Note 2 - Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2024

Summary of Significant Accounting Policies

Note 2 – Summary of Significant Accounting Policies

The following is a summary of significant accounting policies followed in the preparation of these consolidated financial statements.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Revised Prior Period Financial Statements

During the period close for the three months ended March 31, 2024, the Company discovered certain errors related to its accounting policy for the accounting of discontinued operations. The balance sheet did not segregate assets and liabilities for discontinued operations for a subsidiary of the Company on our September 30, 2023 and December 31, 2023 balance sheets that were previously filed. This lack of segregation on the balance sheet did not impact the statements of operations or stockholders' deficit.

The Company has determined that the impact of this balance sheet reclassification is not material to these previously issued balance sheets and as such no restatement was necessary. Correcting prior year financial statements for immaterial errors would not require previously filed reports to be amended. Such a correction may be made the next time the registrant files the prior year financial statements. Correcting the cumulative error in the current year would also be immaterial to the current year. Accordingly, these misstatements were corrected, and the adjustments are reflected in the related periods as noted below. The reclassifications made to the December 31, 2023 balance sheets are summarized below.

Consolidated Balance Sheets:

	As of December 31, 2023
	Previously Reported		Adjustments			Revised
Accounts receivable	$	2,072	$	(161	)	$	1,911
Current assets of discontinued operations		-		161			161
Accounts payable		6,803		(4,723	)		2,080
Accrued expenses and other current liabilities		4,106		(2,054	)		2,052
Short term lease liabilities		1,426		(480	)		946
Current liabilities of discontinued operations		-		7,257			7,257

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. Significant management estimates include those with respect to returns and allowances, allowance for credit losses, reserves for inventory obsolescence, the recoverability of long-lived assets, intangibles and goodwill.

Revenue Recognition

The Company recognizes revenue based on a five-step model in accordance with Accounting Standards Codification ("ASC") 606. For our customer contracts, (i) we identify the contract with a customer, (ii) we identify the performance obligations in the contract, (iii) we determine the transaction price, (iv) we allocate the transaction price to the performance obligation; and (v) we recognize revenue when we satisfy the performance obligation. Our revenues are recorded at a point in time when the performance is fulfilled, which is when the product is shipped to or received by the customer.

Product sales are recorded net of variable considerations, such as provisions for returns, discounts and allowances. We account for shipping and handling costs as costs to fulfill a contract and not as performance obligations to our customers.

Contract Liabilities

Our contract liabilities consist of customer deposits and contractual guaranteed returns.

Net contract liabilities are recorded in accrued expenses and other current liabilities and consisted of the following:

Contract Liabilities
	December 31, 2024		December 31, 2023
Contract Liabilities - Customer Deposits	$	2,290	$	2,022
Contract Liabilities - Guaranteed Returns		127		127
	$	2,417	$	2,149

Fair Value of Financial Instruments

We apply the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 – inputs are quoted prices in active markets for identical assets that the reporting entity has the ability to access at the measurement date.

Level 2 – inputs are other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly.

Level 3 – inputs are unobservable inputs for the asset that are supported by little or no market activity and that are significant to the fair value of the underlying asset or liability.

The Company did not have any financial instruments that are measured at fair value on a recurring basis as of December 31, 2024 and 2023.

Accounts Receivable and Allowances

Our allowance for trade receivables consists of two components: an allowance for customer claims and an allowance for credit losses.

We estimate expected credit losses on our trade receivables in accordance with Accounting Standards Codification ("ASC") 326 - Financial Instruments - Credit Losses. We adopted this accounting standard prospectively on the first day of our 2023 fiscal year.

We measure the allowance for credit losses on trade receivables on a collective (pool) basis when similar risk characteristics exist. We pool our trade receivables by type, wholesalers and retailers. Our historical credit loss experience provides the basis for our estimation of expected credit losses. We use a two-year average of annual loss rates as a starting point for our estimation and make adjustments to the historical loss rates to account for differences in current conditions impacting the collectability of our receivable pools. We generally monitor macroeconomic indicators to assess whether adjustments are necessary to reflect current conditions.

We grant credit to customers and generally do not require collateral or other security. We perform credit evaluations of our customers and provide for expected claims related to promotional items, customer discounts, shipping shortages, damages, and credit losses based upon historical bad debt and claims experience. As of December 31, 2024, total allowances amount to $371, of which $147 related to credit losses on accounts receivable. As of December 31, 2023, total allowances amounted to $862, of which $175 was related to credit losses on accounts receivable.

Inventories

Inventories are stated at the lower of cost or net realizable value and are reduced by an estimated reserve for obsolete inventory.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation, including amounts amortized under capital leases, is calculated on the straight-line method over the estimated useful lives of the related assets, which are 7 to 10 years for machinery and equipment, 8 years for furniture and fixtures and 3 years for computers. Leasehold improvements are amortized over the shorter of the useful life of the asset or the term of the lease.

Normal repairs and maintenance are expensed as incurred. When assets are retired or otherwise disposed of, the related cost and accumulated depreciation or amortization is removed from the accounts and any gain or loss is included in the results of operations.

Discontinued operations

We report financial results for discontinued operations separately from continuing operations to distinguish the financial impact of disposal transactions from ongoing operations. Discontinued operations reporting occurs only when the disposal meets the criteria for classification as a discontinued operation in accordance with ASC Subtopic 205-20, Discontinued Operations (“ASC 205-20”). In our consolidated statements of cash flows, the cash flow from discontinued operations are separately classified/reported. Unless indicated otherwise, the information in the Notes to the consolidated financial statements relate to continuing operations (See Note 8, Discontinued Operations).

Leases

The Company accounts for leases in accordance with ASC 842. The Company reviews all contracts and determines if the arrangement is or contains a lease, at inception. Operating leases are included in right-of-use ("ROU”) assets, current lease liabilities and long-term lease liabilities on the condensed consolidated balance sheets. The Company does not have any finance leases.

Operating lease ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The Company uses its estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The operating lease ROU asset also includes any upfront lease payments made and excludes lease incentives and initial direct costs incurred. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases with a term of 12 months or less are not recorded on the balance sheet. The Company’s lease agreements do not contain any residual value guarantees.

Intangible Assets

Intangible assets consist primarily of trademarks, which are amortized on a straight-line basis over their indefinite useful lives. The valuation and classification of these assets and the assignment of amortizable lives involve significant judgment and the use of estimates.

We believe that our long-term growth strategy supports our fair value conclusions. For intangible assets, the recoverability of these amounts is dependent upon achievement of our projections and the execution of key initiatives related to revenue growth and improved profitability.

Goodwill

Goodwill is not subject to amortization, but is reviewed for impairment annually, or more frequently whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. An impairment charge would be recorded to the extent the carrying value of goodwill exceeds its estimated fair value. The testing of goodwill under established guidelines for impairment requires significant use of judgment and assumptions. Changes in forecasted operations and other assumptions could materially affect the estimated fair values. Changes in business conditions could potentially require adjustments to these asset valuations. (See Note 5 for further discussion on the goodwill and intangible assets impairment charges).

Impairment of Long-Lived Assets

Long-lived assets, including intangible assets subject to amortization, are reviewed for impairment when changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the carrying amount of the asset exceeds the expected undiscounted cash flows of the asset, an impairment charge is recognized equal to the amount by which the carrying amount exceeds fair value. The testing of these intangibles under established guidelines for impairment requires significant use of judgment and assumptions. Changes in forecasted operations and other assumptions could materially affect the estimated fair values. Changes in business conditions could potentially require adjustments to these asset valuations. (See Note 5 for further discussion on the goodwill and intangible assets impairment charges).

Indefinite-Lived Intangible Assets

Indefinite-lived intangible assets relating to the asset acquisition of Organic Holdings, LLC (“Organic Holdings”), a market leader in the healthy aging and beauty from within categories and owner of the award-winning Reserveage™ Nutrition brand, are determined to have an indefinite useful economic life and as such are not amortized. Due to the size of our remaining indefinite-lived intangible assets, annual testing for impairment was performed and no impairment was recorded in the years ended December 31, 2024 and 2023 respectively (see Note 5 for further information on the goodwill and intangible assets impairment charges).

Shipping and Handling Costs

Shipping and handling fees when billed to customers are included as a component of net sales. The total costs associated with shipping and handling are included as a component of cost of sales and totaled $458 and $266 in 2024 and 2023, respectively.

Advertising and Promotion Costs

We advertise our branded products through national and regional media and through cooperative advertising programs with customers. Costs for cooperative advertising programs are expensed as earned by customers and recorded in selling, general and administrative expenses. Our advertising expenses were $69 and $802 in 2024 and 2023, respectively. Customers are also offered in-store promotional allowances and certain products are also promoted with direct to consumer rebate programs. Costs for these promotional programs are recorded as incurred as a reduction to net sales.

Research and Development Costs

Research and development costs are expensed as incurred. We did not incur research and development costs in 2024 or in 2023.

Income Taxes

We use the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income tax assets and liabilities are recognized for the future income tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases and operating loss and income tax credit carry-forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in income tax rates is recognized in the period that includes the enactment date.

Value of Warrants Issued with Debt

We estimate the grant date fair value of certain warrants issued with debt using a valuation method, such as the Black-Scholes option pricing model, or, if the terms are more complex, using an outside professional valuation firm, which uses the Monte Carlo option lattice model. We record the amounts as interest expense or debt discount, depending on the terms of the agreement. These estimates involve multiple inputs and assumptions, including the market price of the Company’s common stock, stock price volatility and other assumptions to project earnings before interest, taxes, depreciation and amortization (“EBITDA”) and other reset events. These inputs and assumptions are subject to management’s judgment and can vary materially from period to period.

Net Income (Loss) per Common Share

Basic net income (loss) per common share (“Basic EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted net income (loss) per common share (“Diluted EPS”) is computed by dividing net income (loss) by the sum of the weighted average number of common shares outstanding and the dilutive potential common shares then outstanding. Potential dilutive common share equivalents consist of total shares issuable upon the exercise of outstanding stock options and warrants to acquire common stock using the treasury stock method and the average market price per share during the period.

When calculating diluted income (loss) per share, if the effects are dilutive, companies are required to add back to net income the effects of the change in derivative liabilities related to warrants. Additionally, if the effects of the change in derivative liabilities are added back to net income, companies are required to include the warrants outstanding related to the derivative liability in the calculation of the weighted average dilutive shares.

The common shares used in the computation of our basic and diluted net loss per share are reconciled as follows:

	For the Years Ended December 31,
	2024			2023
Numerator:	$			$
Net loss from continuing operations		(9,807	)		(9,662	)
Net income (loss) from discontinued operations, net of income taxes		308			(4,052	)
Net loss	$	(9,499	)	$	(13,714	)

Denominator:
Weighted-average number of common shares - Basic		259,092,833			259,092,833
Weighted-average number of common shares - Diluted		259,092,833			259,092,833

Net loss per common share:
Basic EPS	$	(0.04	)	$	(0.05	)
Diluted EPS	$	(0.04	)	$	(0.05	)

Significant Concentration of Credit Risk

The Company maintains its cash in bank deposit accounts which, at times, exceed federally insured limits. To date, the Company has not experienced a loss or lack of access to its invested cash; however, no assurance can be provided that access to the Company's invested cash will not be impacted by adverse conditions in the financial markets.

Sales to our top three customers aggregated to approximately 53% and 32% of total consolidated sales in 2024 and 2023, respectively. Sales to one of those customers were approximately 24% and 15% of total sales in 2024 and 2023, respectively. Accounts receivable from these customers were approximately 62% and 42% of total accounts receivable as of December 31, 2024 and 2023, respectively.

Our two major vendors accounted for 32% and 18% of purchases for the year ended December 31, 2024 and 2023, respectively. A third vendor represented an additional 10% and 8% of purchases for the years ended December 31, 2024 and 2023, respectively.

A single customer represents 0% and 3% of total accounts receivable as of December 31, 2024 and December 31, 2023, respectively. This customer is a related party through a director who sat on both the Company’s board of directors and that of the customer. The relationship with the customer ended in 2023.

Accounting Pronouncements - Adopted

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances reporting requirements under Topic 280. The enhanced disclosure requirements include: title and position of the Chief Operating Decision Maker (CODM), significant segment expenses provided to the CODM, extending certain annual disclosures to interim periods, clarifying single reportable segment entities must apply ASC 280 in its entirety, and permitting more than one measure of segment profit or loss to be reported under certain circumstances. This change is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024. This change will apply retrospectively to all periods presented. Management is currently assessing the impact of the adoption of this ASU on the financial statements of the Company.

Accounting Pronouncements Issued Not Yet Adopted

Although there are several other new accounting pronouncements issued or proposed by the FASB, which we have adopted or will adopt, as applicable, we do not believe any of these accounting pronouncements have had or will have a material impact on our consolidated financial position or results of operations.