UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, ~~2019~~2020

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

For the transition period from ____ to ____

Commission file number: 000-55723

GUARDION HEALTH SCIENCES, INC.

(Exact name of Registrant as specified in its charter)

Delaware

~~15150 Avenue of Science, Suite 200~~

~~San Diego, California 92128~~

~~Telephone: 858-605-9055~~

47-4428421

(State or other jurisdiction of

incorporation or organization)

~~(Address and telephone number~~

~~of principal executive offices)~~

(I.R.S. Employer

Identification No.)

15150 Avenue of Science, Suite 200

San Diego, California 92128

Telephone: 858-605-9055

(Address and telephone number of principal executive offices)

Not applicable

(Former name, former address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). [X] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). [ ] Yes [X] No

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001 per share		GHSI		The NASDAQ Stock Market, LLC

As of May ~~3, 2019,~~13, 2020, there were ~~22,491,264~~85,619,962 shares of the Company’s common stock, par value $0.001 per share, issued and outstanding. ~~The Company’s common stock began trading on the NASDAQ Capital Market on April 5, 2019, under the symbol “GHSI.”~~

On January 30, 2019, 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-two (1:2) 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 Quarterly Report on Form 10-Q.

TABLE OF CONTENTS

		Page No.
PART I – FINANCIAL INFORMATION

ITEM 1.	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	4

	Balance Sheets – As of March 31, ~~2019~~2020 (Unaudited) and December 31, ~~2018~~2019	4

	Statements of Operations (Unaudited) – Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	5

	Statement of Stockholders’ Equity (Unaudited) – Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	6

	Statements of Cash Flows (Unaudited) – Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2019

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	2826

ITEM 4.	CONTROLS AND PROCEDURES	2926

PART II – OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	2927

ITEM 1A.	RISK FACTORS	2927

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	2928

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	2928

ITEM 4.	MINE SAFETY DISCLOSURES	2928

ITEM 5.	OTHER INFORMATION	2928

ITEM 6.	EXHIBITS	2928

SIGNATURES			3029

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q ~~(this “Report”)~~for the three-month period ended March 31, 2020 contains ~~forward-looking statements~~“forward-looking statements” within the meaning ~~of Section 27A~~ of the Securities Act of 1933, as amended (the “Securities Act”), and ~~Section 21E of~~ the Securities Exchange Act of 1934, as ~~amended.~~amended (the “Exchange Act”). These forward-looking statements ~~relate to future events~~contain information about our expectations, beliefs or ~~future predictions, including events~~intentions regarding our product development and commercialization efforts, business, financial condition, results of operations, strategies or ~~predictions relating to the Company’s future financial performance,~~prospects, and other similar matters. These forward-looking statements are based on management’s current expectations ~~estimates, forecasts~~ and ~~projections~~assumptions about ~~the Company, its~~ future ~~performance, its beliefs~~events, which are inherently subject to uncertainties, risks and ~~management’s assumptions. They~~changes in circumstances that are ~~generally identifiable~~difficult to predict. These statements may be identified by ~~use of the~~ words ~~“may,~~such as “expects,” “plans,” “projects,” “will,” “may,” “anticipates,” “believes,” “should,” ~~“expect,~~“intends,” ~~“plan,~~“estimates,” ~~“anticipate,” “believe,” “feel,” “confident,” “estimate,” “intend,” “predict,” “forecast,” “potential” or “continue” or the negative~~and other words of such terms or other variations on these words or comparable terminology. These statements involve unknown risks and uncertainties that may individually or materially impact the matters discussed herein for a variety of reasons that are outside the control of the Company, including, but not limited to, the Company’s ability to raise sufficient financing to implement its business plan and its ability to successfully develop and commercialize its proprietary products and technologies. Readers are cautioned not to place undue reliance on these forward-looking statements, as actualsimilar meaning.

Actual results could differ materially from those ~~described~~contained in ~~the~~forward-looking statements. Many factors could cause actual results to differ materially from those in forward-looking statements, ~~contained herein.~~including those matters discussed below. Readers are urged to read the risk factors set forth in the Company’s recent filings with the U. S. Securities and Exchange Commission (the “SEC”), including the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019 and in other documents the Company files with the SEC from time to time. These filings are available at the SEC’s website (www.sec.gov). ~~The Company disclaims any intention~~

Other unknown or unpredictable factors that could also adversely affect our business, financial condition and results of operations may arise from time to time. Given these risks and uncertainties, the forward-looking statements discussed in this report may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of the Company’s management as of the date of this report. We undertake no obligation to update or revise ~~any~~ forward-looking statements ~~whether as a result~~to reflect changed assumptions, the occurrence of ~~new information, future~~unanticipated events or ~~otherwise, in each case,~~changes to future operating results or expectations, except ~~to the extent~~as required by ~~applicable~~ law.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. The Company will not update or revise the forward-looking statements except to the extent required by applicable law.

PART I – FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Guardion Health Sciences, Inc.

Condensed Consolidated Balance Sheets

	March 31,			December 31,			March 31,			December 31,
	2019			2018			2020			2019
	(Unaudited)						(Unaudited)
Assets

Current assets
Cash	$	174,298		$	670,948		$	12,890,140		$	11,115,502
Accounts receivable		15,086			28,203			31,083			78,337
Inventories		303,819			357,997			759,085			310,941
Prepaid expenses		51,161			47,773			622,959			362,938

Total current assets		544,364			1,104,921			14,303,267			11,867,718

Deposits		11,751			11,751			11,751			11,751
Property and equipment, net		265,176			274,804			383,486			374,638
Right of use asset, net		626,667			-			534,730			572,714
Deferred offering costs		557,000			270,000
Intangible assets, net		402,445			456,104
Goodwill		1,563,520			1,563,520
Intangible assets								50,000			50,000

Total assets	$	3,970,923		$	3,681,100		$	15,283,234		$	12,876,821

Liabilities and Stockholders’ Equity

Current liabilities
Accounts payable and accrued liabilities	$	829,040		$	413,925
Accrued expenses and deferred rent		65,000			81,412
Accounts payable							$	249,383		$	70,291
Accrued expenses								284,970			175,052
Customer deposit								437,500			-
Derivative warrant liability		436,034			-			22,267			13,323
Lease liability – current		121,546			-			154,327			151,568
Convertible notes payable		17,024			-
Notes payable		100,548			-
Total current liabilities		1,569,192			495,337			1,148,447			410,234

Lease liability – long term		513,585			-			395,186			434,747

Total liabilities		2,082,777			495,337			1,543,633			844,981

Commitments and contingencies

Stockholders’ Equity

Preferred stock, $0.001 par value; 10,000,000 shares authorized		-			-
Common stock, $0.001 par value; 90,000,000 shares authorized; 20,856,611 and 20,564,328 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively		20,857			20,564
Preferred stock, $0.001 par value; 10,000,000 shares authorized, no shares issued and outstanding								-			-
Common stock, $0.001 par value; 250,000,000 shares authorized; 85,389,962 and 74,982,562 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively								85,390			74,983
Additional paid-in capital		37,885,751			37,798,562			61,512,795			57,468,528
Accumulated deficit		(36,018,462	)		(34,633,363	)		(47,858,584	)		(45,511,671	)

Total stockholders’ equity		1,888,146			3,185,763			13,739,601			12,031,840

Total liabilities and stockholders’ equity	$	3,970,923		$	3,681,100		$	15,283,234		$	12,876,821

See accompanying notes to condensed consolidated financial statements.

Guardion Health Sciences, Inc.

Condensed Consolidated Statements of Operations

	Three Months Ended March 31,						Three Months Ended March 31,
	2019			2018			2020			2019
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenue
Medical foods	$	99,934		$	72,138		$	139,789		$	99,934
Vision testing diagnostics		142,604			120,902
Medical Devices								91,190			142,604
Other								14,744			-
Total Revenue		242,538			193,040			245,723			242,538

Cost of goods sold
Medical foods		38,272			32,188			66,196			38,272
Vision testing diagnostics		55,220			47,090
Medical Devices								40,642			55,220
Other								2,270			-
Total Cost of goods sold		93,492			79,278			109,108			93,492

Gross profit		149,046			113,762			136,615			149,046

Operating expenses
Research and development		29,028			159,588			31,188			29,028
Sales and marketing		353,537			605,990			488,846			353,537
General and administrative		947,974			1,680,810			1,952,803			947,974

Total operating expenses		1,330,539			2,446,388			2,472,837			1,330,539

Loss from operations		(1,181,493	)		(2,332,626	)		(2,336,222	)		(1,181,493	)

Other expenses:
Interest expense		17,572			835			1,747			17,572
Fair value of warrants		186,034			-
Change in fair value of derivative warrants								8,944			186,034

Total other expenses		203,606			835			10,691			203,606

Net loss	$	(1,385,099	)	$	(2,333,461	)	$	(2,346,913	)	$	(1,385,099	)

Net loss per common share – basic and diluted	$	(0.07	)	$	(0.12	)	$	(0.03	)	$	(0.07	)
Weighted average common shares outstanding – basic and diluted		20,709,469			20,157,461			78,630,366			20,709,469

See accompanying notes to condensed consolidated financial statements.

Guardion Health Sciences, Inc.

Condensed Consolidated Statement of Stockholders’ Equity

(Unaudited)

	Common Stock				Additional Paid-In		Accumulated			Total Stockholders’			Common Stock				Additional Paid-In		Accumulated			Total Stockholders’
	Shares		Amount		Capital		Deficit			Equity			Shares		Amount		Capital		Deficit			Equity
	Three Months Ended March 31, 2019												Three Months Ended March 31, 2020
Balance at December 31, 2018		20,564,328	$	20,564	$	37,798,562	$	(34,633,363	)	$	3,185,763
Balance at December 31, 2019														74,982,562	$	74,983	$	57,468,528	$	(45,511,671	)	$	12,031,840
Fair value of vested stock options – officer and director														-		-		436,287		-			436,287
Fair value of vested stock options		-		-		56,232		-			56,232			-		-		55,281		-			55,281
Issuance of common stock for services														25,000		25		12,300		-			12,325
Issuance of common stock – warrant exercises		292,283		293		30,957		-			31,250			10,382,400		10,382		3,540,399		-			3,550,781
Net loss		-		-		-		(1,385,099	)		(1,385,099	)		-		-		-		(2,346,913	)		(2,346,913	)
Balance at March 31, 2019		20,856,611	$	20,857	$	37,885,751	$	(36,018,462	)	$	1,888,146
Balance at March 31, 2020														85,389,962	$	85,390	$	61,512,795	$	(47,858,584	)	$	13,739,601

	Three Months Ended March 31, 2018												Three Months Ended March 31, 2019
Balance at December 31, 2017		20,091,761	$	20,092	$	33,716,140	$	(26,865,956	)	$	6,870,276
Balance at December 31, 2018														20,564,328	$	20,564	$	37,798,562	$	(34,633,363	)	$	3,185,763
Fair value of vested stock options		-		-		777,513		-			777,513			-		-		56,232		-			56,232
Issuance of common stock – warrant exercises		73,000		73		1,387		-			1,460			292,283		293		30,957		-			31,250
Net loss		-		-		-		(2,333,461	)		(2,333,461	)		-		-		-		(1,385,099	)		(1,385,099	)
Balance at March 31, 2018		20,164,761	$	20,165	$	34,495,040	$	(29,199,417	)	$	5,315,788
Balance at March 31, 2019														20,856,611	$	20,857	$	37,885,751	$	(36,018,462	)	$	1,888,146

See accompanying notes to condensed consolidated financial statements.

Guardion Health Sciences, Inc.

Condensed Consolidated Statements of Cash Flows

	Three Months Ended September 30,						Three Months Ended March 31,
	2018			2017			2020			2019
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Operating Activities
Net loss	$	(1,385,099	)	$	(2,333,461	)	$	(2,346,913	)	$	(1,385,099	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		68,102			73,022			23,114			68,102
Amortization of debt discount		16,545			-			-			16,545
Amortization of lease right		30,502			-			37,983			30,502
Accrued interest expense included in notes payable		1,027			-			-			1,027
Stock-based compensation		56,231			777,513			67,606			56,231
Fair value of warrants – derivative liability		186,034			-
Stock-based compensation – officer and director								436,287			-
Change in fair value of warrants – derivative liability								8,944			186,034
Changes in operating assets and liabilities:
(Increase) decrease in -
Accounts receivable		13,116			15,345			47,255			13,116
Inventories		54,178			(28,188	)		(131,195	)		54,178
Deposits and prepaid expenses		(3,388	)		2,486
Prepaid expenses								(568,199	)		(3,388	)
Increase (decrease) in -
Accounts payable								179,093			463,900
Customer deposit								437,500			-
Lease liability		(28,088	)		-			(36,803	)		(28,088	)
Increase (decrease) in -
Accounts payable and accrued expenses		415,118			135,324
Accrued and deferred rent costs		(10,363	)		4,429
Accrued expenses								109,918			(59,145	)

Net cash used in operating activities		(586,085	)		(1,353,530	)		(1,735,410	)		(586,085	)

Investing Activities
Purchase of property and equipment		(4,815	)		(95,111	)		(40,733	)		(4,815	)
Purchase of intellectual property		-			(50,000	)

Net cash used in investing activities		(4,815	)		(145,111	)		(40,733	)		(4,815	)

Financing Activities
Proceeds from issuance of convertible notes		250,000			-			-			250,000
Proceeds from issuance of promissory notes		100,000			-			-			100,000
Payments on line of credit		-			(30,535	)
Proceeds from exercise of warrants		31,250			1,460			3,550,781			31,250
Deferred financing costs of IPO		(287,000	)		-			-			(287,000	)
Decrease in due to related parties		-			(9,165	)

Net cash provided by (used in) financing activities		94,250			(38,240	)
Net cash provided by financing activities								3,550,781			94,250

Cash:
Net decrease		(496,650	)		(1,536,881	)
Net increase (decrease)								1,774,638			(496,650	)
Balance at beginning of period		670,948			4,735,230			11,115,502			670,948
Balance at end of period	$	174,298		$	3,198,349		$	12,890,140		$	174,298

Supplemental disclosure of cash flow information:
Cash paid for-
Cash paid for:
Interest	$	-		$	-		$	-		$	-
Income taxes	$	-		$	-		$	-		$	-

Non-cash financing activities:
Fair value of warrants issued in connection with convertible notes	$	436,034		$	-		$	-		$	436,034
Recording of lease asset and liability upon adoption of ASU 2016-02	$	663,218			-		$	-		$	721,154
Reclass of prepaid costs to inventory							$	308,178		$	-
Reclass of equipment sold from property and equipment to equipment held for sale							$	8,771		$	-

See accompanying notes to condensed consolidated financial statements.

Guardion Health Sciences, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019

1.	Organization and Business Operations

Organization and Business

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

The Company is a specialty health sciences company (1) that ~~develops, formulates and distributes condition-specific~~has developed medical foods ~~with an initial~~and medical ~~food product on the market under the brand name Lumega-Z~~^® ~~that replenishes and restores the macular protective pigment. The Company also developed a proprietary medical device called the MapcatSF~~^®~~that accurately measures the macular pigment optical density.~~

On September 29, 2017, the Company, through its wholly owned subsidiary VectorVision Ocular Health, Inc. (“VectorVision”), completed its acquisition of substantially all of the assets and certain liabilities of VectorVision, Inc. (an Ohio corporation), a company that specializeddevices in the ~~standardization of contrast sensitivity, glare sensitivity, low contrast acuity,~~ocular health space and early treatment diabetic retinopathy study (“ETDRS”) visual acuity testing. VectorVision develops, manufactures and sells equipment and supplies for standardized vision testing. The acquisition expands the Company’s technical portfolio. CSV-1000 and CSV-3000 instruments offer auto-calibrated tests to ensure correct testing luminance and contrast levels for consistent, highly accurate and repeatable results. Recently issued patents the Company received for continuously calibrating the light source will be incorporated into the new CSV-2000, in which the proprietary standardized contrast sensitivity test patterns can be presented to the patient using a computer monitor as opposed to the current calibrated backlit system.

~~In August 2018, the Company created a wholly owned subsidiary, Transcranial Doppler Solutions, Inc. (“TDSI”). TDSI~~(2) that is ~~dedicated to the pursuit of early predictors resulting in,~~developing nutraceuticals that the Company believes ~~valuable therapeutic intervention for practitioners and their patients, and additional revenue streams generated from the testing and sale of Company products~~will provide supportive health benefits to ~~appropriate customers. The Company has established operations with selected clinics and is focusing on expanding its client base.~~

~~In November 2018, the Company launched a new medical food product, GlaucoCetin~~^TM, which the Company believes is the first vision-specific medical food designed to support and protect the mitochondrial function of optic nerve cells and improve blood flow in the ophthalmic artery in patients with glaucoma.

~~On April 9, 2019, the Company closed its initial public offering (the “IPO”) of 1,250,000 shares of common stock, par value $0.001 per share, at an IPO price to the public of $4.00 per share.The shares began trading on the NASDAQ Capital Market on April 5, 2019 under the symbol “GHSI.”~~consumers.

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

Going Concern and Liquidity

The financial statements have been prepared assuming the Company will continue as a going concern. The Company had a net loss of ~~$1,385,099~~$2,346,913 and utilized cash in operating activities of ~~$586,085~~$1,735,410 during the three months ended March 31, ~~2019.~~2020. The Company expects to continue to incur net losses and negative operating cash flows in the near-term. As a result, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the consolidated financial statements are issued.

The Company’s independent registered public accounting firm has also included explanatory language in their opinion accompanying the Company’s audited financial statements for the year ended December 31, ~~2018.~~2019, stating 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.

The Company will continue to incur significant expenses for commercialization activities related to its medical foods, nutraceuticals, the MapcatSF medical device, VectorVision diagnostic equipment, the TDSI business and with respect to efforts to continue to build the Company’s infrastructure. Development and commercialization of medical foods, nutraceuticals and medical devices involves a lengthy and complex process. Additionally, the Company’s long-term viability and growth may depend upon the successful development and commercialization of new complementary products ~~other than Lumega-Z and the MapcatSF. Subsequent to March 31, 2019, the Company completed the IPO, resulting in net cash proceeds of $3,945,000 to the Company.~~ or product lines.

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

~~Reverse Stock Split~~COVID-19

The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company’s business is highly uncertain and difficult to predict, as the responses that the Company, other businesses and governments are taking continue to evolve. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic recession. Policymakers around the globe have responded with fiscal policy actions to support the healthcare industry and economy as a whole. The magnitude and overall effectiveness of these actions remain uncertain.

To date, we have not experienced any significant changes in our business that would have a significant negative impact on our consolidated statements of operations or cash flows.

The severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company’s customers, service providers and suppliers, all of which are uncertain and cannot be predicted. As of the date of issuance of Company’s financial statements, the extent to which the COVID-19 pandemic may in the future materially impact the Company’s financial condition, liquidity or results of operations is uncertain.

NASDAQ Notice

On ~~January 30,~~September 20, 2019, ~~following stockholder and Board approval,~~ the Company ~~filed~~received a ~~Certificate~~notification letter from the Nasdaq Listing Qualifications Staff (the “Staff”) of ~~Amendment~~the Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, for the last 30 consecutive business days, the closing bid price for the Company’s common stock was below the minimum $1.00 per share requirement for continued listing on The Nasdaq Capital Market as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). The Nasdaq letter has no immediate effect on the listing of the Company’s common stock on the Nasdaq Capital Market.

In accordance with Nasdaq listing rules, the Company was provided an initial period of 180 calendar days, or until March 18, 2020, to ~~its Amended Certificate of Incorporation, as amended (the “Amendment”),~~regain compliance with the ~~Secretary~~Minimum Bid Price Requirement. The Company was unable to regain compliance with the Minimum Bid Price Requirement during the initial period and was eligible for an additional 180 calendar day compliance period. The Company provided written notice of ~~State~~its intention to cure the deficiency during the additional compliance period, and on March 19, 2020, the Company received a written notification from Nasdaq that the Company has been granted an additional 180 calendar days, or until September 14, 2020, to regain compliance withthe minimum bid price requirement.

The current COVID-19 crisis has created unprecedented turmoil in U.S. and world financial markets and has significantly impacted investor confidence. Given these extraordinary market conditions, Nasdaq has determined to toll the compliance periods for bid price and market value of publicly held shares through June 30, 2020 (the “Price-based Requirements”).

Accordingly, since the Company had 152 calendar days remaining in its bid price compliance period as of April 16, 2020, it will, upon reinstatement of the ~~State of Delaware~~Price-based Requirements, still have 152 calendar days from July 1, 2020, or until November 30, 2020, to ~~effectuate a one-for-two (1:2) reverse stock split (the “Reverse Stock Split”) of its common stock, par value $0.001 per share, without any change to its par value.~~regain compliance. The ~~Amendment became effective on~~Company can regain compliance, either during the ~~filing date. The number of shares authorized for common and preferred stock were not affected~~suspension or during the compliance period resuming after the suspension, by ~~the Reverse Stock Split. No fractional shares were issued in connection~~evidencing compliance with the ~~Reverse Stock Split as all fractional shares were “rounded up” to the next whole share. Proportional adjustments~~Price-based Requirements for ~~the Reverse Stock Split were made to all share and per share amounts as if the split occurred at the beginning~~a minimum of ~~the earliest period presented.~~10 consecutive trading days.

2.	Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 filed with the SEC. The condensed consolidated balance sheet as of December 31, ~~2018~~2019 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all adjustments contained herein are of a normal recurring nature. The results of operations for the interim periods presented are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, ~~2019.~~2020.

Certain prior period amounts have been reclassified to conform to current period presentation. Such amounts consist of operating segment disclosures, whereby revenue and cost of goods sold have been broken out on the Consolidated Statements of Operations to conform with the Company’s two reportable business segments as of March 31, 2019.

Use of Estimates

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

~~These~~Significant estimates include those related to assumptions used in valuing assets acquired in business acquisitions, impairment testing of goodwill and ~~assumptions include estimates for reserves of uncollectible accounts, inventory obsolescence, depreciable lives of property and equipment, analysis of impairments of recorded~~other long-term ~~tangible and intangible assets, realization of deferred tax~~ assets, accruals for potential liabilities, ~~and assumptions made in~~ valuing ~~stock~~equity instruments issued ~~for services.~~

~~Intangible Assets~~

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

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

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

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

~~Impairment of Long-Lived Assets~~

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

~~Deferred Offering Costs~~

Deferred offering costs consist principally of legal, accounting, and underwriters’ fees incurred related to the IPO. These deferred offering costs will be charged against the gross proceeds received during the appropriate period.

Revenue Recognition

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

~~On January 1, 2018. the~~The Company ~~adopted~~recognizes revenue in accordance with ASU 2014-09,Revenue from Contracts with Customers (Topic 606)(“ASU 2014-09” or “Topic 606”) and all related ~~amendments and applied the concepts to all contracts using the full retrospective method.~~amendments. The ~~new~~ standard provides authoritative guidance clarifying the principles for recognizing revenue and developing a common revenue standard for U.S. generally accepted accounting principles. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in the exchange for those goods or services.

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

All products sold by the Company are distinct individual products and consist of medical foods, supplemental formulas, medical devices and related supplies. The products are offered for sale as finished goods only, and there are no performance obligations required post-shipment for customers to derive the expected value from them. Contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time.

Control of products sold transfers to customers upon shipment from the Company’s facilities, and the Company’s performance obligations are satisfied at that time. Shipping and handling activities are performed before the customer obtains control of the goods and therefore represent a fulfillment activity rather than a promised service to the customer. ~~Payment~~Payments for sales of ~~Lumega-Z is~~medical foods and dietary supplements are generally made by approved credit cards. Payments for medical device sales are generally made by check, credit card, or wire transfer. Historically the Company has not experienced any significant payment delays from customers.

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

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

Three Months Ended
March 31,
2019 2018
Medical foods $ 99,934 $ 72,138
Vision testing diagnostics 142,604 120,902
$ 242,538 $ 193,040

	Three Months Ended March 31,
	2020		2019
Medical Foods	$	139,789	$	99,934
Medical Devices		91,190		142,604
Other		14,744		-
Total	$	245,723	$	242,538

All of the Company’s Medical Foods revenues are derived from individual retail customers in North America. Medical Devices revenues are derived from a worldwide customer base consisting of both retail customers and distributors. International customers contributed approximately 91% and 20% of Medical Devices revenues for the three months ended March 31, 2020 and 2019, respectively. Distributors contributed approximately 63% and 15% of Medical Devices revenues for the three months ended March 31, 2020 and 2019, respectively.

During February 2020, the Company contracted with a Malaysian company to develop an immune-supportive formula for its consumer base. An initial order was placed for $875,000, and in connection with this order, on March 31, 2020, the Malaysian company paid $437,500 as a deposit for this order. The deposit is recorded as a current liability on our condensed consolidated balance sheet at March 31, 2020. The Company currently anticipates shipping the order during the second quarter of 2020.

Research and Development Costs

Research and development costs consist primarily of fees paid to consultants and outside service providers, patent fees and costs, and other expenses relating to the acquisition, design, development and testing of the Company’s medical foods and related products. Research and development expenditures ~~which include stock compensation expense,~~ are expensed as incurred and totaled ~~$29,028~~$31,188 and ~~$159,588~~$29,028 for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

Patent Costs

The Company is the owner of three issued domestic patents, ~~two~~three pending domestic patent applications, one issued foreign patent in Europe, one issued foreign patent in Hong Kong, and three foreign patent applications in Canada, Europe and Hong Kong. Due to the significant uncertainty associated with the successful development of one or more commercially viable products based on the Company’s research efforts and any related patent applications, patent costs, including patent-related legal fees, filing fees and internally generated costs, are expensed as incurred. During the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, patent costs were ~~$26,025~~$27,181 and ~~$12,474,~~$29,025, respectively, and are included in general and administrative costs in the statements of operations.

~~Leases~~

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

Stock-Based Compensation

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

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

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

Net Loss per Share

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

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

	March 31,				March 31,
	2019		2018		2020		2019
Warrants		896,712		1,418,836		18,390,338		896,712
Options		1,362,500		1,312,500		3,252,500		1,362,500
		2,259,212		2,731,336		21,642,838		2,259,212

Fair Value Measurements

Assets and liabilities recorded at fair value on the balance sheets are categorized based upon the level of judgment associated with the inputs used to measure the fair value. Level inputs are as follows:

Level 1 – quoted prices in active markets for identical assets or liabilities.

Level 2 – other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date.

Level 3 – significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.

We consider carrying amounts of accounts receivable, accounts payable and accrued expenses to approximate fair value due to the short-term nature of these financial instruments. Our non-financial assets are measured at fair value when there is an indicator of impairment and recorded at fair value only when an impairment charge is recognized.

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The new standard will be effective beginning January 1, 2021. The Company is assessing the impact ASU 2019-12 will have on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC 326”). The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and notes receivables. The standard will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. As a smaller reporting company, the standard will be effective for us for interim and annual reporting periods beginning after December 15, 2022. The Company is currently assessing the impact of adopting this standard on the Company’s financial statements and related disclosures.

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

3.	Acquisition of NutriGuard

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

Pursuant to the Asset Purchase Agreement, the Company purchased specified assets of the NutriGuard brand and business, consisting primarily of inventory, trademarks, copyrights and other intellectual property. In exchange, the Company agreed to pay a 3% royalty, payable quarterly, to NutriGuard based on the operating results of the NutriGuard branded products in future periods, after $500,000 in gross revenues have been achieved by the Company. As of March 31, 2020 and December 31, 2019 no amounts were owed or accrued to NutriGuard.

The following preliminary unaudited pro forma financial information gives effect to the Company’s acquisition of NutriGuard as if the acquisition had occurred on January 1, 2018 and had been included in the Company’s consolidated statements of operations during the three months ended March 31, 2019:

	Three Months Ended March 31,
	2019
Pro forma net revenues	$	267,680
Pro forma net loss attributable to common shareholders	$	(1,403,851	)
Pro forma net loss per share	$	(0.07	)

4.	Inventories

Inventories consisted of the following:

	March 31,		December 31,
	2020		2019
Raw materials	$	542,849	$	246,875
Finished goods		216,236		64,066
	$	759,085	$	310,941

5.	Property and Equipment, net

Property and equipment consisted of the following:

	March 31,			December 31,
	2020			2019
Leasehold improvements	$	98,357		$	98,357
Testing equipment		412,429			394,427
Furniture and fixtures		199,132			185,799
Computer equipment		68,460			68,460
Office equipment		8,193			8,193
		786,571			755,236
Less accumulated depreciation and amortization		(403,085	)		(380,598	)
	$	383,486		$	374,638

For the Three Months Ended March 31, 2020 and 2019, depreciation and amortization expense was $23,114 and $14,443, respectively, of which $12,856 and $5,198 was included in research and development expense, $3,910 and $3,910 was included in sales and marketing expense, and $6,348 and $5,335 was included in general and administrative expense, respectively.

6.	Lease Liabilities

In October 2012, the Company entered into a lease agreement for 9,605 square feet of office and warehouse space commencing March 1, 2013. Upon entering into the agreement, the Company paid a deposit of $47,449, of which $36,979 represented prepaid rent. As of March 31, 2020, $11,751 remained on deposit under the lease agreement. The lease (“Lease 1”) was renewed for an additional five years in 2018. As of March 31, 2020, remaining lease payments under the amended lease agreement averaged $13,048 per month through July 2023.

In connection with the VectorVision acquisition on September 29, 2017, the Company assumed a lease agreement for 5,000 square feet of office and warehouse space which commenced on October 1, 2017. The lease (“Lease 2”) was renewed for an additional 65 months. As of March 31, 2020, remaining lease payments averaged $1,859 per month through February 2023.

The leases have been accounted for in accordance with ASC 842, which requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease initially measured at the present value of the lease payments. The Company classified the leases as operating leases and determined that the fair value of Lease 1 at the inception of the lease was $639,520 using a discount rate of 3.9% and the fair value of Lease 2 at the inception of the lease was $81,634 using a discount rate of 3.9%.

The aggregate balance of the lease liabilities at December 31, 2019 was $586,315. During the three months ended March 31, 2020, the Company made combined payments on both leases of $42,400 towards the lease liabilities. As of March 31, 2020, the lease liability for Lease 1 was $488,155, and the lease liability for Lease 2 was $61,358. The aggregate balance of the lease liabilities at March 31, 2020 was $549,513, of which $154,327 was current.

Combined rent expense for both leases for the three months ended March 31, 2020 and 2019 was $43,581 and $43,581, respectively. The balance of the right of use asset as of December 31, 2019 was $572,714. During the three months ended March 31, 2020, the Company reflected amortization of right of use asset of $37,984 related to the leases, resulting in a net asset balance of $534,730 as of March 31, 2020.

7.	Stockholders’ Equity

Common Stock

During the three months ended March 31, 2020, the Company issued 25,000 fully vested shares of common stock for services rendered and recognized $12,325 in stock compensation expense related to these shares.

Warrants

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

	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Term (Years)
December 31, 2019		28,802,738			0.38			4.91
Granted		-			-			-
Forfeitures		-			-			-
Expirations		(30,000	)		(1.50	)		-
Exercised		(10,382,400	)		(0.34	)		-
March 31, 2020, all exercisable		18,390,338		$	0.40			4.65

The exercise prices of warrants outstanding and exercisable as of March 31, 2020 are as follows:

Warrants Outstanding and Exercisable (Shares)		Exercise Prices
	14,957,600	$	0.34
	1,960,000		0.44
	1,040,000		0.50
	226,200		0.59
	35,000		1.50
	109,038		2.88
	62,500		5.00
	18,390,338

During the three months ended March 31, 2020, investors exercised a total of 10,382,400 warrants for 10,382,400 shares of common stock. The warrants were exercisable for $0.34 per share, which resulted in cash proceeds to the Company of $3,550,781.

As of March 31, 2020, the Company had an aggregate of 18,390,338 outstanding warrants to purchase shares of its common stock with a weighted average exercise price of $0.40 and a weighted average remaining life of 4.65 years. The aggregate intrinsic value of warrants outstanding as of March 31, 2020 was $1,712,273.

Warrant Liability

On April 9, 2019, the Company issued 62,500 warrants with an exercise price of $5.00 per share to the underwriter in connection with the Company’s IPO. The Company accounted for these warrants as a derivative liability in the financial statements at June 30, 2019 because they were associated with the IPO, a registered offering, and the settlement provisions contained language that the shares underlying the warrants are required to be registered. The fair value of the warrants is remeasured at each reporting period, and the change in the fair value is recognized in earnings in the accompanying Statements of Operations. The fair value of the warrants at December 31, 2019 was $13,323. As of March 31, 2020, the fair value of the warrants was determined to be $22,267 and the change in fair value of $8,944 was recognized in the accompanying statements of operations.

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

	Warrant Liability As of			Warrant Liability As of
	March 31, 2020			December 31, 2019
Stock price	$	0.46		$	0.22
Risk free interest rate		0.29	%		1.62	%
Expected volatility		143	%		145	%
Expected life in years		4.01			4.26
Expected dividend yield		0	%		0	%
Number of warrants		62,500			62,500
Fair value of warrants	$	22,267		$	13,323

Stock Options

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

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)
December 31, 2019		2,962,500		2.94		3.64
Granted		290,000		-		-
Forfeitures		-		-		-
Expirations		-		-		-
Exercised		-		-		-
March 31, 2020, outstanding		3,252,500	$	2.71		3.96
March 31, 2020, exercisable		1,991,667	$	2.50		3.13

The exercise prices of options outstanding and exercisable as of March 31, 2020 are as follows:

Options Outstanding (Shares)		Options Exercisable (Shares)		Exercise Prices
	250,000		156,250	$	0.25
	30,000		-		0.32
	250,000		31,250		0.39
	10,000		-		0.41
	100,000		25,000		0.54
	625,000		625,000		2.00
	62,500		62,500		2.30
	675,000		675,000		2.50
	1,250,000		416,667		4.40
	3,252,500		1,991,667

During the three months ended March 31, 2020, the Company granted options to purchase 290,000 shares of common stock to five employees with a grant date fair value of $110,887. The options have an exercise price of $0.32 to $0.41 per share. 250,000 of the options vest on a quarterly basis over two years and 40,000 options vest in full six months after the grant date.

The Company accounts for share-based payments in accordance with ASC 718 wherein grants are measured at the grant date fair value and charged to operations over the vesting periods. During the Three Months Ended March 31, 2020 and 2019, we recognized aggregate stock-compensation expense of $503,893 and $56,231, based upon stock prices ranging from $0.25 to $3.30 per share respectively, and of which $436,287 related to options granted to our chairman and CEO. Of the stock compensation expense recognized during the three months ended March 31, 2020, $36,902 was recorded to sales and marketing expense and $466,991 was recorded in general and administrative expense. All of the stock compensation expense recognized during the three months ended March 31, 2019 was recorded in general and administrative expense.

As of March 31, 2020, the Company had an aggregate of 1,260,833 remaining unvested options outstanding, with a fair value of $2,910,828, weighted average exercise price of $3.04, and weighted average remaining life of 5.27 years. The aggregate intrinsic value of options outstanding as of March 31, 2020 was $73,185. The aggregate intrinsic value of unvested options outstanding as of March 31, 2020 was $38,544.

8.	Related Party Transactions

During the three months ended March 31, 2020 and 2019, the Company incurred and paid $81,250 and $75,000, respectively, of salary expense to our Board Chairman and CEO, Mr. Michael Favish. In addition, compensation cost of $436,287 was recognized on amortization of stock option awards during the three months ended March 31, 2020. During the three months ended March 31, 2020 and 2019, the Company incurred and paid salaries of $28,750 and $28,750, respectively, to Karen Favish, spouse of Michael Favish. During the three months ended March 31, 2020 and 2019, the Company incurred and paid salaries of $15,000 and $13,750, respectively, to Kristine Townsend, spouse of Controller and Chief Accounting Officer John Townsend.

9.	Segment Reporting

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

In September 2017, the Company, through its wholly-owned subsidiary VectorVision Ocular Health, Inc., acquired substantially all of the assets and certain liabilities of VectorVision, Inc., a company that specialized in the standardization of contrast sensitivity, glare sensitivity, low contrast acuity, and early treatment diabetic retinopathy study ~~(“ETDRS”)~~ visual acuity testing. In August 2018, the Company created a wholly owned subsidiary, Transcranial Doppler Solutions, Inc. (“TDSI”). The Company has established TDSI operations with selected clinics and is focusing on expanding its client base. In September 2019, the Company’s newly-formed wholly-owned subsidiary, NutriGuard Formulations, Inc. (“NGFI”), completed an asset purchase agreement with NutriGuard Research, Inc., and NutriGuard’s sole shareholder, Mark McCarty. The Company intends to utilize the NGFI subsidiary to build a nutraceutical brand and product portfolio based on updated and reformulated compounds.

~~Although all of the Company’s products and services target the early detection, intervention and monitoring of a range of eye diseases, the~~The addition of potential new products or services as the Company grows requires management to periodically reevaluate its reporting structure. As sales of our medical ~~food~~foods as well as sales of VectorVision products grow, there is an increased need for the CODM to evaluate revenue and gross profit on a product line or group basis for purposes of resource allocation. As of March 31, ~~2019,~~2020, the TDSI ~~subsidiary does~~and NGFI subsidiaries do not meet the required quantitative criteria to be considered a reportable operating segment. Additionally, ~~TDSI does~~these subsidiaries do not share similar economic characteristics or a majority of the aggregation criteria set forth in ASC 280, and therefore isare included in the category “Corporate” below. The TDSI and NGFI businesses earned $3,400 and $11,344 of service revenue, respectively, and incurred approximately $84,483 and $22,995 of operating costs, respectively, during the three months ended March 31, 2020. As of ~~December~~March 31, ~~2018,~~2020, based on anticipated growth and the expanding diversity of product and service offerings by the Company, ~~Management~~management has concluded that results should be reported in two ~~operating~~ segments: Medical Foods and ~~Vision Testing Diagnostics.~~Medical Devices. The following tables set forth our results of operations by segment ~~(expenses~~(results allocated to Corporate consist of ~~non-cash stock compensation expense, depreciation~~the TDSI and ~~amortization, and corporate legal fees)~~NGFI operations):

For the Three Months Ended March 31, 2019
Corporate Medical Foods Vision Testing
Diagnostics Total

Revenue $ - $ 99,934 $ 142,604 $ 242,538

Cost of goods sold - 38,272 55,220 93,492

Gross profit - 61,662 87,384 149,046

Operating expenses 334,775 884,701 111,063 1,330,539

Loss from operations $ (334,775 ) $ (823,039 ) $ (23,679 ) $ (1,181,493 )
For the Three Months Ended March 31, 2018
Corporate Medical Foods Vision Testing
Diagnostics Total

Revenue $ - $ 72,138 $ 120,902 $ 193,040

Cost of goods sold - 32,188 47,090 79,278

Gross profit - 39,950 73,812 113,762

Operating expenses 1,073,400 1,320,627 52,361 2,446,388

Loss from operations $ (1,073,400 ) $ (1,280,677 ) $ 21,451 $ (2,332,626 )

	For the Three Months Ended March 31, 2020
	Corporate			Medical Foods			Medical Devices			Total

Revenue	$	14,744		$	139,789		$	91,190		$	245,723

Cost of goods sold		2,270			66,196			40,642			109,108

Gross profit		12,474			73,593			50,548			136,615

Operating expenses		107,478			2,248,909			116,450			2,472,837

Loss from operations	$	(95,004	)	$	(2,175,316	)	$	(65,902	)	$	(2,336,222	)

	For the Three Months Ended March 31, 2019
	Corporate			Medical Foods			Medical Devices			Total

Revenue	$	-		$	99,934		$	142,604		$	242,538

Cost of goods sold		-			38,272			55,220			93,492

Gross profit		-			61,662			87,384			149,046

Operating expenses		48,763			1,076,744			205,032			1,330,539

Loss from operations	$	(48,763	)	$	(1,015,082	)	$	(117,648	)	$	(1,181,493	)

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

	As of March 31, 2019								As of March 31, 2020
	Corporate		Medical Foods		Vision Testing Diagnostics		Total		Corporate		Medical Foods		Medical Devices		Total
Current assets
Cash	$	-	$	164,914	$	9,384	$	174,298	$	12,890,140	$	-	$	-	$	12,890,140
Inventories		-		170,554		133,265		303,819		157,557		243,992		357,536		759,085
Other		-		46,950		19,297		66,247		266,663		340,849		46,530		654,042
Total current assets		-		382,418		161,946		544,364		13,314,360		584,841		404,066		14,303,267

Right to use asset		626,667		-		-		626,667
Right of use asset, net										-		476,187		58,543		534,730
Property and equipment, net		-		255,313		9,863		265,176		-		247,205		136,281		383,486
Deferred offering		557,000		-		-		557,000
Intangible assets, net		402,445		-		-		402,445		-		50,000		-		50,000
Goodwill		1,563,520		-		-		1,563,520
Other		-		11,751		-		11,751		-		11,751		-		11,751

Total assets	$	3,149,632	$	649,482	$	171,809	$	3,970,923	$	13,314,360	$	1,369,984	$	598,890	$	15,283,234

	As of December 31, 2018								As of December 31, 2019
	Corporate		Medical Foods		Vision Testing Diagnostics		Total		Corporate		Medical Foods		Medical Devices		Total
Current assets
Cash	$	-	$	552,613	$	118,335	$	670,948	$	11,115,502	$	-	$	-	$	11,115,502
Inventories		-		235,957		122,040		357,997		5,003		126,708		179,230		310,941
Other		-		44,110		31,866		75,976		7,399		219,223		214,653		441,275
Total current assets		-		832,680		272,241		1,104,921		11,127,904		345,931		393,883		11,867,718

Right of use asset										-		509,464		63,250		572,714
Property and equipment, net		-		264,178		10,626		274,804		-		219,056		155,582		374,638
Deferred offering		270,000		-		-		270,000
Intangible assets, net		456,104		-		-		456,104		-		50,000		-		50,000
Goodwill		1,563,520		-		-		1,563,520
Other		-		11,751		-		11,751		-		11,751		-		11,751

Total assets	$	2,289,624	$	1,108,609	$	282,867	$	3,681,100	$	11,127,904	$	1,136,202	$	612,715	$	12,876,821

4.	~~Inventories~~

~~Inventories consisted of the following:~~

March 31, December 31,
2019 2018
Raw materials $ 236,005 $ 282,574
Finished goods 67,814 75,423
$ 303,819 $ 357,997

5.	~~Property and Equipment, net~~

~~Property and equipment consisted of the following:~~

March 31, December 31,
2019 2018
Leasehold improvements $ 98,357 $ 98,357
Testing equipment 249,447 249,447
Furniture and fixtures 168,002 163,186
Computer equipment 64,976 64,976
Office equipment 8,193 8,193
588,975 584,159
Less accumulated depreciation and amortization (323,799 ) (309,355 )
$ 265,176 $ 274,804

For the three months ended March 31, 2019 and 2018, depreciation and amortization expense was $14,444 and $19,363, respectively, of which $0 and $7,325 was included in research and development expense, $9,108 and $1,500 was included in sales and marketing expense, and $5,335 and $10,333 was included in general and administrative expense, respectively.

6.	~~Intangible Assets~~

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

March 31, December 31,
2019 2018
Customer relationships $ 430,700 $ 430,700
Technology 161,100 161,100
Trade Names 115,600 115,600
Noncompetition 17,000 17,000
724,400 724,400
Less accumulated amortization (321,955 ) (268,296 )
$ 402,445 $ 456,104

~~The Company’s amortization expense on its finite-lived intangible assets was $53,659 and $53,659 for the three months ended March 31, 2019 and 2018, respectively.~~

~~The Company estimates future amortization expense on its finite-lived intangible assets as of March 31, 2019 to be as follows:~~

For Years Ended December 31,
2019 $ 160,978
2020 165,320
2021 16,307
2022 9,840
$ 352,445

7.	~~Promissory Notes~~

~~Promissory Note~~

~~On March 12, 2019, the Company issued a promissory note with principal in the amount of $100,000, simple interest of 10% annually, and with a maturity date of June 10, 2019.~~

~~Convertible Notes and Related Warrants~~

~~The Company’s convertible notes payable consisted of the following:~~

March 31, December 31,
2019 2018
Convertible notes $ 250,000 $ -
Accrued interest 479 -
Debt discount (233,455 ) -
Net $ 17,024 $ -

On March 15, 2019, the Company issued a convertible note with principal in the amount of $100,000, simple interest of 5% annually, and with a maturity date of September 30, 2019. In addition, on March 20, 2019, the Company issued a convertible note with principal in the amount of $150,000, simple interest of 5% annually, and with a maturity date of September 30, 2019. As of March 31, 2019, convertible notes with a principal balance of $250,000 and accrued interest of $479 were outstanding.

The convertible notes (principal and accrued interest) were mandatorily convertible upon the consummation of the IPO. Concurrent with the issuance of the notes, the Company issued warrants to both note holders equal to the number of shares of common stock that the holders receive in connection with the converted notes. The per share exercise price of the warrants was set at 125% of the conversion price of the notes, defined in the note agreements, as the lower of (a) 75% of the price per share of common stock of the IPO or (b) $2.30.

Due to the variable terms of both the exercise price and the number of warrants to be issued, the warrants were accounted for as derivative liabilities at March 31, 2019. The aggregate fair value of the warrants was calculated as $436,034 based on a probability effected Black-Scholes option pricing model with a stock price of $4.00, volatility of 138%, and risk-free rates ranging from 2.34% - 2.39%. At March 31, 2019, the Company estimated that the issuance of 109,038 warrants with an exercise price of $2.88 per share would correspond to the number of shares of common stock that the holders would receive in connection with the completion of the IPO (the IPO was completed on April 9, 2019). The Company recognized a debt discount of $250,000 equal to the face amount of the convertible notes and recorded a financing cost equal to the difference between the fair value of the warrants and the debt discount. The financing cost of $186,034 is shown as fair value of warrants on the accompanying statement of operations for the three months ended March 31, 2019.

~~The company recorded amortization expense related to the debt discount of $16,545 during the three months ended March 31, 2019. As of March 31, 2019, the unamortized debt discount was $233,455.~~

8.	~~Lease Liabilities~~

In October 2012, the Company entered into a lease agreement for 9,605 square feet of office and warehouse space commencing March 1, 2013. Upon entering into the agreement, the Company paid a deposit of $47,449, of which $36,979 represented prepaid rent. As of March 31, 2019, $10,470 remained on deposit under the lease agreement. The lease (“Lease 1”) was renewed for an additional five years in 2018. As of March 31, 2019, remaining average monthly lease payments under the amended lease agreement were $12,863 through July 2023.

In connection with the VectorVision acquisition on September 29, 2017, the Company assumed a lease agreement for 5,000 square feet of office and warehouse space which commenced on October 1, 2017. The lease (“Lease 2”) was renewed for an additional 65 months. As of March 31, 2019, remaining average monthly lease payments are $1,832 through February 2023.

In accounting for the leases, the Company adopted ASU 2016-02 - Leases, which requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease initially measured at the present value of the lease payments. The Company classified the leases as operating leases and determined that the fair value of Lease 1 at the inception of the lease was $625,778 using a discount rate of 8.0%. the fair value of Lease 2 at the inception of the lease was $100,742 using a discount rate of 8%. During the three months ended March 31, 2019, the Company made combined payments on both leases of $41,166 towards the lease liabilities. As of March 31, 2019 and December 31, 2018, the lease liability for Lease 1 was $561,623 and $586,082, respectively, and the lease liability for Lease 2 was $73,508 and $77,137, respectively. ASU 2016-02 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. Combined rent expense for both leases for the three months ended March 31, 2019 and 2018 was $43,581 and $5,336, respectively. During the three months ended March 31, 2019 and 2018, the Company reflected amortization of right of use asset of $30,502 and $3,543 related to the leases, respectively, resulting in a net asset balance of $626,667 as of March 31, 2019.

9.10.

Contingencies

The Company is periodically the subject of various pending or threatened legal actions and claims arising out of its operations in the normal course of business. In the opinion of management of the Company, adequate provision has been made in the Company’s financial statements at March 31, ~~2019~~2020 with respect to such matters.

~~10.~~

~~Stockholders’ Equity (Deficit)~~

~~Warrants~~

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

Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years)
December 31, 2018 1,230,674 0.71 0.29
Granted 109,038 0.35 0.60
Forfeitures - - -
Expirations (70,500 ) (0.11 ) -
Exercised (372,500 ) (0.24 ) -
March 31, 2019, all exercisable 896,712 $ 1.19 0.79

~~The exercise prices of warrants outstanding and exercisable as of March 31, 2019 are as follows:~~

Warrants Outstanding and Exercisable (Shares) Exercise Prices
536,250 $ 0.50
5,000 1.00
30,000 1.50
216,424 2.00
109,038 2.88
896,712

~~In February and March 2019, investors net exercised a total of 310,000 warrants for 231,740 shares of common stock on a cashless basis.~~

~~In February 2019, an investor exercised warrants for 62,500 shares of common stock. The warrants were exercisable for $0.50 per share, and the Company received $31,250 in cash.~~

In March 2019, the Company issued 109,038 warrants with an exercise price of $2.88 per share to two convertible note holders pursuant to the anticipated completion of the Company’s IPO (the IPO was completed on April 9, 2019).

As of March 31, 2019, the Company had an aggregate of 896,712 outstanding warrants to purchase shares of its common stock with a weighted average exercise price of $1.19, weighted average remaining life of 0.8 years and aggregate intrinsic value of $2,522,391, based upon a stock valuation of $4.00 per share. The intrinsic value is calculated as the difference between the market value of the underlying common stock and the exercise price of the warrants.

~~Stock Options~~

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

Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years)
December 31, 2018 1,362,500 2.26 3.78
Granted - - -
Forfeitures - - -
Expirations - - -
Exercised - - -
March 31, 2019, outstanding 1,362,500 $ 2.26 3.53
March 31, 2019, exercisable 1,287,500 $ 2.24 3.67

~~The exercise prices of options outstanding and exercisable as of March 31, 2019 are as follows:~~

Options Outstanding
(Shares)

Options Exercisable
(Shares)
Exercise Prices
625,000 625,000 $ 2.00
62,500 62,500 2.30
675,000 600,000 2.50
1,362,500 1,287,500

~~As of March 31, 2019, options were valued based upon the Black-Scholes option-pricing model, with a stock price of $4.00, volatility of 138%, and an average risk-free rate of 2.21%.~~

During the three months ended March 31, 2019 and 2018, we recognized aggregate stock-compensation expense of $56,232 and $777,513, respectively, based upon stock prices ranging from $2.30 to $4.00 per share, all of which was recorded in general and administrative expense.

As of March 31, 2019, the Company had an aggregate of 75,000 remaining unvested options outstanding, with a total estimated fair value of $138,516, weighted average exercise price of $2.50, and weighted average remaining life of 2.8 years. The Company remeasures unvested options for non-employees to fair value at the end of each reporting period. The aggregate intrinsic value of options outstanding as of March 31, 2019 was $2,368,750.

11.	~~Related Party Transactions~~

~~During the three months ended March 31, 2019 and March 31, 2018, the Company incurred and paid $75,000 and 68,750, respectively, of salary expense to our CEO, Michael Favish.~~

~~12.~~

Subsequent Events

On April 9, 2019, the Company closed the IPO and issued 1,250,000 shares of its common stock at a public offering price of $4.00 per share for total gross proceeds of $5.0 million, resulting in net proceeds to the Company of $3,945,000 after deducting underwriting discounts and commissions and other offering costs and expenses payable by Guardion. The shares began trading on the Nasdaq Capital Market on April 5, 2019, under the symbol “GHSI.” In connection with the IPO, the convertible promissory notes previously issued on March 15, 2019 and March 20, 2019 were automatically converted into 109,038 shares of common stock based on a conversion price of $2.30 per share.

~~The following table sets forth the Company’s cash, debt and derivative liabilities, and stockholders’ equity as of March 31, 2019 on:~~

~~● an actual basis; and~~

● a pro forma basis giving effect to (i) the issuance of 109,038 shares of common stock to be issued upon the mandatory conversion of the principal amount and accrued interest of the convertible promissory notes issued in March 2019, (ii) the extinguishment of the corresponding derivative liability, and (iii) the sale and issuance by the Company of 1,250,000 shares of common stock in this offering at the public offering price of $4.00 per share, resulting in net proceeds to the Company of $3,945,000 after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.

As of March 31, 2019
Actual Pro Forma
Cash and cash equivalents $ 174,298 $ 4,119,298
Other current assets 370,066 370,066
Non-current assets 3,426,559 3,426,559
Total assets $ 3,970,923 $ 7,915,923

Derivative warrant liability $ 436,034 $ -
Convertible notes payable 17,024 -
Other current liabilities 1,116,134 1,116,134
Lease liability – long term 513,585 513,585
Total liabilities 2,082,777 1,629,719

Stockholders’ equity:
Common stock 20,857 22,216
Additional paid-in capital 37,885,751 42,282,450
Accumulated deficit (36,018,462 ) (36,018,462 )
Total stockholders’ equity 1,888,146 6,286,204
Total liabilities and stockholders’ equity $ 3,970,923 $ 7,915,923

~~On April 11, 2019, the Company repaid its promissory note previously issued on March 12, 2019, for a total of $100,849 including accrued interest.~~

~~On April 12, 2019, an investor~~14, 2020, investors exercised warrants for ~~26,250~~150,000 shares of common stock. The warrants were exercisable for ~~$0.50~~$0.34 per share, and the Company received ~~$13,125~~net proceeds of $51,300 in cash.

On April ~~5 and 17, 2019,~~15, 2020, investors exercised ~~a total of 275,000~~ warrants ~~on a cashless basis resulting in the issuance of 229,365~~for 80,000 shares of common stock. The warrants were exercisable for ~~$0.50~~$0.34 per share, and ~~$2.00 per share.~~the Company received net proceeds of $27,360 in cash.

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

Presentation of Information

As used in this Quarterly Report on Form 10-Q, the terms “we,” “us” “our” and the “Company” mean Guardion Health Sciences, Inc. unless the context requires otherwise. The following discussion and analysis should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this report and our audited financing statements for the year ended December 31, ~~2018,~~2019, and the notes thereto, which are set forth in the ~~2018~~2019 Form 10-K. All dollar amounts refer to U.S. dollars unless otherwise indicated.

Overview

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

The Company is a specialty health sciences company ~~formed to develop, formulate and distribute condition-specific~~(1) that has developed medical foods ~~with an initial~~and medical ~~food product on~~devices in the ~~market under~~ocular 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. The Company believes ~~this risk may be modified by taking Lumega-Z~~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.

Recent Trends – COVID-19

The ~~Company invented a proprietary technology, embodied in~~COVID-19 pandemic has and will continue affecting economies and businesses around the ~~Company’s medical device, the MapcatSF~~^®that accurately measures the macular pigment optical density (“MPOD”). On November 8, 2016, the United States Patent and Trademark Office (“USPTO”) issued patent number 9,486,136 for the MapcatSF invention. Using the MapcatSF to measure the MPOD allows one to monitor the increase in the densityworld. The impacts of the ~~macular protective pigment after taking Lumega-Z. The MapcatSF is a non-mydriatic, non-invasive device~~pandemic 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 ~~accurately~~could impact our results are: effectiveness of COVID-19 mitigation measures, ~~the MPOD, the lens optical density~~global economic conditions, consumer spending, work from home trends, supply chain sustainability 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~~other factors. These factors could result in increased or decreased demand for our products and services and impact our ability to serve customers. Additionally, see Item 1A.Risk Factors for further discussion of the ~~pupil for it to function. The MapcatSF is the first medical device using a patented “single fixation” process and “automatic lens density correction” that produces accurate serialized data.~~

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

In August 2018, the Company created a wholly owned subsidiary, Transcranial Doppler Solutions, Inc. (“TDSI”). TDSI is dedicated to the pursuit of early predictors resulting in, the Company believes, valuable therapeutic intervention for practitioners and their patients, and additional revenue streams generated from the testing and sale of Company products to appropriate customers. The Company has established operations with selected clinics and is focusingCOVID-19 pandemic on ~~expanding its client base.~~

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

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

Recent Developments

~~Initial Public Offering~~Warrant Exercises

From January 1, 2020 through March 31, 2020, the Company received total gross proceeds of $3,550,781 from the exercise of 10,382,400 warrants issued in the Company’s October 2019 follow-on offering.

Nutraceutical Sales

~~On April 9, 2019,~~During February 2020, the Company ~~closed its initial public offering (the “IPO”) of 1,250,000 shares of common stock, par value $0.001 per share, at~~contracted with a Malaysian company to develop an IPO price to the public of $4.00 per share resulting in net proceeds to the Company of $3,945,000 after all costs and expenses. The shares began trading on the NASDAQ Capital Market on April 5, 2019 under the symbol “GHSI.”

~~Trademarks~~

On April 25, 2019, the Company was notified by the State Intellectual Property Office of the People’s Republic of China (“China”) that the Company has been granted trademark registrations in Chinaimmune-supportive formula for its ~~proprietary medical food, Lumega-Z (Registration No. 27151643),~~consumer base. An initial order was placed for $875,000, and in connection with this order, on March 31, 2020, the Malaysian company paid $437,500 as a deposit for ~~its proprietary and patented medical device,~~this order. The deposit is recorded as a current liability on our condensed consolidated balance sheet at March 31, 2020. The Company currently anticipates shipping the ~~MapcatSF (Registration No. 27151644). The trademark registration for~~order during the ~~mark LUMEGA-Z is effective from November 7, 2018 to November 6, 2028. The trademark registration for the mark MAPCAT SF is effective from October 28, 2018 to October 27, 2028.~~second quarter of 2020.

Going Concern

The Company’s independent registered public accounting firm has also included explanatory language in their opinion accompanying the Company’s audited financial statements for the year ended December 31, ~~2018.~~2019, stating there is substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.

The Company will continue to incur significant expenses for ~~continued~~ commercialization activities related to ~~Lumega-Z,~~its medical foods, nutraceuticals, the MapcatSF^®medical device, VectorVision diagnostic equipment, the TDSI business and ~~VectorVision products.~~with respect to efforts to continue to build the Company’s infrastructure. Development and commercialization of medical foods and medical devices involves a lengthy and complex process. Additionally, the Company’s long-term viability and growth may depend upon the successful development and commercialization of new complementary products or product lines. ~~On April 9, 2019, the Company completed the IPO, resulting in net cash proceeds of $3,945,000 to the Company.~~

~~Reverse Stock Split~~

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

Recent Accounting Pronouncements

See Note 2 to the condensed consolidated financial statements for management’s discussion of recent accounting pronouncements.

Concentration of Risk

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

Critical Accounting Policies and Estimates

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

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

~~Intangible Assets~~

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

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

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

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

~~Goodwill~~

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

Stock-Based Compensation

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

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

~~In prior periods, the Company accounted for stock option and warrant grants issued and vesting to non-employees~~consultants in accordance with the ~~authoritative~~provisions of ASC 718, Compensation—Stock Compensation., and under the recently issued guidance following FASB’s pronouncement, ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. Under ASC 718, and applicable updates adopted, share-based awards are valued at fair value on the date of grant and that fair value is recognized over the requisite service, or vesting, period. The Company values its equity awards using the Black-Scholes option pricing model, and accounts for forfeitures when they occur.

Use of the ~~FASB whereas~~Black-Scholes option pricing model requires the ~~value~~input of subjective assumptions including expected volatility, expected term, and a risk-free interest rate. The Company estimates volatility using a blend of its own historical stock price volatility as well as that of market comparable entities since the Company’s common stock has limited trading history and limited observable volatility of its own. The expected term of the ~~stock compensation~~options is ~~based upon~~estimated by using the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. On January 1, 2019, the Company adopted Accounting Standards Update (ASU) 2018-07 which expands the scope of Topic 718 to include share-based payment transactionsSecurities and Exchange Commission Staff Bulletin No. 107’s Simplified Method for acquiring goods and services from nonemployees. Non-employee stock-based compensation charges generally are amortized over the vesting period using a graded vesting basis. In certain circumstances where there are no future performance requirements by the non-employee, grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.

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

The fair value of common stock was determined based on management’s judgment. Due to the availability of historical data from the Company’s recent preferred stock sales, Management used a valuation of $2.30 for accounting purposes during the first quarter of 2018. Management used a valuation $4.00 for the first quarter of 2019. Management considered business and market factors affecting the Company during these periods, including capital raising efforts, its proprietary technology, and other factors. Based on this evaluation, management believes that its valuations are appropriate for accounting purposes at March 31, 2019 and 2018, respectively.

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

~~Plan of Operations~~

~~General Overview~~

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

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

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

Results of Operations

Through March 31, ~~2019,~~2020, the Company ~~had limited operations and~~ has primarily been engaged in product development, commercialization, and raising capital. The Company has incurred and will continue to incur significant expenditures for the development of its products and intellectual property, which includes ~~both~~ medical foods, nutraceuticals and medical ~~diagnostic equipment~~devices for the treatment of various eye diseases. The Company had limited revenue during the ~~three months ended~~Three Months Ended March 31, ~~2019~~2020 and ~~2018.~~2019.

Comparison of Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019

	Three Months Ended March 31,											Three Months Ended March 31,
	2019			2018			Change					2020			2019			Change
Revenue	$	242,538		$	193,040		$	49,498		26	%	$	245,723		$	242,538		$	3,185		1	%
Cost of goods sold		93,492			79,278			14,214		18	%		109,108			93,492			15,616		17	%
Gross Profit		149,046			113,762			35,284		31	%		136,615			149,046			(12,431	)	(8	)%
Operating Expenses:
Research and development		29,028			159,588			(130,560	)	(82	)%		31,188			29,028			2,160		7	%
Sales and marketing		353,537			605,990			(252,453	)	(42	)%		488,846			353,537			135,309		38	%
General and administrative		947,974			1,680,810			(732,836	)	(44	)%		1,952,803			947,974			1,004,829		106	%
Total Operating Expenses		1,330,539			2,446,388			(1,115,849	)	(46	)%		2,472,837			1,330,539			1,142,298		86	%
Loss from Operations		(1,181,493	)		(2,332,626	)		1,151,133		(49	)%		(2,336,222	)		(1,181,493	)		(1,154,729	)	98	%
Other Expense:
Interest expense		17,572			835			16,737		2004	%		1,747			17,572			(15,825	)	(90	)%
Fair value of warrants		186,034			-			186,034		100	%
Change in fair value of derivative warrants													8,944			186,034			(177,090	)	(95	)%
Net Loss	$	(1,385,099	)	$	(2,333,461	)	$	948,362		(41	)%	$	(2,346,913	)	$	(1,385,099	)	$	(961,814	)	69	%

Revenue

For the three months ended March 31, ~~2019,~~2020, revenue from product sales was ~~$242,538~~$245,723 compared to ~~$193,040~~$242,538 for the three months ended March 31, ~~2018,~~2019, resulting in an increase of ~~$49,498~~$3,185 or ~~26%~~1%. The ~~increase~~relatively flat overall performance reflects ~~both an increased customer base for Lumega-Z as~~a combination of improved sales of medical foods offset by a decrease in device sales due to the transition of sales and manufacturing efforts away from our VectorVision CSV-1000 device. Although the CSV-1000 will continue to be sold, the Company ~~expands into~~plans to put a greater focus on sales and marketing efforts of the new ~~clinics and increased~~CSV-2000. The Company commenced sales of ~~VectorVision products.~~the next generation CSV-2000 device in February 2020.

Cost of Goods Sold

For the three months ended March 31, ~~2019,~~2020, cost of goods sold was ~~$93,492~~$109,108 compared to ~~$79,278~~$93,492 for the three months ended March 31, ~~2018,~~2019, resulting in an increase of ~~$14,214~~$15,616 or ~~18%~~17%. ~~The increase~~This reflects the ~~additional~~increase in medical food sales and the decrease in device sales noted above. In addition, a $13,000 inventory adjustment affecting cost of sales due primarily to the write off of scrap materials was recorded in ~~2018.~~March 2020.

Gross Profit

For the three months ended March 31, ~~2019,~~2020, gross profit was ~~$149,046~~$136,615 compared to ~~$113,762~~$149,046 for the three months ended March 31, ~~2018,~~2019, resulting in ~~an increase~~a decrease of ~~$35,284~~$12,431 or ~~31%~~8%. Gross profit represented ~~61%~~56% of revenues the three months ended March 31, ~~2019,~~2020, versus ~~59%~~61% of revenue for the three months ended March 31, ~~2018. The increase in gross profit in 2019 was due primarily to pricing and product mix changes in~~ 2019.

Research and Development

For the three months ended March 31, ~~2019,~~2020, research and development costs were ~~$29,028~~$31,188 compared to ~~$159,588~~$29,028 for the three months ended March 31, ~~2018,~~2019, resulting in ~~a decrease~~an increase of ~~$130,560~~$2,160 or ~~82%~~7%. ~~The decrease was due to reduced engineering~~Research and development costs ~~associated with the Company’s MapcatSF~~consist of engineering efforts related to our medical ~~device during 2019.~~devices.

Sales and Marketing

For the three months ended March 31, ~~2019,~~2020, sales and marketing expenses were ~~$353,537~~$488,846 compared to ~~$605,990~~$353,537 for the three months ended March 31, ~~2018.~~2019. The ~~decrease~~increase in sales and marketing expenses of ~~$252,453~~$135,309 or ~~42%~~38% compared to the prior period was primarily due to a $105,000 increase in labor costs ~~associated with engagement of a third-party contract~~stemming from our new sales ~~organization in 2018. The contract sales agreement was cancelled during the second quarter of 2018.~~force initiatives. Additionally, non-cash stock compensation expense increased by $37,000.

General and Administrative

For the three months ended March 31, ~~2019,~~2020, general and administrative expenses were ~~$947,974~~$1,952,803 compared to ~~$1,680,810~~$947,974 for the three months ended March 31, ~~2018.~~2019. The ~~decrease~~increase of ~~$732,836~~$1,004,829 or ~~44%~~106% compared to the prior period was primarily due to a ~~decrease~~$411,000 increase in non-cash stock compensation expense. Additionally, there was a $145,000 increase in legal costs, ~~during the current period.~~a $122,000 increase in professional services, a $80,000 increase in corporate insurance, and a $115,000 increase in labor costs.

Interest Expense

For the three months ended March 31, ~~2019,~~2020, interest expense was ~~$17,572~~$1,747 compared to ~~$835~~$17,572 for the three months ended March 31, ~~2018.~~2019. The ~~increase~~decrease of ~~$16,737~~$15,825 or ~~2004%~~90%, was due primarily to a non-cash amortization expense related to the debt discount associated warrants issued in March 2019.

Change in Fair Value of Derivative Warrants

~~During March~~On April 4, 2019, the Company issued ~~$250,000~~62,500 warrants with an exercise price of ~~convertible promissory notes~~$5.00 per share to the Underwriter in connection with the Company’s IPO. The Company accounted for these warrants as a derivative liability in the financial statements because they were associated with the IPO, a registered offering, and the settlement provisions contained language that the shares underlying the warrants are required to be registered. The fair value of the warrants will be remeasured at each reporting period, with the change in the fair value recognized in earnings in the accompanying Statements of Operations. The fair value of the warrants at the date of issuance was determined to be $229,921 and was recorded as a finance cost in April of 2019. As of March 31, 2020, the fair value of the warrant liability was determined to be $22,267 and the Company recorded a change in fair value of derivative warrants for the three months ended March 31, 2020 of $8,944.

On March 15, 2019, warrants were issued to two ~~investors.~~convertible note holders pursuant to the ~~notes~~anticipated completion of the Company’s IPO (the IPO was completed on April 9, 2019). Due to the variable terms of both the exercise price and the number of warrants to be issued, the warrants were ~~convertible upon the~~accounted for as derivative liabilities at March 31, 2019 with a fair value of $436,034. Upon completion of the IPO ~~into 109,038 shares~~on April 9, 2019, the exercise price and the number of ~~common stock. in connection with~~warrants were fixed and the ~~notes, the~~warrants were no longer accounted for as liabilities. The Company ~~also issued 109,038 warrants~~recognized a debt discount of $250,000 equal to the ~~investors. See Note 9~~face amount of the ~~condensed consolidated financial statements for details~~convertible notes and recorded a financing cost equal to the difference between the fair value of the ~~notes~~warrants and ~~associated warrants.~~the debt discount. The financing cost of $186,034 is shown as fair value of warrants on the accompanying statement of operations for the three months ended March 31, 2019.

Net Loss

For the three months ended March 31, ~~2019,~~2020, the Company incurred a net loss of ~~$1,385,099,~~$2,346,913, compared to a net loss of ~~$2,333,461~~$1,385,099 for the three months ended March 31, ~~2018.~~2019. The ~~decrease~~increase in net loss of ~~$948,362~~$961,814 or ~~41%~~69% compared to the prior year period was primarily due to ~~a decrease~~increases in stock compensation, legal, and professional services costs during the current period.

Segment Information

As of March 31, 2019, Management reports its operating results in two operating segments: Medical Foods, and Vision Testing Diagnostics. As of March 31, 2019, the TDSI subsidiary does not yet earn revenues or meet the required criteria to be considered a reportable operating segment.

	i.	~~Medical Foods~~ ~~– Our Medical Foods segment develops, formulates and distributes condition-specific medical foods with an initial medical food product on the market under the brand name Lumega-Z~~^® ~~that replenishes and restores the macular protective pigment. We have also invented a proprietary technology, embodied in a medical device, the MapcatSF,~~^®that accurately measures the macular pigment optical density (“MPOD”). Using the MapcatSF to measure the MPOD allows one to monitor the increase in the density of the macular protective pigment after taking Lumega-Z. The Company has also developed a new medical food product, GlaucoCetin^TM, which the Company believes is the first vision-specific medical food designed to support and protect the mitochondrial function of optic nerve cells and improve blood flow in the ophthalmic artery in patients with glaucoma. GlaucoCetin^TM ~~combines a unique set of ingredients, specifically designed to stop or potentially reverse the underlying cause of optic nerve loss, and ultimately vision loss, in patients with glaucoma.~~

	~~ii.~~	~~Vision Testing Diagnostics~~ – Our Vision Testing Diagnostics segment, under the brand name VectorVision, specializes in the standardization of contrast sensitivity, glare sensitivity, low contrast acuity, and early treatment diabetic retinopathy study (“ETDRS”) visual acuity testing. VectorVision’s standardization system is designed to provide the practitioner or researcher with the ability to delineate very small changes in visual capability, either as compared to the population or from visit to visit. VectorVision develops, manufactures and sells equipment and supplies for standardized vision testing for use by eye doctors in clinical trials, for real-world vision evaluation, and industrial vision testing.

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

	For the Three Months Ended March 31, 2019												For the Three Months Ended March 31, 2020
	Corporate			Medical Foods			Vision Testing Diagnostics			Total			Corporate			Medical Foods			Medical Devices			Total

Revenue	$	-		$	99,934		$	142,604		$	242,538		$	14,744		$	139,789		$	91,190		$	245,723

Cost of goods sold		-			38,272			55,220			93,492			2,270			66,196			40,642			109,108

Gross profit		-			61,662			87,384			149,046			12,474			73,593			50,548			136,615

Operating expenses		334,774			884,701			111,063			1,330,539			107,478			2,248,909			116,450			2,472,837

Loss from operations	$	(334,775	)	$	(823,039	)	$	(23,679	)	$	(1,181,493	)	$	(95,004	)	$	(2,175,316	)	$	(65,902	)	$	(2,336,222	)

	For the Three Months Ended March 31, 2018											For the Three Months Ended March 31, 2019
	Corporate			Medical Foods			Vision Testing Diagnostics		Total			Corporate			Medical Foods			Medical Devices			Total

Revenue	$	-		$	72,138		$	120,902	$	193,040		$	-		$	99,934		$	142,604		$	242,538

Cost of goods sold		-			32,188			47,090		79,278			-			38,272			55,220			93,492

Gross profit		-			39,950			73,812		113,762			-			61,662			87,384			149,046

Operating expenses		1,073,400			1,320,627			52,361		2,446,388			48,763			1,076,744			205,032			1,330,539

Loss from operations	$	(1,073,400	)	$	(1,280,677	)	$	21,451	$	(2,332,626	)	$	(48,763	)	$	(1,015,082	)	$	(117,648	)	$	(1,181,493	)

Revenue

For the three months ended March 31, ~~2019,~~2020, revenue from our Medical Foods segment was ~~$99,934~~$139,789 compared to ~~$72,138~~$99,934 for the three months ended March 31, ~~2018,~~2019, resulting in an increase of ~~$27,796~~$39,855 or ~~39%~~40%. The increase reflects an increased customer base for Lumega-Z as the Company expands into new clinics. For the three months ended March 31, ~~2019,~~2020, revenue from our ~~Vision Testing Diagnostics~~Medical Devices segment was ~~$142,604~~$91,190 compared to ~~$120,902~~$142,604 for the three months ended March 31, ~~2018,~~2019, resulting in ~~an increase~~a decrease of ~~$21,702~~$51,414 or ~~18%~~36%. The ~~increase~~decrease was due to ~~increased distributor~~the transition of sales and manufacturing efforts away from our VectorVision CSV-1000 device. The decrease was offset in ~~2019.~~part from the sale of a MapCat device in January 2020. The Company also earned $14,744 from a combination of diagnostic imaging services revenue from its TDSI business and nutraceutical product sales from its NGFI business during the three months ended March 31, 2020, as shown in the Corporate category above.

Cost of Goods Sold

For the three months ended March 31, ~~2019,~~2020, cost of goods sold from our Medical Foods segment was ~~$38,272~~$66,196 compared to ~~$32,188~~$38,272 for the three months ended March 31, ~~2018,~~2019, resulting in an increase of ~~$6,084~~$27,924 or ~~19%~~73%. The increase was due to the additional sales recorded in 2020 as well as an inventory adjustment related primarily to the write off of scrap materials recorded in March 2020. For the three months ended March 31, ~~2019,~~2020, cost of goods sold from our ~~Vision Testing Diagnostics~~Medical Devices segment was ~~$55,220~~$40,642 compared to ~~$47,090~~$55,220 for the three months ended March 31, ~~2018,~~2019, resulting in ~~an increase~~a decrease of ~~$8,130~~$14,578 or ~~17%~~26%. The ~~increase for both segments reflects~~decrease was due to the ~~additional~~decrease in sales ~~recorded in 2018.~~noted above.

Gross Profit

For the three months ended March 31, ~~2019,~~2020, gross profit from the Medical Foods segment was ~~$61,662~~$73,593 compared to ~~$39,950~~$61,662 for the three months ended March 31, ~~2018,~~2019, resulting in an increase of ~~$21,712~~$11,931 or ~~54%~~19%. For the three months ended March 31, ~~2019,~~2020, gross profit from the ~~Vision Testing Diagnostics~~Medical Devices segment was ~~$87,384~~$50,548 compared to ~~$73,812~~$87,384 for the three months ended March 31, ~~2018,~~2019, resulting in ~~an increase~~a decrease of ~~$13,572~~$36,836 or ~~18%~~42%. ~~The increase is due to the additional sales recorded for both segments in the current year.~~ Gross profit overall represented ~~61%~~56% of revenues for the three months ended March 31, ~~2019,~~2020, versus ~~59%~~61% of revenue for the three months ended March 31, ~~2018. The increase in gross profit in 2018 was due increased sales and to pricing and product mix changes in 2018.~~2019.

Liquidity and Capital Resources

Since its formation in 2009, the Company has devoted substantial effort and capital resources to the development and commercialization activities related to its ~~lead~~ product ~~Lumega-Z and its MapcatSF medical device.~~candidates. As a result of these and other activities, the Company utilized cash in operating activities of ~~$586,085~~$1,735,410 during the three months ended March 31, ~~2019.~~2020. The Company had ~~negative~~ working capital of ~~$1,024,828~~$13,154,820 at March 31, ~~2019 due to liabilities associated with the issuance of promissory and convertible promissory notes during March 2019 as well as accrued legal costs related to the Company’s IPO process.~~2020. As of March 31, ~~2019,~~2020, the Company had cash in the amount of ~~$174,298~~$12,890,140 and no available borrowings. The Company’s financing has historically come primarily from the issuance of convertible notes, promissory notes and from the sale of common and preferred ~~stocks.~~stock and other equity securities.

The ~~financial statements have been prepared assuming the Company~~COVID-19 pandemic has and will continue ~~as a going concern.~~affecting economies and businesses around the world. The ~~Company expects~~impacts of the pandemic could be material, but due to ~~continue~~the evolving nature of this situation, we are not able at this time to ~~incur net losses~~estimate the impact on our financial or operational results. Among the factors that could impact our results are: effectiveness of COVID-19 mitigation measures, global economic conditions, consumer spending, work from home trends, supply chain sustainability and ~~negative operating cash flows~~other factors. These factors could result in ~~the near-term. As a result, management has concluded that there is substantial doubt about the Company’s~~increased or decreased demand for our products and services and impact our ability to ~~continue as a going concern within one year of the date that the financial statements are issued.~~serve customers.

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

The Company will continue to incur significant expenses for continued commercialization activities related to ~~Lumega-Z, the MapcatSF~~its medical ~~device,~~foods, medical devices and ~~VectorVision products.~~its nutraceuticals product line. Development and commercialization of medical foods, ~~and~~ medical devices and nutraceuticals involves a lengthy and complex process. Additionally, the Company’s long-term viability and growth may depend upon the successful development and commercialization of new complementary products or product lines. On April 9, 2019, the Company completed the IPO, resulting in net cash proceeds of ~~$3,945,000~~$3,888,000 to the Company. On August 15, 2019, the Company consummated an underwritten public offering resulting in net proceeds to the Company of $4,944,340. On October 30, 2019, the Company consummated an underwritten public offering resulting in net proceeds to the Company of $7,392,467.

The Company ~~is seeking~~received total gross proceeds of $3,550,781 during the three months ended March 31, 2020 from the exercise of 10,382,400 warrants issued in the Company’s October 2019 follow-on offering.

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

Management believes that the Company has adequate funding to pursue its planned business initiatives and operations through at least December 31, 2020.

Sources and Uses of Cash

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

	Three Months Ended March 31,						Three Months Ended March 31,
	2019			2018			2020			2019
Net cash used in operating activities	$	(586,085	)	$	(1,353,530	)	$	(1,735,410	)	$	(586,085	)
Net cash used in investing activities		(4,815	)		(145,111	)		(40,733	)		(4,815	)
Net cash provided by (used in) financing activities		94,250			(38,240	)
Net decrease in cash	$	(496,650	)	$	(1,536,881	)
Net cash provided by financing activities								3,550,781			94,250
Net increase (decrease) in cash							$	1,774,638		$	(496,650	)

Operating Activities

Net cash used in operating activities was ~~$586,085~~$1,735,410 during the three months ended March 31, ~~2019,~~2020, versus ~~$1,353,530~~$586,085 used during the comparable prior year period. The decrease in ~~2019~~2020 was due primarily to higher ~~sales, marketing, product development,~~legal, insurance, professional services, and ~~legal~~labor costs paid in the ~~prior year~~current period.

Investing Activities

Net cash used in investing activities was ~~$4,815~~$40,733 for the three months ended March 31, ~~2019~~2020 and ~~$145,111~~$4,185 for the three months ended March 31, ~~2018. In January 2018, we acquired~~2019. Cash was used in both periods for the ~~rights to a trademark portfolio for $50,000. In addition, we purchased a trade show booth in February 2018~~purchase of testing equipment, furniture and ~~have invested in MapCatSF equipment and internal-use software development.~~fixtures.

Financing Activities

Net cash provided by financing activities was $3,550,781 for the three months ended March 31, 2020 and was due to warrant exercise during the period. Net cash provided by financing activities was $94,250 for the three months ended March 31, 2019 and was due to the issuance in March 2019 of $350,000 in promissory and convertible promissory notes as well as from the exercise of warrants for proceeds of $31,250. These proceeds were partially offset by payment of costs directly related to the Company’s IPO. Net cash used in financing activities was $38,240 for the three months ended March 31, 2018 was due primarily to our payoff of a line of credit balance that had been assumed during our 2017 VectorVision acquisition.

Off-Balance Sheet Arrangements

At March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

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

In evaluating the effectiveness of our internal control over financial reporting, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework 2013. Based on this evaluation, our Chief Executive Officer and our Chief Accounting Officer determined, based upon the existence of the material weakness described below, that we did not maintain effective internal control over financial reporting as of March 31, 2020.

Segregation of Duties – The Company did not maintain effective policies to ensure adequate segregation of duties within its accounting processes. Specifically, due to the size of the Company and the smaller nature of department teams, opportunities are limited to segregate duties, resulting in one individual having almost complete responsibility for the processing of certain financial information.

While we have designed and implemented, or expect to implement, measures that we believe address or will address this control weakness, we continue to develop our internal controls, processes and reporting systems by, among other things, hiring qualified personnel with expertise to perform specific functions, and designing and implementing improved processes and internal controls, including ongoing senior management review and audit committee oversight. We plan to remediate the identified material weakness through the redistribution of job responsibilities, by hiring additional senior accounting staff, and through the design and implementation of additional internal controls in order to promote adequate segregation of duties. We expect to complete the remediation by the end of 2020. We expect to incur additional costs to remediate this weakness, primarily personnel costs.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation that occurred during the first quarter ended in ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is not currently a party to any material legal proceedings and is not aware of any pending or threatened legal proceeding against the Company that the Company believes could have a material adverse effect on its business, operating results, cash flows or financial condition. The Company is periodically the subject of various pending or threatened legal actions and claims arising out of its operations in the normal course of business. Regardless of the outcome, such proceedings or claims can have an adverse impact on the Company because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained. In the opinion of management of the Company, adequate provision has been made in the Company’s condensed consolidated financial statements at March 31, ~~2019~~2020 with respect to such matters.

ITEM 1A. RISK FACTORS

~~Not required~~Our business, financial condition, results of operations, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our Form 10-K, the occurrence of any one of which could have a material adverse effect on our actual results.

There have been no material changes to the Risk Factors previously disclosed in our Form 10-K, except as noted below.

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.

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 United 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 disease, 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 of third parties to reduce the spread of COVID-19 may negatively impact productivity and our ability to market and sell our products, cause disruptions to our supply chain and impair our ability to execute our business development strategy. These and other 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 ~~smaller reporting companies.~~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 development activities.

COVID-19 continues to rapidly evolve. The extent to which COVID-19 may impact the commercialization of our 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 the pandemic, the duration of the pandemic and the efforts by governments and business to contain it, business closures or business disruptions and the impact on the economy and capital markets.

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

On March 15, 2019 and March 20, 2019, the Company entered into separate securities purchase agreements (the “Purchase Agreements”) pursuant to which the Company issued convertible promissory notes (the “Debentures”) and common stock purchase warrants (the “Warrants”) to two investors in exchange for $250,000 (collectively, the “Private Placement”). The securities issued pursuant to the Purchase Agreements were issued in reliance upon the exemption from registration pursuant to Section 4(a)(2) and Rule 903 of Regulation S promulgated under the Securities Act of 1933, as amended.None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

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

~~SIGNATURES~~

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on the 10th day of May, 2019.

~~Signature~~	~~Title~~	~~Date~~

~~/s/ Michael Favish~~	~~CEO, President and~~	~~May 10, 2019~~
~~Michael Favish~~	~~Chairman of the Board~~ ~~(Principal Executive Officer)~~

~~/s/ John Townsend~~	~~Controller and Chief Accounting Officer~~	~~May 10, 2019~~
~~John Townsend~~	~~(Principal Accounting Officer)~~

~~INDEX TO EXHIBITS~~

Exhibit No.		Description

~~3.1~~		Certificate of Amendment to Certificate of Incorporation filed and effective with the Delaware Secretary of State on January 30, 2019 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the SEC on February 1, 2019)
~~10.1~~		~~Form of Purchase Agreement (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on March 21, 2019)~~
~~10.2~~		~~Form of Debenture (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on March 21, 2019)~~
~~10.3~~		~~Form of Warrant (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on March 21, 2019)~~
31.1		Certification of Chief Executive Officer pursuant to Rule 13a – 14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Accounting Officer pursuant to Rule 13a – 14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Certification of Chief Executive Officer and Chief Accounting Officer pursuant to 18.U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
101		The following materials from the Company’s Quarterly Report on Form 10-Q for the period ended ~~September 30, 2018,~~March 31, 2020, formatted in XBRL (eXtensible Business Reporting Language), (i) Balance Sheets, (ii) Statements of Income, (iii) Statements of Comprehensive Income, (iv) Statements of Cash Flows, (v) Statement of Stockholders’ Equity and (vi) Notes to Financial Statements

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

SIGNATURES

Signature	Title	Date

/s/ Michael Favish	CEO, President and	May 14, 2020
Michael Favish	Chairman of the Board (Principal Executive Officer)

/s/ John Townsend	Controller and Chief Accounting Officer	May 14, 2020
John Townsend	(Principal Accounting Officer)

For Years Ended December 31,
2019	$	160,978
2020		165,320
2021		16,307
2022		9,840
	$	352,445

	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Term (Years)
December 31, 2018		1,230,674			0.71			0.29
Granted		109,038			0.35			0.60
Forfeitures		-			-			-
Expirations		(70,500	)		(0.11	)		-
Exercised		(372,500	)		(0.24	)		-
March 31, 2019, all exercisable		896,712		$	1.19			0.79

Warrants Outstanding and Exercisable (Shares)		Exercise Prices
	536,250	$	0.50
	5,000		1.00
	30,000		1.50
	216,424		2.00
	109,038		2.88
	896,712

	As of March 31, 2019
	Actual			Pro Forma
Cash and cash equivalents	$	174,298		$	4,119,298
Other current assets		370,066			370,066
Non-current assets		3,426,559			3,426,559
Total assets	$	3,970,923		$	7,915,923

Derivative warrant liability	$	436,034		$	-
Convertible notes payable		17,024			-
Other current liabilities		1,116,134			1,116,134
Lease liability – long term		513,585			513,585
Total liabilities		2,082,777			1,629,719

Stockholders’ equity:
Common stock		20,857			22,216
Additional paid-in capital		37,885,751			42,282,450
Accumulated deficit		(36,018,462	)		(36,018,462	)
Total stockholders’ equity		1,888,146			6,286,204
Total liabilities and stockholders’ equity	$	3,970,923		$	7,915,923