOM rules the extent to which non-licensed personnel may be involved in the practice of medicine or otherwise employ licensed personnel. Related state rules further limit the extent to which fees for professional services may be shared or “split” between parties. Under the TCD Testing line of business, such rules in some states my impact the Company’s relationship with the radiologists who will be reading and interpreting the results of the TCD tests, and thereby providing the “professional component” of such tests. The Company is structuring its financial and billing relationships with such radiologists to be in compliance with applicable state rules. Failure to comply with state CPOM and fee splitting rules, however, may result in fines and other liabilities, which may adversely affect the Company’s results of operations.

Other United States Regulatory Requirements

In the United States, the research, manufacturing, distribution, sale, and promotion of drugfood and biologicalmedical devices products are subject to regulation by various federal, state, and local authorities in addition to the FDA, including the Centers for Medicare and Medicaid Services (formerly the Health Care Financing Administration), other divisions of the United States Department of Health and Human Services (e.g., the Office of Inspector General), the United States Department of Justice and individual United States Attorney offices within the Department of Justice, and state and local governments. Pricing and rebate programs must comply with the Medicaid rebate requirements of the Omnibus Budget Reconciliation Act of 1990 and the Veterans Health Care Act of 1992, each as amended. If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply. All of these activities are also potentially subject to federal and state consumer protection, unfair competition, and other laws. In addition, wethe Company may be subject to federal and state laws requiring the disclosure of financial arrangements with health care professionals.

Foreign Regulatory Requirements

While not yet applicable to us, weThe Company may eventually be subject to widely varying foreign regulations, which may be quite different from those of the FDA, governing clinical trials, product design, manufacturing, labeling, product registration and approval, and sales. Whether or not FDA approval has been obtained, generally wethe Company must obtain a separate approvalauthorization for a product by the comparable regulatory authorities of foreign countries prior to the commencement of product marketing in thesethose countries. In certain countries, regulatory authorities also establish pricing and reimbursement criteria. The authorization or approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval.country.

Corporate History

Guardion Health Sciences, Inc. was formed under the name P4L Health Sciences, LLC in December 2009 in California as a limited liability company. The Company changed its name to Guardion Health Sciences, LLC in December 2009. In June 2015, the Company converted into a Delaware “C” corporation.

Reverse Stock Split

On March 1, 2021, the Company filed a Certificate of Amendment to its Certificate of Incorporation, as amended, with the Secretary of State of the State of Delaware to effectuate a one-for-six (1:6) reverse stock split (the “Reverse Stock Split”) of its common stock without any change to its par value. 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 in this Annual Report.

Employees and Human Capital Resources

As of December 31, 2017, the CompanyMarch 25, 2021, we had a staff of nine, consisting of four officers, four13 full-time staffemployees, including 12 full-time employees and one part-time staff person.employee. We consider our relationship with our employees to be good. Our future performance depends significantly upon the continued service of our key personnel and our ability to attract highly skilled employees. We provide our employees with opportunities for equity ownership.

Advisory Boards

The Company’s research and development efforts are assisted by a Science Advisory Board with advice from a Medical Advisory Board consisting of practicing physicians. Both teams are committed to revealing and validating the connections between health and nutrition and then developing products based on these findings. Their joint goal is the integration of a medical model incorporating nutritional therapy into clinical practice.

Science Advisory Board

The Company’s Science Advisory Board is a product development and research team of esteemed experts in the fields of biochemistry, biophysics, and clinical nutrition. In addition VectorVision hasto developing products based on scientific studies in the public domain, members of the Science Advisory Board conduct and publish their own evidence. Their expertise and the evidence they develop guide the formulation of the Company’s products. As an elite team of scientists and researchers, members of the Science Advisory Board contribute a staffhigh level of four, consistingexperience and judgment to the field of two officers, one full-time employeeretinal health and one part-time staff member.nutrition. The Science Advisory Board currently consists of:

Medical Advisory Board

The Company’s Medical Advisory Board is composed of clinicians who are active medical practitioners. Members of the Medical Advisory Board consult with the Scientific Advisory Board and management on the current standards of care in relevant medical practices. Members of the Medical Advisory Board objectively advise on trends, needs, and issues of concern within their specialties. Their input helps shape the direction of the Company’s research and product development efforts. The Medical Advisory Board currently consists of:

RISK FACTORS SUMMARY

Our business is subject to significant risks and uncertainties that make an investment in us speculative and risky. Below we summarize what we believe are the principal risk factors, but these risks are not the only ones we face, and you should carefully review and consider the full discussion of our risk factors in the section titled “Risk Factors”, together with the other information in this Annual Report on Form 10-K. If any of the following risks actually occurs (or if any of those listed elsewhere in this Annual Report on Form 10-K occur), our business, reputation, financial condition, results of operations, revenue, and future prospects could be seriously harmed. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business.

ITEM 1A. RISK FACTORS

Investing in the Company’s common stock involves a high degree of risk. Prospective investors should carefully consider the risks described below, together with all of the other information included or referred to in this Form 10-K, before purchasing shares of the Company’s common stock. There are numerous and varied risks that may prevent the Company from achieving its goals. If any of these risks actually occurs, the business, financial condition or results of operations may be materially adversely affected. In such case, the trading price of the Company’s common stock could decline and investors in the Company’s common stock could lose all or part of their investment.

Risks Related to the Company’s Business

The Company’sAs the Company has incurred recurring operating losses have raised substantial doubt regarding its abilityand negative cash flows since our inception, there is no assurance that the Company will be able to continue as a going concern.reach and sustain profitability. If it cannot, the Company will be required to secure additional financing, which the Company may not be able to obtain on favorable terms or at all.

The Company has sustained recurring operatingincurred net losses which raises substantial doubt about its ability to continue as a going concern. The perception of the Company’s ability to continue as a going concern may make it more difficult for it to obtain financing for the continuation of its operationssince inception in 2009 and could result in the loss of confidence by investors, suppliers and employees. The Company’s financial statements for all periods have been prepared assumingcannot be certain if or when the Company will continue as a going concern. As discussed in Note 1produce sufficient revenue from operations to the Financial Statements, the continuation of the Company as a going concern is dependent upon the Company raising additional debt and/or equity financing to fund future operations and to provide additional working capital.support costs. The Company has completed multiple capital financing transactions during 2017, resulting in cash on handhad a net loss of $4,735,230 at December 31, 2017.

As of December 31, 2017, management had concluded that there was substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements were issued, and the Company’s independent registered public accounting firm also included explanatory going concern language in their report accompanying the Company’s audited financial statements$8,571,657 for the year ended December 31, 2017.2020 and a net loss of $10,878,308 for the year ended December 31, 2019. The Company had an accumulated deficit of $54,083,328 as of December 31, 2020. The Company expects to continue to incur net losses and negative operating cash flows in the near-term. At December 31, 2020, the Company had cash on hand of $8,518,732 and working capital of $8,021,152. Subsequent to December 31, 2020, the Company sold an aggregate of 7,566,733 shares of its common stock for net proceeds of approximately $33,600,000 in two offerings, one completed in January 2021, and one completed in February 2021. In addition, in January and February 2021, the Company issued an aggregate of 1,647,691 shares of common stock upon the exercise of warrants and received cash proceeds of $3,608,509. Notwithstanding the net loss for 2020, management believes that its current cash balance, plus the net proceeds from issuance of common stock and exercise of warrants in January and February 2021, is sufficient to fund operations for at least one year from the date the Company’s 2020 financial statements are issued.

Although recent capital transactions have significantly improved our current cash position, weThe Company will continue to incur significant expenses for commercialization activities related to our lead product Lumega-Z, the MapcatSF medical device, the CSV-1000 and ESV-3000 devices,commercialization of its products and with respect to efforts to build its infrastructure, expand its operations, and execute on its business plans. The Company may also utilize cash to fund acquisitions.

Even if profitability is achieved in the future, the Company may not be able to sustain profitability on a consistent basis. The Company expects to continue to incur substantial losses and negative cash flow from operations for the foreseeable future.

The Company does not have any credit facilities as a source of present or future funds, and there can be no assurance that the Company will be able to raise sufficient additional capital on acceptable terms, or at all. The Company may seek additional capital through a combination of private and public equity offerings and debt financings. If the Company raises additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our infrastructure.stockholders could be significantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders. Debt financing, if obtained, may involve agreements that include covenants limiting or restricting the ability to take specific actions, such as incurring additional debt, would increase expenses and require that Company assets secure such debt. Moreover, any debt the Company incurs must be repaid regardless of our operating results.

The Company’s ability to obtain additional financing in the future will be subject to a number of factors, including market conditions, operating performance and investor sentiment. If the Company is unable to raise additional capital when required or on acceptable terms, the Company willmay have to significantly delay, scale back or discontinue our operations or obtain funds by entering into agreements on unattractive terms, which would likely have a material adverse effect on its business, stock price and relationships with third parties, at least until additional funding is obtained. If the Company does not have sufficient funds to continue operations, the Company could be forcedrequired to suspendseek other alternatives that would likely result in our stockholders losing some or terminate operations and, in all likelihood, cause investors to loseof their entire investment.

The Company’s future success is largely dependent on the successful commercialization of Lumega-Z^®, and GlaucoCetin^TM medical foods, its line of nutraceuticals, the MapcatSF^® medical device, and the CSV-1000 and ESV-3000 testing devices, and the successful integration of VectorVision into the Company’s business.CSV-2000 medical devices.

The future success of the Company’s business is largely dependent upon the successful commercialization of its medical food, Lumega-Z,foods, nutraceuticals and its medical device, the MapcatSF and the VectorVision CSV-1000 and ESV-3000 testing devices. The Company is dedicating a substantial amount of its resources to advance Lumega-Z and certain resources to advance MapcatSF as aggressively as possible. If the Company encounters difficulties in the commercialization of Lumega-Z or the MapcatSF, the Company will not have the resources necessary to continue its business in its current form. If the Company is unable to establish and maintain adequate sales, marketing and distribution capabilities or enter into or maintain agreements with third parties to do so, it may be unable to successfully commercialize its products. The Company believes it is creating an efficient commercial organization, taking advantage of outsourcing options where prudent to maximize the effectiveness of its commercial expenditures. However, it may not be able to correctly judge the size and experience of the sales and marketing force and the scale of distribution necessary to be successful. Establishing and maintaining sales, marketing, and distribution capabilities are expensive and time-consuming. Such expenses may be disproportionate compared to the revenues the Company may be able to generate on sales of Lumega-Z or licensing fees or sales of the MapcatSF device or the CSV-1000 and ESV-3000 testing devices.from sales. If this occurs, it will have an adverse impact on operations and the Company’s ability to fund any future development.development and commercialization efforts.

The COVID-19 global pandemic could adversely impact our business, including the commercialization of our medicines, our supply chain, our clinical trials, our liquidity and access to capital markets and our business development activities.

We may fail to realize all

On March 11, 2020, the World Health Organization made the assessment that a novel strain of coronavirus, which causes the COVID-19 disease, can be characterized as a pandemic. The President of the anticipated benefitsUnited States declared the COVID-19 pandemic a national emergency and many states and municipalities in the Unites States have announced aggressive actions to reduce the spread of the VectorVision acquisition ordisease, including limiting non-essential gatherings of people, ceasing all non-essential travel, ordering certain businesses and government agencies to cease non-essential operations at physical locations and issuing “shelter-in-place” orders which direct individuals to shelter at their places of residence (subject to limited exceptions). The effects of government actions and our policies and those benefitsof third parties to reduce the spread of COVID-19 may take longer to realize than expected. We may also encounter significant difficulties in integrating VectorVision into the existing businessnegatively impact productivity and VectorVision may underperform relative to our expectations.

Our ability to realize the anticipated benefits of the VectorVision acquisition will depend, to a large extent, on our ability to integrate the business of VectorVision withmarket and sell our legacy business, which may be a complex, costlyproducts, cause disruptions to our supply chain and time-consuming process. We may be requiredimpair our ability to devote significant management attention and resources to integrate the VectorVision business practices into our existing operations. The integration process may disruptexecute our business development strategy. These and if implemented ineffectively, could restrict the realization of the full expected benefits of the acquisition. The failure to meet the challenges involved in the integration process and to realize the anticipated benefits of the VectorVision acquisition could cause an interruption of, or a loss of momentumother disruptions in our operations and the global economy could negatively impact our business, operating results and financial condition.

The commercialization of our products may be adversely impacted by COVID-19 and actions taken to slow its spread. For example, patients may postpone visits to healthcare provider facilities, certain healthcare providers have temporarily closed their offices or are restricting patient visits, healthcare provider employees may become generally unavailable and there could be disruptions in the operations of payors, distributors, logistics providers and other third parties that are necessary for our products to be recommended and administered to patients.

Quarantines, shelter-in-place and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases could impact personnel at third-party manufacturing facilities upon which we rely, or the availability or cost of materials, which could disrupt the supply chain for our products.

The spread of COVID-19 and actions taken to reduce its spread may also materially affect us economically. As a result of the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have recently experienced extreme volatility and disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. If the equity and credit markets continue to deteriorate, it may make any additional debt or equity financing more difficult, more costly or more dilutive. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, there could be a significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity and financial position or our business financial condition and results of operations.development activities.

In addition,COVID-19 continues to rapidly evolve. The extent to which COVID-19 may impact the integrationcommercialization of VectorVision may result in material unanticipated problems, expenses, liabilities, competitive responses, lossour products, our supply chain, our access to capital and our business development activities, will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of customersthe pandemic, the duration of the pandemic and otherthe efforts by governments and business relationships,to contain it, business closures or business disruptions and diversion of management’s attention. Additional integration challenges may include, among other things:

These risks could have a material adverse effect on our business, financial condition and results of operations.

Our ability to provide high-quality products and services to our clients depends, in large part, upon our employees’ experience and expertise. We must attract and retain highly qualified personnel with a deep understanding of the pharmaceutical and healthcare information technology industries. In addition, we will invest significant time and expense in training our employees, increasing their value to clients as well as to competitors who may seek to recruit them, which will increase the cost of replacing them. If we fail to retain our employees, the quality of our product development and services could diminish and the growth of our business may be slowed. This may have a material adverse effect on our business, financial condition and results of operations.

If we lose the services of our Chief Executive Officer and other key personnel, we may be unable to replace them, and our business, financial condition and results of operations and financial condition. We have faced, and expect to continue to face, intense competition for acquisition candidates, which may be adversely affected.

Our success largely depends on the continued skills, experience, efforts and policies of our management and other key personnel andlimit our ability to continuemake acquisitions and may lead to attract, motivate and retain highly qualified employees. In particular, the services of Michael Favish, our founder, President and Chief Executive Officer, and David Evans, director of the Company and a consultant to VectorVision, are integral to the execution of our business strategy. We believe that the loss of the services of Mr. Favish or Dr. Evans could adversely affect our business, financial condition and results of operations.higher acquisition prices. We cannot assure you that Mr. Favish, Dr. Evans or our other executive officers will continue to provide services to the Company. We do not maintain key man insurance for any of our key personnel.

Our failure to compete successfully could cause our revenue or market share to decline.

The market for our products and services is competitive and is characterized by rapidly evolving industry standards, technology and user needs and the frequent introduction of new products and services. Some of our competitors, which include major pharmaceutical companies with alternatives to our products, may be more established, benefit from greater name recognition and have substantially greater financial, technical and marketing resources than us. We compete on the basis of several factors, including distribution of products, reputation, scientific validity, reliability, client service, price, and industry expertise and experience. There can be no assurance that we will be able to compete successfully against current and future competitorsidentify, acquire or that the competitive pressures that we face will not materially adversely affect our business, financial condition and results of operations.

Our future success depends upon our ability to grow, and if we are unable to manage our growth effectively, we may incur unexpected expenses and be unable to meet our customers’ requirements.

We will need to expand our operations if we successfully achieve market acceptance for our products and services. We cannot be certain that our systems, procedures, controls and existing space will be adequate to support expansion of our operations. Our future operating results will depend on the ability of our officers and key employees to manage changing business conditions and to implement and improve our technical, administrative, financial control and reporting systems. We may not be able to expand and upgrade our systems and infrastructure to accommodate these increases. Difficulties in managingprofitably any future growth could have a significant negative impact on our business, financial condition and results of operations because we may incur unexpected expenses and be unable to meet our customers’ requirements.acquisition opportunity.

We may consider acquiring other companies or product lines in an effort to expand our business in exchange for cash and/or stock of the Company (or a combination thereof), which may not be successful or which may cause dilution to investors.

The Company will consider acquiring other companies or product lines that may be complementary or supplementary as part of our future efforts to expand the business, which acquisitions could be for cash, stock or a combination thereof. In either event, there is no guarantee that any such acquisition will be successful or that an acquired company’s products, operations or corporate culture will mesh with our Company, integrate well, or that any economies of scale will be realized. In addition, any such transaction that involves the Company’s stock would cause dilution to investors. In addition, any such transaction that involves cash would result in a reallocation of funds on hand that would be needed to support an acquired company or acquired product line.

In order to expand ourthe Company’s business into additional states, wejurisdictions, it may need to comply with regulatory requirements specific to such states and there can be no assurance that weit will be able to initially meet such requirements or that weit will be able to maintain compliance on an on-going basis.

While we believe our product, Lumega-Z^®, and Glauco-Cetin^TM to be a medical foodfoods and not a drug, it isdrugs, they are only available under the supervision of a physician. While it is not available in pharmacies, we are mindful that the act of physicians prescribing, particularly if conducted across state lines, could potentially be subject to certain pharmacy regulations. Each state has its own regulations concerning physician dispensing, restrictions on the corporate practice of medicine, anti-kickback and false claims. In addition, each state has a board of pharmacy that regulates the sale and distribution of drugs and other therapeutic agents. Some states require a physician to obtain a license to dispense prescription products. While we do not believe these pharmacy requirements are applicable, should a pharmacy board or medical board determine otherwise, there can be no assurance that we will be able to comply with the regulations of particular states into which we may expand or that we will be able to maintain compliance with the states in which we currently distribute our products. We currently have Lumega-Z customers in Alabama, Alaska, California, Massachusetts, Connecticut, New York, Pennsylvania, New Jersey, Georgia, North Carolina, South Carolina, Florida, Kentucky, Tennessee, Kansas, Indiana, Illinois, Minnesota, Oklahoma, Texas, New Mexico, Mississippi, Idaho, Utah, Nevada, Arizona, Washington, Hawaii Malaysia and Alberta, Canada. Our inability to maintain compliance with the regulations of California and these other jurisdictions or expand our business into additional states may adversely affect our results of operations.

For distribution of products in Malaysia, China and throughout Asia, our nutritional compounds are affected by the regulatory agencies in each country. Each country has unique requirements related to the amount of ingredients allowed in the product and the labelling of each product. We believe that by obtaining regulatory approval in advance of marketing and distribution in each country, we will be protected from these regulatory restrictions affecting our ongoing operations. However, many factors can affect our ability to maintain compliance that are out of our control, including the availability of approved ingredients and sudden changes in regulatory restrictions imposed by each country.

We areThe Company is subject to anti-corruption laws, as well as export control laws, customs laws, sanctions laws and other laws governing our operations. If we failit fails to comply with these laws, weit could be subject to civil or criminal penalties, other remedial measures and legal expenses, be precluded from developing manufacturing and selling certain products outside the U.S. or be required to develop and implement costly compliance programs, which could adversely affect ourits business, results of operations and financial condition.

Our operations are subject to anti-corruption laws, including the U.K. Bribery Act 2010, or Bribery Act, the U.S. Foreign Corrupt Practices Act, or FCPA, and other anti-corruption laws that apply in countries where we do business (including in Malaysia) and may do business in the future.future, particularly as we expand our sales and operations to foreign markets. The Bribery Act, FCPA and these other laws generally prohibit us, our officers, and our employees and intermediaries from bribing, being bribed or making other prohibited payments to government officials or other persons to obtain or retain business or gain some other business advantage. Compliance with the FCPA, in particular, is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.

We may in the future operate in jurisdictions that pose a high risk of potential Bribery Act or FCPA violations, and we may participate in collaborations and relationships with third parties whose actions could potentially subject us to liability under the Bribery Act, FCPA or local anti-corruption laws. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted. If we expand our operations outside of the U.S., we will need to dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate.

We are also subject to other laws and regulations governing our international operations, including regulations administered by the governments of the United Kingdom and the U.S., and authorities in the European Union, including applicable export control regulations, economic sanctions on countries and persons, customs requirements and currency exchange regulations, collectively referred to as the Trade Control laws. In addition, various laws, regulations and executive orders also restrict the use and dissemination outside of the U.S., or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. If we expand our presence outside of the U.S., it will require us to dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing, or selling certain products and product candidates outside of the U.S., which could limit our growth potential and increase our development costs.

We may not be completely effective in ensuring our compliance with all applicable anti-corruption laws, including the Bribery Act, the FCPA or other legal requirements, including Trade Control laws. If we are not in compliance with the Bribery Act, the FCPA and other anti-corruption laws or Trade Control laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and liquidity. The Securities and Exchange Commission also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions. Any investigation of any potential violations of the Bribery Act, the FCPA, other anti-corruption laws or Trade Control laws by U.K., U.S. or other authorities could also have an adverse impact on our reputation, our business, results of operations and financial condition.

OurThe Company’s Second Amended and Restated Bylaws have andesignates the Court of Chancery of the State of Delaware as the sole and exclusive forum for adjudicationcertain types of state law actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes provision which limits the forum to the Delaware Court of Chancery for certain actions against the Company.with us or our directors, officers, employees or agents.

Article XI of our Second Amended and Restated Bylaws, or our Bylaws, dictates that the Delaware Court of Chancery is the sole and exclusive forum for certain state law based actions including certain derivative actionactions or proceedingproceedings brought on behalf of the Company; an action asserting a breach of fiduciary duty owed by an officer, a director, employee or to the shareholders of the Company; any claim arising under Delaware corporate law; and any action asserting a claim governed by the internal affairs doctrine. This means a shareholder has a limited forum in which to bring one of the above causes of action, which can be inconvenient for the shareholder.

A Delaware corporationThis exclusive forum provision does not apply to suits brought to enforce any liability or duty created by the Securities Act or the Exchange Act or other federal securities laws for which there is allowed to mandate in its corporate governance documents a chosenexclusive federal or concurrent federal and state jurisdiction.

This choice of forum for the resolution of state law based shareholder class actions, derivative suits and other intra-corporate disputes. The Company’s management believes limiting state law based claims to Delaware will provide the most appropriate outcomes as the risk of another forum misapplying Delaware law is avoided. Delaware courts have a well-developed body of case law and limiting the forum will preclude costly and duplicative litigation and avoids the risk of inconsistent outcomes. It also means a shareholder’sprovision may limit our stockholders’ ability to bring a claim in a judicial forum that it believes isfinds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and our directors, officers, employees and agents even though an action, if successful, might benefit our stockholders. Stockholders who do bring a claim in the Court of Chancery could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near Delaware. The Court of Chancery may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments or results may be more favorable to shareholdersus than to our stockholders. Alternatively, if a court were to find this provision of our Bylaws inapplicable to, or unenforceable in disputesrespect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with directors, officersresolving such matters in other jurisdictions, which could have a material adverse effect on our business, financial condition or other employees is limited and may discourage shareholders from bringing such claims. Additionally, Delaware Chancery Courts can typically resolve disputes on an accelerated schedule when compared to other forums.results of operations.

Risks Related to the Company’s Industry

Any failure to comply with all applicable federal and state confidentialityprivacy and security requirements for the protection of patient information may result in fines and other liabilities, which may adversely affect ourthe Company’s results of operations.operations and reputation.

When a physician recommends our medical food, Lumega-Z, to a patient we typically receive an order from the customer, but we do not usually receive medical information. As part of the operation of our business, it is possible, however, that during communication with customers or with physicians we might receive patient-identifiable medical information. The Health Insurance Portability and Accountability Act of 1996, Pub. L. No. 104-191 (“HIPAA”), the Health Information Technology for Economic and Clinical Health Act, Title XIII of the American Recovery and Reinvestment Act of 2009 (the “HITECH Act”), and related regulations promulgated by the Secretary (“HIPAA Regulations”) grant a number of rights to individuals as to their identifiable confidential medical information (called “Protected Health Information”) and restrict the use and disclosure of Protected Health Information. Failure to comply with these confidentiality requirements may result in penalties and sanctions. In addition, certain state laws may impose independent obligations upon us with respect to patient-identifiable medical information. Moreover, various new laws relating to the acquisition, storage and transmission of patient medical information have been proposed at both the federal and state level. These laws (collectively, the “State and Federal Privacy and Security Laws”) present different risks as to our sale of medical foods.

When a physician recommends one or more of the Company’s medical foods to a patient, the Company typically receives an order from the customer, but does not usually receive medical information. As part of the operation of its business, it is possible, however, that during communication with customers or with physicians the Company might receive patient-identifiable medical information. To the extent the Company obtains access to Protected Health Information, it must ensure it complies with the State and Federal Privacy and Security Laws. Any failure to comply may result in fines and other liabilities, which may adversely affect ourits results of operations.

Congress enacted significant prohibitions against physician self-referrals in the Omnibus Budget Reconciliation Act of 1993. This law and its supporting regulations, which have been amended and expanded substantially, are commonly referred to as the “Stark II,Law,” appliesand prohibit a physician from making any referral of a Stark Designated Health Service (“DHS”) to an entity with which the physician dispensinghas any kind of financial relationship, unless all the requirements of a statutory or regulatory exception are met. Stark covered DHS include both outpatient prescription drugs and diagnostic testing that are reimbursable by Medicare or Medicaid. Our productsMany states have similar laws, some of which can apply to all payors and not just governmental payors. While the Company believes that its arrangements with its customers are in compliance with the federal and any state Stark Laws, the Stark Laws present different levels of risks as to two of the Company’s lines of business: (1) sale of the Company’s medical foods and (2) sale of the Company’s medical devices.

Medical foods and medical devices are neither prescription drugs nor are they reimbursable under any federal program at present. Therefore, the Company believes that the federal Stark II,Law is not applicable. Further, the Company’s believes that these products are also not covered under any potentially applicable state Stark Laws. The federal Stark Law, however, includes an exception for the provision of in-office ancillary services, including a physician’s dispensing of outpatient prescription drugs, provided that the physician meets specified requirements. We believeTo the extent that the products might become reimbursable under a federal program, or otherwise become covered under the Stark Law, the Company believes that the physicians who use ourthe Company’s medical device, the MapcatSF,devices or recommend ourits medical food, Lumega-Z,foods to their patients are aware of these requirements, but we dorequirements. However, the Company does not monitor their compliance and havehas no assurance that the physicians are in material compliance with the Stark II.Law. If it were determined that the physicians who use ourthe Company’s medical device or prescribe medical foods purchased from usthe Company were not in compliance with Stark II, it could potentially have an adverse effect on ourthe Company’s business, financial condition and results of operations.

Any failure to comply with all applicable federal and state anti-kickback laws may result in fines and other liabilities, which may adversely affect the Company’s results of operations and reputation.

The federal anti-kickback statute (the “AKS”) applies to Medicare, Medicaid and other state and federal programs. At present, our products are not prescription drugs, nor are they reimbursable under any federal program. The federal anti-kickback statuteAKS prohibits the solicitation, offer, payment or receipt of remuneration in return for referrals or the purchase, or in return for recommending or arranging for the referral or purchase, of goods, including drugs, covered by the federal health care programs. At present, the Company does not participate in any federal programs and its products are not reimbursed by Medicare, Medicaid or any other state or federal program. The federal anti-kickbackAKS is a criminal statute with criminal penalties, as well as potential civil and administrative penalties. The AKS, however, provides a number of statutory exceptions and regulatory “safe harbors” for particular types of transactions. We believe that our arrangements with our customers are in material compliance with the anti-kickback statute and relevant safe harbors. Many states have similar fraud and abuse laws and we believetheir own anti-kickback laws, some of which can apply to all payors, and not just governmental payors. While the Company believes that we areit is in material compliance with those laws. both federal and state AKS laws, the AKS laws present different levels of risks as to two of the Company’s lines of business: (1) sale of the Company’s medical foods, and (2) sale of the Company’s medical devices.

At present, we do not participate in any federal programs and ourthe Company’s products are not reimbursed by Medicare, Medicaid orreimbursable under any other state or federal program. If, however, that changes in the future and it were determined that we werethe Company was not in compliance with the federal anti-kickback statute, weAKS, the Company could be subject to liability, and ourits operations could be curtailed.curtailed, which could have a material adverse effect on the Company’s business, financial condition and results of operations. Moreover, if the activities of ourits customers or other entity with which we havethe Company has a business relationship were found to constitute a violation of the federal anti-kickback lawAKS and we,the Company, as a result of the provision of products or services to such customer or entity, were found to have knowingly participated in such activities, wethe Company could be subject to sanctionsanctions or liability under such laws, including civil and/or criminal penalties, as well as exclusion from government health programs. As a result of exclusion from government health programs, neither products nor services could be provided to any beneficiaries of any federal healthcare program.

Increased government involvement in healthcare could adversely affect ourthe Company’s business.

U.S. healthcare system reform under the Medicare Prescription Drug, Improvement and Modernization Act of 2003, the Patient Protection and Affordable Care Act of 2010 and other initiatives at both the federal and state level, could increase government involvement in healthcare, lower reimbursement rates and otherwise change the business environment of our customers and the other entities with which we have a business relationship. While no federal price controls are included in the Medicare Prescription Drug, Improvement and Modernization Act, any legislation that reduces physician incentives to dispense medications in their offices could adversely affect physician acceptance of our products. We cannot predict whether or when future healthcare reform initiatives at the federal or state level or other initiatives affecting our business will be proposed, enacted or implemented or what impact those initiatives may have on our business, financial condition or results of operations. Our customers and the other entities with which we have a business relationship could react to these initiatives and the uncertainty surrounding these proposals by curtailing or deferring investments, including those for our products. Additionally, government regulation could alter the clinical workflow of physicians, hospitals and other healthcare participants, thereby limiting the utility of our products and services to existing and potential customers and curtailing broad acceptance of our products and services. Additionally, new safe harbors to the federal Anti-Kickback Statute and corresponding exceptions to such law may alter the competitive landscape.

Risks Related to OurThe Company’s Common Stock

We areThe Company is an “emerging growth company” and we haveit has elected to comply with certain reduced reporting and disclosure requirements which could make ourits common stock less attractive to investors.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For as long as we continue to be an emerging growth company, we have elected to take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including (1) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which we refer to as the Sarbanes-Oxley Act, (2) reduced disclosure obligations regarding executive compensation in this Annual Report and our periodic reports and proxy statements and (3) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In addition, as an emerging growth company, we are only required to provide two years of audited financial statements and two years of selected financial data in this Annual Report.statements. As a result of these reduced reporting and disclosure requirements our financial statements may not be comparable to SEC registrants not classified as emerging growth companies. We may be an emerging growth company for up to five years following the first sale our equity securities in a public offering (April 2019), although circumstances could cause us to lose that status earlier, including if the market value of our common stock held by non-affiliates exceeds $700.0 million before that time or if we have total annual gross revenue of $1.0$1.07 billion or more during any fiscal year before that time, in which cases we would no longer be an emerging growth company as of the following December 31 or, if we issue more than $1.0 billion in non-convertible debt during any three-year period before that time, we would immediately cease to be an emerging growth company. Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company” which would allow us to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting until the later of our second annual report or the first annual report required to be filed with the SEC following the date we are no longer an “emerging growth company” as defined in the JOBS Act.  We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal controls in the future.

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards and, therefore, will not be subject to the same new or revised accounting standards as other SEC registrants that are not emerging growth companies.

Investors may find our common stock less attractive as a result of our election to utilize these exemptions, which could result in a less active trading market for our common stock and/or the market price of our common stock may be more volatile.

Our directorsstock price has fluctuated in the past, has recently been volatile and executive officers beneficially ownmay be volatile in the future, and as a result, investors in our common stock could incur substantial losses.

Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future. Additionally, over the course of the past year, our shareholder base has increased in size due to the prevalence of new platforms and ease of access to stock trading brought on by new technologies. We may incur rapid and substantial increases or decreases in our stock price in the foreseeable future that are unrelated to our operating performance or prospects. In addition, the recent outbreak of the novel strain of coronavirus (COVID-19) has caused broad stock market and industry fluctuations. The stock market in general and the market for biotechnology and pharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may experience losses on their investment in our common stock. The market price for our common stock may be influenced by many factors, including the following:

These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance. Further, recent increases are inconsistent with any improvements in actual or expected operating performance, financial condition or other indicators of value. Since the stock price of our common stock has fluctuated in the past, has been recently volatile and may be volatile in the future, investors in our common stock could incur substantial losses. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, results of operations and growth prospects. There can be no guarantee that our stock price will remain at current prices or that future sales of our common stock will not be at prices lower than those sold to investors.

Additionally, recently, securities of certain companies have experienced significant numberand extreme volatility in stock price due short sellers of shares of common stock, known as a “short squeeze.” These short squeezes have caused extreme volatility in those companies and in the market and have led to the price per share of those companies to trade at a significantly inflated rate that is disconnected from the underlying value of the company. Many investors who have purchased shares in those companies at an inflated rate face the risk of losing a significant portion of their original investment as the price per share has declined steadily as interest in those stocks have abated. While we have no reason to believe our common stock.  Their interestsshares would be the target of a short squeeze, there can be no assurance that we won’t be in the future, and you may conflict withlose a significant portion or all of your investment if you purchase our outside stockholders, who may be unable to influence management and exercise control overshares at a rate that is significantly disconnected from our business.underlying value.

As of the date of this Annual Report, our executive officers and directors beneficially own approximately 30.4% of our shares of common stock.  As a result, our executive officers and directors may be able to affect the election or defeat the election of our directors, amend or prevent amendment to our certificates of incorporation or bylaws, effect or prevent a merger, sale of assets or other corporate transaction, and control the outcome of any other matter submitted to the shareholders for vote. Accordingly, our outside stockholders may be unable to influence management and exercise control over our business.

We doThe Company does not intend to pay cash dividends to ourits stockholders, so you willmay not receive any return on your investment in ourthe Company prior to selling your interest in the Company.

We have never paid any dividends to our common stockholders and do not foresee doing so as a public company. We currently intend to retain any future earnings for funding growth and, therefore, do not expect to pay any cash dividends in the foreseeable future. If we determine that we will pay cash dividends to the holders of our common stock, we cannot assure that such cash dividends will be paid on a timely basis. The success of your investment in the Company will likely depend entirely upon any future appreciation. As a result, you will not receive any return on your investment prior to selling your shares in our Company and, for the other reasons discussed in this “Risk Factors” section, you may not receive any return on your investment even when you sell your shares in our Company.

WeThe Company may require additional capital in the future to support our currentits operations, and this capital has not always been readily available.

We may require additional debt or equity financing to fund our current operations, including, but not limited to, working capital. As a publicly-owned reporting company, we expect that it may facilitate our ability to secure additional funds. Our limited operating history makes it difficult to evaluate our current business model and future prospects. Accordingly, investors should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in the early stages of development, as we have, in fact, encountered. Potential investors should carefully consider the risks and uncertainties that a new company with a limited operating history and with limited funds, will face. In particular, while we do not have current plans to re-prioritize our business plan, potential investors should consider that there is a significant risk that we will not be able to:

If we raise additional funds through further issuances of equity or convertible debt securities, our existing shareholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our existing capital stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. In addition, we may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our current operations and to respond to business challenges would be significantly limited. If we cannot access the capital necessary to support our business, we would be forced to curtail our business activities or even shut down operations. If we cannot execute any one of the foregoing or similar matters relating to our business, the business may fail, in which case you would lose the entire amount of your investment in the Company.

The obligations associated with being a public company require significant resources and management attention, which may divert from our business operations.

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and The Sarbanes-Oxley Act of 2002 (“SOX”).  The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition, proxy statement, and other information. SOX requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting.  Our Chief Executive Officer and Chief Accounting Officer need to certify that our disclosure controls and procedures are effective in ensuring that material information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. We will need to hire additional financial reporting, internal controls and other financial personnel in order to develop and implement appropriate internal controls and reporting procedures.  As a result, we will incur significant legal, accounting and other expenses.  Furthermore, the need to establish the corporate infrastructure demanded of a public company may divert management’s attention from implementing our growth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations asidentified a public company. However, the measures we take may not be sufficient to satisfy our obligations as a public company. In addition, we cannot predict or estimate the amount of additional costs we may incurmaterial weakness in order to comply with these requirements. We anticipate that these costs will materially increase our selling, general and administrative expenses.

Section 404 of SOX requires annual management assessments of the effectiveness of our internal control over financial reporting. In connection with the implementation of the necessary procedures and practices relatedFailure to internal control over financial reporting, we may identify deficiencies.  If we are unable to comply with themaintain effective internal controls requirementscould cause our investors to lose confidence in us and adversely affect the market price of SOX, thenour common stock. If our internal controls are not effective, we may not be able to obtain the independent account certifications required by that act, which may preclude us from keeping our filings with the SEC current, and interfere with the ability of investors to trade our securities and our shares to be quoted or our ability to list our shares on any national securities exchange.

If we fail to establish and maintain an effective system of internal controls, we may not be able toaccurately report our financial results accurately or prevent fraud.

Maintaining effective internal control over financial reporting and effective disclosure controls and procedures are necessary for us to produce reliable financial statements. As discussed in Item 9A – “Controls and Procedures” of this Form 10-K, we have re-evaluated our internal control over financial reporting and our disclosure controls and procedures and concluded that they were not effective as of December 31, 2020.

A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness we identified was inadequate segregation of duties within accounting processes.

The Company is committed to remediating its material weaknesses as promptly as possible. Implementation of the Company’s remediation plans has commenced and is being overseen by the audit committee. However, there can be no assurance as to when these material weaknesses will be remediated or that additional material weaknesses will not arise in the future. Even effective internal control can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. Any inabilityfailure to report and fileremediate the material weaknesses, or the development of new material weaknesses in our internal control over financial reporting, could result in material misstatements in our financial results accuratelystatements, which in turn could have a material adverse effect on our financial condition and timely could harm our reputation and adversely impact the trading price of our common stock.stock and we could fail to meet our financial reporting obligations.

Effective internal controls are necessaryThe Company’s failure to meet the continued listing requirements of Nasdaq could result in a delisting of its common stock.

On September 20, 2019, we received notice from the Listing Qualifications staff (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of the Company’s common stock for the previous 30 consecutive business days, the Company no longer satisfied the requirement to maintain a minimum bid price of $1.00 per share, as required by Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”).

In accordance with the Nasdaq Listing Rules, the Company was afforded 180 days, or until March 18, 2020, to regain compliance with the Bid Price Rule by evidence of a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days. Thereafter, the Company had been afforded a second 180-calendar day compliance period (which 180-day period was extended due to circumstances related to COVID-19), or until November 30, 2020, to regain compliance with the Bid Price Rule.

The Company was unable to regain compliance with the Bid Price Rule by November 30, 2020. Accordingly, on December 1, 2020, the Company received a letter from the Staff notifying it that its Common Stock would be subject to delisting from Nasdaq unless the Company timely appealed Nasdaq’s determination to a Nasdaq Listing Qualifications Panel (the “Panel”). The Company timely appealed Nasdaq’s determination to the Panel. 

On January 26, 2021, the Company received written notification that the Panel granted the Company an extension for continued listing through March 15, 2021.

On March 1, 2021, the Company filed a Certificate of Amendment to its Certificate of Incorporation, as amended, with the Secretary of State of the State of Delaware to effectuate a one-for-six (1:6) reverse stock split (the “Reverse Stock Split”) of its common stock without any change to its par value. 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 in this Annual Report.

On March 15, 2021, we received a letter from the Staff notifying us to provide reliable financial reportsthat we had regained compliance with the Bid Price Rule. The letter stated the staff had determined that for the prior 10 consecutive business days the closing bid price of the Company’s common stock had been at $1.00 per share or greater and prevent fraud.  that accordingly, the Company had regained compliance under the Bid Price Rule, and that the matter was now closed.

If we cannot provide reliable financial reports or prevent fraud, we may not be ablefail to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed.  With each prospective acquisition, we will conduct whatever due diligence is necessary or prudent to assure us thatsatisfy the acquisition target can comply with the internal controlscontinued listing requirements of SOX.  Notwithstanding our diligence, certain internal controls deficiencies may not be detected.  As a result, any internal control deficiencies may adversely affect our financial condition, results of operations and access to capital.  We have not performed an in-depth analysis to determine if historical undiscovered failures of internal controls exist, and mayNasdaq in the future, discover areasincluding the Bid Price Rule, Nasdaq may take steps to delist our common stock. Such a delisting would likely have a negative effect on the price of our internal controls that need improvement.common stock and would impair your ability to sell or purchase our common stock when you wish to do so. A delisting would adversely affect the liquidity, trading volume and likely the price of our common stock, causing the value of an investment in us to decrease and having an adverse effect on our business, financial condition and results of operations.

Risks Related to Our Securities

Public company compliance may make it more difficult to attract and retain officers and directors.

SOX and rules implemented by the SEC have required changes in corporate governance practices of public companies. As a public company, these rules and regulations increase our compliance costs and make certain activities more time consuming and costly. As a public company, these rules and regulations may make it more difficult and expensive for us to maintain our director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our Board of Directors or as executive officers, and to maintain insurance at reasonable rates, or at all.

OurThe Company’s stock price may be volatile, and you may not be able to resell your shares at or above the purchase price.

In the event that we become listed or traded, theThe market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:

In addition, the securities markets have from time to timetime-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

Our shares of common stock are not publicly traded and there can be no assurance that there will be an active market for our shares of common stock in the future.

Our shares of common stock are not currently publicly traded and timing for the commencement of trading is uncertain. There can be no assurance that there will be an active market for our shares of common stock in the future. If we are able to establish a public market for our securities, the market liquidity will be dependent on the perception of our operating business, among other things.  We intend to take certain steps including utilizing investor awareness campaigns and firms, press releases, road shows and conferences to increase awareness of our business. Any steps that we might take to bring us to the awareness of investors may require that we compensate consultants with cash and/or stock. There can be no assurance that there will be any awareness generated or the results of any efforts will result in any impact on our trading volume. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business, and trading may be at an inflated price relative to the performance of the Company due to, among other things, the availability of sellers of our shares.

If an active market should develop, the price may be highly volatile. If there is a low price for our shares of common stock, many brokerage firms or clearing firms may not be willing to effect transactions in the securities or accept our shares for deposit in an account.  Many lending institutions will not permit the use of low priced shares of common stock as collateral for any loans.

We are subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock.

Our common stock will be subject to the provisions of Section 15(g) and Rule 15g-9 of the Exchange Act, commonly referred to as the “penny stock rules.”  Section 15(g) sets forth certain requirements for transactions in penny stock, and Rule 15g-9(d) incorporates the definition of “penny stock” that is found in Rule 3a51-1 of the Exchange Act.  The SEC generally defines a penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. We will be subject to the SEC’s penny stock rules.

Since our common stock will be deemed to be penny stock, trading in the shares of our common stock will be subject to additional sales practice requirements on broker-dealers who sell penny stock to persons other than established customers and accredited investors. “Accredited investors” are persons with assets in excess of $1,000,000 (excluding the value of such person’s primary residence) or annual income exceeding $200,000 or $300,000 together with their spouse. For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such security and must have the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt from the rules require the delivery, prior to the first transaction of a risk disclosure document, prepared by the SEC, relating to the penny stock market.  A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities.  Finally, monthly statements must be sent disclosing recent price information for the penny stocks held in an account and information to the limited market in penny stocks. Consequently, these rules may restrict the ability of broker-dealer to trade and/or maintain a market in our common stock and may affect the ability of the Company’s stockholders to sell their shares of common stock.

There can be no assurance that our shares of common stock will qualify for exemption from the penny stock rules. In any event, even if our common stock was exempt from the penny stock rules, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock if the SEC finds that such a restriction would be in the public interest.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

The Company’s address is 15150 Avenue of Science, Suite 200, San Diego, California 92128. Our telephone number is 858-605-9055. The Company’s corporate offices are rented under a six-yearfive-year lease for approximately 9,605 square feet of space at a current rental of $10,181$12,336 per month. We believe these facilities will be adequate for our needs during the foreseeable future.

In connection with the VectorVision acquisition, the Company assumed a lease agreement for 5,000 square feet of office and warehouse space in Greenville Ohio which commenced October 1, 2017 through February 2023. 

ITEM 3. 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 managementRegardless of the Company, adequate provision has been made in the Company’s condensed financial statements at December 31, 2017 with respect tooutcome, such matters, including the matter noted below.

Onproceedings or about July 26, 2017,claims can have an adverse impact on the Company received a payment demand from a former consultant tobecause of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained. As of March 25, 2021, the Company alleging that the consultant is owed approximately $192,000 for services rendered. The Company has disputed this demand and attemptsnot subject to resolve this matter were unsuccessful. On January 29, 2018, the Company filed a lawsuit against the consultant and its related entities in the United States District Court for the Southern District of California (Case No. 18CV200-W-KSC) seeking declaratory relief regarding advisory fees and ownership interest in the Company. The Company cannot predict the outcome of this matter.any such proceedings or claims.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

There is currently no public market for our shares of common stock. We intend to seek a listing of ourThe Company’s common stock is listed on a national securities exchange, however, we cannot assure you that our application will be approved or be certainThe NASDAQ Capital Market under the symbol “GHSI.” As of March 25, 2021, there were approximately 169 record holders of the timing for commencement of trading.Company’s common stock.

Dividend Policy

Guardion Health Sciences, Inc.The Company has not declared nor paid any cash dividend on its common stock, and the Companyit currently intends to retain future earnings, if any, to finance the expansion of its business. Thebusiness, and the Company does not expect to pay any cash dividends in the foreseeable future. The decision whether to pay cash dividends on the Company’sits common stock will be made by the Boardits board of Directors,directors, in theirits discretion, and will depend on the Company’s financial condition, results of operations, capital requirements general business conditions and other factors that the Boardits board of Directorsdirectors considers significant.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Presentation of Information

As used in this Annual Report, on Form 10-K, the terms “we,” “us” “our” and the “Company” mean Guardion Health Sciences, Inc. and its subsidiaries unless the context requires otherwise. The following discussion and analysis should be read in conjunction with ourthe Company’s audited (and unaudited) financial statements and the related notes that appear elsewhere in this report. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risk, uncertainties and other factors. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. Actual results could differ materially because of the factors discussed in “Risk Factors” elsewherethereto. All dollar amounts in this Annual Report and other factors that we may not know.refer to U.S. dollars unless otherwise indicated. Certain prior period amounts have been reclassified to conform to current period presentation.

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 weit subsequently changed ourits name to Guardion Health Sciences, LLC. On June 30, 2015, wethe Company converted from a California limited liability company to a Delaware corporation, changing ourits name to Guardion Health Sciences, Inc.

We areThe Company is a specialty health sciences company formed to develop, formulate and distribute condition-specific(1) that has developed medical foods with an initialand medical food product ondevices in the market underocular health space and (2) that is developing nutraceuticals that the brand name Lumega-Z^® that replenishesCompany believes will provide supportive health benefits to consumers.

We see opportunities to grow our business 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”)create value by developing and diabetic retinopathy. Additional research has also shown a depleted macular protective pigment to be a biomarker for neurodegenerative diseases such as Alzheimer’sdistributing condition-specific, clinically proven nutrition, medical foods, and dementia. We have had limited commercial operations to date,diagnostic devices. Our portfolio of science-based, clinically supported products support healthcare professionals, their patients, and have primarily been engagedconsumers in research, development, commercialization and capital raising.achieving health goals.

We have also developed a proprietary medical device calledRecent Trends – Market Conditions

The COVID-19 pandemic has and will continue affecting economies and businesses around the MapcatSF^®that accurately measures the macular pigment optical density (“MPOD”). We invented our own proprietary patented technology embodied in the MapcatSF. On November 8, 2016, the 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 densityworld. The impacts of the macular protective pigment after taking Lumega-Z. The MapcatSF is a non-mydriatic, non-invasive devicepandemic could be material, but due to the evolving nature of this situation, we are not able at this time to estimate the impact on our financial or operational results. Among the factors that is designedcould impact our results are: effectiveness of COVID-19 mitigation measures; global economic conditions; consumer spending; work from home trends; supply chain sustainability; and other factors. These factors could result in increased or decreased demand for our products and services and impact our ability to accurately measure 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 intended to be the first device using a patented “single fixation” process and “automatic lens density correction” that produces accurate serialized data.serve customers.

Lumega-Z has a patent-pending formula that replenishes and restores the macular protective pigment simultaneously delivering critical and essential nutrients to the eye. Formulated by Dr. Sheldon Hendler in 2010, modifications were made over a two-year period to improve the taste and method of delivery. We believe that there is an increasing level of acceptance of medical foods as a primary therapy by patients and healthcare providers to treat pain syndromes, sleep and cognitive disorders, obesity, hypertension, and viral infection. In clinical practice, medical foods are being prescribed as both a standalone therapy and as an adjunct therapy to low doses of commonly prescribed drugs. We believe that medical foods will continue to grow in importance over the coming years.Recent Developments

By combiningJanuary and February 2021 At the Market Offerings

On January 8, 2021, we entered into the Sales Agreement and filed a prospectus supplement pursuant to which we could sell up to $10,000,000 worth of shares of our MapcatSF medical devicecommon stock in an “at the market” offering through the Distribution Agent (the “January 2021 1st ATM Offering”). On January 15, 2021, we completed the January 2021 1st ATM Offering, pursuant to which we sold an aggregate of 2,559,834 shares of our common stock, raised gross proceeds of approximately $10,000,000 and Lumega-Z medical food,net proceeds of approximately $9,500,000.

On January 28, 2021, we have developed, based on Management’s knowledgeentered into the Sales Agreement and filed a prospectus supplement pursuant to which we could sell up to $25,000,000 worth of shares of our common stock in an “at the industry, whatmarket” offering through the Distribution Agent (the “January 2021 2nd ATM Offering”). On February 10, 2021, we believecompleted the January 2021 2nd ATM Offering, pursuant to be the only reliable two-pronged, evidence-based protocol for replenishingwhich we sold an aggregate of 5,006,900 shares of our common stock, raised gross proceeds of approximately $25,000,000 and restoring the macular protective pigment and increasing overall retinal health.net proceeds of approximately $24,100,000.

In September 2017,addition, in January 2021 and February 2021, the Company through its wholly-owned subsidiary VectorVision Ocular Health, Inc., acquired substantially allissued an aggregate of 1,647,691 shares of common stock upon the assetsexercise of warrants and certain liabilities of VectorVision, Inc., a company that 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 acquisition expands our technical portfolio and we believe it further establishes our position at the forefront of early detection, intervention and monitoring of a range of eye diseases.

Recent Developmentsreceived $3,608,509.

Sale of Common Stock2019 Initial Public Offering and Conversion of Preferred Stock into Common Stock2019 Follow-On Public Offerings

On November 3, 2017,April 9, 2019, the Company completed the issuance and saleclosed its initial public offering (the “IPO”) of an aggregate of 4,347,827208,334 shares of common stock, par value $0.001 per share, at a purchasean IPO price to the public of $1.15$24.00 per share. Total grossshare resulting in net proceeds were $5,000,001. Theseto the Company of $3,888,000 after all costs and expenses. The shares were sold in a private placement to certain purchasers pursuant to a Stock Purchase Agreement dated as of November 3, 2017.began trading on the NASDAQ Capital Market on April 5, 2019 under the symbol “GHSI.”

The completion of the private placement triggered, at the Company’s election, the automatic conversion of the preferred stock into shares of common stock. Accordingly, immediately following the completion of the private placement,On August 15, 2019, the Company effected the conversioncompleted a second public offering (the “August Offering”) of all outstanding shares of preferred stock into 6,981,938(i) 2,000,000 shares of common stock, (excluding accrued but unpaid dividends) effective November 3, 2017. The Company issued 205,242(ii) pre-funded warrants exercisable for 166,667 shares of common stock for(the “Pre-Funded Warrants”), and (iii) warrants to purchase up to an aggregate of 2,166,667 shares of common stock (the “August Warrants”). The August Offering was conducted pursuant to an Underwriting Agreement, dated August 13, 2019 by and between the accrued but unpaid dividendsCompany and Maxim Group LLC and WallachBeth Capital, LLC. On August 16, 2019, the Company sold an additional 325,000 August Warrants upon exercise of the underwriters’ over-allotment option. The net proceeds to the Company from October 1, 2017 through November 3, 2017, representing the payment in full of all Preferred Stock dividend obligations.

Development of Sales ForceAugust Offering, after deducting underwriting discounts and commissions and other estimated expenses were $4,944,340.

The public offering price was $2.64 per share of common stock and $0.01 per accompanying August Warrant. Each August Warrant represents the right to purchase one share of common stock at an exercise price of $3.51 per share. The August Warrants are exercisable immediately, expire five years from the date of issuance and provide that, beginning on the earlier of (i) September 11, 2019 and (ii) the date on which the common stock traded an aggregate of more than 6,666,667 shares after the announcement of the pricing of the August Offering, and ending on the twelve (12) month anniversary thereof, each August Warrant may be exercised at the option of the holder on a cashless basis at a ratio of one August Warrant for one share of common stock, in whole or in part, if the weighted average price of the Common Stock on the trading day immediately prior to the exercise date fails to exceed the initial exercise price of the August Warrant

On October 30, 2019, the Company is investingcompleted a third public offering of 4,083,334 shares of its common stock (including 283,334 pre-funded warrants to purchase common stock in a direct sales force comprisedlieu thereof) and Series B warrants to purchase up to 4,083,334 shares of a field-based team of account managers located in key geographical locations based on high population density areas with demographics that match the Company’s target markets.common stock. Each account managershare of common stock (or pre-funded warrant) was sold together with one Series B warrant to purchase one share of common stock at a combined price to the public of $2.052 per share and Series B warrant. The shares of common stock or pre-funded warrants and the accompanying Series B warrants were sold together but will have responsibility for a pre-defined geographical area,be issued separately and will be expected to travel extensively to support the needs of customers. The account managers will be tasked with prospecting for new accounts, closing leads generated by the Company’s marketing efforts,immediately separable upon issuance. Net proceeds, after deducting underwriting discounts, commissions and generating revenue through account management activities including physician and staff training, and implementation of patient education resources. The account managers will also participate in national and regional trade shows and events, including supporting professional optometric and ophthalmological societies at a State level. Each account manager will be tasked with a quota that includes units of Lumega-Z sold, as well as sales of the MapcatSF, CSV-1000 and ESV-3000. Commissions will be paid based on performance and achievement of quota. Training of the direct sales force is expected to commence in March 2018.

Going Concernoffering expenses, were approximately $7.4 million.

The financial statements have been prepared assumingSeries B warrants are exercisable at a price of $2.05 per share of common stock and will expire five years from the date on which the Series B warrants become initially exercisable.

Warrant Exercises

From January 1, 2020 through December 31, 2020, the Company will continue as a going concern. The Company has utilized cash in operating activitiesreceived total gross proceeds of $3,403,696 and $1,653,574 during$5,451,892 from the years ended December 31, 2017 and 2016, respectively, and had a total accumulated deficitexercise of $26,865,956 and $20,650,207 as of December 31, 2017 and 2016, respectively. The Company expects to continue to incur net losses and negative operating cash flows2,656,868 warrants issued in the near-term. As a result, management has concluded that there is substantial doubt aboutCompany’s October 2019 follow-on offering.

NutriGuard Acquisition

Effective September 20, 2019 (the “Effective Date”), the Company’s abilitynewly-formed wholly-owned subsidiary, NutriGuard Formulations, Inc., a Delaware corporation (“Buyer”), entered into an asset purchase agreement (the “Asset Purchase Agreement”) with NutriGuard Research, Inc., a California corporation (“NutriGuard”), and NutriGuard’s sole shareholder, Mark McCarty (the “NutriGuard Acquisition”).

Pursuant to continue as a going concern within one yearthe Asset Purchase Agreement, Buyer purchased from NutriGuard specified assets of the date that the consolidatedNutriGuard brand and business, primarily consisting of inventory, trademarks, copyrights and other intellectual property. In exchange, Buyer agreed to pay a royalty fee to NutriGuard subsequent to meeting certain financial statements are issued.

The Company’s auditors have also included explanatory language in their opinion that there is substantial doubt about the Company’s ability to continue as a going concern. 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.

We will continue to incur significant expenses for commercialization activities related to our lead product Lumega-Z, the MapcatSF medical device, and with respect to efforts to build our infrastructure. Development and commercialization of medical foods and medical devices involves a lengthy and complex process. Additionally, our long-term viability and growth may depend upon the successful development and commercialization of products other than Lumega-Z and the MapcatSF. We are continuing attempts to raise additional debt and/or equity capital to fund future operations, but there can be no assurances that we will be able to secure such additional financing in the amounts necessary to fully fund our operating requirements on acceptable terms or at all. If we are unable to access sufficient capital resources on a timely basis, we may be forced to reduce or discontinue our technology and product development programs and curtail or cease operations. 

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09 (ASU 2014-09), Revenue from Contracts with Customers. ASU 2014-09 will eliminate transaction- and industry-specific revenue recognition guidance under current GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenueperformance metrics based on the value of transferred goods or services as they occur in the contract. ASU 2014-09 also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. Based on the FASB’s Exposure Draft Update issued on April 29, 2015, and approved in July 2015, Revenue from Contracts With Customers (Topic 606): Deferraloperating results of the NutriGuard brand of products following the Effective Date, ASU 2014-09 is now effective for reporting periods beginning after December 15, 2017, with early adoption permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Entities will be ableDate. NutriGuard and Mr. McCarty also agreed, among other terms, to transitionno longer use the “NutriGuard” name upon the Effective Date.

Nutraceutical Sales to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The adoption of ASU 2014-09 is not expected to have any impact on our financial statement presentation or disclosures.Malaysian Customer

In February 2016,2020, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02), Leases (Topic 842). ASU 2016-02 requiresCompany contracted with a lesseeMalaysian company to record a right-of-use assetdevelop an immune-supportive formula for its consumer base. An initial order was placed, and a corresponding lease liability, initially measured at the present valueCompany completed shipment of the lease payments, onproduct, received payment in full, and recognized revenue for this order of $890,000 during the balance sheet for all leases with terms longer than 12 months, as well as the disclosure of key information about leasing arrangements. 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. ASU 2016-02 requires classification of all cash payments within operating activities in the statement of cash flows. Disclosures are requiredyear ended December 31, 2020.

Recent Accounting Pronouncements

See Note 1 to provide the amount, timing and uncertainty of cash flows arising from leases. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements with certain practical expedients available. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The Company has not yet evaluated the impact of the adoption of ASU 2016-02 on the Company’s financial statement presentation or disclosures.regarding recent accounting pronouncements.

In March 2016, the FASB issued Accounting Standards Update No. 2016-09 (ASU 2016-09), Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 requires, among other things, that all income tax effects of awards be recognized in the statement of operations when the awards vest or are settled. ASU 2016-09 also allows for an employer to repurchase more of an employee’s shares than it can today for tax withholding purposes without triggering liability accounting and allows for a policy election to account for forfeitures as they occur. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted for any entity in any interim or annual period. The adoption of ASU 2016-09 has not had any impact on the Company’s financial statement presentation or disclosures.

Management does not believe that any other 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.

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

OurThe Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of theits 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. OurThe 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 consolidated financial statements.

Intangible AssetsRevenue Recognition

In connection with our acquisition of VectorVision, Inc., we identified and allocated estimated fair values to intangible assets including goodwill and customer relationships.

InThe Company recognizes revenue in accordance with Accounting StandardStandards Codification (“ASC”) 350 – Intangibles – Goodwill and Other, we determined whether these assets are expected(ASC) 606, Revenue from Contracts with Customers. Revenue is recognized when control of promised goods or services is transferred to have indefinite (such as goodwill) or limited useful lives, andthe customer in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those with limited lives, we established an amortization periodproducts or services. The Company reviews its sales transactions to identify contractual rights, performance obligations, and methodtransaction prices, including the allocation of amortization. Our goodwill and other intangible assets are subjectprices to periodic impairment testing.separate performance obligations, if applicable.

We utilizedAll products sold by the services of an independent third party valuation firmCompany 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 assist us in identifying intangible assets and in estimating their fair values. The useful lives for our intangible assets other than goodwill were estimated based on Management’s consideration of various factors, including assumptionsderive the expected value from them. Contracts with customers contain no incentives or discounts 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 notcould cause revenue to be reliably determined, amortization expense is generally calculated on a straight-line basis.allocated or adjusted over time.

Revenue Recognition

The Company’s revenue is comprisedShipping 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. Payments for sales of medical foods and dietary supplements to consumers through a direct sales/are generally made by approved credit cards. Payments for medical device sales are generally made by check, credit card, process. In addition,or wire transfer. Historically the Company sells medical device equipment and supplies to consumers both in the U.S. and internationally. Revenue is recognized when the risk of loss transfers to our customers, and collection of the receivable is reasonably assured, which generally occurs when the product is shipped. A product ishas not shipped without an orderexperienced any significant payment delays from the customer and credit acceptance procedures performed. The Company allows for returns within 30 days of purchase. Product returns for the years ended December 31, 2017 and 2016 were insignificant.

Research and Development

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, which include stock compensation expense, are expensed as incurred and totaled $259,463 and $33,084 for the years ended December 31, 2017 and 2016, respectively.

Patent Costscustomers.

The Company provides a 30-day right of return to its retail 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 product returns, the ownerCompany determined that less than one percent of one issued domestic patent, three pending domestic patent applications,products is returned, and three foreign patent applicationstherefore believes it is probable that such returns will not cause a significant reversal of revenue in Canada, Europe and Hong Kong.the future. Due to the significant uncertainty associated withinsignificant amount of historical returns as well as the successful developmentstandalone nature of one or more commercially viable products based on the Company’s research effortsproducts and any related patent applications, patent costs, including patent-related legal fees, filing feesassessment of performance obligations and internally generated costs, are expensed as incurred. Duringtransaction pricing for the years ended December 31, 2017Company’s sales contracts, the Company does not currently maintain a contract asset or liability balance at this time. The Company assesses its contracts and 2016, patent costs were $30,789 and $30,942, respectively, and are included in general and administrative costs in the statementsreasonableness of operations.

Convertible Notes Payableits conclusions on a quarterly basis.

When conventional convertible debt is issued with detachable warrants, the proceeds from issuance are allocated to the two instruments based on their relative fair values. This method is generally appropriate if debt is issued with any other freestanding instrument that is classified in equity.Inventories

When the convertible debt instrument includes both detachable instruments such as warrants, and a beneficial conversion option, the proceeds of issuanceInventories are allocated among the convertible instrument and the other detachable instruments based on their relative fair values as indicated above, and the amount allocated to the convertible instrument is further analyzed to determine if the embedded conversion option has intrinsic value. If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value, then the conversion option has intrinsic value and this feature is characterized as a beneficial conversion feature (“BCF”). We calculate an effective conversion price based on the fair value allocated to the convertible instrument divided by the number of conversion shares based upon the conversion terms of the instrument. The resulting calculation or effective conversion price is used to measure the intrinsic value, if any, of the embedded conversion option. Stated differently, intrinsic value is calculatedstated at the commitment date aslower of cost or net realizable value, with cost determined on a first-in, first-out (“FIFO”) basis. The Company records adjustments to its inventory for estimated obsolescence or diminution in net realizable value equal to the difference between the conversion price (effective or otherwise)cost of the inventory and the fair value ofestimated net realizable value. The difference is recognized as a loss in the common stock or other securities intoperiod in which the securityit occurs. Once inventory has been written down, it creates a new cost basis for inventory that is convertible, multiplied by the number of shares into which the security is convertible.not subsequently written up.

If the intrinsic value of the BCF is greater than the proceeds allocated to the convertible instrument, the amount of the discount assigned to the BCF is limited to the amount of the proceeds allocated to the convertible instrument. We record a BCF as a debt discount and in those circumstances, the convertible debt will be recorded net of the discount related to the BCF. The Company amortizes the discount to interest expense over the life of the debt using the effective interest rate method or the straight-line method, as an approximation of effective interest amortization.

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, and directors, consultants, contractors, and to 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 or performance vested, will beare 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.

The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidancePlan 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. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line 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.Operations

The Company recognizes stock compensation expense on stock or unit purchases at a price less than fair value, and for fully-vested stock issued to consultants and other service providers, for the excess of fair value of the stock or units over the price paid for the stock or units.

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 Company will issue new shares to satisfy stock option exercises.

Income Taxes

The Company currently accounts for income taxes under an asset and liability approach for financial accounting and reporting for income taxes. Accordingly, the Company recognizes deferred tax assets and liabilities for the expected impact of differences between the financial statements and the tax basis of assets and liabilities.

The Company accounts for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by GAAP. The tax effects of a position are recognized only if it is “more-likely-than-not” to be sustained by the taxing authority as of the reporting date. If the tax position is not considered “more-likely-than-not” to be sustained, then no benefits of the position are recognized. As of December 31, 2017, the Company had not recorded any liability for uncertain tax positions. In subsequent periods, any interest and penalties related to uncertain tax positions will be recognized as a component of income tax expense.

The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. In the event the Company determines that it would be able to realize its deferred tax assets in the future in excess of its recorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Likewise, should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to operations in the period such determination was made.

Plan of Operations

General Overview

Based on the availability of sufficient funding, we intendthe Company intends to increase ourits commercialization activities and:and capitalize on growth opportunities. Our significant business development and commercialization activities include:

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 productsIn addition to the specifications of applicable product safety standards. We are in discussions withcommercialization and business development activities described above, we will also seek opportunities to utilize mergers and acquisitions and similar transactions to advance our 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, we expect to complete applicable IEC 60601-1 testing prior to commercialization as we believe in marketing a product that has evidence that it is safe and effective.business strategy.

Results of Operations

Through December 31, 2017, we had limited operations and have2020, the Company has primarily been engaged in research,product development, commercialization, building infrastructure and raising capital. We haveThe Company has incurred and will continue to incur significant expenditures for the development of ourits products and intellectual property, which includes research and development of both medical foods and medical diagnostic equipmentdevices for the treatment of various eye diseases. Wediseases and nutraceuticals. The Company had limited revenue during the years ended December 31, 20172020 and 2016. Beginning in the fourth quarter of 2017, we recognized product revenue from the sale of VectorVision products in addition to sales of our proprietary product, Lumega-Z.2019.

Comparison of Years Ended December 31, 20172020 and 20162019