NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2020
(Unaudited;
amounts in thousands, except share and per share amounts, unless otherwise indicated)
NOTE
1 – NATURE OF OPERATIONS, BASIS OF PRESENTATION AND LIQUIDITY
Nature
of Operations
MYOS
RENS Technology Inc. (the “Company”) is focused on the discovery, development and commercialization of advanced
nutrition products that improve muscle health and performance. The Company was incorporated under the laws of the State of
Nevada on April 11, 2007. On March 17, 2016, the Company merged with its wholly-owned subsidiary and changed its name from
MYOS Corporation to MYOS RENS Technology Inc. As used in these condensed consolidated financial statements, the terms
“the Company”, “MYOS”, “our”, or “we”, refers to MYOS RENS Technology Inc.
and its subsidiary, unless the context indicates otherwise. On February 25, 2011, the Company entered into an agreement to
acquire the intellectual property for Fortetropin®, our proprietary active ingredient from Peak Wellness, Inc.
The Company’s activities are subject to significant risks and uncertainties.
Our
commercial focus is to leverage our clinical data to develop multiple products to target the large, but currently underserved,
markets focused on muscle health. The sales channels through which we sell our products are evolving. The first product we introduced
was MYO-T12, a proprietary formula containing Fortetropin® and other ingredients which was sold in the sports nutrition
market. Some of our other product launches included Re and QURR®.
In March 2018,
we launched Yolked®, a Fortetropin®-powered product which is NSF Certified for Sports, and developed and marketed to collegiate
and professional athletes who want to increase their muscle size and performance with an all-natural advanced nutrition product.
The Company recorded $51 and $68 of net revenues for the three months ended March 31, 2020 and 2019, respectively, for our Yolked®
product line.
In June 2018,
we launched our Fortetropin® based pet product Myos Canine Muscle Formula® (“MCMF”). Two veterinarian
hospitals had previously performed some informal observational studies with older dogs experiencing muscle atrophy and saw positive
results after taking our pet product. We believe that the positive feedback received from the veterinarian community, together
with the positive results from our Kansas State University study, will enable us to grow our pet business product line. The Company
recorded $216 and $61 of net revenues for the three months ended March 31, 2020 and 2019, respectively, for our MCMF product line.
In November 2019, we launched our white
label business, working with manufacturers to create new brands and products using Fortetropin® as the foundation.
We recorded $17 of net revenues for the three months ended March 31, 2020.
We continue to pursue additional distribution
and branded sales opportunities. There can be no assurance that we will be able to secure distribution arrangements on terms acceptable
to us, or that we will be able to generate significant sales of our current and future branded products. We expect to continue
developing our own core branded products in markets such as functional foods, sports and fitness nutrition and to pursue international
sales opportunities. We remain committed to continuing our focus on various clinical trials in support of enhancing our commercial
strategy as well as enhancing our intellectual property assets, to develop product improvements and new products, and to reduce
the cost of our products by finding more efficient manufacturing processes and contract manufacturers.
Basis of Presentation
The accompanying condensed
consolidated balance sheet as of December 31, 2019 has been derived from our audited consolidated financial statements, and
the unaudited interim condensed consolidated financial statements as of March 31, 2020 have been prepared in accordance with
accounting principles generally accepted in the U.S. (“U.S. GAAP”) and the rules and regulations of the U.S.
Securities and Exchange Commission (“SEC”). Certain information and disclosures required by U.S. GAAP for
complete consolidated financial statements have been condensed or omitted herein. The unaudited interim condensed
consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes
thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on
March 24, 2020. The unaudited interim condensed consolidated financial statements presented herein reflect all normal
adjustments that are, in the opinion of management, necessary for a fair presentation of the statement of the financial
position, results of operations and cash flows for the periods presented. The results of any interim period are not
necessarily indicative of the results for the full year.
MYOS
RENS TECHNOLOGY INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2020
(Unaudited;
amounts in thousands, except share and per share amounts, unless otherwise indicated)
Going Concern and Liquidity
The accompanying condensed consolidated
financial statements have been prepared in accordance with U.S. GAAP, which contemplates the continuation of the Company as a going
concern and the realization of assets and satisfaction of liabilities in the normal course of business. The condensed consolidated
financial statements do not include any adjustment that might become necessary should the Company be unable to continue as a going
concern.
The
Company has suffered recurring losses from operations and incurred a net loss of $866 for the three months ended March 31,
2020. The accumulated deficit as of March 31, 2020 was $40,191. The Company has not yet achieved profitability and expects to
continue to incur cash outflows from operations.
It is expected that its operating expenses will continue to increase and, as a result, the Company will eventually need to
generate significant product revenues to achieve profitability. These conditions indicate that there is substantial doubt
about the Company’s ability to continue as a going concern within one year after the condensed consolidated financial
statement issuance date.
As of March 31, 2020 the Company had cash
of $678 and working capital of $1,567 (current assets of $2,398 less current liabilities of $831). For the three months ended March
31, 2020 and 2019, our net loss was $866 and $975, respectively. For the three months ended March 31, 2020, net cash used in operating
activities was $944. For the three months ended March 31, 2019, net cash provided by operating activities was $104.
As of the filing date of this quarterly
report on From 10-Q (the “Report”), management believes that there may not be sufficient capital resources from operations
and existing financing arrangements in order to meet operating expenses and working capital requirements for the next twelve months.
Accordingly, we are evaluating various alternatives, including
reducing operating expenses, securing additional financing through debt or equity securities to fund future business activities
and other strategic alternatives. There can be no assurance that the Company will be able to generate the level of operating revenues
in its business plan, or if additional sources of financing will be available on acceptable terms, if at all. If no additional
sources of financing are available, our future operating prospects may be adversely affected. The condensed consolidated financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Since the date of the
Annual Report on Form 10-K for the year ended December 31, 2019, there have been no material changes to the Company’s significant
accounting policies, except as disclosed in this note.
Cash and Cash Equivalents
The Company considers all highly
liquid investments purchased with a maturity of three months or less and money market accounts to be cash equivalents. At
March 31, 2020 and December 31, 2019, the Company had no cash equivalents. The Company maintains its bank accounts with high
credit quality financial institutions and has never experienced any losses related to these bank accounts. The Company
minimizes its credit risk associated with cash by periodically evaluating the credit quality of its financial
institutions. As part of our ongoing liquidity assessments management evaluates our cash and cash equivalents. The
amount of funds held in these accounts can fluctuate due to the timing of receipts and payments in the ordinary course of
business and due to other reasons, such as business-development activities so the Company may at times have exposure to cash
in excess of FDIC insured limits. At March 31, 2020, total cash in the Company’s bank accounts was $678, which exceeded
the FDIC coverage limit of $250. There were no accounts that exceeded the FDIC limit at December 31, 2019.
Concentrations of Credit Risk, Customers
and Suppliers
Management regularly reviews accounts receivable,
and if necessary, establishes an allowance for doubtful accounts that reflects management’s best estimate of amounts that
may not be collectible based on historical collection experience and specific customer information. Accounts receivable is non-interest
bearing. Credit is issued to customers without collateral. If an account becomes delinquent, management will review if a write
off is appropriate. Expense recognized as a result of an allowance for doubtful accounts is classified under general and administrative
expenses in the condensed consolidated statements of operations.
For the three months ended March 31, 2020
and 2019, the Company did not have any revenue, accounts receivable or supplier concentrations.
MYOS RENS TECHNOLOGY
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2020
(Unaudited;
amounts in thousands, except share and per share amounts, unless otherwise indicated)
Deferred
Offering Costs
The Company defers as other assets the
direct incremental costs of raising capital until such time as the offering is completed. At the time of the completion of the
offering, the costs are charged against the capital raised. Should the offering not be completed, deferred offering costs are charged
to operations during the period in accordance with SEC guidance.
As of March 31, 2020 and December 31, 2019
deferred offering costs of $79 and $95, respectively, were included as a noncurrent asset on the accompanying condensed consolidated
balance sheets related to a July 2018 sales agreement. Management continues to assess the probability of its ability to conduct
future closings of its offerings. If management were to determine that it was not probable that an offering would be completed,
any deferred offering costs would be recognized in the condensed consolidated statements of operations.
Intangible Assets
The Company’s intangible assets consist
primarily of intellectual property pertaining to Fortetropin®, including its formula, trademarks, trade secrets,
patent application and domain names which were determined to have a fair value of $2,000 as of December 31, 2011. Management determined
that the intellectual property had a finite useful life of ten (10) years and began amortizing the asset over its estimated useful
life beginning April 2014.
Intangible assets also includes patent
costs associated with applying for a patent and being issued a patent. Costs to defend a patent and costs to invalidate a competitor’s
patent or patent application are expensed as incurred. Upon issuance of the patent, capitalized patent costs are reclassified from
intangibles with indefinite lives to intangibles with finite lives and amortized on a straight-line basis over the shorter of the
estimated economic life or the initial term of the patent, generally 20 years.
Our policy is to evaluate intangible assets
subject to amortization for possible impairment whenever events or changes in circumstances indicate that the carrying amount of
such assets may not be recoverable. Impairment testing of intangible assets subject to amortization involves comparing the carrying
amount of the asset to the forecasted undiscounted future cash flows. In the event the carrying value of the asset exceeds the
undiscounted future cash flows, the carrying value is considered not recoverable and an impairment exists. An impairment loss is
measured as the excess of the asset’s carrying value over its fair value, calculated using a discounted future cash flow
method. The computed impairment loss is recognized in the period that the impairment occurs. Assets which are not impaired may
require an adjustment to the remaining useful lives for which to amortize the asset. There were no impairment charges for the three
months ended March 31, 2020 and 2019. Intangible assets at March 31, 2020 and December 31, 2019 consisted of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Intangibles with finite lives:
|
|
|
|
|
|
|
Intellectual property
|
|
$
|
2,101
|
|
|
$
|
2,101
|
|
Website - qurr.com
|
|
|
380
|
|
|
|
380
|
|
Less: accumulated amortization – intellectual property
|
|
|
(1,257
|
)
|
|
|
(1,205
|
)
|
Less: accumulated amortization - website
|
|
|
(380
|
)
|
|
|
(380
|
)
|
Total intangible assets, net
|
|
$
|
844
|
|
|
$
|
896
|
|
Amortization
expense related to intangible assets for the three months ended March 31, 2020 and 2019 was $52 and $72, respectively.
MYOS RENS TECHNOLOGY
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2020
(Unaudited;
amounts in thousands, except share and per share amounts, unless otherwise indicated)
Net Revenues
Revenue Recognition
Net revenues include products and shipping
and handling charges, net of estimates for incentives and other sales allowances or discounts. Our product sales generally do not
provide for rights of return. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring
products. All revenue is recognized when we satisfy our performance obligations under the contract. We recognize revenue by transferring
the promised products to the customer, with revenue recognized at the point in time the customer obtains control of the products.
We consider charges associated with shipping and handling activities as costs to fulfill our performance obligations. Using probability
assessments, we estimate sales incentives expected to be paid over the term of the contract. The majority of our contracts have
a single performance obligation and are short term in nature. Sales taxes that are collected from customers and remitted to governmental
authorities are accounted for on a net basis and therefore are excluded from net revenues.
Disaggregation of Net Revenues
Our
net revenues by product type are presented below for the three months ended March 31, 2020 and 2019.
|
|
Three months ended
|
|
Product Type
|
|
March 31,
2020
|
|
|
March 31,
2019
|
|
Myos Canine Muscle Formula® (1)
|
|
$
|
216
|
|
|
$
|
61
|
|
Yolked® (2)
|
|
|
51
|
|
|
|
68
|
|
Longevity (includes Qurr® (3) and Physician Muscle Health Formula (4) brands)
|
|
|
6
|
|
|
|
20
|
|
White Label (5)
|
|
|
17
|
|
|
|
-
|
|
Total Net Revenues
|
|
$
|
290
|
|
|
$
|
149
|
|
(1)
|
Launched
in June 2018
|
(2)
|
Launched
in March 2018
|
(3)
|
Launched
in March 2017
|
(4)
|
Launched
in May 2016; relaunched December 2019
|
(5)
|
Launched in December 2019
|
Contract Assets and Liabilities
The Company did not have any contract assets
and contract liabilities from contracts with customers as of March 31, 2020 or December 31, 2019. Contract liabilities represent
payments received from customers for which the Company had not yet satisfied its performance obligation under the contract. For
the three months ended March 31, 2020 and 2019 there was no revenue recognized from performance obligations satisfied
(or partially satisfied) in previous periods.
Advertising,
Marketing and Promotions
The Company charges the costs of advertising
to sales and marketing expenses as incurred. Advertising and marketing costs were $178 and $236 for the three months ended
March 31, 2020 and 2019, respectively. Advertising costs consisted primarily of marketing costs for our Yolked® and Myos Canine
Muscle Formula® products.
Shipping
and Handling Costs
The Company records costs for the shipping
and handling of products to its customers in cost of revenues. These expenses were $9 and $6 for the three months ended March 31,
2020 and 2019, respectively.
Research
and Development
Research and development expenses consist
primarily of the cost of manufacturing our product for clinical study, the cost of conducting clinical studies and the cost of
conducting preclinical and research activities. Nonrefundable advance payments for goods or services that will be used or
rendered for future research and development activities are initially capitalized and are then recognized as an expense as the
related goods are consumed or the services are performed. Research and development expenses were $22 and $9 for the three months
ended March 31, 2020 and 2019, respectively.
MYOS RENS TECHNOLOGY
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2020
(Unaudited;
amounts in thousands, except share and per share amounts, unless otherwise indicated)
Basic
and Diluted Loss Per Share
Basic net loss per share is computed by
dividing net loss available to common stockholders for the period by the weighted average number of common shares outstanding during
the period. Diluted net loss per share is computed by dividing net loss for the period by the weighted average number of common
shares outstanding during the period increased to include the number of additional shares of common stock that would have been
outstanding if potential dilutive securities outstanding had been issued. The Company uses the “treasury stock” method
to determine the dilutive effect of common stock equivalents such as options, warrants and restricted stock. For the three months
ended March 31, 2020 and 2019, the Company incurred a net loss. Accordingly, the Company’s common stock equivalents were
anti-dilutive and excluded from the diluted net loss per share computation.
The aggregate number of potentially dilutive
common stock equivalents outstanding at March 31, 2020 excluded from the diluted net loss per share computation because their inclusion
would be anti-dilutive were 1,281,736, which includes warrants to purchase an aggregate of 663,356 shares of common stock and options
to purchase an aggregate of 618,380 shares of common stock and rights under the Rights Agreement.
The aggregate number of potentially dilutive
common stock equivalents outstanding at March 31, 2019 excluded from the diluted net loss per share computation because their
inclusion would be anti-dilutive were 1,083,082, which includes warrants to purchase an aggregate of 663,356 shares of common
stock, options to purchase an aggregate of 419,726 shares of common stock and rights under the Rights Agreement.
Income Taxes
On March 27,
2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).
The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side
social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the
net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.
Under Accounting Standards Codification Topic 740 (“ASC 740”), Income Taxes, the effects of new
legislation are recognized upon enactment. Accordingly, the CARES Act is effective beginning in the quarter ended March 31,
2020. While the Company is currently evaluating how provisions in the CARES Act will impact its condensed consolidated
financial statements, it does not currently believe that such provisions will have a material impact on the Company’s
condensed consolidated financial statements.
NOTE 3 – RECENTLY ISSUED ACCOUNTING
STANDARDS
In December 2019,
the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. The amendments in ASU 2019-12 simplify
the accounting for income taxes by removing certain exceptions to the general principles in ASC 740. The amendments also improve
consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12
will be effective for the Company’s fiscal year beginning after December 15. 2020, with early adoption permitted. The transition
requirements are dependent upon each amendment within this update and will be applied either prospectively or retrospectively.
The Company does not expect this ASU to have a material impact on its condensed consolidated financial statements.
MYOS
RENS TECHNOLOGY INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2020
(Unaudited;
amounts in thousands, except share and per share amounts, unless otherwise indicated)
NOTE
4 – INVENTORIES, NET
Inventories,
net at March 31, 2020 and December 31, 2019 consisted of the following:
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Raw materials
|
|
$
|
1,153
|
|
|
$
|
1,264
|
|
Work in process
|
|
|
118
|
|
|
|
15
|
|
Finished goods
|
|
|
362
|
|
|
|
450
|
|
|
|
|
1,633
|
|
|
|
1,729
|
|
Less: inventory reserves
|
|
|
(63
|
)
|
|
|
(63
|
)
|
Inventories, net
|
|
$
|
1,570
|
|
|
$
|
1,666
|
|
NOTE
5 – FIXED ASSETS, NET
Fixed assets, net at March 31, 2020 and
December 31, 2019 consisted of the following:
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Furniture, fixtures and equipment
|
|
$
|
116
|
|
|
$
|
116
|
|
Computers and software
|
|
|
68
|
|
|
|
68
|
|
Leasehold improvements
|
|
|
239
|
|
|
|
239
|
|
Other
|
|
|
7
|
|
|
|
7
|
|
Total fixed assets
|
|
|
430
|
|
|
|
430
|
|
Less: accumulated depreciation and amortization
|
|
|
(338
|
)
|
|
|
(333
|
)
|
Net book value of fixed assets
|
|
$
|
92
|
|
|
$
|
97
|
|
Depreciation expense was $5 and $7 for the three months ended
March 31, 2020 and 2019, respectively.
NOTE
6 – PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of various
payments that the Company has made in advance for goods or services to be received in the future. Prepaid expenses and other current
assets at March 31, 2020 and December 31, 2019 consisted of the following:
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Prepaid consulting fees
|
|
$
|
46
|
|
|
$
|
9
|
|
Prepaid Nasdaq fees
|
|
|
33
|
|
|
|
-
|
|
Prepaid marketing expenses
|
|
|
32
|
|
|
|
6
|
|
Prepaid other expenses
|
|
|
16
|
|
|
|
8
|
|
Total prepaid expenses and other current assets
|
|
$
|
127
|
|
|
$
|
23
|
|
MYOS RENS TECHNOLOGY
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2020
(Unaudited;
amounts in thousands, except share and per share amounts, unless otherwise indicated)
NOTE
7 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued
expenses and other current liabilities consist of estimated future payments that relate to the current and prior accounting periods.
Management reviews these estimates regularly to determine their reasonableness. Accrued expenses and other current liabilities
at March 31, 2020 and December 31, 2019 consisted of the following:
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Board compensation
|
|
$
|
-
|
|
|
$
|
209
|
|
Other
|
|
|
18
|
|
|
|
21
|
|
Total accrued expenses and other current liabilities
|
|
$
|
18
|
|
|
$
|
230
|
|
NOTE
8 – RELATED PARTY PROMISSORY NOTE PAYABLE
On August 30, 2018, the Company issued
an unsecured promissory note (the “Note”) in the principal amount of $750 in favor of Joseph Mannello, the Company’s
chief executive officer (the “Lender”).
The Note accrues interest at a rate of
5% per annum and all payments of principal, interest and other amounts under the original Note were payable on March 31, 2020.
On March 31, 2020, the Company modified its Note to extend the maturity to March 31, 2021. The Company may prepay, in whole or
in part, at any time, the principal, interest and other amounts owed under the Note, without penalty.
In January 2020, the Lender advanced an
additional $300 to the Company for general working capital purposes.
On March 2, 2020,
the Company entered into securities purchase agreements for a private placement with a group of accredited investors, including
four members of the Company’s board of directors. In connection with the closing of the private placement on March 5, 2020,
the Company issued 851,240 shares of common stock for aggregate cash proceeds of $1,030 and $825 of the principal amount of the
Note was exchanged for 681,818 shares of common stock.
As of March 31, 2020, the total amounts outstanding under the
Note was $580 of principal and $66 of accrued interest.
Note
9 – Stockholders’ Equity
Authorized
Capital
As of March 31, 2020, the Company was
authorized to issue 15,000,000 shares of common stock, $0.001 par value, and 500,000 shares of preferred stock, $0.001 par value.
The holders of the Company’s common stock are entitled to one vote per share.
Preferred Stock Purchase Rights
Effective February 14, 2017, the board
of directors declared a dividend of one right (“Right”) for each of the Company’s issued and outstanding shares
of common stock. The Rights were granted to the stockholders of record at the close of business on February 24, 2017. Each Right
entitles the registered holder, upon the occurrence of certain events specified in the Rights Agreement, to purchase from the Company
one one-thousandth of a share of the Company’s Series A Preferred Stock at a price of $7.00, subject to certain adjustments.
The Rights are not exercisable until the occurrence of certain events, including a person acquiring or obtaining the right to acquire
beneficial ownership of 10% or more of the Company’s outstanding common stock. The Rights are evidenced by certificates for
the common stock and automatically transfer with the common stock unless they become exercisable. If the Rights become exercisable,
separate certificates evidencing the Rights will be distributed to each holder of common stock. Holders of the preferred stock
will be entitled to certain dividend, liquidation and voting rights. The Rights are redeemable by the Company at a fixed price
as determined by the board of directors, after certain defined events.
On February 14, 2020, the Company amended
the Rights Agreement to, among other things extend the expiration date to February 14, 2021.
As of March 31, 2020, the Rights have no dilutive effect on
the earnings per common share calculation and no shares of preferred stock have been issued. At the time of issuance, the Company
determined that these Rights have a de minimis fair value.
MYOS RENS TECHNOLOGY INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2020
(Unaudited;
amounts in thousands, except share and per share amounts, unless otherwise indicated)
Issuance
of Common Stock
The Company has periodically issued common stock in connection
with certain private and public offerings. For the three months ended March 31, 2020, the Company received aggregate net proceeds
of $1,258 from these offerings:
|
|
|
|
|
Net
|
|
Date
|
|
Shares
|
|
|
Proceeds
|
|
March 5, 2020
|
|
|
851,240
|
(1)
|
|
$
|
1,030
|
|
January 1, 2020 through March 31, 2020
|
|
|
147,407
|
(2)
|
|
|
228
|
|
(1)
|
Shares issued pursuant to a private placement with accredited investors for $1.21 per share.
|
(2)
|
Shares of common stock sold for $1.55 per share in at-the-market offerings.
|
See Note 8 for a description of the issuance
of common stock on March 5, 2020 in connection with the exchange of a portion of the related party promissory notes payable.
At-the-Market
Offering
On January 23, 2020, the Company sold 7,322
shares of common stock for $1.50 per share for gross proceeds of $11 in an at-the-market offering.
On February 3, 2020, the Company sold 140,085
shares of common stock for $1.55 per share for gross proceeds of $217 in an at-the-market offering.
As of the filing date of this Report, a
total of 258,536 shares were sold under this program for aggregate gross proceeds of $439 since the sales agreement began in July
2018.
NOTE 10 – STOCK-BASED COMPENSATION
Equity Incentive Plan
The Company increased the number of shares
available for issuance under its 2012 Equity Incentive Plan (as amended, the “Plan”) from 850,000 to 1,200,000 in
December 2019, which was approved by the Company’s shareholders in December 2019. The plan provides for the issuance of
up to 1,200,000 shares. The Plan provides for grants of stock options, stock appreciation rights, restricted stock, other stock-based
awards and other cash-based awards. As of March 31, 2020, the remaining shares of common stock available for future issuances
of awards was 529,260.
Stock options generally vest and become
exercisable with respect to 100% of the common stock subject to such stock option on the third (3rd) anniversary of the date of
grant. Any unvested portion of a stock option shall expire upon termination of employment or service of the participant granted
the stock option, and the vested portion shall remain exercisable in accordance with the provisions of the Plan.
Stock-Based Compensation
Stock-based compensation consists of expenses
related to the issuance of stock options and restricted stock. Stock-based compensation expenses were $217 and $243 for the three
months ended March 31, 2020 and 2019, respectively.
On March 31, 2020, the Company issued 172,727
shares of its common stock with a fair value of $209 to members of its board of directors in connection with 2019 services. These
restricted shares vested immediately upon issuance.
MYOS RENS TECHNOLOGY INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
March 31, 2020
(Unaudited; amounts in thousands, except
share and per share amounts, unless otherwise indicated)
Note
11 – Commitments and Contingencies
Defined Contribution Plan
The Company established a 401(k) Plan (the “401(k) Plan”)
for eligible employees of the Company effective April 1, 2014. Generally, all employees of the Company who are at least twenty-one
years of age and who have completed three months of service are eligible to participate in the 401(k) Plan. The 401(k) Plan is
a defined contribution plan that provides that participants may make salary deferral contributions, of up to the statutory maximum
allowed by law (subject to catch-up contributions) in the form of voluntary payroll deductions. The Company’s aggregate matching
contributions were $11 and $8 for the three months ended March 31, 2020 and 2019, respectively.
Supply Agreement
On November 18, 2016, the Company entered into an Amended Supply
Agreement with DIL Technologie GmbH (“DIL”). Pursuant to the agreement, DIL agreed to manufacture and supply the Company
with Fortetropin®, the active ingredient for its products, and the Company agreed to purchase quantities of Fortetropin®
from DIL in its discretion. DIL agreed to manufacture the formula exclusively for the Company in perpetuity, and agreed not manufacture
the formula for other entities (but may manufacture it for its own non-commercial research).
The
agreement expired on December 31, 2018, and the Company has not elected to renew the agreement as of the date of the filing of
this Report.
Note
12 – OPERATING LEASES
The Company has operating leases for
its executive office (approximately 5,225 square feet of space) and office equipment. The remaining terms on these leases
range from 3 to 4 years. The Company does not have any financing leases. The components of lease expense of $15 and $16 for
the three months ended March 31, 2020 and March 31, 2019, respectively, were recorded in the condensed consolidated
statements of operations.
There were no material operating and financing
leases that the Company had entered into that were yet to commence as of March 31, 2020.
Components of the Company’s
right-of-use assets and liabilities calculations are as follows:
Cash paid for rent included in the measurement of operating lease liabilities cash flows
|
|
$
|
75
|
|
Right-of-use asset obtained in exchange for new operating lease liability
|
|
|
236
|
|
Weighted-average remaining lease term - operating leases, in years
|
|
|
3.79
|
|
Weighted-average discount rate - operating leases
|
|
|
11.7
|
%
|
Future minimum lease payments for operating
leases in excess of one year as of March 31, 2020 are as follows:
For the year ending December 31,
|
|
Amount
|
|
2020
|
|
$
|
51
|
|
2021
|
|
|
77
|
|
2022
|
|
|
80
|
|
2023
|
|
|
3
|
|
Total future minimum lease payments
|
|
|
211
|
|
Imputed interest
|
|
|
(28
|
)
|
Total
|
|
$
|
183
|
|
MYOS RENS TECHNOLOGY INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
March 31, 2020
(Unaudited; amounts in thousands, except
share and per share amounts, unless otherwise indicated)
Note
13 – Related Party Transactions
See Notes 8 and 9 for additional information relating to the
Note issued to the Company’s chief executive officer as well as details associated with the issuance of common stock to certain
related parties in connection with securities purchase agreements.
Note
14 – legal PROCEEDINGS
On January 6,
2017, in connection with the financing contemplated by a securities purchase agreement with RENS Technology Inc. (the “Purchaser”),
we commenced an action in the Supreme Court of New York, County of New York (the “Court”), against the Purchaser, RENS
Agriculture, the parent company of the Purchaser, and Ren Ren, a principal in both entities and one of our directors, arising from
the Purchaser’s breach of the agreement under which the Purchaser agreed to invest an aggregate of $20.25 million in our
company in exchange for an aggregate of 3,537,037 shares of our common stock and warrants to purchase an aggregate of 884,259 shares
of common stock.
On April 11, 2017, the Court noted that
we had demonstrated a likelihood of success on the merits of the breach of contract claim. Thereafter, a hearing was scheduled
on the application by the Purchaser to dismiss the complaint and various pre-trial discovery applications by both parties.
In August 2017, before the hearing occurred,
the Company amended its complaint repeating most of the initial claims but adding several additional claims against RENS Agriculture,
Mr. Ren and two additional Chinese defendants, including a claim against RENS Agriculture for breaching the exclusive distribution
agreement, as well as claims against all defendants for theft and misappropriation of our confidential proprietary information
and trade secrets, breach of fiduciary duty and duty of loyalty, misappropriation of corporate opportunity, unfair competition
and a number of other torts. We are seeking damages and injunctive relief. The Purchaser has filed a motion to dismiss the amended
complaint, which is still pending and scheduled for oral argument in the second quarter of 2020.
The parties are
currently in settlement discussions regarding the foregoing matter.
The outcome of
the aforementioned matter cannot be determined as of the date of these condensed consolidated financial statements.
NOTE
15 – SUBSEQUENT EVENTS
Paycheck Protection Program Loan
On April 22, 2020, the Company received
loan proceeds in the amount of $310 under the Paycheck Protection Program (“PPP”). The PPP, established as part of
the CARES Act, provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses
of the qualifying business. The loans and accrued interest are forgivable after eight weeks as long as the borrower uses the loan
proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of
loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period.
The unforgiven portion of the PPP
loan is payable over two years at an interest rate of 1% per annum, with a deferral of payments for the first six months. The Company
intends to use the proceeds for purposes consistent with the PPP. While the Company currently believes that its use of the
loan proceeds will meet the conditions for forgiveness of the loan, there can be no assurance that it will not take actions
that could cause the Company to be ineligible for forgiveness of the loan, in whole or in part.