Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Nov. 13, 2017 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | ProPhase Labs, Inc. | |
Entity Central Index Key | 868,278 | |
Document Type | 10-Q/A | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | true | |
Amendment Description | On August 10, 2018, the Company’s management, after consultation and discussions with EisnerAmper LLP, the Company’s independent registered public accounting firm, and the Audit Committee of the Board of Directors, concluded that the Company’s previously issued audited consolidated financial statements for the fiscal year ended December 31, 2017 included in the Company’s Annual Report on Form 10-K for such period and unaudited condensed consolidated financial statements for the fiscal quarters ended March 31, 2017, June 30, 2017, September 30, 2017 and March 31, 2018 (collectively with the fiscal year ended December 31,2017, the “Restated and Revised Periods”) included in the Company’s Quarterly Reports on Form 10-Q for such periods should no longer be relied upon, and determined that these financial statements will be restated due to the identification of certain accounting errors related to income tax accounting. The Company has determined that it miscalculated its income tax benefit by incorrectly utilizing certain net operating losses without taking into account the statutory limitation imposed by the State of Pennsylvania, which resulted in an overstatement of net income as discussed below. The Company also incorrectly determined the amount of income tax benefit allocable to continuing operations, which resulted in an overstatement of income from continuing operations, and an equal understatement of the gain on sale of discontinued operations, presented net of taxes, which had no impact on net income. Based on its review, the Company has determined that its income tax expense was understated and its net income was overstated by approximately $1.2 million for the fiscal year ended December 31, 2017. Concurrently with the filing of this Form10-Q/A, the Company is filing an amendment on Form 10-K/A to its Annual Report on Form 10-K for the fiscal year ended December 31, 2017 to restate the audited consolidated financial statements included in the Form 10-K and amendments on Form 10-Q/A to its Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2017, June 30, 2017, September 30, 2017 and March 31,2018 to correct the errors described above. The corrections to the Restated and Revised Periods, which we refer to herein collectively as the “Restatement”, were prepared following an independent review by the Company. Description of the Restatement In completing our Federal and State income tax preparation review procedures for filing of the Federal and State income tax returns for the fiscal year ended December 31,2017 during the second quarter of fiscal 2018, the Company identified an error in the accounting treatment of state Net Operating Loss (NOL) limitations which resulted in understatement of state income tax liability and expense of approximately $0.8 million and a corresponding overstatement of net income for the nine months ended September 30, 2017. We also identified an error in our treatment of the reversal of certain valuation allowances in 2017 and their allocation between continuing and discontinued operations, resulting in the overstatement of the tax benefit allocated to continuing operations and an equal overstatement of the tax provision for discontinued operations of approximately $16.0 million for the nine months ended September 30, 2017, and the understatement of the tax benefit allocated to continuing operations and an equal understatement of the tax provision for discontinued operations of approximately $0.3 million for the three months ended September 30, 2017, which had no further impact on net income. For additional information regarding the corrections to the financial statements in the Restated and Revised Periods, see Notes 2, 4 and 7 of the Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements”. Internal Controls Over Financial Reporting As a result of the Restatement, we also concluded that we had a material weakness related to our internal control over financial reporting. For more information regarding management’s assessment of internal control over financial reporting and disclosure controls and procedures, as well as the related remediation actions, refer to Item 4 “Controls and Procedures” in this Quarterly Report on Form 10-Q/A. Items Amended by this Form 10-Q/A This Form 10-Q/A amends and restates the entire contents of the original Form 10-Q. The portions of this Form 10-Q/A that have been revised to give effect to the Restatement and matters related thereto are as follows: ● Part I, Item 1. Financial Statements ● Part I, Item 2. Management’s Discussions and Analysis of Financial Condition and Results of Operations ● Part I, Item 4. Controls and Procedures In addition, the Company’s Chief Executive Officer and Principal Accounting Officer have provided new certifications dated as of the date of this filing in connection with this Form 10-Q/A. Except as described above, no other changes have been made to the Company’s Quarterly Report on Form 10-Q ended September 30, 2017 (the “Original Filing”). This Form 10-Q/A speaks as of the date of the Original Filing and does not reflect events that may have occurred after the date of the Original Filing or modify or update any disclosures that may have been affected by subsequent events. | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 12,428,461 | |
Trading Symbol | PRPH | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,017 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
ASSETS | ||
Cash and cash equivalents (Note 3) | $ 3,897 | $ 441 |
Marketable securities, available for sale (Note 3) | 23,641 | |
Escrow receivable, current | 2,500 | |
Accounts receivable, net (Note 3) | 1,113 | 5,770 |
Inventory (Note 3) | 1,992 | 2,736 |
Prepaid expenses and other current assets (Note 3) | 568 | 680 |
Assets held for sale (Note 4) | 22 | |
Total current assets | 33,733 | 9,627 |
Property, plant and equipment, net of accumulated depreciation of $5,369 and $5,134, respectively (Note 3) | 2,849 | 3,175 |
Escrow receivable | 2,500 | |
Total assets | 39,082 | 12,802 |
LIABILITIES | ||
Secured promissory notes, net (Note 5) | 1,490 | |
Accounts payable | 503 | 2,156 |
Accrued advertising and other allowances (Note 3) | 1,288 | 2,805 |
Other current liabilities | 322 | 389 |
Due to Mylan, Inc. and affiliates (Note 4) | 319 | |
Income taxes payable (Note 7) | 751 | |
Total current liabilities | 3,183 | 6,840 |
COMMITMENTS AND CONTINGENCIES (Note 8) | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock, authorized 1,000,000, $.0005 par value, no shares issued (Note 6) | ||
Common stock, $.0005 par value; authorized 50,000,000; issued: 27,046,593 and 26,313,593 shares, respectively (Note 6) | 13 | 13 |
Additional paid-in-capital | 57,347 | 56,378 |
Retained earnings (Accumulated deficit) | 21,118 | (19,687) |
Accumulated other comprehensive loss | (35) | |
Treasury stock, at cost, 14,618,132 and 9,232,817 shares (Note 6) | (42,544) | (30,742) |
Total stockholders' equity | 35,899 | 5,962 |
Total liabilities and stockholders' equity | $ 39,082 | $ 12,802 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Accumulated depreciation | $ 5,369 | $ 5,134 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, par value | $ .0005 | $ .0005 |
Preferred stock, shares issued | ||
Common stock, par value | $ 0.0005 | $ 0.0005 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 27,046,593 | 26,313,593 |
Treasury stock, shares | 14,618,132 | 9,232,817 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Other Comprehensive Income (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Income Statement [Abstract] | ||||
Net sales (Note 3) | $ 3,040 | $ 1,402 | $ 5,716 | $ 3,439 |
Cost of sales (Note 3) | 2,608 | 1,205 | 5,060 | 2,929 |
Gross profit | 432 | 197 | 656 | 510 |
Operating expenses (Note 3): | ||||
Sales and marketing | 150 | 153 | 486 | 686 |
Administration | 1,124 | 734 | 3,510 | 2,881 |
Research and development | 60 | 43 | 318 | 202 |
Total operating expenses | 1,334 | 930 | 4,314 | 3,769 |
Other income (expense), net | 125 | (53) | 222 | (158) |
Loss from continuing operations before income taxes (Note 7) | (777) | (786) | (3,436) | (3,417) |
Income tax benefit from continuing operations | 305 | 1,322 | ||
Loss from continuing operations | (472) | (786) | (2,114) | (3,417) |
Discontinued operations (Note 4): | ||||
Income from discontinued operations | 953 | 530 | 1,121 | |
Gain (loss) on sale of discontinued operations, net of taxes | (305) | 42,389 | ||
Income (loss) from discontinued operations | (305) | 953 | 42,919 | 1,121 |
Net income (loss) | (777) | 167 | 40,805 | (2,296) |
Other comprehensive loss: | ||||
Unrealized loss on marketable securities (Note 3): | (35) | (35) | ||
Total comprehensive income (loss) | $ (812) | $ 167 | $ 40,770 | $ (2,296) |
Basic earnings (loss) per share: | ||||
Loss from continuing operations | $ (0.03) | $ (0.05) | $ (0.13) | $ (0.20) |
Income (loss) from discontinued operations | (0.02) | 0.06 | 2.58 | 0.07 |
Net income | (0.05) | 0.01 | 2.45 | (0.13) |
Diluted earnings (loss) per share: | ||||
Loss from continuing operations | (0.03) | (0.04) | (0.13) | (0.20) |
Income (loss) from discontinued operations | (0.02) | 0.05 | 2.51 | 0.07 |
Net income (loss) | $ (0.05) | $ 0.01 | $ 2.38 | $ (0.13) |
Weighted average common shares outstanding: | ||||
Basic | 15,967,000 | 17,081,000 | 16,661,000 | 17,081,000 |
Diluted | 15,967,000 | 17,600,000 | 17,118,000 | 17,081,000 |
Condensed Consolidated Stateme5
Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - 9 months ended Sep. 30, 2017 - USD ($) $ in Thousands | Common Stock Shares Outstanding, Net of Shares of Treasury Stock [Member] | Additional Paid-In Capital [Member] | Retained Earnings (Accumulated Deficit) [Member] | Accumulated Comprehensive Loss [Member] | Treasury Stock [Member] | Total |
Balance at Dec. 31, 2016 | $ 13 | $ 56,378 | $ (19,687) | $ (30,742) | $ 5,962 | |
Balance, shares at Dec. 31, 2016 | 17,080,776 | |||||
Net income | 40,805 | 40,805 | ||||
Unrealized loss | (35) | (35) | ||||
Proceeds from warrants exercised | 69 | 69 | ||||
Proceeds from warrants exercised, shares | 51,000 | |||||
Proceeds from options exercised | 854 | 854 | ||||
Proceeds from options exercised, shares | 682,000 | |||||
Treasury stock acquired | (11,802) | (11,802) | ||||
Treasury stock acquired, shares | (5,385,315) | |||||
Share-based compensation expense | 46 | 46 | ||||
Tax benefits from exercise of warrants and options | 179 | 179 | ||||
Tax benefit allowance | (179) | (179) | ||||
Balance at Sep. 30, 2017 | $ 13 | $ 57,347 | $ 21,118 | $ (35) | $ (42,544) | $ 35,899 |
Balance, shares at Sep. 30, 2017 | 12,428,461 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Cash flows from operating activities: | ||
Net income (loss) | $ 40,805 | $ (2,296) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
Gain on sale of assets, net of taxes | (42,389) | |
Change in valuation allowance, income tax | (1,322) | |
Depreciation | 515 | 317 |
Amortization of loan origination and warrant expenses | 10 | 18 |
Share-based compensation expense | 46 | 1 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 4,657 | 167 |
Inventory | 744 | 133 |
Prepaid and other assets | 112 | |
Accounts payable | (1,653) | 978 |
Accrued advertising and other allowances | (1,517) | (210) |
Due to Mylan, Inc. and affiliates | 319 | |
Other current liabilities | (1,417) | 22 |
Assets held for sale | (22) | |
Net cash used in operating activities | (1,112) | (870) |
Cash flows from investing activities: | ||
Net proceeds from the sale of asset | 40,825 | |
Purchase of marketable securities | (32,194) | |
Sale of marketable securities | 8,518 | |
Capital expenditures | (202) | (419) |
Net cash provided by (used in) investing activities | 16,947 | (419) |
Cash flows from financing activities: | ||
Payments to retire Notes | (1,500) | |
Payments to acquire treasury stock | (11,802) | |
Proceeds from exercise of warrants | 69 | |
Proceeds from exercise of stock options | 854 | |
Net cash used in financing activities | (12,379) | |
Net decrease in cash and cash equivalents | 3,456 | (1,289) |
Cash and cash equivalents at beginning of period | 441 | 1,664 |
Cash and cash equivalents at end of period | 3,897 | 375 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 54 | 95 |
Income taxes paid | 1,350 | |
Non-cash investing activities: | ||
Escrow receivable | 5,000 | |
Net unrealized losses, investments in marketable securities | $ 35 |
Organization and Business
Organization and Business | 9 Months Ended |
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Business | Note 1 – Organization and Business ProPhase Labs, Inc. (“we”, “us” or the “Company”) was initially organized in Nevada in July 1989. Effective June 18, 2015, we changed our state of incorporation from the State of Nevada to the State of Delaware. We are a manufacturer, marketer and distributor of a diversified range of health care and cold remedy products that are offered to the general public. We are also engaged in the research and development of potential over-the-counter (“OTC”) drug and natural base health products including supplements, personal care and cosmeceutical products. On August 23, 2017, the Company formed a new wholly-owned subsidiary, ProPhase Digital Media, Inc. (a Delaware corporation), which will be responsible for marketing the dietary TK Supplements ® Discontinued Operations Prior to March 29, 2017, our flagship OTC drug brand was Cold-EEZE ® ® ® ® ® ® ® ® ® On January 6, 2017, we signed an asset purchase agreement (as amended, the “Asset Purchase Agreement”), by and among the Company, Meda Consumer Healthcare Inc. (“MCH”) and Mylan Inc. (together with MCH, “Mylan”), for the sale of assets by us to Mylan (see Note 4). The sale of assets (i) was subject to stockholder approval and other customary closing conditions and (ii) consisted principally of the sale of our intellectual property rights and other assets relating to our Cold-EEZE ® ® ® A special meeting of our stockholders was held on March 29, 2017 (the “Special Meeting”). At the Special Meeting, our stockholders approved the sale of assets and the transactions contemplated by the Asset Purchase Agreement. Effective March 29, 2017, we completed the sale of the Cold-EEZE ® ® ® ® ® ® ® Continuing Operations We continue to own and operate our manufacturing facility and manufacturing business in Lebanon, Pennsylvania, and our headquarters in Doylestown, Pennsylvania. As part of the sale of the Cold-EEZE ® ® We are also pursuing a series of new product development and pre-commercialization initiatives in the OTC dietary supplement category. Initial OTC dietary supplement product development activities were completed in the fourth quarter of Fiscal 2015 under the brand name of TK Supplements ® ® ® ® TM ® For the three and nine months ended September 30, 2017 and 2016, our revenues from continuing operations have come principally from our OTC health care products. We use a December 31 year-end for financial reporting purposes. References herein to “Fiscal 2017” shall mean the fiscal year ended December 31, 2017 and references to other “Fiscal” years shall mean the year, which ended on December 31 of the year indicated. The term “we”, “us” or the “Company” as used herein also refer, where appropriate, to the Company, together with its subsidiaries unless the context otherwise requires. |
Restatement of Previously Issue
Restatement of Previously Issued Financial Statements | 9 Months Ended |
Sep. 30, 2017 | |
Equity [Abstract] | |
Restatement of Previously Issued Financial Statements | Note 2 - Restatement of Previously Issued Financial Statements The Company determined that when calculating its income tax provision related to the gain on the sale of discontinued operations, it incorrectly utilized available net operating losses without considering the statutory limitations imposed by the state of Pennsylvania, and that it incorrectly allocated the amount of income tax benefit resulting from the reversal of certain valuation allowances to continuing operations, which resulted in an overstatement of income the tax benefit from continuing operations and an understatement of the gain on sale of discontinued operations, which is presented net of taxes. In the process of this determination, the Company determined that such information existed at September 30, 2017 which affected the income tax benefit/ provision from continuing and discontinued operations reported in the three and nine months ended September 30, 2017. The Company concluded that the impact of applying corrections for these errors and misstatements on the consolidated financial statements as of and for the three and nine months ended September 30, 2017 is material. As a result, the Company is restating its consolidated financial statements as of and for the three and nine months ended September 30, 2017. See below for a reconciliation of the previously reported amounts to the restated amounts. The table below sets forth the condensed consolidated balance sheet, including the balances as originally reported, adjustments and the as restated balances (in thousands): As of September 30, 2017 As originally reported Adjustments As restated Income taxes payable $ - $ 751 $ 751 Total current liabilities 2,432 751 3,183 Retained earnings 21,869 (751 ) 21,118 Total stockholders’ equity 36,650 (751 ) 35,899 Total liabilities and stockholders’ equity $ 39,082 $ - $ 39,082 The table below sets for the condensed consolidated statements of operations, including the balances as originally reported, adjustments, and the as restated amounts (in thousands): For the three months ended September 30, 2017 As originally reported Adjustments As restated Income tax benefit from continuing operations $ - $ 305 $ 305 Loss from continuing operations (777 ) 305 (472 ) Gain on sale of discontinued operations, net of taxes $ - (305 ) (305 ) Loss from discontinued operations, net of tax - (305 ) (305 ) Net loss (777 ) - (777 ) Basic loss per share: Loss from continuing operations $ (0.05 ) $ 0.02 $ (0.03 ) Loss from discontinued operations - (0.02 ) (0.02 ) Net loss $ (0.05 ) $ 0.00 $ (0.05 ) Diluted loss per share: Loss from continuing operations $ (0.05 ) $ 0.02 $ (0.03 ) Loss from discontinued operations - (0.02 ) (0.02 ) Net loss $ (0.05 ) $ 0.00 $ (0.05 ) For the nine months ended September 30, 2017 As originally reported Adjustments As restated Income tax benefit from continuing operations $ 18,113 $ (16,791 ) $ 1,322 Income (loss) from continuing operations 14,677 (16,791 ) (2,114 ) Gain on sale of discontinued operations, net of taxes 26,349 16,040 42,389 Income from discontinued operations 26,879 16,040 42,919 Net income 41,556 (751 ) 40,805 Basic earnings (loss) per share: Income (loss) from continuing operations $ 0.88 $ (1.01 ) $ (0.13 ) Income from discontinued operations 1.61 0.97 2.58 Net income $ 2.49 $ (0.04 ) $ 2.45 Diluted earnings (loss) per share: Income (loss) from continuing operations $ 0.86 $ (0.99 ) $ (0.13 ) Income income from discontinued operations 1.57 0.94 2.51 Net income $ 2.43 $ (0.05 ) $ 2.38 The table below sets forth the condensed consolidated statements of cash flows from operating activities, including the balances as originally reported, adjustments and as the restated balances (in thousands): For the nine months ended September 30, 2017 As originally reported Adjustments As restated Net income $ 41,556 $ (751 ) $ 40,805 Gain on sale of assets, net of taxes (26,339 ) (16,050 ) (42,389 ) Change in valuation allowance, income tax (19,473 ) 18,151 (1,322 ) Other current liabilities (67 ) (1,350 ) (1,417 ) Net cash used in operating activities $ (4,323 ) $ - $ (4,323 ) The restatement had no impact on cash flows from investing activities or financing activities or net increase in cash. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 3 – Summary of Significant Accounting Policies Basis of Presentation The unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and within the rules of the Securities and Exchange Commission (“SEC”) applicable to interim financial statements and therefore do not include all disclosures that might normally be required for financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying unaudited condensed consolidated financial statements have been prepared by management without audit and should be read in conjunction with our consolidated financial statements, including the notes thereto, appearing in our Annual Report on Form 10-K for Fiscal 2016. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial position, consolidated results of operations and consolidated cash flows, for the periods indicated, have been made. The results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of operating results that may be achieved over the course of the full year. Historical financial statements have been reclassified to conform to the current period presentation, principally reflecting the sale of Cold-EEZE ® Discontinued Operations Carve Out and ProPhase Allocations For the three and nine months ended September 30, 2017 and 2016, results from operations for our Cold-EEZE ® ® ® Seasonality of the Business Our net sales are derived principally from our OTC heath care and cold remedy products sold in the United States of America. Our sales are influenced by and subject to fluctuations in the timing of purchase and the ultimate level of demand for our products which are a function of the timing, length and severity of each cold season. Generally, a cold season is defined as the period of September to March when the incidence of the common cold rises as a consequence of the change in weather and other factors. We generally experience in the first, third and fourth quarter higher levels of net sales. Revenues are generally at their lowest levels in the second quarter when customer demand generally declines. For the three and nine months ended September 30, 2017 and 2016, our net sales were principally related to domestic markets. Use of Estimates The preparation of financial statements and the accompanying notes thereto, in conformity with GAAP, requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the respective reporting periods. Examples include the provision for bad debt, sales returns and allowances, inventory obsolescence, useful lives of property and equipment, impairment of property and equipment, income tax valuations and assumptions related to accrued advertising. When providing for the appropriate sales returns, allowances, cash discounts and cooperative incentive promotion costs, we apply a uniform and consistent method for making certain assumptions for estimating these provisions. These estimates and assumptions are based on historical experience, current trends and other factors that management believes to be relevant at the time the financial statements are prepared. Management reviews the accounting policies, assumptions, estimates and judgments on a quarterly basis. Actual results could differ from those estimates. Cash and Cash Equivalents We consider all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Cash equivalents include cash on hand and monies invested in money market funds. The carrying amount approximates the fair market value due to the short-term maturity of these investments. Marketable Securities We have classified our investments in marketable securities as available-for-sale and as a current asset. Our investments in marketable securities are carried at fair value, with unrealized gains and losses included as a separate component of stockholders’ equity. Realized gains and losses from our marketable securities recorded as other income (expense). We initiated short term investments in marketable securities, which carry maturity dates under one year from date of purchase with interest rates of 0.87% - 1.56%, during the third quarter of Fiscal 2017. For those three and nine months ended September 30, 2017, we reported an unrealized loss of $35,000. Unrealized gains and losses are classified as other comprehensive income (loss) and the cost is determined on a specific identification basis. The following is a summary of the components of our marketable securities and the underlying fair value input level tier hierarchy (see long-lived assets below) (in thousands): As of September 30, 2017 Input Amortizied Unrealized Unrealized Market Level cost gain loss Value U.S. government obligations Level 2 $ 6,455 $ - $ 1 $ 6,454 Corporate obligations Level 2 17,221 - 34 17,187 $ 23,676 $ - $ 35 $ 23,641 Inventory Valuation Inventory is valued at the lower of cost, determined on a first-in, first-out basis (FIFO), or market. Inventory items are analyzed to determine cost and the market value and appropriate valuation adjustments are established. At September 30, 2017 and December 31, 2016, the financial statements include adjustments to reduce inventory for excess or obsolete inventory of $1.5 million and $1.6 million, respectively. The components of inventory are as follows (in thousands): September 30, December 31, 2017 2016 Raw materials $ 1,493 $ 1,404 Work in process 366 466 Finished goods 133 866 $ 1,992 $ 2,736 Property, Plant and Equipment Property, plant and equipment are recorded at cost. We use the straight-line method in computing depreciation for financial reporting purposes. Depreciation expense is computed in accordance with the following ranges of estimated asset lives: building and improvements – ten to thirty-nine years; machinery and equipment – three to seven years; computer software – three years; and furniture and fixtures – five years. Concentration of Risks Future revenues, costs, margins and profits will continue to be influenced by our ability to maintain our manufacturing availability and capacity together with our marketing and distribution capabilities and the regulatory requirements associated with the development of OTC and other personal care products in order to compete on a national level and/or international level. Our business is subject to federal and state laws and regulations adopted for the health and safety of users of our products. Our OTC health care products are subject to regulations by various federal, state and local agencies, including the Food and Drug Administration (“FDA”) and, as applicable, the Homeopathic Pharmacopoeia of the United States. Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash investments, marketable securities and trade accounts receivable. Our marketable securities are fixed income investments which are highly liquid and can be readily purchased or sold through established markets. We maintain cash and cash equivalents with certain major financial institutions. As of September 30, 2017, our cash balance was $3.9 million and our bank balance was $3.6 million. Of the total bank balance, $500,000 was covered by federal depository insurance and $3.1 million was uninsured at September 30, 2017. Trade accounts receivable potentially subject us to credit concentrations from time-to-time as a consequence of the timing, payment pattern and ultimate purchase volumes or shipping schedules with our customers. We extend credit to our customers based upon an evaluation of the customer’s financial condition and credit history and generally we do not require collateral. Our customers include consumer products companies and large national chain, regional, specialty and local retail stores. These credit concentrations may impact our overall exposure to credit risk, either positively or negatively, in that our customers may be similarly affected by changes in economic, regulatory or other conditions that may impact the timing and collectability of amounts due to us. As a consequence of an evaluation of our customer’s financial condition, payment patterns, balance due to us and other factors, we did not offset our account receivable with an allowance for bad debt at September 30, 2017 and December 31, 2016. Long-lived Assets We review our carrying value of our long-lived assets with definite lives whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. When indicators of impairment exist, we determine whether the estimated undiscounted sum of the future cash flows of such assets is less than their carrying amounts. If less, an impairment loss is recognized in the amount, if any, by which the carrying amount of such assets exceeds their respective fair values. The determination of fair value is based on quoted market prices in active markets, if available, or independent appraisals; sales price negotiations; or projected future cash flows discounted at a rate determined by management to be commensurate with our business risk. The estimation of fair value utilizing discounted forecasted cash flows includes significant judgments regarding assumptions of revenue, operating and marketing costs; selling and administrative expenses; interest rates; property and equipment additions and retirements; industry competition; and general economic and business conditions, among other factors. Fair value is based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, a three-tier fair value hierarchy prioritizes the inputs used to measure fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. Fair Value of Financial Instruments Cash and cash equivalents, marketable securities, accounts receivable, assets held for sale, accounts payable, accrued expenses and notes payable are reflected in the Condensed Consolidated Financial Statements at carrying value which approximates fair value. We account for our marketable securities at fair value pursuant to Accounting Standards Codification, or ASC, 820-10, with the net unrealized gains or losses reported as a component of accumulated other comprehensive income or loss. As of September 30, 2017 Level 1 Level 2 Level 3 Total Marketable securities U.S. government obligations $ - $ 6,454 $ - $ 6,454 Corporate obligations - 17,187 - 17,187 $ - $ 23,641 $ - $ 23,641 Revenue Recognition We generate sales principally through two types of customers, contract manufacturing customers and retail customers. Sales from product shipments to contract manufacturing and retailer customer are recognized at the time ownership is transferred to the customer. Revenue from retailer customers is reduced for trade promotions, estimated sales returns, cash discounts and other allowances in the same period as the related sales are recorded. We make estimates of potential future product returns and other allowances related to current period revenue. We analyze historical returns, current trends, and changes in customer and consumer demand when evaluating the adequacy of the sales returns and other allowances. Our return policy for retailer customers accommodates returns for (i) discontinued products, (ii) store closings and (iii) products that have reached or exceeded their designated expiration date. We do not impose a period of time within which product may be returned. All requests for product returns must be submitted to us for pre-approval. The main components of our returns policy are: (i) we will accept returns that are due to damaged product that is un-saleable and such return request activity falls within an acceptable range, (ii) we will accept returns for products that have reached or exceeded designated expiration dates and (iii) we will accept returns in the event that we discontinue a product provided that the customer will have the right to return only such items that it purchased directly from us. We will not accept return requests pertaining to customer inventory “Overstocking” or “Resets”. We will only accept return requests for product in its intended package configuration. We reserve the right to terminate shipment of product to customers who have made unauthorized deductions contrary to our return policy or pursue other methods of reimbursement. We compensate the customer for authorized returns by means of a credit applied to amounts owed or to be owed and in the case of discontinued product only, also by way of an exchange. We do not have any significant product exchange history. Pursuant to the terms of the Asset Purchase Agreement, we are responsible for and continue to accept product returns of the Cold-EEZE ® As of September 30, 2017 and December 31, 2016, we included a provision for sales allowances of zero and $108,000, respectively. Additionally, accrued advertising and other allowances as of September 30, 2017 included (i) $902,000 for estimated future sales returns and (ii) $371,000 for cooperative incentive promotion costs. As of December 31, 2016, accrued advertising and other allowances included (i) $1.2 million for estimated future sales returns and (ii) $1.5 million for cooperative incentive promotion costs. One of our customers accounted for 50.7% of our revenues in the nine months ended September 30, 2017, compared to one customer accounted for 68.3% of our revenues in Fiscal 2016. Advertising and Incentive Promotions Advertising and incentive promotion costs are expensed within the period in which they are utilized. Advertising and incentive promotion expense is comprised of (i) media advertising, presented as part of sales and marketing expense, (ii) cooperative incentive promotions and coupon program expenses, which are accounted for as part of net sales, and (iii) free product, which is accounted for as part of cost of sales. Advertising and incentive promotion expenses incurred (i) from continuing operations for the three months ended September 30, 2017 and 2016 were $22,000 and $46,000, respectively, and (ii) attributed to and classified as discontinued operations were zero and $1.1 million, respectively. Advertising and incentive promotion expenses incurred (i) from continuing operations for the nine months ended September 30, 2017 and 2016 were $78,000 and $385,000, respectively, and (ii) attributed to and classified as discontinued operations were $2.8 million and $4.5 million, respectively. Included in prepaid expenses and other current assets was $10,000 and $263,000 at September 30, 2017 and December 31, 2016, respectively, relating to prepaid advertising and promotion expenses. Shipping and Handling Product sales may carry shipping and handling charges to the purchaser, included as part of the invoiced price, which is classified as revenue. In all cases, costs related to this revenue are recorded in cost of sales. Stock-Based Compensation We recognize all share-based payments to employees and directors, including grants of stock options, as compensation expense in the financial statements based on their fair values. Fair values of stock options are determined through the use of the Black-Scholes option pricing model. The compensation cost is recognized as an expense over the requisite service period of the award, which usually coincides with the vesting period. Stock and stock options for the purchase of our common stock, $0.0005 par value (“Common Stock”), have been granted to both employees and non-employees pursuant to the terms of certain agreements and stock option plans (see Note 6). Stock options are exercisable during a period determined by us, but in no event later than ten years from the date granted. For the three months ended September 30, 2017 and 2016, we charged to operations $28,000 and zero, respectively, for share-based compensation expense for the aggregate fair value of stock grants issued and vested stock options earned. For the nine months ended September 30, 2017 and 2016, we charged to operations $46,000 and $1,000, respectively, for share-based compensation expense for the aggregate fair value of stock grants issued and vested stock options earned. Research and Development Research and development costs are charged to operations in the period incurred. Research and development costs incurred for the three months ended September 30, 2017 and 2016 (i) from continuing operations were $60,000 and $43,000, respectively, and (ii) attributed to and classified as discontinued operations of zero and $77,000, respectively. Research and development costs incurred for the nine months ended September 30, 2017 and 2016 (i) from continuing operations were $318,000 and $202,000, respectively, and (ii) attributed to and classified as discontinued operations of $52,000 and $172,000, respectively. Research and development costs are principally related to personnel expenses and new product development initiatives and costs associated with our OTC health care products. Income Taxes We utilize the asset and liability approach which requires the recognition of deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our financial statements or tax returns. In estimating future tax consequences, we generally consider all expected future events other than enactments of changes in the tax law or rates. Until we have sufficient taxable income to offset the temporary timing differences attributable to operations and the tax deductions attributable to option, warrant and stock activities are assured, a full valuation allowance equaling the total deferred tax asset is being provided (see Notes 4 and 7). We utilize a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than fifty percent likely of being realized upon ultimate settlement. Any interest or penalties related to income taxes will be recorded as interest or administrative expense, respectively. As a result of our continuing tax losses, we have recorded a full valuation allowance against a net deferred tax asset. Additionally, we have not recorded a liability for unrecognized tax benefits. Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers”, on revenue recognition. The new standard provides for a single five-step model to be applied to all revenue contracts with customers as well as requires additional financial statement disclosures that will enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. Companies have an option to use either a retrospective approach or cumulative effect adjustment approach to implement the standard. This ASU, as amended, is effective for fiscal years and interim periods within those years beginning after December 15, 2017. We plan to adopt the provisions of the new standard in the first quarter of 2018. The Company is utilizing a comprehensive approach to access the impact of the guidance our revenue. Additionally, the Company is evaluating the impact of the new guidance on disclosures, as well as the impact on controls to support the recognition. We do not believe that its adoption will not have a material impact on our consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02 “Leases”. The new standard will require most leases to be recognized on the balance sheet which will increase reported assets and liabilities. Lessor accounting remains substantially similar to current guidance. The new standard is effective for annual and interim periods in fiscal years beginning after December 15, 2018, which for us is the first quarter of fiscal 2019 and mandates a modified retrospective transition method. We do not intend to early adopt and are currently assessing the impact of this update, but preliminarily believe that its adoption will not have a material impact on our consolidated financial statements. In April 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting”. The new standard simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. We adopted the standard in January 2017 with no material impact on our consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses.” The standard modifies the impairment model for most financial assets, including trade accounts receivables and loans, and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. The effective date of the standard is for fiscal years beginning after December 15, 2019 with early adoption permitted. We are currently evaluating the impact adoption of this update will have on our consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments” . In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes: Intra-Entity Transfers of Assets Other than Inventory”. The new standard requires entities should recognize the income tax consequences of an asset other than inventory when the asset transfer occurs. The new guidance will be effective for fiscal years beginning after December 15, 2017 and requires a modified retrospective adoption through a cumulative effect adjustment directly to retained earnings as of the beginning of the period of adoption. We are currently evaluating the impact adoption of this update will have on our consolidated financial statements. |
Discontinued Operations, Sale o
Discontinued Operations, Sale of the Cold-EEZE® Business | 9 Months Ended |
Sep. 30, 2017 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Discontinued Operations, Sale of the Cold-EEZE® Business | Note 4 – Discontinued Operations, Sale of the Cold-EEZE ® At the Special Meeting held on March 29, 2017, our stockholders approved the sale of the Cold-EEZE ® ® As a consequence of the sale of the Cold-EEZE ® ® ® ® ® ® Pursuant to the Asset Purchase Agreement, we also agreed to a one-time sale to Mylan of certain non-lozenge-based Cold-EEZE ® Pursuant to the Asset Purchase Agreement, we entered into a 90 day transition service arrangement with Mylan, for which we earned $150,000 in transition service fees through September 30, 2017. Pursuant to this arrangement, we (i) received, processed, fulfilled, and shipped customer orders, and billed such customers for these shipments on behalf of Mylan from March 30, 2017 to June 30, 2017, (ii) processed certain sales allowances, returns and other customer promotional deductions, and (iii) paid certain Cold-EEZE ® ® The net proceeds received from the sale of the Cold-EEZE ® Amount (as restated) Gross consideration from the sale of the Cold-EEZE ® $ 50,000 Closing and transaction costs (4,175 ) Net proceeds from sale of the Cold-EEZE ® 45,825 Book value of assets sold (13 ) Gain on sale of the Cold-EEZE ® 45,812 Income tax expense (3,422 ) Gain on sale of the Cold-EEZE ® $ 42,390 Net proceeds: Cash paid at closing, net of closing and transaction costs $ 43,145 Proceeds due on sale of assets, cash held in escrow 5,000 $ 48,145 For the nine months ended September 30, 2017, we incurred $4.2 million in closing and transaction costs associated with the sale of the Cold-EEZE ® ® The following table sets forth the condensed operating results of our discontinued operations for the three and nine months ended September 30, 2017 and 2016, respectively, (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Net sales - $ 3,787 $ 4,687 $ 9,966 Cost of sales - 1,827 2,037 4,255 Sales and marketing - 524 1,720 3,357 Administration - 406 348 1,061 Research and development - 77 52 172 Income from discontinued operations $ - $ 953 $ 530 $ 1,121 |
Secured Promissory Notes and Ot
Secured Promissory Notes and Other Obligations | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Secured Promissory Notes and Other Obligations | Note 5 – Secured Promissory Notes and Other Obligations Secured Promissory Notes On December 11, 2015, we executed two Subscription Agreements (the “Subscription Agreements”) with the investors named therein (the “Investors”) providing for the purchase of 12% Secured Promissory Notes – Series A (“Notes”) in the aggregate principal amount of up to $3.0 million and warrants to purchase shares of our Common Stock (the “Warrants”). Notes in the amount of $1.5 million and 51,000 Warrants, at an exercise price of $1.35 per share, which was equal to the closing price of our Common Stock on the date of investment, were issued by the Company and its wholly-owned subsidiaries, PMI and Quigley Pharma, Inc. (collectively, the “Obligors”), and funded on December 11, 2015. We incurred loan origination costs of $22,000 which were recorded as a reduction of the Notes and the origination costs were charged to other income (expense) over the term of the loan. The Warrants had an exercise term equal to three years and were exercisable commencing on the date of issuance. The fair value of the Warrants at the date of grant was $14,000 which was recorded as a reduction of the Notes and is charged to other income (expense) over the term of the loan. The Notes bore interest at the rate of 12% per annum, payable semi-annually and the principal was due and payable on June 15, 2017. The Notes could be pre-paid at any time prior to maturity without penalty. The effective interest, inclusive of the Warrant and loan origination costs, was 14.3% per annum. For the nine months ended September 30, 2017 and 2016, we charged to other income (expense) $54,000 and $105,000, respectively, in connection with the Notes. On March 29, 2017, in connection with the sale of the Cold-EEZE ® In connection with the issuance of the Notes, the Company entered into a security agreement with John E. Ligums, Jr., as collateral agent for the Investors (the “Security Agreement”), to secure the timely payment and performance in full of the Company’s obligations under the Notes. Under the Security Agreement, we granted to the collateral agent, for the benefit of the Investors a lien upon and security interest in the property and assets listed as collateral in the Security Agreement, including without limitation, all of our personal property, inventory, equipment, general intangibles, cash and cash equivalents, and proceeds. In connection with the payoff of the Notes, the Security Agreement was terminated. |
Transactions Affecting Stockhol
Transactions Affecting Stockholders' Equity | 9 Months Ended |
Sep. 30, 2017 | |
Equity [Abstract] | |
Transactions Affecting Stockholders' Equity | Note 6 – Transactions Affecting Stockholders’ Equity Our authorized capital stock consists of 50 million shares of Common Stock and 1 million shares of preferred stock, $.0005 par value (“Preferred Stock”). Preferred Stock On June 16, 2015, our stockholders approved the change to our state of incorporation from the State of Nevada to the State of Delaware pursuant to a plan of conversion (the “Conversion Plan”) and the filing of a certificate of incorporation in the State of Delaware. The Preferred Stock authorized under our certificate of incorporation may be issued from time to time in one or more series. As of September 30, 2017, no shares of Preferred Stock have been issued. Our board of directors has the full authority permitted by law to establish, without further stockholder approval, one or more series of Preferred Stock and the number of shares constituting each such series and to fix by resolution, voting powers, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any. Subject to the limitation on the total number of shares of Preferred Stock that we have authority to issue under our certificate of incorporation, the board of directors is also authorized to increase or decrease the number of shares of any series, subsequent to the issue of that series, but not below the number of shares of such series then-outstanding. In case the number of shares of any series is so decreased, the shares constituting such decrease will resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series. We may amend from time to time our certificate of incorporation and bylaws to increase the number of authorized shares of Preferred Stock or Common Stock or to make other changes or additions to our capital structure or the terms of our capital stock. Stockholder Rights Plan On September 8, 1998, our Board of Directors declared a dividend distribution of Common Stock Purchase Rights (each individually, a “Right” and collectively, the “Rights”) payable to our stockholders of record on September 25, 1998, thereby creating a Stockholder Rights Plan (the “Rights Agreement”). The Plan was subsequently amended effective each of (i) May 23, 2008, (ii) August 18, 2009, (iii) June 18, 2014 and (iv) January 6, 2017. The Rights Agreement, as amended and restated, provides that each Right entitles the stockholder of record to purchase from the Company that number of shares of Common Stock having a combined market value equal to two times the Rights exercise price of $45. The Rights are not exercisable until the distribution date, which will be the earlier of a public announcement that a person or group of affiliated or associated persons has acquired 15% or more of the outstanding shares of Common Stock, or the announcement of an intention by a similarly constituted party to make a tender or exchange offer resulting in the ownership of 15% or more of the outstanding shares of Common Stock (such person, the “acquirer”). The Rights Agreement allows for an exemption for Ted Karkus, the Company’s Chairman and Chief Executive Officer, to acquire up to 20% of our Common Stock without our Board of Directors declaring a dividend distribution. The dividend has the effect of diluting the acquirer by giving our other stockholders a 50% discount on our Common Stock’s current market value for exercising the Rights. In the event of a cashless exercise of the Right and the acquirer has acquired less than 50% beneficial ownership of the Company, a stockholder may exchange one Right for one share of Common Stock of the Company. The Rights Agreement, as amended, includes a provision pursuant to which our Board of Directors may exempt from the provisions of the Rights Agreement an offer for all outstanding shares of our Common Stock that the Board of Directors determines to be fair and not inadequate and to otherwise be in the best interests of the Company and its stockholders, after receiving advice from one or more investment banking firms. The expiration date of the Rights Agreement, as amended, is June 18, 2024. Equity Line of Credit On July 30, 2015, we entered into a new equity line of credit agreement (such arrangement, the “2015 Equity Line”) with Dutchess Opportunity Fund II, LP (“Dutchess”). Pursuant to the 2015 Equity Line, Dutchess committed to purchase, subject to certain restrictions and conditions, up to 3,200,000 shares of our Common Stock, over a period of 36 months from the effectiveness of the registration statement registering the resale of shares purchased by Dutchess pursuant to the Investment Agreement. We may, at our discretion, draw on the 2015 Equity Line from time to time, as and when we determine appropriate in accordance with the terms and conditions of the 2015 Equity Line. The maximum number of shares that we are entitled to put to Dutchess in any one draw down notice shall not exceed 500,000 shares with a purchase price calculated in accordance with the terms of the 2015 Equity Line. We may deliver a notice for a subsequent put from time to time, following the one day pricing period for the prior put. The purchase price shall be set at ninety-five percent (95%) of the volume weighted average price (VWAP) of the Common Stock during the one trading day immediately following our put notice. We have the right to withdraw all or any portion of any put, except that portion of the put that has already been sold to a third party, including any portion of a put that is below the minimum acceptable price set forth on the put notice, before the closing. In the event Dutchess receives more than a five percent (5%) return on the net sales for a specific put, Dutchess must remit such excess proceeds to us; however, in the event Dutchess receives less than a five percent (5%) return on the net sales for a specific put, Dutchess will have the right to deduct from the proceeds of the put amount on the applicable closing date so Dutchess’s return will equal five percent (5%). There are put restrictions applied on days between the draw down notice date and the closing date with respect to that particular put. During such time, we are entitled to deliver another draw down notice. In addition, Dutchess will not be obligated to purchase shares if Dutchess’ total number of shares beneficially held at that time would exceed 4.99% of the number of shares of Common Stock as determined in accordance with Rule 13d-1(j) of the Securities Exchange Act of 1934, as amended. In addition, we are not permitted to draw on the facility unless there is an effective registration statement to cover the resale of the shares. Pursuant to the terms of the 2015 Equity Line, we are obligated to file one or more registration statements with the SEC to register the resale by Dutchess of the shares of Common Stock issued or issuable under the 2015 Equity Line. In addition, we are obligated to use all commercially reasonable efforts to have the registration statement declared effective by the SEC within 90 days after the registration statement is filed. On August 4, 2015, we filed a registration statement for the underlying shares of the 2015 Equity Line with the SEC and the registration statement was declared effective by the SEC on August 21, 2015. At September 30, 2017, we have 2,450,000 shares of our Common Stock available for sale, at our discretion, under the terms of our 2015 Equity Line and covered pursuant to an effective registration statement. The 2010 Equity Compensation Plan On May 5, 2010, our stockholders approved the 2010 Equity Compensation Plan which was subsequently amended, restated and approved by our stockholders on April 24, 2011, and further amended and approved by our stockholders on May 6, 2013 and May 24, 2016 (the “2010 Plan”). The 2010 Plan provides that the total number of shares of Common Stock that may be issued under the 2010 Plan is equal to 3.2 million shares, including 900,000 shares that are authorized for issuance but unissued under a 1997 incentive stock option plan and 700,000 shares added to the 2010 Plan effective May 24, 2016. For the nine months ended September 30, 2017, we granted to employees to acquire our Common Stock pursuant to the terms of 2010 Plan and aggregate of 625,000 options of which (i) 25,000 options are exercisable at $2.15 per share that vest over three years and (ii) 600,000 options are exercisable at $2.00 per share that vest over four years. The assumptions used in determining the fair value of the 25,000 stock options granted in the third quarter of Fiscal 2017 were (i) expected option life of 4.5 years, (ii) weighted average risk rate of 1.62%, (iii) dividend yield of 0% and (iv) expected volatility of 38.59%. The assumptions used in determining the fair value of the 600,000 stock options granted in the second quarter of Fiscal 2017 were (i) expected option life of 4.75 years, (ii) weighted average risk rate of 1.81%, (iii) dividend yield of 0% and (iv) expected volatility of 44.51%. No options were granted for the three months and nine months ended September 30, 2016. For the three months and nine months ended September 30, 2017, stock options of 592,000 and 682,000, respectively, were exercised pursuant to the 2010 Plan and we derived net proceeds of $752,000 and $854,000, respectively. For the nine months ended September 30, 2016, there were no stock options exercised. At September 30, 2017, there were 1,642,000 options outstanding under the 2010 Plan and 108,659 options available to be issued pursuant to the terms of the 2010 Plan. The 2010 Directors’ Equity Compensation Plan On May 5, 2010, our stockholders approved the 2010 Directors’ Equity Compensation Plan, which was subsequently amended and approved by stockholders on May 6, 2013. A primary purpose of the 2010 Directors’ Equity Compensation Plan is to provide us with the ability to pay all or a portion of the fees of directors in restricted stock instead of cash. The 2010 Directors’ Equity Compensation Plan provides that the total number of shares of Common Stock that may be issued under the 2010 Directors’ Equity Compensation Plan is equal to 425,000. For the nine months ended September 30, 2017 and 2016, no shares were granted to our directors. At September 30, 2017, there were 147,808 shares of Common Stock that may be issued pursuant to the terms of the 2010 Directors’ Equity Compensation Plan. Treasury Stock Stock Purchase Agreements On June 12, 2017 we entered into a Stock Purchase Agreement with each of Mark S. Leventhal, a former director of the Company, and certain other persons and entities associated and/or affiliated with Mr. Leventhal (the “Leventhal Holders”), pursuant to which we purchased all 1,061,980 shares of our Common Stock then held by the Leventhal Holders, representing an approximate 6.2% aggregate ownership interest (based on 17.2 million shares of common stock outstanding as of June 12, 2017). Upon consummation of the transactions, the Leventhal Holders ceased to hold any direct or indirect ownership interest in the Company. Pursuant to the terms of the Stock Purchase Agreements, the total consideration paid by us to the Leventhal Holders for their shares was $1,858,465, which amount was equal to the product of (i) $1.75 multiplied by (ii) the number of shares purchased. Tender Offer On August 25, 2017, we announced a tender offer to purchase up to 4.0 million shares of our Common Stock at a price of $2.30 per share (the “Tender Offer”). The number of shares proposed to be purchased in the tender offer represented approximately 24.7% of the approximately 16.2 million shares of our Common Stock issued and outstanding as of August 21, 2017. The last reported sale price of our Common Stock on August 15, 2017, the last full trading day before we announced the Tender Offer, was $2.13 per share. The Tender Offer expired on September 25, 2017. Subject to the terms of the Tender Offer, we accepted for purchase 4,323,335 shares of our Common Stock, including all “odd lots” validly tendered, at a purchase price of $2.30 per share, for an aggregate purchase price of approximately $9.9 million. Based on the final tabulation by American Stock Transfer & Trust Company, the Depositary for the Tender Offer, 5,910,327 shares of our Common Stock were properly tendered and not withdrawn. We were informed by the Depositary that, after giving effect to the priority for an aggregate amount of approximately 9,338 “odd lot” shares, the final proration factor for the remaining tendered shares is approximately 73%. Prior to the Tender Offer, an investor, BML Investment Partners, L.P. (“BLM”), owned 2,322,627 shares, or 13.6%, of our outstanding Common Stock. Pursuant to the terms of the Tender Offer, BML tendered and sold 1,695,305 shares of our Common Stock. In addition, Ted Karkus, our Chairman of the Board and Chief Executive Officer, Robert V. Cuddihy, Jr., our then Chief Operating Officer and Chief Financial Officer, and one of our directors tendered and sold 364,954, 358,621 and 4,379 shares of Common Stock, respectively. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 7 – Income Taxes At December 31, 2016, there were $47.1 million in net operating loss carryforwards, subject to applicable limitations, available to us for federal purposes which will expire beginning for the year ended December 31, 2020 through 2036. Additionally, there were $22.1 million in net operating loss carryforwards, subject to limitations, available to us for state purposes which will expire beginning for the year ended December 31, 2020 through 2036. We believe that a significant portion of our income tax liability arising from our taxable gain for federal and state income tax purposes from the sale of the Cold-EEZE ® ® ® Utilization of net operating loss carryforwards may be subject to limitations as set forth in Section 382 of the Internal Revenue Code (“Section 382”). Based on our preliminary Section 382 analysis, we do not believe that our current net operating loss carryforwards are subject to these limitations as of September 30, 2017. However, until we complete a final Section 382 analysis upon filing of our 2017 income tax return, there can be no assurances that our preliminary analysis is accurate or complete. Should we identify any limitations upon the completion of our final Section 382 analysis, the impact could be material to our consolidated financial statements and that we could incur additional income tax expense arising from the sale of the Cold-EEZE ® For the nine months ended September 30, 2017, we charged to discontinued operations $3.4 million for estimated federal and state income taxes arising from the sale of the Cold-EEZE ® Subsequent to the income tax effects arising from the sale of the Cold-EEZE ® |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 8– Commitments and Contingencies Escrow Receivable We have indemnification obligations to Mylan under the Asset Purchase Agreement that may require us to make future payments to Mylan and other related persons for any damages incurred by Mylan or such related persons as a result of any breaches of our representations, warranties, covenants or agreements contained in the Asset Purchase Agreement, or arising from the Retained Liabilities (as such term is defined in the Asset Purchase Agreement) or certain third party claims specified in the Asset Purchase Agreement. Generally, our representations and warranties survive for a period of 24 months from the closing date, other than certain fundamental representations which survive until the expiration of the applicable statute of limitations. There is a limited indemnification cap with respect to a majority of the Company’s indemnification obligations under the Asset Purchase Agreement with the exception of claims for actual fraud, the breach of any fundamental representations and certain other items, which have a larger indemnification cap (e.g., the purchase price). Pursuant to the terms of the Asset Purchase Agreement, we, Mylan, and an escrow agent entered into an Escrow Agreement at closing, pursuant to which Mylan deposited $5 million of the aggregate purchase price for the Cold-EEZE ® th Management does not believe that we will be subject to indemnity claims contemplated by the Asset Purchase Agreement. However, in the event that such a claim is made, and if successful, we would be required to pay Mylan pursuant to the indemnification provisions of the Asset Purchase Agreement which may reduce the amount we ultimately collect from escrow or could even require us to return a portion of the net proceeds received from the sale of the Cold-EEZE ® Manufacturing Agreement In connection with the Asset Purchase Agreement, the Company and its wholly-owned subsidiary, PMI, entered into a Manufacturing Agreement (the “Manufacturing Agreement”) with Mylan. Pursuant to the terms of the Manufacturing Agreement, Mylan (or an affiliate or designee) will purchase the inventory of the Company’s Cold-EEZE ® Transition Services Agreement In connection with the Asset Purchase Agreement, we entered into a transition services agreement with Mylan to provide litigation support, insurance coverage, supply chain, customer support, finance, accounting, commercial advertising and packaging services, quality control, IT and research and development services to Mylan for time periods ranging from two to nine months from the closing date. We will continue to incur certain operating costs during the transition period to support Mylan. Future Obligations: We have estimated future minimum obligations over the next five years, including the remainder of Fiscal 2017, as follows (in thousands): Fiscal Year Employment Contracts 2017 169 2018 675 2019 169 2020 - 2021 - Total $ 1,013 Other Commitments: On September 27, 2017, we entered into an Employment Agreement Termination and Release Agreement with Robert V. Cuddihy, Jr., our former Chief Financial Officer (the “Termination Agreement”). The Termination Agreement provides that Mr. Cuddihy’s employment agreement will terminate effective September 30, 2017, and that on the expiration of the seven day revocation period from the date Mr. Cuddihy signs the Termination Agreement, and subject to his not having revoked the Termination Agreement prior to that time, we would pay Mr. Cuddihy a one-time lump sum payment of $55,000 by October 15, 2017. The Termination Agreement contains a general release of claims in favor of us and other customary provisions. The one-time payment to Mr. Cuddihy was paid on October 20, 2017. |
Earnings (Loss) Per Share
Earnings (Loss) Per Share | 9 Months Ended |
Sep. 30, 2017 | |
Earnings Per Share [Abstract] | |
Earnings (Loss) Per Share | Note 9 – Earnings (Loss) Per Share Basic earnings (loss) per share for continuing and discontinued operations are computed by dividing respective net income or loss attributable to common stockholders by the weighted-average number of shares of our Common Stock outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock or resulted in the issuance of Common Stock that shared in the earnings of the entity. Diluted earnings (loss) per share also utilize the treasury stock method which prescribes a theoretical buy-back of shares from the theoretical proceeds of all options and warrants outstanding during the period. Options and warrants outstanding to acquire shares of our Common Stock at September 30, 2017 and 2016 were 1,642,000 and 1,706,500, respectively. For the three months ended September 30, 2017 dilutive earnings (loss) per share is the same as basic earnings per share due to (i) the inclusion of Common Stock, in the form of stock options and warrants (“Common Stock Equivalents”), would have an anti-dilutive effect on the loss per share or (ii) there were no Common Stock Equivalents for the respective period. For the three months ended September 30, 2017 there were 504,170 Common Stock Equivalents which were in the money, that were excluded from the loss per share computation as a consequence of their anti-dilutive effect. For the nine months ended September 30, 2017, for continuing operations diluted loss per share is the same as basic loss per share due to the inclusion of Common Stock Equivalents, would have an anti-dilutive effect on the loss per share from continuing operations. For the nine months ended September 30, 2017 there were 456,728 Common Stock Equivalents which were in the money, that were included in the fully diluted earnings per share from discontinued operations computation. For the three months ended September 30, 2016 there were 519,162 Common Stock Equivalents which were in the money, that were included in the fully diluted earnings per share computation. For the nine months ended September 30, 2016, for continuing operations dilutive earnings (loss) per share is the same as basic earnings per share due to (i) the inclusion of Common Stock Equivalents, would have an anti-dilutive effect on the loss per share or (ii) there were no Common Stock Equivalents for the respective period. For the nine months ended September 30, 2016, there were 342,248, Common Stock Equivalents which were in the money, that were excluded from the earnings (loss) per share computation as a consequence of their anti-dilutive effect. |
Subsequent Event
Subsequent Event | 9 Months Ended |
Sep. 30, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Event | Note 10 – Subsequent Event On November 10, 2017, we announced our intention to commence a tender offer to purchase up to 1,700,000 shares of our Common Stock at a price per share of $2.30 per share. We anticipate that the tender offer will be launched on or before November 20, 2017 and will remain open for at least 20 business days from initiation. If the maximum number of shares to be purchased in the tender offer were in fact tendered, the number of shares that would then be purchased in the tender offer represents approximately 13.7% of our currently issued and outstanding common shares. If stockholders tender more than 1,700,000 shares, the maximum sought in the tender offer, ProPhase will purchase shares from all stockholders who properly tender shares, on a pro rata basis, based on the aggregate number of shares tendered. The NASDAQ Official Closing Price of our Common Stock on November 9, 2017 was $2.11 per share. As of November 10, 2017, we have approximately $27.7 million in cash and cash equivalents and marketable securities, a portion of which will be used to fund the tender offer. |
Summary of Significant Accoun17
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and within the rules of the Securities and Exchange Commission (“SEC”) applicable to interim financial statements and therefore do not include all disclosures that might normally be required for financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying unaudited condensed consolidated financial statements have been prepared by management without audit and should be read in conjunction with our consolidated financial statements, including the notes thereto, appearing in our Annual Report on Form 10-K for Fiscal 2016. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial position, consolidated results of operations and consolidated cash flows, for the periods indicated, have been made. The results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of operating results that may be achieved over the course of the full year. Historical financial statements have been reclassified to conform to the current period presentation, principally reflecting the sale of Cold-EEZE ® |
Discontinued Operations Carve Out and ProPhase Allocations | Discontinued Operations Carve Out and ProPhase Allocations For the three and nine months ended September 30, 2017 and 2016, results from operations for our Cold-EEZE ® ® ® |
Seasonality of the Business | Seasonality of the Business Our net sales are derived principally from our OTC heath care and cold remedy products sold in the United States of America. Our sales are influenced by and subject to fluctuations in the timing of purchase and the ultimate level of demand for our products which are a function of the timing, length and severity of each cold season. Generally, a cold season is defined as the period of September to March when the incidence of the common cold rises as a consequence of the change in weather and other factors. We generally experience in the first, third and fourth quarter higher levels of net sales. Revenues are generally at their lowest levels in the second quarter when customer demand generally declines. For the three and nine months ended September 30, 2017 and 2016, our net sales were principally related to domestic markets. |
Use of Estimates | Use of Estimates The preparation of financial statements and the accompanying notes thereto, in conformity with GAAP, requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the respective reporting periods. Examples include the provision for bad debt, sales returns and allowances, inventory obsolescence, useful lives of property and equipment, impairment of property and equipment, income tax valuations and assumptions related to accrued advertising. When providing for the appropriate sales returns, allowances, cash discounts and cooperative incentive promotion costs, we apply a uniform and consistent method for making certain assumptions for estimating these provisions. These estimates and assumptions are based on historical experience, current trends and other factors that management believes to be relevant at the time the financial statements are prepared. Management reviews the accounting policies, assumptions, estimates and judgments on a quarterly basis. Actual results could differ from those estimates. |
Cash and Cash Equivalents | Cash and Cash Equivalents We consider all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Cash equivalents include cash on hand and monies invested in money market funds. The carrying amount approximates the fair market value due to the short-term maturity of these investments. |
Marketable Securities | Marketable Securities We have classified our investments in marketable securities as available-for-sale and as a current asset. Our investments in marketable securities are carried at fair value, with unrealized gains and losses included as a separate component of stockholders’ equity. Realized gains and losses from our marketable securities recorded as other income (expense). We initiated short term investments in marketable securities, which carry maturity dates under one year from date of purchase with interest rates of 0.87% - 1.56%, during the third quarter of Fiscal 2017. For those three and nine months ended September 30, 2017, we reported an unrealized loss of $35,000. Unrealized gains and losses are classified as other comprehensive income (loss) and the cost is determined on a specific identification basis. The following is a summary of the components of our marketable securities and the underlying fair value input level tier hierarchy (see long-lived assets below) (in thousands): As of September 30, 2017 Input Amortizied Unrealized Unrealized Market Level cost gain loss Value U.S. government obligations Level 2 $ 6,455 $ - $ 1 $ 6,454 Corporate obligations Level 2 17,221 - 34 17,187 $ 23,676 $ - $ 35 $ 23,641 |
Inventory Valuation | Inventory Valuation Inventory is valued at the lower of cost, determined on a first-in, first-out basis (FIFO), or market. Inventory items are analyzed to determine cost and the market value and appropriate valuation adjustments are established. At September 30, 2017 and December 31, 2016, the financial statements include adjustments to reduce inventory for excess or obsolete inventory of $1.5 million and $1.6 million, respectively. The components of inventory are as follows (in thousands): September 30, December 31, 2017 2016 Raw materials $ 1,493 $ 1,404 Work in process 366 466 Finished goods 133 866 $ 1,992 $ 2,736 |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment are recorded at cost. We use the straight-line method in computing depreciation for financial reporting purposes. Depreciation expense is computed in accordance with the following ranges of estimated asset lives: building and improvements – ten to thirty-nine years; machinery and equipment – three to seven years; computer software – three years; and furniture and fixtures – five years. |
Concentration of Risks | Concentration of Risks Future revenues, costs, margins and profits will continue to be influenced by our ability to maintain our manufacturing availability and capacity together with our marketing and distribution capabilities and the regulatory requirements associated with the development of OTC and other personal care products in order to compete on a national level and/or international level. Our business is subject to federal and state laws and regulations adopted for the health and safety of users of our products. Our OTC health care products are subject to regulations by various federal, state and local agencies, including the Food and Drug Administration (“FDA”) and, as applicable, the Homeopathic Pharmacopoeia of the United States. Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash investments, marketable securities and trade accounts receivable. Our marketable securities are fixed income investments which are highly liquid and can be readily purchased or sold through established markets. We maintain cash and cash equivalents with certain major financial institutions. As of September 30, 2017, our cash balance was $3.9 million and our bank balance was $3.6 million. Of the total bank balance, $500,000 was covered by federal depository insurance and $3.1 million was uninsured at September 30, 2017. Trade accounts receivable potentially subject us to credit concentrations from time-to-time as a consequence of the timing, payment pattern and ultimate purchase volumes or shipping schedules with our customers. We extend credit to our customers based upon an evaluation of the customer’s financial condition and credit history and generally we do not require collateral. Our customers include consumer products companies and large national chain, regional, specialty and local retail stores. These credit concentrations may impact our overall exposure to credit risk, either positively or negatively, in that our customers may be similarly affected by changes in economic, regulatory or other conditions that may impact the timing and collectability of amounts due to us. As a consequence of an evaluation of our customer’s financial condition, payment patterns, balance due to us and other factors, we did not offset our account receivable with an allowance for bad debt at September 30, 2017 and December 31, 2016. |
Long-lived Assets | Long-lived Assets We review our carrying value of our long-lived assets with definite lives whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. When indicators of impairment exist, we determine whether the estimated undiscounted sum of the future cash flows of such assets is less than their carrying amounts. If less, an impairment loss is recognized in the amount, if any, by which the carrying amount of such assets exceeds their respective fair values. The determination of fair value is based on quoted market prices in active markets, if available, or independent appraisals; sales price negotiations; or projected future cash flows discounted at a rate determined by management to be commensurate with our business risk. The estimation of fair value utilizing discounted forecasted cash flows includes significant judgments regarding assumptions of revenue, operating and marketing costs; selling and administrative expenses; interest rates; property and equipment additions and retirements; industry competition; and general economic and business conditions, among other factors. Fair value is based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, a three-tier fair value hierarchy prioritizes the inputs used to measure fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Cash and cash equivalents, marketable securities, accounts receivable, assets held for sale, accounts payable, accrued expenses and notes payable are reflected in the Condensed Consolidated Financial Statements at carrying value which approximates fair value. We account for our marketable securities at fair value pursuant to Accounting Standards Codification, or ASC, 820-10, with the net unrealized gains or losses reported as a component of accumulated other comprehensive income or loss. As of September 30, 2017 Level 1 Level 2 Level 3 Total Marketable securities U.S. government obligations $ - $ 6,454 $ - $ 6,454 Corporate obligations - 17,187 - 17,187 $ - $ 23,641 $ - $ 23,641 |
Revenue Recognition | Revenue Recognition We generate sales principally through two types of customers, contract manufacturing customers and retail customers. Sales from product shipments to contract manufacturing and retailer customer are recognized at the time ownership is transferred to the customer. Revenue from retailer customers is reduced for trade promotions, estimated sales returns, cash discounts and other allowances in the same period as the related sales are recorded. We make estimates of potential future product returns and other allowances related to current period revenue. We analyze historical returns, current trends, and changes in customer and consumer demand when evaluating the adequacy of the sales returns and other allowances. Our return policy for retailer customers accommodates returns for (i) discontinued products, (ii) store closings and (iii) products that have reached or exceeded their designated expiration date. We do not impose a period of time within which product may be returned. All requests for product returns must be submitted to us for pre-approval. The main components of our returns policy are: (i) we will accept returns that are due to damaged product that is un-saleable and such return request activity falls within an acceptable range, (ii) we will accept returns for products that have reached or exceeded designated expiration dates and (iii) we will accept returns in the event that we discontinue a product provided that the customer will have the right to return only such items that it purchased directly from us. We will not accept return requests pertaining to customer inventory “Overstocking” or “Resets”. We will only accept return requests for product in its intended package configuration. We reserve the right to terminate shipment of product to customers who have made unauthorized deductions contrary to our return policy or pursue other methods of reimbursement. We compensate the customer for authorized returns by means of a credit applied to amounts owed or to be owed and in the case of discontinued product only, also by way of an exchange. We do not have any significant product exchange history. Pursuant to the terms of the Asset Purchase Agreement, we are responsible for and continue to accept product returns of the Cold-EEZE ® As of September 30, 2017 and December 31, 2016, we included a provision for sales allowances of zero and $108,000, respectively. Additionally, accrued advertising and other allowances as of September 30, 2017 included (i) $902,000 for estimated future sales returns and (ii) $371,000 for cooperative incentive promotion costs. As of December 31, 2016, accrued advertising and other allowances included (i) $1.2 million for estimated future sales returns and (ii) $1.5 million for cooperative incentive promotion costs. One of our customers accounted for 50.7% of our revenues in the nine months ended September 30, 2017, compared to one customer accounted for 68.3% of our revenues in Fiscal 2016. |
Advertising and Incentive Promotions | Advertising and Incentive Promotions Advertising and incentive promotion costs are expensed within the period in which they are utilized. Advertising and incentive promotion expense is comprised of (i) media advertising, presented as part of sales and marketing expense, (ii) cooperative incentive promotions and coupon program expenses, which are accounted for as part of net sales, and (iii) free product, which is accounted for as part of cost of sales. Advertising and incentive promotion expenses incurred (i) from continuing operations for the three months ended September 30, 2017 and 2016 were $22,000 and $46,000, respectively, and (ii) attributed to and classified as discontinued operations were zero and $1.1 million, respectively. Advertising and incentive promotion expenses incurred (i) from continuing operations for the nine months ended September 30, 2017 and 2016 were $78,000 and $385,000, respectively, and (ii) attributed to and classified as discontinued operations were $2.8 million and $4.5 million, respectively. Included in prepaid expenses and other current assets was $10,000 and $263,000 at September 30, 2017 and December 31, 2016, respectively, relating to prepaid advertising and promotion expenses. |
Shipping and Handling | Shipping and Handling Product sales may carry shipping and handling charges to the purchaser, included as part of the invoiced price, which is classified as revenue. In all cases, costs related to this revenue are recorded in cost of sales. |
Stock-Based Compensation | Stock-Based Compensation We recognize all share-based payments to employees and directors, including grants of stock options, as compensation expense in the financial statements based on their fair values. Fair values of stock options are determined through the use of the Black-Scholes option pricing model. The compensation cost is recognized as an expense over the requisite service period of the award, which usually coincides with the vesting period. Stock and stock options for the purchase of our common stock, $0.0005 par value (“Common Stock”), have been granted to both employees and non-employees pursuant to the terms of certain agreements and stock option plans (see Note 6). Stock options are exercisable during a period determined by us, but in no event later than ten years from the date granted. For the three months ended September 30, 2017 and 2016, we charged to operations $28,000 and zero, respectively, for share-based compensation expense for the aggregate fair value of stock grants issued and vested stock options earned. For the nine months ended September 30, 2017 and 2016, we charged to operations $46,000 and $1,000, respectively, for share-based compensation expense for the aggregate fair value of stock grants issued and vested stock options earned. |
Research and Development | Research and Development Research and development costs are charged to operations in the period incurred. Research and development costs incurred for the three months ended September 30, 2017 and 2016 (i) from continuing operations were $60,000 and $43,000, respectively, and (ii) attributed to and classified as discontinued operations of zero and $77,000, respectively. Research and development costs incurred for the nine months ended September 30, 2017 and 2016 (i) from continuing operations were $318,000 and $202,000, respectively, and (ii) attributed to and classified as discontinued operations of $52,000 and $172,000, respectively. Research and development costs are principally related to personnel expenses and new product development initiatives and costs associated with our OTC health care products. |
Income Taxes | Income Taxes We utilize the asset and liability approach which requires the recognition of deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our financial statements or tax returns. In estimating future tax consequences, we generally consider all expected future events other than enactments of changes in the tax law or rates. Until we have sufficient taxable income to offset the temporary timing differences attributable to operations and the tax deductions attributable to option, warrant and stock activities are assured, a full valuation allowance equaling the total deferred tax asset is being provided (see Notes 4 and 7). We utilize a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than fifty percent likely of being realized upon ultimate settlement. Any interest or penalties related to income taxes will be recorded as interest or administrative expense, respectively. As a result of our continuing tax losses, we have recorded a full valuation allowance against a net deferred tax asset. Additionally, we have not recorded a liability for unrecognized tax benefits. |
Recently Issued Accounting Standards | Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers”, on revenue recognition. The new standard provides for a single five-step model to be applied to all revenue contracts with customers as well as requires additional financial statement disclosures that will enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. Companies have an option to use either a retrospective approach or cumulative effect adjustment approach to implement the standard. This ASU, as amended, is effective for fiscal years and interim periods within those years beginning after December 15, 2017. We plan to adopt the provisions of the new standard in the first quarter of 2018. The Company is utilizing a comprehensive approach to access the impact of the guidance our revenue. Additionally, the Company is evaluating the impact of the new guidance on disclosures, as well as the impact on controls to support the recognition. We do not believe that its adoption will not have a material impact on our consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02 “Leases”. The new standard will require most leases to be recognized on the balance sheet which will increase reported assets and liabilities. Lessor accounting remains substantially similar to current guidance. The new standard is effective for annual and interim periods in fiscal years beginning after December 15, 2018, which for us is the first quarter of fiscal 2019 and mandates a modified retrospective transition method. We do not intend to early adopt and are currently assessing the impact of this update, but preliminarily believe that its adoption will not have a material impact on our consolidated financial statements. In April 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting”. The new standard simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. We adopted the standard in January 2017 with no material impact on our consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses.” The standard modifies the impairment model for most financial assets, including trade accounts receivables and loans, and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. The effective date of the standard is for fiscal years beginning after December 15, 2019 with early adoption permitted. We are currently evaluating the impact adoption of this update will have on our consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments” . In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes: Intra-Entity Transfers of Assets Other than Inventory”. The new standard requires entities should recognize the income tax consequences of an asset other than inventory when the asset transfer occurs. The new guidance will be effective for fiscal years beginning after December 15, 2017 and requires a modified retrospective adoption through a cumulative effect adjustment directly to retained earnings as of the beginning of the period of adoption. We are currently evaluating the impact adoption of this update will have on our consolidated financial statements. |
Restatement of Previously Iss18
Restatement of Previously Issued Financial Statements (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Equity [Abstract] | |
Schedule of Consolidated Financial Statements Previously Issued | The table below sets forth the condensed consolidated balance sheet, including the balances as originally reported, adjustments and the as restated balances (in thousands): As of September 30, 2017 As originally reported Adjustments As restated Income taxes payable $ - $ 751 $ 751 Total current liabilities 2,432 751 3,183 Retained earnings 21,869 (751 ) 21,118 Total stockholders’ equity 36,650 (751 ) 35,899 Total liabilities and stockholders’ equity $ 39,082 $ - $ 39,082 The table below sets for the condensed consolidated statements of operations, including the balances as originally reported, adjustments, and the as restated amounts (in thousands): For the three months ended September 30, 2017 As originally reported Adjustments As restated Income tax benefit from continuing operations $ - $ 305 $ 305 Loss from continuing operations (777 ) 305 (472 ) Gain on sale of discontinued operations, net of taxes $ - (305 ) (305 ) Loss from discontinued operations, net of tax - (305 ) (305 ) Net loss (777 ) - (777 ) Basic loss per share: Loss from continuing operations $ (0.05 ) $ 0.02 $ (0.03 ) Loss from discontinued operations - (0.02 ) (0.02 ) Net loss $ (0.05 ) $ 0.00 $ (0.05 ) Diluted loss per share: Loss from continuing operations $ (0.05 ) $ 0.02 $ (0.03 ) Loss from discontinued operations - (0.02 ) (0.02 ) Net loss $ (0.05 ) $ 0.00 $ (0.05 ) For the nine months ended September 30, 2017 As originally reported Adjustments As restated Income tax benefit from continuing operations $ 18,113 $ (16,791 ) $ 1,322 Income (loss) from continuing operations 14,677 (16,791 ) (2,114 ) Gain on sale of discontinued operations, net of taxes 26,349 16,040 42,389 Income from discontinued operations 26,879 16,040 42,919 Net income 41,556 (751 ) 40,805 Basic earnings (loss) per share: Income (loss) from continuing operations $ 0.88 $ (1.01 ) $ (0.13 ) Income from discontinued operations 1.61 0.97 2.58 Net income $ 2.49 $ (0.04 ) $ 2.45 Diluted earnings (loss) per share: Income (loss) from continuing operations $ 0.86 $ (0.99 ) $ (0.13 ) Income income from discontinued operations 1.57 0.94 2.51 Net income $ 2.43 $ (0.05 ) $ 2.38 The table below sets forth the condensed consolidated statements of cash flows from operating activities, including the balances as originally reported, adjustments and as the restated balances (in thousands): For the nine months ended September 30, 2017 As originally reported Adjustments As restated Net income $ 41,556 $ (751 ) $ 40,805 Gain on sale of assets, net of taxes (26,339 ) (16,050 ) (42,389 ) Change in valuation allowance, income tax (19,473 ) 18,151 (1,322 ) Other current liabilities (67 ) (1,350 ) (1,417 ) Net cash used in operating activities $ (4,323 ) $ - $ (4,323 ) |
Summary of Significant Accoun19
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Summary of Components of Marketable Securities | The following is a summary of the components of our marketable securities and the underlying fair value input level tier hierarchy (see long-lived assets below) (in thousands): As of September 30, 2017 Input Amortizied Unrealized Unrealized Market Level cost gain loss Value U.S. government obligations Level 2 $ 6,455 $ - $ 1 $ 6,454 Corporate obligations Level 2 17,221 - 34 17,187 $ 23,676 $ - $ 35 $ 23,641 |
Schedule of Components of Inventory | The components of inventory are as follows (in thousands): September 30, December 31, 2017 2016 Raw materials $ 1,493 $ 1,404 Work in process 366 466 Finished goods 133 866 $ 1,992 $ 2,736 |
Schedule of Fair Value of Financial Instruments | As of September 30, 2017 Level 1 Level 2 Level 3 Total Marketable securities U.S. government obligations $ - $ 6,454 $ - $ 6,454 Corporate obligations - 17,187 - 17,187 $ - $ 23,641 $ - $ 23,641 |
Discontinued Operations, Sale20
Discontinued Operations, Sale of the Cold-EEZE® Business (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Schedule of Proceeds from Sale of Business | The net proceeds received from the sale of the Cold-EEZE ® Amount (as restated) Gross consideration from the sale of the Cold-EEZE ® $ 50,000 Closing and transaction costs (4,175 ) Net proceeds from sale of the Cold-EEZE ® 45,825 Book value of assets sold (13 ) Gain on sale of the Cold-EEZE ® 45,812 Income tax expense (3,422 ) Gain on sale of the Cold-EEZE ® $ 42,390 Net proceeds: Cash paid at closing, net of closing and transaction costs $ 43,145 Proceeds due on sale of assets, cash held in escrow 5,000 $ 48,145 |
Schedule of Operating Results of Discontinued Operations | The following table sets forth the condensed operating results of our discontinued operations for the three and nine months ended September 30, 2017 and 2016, respectively, (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Net sales - $ 3,787 $ 4,687 $ 9,966 Cost of sales - 1,827 2,037 4,255 Sales and marketing - 524 1,720 3,357 Administration - 406 348 1,061 Research and development - 77 52 172 Income from discontinued operations $ - $ 953 $ 530 $ 1,121 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Estimated Future Minimum Obligations | We have estimated future minimum obligations over the next five years, including the remainder of Fiscal 2017, as follows (in thousands): Fiscal Year Employment Contracts 2017 169 2018 675 2019 169 2020 - 2021 - Total $ 1,013 |
Restatement of Previously Iss22
Restatement of Previously Issued Financial Statements - Schedule of Consolidated Financial Statements Previously Issued (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Income taxes payable | $ 751 | $ 751 | |||
Total current liabilities | 3,183 | 3,183 | 6,840 | ||
Retained earnings | 21,118 | 21,118 | (19,687) | ||
Total stockholders' equity | 35,899 | 35,899 | 5,962 | ||
Total liabilities and stockholders' equity | 39,082 | 39,082 | $ 12,802 | ||
Income tax benefit from continuing operations | 305 | 1,322 | |||
Loss from continuing operations | (472) | (786) | (2,114) | (3,417) | |
Gain on sale of discontinued operations, net of taxes | (305) | 42,389 | |||
Loss from discontinued operations, net of tax | (305) | 953 | 42,919 | 1,121 | |
Net income (loss) | $ (777) | $ 167 | $ 40,805 | $ (2,296) | |
Basic loss per share: Loss from continuing operations | $ (0.03) | $ (0.05) | $ (0.13) | $ (0.20) | |
Basic loss per share: Loss from discontinued operations | (0.02) | 0.06 | 2.58 | 0.07 | |
Basic loss per share: Net loss | (0.05) | 2.45 | |||
Diluted loss per share: Loss from continuing operations | (0.03) | (0.04) | (0.13) | (0.20) | |
Diluted loss per share: Loss from discontinued operations | (0.02) | $ 0.05 | 2.51 | $ 0.07 | |
Diluted loss per share: Net loss | $ (0.05) | $ 2.38 | |||
Gain on sale of assets, net of taxes | $ (42,389) | ||||
Change in valuation allowance, income tax | (1,322) | ||||
Other current liabilities | (1,417) | 22 | |||
Net cash used in operating activities | (1,112) | $ (870) | |||
As Originally Reported [Member] | |||||
Income taxes payable | |||||
Total current liabilities | 2,432 | 2,432 | |||
Retained earnings | 21,869 | 21,869 | |||
Total stockholders' equity | 36,650 | 36,650 | |||
Total liabilities and stockholders' equity | 39,082 | 39,082 | |||
Income tax benefit from continuing operations | 18,113 | ||||
Loss from continuing operations | (777) | 14,677 | |||
Gain on sale of discontinued operations, net of taxes | 26,349 | ||||
Loss from discontinued operations, net of tax | 26,879 | ||||
Net income (loss) | $ (777) | $ 41,556 | |||
Basic loss per share: Loss from continuing operations | $ (0.05) | $ 0.88 | |||
Basic loss per share: Loss from discontinued operations | 1.61 | ||||
Basic loss per share: Net loss | (0.05) | 2.49 | |||
Diluted loss per share: Loss from continuing operations | (0.05) | 0.86 | |||
Diluted loss per share: Loss from discontinued operations | 1.57 | ||||
Diluted loss per share: Net loss | $ (0.05) | $ 2.43 | |||
Gain on sale of assets, net of taxes | $ (26,339) | ||||
Change in valuation allowance, income tax | (19,473) | ||||
Other current liabilities | (67) | ||||
Net cash used in operating activities | (4,323) | ||||
Adjustments [Member] | |||||
Income taxes payable | $ 751 | 751 | |||
Total current liabilities | 751 | 751 | |||
Retained earnings | (751) | (751) | |||
Total stockholders' equity | (751) | (751) | |||
Total liabilities and stockholders' equity | |||||
Income tax benefit from continuing operations | 305 | (16,791) | |||
Loss from continuing operations | 305 | (16,791) | |||
Gain on sale of discontinued operations, net of taxes | (305) | 16,040 | |||
Loss from discontinued operations, net of tax | (305) | 16,040 | |||
Net income (loss) | $ (751) | ||||
Basic loss per share: Loss from continuing operations | $ 0.02 | $ (1.01) | |||
Basic loss per share: Loss from discontinued operations | (0.02) | 0.97 | |||
Basic loss per share: Net loss | 0 | (0.04) | |||
Diluted loss per share: Loss from continuing operations | 0.02 | (0.99) | |||
Diluted loss per share: Loss from discontinued operations | (0.02) | 0.94 | |||
Diluted loss per share: Net loss | $ 0 | $ (0.05) | |||
Gain on sale of assets, net of taxes | $ (16,050) | ||||
Change in valuation allowance, income tax | 18,151 | ||||
Other current liabilities | (1,350) | ||||
Net cash used in operating activities |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Administrative expense | $ 406 | $ 348 | $ 1,061 | ||
Research and development discontinued operation | 77 | 52 | 172 | ||
Unrealized loss on marketable securities | 35 | 35 | |||
Adjustments to reduce inventory for excess or obsolete inventory | 1,500 | 1,500 | $ 1,600 | ||
Cash balance | 3,900 | 3,900 | |||
Bank balance | 3,600 | 3,600 | |||
Amount of bank balance covered by federal depository insurance | 500 | 500 | |||
Amount of bank balance uninsured | 3,100 | 3,100 | |||
Allowance for bad debt | |||||
Accrued liabilities | 400 | 400 | |||
Provision for sales allowances | 0 | 108 | |||
Advertising and incentive promotion expenses | 22 | 46 | 78 | 385 | |
Prepaid expenses and other current assets | $ 10 | $ 10 | $ 263 | ||
Common stock par value | $ 0.0005 | $ 0.0005 | $ 0.0005 | ||
Stock option exercisable period | 10 years | ||||
Share-based compensation expense | $ 28 | 0 | $ 46 | 1 | |
Research and development | 60 | 43 | 318 | 202 | |
Discontinued Operations [Member] | |||||
Advertising and incentive promotion expenses | 0 | 1,100 | 2,800 | 4,500 | |
Research and development | 0 | $ 77 | 52 | $ 172 | |
Estimated Future Sales Return [Member] | |||||
Accrued liabilities | $ 902 | 902 | $ 1,200 | ||
Cooperative Incentive [Member] | |||||
Advertising and incentive promotion expenses | $ 371 | $ 1,500 | |||
Sales Revenue, Net [Member] | One Customers [Member] | |||||
Concentration risk percentage | 50.70% | 68.30% | |||
Minimum [Member] | |||||
Interest rate | 0.87% | ||||
Maximum [Member] | |||||
Interest rate | 1.56% | ||||
Building and Improvements [Member] | Minimum [Member] | |||||
Property, plant and equipment, useful life | 10 years | ||||
Building and Improvements [Member] | Maximum [Member] | |||||
Property, plant and equipment, useful life | 39 years | ||||
Machinery and Equipment [Member] | Minimum [Member] | |||||
Property, plant and equipment, useful life | 3 years | ||||
Machinery and Equipment [Member] | Maximum [Member] | |||||
Property, plant and equipment, useful life | 7 years | ||||
Computer Software [Member] | |||||
Property, plant and equipment, useful life | 3 years | ||||
Furniture and Fixtures [Member] | |||||
Property, plant and equipment, useful life | 5 years |
Summary of Significant Accoun24
Summary of Significant Accounting Policies - Summary of Components of Marketable Securities (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Amortized cost | $ 23,676 | |
Unrealized gain | ||
Unrealized loss | 35 | |
Market value | 23,641 | |
U.S. Government Obligations [Member] | ||
Amortized cost | 6,455 | |
Unrealized gain | ||
Unrealized loss | 1 | |
Market value | 6,454 | |
Corporate Bonds and Commercial Paper [Member] | ||
Amortized cost | 17,221 | |
Unrealized gain | ||
Unrealized loss | 34 | |
Market value | $ 17,187 |
Summary of Significant Accoun25
Summary of Significant Accounting Policies - Schedule of Components of Inventory (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Accounting Policies [Abstract] | ||
Raw materials | $ 1,493 | $ 1,404 |
Work in process | 366 | 466 |
Finished goods | 133 | 866 |
Total inventory | $ 1,992 | $ 2,736 |
Summary of Significant Accoun26
Summary of Significant Accounting Policies - Schedule of Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Fair Value of Marketable Securities | $ 23,641 | |
Level 1 [Member] | ||
Fair Value of Marketable Securities | ||
Level 2 [Member] | ||
Fair Value of Marketable Securities | 23,641 | |
Level 3 [Member] | ||
Fair Value of Marketable Securities | ||
U.S. Government Obligations [Member] | ||
Fair Value of Marketable Securities | 6,454 | |
U.S. Government Obligations [Member] | Level 1 [Member] | ||
Fair Value of Marketable Securities | ||
U.S. Government Obligations [Member] | Level 2 [Member] | ||
Fair Value of Marketable Securities | 6,454 | |
U.S. Government Obligations [Member] | Level 3 [Member] | ||
Fair Value of Marketable Securities | ||
Corporate Obligations [Member] | ||
Fair Value of Marketable Securities | 17,187 | |
Corporate Obligations [Member] | Level 1 [Member] | ||
Fair Value of Marketable Securities | ||
Corporate Obligations [Member] | Level 2 [Member] | ||
Fair Value of Marketable Securities | 17,187 | |
Corporate Obligations [Member] | Level 3 [Member] | ||
Fair Value of Marketable Securities |
Discontinued Operations, Sale27
Discontinued Operations, Sale of the Cold-EEZE® Business (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2017 | Dec. 31, 2016 | |
Assets held for sale | $ 22 | $ 22 | |
Transition service fees | 150 | 150 | |
Closing and transaction costs | 1,900 | ||
Cold-EEZE® Business [Member] | |||
Closing and transaction costs | 4,200 | ||
Employees related compensation | 2,300 | ||
Asset Purchase Agreement [Member] | |||
Assets held for sale | 22 | 22 | |
Transition service fees | 150 | ||
Asset Purchase Agreement [Member] | Mylan [Member] | |||
Transition service fees | 1,500 | ||
Due to related party | 319 | 319 | |
Sales and other allowances | $ 1,000 | 1,000 | |
Sales return allocation | 400 | ||
Reimbursement expenses | $ 240 |
Discontinued Operations, Sale28
Discontinued Operations, Sale of the Cold-EEZE® Business - Schedule of Proceeds from Sale of Business (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Discontinued Operations and Disposal Groups [Abstract] | ||||
Gross consideration from the sale of the Cold-EEZE® Business | $ 50,000 | |||
Closing and transaction costs | (4,175) | |||
Net proceeds from sale of the Cold-EEZE® Business | 45,825 | |||
Book value of assets sold | (13) | |||
Gain on sale of the Cold-EEZE® Business before income taxes | 45,812 | |||
Income tax expense | (3,423) | |||
Gain on sale of the Cold-EEZE® Business after income taxes | $ (305) | 42,389 | ||
Cash paid at closing, net of closing and transaction costs | 43,145 | |||
Proceeds due on sale of assets, cash held in escrow | 5,000 | |||
Net proceeds from the sale of assets | $ 48,145 |
Discontinued Operations, Sale29
Discontinued Operations, Sale of the Cold-EEZE® Business - Schedule of Operating Results of Discontinued Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Discontinued Operations and Disposal Groups [Abstract] | ||||
Net sales | $ 3,787 | $ 4,687 | $ 9,966 | |
Cost of sales | 1,827 | 2,037 | 4,255 | |
Sales and marketing | 524 | 1,720 | 3,357 | |
Administration | 406 | 348 | 1,061 | |
Research and development | 77 | 52 | 172 | |
Income from discontinued operations | $ 953 | $ 530 | $ 1,121 |
Secured Promissory Notes and 30
Secured Promissory Notes and Other Obligations (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | Mar. 29, 2017 | Dec. 11, 2015 | Sep. 30, 2017 | Sep. 30, 2016 | Jun. 15, 2017 |
Notes bear interest at rate per annum | 12.00% | 12.00% | |||
Proceeds from notes payable | $ 1,500 | ||||
Class of warrants issued during period | 51,000 | ||||
Warrants exercise price per share | $ 1.35 | ||||
Incurred loan origination costs | $ 22 | ||||
Warrant exercise term | 3 years | ||||
Fair value of warrants | $ 14 | ||||
Debt instruments maturity date | Jun. 15, 2017 | ||||
Percentage of warrant and loan origination costs | 14.30% | ||||
Interest expense | $ 54 | $ 105 | |||
Cold-EEZE® Business [Member] | |||||
Payment of principal and accrued interest | $ 1,553 | ||||
Cold-EEZE® Business [Member] | Investors [Member] | |||||
Warrants aggregate exercise price | $ 69 | ||||
Secured Promissory Notes [Member] | |||||
Debt instruments principal amount, maximum limit | $ 3,000 |
Transactions Affecting Stockh31
Transactions Affecting Stockholders' Equity (Details Narrative) - USD ($) | Aug. 26, 2017 | Aug. 25, 2017 | Aug. 21, 2017 | Jun. 12, 2017 | Jul. 30, 2015 | Sep. 30, 2017 | Jun. 30, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Aug. 15, 2017 | Dec. 31, 2016 | May 24, 2016 | Dec. 11, 2015 | May 05, 2010 |
Common stock, shares authorized | 50,000,000 | 50,000,000 | 50,000,000 | |||||||||||
Preferred stock, shares authorized | 1,000,000 | 1,000,000 | 1,000,000 | |||||||||||
Preferred stock, par value | $ .0005 | $ .0005 | $ .0005 | |||||||||||
Common stock right's exercise price | $ 1.35 | |||||||||||||
Equity method investment ownership percentage | 50.00% | 50.00% | ||||||||||||
Stock option granted | 600,000 | 25,000 | ||||||||||||
Stock option, expected life | 4 years 9 months | 4 years 6 months | ||||||||||||
Weighted average risk rate | 1.81% | 1.62% | ||||||||||||
Stock option, dividend yield | 0.00% | 0.00% | ||||||||||||
Stock option, expected volatility | 44.51% | 38.59% | ||||||||||||
Stock option, exercised | 592,000 | 682,000 | ||||||||||||
Proceeds from stock option exercised | $ 752,000 | $ 854,000 | ||||||||||||
Common stock, shares issued | 27,046,593 | 27,046,593 | 26,313,593 | |||||||||||
Tender Offer [Member] | ||||||||||||||
Common stock, shares issued | 16,200,000 | |||||||||||||
Number of common stock shares purchased | 4,323,335 | |||||||||||||
Common stock share price | $ 2.30 | |||||||||||||
Common stock purchased percentage | 73.00% | |||||||||||||
Shares proposed to purchased in tender offer percentage | 24.70% | |||||||||||||
Common stock shares outstanding | 16,200,000 | |||||||||||||
Trading price per share | $ 2.13 | |||||||||||||
Offer expire date | Sep. 25, 2017 | |||||||||||||
Purchase price per share | $ 2.30 | |||||||||||||
Purchase price amount | $ 9,900,000 | |||||||||||||
Tender Offer [Member] | Maximum [Member] | ||||||||||||||
Number of common stock shares purchased | 4,000,000 | |||||||||||||
Ted Karkus [Member] | ||||||||||||||
Number of common stock shares sold | 364,954 | |||||||||||||
Robert V. Cuddihy, Jr. [Member] | ||||||||||||||
Number of common stock shares sold | 358,621 | |||||||||||||
American Stock Transfer & Trust Company [Member] | ||||||||||||||
Number of common stock shares purchased | 5,910,327 | |||||||||||||
American Stock Transfer & Trust Company [Member] | Minimum [Member] | ||||||||||||||
Number of common stock shares purchased | 9,338 | |||||||||||||
BML Investment Partners, L.P [Member] | ||||||||||||||
Equity method investment ownership percentage | 13.60% | |||||||||||||
Investments owned shares | 2,322,627 | |||||||||||||
Number of common stock shares sold | 1,695,305 | |||||||||||||
2015 Equity Line of Credit [Member] | Dutchess [Member] | ||||||||||||||
Stock issued during period shares | 3,200,000 | |||||||||||||
Maximum number of shares of draw down notice | 500,000 | |||||||||||||
Derivative transaction, conditions description | The purchase price shall be set at ninety-five percent (95%) of the volume weighted average price (VWAP) of the Common Stock during the one trading day immediately following our put notice. We have the right to withdraw all or any portion of any put, except that portion of the put that has already been sold to a third party, including any portion of a put that is below the minimum acceptable price set forth on the put notice, before the closing. In the event Dutchess receives more than a five percent (5%) return on the net sales for a specific put, Dutchess must remit such excess proceeds to us; however, in the event Dutchess receives less than a five percent (5%) return on the net sales for a specific put, Dutchess will have the right to deduct from the proceeds of the put amount on the applicable closing date so Dutchesss return will equal five percent (5%). | |||||||||||||
Number of shares beneficially held maximum percentage | 4.99% | |||||||||||||
Available for sale, shares | $ 2,450,000 | $ 2,450,000 | ||||||||||||
Stock Purchase Agreement [Member] | ||||||||||||||
Equity method investment ownership percentage | 6.20% | |||||||||||||
Options outstanding - shares | 17,200,000 | |||||||||||||
Common stock, shares purchased | 1,061,980 | |||||||||||||
Stock Purchase Agreement [Member] | Leventhal Holders [Member] | ||||||||||||||
Consideration paid | $ 1,858,465 | |||||||||||||
Share price | $ 1.75 | |||||||||||||
Chairman and Chief Executive Officer [Member] | Rights Agreement [Member] | ||||||||||||||
Equity method investment ownership percentage required for rights exercisable under right agreement | 20.00% | |||||||||||||
Stockholder Rights Plan [Member] | ||||||||||||||
Common stock right's exercise price | $ 45 | $ 45 | ||||||||||||
Equity method investment ownership percentage required for rights exercisable under right agreement | 15.00% | |||||||||||||
Percentage of discount on exercise of right | 50.00% | |||||||||||||
Rights agreement expiration date | Jun. 18, 2024 | |||||||||||||
2010 Equity Compensation Plan [Member] | ||||||||||||||
Plan provides total number of shares of common stock issued | 700,000 | 3,200,000 | ||||||||||||
2010 Equity Compensation Plan [Member] | Employees [Member] | ||||||||||||||
Stock option granted | 625,000 | |||||||||||||
Stock option shares exercisable | 25,000 | 25,000 | ||||||||||||
Common stock option exercisable, per share | $ 2.15 | |||||||||||||
Stock option vesting period | 3 years | |||||||||||||
2010 Equity Compensation Plan [Member] | Employees 1 [Member] | ||||||||||||||
Stock option shares exercisable | 600,000 | 600,000 | ||||||||||||
Common stock option exercisable, per share | $ 2 | |||||||||||||
Stock option vesting period | 4 years | |||||||||||||
1997 Equity Compensation Plan [Member] | ||||||||||||||
Plan provides total number of shares of common stock issued | 900,000 | |||||||||||||
2010 Plan [Member] | ||||||||||||||
Options outstanding - shares | 1,642,000 | 1,642,000 | ||||||||||||
Available for grant, shares | 108,659 | 108,659 | ||||||||||||
2010 Directors' Equity Compensation Plan [Member] | ||||||||||||||
Number of shares issued during period | 425,000 | |||||||||||||
Common stock, shares issued | 147,808 | 147,808 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Net operating loss carry-forwards | $ 47,100 | ||||
Additional net operating loss carry-forwards | $ 22,100 | ||||
Estimated federal and state income taxes to discontinued operations | $ (305) | $ 42,389 | |||
Income tax benefit from continuing operations | $ (305) | (1,322) | |||
Cold-EEZE® Business [Member] | |||||
Income tax expense arising from sale | 2,100 | ||||
Estimated federal and state income taxes to discontinued operations | 3,400 | ||||
Income tax benefit from continuing operations | $ 1,300 | ||||
Domestic Tax Authority [Member] | |||||
Operating loss carry forwards expiration dates description | Expire beginning for the year ended December 31, 2020 through 2036 | ||||
State and Local Jurisdiction [Member] | |||||
Operating loss carry forwards expiration dates description | Expire beginning for the year ended December 31, 2020 through 2036 |
Commitments and Contingencies33
Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 27, 2017 | Dec. 31, 2016 | |
Escrow deposit | $ 2,500 | ||
Employment Agreement Termination and Release Agreement [Member] | Robert V. Cuddihy, Jr. [Member] | |||
Other commitment | $ 55 | ||
Mylan and Escrow Agent [Member] | Escrow Agreement [Member] | |||
Escrow deposit | $ 5,000 | ||
Escrow receivable, description | If, on the 18th month anniversary of the closing date, there are funds remaining in the escrow account, then the escrow account will be reduced by the difference, if a positive number, of (i) $2.5 million minus (ii) the aggregate amount of all escrow claims asserted by Mylan prior to this date that have either been paid out of the escrow account or are pending as of such date, and, within two business days of such date, the Escrow Agent will disburse such difference, if a positive number, to us. Within two business days of the second anniversary of the closing date, the Escrow Agent will release any funds remaining in the escrow account to us minus any amounts being reserved for escrow claims asserted by Mylan prior to such date. Upon the resolution of any pending escrow claims, the Escrow Agent will, within two business days of receipt of joint instructions or a final order from a court (as described in the Escrow Agreement) disburse such reserved amount to the parties entitled to such funds. | ||
Agreement termination date | Mar. 29, 2022 |
Commitments and Contingencies -
Commitments and Contingencies - Schedule of Estimated Future Minimum Obligations (Details) - Employment Contracts [Member] $ in Thousands | Sep. 30, 2017USD ($) |
2,017 | $ 169 |
2,018 | 675 |
2,019 | 169 |
2,020 | |
2,021 | |
Total | $ 1,013 |
Earnings (Loss) Per Share (Deta
Earnings (Loss) Per Share (Details Narrative) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Earnings Per Share [Abstract] | ||||
Options and warrants outstanding to acquire shares | 1,642,000 | 1,706,500 | ||
Anti-diluted shares | 504,170 | 519,162 | 456,728 | 342,248 |
Subsequent Event (Details Narra
Subsequent Event (Details Narrative) - Tender Offer [Member] - USD ($) $ / shares in Units, $ in Thousands | Nov. 10, 2017 | Aug. 25, 2017 | Aug. 21, 2017 |
Purchase price per share | $ 2.30 | ||
Offer expire date | Sep. 25, 2017 | ||
Shares proposed to purchased in tender offer percentage | 24.70% | ||
Subsequent Event [Member] | |||
Tender offer to purchase maximum number of shares | 1,700,000 | ||
Purchase price per share | $ 2.30 | ||
Official closing price of common stock | $ 2.11 | ||
Cash, cash equivalents, and marketable securities | $ 27,700 |