Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2019 | Nov. 11, 2019 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | ProPhase Labs, Inc. | |
Entity Central Index Key | 0000868278 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business Flag | true | |
Entity Emerging Growth Company | false | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 11,573,593 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2019 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Current assets | ||
Cash and cash equivalents | $ 968 | $ 1,554 |
Marketable debt securities, available for sale | 3,760 | 6,687 |
Escrow receivable | 4,828 | 4,830 |
Accounts receivable, net | 1,483 | 2,968 |
Inventory, net | 1,886 | 1,903 |
Prepaid expenses and other current assets | 294 | 296 |
Total current assets | 13,219 | 18,238 |
Property, plant and equipment, net of accumulated depreciation of $6,156 and $5,854, respectively | 2,382 | 2,499 |
TOTAL ASSETS | 15,601 | 20,737 |
Current liabilities | ||
Accounts payable | 374 | 437 |
Accrued advertising and other allowances | 334 | 101 |
Dividend payable | 2,929 | |
Other current liabilities | 365 | 766 |
Total current liabilities | 1,073 | 4,233 |
Non-current liabilities: | ||
Deferred revenue, net of current portion | 129 | |
Total non-current liabilities | 129 | |
Total liabilities | 1,202 | 4,233 |
COMMITMENTS AND CONTINGENCIES | ||
Stockholders' equity | ||
Preferred stock authorized 1,000,000, $.0005 par value, no shares issued | ||
Common stock authorized 50,000,000, $.0005 par value, issued 28,217,005 and 28,201,541 shares, respectively | 14 | 14 |
Additional paid-in capital | 60,027 | 59,471 |
Retained earnings | 1,854 | 4,533 |
Treasury stock, at cost, 16,652,022 and 16,652,022 shares | (47,490) | (47,490) |
Accumulated comprehensive loss | (6) | (24) |
Total stockholders' equity | 14,399 | 16,504 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 15,601 | $ 20,737 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Accumulated depreciation | $ 6,156 | $ 5,854 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, par value | $ 0.0005 | $ 0.0005 |
Preferred stock, shares issued | ||
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, par value | $ 0.0005 | $ 0.0005 |
Common stock, shares issued | 28,217,005 | 28,201,541 |
Treasury stock, shares | 16,652,022 | 16,652,022 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Other Comprehensive Loss (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income Statement [Abstract] | ||||
Net sales | $ 2,766 | $ 2,439 | $ 6,735 | $ 9,033 |
Cost of sales | 1,932 | 1,683 | 5,120 | 5,593 |
Gross profit | 834 | 756 | 1,615 | 3,440 |
Operating expenses: | ||||
Sales and marketing | 302 | 395 | 910 | 802 |
Administration | 936 | 1,129 | 3,232 | 3,547 |
Research and development | 57 | 144 | 246 | 319 |
Total operating expenses | 1,295 | 1,668 | 4,388 | 4,668 |
Loss from operations | (461) | (912) | (2,773) | (1,228) |
Interest income, net | 33 | 15 | 94 | 115 |
Loss from continuing operations | (428) | (897) | (2,679) | (1,113) |
Discontinued operations: | ||||
Loss on sale of discontinued operations, net of taxes | (160) | (160) | ||
Loss from discontinued operations | (160) | (160) | ||
Net (loss) | (428) | (1,057) | (2,679) | (1,273) |
Other comprehensive loss: | ||||
Unrealized gain (loss) on marketable debt securities | (5) | 28 | 18 | 54 |
Total comprehensive loss | $ (433) | $ (1,029) | $ (2,661) | $ (1,219) |
Basic loss per share: | ||||
Loss from continuing operations | $ (0.04) | $ (0.08) | $ (0.23) | $ (0.10) |
Loss from discontinued operations | (0.01) | (0.01) | ||
Net loss | (0.04) | (0.09) | (0.23) | (0.11) |
Diluted loss per share: | ||||
Loss from continuing operations | (0.04) | (0.08) | (0.23) | (0.10) |
Loss from discontinued operations | (0.01) | (0.01) | ||
Net loss | (0.04) | (0.09) | (0.23) | (0.11) |
Weighted average common shares outstanding: | ||||
Basic and diluted | $ 11,565,000 | $ 11,541,000 | $ 11,561,000 | $ 11,344,000 |
Condensed Consolidated Statem_2
Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands | Common Stock Shares Outstanding, Net of Shares of Treasury Stock [Member] | Additional Paid in Capital [Member] | Retained Earnings [Member] | Accumulated Comprehensive Loss [Member] | Treasury Stock [Member] | Total |
Balance at Dec. 31, 2017 | $ 14 | $ 58,034 | $ 20,902 | $ (78) | $ (47,025) | $ 31,847 |
Balance, shares at Dec. 31, 2017 | 11,129,892 | |||||
Unrealized gain (loss) on marketable debt securities | 54 | 54 | ||||
Cash dividends | (11,700) | (11,700) | ||||
Proceeds from options exercised | 338 | 338 | ||||
Proceeds from options exercised, shares | 240,000 | |||||
Cashless options exercise | ||||||
Cashless options exercise, shares | 164,679 | |||||
Stock-based compensation | 433 | 433 | ||||
Stock-based compensation, shares | 7,474 | |||||
Net loss | (1,273) | (1,273) | ||||
Balance at Sep. 30, 2018 | $ 14 | 58,805 | 7,929 | (24) | (47,025) | 19,699 |
Balance, shares at Sep. 30, 2018 | 11,542,045 | |||||
Balance at Jun. 30, 2018 | $ 14 | 58,606 | 8,986 | (53) | (47,025) | 20,528 |
Balance, shares at Jun. 30, 2018 | 11,534,571 | |||||
Unrealized gain (loss) on marketable debt securities | 29 | 29 | ||||
Stock-based compensation | 199 | 199 | ||||
Stock-based compensation, shares | 7,474 | |||||
Net loss | (1,057) | (1,057) | ||||
Balance at Sep. 30, 2018 | $ 14 | 58,805 | 7,929 | (24) | (47,025) | 19,699 |
Balance, shares at Sep. 30, 2018 | 11,542,045 | |||||
Balance at Dec. 31, 2018 | $ 14 | 59,471 | 4,533 | (24) | (47,490) | 16,504 |
Balance, shares at Dec. 31, 2018 | 11,549,519 | |||||
Unrealized gain (loss) on marketable debt securities | 18 | 18 | ||||
Stock-based compensation | 556 | 556 | ||||
Stock-based compensation, shares | 15,464 | |||||
Net loss | (2,679) | (2,679) | ||||
Balance at Sep. 30, 2019 | $ 14 | 60,027 | 1,854 | (6) | (47,490) | 14,399 |
Balance, shares at Sep. 30, 2019 | 11,564,983 | |||||
Balance at Jun. 30, 2019 | $ 14 | 59,847 | 2,282 | (1) | (47,490) | 14,652 |
Balance, shares at Jun. 30, 2019 | 11,560,256 | |||||
Unrealized gain (loss) on marketable debt securities | (5) | (5) | ||||
Stock-based compensation | 180 | 180 | ||||
Stock-based compensation, shares | 4,727 | |||||
Net loss | (428) | (428) | ||||
Balance at Sep. 30, 2019 | $ 14 | $ 60,027 | $ 1,854 | $ (6) | $ (47,490) | $ 14,399 |
Balance, shares at Sep. 30, 2019 | 11,564,983 |
Condensed Consolidated Statem_3
Condensed Consolidated Statement of Stockholders' Equity (Unaudited) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Statement of Stockholders' Equity [Abstract] | |||
Marketable debt securities, net realized losses | $ 33 | $ 4 | $ 133 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Cash flows from operating activities | ||
Net loss | $ (2,679) | $ (1,273) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Realized loss on marketable debt securities | 4 | 133 |
Loss on sale of assets, net of taxes | 160 | |
Depreciation and amortization | 302 | 287 |
Stock-based compensation expense | 556 | 433 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 1,485 | 894 |
Escrow receivable | 2 | |
Inventory | 17 | (1,186) |
Prepaid and other assets | 2 | 128 |
Accounts payable and accrued expenses | 170 | (295) |
Other liabilities | (272) | (641) |
Assets held for sale | 22 | |
Net cash used in operating activities | (413) | (1,338) |
Cash flows from investing activities | ||
Purchase of marketable securities | (1,398) | (12,034) |
Proceeds from maturities of marketable debt securities | 14,280 | |
Proceeds from sale of marketable debt securities | 4,339 | 9,574 |
Capital expenditures | (185) | (24) |
Net cash provided by investing activities | 2,756 | 11,796 |
Cash flows from financing activities | ||
Payment of dividends | (2,929) | (11,700) |
Proceeds from exercise of stock options | 338 | |
Net cash used in financing activities | (2,929) | (11,362) |
Decrease in cash and cash equivalents | (586) | (904) |
Cash and cash equivalents, at the beginning of the period | 1,554 | 3,173 |
Cash and cash equivalents, at the end of the period | 968 | 2,269 |
Supplemental disclosure of non-cash investing and financing activities: | ||
Net unrealized gain, investments in marketable debt securities | $ 18 | $ 54 |
Organization and Business
Organization and Business | 9 Months Ended |
Sep. 30, 2019 | |
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 as a corporation in Nevada in July 1989. Effective September 18, 2015, we changed our state of incorporation from the State of Nevada to the State of Delaware. We are a vertically integrated and diversified branding, marketing and technology company engaged in the research, development, manufacture, distribution, marketing and sale of over-the-counter (“OTC”) consumer healthcare products, dietary supplements and other remedies in the United States. This includes the development and marketing of dietary supplements under the TK Supplements ® Our wholly-owned subsidiary, Pharmaloz Manufacturing, Inc. (“PMI”), is a full service contract manufacturer and distributor of a broad range of non-GMO, organic and/or natural-based cough drops and lozenges and OTC drug and dietary supplement products. In addition, we continue to actively pursue acquisition opportunities for other companies, technologies and products within and outside the consumer products industry. We use a December 31 year-end for financial reporting purposes. References herein to “Fiscal 2019” shall mean the fiscal year ended December 31, 2019 and references to other “Fiscal” years shall mean the year that 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. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2 – Summary of Significant Accounting Policies For the three and nine months ended September 30, 2019 and 2018, our revenues have come principally from OTC healthcare contract manufacturing and sales of dietary supplement products to retail customers in the United States. Basis of Presentation The unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and 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 audited consolidated financial statements, including the notes thereto, appearing in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. 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, 2019 are not necessarily indicative of operating results that may be achieved over the course of the full year. Product Innovation, Seasonality of the Business and Liquidity Our net sales are derived principally from our OTC healthcare contract manufacturing and sales of dietary supplement products to retail customers in the United States. In addition, we are engaged in marketing activities for the TK Supplements ® Our sales are influenced by and subject to (i) the scope and timing of TK Supplements ® As a consequence of the scope and timing of our TK Supplements ® 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 Debt Securities We have classified our investments in marketable debt securities as available-for-sale and as a current asset. Our investments in marketable debt 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 debt securities are recorded as interest income (expense). We initiated short term investments in marketable debt securities, which carry maturity dates between one and three years from date of purchase with interest rates of 1.91% - 4.70% during the first three quarters of Fiscal 2019. For the three months and nine months ended September 30, 2019, we reported an unrealized loss of $5,000 and unrealized gain of $18,000, respectively, and an accumulated unrealized loss of $6,000. 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 debt securities and the underlying fair value input level tier hierarchy (see long-lived assets below) (in thousands): As of September 30, 2019 Amortized Unrealized Market Cost Losses Value U.S treasuries $ 553 $ (3 ) $ 550 Corporate bonds 3,213 (3 ) 3,210 $ 3,766 $ (6 ) $ 3,760 As of December 31, 2018 Amortized Unrealized Market Cost Losses Value U.S treasuries $ 2,401 $ (3 ) $ 2,398 Corporate bonds 4,310 (21 ) 4,289 $ 6,711 $ (24 ) $ 6,687 We have determined that the unrealized losses are deemed to be temporary as of September 30, 2019. We believe that the unrealized losses generally are the result of increases in the risk premiums required by market participants rather than an adverse change in cash flows or a fundamental weakness in the credit quality of the issuer or underlying assets. We have the ability and intent to hold these investments until a recovery of fair value, which may be maturity. We do not consider the investment in corporate bonds to be other-than-temporarily impaired at September 30, 2019. Inventory Inventory is valued at the lower of cost, determined on a first-in, first-out basis (FIFO), or net realizable value. Inventory items are analyzed to determine cost and the net realizable value and appropriate valuation adjustments are established. At September 30, 2019, after the 2019 write-off of certain inventory previously recorded, the financial statements include adjustments to reduce inventory for excess, obsolete or short-dated shelf-life inventory of $344,000, inclusive of adjustments of $305,000 for product samples of TK Supplements ® ® September 30, 2019 December 31, 2018 Raw materials $ 1,125 $ 1,374 Work in process 462 371 Finished goods 299 158 $ 1,886 $ 1,903 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 equipment and software – three to five years; and furniture and fixtures – five years. We have reviewed our property, plant and equipment for the nine months ended September 30, 2019 and 2018 and concluded there were no impairments or changes in useful lives. 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 healthcare 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. The manufacturing and distribution of OTC healthcare and dietary supplement 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 debt 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, 2019, our cash and cash equivalents balance was $1.0 million and our bank balance was $1.1 million. Of the total bank balance, $250,000 was covered by federal depository insurance and $0.8 million was uninsured at September 30, 2019. 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 product 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, 2019 and December 31, 2018. 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 of Financial Instruments 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. Cash and cash equivalents, marketable debt securities, accounts receivable, accounts payable, and accrued expenses are reflected in the Condensed Consolidated Financial Statements at carrying value which approximates fair value. We account for our marketable debt securities at fair value pursuant to GAAP, with the net unrealized gains or losses reported as a component of accumulated other comprehensive income or loss. As of September 30, 2019 Level 1 Level 2 Level 3 Total Marketable debt securities U.S. government obligations $ - $ 550 $ - $ 550 Corporate obligations - 3,210 - 3,210 $ - $ 3,760 $ - $ 3,760 As of December 31, 2018 Level 1 Level 2 Level 3 Total Marketable debt securities U.S. government obligations $ - $ 2,398 $ - $ 2,398 Corporate obligations - 4,289 - 4,289 $ - $ 6,687 $ - $ 6,687 There were no transfers of marketable debt securities between Levels 1, 2 or 3 for the nine months ended September 30, 2019. Revenue Recognition We account for revenue when our performance obligations with our customers have been satisfied. At contract inception, we evaluate the contract using the following five steps: (1) identify the contract with the customer; (2) identify the performance obligations; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. We adopted ASC 606 as of January 1, 2018 using the modified retrospective method. There were no changes to our opening balances upon the adoption of ASC 606 and the amounts which would have been reported under the standards in effect prior to adoption. Performance Obligations We generate sales principally through two types of customers, contract manufacturing and retail customers. Sales from product shipments to contract manufacturing and retailer customers are recognized at the time ownership is transferred to the customer. Net sales from contract manufacturing and retail customers was $2.5 million and $0.2 million, respectively, for the three months ended September 30, 2019 and $2.3 million and $0.1 million, respectively, for the three months ended September 30, 2018. Net sales from contract manufacturing and retail customers was $6.1 million and $0.6 million, respectively, for the nine months ended September 30, 2019 and $8.8 million and $0.3 million, respectively, for the nine months ended September 30, 2018. 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. No such allowance is applicable to our contract manufacturing customers. 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. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The combined duties and responsibilities within each contract will be considered one single performance obligation under ASC 606 as these items would not be separately identifiable from each other promise in the contract and we provide a significant service of integrating the duties with other promises in the contracts. Transaction Price The transaction price is fixed based upon either (i) a combined Master Agreement and each related purchase order, or (ii) if there is no Master Agreement, the price per the individual purchase order received from each customer. The customers are invoiced at an agreed upon contractual price for each unit ordered and delivered by the Company and the R&D services are invoiced at the time the performance is completed. The Company does not collect sales tax or other similar taxes from customers. As such, there is no effect on the measurement of the transaction price. Recognize Revenue When the Company Satisfies a Performance Obligation Performance obligations related to contract manufacturing and retail customers are satisfied at a point in time when the goods are shipped to the customer as (i) the Company has transferred control of the assets to the customers upon shipping, and (ii) the customer obtains title and assumes the risks and rewards of ownership after the goods are shipped. We do not accept returns in the contract manufacturing revenue stream. 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 accept return requests for only products 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. We recognize contract manufacturing and retail customers revenue at a point in time as the Company has an enforceable right to payment for goods as products are shipped to customers. As of September 30, 2019 and December 31, 2018, we included a provision for sales allowances from operations of $500 and $1,000, respectively, which are reported as a reduction to account receivables. Additionally, accrued advertising and other allowances from discontinued operations as of September 30, 2019 included (i) $132,000 for estimated returns, which is reported as a reduction to account receivables, and (ii) $76,000 for cooperative incentive promotion costs, which is reported as accrued advertising and other allowances under current liabilities. As of December 31, 2018, accrued advertising and other allowances from discontinued operations included (i) $181,000 for estimated future sales returns, which is reported as a reduction to account receivables, and (ii) $88,000 for cooperative incentive promotion costs, which is reported as accrued advertising and other allowances under current liabilities. As of September 30, 2019, we have deferred revenue of $247,000 in relation to Research and Development (“R&D”) stability and release testing programs. Deferred revenues primarily consist of amounts that have been billed to or received from customers in advance of revenue recognition and prepayments received from customers in advance for implementation, maintenance and other services, as well as initial subscription fees. We recognize deferred revenues as revenues when the services are performed and the corresponding revenue recognition criteria are met. Customer prepayments are generally applied against invoices issued to customers when services are performed and billed. The following table disaggregates the Company’s deferred revenue by recognition period (in thousands): Recognition Period Deferred Revenue 0-12 Months $ 118 13-24 Months 34 Over 24 Months 95 Total $ 247 Disaggregation of Revenue We disaggregate revenue from contracts with customers into two categories: contract manufacturing and retail customers. The Company determined that disaggregating revenue into these categories achieves the disclosure objective to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The following table disaggregates the Company’s revenue by revenue source for the three and nine months ended September 30, 2019 and 2018 (in thousands): For the Three Months Ended For the Nine Months Ended Revenue by Customer Type September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018 Contract manufacturing $ 2,517 $ 2,324 $ 6,093 $ 8,764 Retail and others 249 115 642 269 Total revenue $ 2,766 $ 2,439 $ 6,735 $ 9,033 Shipping and Handling Activities We account for shipping and handling activities we perform after a customer obtains control of the good as activities to fulfill the promise to transfer the good. 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 for the three months ended September 30, 2019 and 2018 were $270,000 and $14,000, respectively. Advertising and incentive promotion expenses incurred for the nine months ended September 30, 2019 and 2018 were $352,000 and $51,000, respectively. Share-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 at their grant date. 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. We account for forfeitures as they occur. Stock and stock options for the purchase of our common stock, have been granted to employees pursuant to the terms of certain agreements and stock option plans (see Note 4). Stock options are exercisable during a period determined by us, but in no event later than seven years from the date granted. 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, 2019 and 2018 were $57,000 and $144,000, respectively. Research and development costs incurred for the nine months ended September 30, 2019 and 2018 were $246,000 and $319,000, respectively. Research and development costs are principally related to personnel expenses and new product development initiatives and costs associated with our OTC healthcare products and dietary supplements. 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 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 valuation allowance equaling the total deferred tax asset is being provided. 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 losses from continuing operations, we have recorded a full valuation allowance against a net deferred tax asset. Additionally, we have not recorded a liability for unrecognized tax benefit. Recently Adopted Accounting Standards In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by, among other provisions, recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous GAAP. For public companies, ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach and early adoption is permitted. In transition, entities may also elect a package of practical expedients that must be applied in its entirety to all leases commencing before the adoption date, unless the lease is modified, and permits entities to not reassess (a) the existence of a lease, (b) lease classification or (c) determination of initial direct costs, as of the adoption date, which effectively allows entities to carryforward accounting conclusions under previous GAAP. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides entities an optional transition method to apply the guidance under Topic 842 as of the adoption date, rather than as of the earliest period presented. We adopted Topic 842 on January 1, 2019, using the optional transition method to apply the new guidance as of January 1, 2019, rather than as of the earliest period presented, and elected the package of practical expedients described above. The adoption of this standard did not have a material impact on our condensed consolidated financial statements. In August 2018, the SEC adopted SEC Final Rule Release No. 33-10532, Disclosure Update and Simplification, which amended certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements regarding stockholders’ equity to interim financial statements. Under the amendments, a description of the changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The description must include a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. The condensed consolidated financial statements included in this Quarterly Report include a reconciliation of the beginning balance to the ending balance of stockholders’ equity for each period in which a statement of operations and comprehensive income (loss) is provided. Recently Issued Accounting Standards, Not Yet Adopted In September 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, subject to a deferral for smaller reporting companies pending issuance of a final ASU by the FASB. We are currently evaluating the potential impact of the adoption of this update on our consolidated financial statements. In June 2018, the FASB issued ASU 2018-07 “Improvements to Nonemployee Share-Based Payment Accounting”, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but not earlier than an entity’s adoption date of Topic 606. The Company is currently evaluating the impact of the new standard on its condensed consolidated financial statements. |
Property, Plant and Equipment
Property, Plant and Equipment | 9 Months Ended |
Sep. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Note 3 – Property, Plant and Equipment The components of property and equipment are as follows (in thousands): September 30, 2019 December 31, 2018 Estimated Useful Life Land $ 504 $ 504 Building improvements 3,113 3,059 10-39 years Machinery 4,257 4,126 3-7 years Computer equipment 457 457 3-5 years Furniture and fixtures 207 207 5 years 8,538 8,353 Less: accumulated depreciation (6,156 ) (5,854 ) Total property, plant and equipment, net $ 2,382 $ 2,499 Depreciation expense incurred for the three months ended September 30, 2019 and 2018 was $100,000 and $97,000, respectively. Depreciation expense incurred for the nine months ended September 30, 2019 and 2018 was $302,000 and $287,000, respectively. |
Transactions Affecting Stockhol
Transactions Affecting Stockholders' Equity | 9 Months Ended |
Sep. 30, 2019 | |
Equity [Abstract] | |
Transactions Affecting Stockholders' Equity | Note 4 – Transactions Affecting Stockholders’ Equity Our authorized capital stock consists of 50 million shares of Common Stock, $0.0005 par value (“Common Stock”), and one million shares of preferred stock, $0.0005 par value (“Preferred Stock”). Preferred Stock 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, 2019, 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. Common Stock Dividend On May 7, 2018, the Board declared a special cash dividend of $1.00 per share on the Company’s Common Stock payable on September 5, 2018 to holders of record of the Company’s Common Stock on September 6, 2018. On September 5, 2018, we made an aggregate cash payment of $11.7 million to our stockholders. On December 24, 2018, the Board declared a special cash dividend of $0.25 per share on the Company’s Common Stock resulting in $2.9 million payable on January 24, 2019 to holders of record of the Company’s Common Stock on January 10, 2019. On January 24, 2019, we made an aggregate cash payment of $2.9 million to our stockholders. The 2010 Directors’ Equity Compensation Plan On May 5, 2010, our stockholders approved the 2010 Directors’ Equity Compensation Plan, which was has been subsequently amended and restated by our stockholders (the “2010 Directors’ Plan”). A primary purpose of the 2010 Directors’ 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’ Plan provides that the total number of shares of Common Stock that may be issued under the 2010 Directors’ Plan is equal to 675,000 shares. During the three and nine months ended September 30, 2019, 4,727 and 15,464 shares of restricted stock were granted to our directors under the 2010 Directors’ Plan. We recorded $45,000 of director fees during the nine months ended September 30, 2019 in connection with these grants, which represented the fair value of the shares calculated based on the average closing price of the Company’s shares of Common Stock for the first five trading days of the quarter in which the Board fee was earned. During the nine months ended September 30, 2018, 7,474 shares of restricted stock were granted to our directors under the 2010 Directors’ Plan. We recorded $23,000 of director fees during the nine months ended September 30, 2018 in connection with these grants. As of September 30, 2019, there were 367,396 shares of Common Stock that may be issued pursuant to the terms of the 2010 Directors’ Plan. The 2010 Equity Compensation Plan On May 5, 2010, our stockholders approved the 2010 Equity Compensation Plan, which was subsequently amended and restated by our stockholders (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 3.9 million shares. No options were granted under the 2010 Plan for the three and nine months ended September 30, 2019. During the three and nine months ended September 30, 2018, we granted 30,000 options, exercisable at $2.35 per share and subject to vesting over a three-year term, to a consultant pursuant to the terms of the 2010 Plan. During the nine months ended September 30, 2018, we issued 490,000 shares of common stock upon the exercise of stock options granted under our 2010 Plan, including 250,000 shares that were issued in the nine months ended September 30, 2018 pursuant to a cashless exercise. As of September 30, 2019, there were 599,500 options outstanding and 711,159 options available to be issued pursuant to the terms of the 2010 Plan. We will recognize approximately $309,000 of share-based compensation expense over a weighted average period of 2.1 years. The 2018 Stock Incentive Plan On April 12, 2018, our stockholders approved the 2018 Stock Incentive Plan (the “2018 Stock Plan”). The 2018 Stock Plan provides for the grant of incentive stock options to eligible employees of the Company, and for the grant of nonstatutory stock options to eligible employees, directors and consultants. The purpose of the 2018 Stock Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain, and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. The 2018 Stock Plan provides that the total number of shares that may be issued pursuant to the 2018 Stock Plan is 2.3 million shares. As of September 30, 2018, all 2.3 million shares have been granted in the form of stock options to Ted Karkus (the “CEO Option”), our Chief Executive Officer and no stock options have been exercised under the 2018 Stock Plan. We use the Black-Scholes option pricing model to determine the fair value of the stock options at the date of grant. Based upon our limited historical experience, we determined the expected term of the stock option grants to be 4.5 years, calculated using the “simplified” method in accordance with the SEC Staff Accounting Bulletin 110. We use the “simplified” method since our historical data does not provide a reasonable basis upon which to estimate expected term. We will recognize approximately $706,000 of share-based compensation expense over a weighted average period of 1.4 years. The 2018 Plan requires certain proportionate adjustments to be made to the stock options granted under the 2018 Plan upon the occurrence of certain events, including a special distribution (whether in the form of cash, shares, other securities, or other property) in order to maintain parity. Accordingly, the Compensation Committee of the board of directors, as required by the terms of the 2018 Stock Plan, adjusted the terms of the CEO Option, such that the exercise price of the CEO Option was reduced from $3.00 per share to $2.00 per share, effective as of September 5, 2018, the date the special $1.00 special cash dividend was paid to stockholders. The exercise price of the CEO Option was further reduced from $2.00 to $1.75 per share, effective as of January 24, 2019, the date the $0.25 special cash dividend was paid to stockholders. The following table summarizes stock options activity during the nine months ended September 30, 2019 and 2018 for both the 2010 Plan and 2018 Stock Plan (in thousands, except per share data): Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life Total Intrinsic Value Outstanding as of January 1, 2019 2,980 $ 1.82 4.8 $ 3,235 Forfeited (80 ) 2.87 - - Outstanding as of September 30, 2019 2,900 $ 1.85 3.7 $ 420 Options vested and exercisable 1,397 $ 2.00 3.5 $ 224 Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life Total Intrinsic Value Outstanding as of January 1, 2018 980 $ 1.82 4.8 $ 31 Granted 2,330 2.00 - - Cashless exercised (250 ) 1.86 - - Cash exercised (240 ) 1.41 - - Outstanding as of September 30, 2018 2,820 $ 2.00 4.6 $ 2,812 Options vested and exercisable 482 $ 2.00 4.4 $ 484 |
Defined Contribution Plans
Defined Contribution Plans | 9 Months Ended |
Sep. 30, 2019 | |
Retirement Benefits [Abstract] | |
Defined Contribution Plans | Note 5 – Defined Contribution Plans We maintain the ProPhase Labs, Inc. 401(k) Savings and Retirement Plan, a defined contribution plan for our employees. Our contributions to the plan are based on the amount of the employee plan contributions and compensation. Our contributions to the plan during the three and nine months ended September 30, 2019 were $20,000 and $63,000, respectively, and for the three and nine months ended 2018 were $20,000 and $66,000, respectively. |
Other Accrued Liabilities
Other Accrued Liabilities | 9 Months Ended |
Sep. 30, 2019 | |
Other Liabilities Disclosure [Abstract] | |
Other Accrued Liabilities | Note 6 – Other Accrued Liabilities The following table sets forth the components of other current liabilities at September 30, 2019 and December 31, 2018, respectively, (in thousands): September 30, 2019 December 31, 2018 Accrued expenses $ 87 $ 167 Accrued benefits 67 23 Accrued payroll 64 195 Accrued vacation 29 66 Sales tax payable - 3 Income taxes payable - 106 Deferred revenue 118 206 Total other current liabilities $ 365 $ 766 |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 7– Commitments and Contingencies Escrow Receivable We have indemnification obligations to Mylan Consumer Healthcare Inc. (formerly known as Meda Consumer Healthcare Inc.) (“MCH”) and Mylan Inc. (together with MCH, “Mylan”) under the asset purchase agreement pursuant to which we sold the Cold-EEZE ® 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 ® The terms of the Escrow Agreement provide that if, as of September 29, 2018, 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. In addition, within two business days of March 29, 2019, 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. As described below, in August 2018, Mylan asserted an indemnification claim against us, for a yet to be determined amount. Accordingly, the distributions were not released to us on September 29, 2018 or March 29, 2019. On May 31, 2018, we received notice of a claim for $800,000 in losses against the escrow amount. We resolved this claim pursuant to a settlement agreement, effective October 16, 2018, pursuant to which $160,000 of the funds held in escrow were released to Mylan. This expense is reflected in discontinued operations in the third quarter of 2018. On August 2, 2018, we received notice of an indemnification claim from Mylan in relation to certain product advertising claims brought against Mylan related to certain 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) purchased the inventory of the Company’s Cold-EEZE ® Future Obligations: We have estimated future minimum obligations for an executive’s employment agreement over the next five years, including the remainder of Fiscal 2019, as follows (in thousands): Employment Contracts 2019 $ 31 2020 125 2021 595 2022 675 2023 675 Total $ 2,101 |
Loss Per Share
Loss Per Share | 9 Months Ended |
Sep. 30, 2019 | |
Earnings Per Share [Abstract] | |
Loss Per Share | Note 8 – Loss Per Share Basic loss per share for continuing operations are computed by dividing the 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 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 outstanding to acquire shares of our Common Stock at September 30, 2019 and December 31, 2018 were 2,900,000 and 2,980,000, respectively. For the three months ended September 30, 2019, dilutive loss per share were the same as basic earnings per share due to the exclusion of Common Stock in the form of stock options (“Common Stock Equivalents”), which in a net loss position would have an anti-dilutive effect on loss per share. For the three months ended September 30, 2019, there were 2,900,000 potential dilutive Common Stock Equivalents that were excluded from the loss per share computation as a consequence of their anti-dilutive effect. For the three months ended September 30, 2018 there were 2,800,000 potential dilutive Common Stock Equivalents that were excluded from the loss per share computation as a consequence of their anti-dilutive effect. For the nine months ended September 30, 2019, dilutive loss per share were the same as basic earnings per share due to the exclusion of Common Stock Equivalents, which in a net loss position would have an anti-dilutive effect on loss per share. For the nine months ended September 30, 2019, there were 2,900,000 potential dilutive Common Stock Equivalents that were excluded from the loss per share computation as a consequence of their anti-dilutive effect. For the nine months ended September 30 2018, there were 2,800,000 potential dilutive Common Stock Equivalents that were excluded from the loss per share computation as a consequence of their anti-dilutive effect. |
Significant Customers
Significant Customers | 9 Months Ended |
Sep. 30, 2019 | |
Risks and Uncertainties [Abstract] | |
Significant Customers | Note 9 – Significant Customers Revenue for the three months ended September 30, 2019 and 2018 was $2.8 million and $2.4 million, respectively. Three third-party contract manufacturing customers accounted for 33.04% and 30.1% and 10.2%, respectively, of our revenue from continuing operations for the three months ended September 30, 2019. Three third-party contract manufacturing customers accounted for 38.9%, 30.4% and 15.2%, respectively, of our revenue from continuing operations for the three months ended September 30, 2018. The loss of sales to any of these large third-party contract manufacturing customers could have a material adverse effect on our business operations and financial condition. Revenue for the nine months ended September 30, 2019 and 2018 was $6.7 million and $9.0 million, respectively. Two third-party contract manufacturing customers accounted for 44.2% and 27.2% respectively, of our revenue from continuing operations for the nine months ended September 30, 2019. Two third-party contract manufacturing customers accounted for 39.8% and 39.0%, respectively, of our revenue from continuing operations for the nine months ended September 30, 2018. The loss of sales to either of these large third-party contract manufacturing customers could have a material adverse effect on our business operations and financial condition. We are subject to account receivable credit concentrations from time-to-time as a consequence of the timing, payment pattern and ultimate purchase volumes or shipping schedules with our customers. These 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. Two customers represented 62.5% and 20.1% of our total trade receivable balances at September 30, 2019 and one customer represented 82% of our total trade receivable balances at December 31, 2018. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
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 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 audited consolidated financial statements, including the notes thereto, appearing in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. 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, 2019 are not necessarily indicative of operating results that may be achieved over the course of the full year. |
Product Innovation, Seasonality of the Business and Liquidity | Product Innovation, Seasonality of the Business and Liquidity Our net sales are derived principally from our OTC healthcare contract manufacturing and sales of dietary supplement products to retail customers in the United States. In addition, we are engaged in marketing activities for the TK Supplements ® Our sales are influenced by and subject to (i) the scope and timing of TK Supplements ® As a consequence of the scope and timing of our TK Supplements ® |
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 Debt Securities | Marketable Debt Securities We have classified our investments in marketable debt securities as available-for-sale and as a current asset. Our investments in marketable debt 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 debt securities are recorded as interest income (expense). We initiated short term investments in marketable debt securities, which carry maturity dates between one and three years from date of purchase with interest rates of 1.91% - 4.70% during the first three quarters of Fiscal 2019. For the three months and nine months ended September 30, 2019, we reported an unrealized loss of $5,000 and unrealized gain of $18,000, respectively, and an accumulated unrealized loss of $6,000. 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 debt securities and the underlying fair value input level tier hierarchy (see long-lived assets below) (in thousands): As of September 30, 2019 Amortized Unrealized Market Cost Losses Value U.S treasuries $ 553 $ (3 ) $ 550 Corporate bonds 3,213 (3 ) 3,210 $ 3,766 $ (6 ) $ 3,760 As of December 31, 2018 Amortized Unrealized Market Cost Losses Value U.S treasuries $ 2,401 $ (3 ) $ 2,398 Corporate bonds 4,310 (21 ) 4,289 $ 6,711 $ (24 ) $ 6,687 We have determined that the unrealized losses are deemed to be temporary as of September 30, 2019. We believe that the unrealized losses generally are the result of increases in the risk premiums required by market participants rather than an adverse change in cash flows or a fundamental weakness in the credit quality of the issuer or underlying assets. We have the ability and intent to hold these investments until a recovery of fair value, which may be maturity. We do not consider the investment in corporate bonds to be other-than-temporarily impaired at September 30, 2019. |
Inventory | Inventory Inventory is valued at the lower of cost, determined on a first-in, first-out basis (FIFO), or net realizable value. Inventory items are analyzed to determine cost and the net realizable value and appropriate valuation adjustments are established. At September 30, 2019, after the 2019 write-off of certain inventory previously recorded, the financial statements include adjustments to reduce inventory for excess, obsolete or short-dated shelf-life inventory of $344,000, inclusive of adjustments of $305,000 for product samples of TK Supplements ® ® September 30, 2019 December 31, 2018 Raw materials $ 1,125 $ 1,374 Work in process 462 371 Finished goods 299 158 $ 1,886 $ 1,903 |
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 equipment and software – three to five years; and furniture and fixtures – five years. We have reviewed our property, plant and equipment for the nine months ended September 30, 2019 and 2018 and concluded there were no impairments or changes in useful lives. |
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 healthcare 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. The manufacturing and distribution of OTC healthcare and dietary supplement 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 debt 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, 2019, our cash and cash equivalents balance was $1.0 million and our bank balance was $1.1 million. Of the total bank balance, $250,000 was covered by federal depository insurance and $0.8 million was uninsured at September 30, 2019. 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 product 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, 2019 and December 31, 2018. |
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 of Financial Instruments | Fair Value of Financial Instruments 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. Cash and cash equivalents, marketable debt securities, accounts receivable, accounts payable, and accrued expenses are reflected in the Condensed Consolidated Financial Statements at carrying value which approximates fair value. We account for our marketable debt securities at fair value pursuant to GAAP, with the net unrealized gains or losses reported as a component of accumulated other comprehensive income or loss. As of September 30, 2019 Level 1 Level 2 Level 3 Total Marketable debt securities U.S. government obligations $ - $ 550 $ - $ 550 Corporate obligations - 3,210 - 3,210 $ - $ 3,760 $ - $ 3,760 As of December 31, 2018 Level 1 Level 2 Level 3 Total Marketable debt securities U.S. government obligations $ - $ 2,398 $ - $ 2,398 Corporate obligations - 4,289 - 4,289 $ - $ 6,687 $ - $ 6,687 There were no transfers of marketable debt securities between Levels 1, 2 or 3 for the nine months ended September 30, 2019. |
Revenue Recognition | Revenue Recognition We account for revenue when our performance obligations with our customers have been satisfied. At contract inception, we evaluate the contract using the following five steps: (1) identify the contract with the customer; (2) identify the performance obligations; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. We adopted ASC 606 as of January 1, 2018 using the modified retrospective method. There were no changes to our opening balances upon the adoption of ASC 606 and the amounts which would have been reported under the standards in effect prior to adoption. Performance Obligations We generate sales principally through two types of customers, contract manufacturing and retail customers. Sales from product shipments to contract manufacturing and retailer customers are recognized at the time ownership is transferred to the customer. Net sales from contract manufacturing and retail customers was $2.5 million and $0.2 million, respectively, for the three months ended September 30, 2019 and $2.3 million and $0.1 million, respectively, for the three months ended September 30, 2018. Net sales from contract manufacturing and retail customers was $6.1 million and $0.6 million, respectively, for the nine months ended September 30, 2019 and $8.8 million and $0.3 million, respectively, for the nine months ended September 30, 2018. 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. No such allowance is applicable to our contract manufacturing customers. 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. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The combined duties and responsibilities within each contract will be considered one single performance obligation under ASC 606 as these items would not be separately identifiable from each other promise in the contract and we provide a significant service of integrating the duties with other promises in the contracts. Transaction Price The transaction price is fixed based upon either (i) a combined Master Agreement and each related purchase order, or (ii) if there is no Master Agreement, the price per the individual purchase order received from each customer. The customers are invoiced at an agreed upon contractual price for each unit ordered and delivered by the Company and the R&D services are invoiced at the time the performance is completed. The Company does not collect sales tax or other similar taxes from customers. As such, there is no effect on the measurement of the transaction price. Recognize Revenue When the Company Satisfies a Performance Obligation Performance obligations related to contract manufacturing and retail customers are satisfied at a point in time when the goods are shipped to the customer as (i) the Company has transferred control of the assets to the customers upon shipping, and (ii) the customer obtains title and assumes the risks and rewards of ownership after the goods are shipped. We do not accept returns in the contract manufacturing revenue stream. 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 accept return requests for only products 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. We recognize contract manufacturing and retail customers revenue at a point in time as the Company has an enforceable right to payment for goods as products are shipped to customers. As of September 30, 2019 and December 31, 2018, we included a provision for sales allowances from operations of $500 and $1,000, respectively, which are reported as a reduction to account receivables. Additionally, accrued advertising and other allowances from discontinued operations as of September 30, 2019 included (i) $132,000 for estimated returns, which is reported as a reduction to account receivables, and (ii) $76,000 for cooperative incentive promotion costs, which is reported as accrued advertising and other allowances under current liabilities. As of December 31, 2018, accrued advertising and other allowances from discontinued operations included (i) $181,000 for estimated future sales returns, which is reported as a reduction to account receivables, and (ii) $88,000 for cooperative incentive promotion costs, which is reported as accrued advertising and other allowances under current liabilities. As of September 30, 2019, we have deferred revenue of $247,000 in relation to Research and Development (“R&D”) stability and release testing programs. Deferred revenues primarily consist of amounts that have been billed to or received from customers in advance of revenue recognition and prepayments received from customers in advance for implementation, maintenance and other services, as well as initial subscription fees. We recognize deferred revenues as revenues when the services are performed and the corresponding revenue recognition criteria are met. Customer prepayments are generally applied against invoices issued to customers when services are performed and billed. The following table disaggregates the Company’s deferred revenue by recognition period (in thousands): Recognition Period Deferred Revenue 0-12 Months $ 118 13-24 Months 34 Over 24 Months 95 Total $ 247 Disaggregation of Revenue We disaggregate revenue from contracts with customers into two categories: contract manufacturing and retail customers. The Company determined that disaggregating revenue into these categories achieves the disclosure objective to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The following table disaggregates the Company’s revenue by revenue source for the three and nine months ended September 30, 2019 and 2018 (in thousands): For the Three Months Ended For the Nine Months Ended Revenue by Customer Type September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018 Contract manufacturing $ 2,517 $ 2,324 $ 6,093 $ 8,764 Retail and others 249 115 642 269 Total revenue $ 2,766 $ 2,439 $ 6,735 $ 9,033 Shipping and Handling Activities We account for shipping and handling activities we perform after a customer obtains control of the good as activities to fulfill the promise to transfer the good. |
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 for the three months ended September 30, 2019 and 2018 were $270,000 and $14,000, respectively. Advertising and incentive promotion expenses incurred for the nine months ended September 30, 2019 and 2018 were $352,000 and $51,000, respectively. |
Share-Based Compensation | Share-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 at their grant date. 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. We account for forfeitures as they occur. Stock and stock options for the purchase of our common stock, have been granted to employees pursuant to the terms of certain agreements and stock option plans (see Note 4). Stock options are exercisable during a period determined by us, but in no event later than seven years from the date granted. |
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, 2019 and 2018 were $57,000 and $144,000, respectively. Research and development costs incurred for the nine months ended September 30, 2019 and 2018 were $246,000 and $319,000, respectively. Research and development costs are principally related to personnel expenses and new product development initiatives and costs associated with our OTC healthcare products and dietary supplements. |
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 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 valuation allowance equaling the total deferred tax asset is being provided. 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 losses from continuing operations, we have recorded a full valuation allowance against a net deferred tax asset. Additionally, we have not recorded a liability for unrecognized tax benefit. |
Recently Adopted Accounting Standards | Recently Adopted Accounting Standards In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by, among other provisions, recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous GAAP. For public companies, ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach and early adoption is permitted. In transition, entities may also elect a package of practical expedients that must be applied in its entirety to all leases commencing before the adoption date, unless the lease is modified, and permits entities to not reassess (a) the existence of a lease, (b) lease classification or (c) determination of initial direct costs, as of the adoption date, which effectively allows entities to carryforward accounting conclusions under previous GAAP. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides entities an optional transition method to apply the guidance under Topic 842 as of the adoption date, rather than as of the earliest period presented. We adopted Topic 842 on January 1, 2019, using the optional transition method to apply the new guidance as of January 1, 2019, rather than as of the earliest period presented, and elected the package of practical expedients described above. The adoption of this standard did not have a material impact on our condensed consolidated financial statements. In August 2018, the SEC adopted SEC Final Rule Release No. 33-10532, Disclosure Update and Simplification, which amended certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements regarding stockholders’ equity to interim financial statements. Under the amendments, a description of the changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The description must include a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. The condensed consolidated financial statements included in this Quarterly Report include a reconciliation of the beginning balance to the ending balance of stockholders’ equity for each period in which a statement of operations and comprehensive income (loss) is provided. |
Recently Issued Accounting Standards, Not Yet Adopted | Recently Issued Accounting Standards, Not Yet Adopted In September 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, subject to a deferral for smaller reporting companies pending issuance of a final ASU by the FASB. We are currently evaluating the potential impact of the adoption of this update on our consolidated financial statements. In June 2018, the FASB issued ASU 2018-07 “Improvements to Nonemployee Share-Based Payment Accounting”, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but not earlier than an entity’s adoption date of Topic 606. The Company is currently evaluating the impact of the new standard on its condensed consolidated financial statements. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Summary of Components of Marketable Securities | The following is a summary of the components of our marketable debt securities and the underlying fair value input level tier hierarchy (see long-lived assets below) (in thousands): As of September 30, 2019 Amortized Unrealized Market Cost Losses Value U.S treasuries $ 553 $ (3 ) $ 550 Corporate bonds 3,213 (3 ) 3,210 $ 3,766 $ (6 ) $ 3,760 As of December 31, 2018 Amortized Unrealized Market Cost Losses Value U.S treasuries $ 2,401 $ (3 ) $ 2,398 Corporate bonds 4,310 (21 ) 4,289 $ 6,711 $ (24 ) $ 6,687 |
Components of Inventory | The components of inventory are as follows (in thousands): September 30, 2019 December 31, 2018 Raw materials $ 1,125 $ 1,374 Work in process 462 371 Finished goods 299 158 $ 1,886 $ 1,903 |
Schedule of Fair Value of Financial Instruments | We account for our marketable debt securities at fair value pursuant to GAAP, with the net unrealized gains or losses reported as a component of accumulated other comprehensive income or loss. As of September 30, 2019 Level 1 Level 2 Level 3 Total Marketable debt securities U.S. government obligations $ - $ 550 $ - $ 550 Corporate obligations - 3,210 - 3,210 $ - $ 3,760 $ - $ 3,760 As of December 31, 2018 Level 1 Level 2 Level 3 Total Marketable debt securities U.S. government obligations $ - $ 2,398 $ - $ 2,398 Corporate obligations - 4,289 - 4,289 $ - $ 6,687 $ - $ 6,687 |
Schedule of Deferred Revenue | The following table disaggregates the Company’s deferred revenue by recognition period (in thousands): Recognition Period Deferred Revenue 0-12 Months $ 118 13-24 Months 34 Over 24 Months 95 Total $ 247 |
Schedule of Disaggregation by Revenue | The following table disaggregates the Company’s revenue by revenue source for the three and nine months ended September 30, 2019 and 2018 (in thousands): For the Three Months Ended For the Nine Months Ended Revenue by Customer Type September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018 Contract manufacturing $ 2,517 $ 2,324 $ 6,093 $ 8,764 Retail and others 249 115 642 269 Total revenue $ 2,766 $ 2,439 $ 6,735 $ 9,033 |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property, Plant and Equipment | The components of property and equipment are as follows (in thousands): September 30, 2019 December 31, 2018 Estimated Useful Life Land $ 504 $ 504 Building improvements 3,113 3,059 10-39 years Machinery 4,257 4,126 3-7 years Computer equipment 457 457 3-5 years Furniture and fixtures 207 207 5 years 8,538 8,353 Less: accumulated depreciation (6,156 ) (5,854 ) Total property, plant and equipment, net $ 2,382 $ 2,499 |
Transactions Affecting Stockh_2
Transactions Affecting Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Equity [Abstract] | |
Schedule of Stock Options Granted | The following table summarizes stock options activity during the nine months ended September 30, 2019 and 2018 for both the 2010 Plan and 2018 Stock Plan (in thousands, except per share data): Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life Total Intrinsic Value Outstanding as of January 1, 2019 2,980 $ 1.82 4.8 $ 3,235 Forfeited (80 ) 2.87 - - Outstanding as of September 30, 2019 2,900 $ 1.85 3.7 $ 420 Options vested and exercisable 1,397 $ 2.00 3.5 $ 224 Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life Total Intrinsic Value Outstanding as of January 1, 2018 980 $ 1.82 4.8 $ 31 Granted 2,330 2.00 - - Cashless exercised (250 ) 1.86 - - Cash exercised (240 ) 1.41 - - Outstanding as of September 30, 2018 2,820 $ 2.00 4.6 $ 2,812 Options vested and exercisable 482 $ 2.00 4.4 $ 484 |
Other Accrued Liabilities (Tabl
Other Accrued Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Other Liabilities Disclosure [Abstract] | |
Schedule of Other Current Liabilities | The following table sets forth the components of other current liabilities at September 30, 2019 and December 31, 2018, respectively, (in thousands): September 30, 2019 December 31, 2018 Accrued expenses $ 87 $ 167 Accrued benefits 67 23 Accrued payroll 64 195 Accrued vacation 29 66 Sales tax payable - 3 Income taxes payable - 106 Deferred revenue 118 206 Total other current liabilities $ 365 $ 766 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
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 2019, as follows (in thousands): Employment Contracts 2019 $ 31 2020 125 2021 595 2022 675 2023 675 Total $ 2,101 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Working capital | $ 12,100,000 | $ 12,100,000 | |||
Marketable debt securities, available for sale | 3,760,000 | 3,760,000 | $ 6,687,000 | ||
Unrealized gain (loss) on marketable securities | (5,000) | $ 28,000 | 18,000 | $ 54,000 | |
Accumulated unrealized loss on marketable securities | 6,000 | 6,000 | |||
Adjustments to reduce inventory for excess or obsolete inventory | 344,000 | 344,000 | 377,000 | ||
Inventory finished goods | 299,000 | 299,000 | 158,000 | ||
Impairments or changes in useful lives | |||||
Cash and cash equivalents | 968,000 | 968,000 | 1,554,000 | ||
Bank balance | 1,100,000 | 1,100,000 | |||
Amount of bank balance covered by federal depository insurance | 250,000 | 250,000 | |||
Amount of bank balance uninsured | 800,000 | 800,000 | |||
Allowance for bad debt | |||||
Net sales | 2,766,000 | 2,439,000 | 6,735,000 | 9,033,000 | |
Provision for sales allowances | 500 | 1,000 | |||
Estimated sales returns | 132,000 | 132,000 | 181,000 | ||
Advertising and incentive promotion expenses | 270,000 | 14,000 | 352,000 | 51,000 | |
Deferred revenue | 247,000 | $ 247,000 | |||
Stock option exercisable period | 7 years | ||||
Research and development | 57,000 | 144,000 | $ 246,000 | 319,000 | |
Research and Development Expense [Member] | |||||
Deferred revenue | 247,000 | 247,000 | |||
Cooperative Incentive [Member] | |||||
Advertising and incentive promotion expenses | 76,000 | 88,000 | |||
Contract Manufacturing [Member] | |||||
Net sales | 2,517,000 | 2,324,000 | 6,093,000 | 8,764,000 | |
Retail Customers [Member] | |||||
Net sales | 200,000 | $ 100,000 | $ 600,000 | $ 300,000 | |
Furniture and Fixtures [Member] | |||||
Property, plant and equipment, useful life | 5 years | ||||
Shelf-life Inventory [Member] | |||||
Inventory finished goods | 78,000 | $ 78,000 | 319,000 | ||
Raw material and work in process | 266,000 | 266,000 | 58,000 | ||
TK Supplements [Member] | |||||
Adjustments to reduce inventory for excess or obsolete inventory | $ 305,000 | $ 305,000 | $ 270,000 | ||
Minimum [Member] | Building and Improvements [Member] | |||||
Property, plant and equipment, useful life | 10 years | ||||
Minimum [Member] | Machinery and Equipment [Member] | |||||
Property, plant and equipment, useful life | 3 years | ||||
Minimum [Member] | Computer Equipment and Software [Member] | |||||
Property, plant and equipment, useful life | 3 years | ||||
Maximum [Member] | Building and Improvements [Member] | |||||
Property, plant and equipment, useful life | 39 years | ||||
Maximum [Member] | Machinery and Equipment [Member] | |||||
Property, plant and equipment, useful life | 7 years | ||||
Maximum [Member] | Computer Equipment and Software [Member] | |||||
Property, plant and equipment, useful life | 5 years | ||||
Marketable Securities [Member] | Minimum [Member] | |||||
Investment in securities term | 1 year | ||||
Interest rate | 1.91% | ||||
Marketable Securities [Member] | Maximum [Member] | |||||
Investment in securities term | 3 years | ||||
Interest rate | 4.70% |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Summary of Components of Marketable Securities (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Amortized Cost | $ 3,766 | $ 6,711 |
Unrealized Losses | (6) | (24) |
Market Value | 3,760 | 6,687 |
U.S. Treasuries [Member] | ||
Amortized Cost | 553 | 2,401 |
Unrealized Losses | (3) | (3) |
Market Value | 550 | 2,398 |
Corporate Bonds [Member] | ||
Amortized Cost | 3,213 | 4,310 |
Unrealized Losses | (3) | (21) |
Market Value | $ 3,210 | $ 4,289 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Components of Inventory (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Accounting Policies [Abstract] | ||
Raw materials | $ 1,125 | $ 1,374 |
Work in process | 462 | 371 |
Finished goods | 299 | 158 |
Total inventory | $ 1,886 | $ 1,903 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Schedule of Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Fair Value of Marketable debt Securities | $ 3,760 | $ 6,687 |
Level 1 [Member] | ||
Fair Value of Marketable debt Securities | ||
Level 2 [Member] | ||
Fair Value of Marketable debt Securities | 3,760 | 6,687 |
Level 3 [Member] | ||
Fair Value of Marketable debt Securities | ||
U.S. Government Obligations [Member] | ||
Fair Value of Marketable debt Securities | 550 | 2,398 |
U.S. Government Obligations [Member] | Level 1 [Member] | ||
Fair Value of Marketable debt Securities | ||
U.S. Government Obligations [Member] | Level 2 [Member] | ||
Fair Value of Marketable debt Securities | 550 | 2,398 |
U.S. Government Obligations [Member] | Level 3 [Member] | ||
Fair Value of Marketable debt Securities | ||
Corporate Obligations [Member] | ||
Fair Value of Marketable debt Securities | 3,210 | 4,289 |
Corporate Obligations [Member] | Level 1 [Member] | ||
Fair Value of Marketable debt Securities | ||
Corporate Obligations [Member] | Level 2 [Member] | ||
Fair Value of Marketable debt Securities | 3,210 | 4,289 |
Corporate Obligations [Member] | Level 3 [Member] | ||
Fair Value of Marketable debt Securities |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Schedule of Deferred Revenue (Details) $ in Thousands | Sep. 30, 2019USD ($) |
Deferred Revenue | $ 247 |
0-12 Months [Member] | |
Deferred Revenue | 118 |
13-24 Months [Member] | |
Deferred Revenue | 34 |
Over 24 Months [Member] | |
Deferred Revenue | $ 95 |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Schedule of Disaggregation by Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Total Revenue | $ 2,766 | $ 2,439 | $ 6,735 | $ 9,033 |
Contract Manufacturing [Member] | ||||
Total Revenue | 2,517 | 2,324 | 6,093 | 8,764 |
Retail and Others [Member] | ||||
Total Revenue | $ 249 | $ 115 | $ 642 | $ 269 |
Property, Plant and Equipment_2
Property, Plant and Equipment (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense | $ 100 | $ 97 | $ 302 | $ 287 |
Property, Plant and Equipment -
Property, Plant and Equipment - Schedule of Property, Plant and Equipment (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Dec. 31, 2018 | |
Property, Plant and Equipment, Gross | $ 8,538 | $ 8,353 |
Less: Accumulated depreciation | (6,156) | (5,854) |
Total property, plant and equipment, net | 2,382 | 2,499 |
Land [Member] | ||
Property, Plant and Equipment, Gross | 504 | 504 |
Building Improvements [Member] | ||
Property, Plant and Equipment, Gross | $ 3,113 | 3,059 |
Building Improvements [Member] | Minimum [Member] | ||
Property, Plant and Equipment, Estimated Useful Life | 10 years | |
Building Improvements [Member] | Maximum [Member] | ||
Property, Plant and Equipment, Estimated Useful Life | 39 years | |
Machinery [Member] | ||
Property, Plant and Equipment, Gross | $ 4,257 | 4,126 |
Machinery [Member] | Minimum [Member] | ||
Property, Plant and Equipment, Estimated Useful Life | 3 years | |
Machinery [Member] | Maximum [Member] | ||
Property, Plant and Equipment, Estimated Useful Life | 7 years | |
Computer Equipment [Member] | ||
Property, Plant and Equipment, Gross | $ 457 | 457 |
Computer Equipment [Member] | Minimum [Member] | ||
Property, Plant and Equipment, Estimated Useful Life | 3 years | |
Computer Equipment [Member] | Maximum [Member] | ||
Property, Plant and Equipment, Estimated Useful Life | 5 years | |
Furniture and Fixtures [Member] | ||
Property, Plant and Equipment, Gross | $ 207 | $ 207 |
Property, Plant and Equipment, Estimated Useful Life | 5 years |
Transactions Affecting Stockh_3
Transactions Affecting Stockholders' Equity (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | Jan. 24, 2019 | Dec. 24, 2018 | Sep. 30, 2018 | Sep. 05, 2018 | May 07, 2018 | Apr. 12, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | May 05, 2010 |
Common stock, shares authorized | 50,000,000 | 50,000,000 | 50,000,000 | |||||||||
Common stock, par value | $ 0.0005 | $ 0.0005 | $ 0.0005 | |||||||||
Preferred stock, shares authorized | 1,000,000 | 1,000,000 | 1,000,000 | |||||||||
Preferred stock, par value | $ 0.0005 | $ 0.0005 | $ 0.0005 | |||||||||
Preferred stock, shares issued | ||||||||||||
Cash dividend paid | $ 0.25 | $ 1 | ||||||||||
Dividends payable date | Jan. 24, 2019 | Sep. 5, 2018 | ||||||||||
Dividends record date | Jan. 10, 2019 | Sep. 6, 2018 | ||||||||||
Cash payment | $ 2,900 | $ 11,700 | ||||||||||
Dividend payable | $ 2,900 | |||||||||||
2010 Directors' Equity Compensation Plan [Member] | ||||||||||||
Plan provides total number of shares of common stock issued | 675,000 | |||||||||||
Direct fees | $ 45 | $ 23 | ||||||||||
Stock issued during period shares | 367,396 | |||||||||||
2010 Directors' Equity Compensation Plan [Member] | Restricted Stock [Member] | ||||||||||||
Stock option granted | 4,727 | 15,464 | 7,474 | |||||||||
2010 Equity Compensation Plan [Member] | ||||||||||||
Plan provides total number of shares of common stock issued | 3,900,000 | |||||||||||
Stock option granted | ||||||||||||
Stock option, exercised | 490,000 | |||||||||||
Stock issued for cashless exercise | 250,000 | |||||||||||
Options outstanding shares | 599,500 | 599,500 | ||||||||||
Stock options available to be issued | 711,159 | 711,159 | ||||||||||
Share-based compensation expense | $ 309 | |||||||||||
Share-based compensation expense weighted average period | 2 years 1 month 6 days | |||||||||||
2010 Equity Compensation Plan [Member] | Consultant [Member] | ||||||||||||
Stock option, exercised | 30,000 | 30,000 | ||||||||||
Stock options exercise price per share | $ 2.35 | $ 2.35 | $ 2.35 | |||||||||
Stock option, expected life | 3 years | |||||||||||
2018 Stock Incentive Plan [Member] | ||||||||||||
Stock option, expected life | 4 years 6 months | |||||||||||
Stock options available to be issued | 2,300,000 | |||||||||||
Share-based compensation expense | $ 706 | |||||||||||
Share-based compensation expense weighted average period | 1 year 4 months 24 days | |||||||||||
Special cash dividend paid | $ 0.25 | $ 1 | ||||||||||
2018 Stock Incentive Plan [Member] | Maximum [Member] | ||||||||||||
Stock options exercise price per share | 2 | 3 | ||||||||||
2018 Stock Incentive Plan [Member] | Minimum [Member] | ||||||||||||
Stock options exercise price per share | $ 1.75 | $ 2 | ||||||||||
2018 Stock Incentive Plan [Member] | CEO [Member] | ||||||||||||
Stock option granted | 2,300,000 | |||||||||||
Stock option, exercised |
Transactions Affecting Stockh_4
Transactions Affecting Stockholders' Equity - Schedule of Stock Options Granted (Details) - Stock Option [Member] - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Stockholders' Equity [Line Items] | ||
Number of Shares Options Outstanding - Beginning | 2,980 | 980 |
Number of Shares, Granted | 2,330 | |
Number of Shares, Cashless exercised | (250) | |
Number of Shares, Cash exercised | (240) | |
Number of Shares, Forfeited | (80) | |
Number of Shares Options Outstanding - Ending | 2,900 | 2,820 |
Number of Shares Options Vested and Exercisable | 1,397 | 482 |
Weighted Average Exercise Price Options Outstanding - Beginning | $ 1.82 | $ 1.82 |
Weighted Average Exercise Price, Granted | 2 | |
Weighted Average Exercise Price, Cashless exercised | 1.86 | |
Weighted Average Exercise Price, Cash exercised | 1.41 | |
Weighted Average Exercise Price, Forfeited | 2.87 | |
Weighted Average Exercise Price Options Outstanding - Ending | 1.85 | 2 |
Weighted Average Exercise Price, Options Vested and Exercisable | $ 2 | $ 2 |
Weighted Average Remaining Contractual Life (in Years) - Beginning | 4 years 9 months 18 days | 4 years 9 months 18 days |
Weighted Average Remaining Contractual Life (in Years) - Ending | 3 years 8 months 12 days | 4 years 7 months 6 days |
Weighted Average Remaining Contractual Life (in Years) - Options Vested and Exercisable | 3 years 6 months | 4 years 4 months 24 days |
Total Intrinsic Value - Beginning | $ 3,235 | $ 31 |
Total Intrinsic Value - Ending | 420 | 2,812 |
Total Intrinsic Value, Options Vested and Exercisable | $ 224 | $ 484 |
Defined Contribution Plans (Det
Defined Contribution Plans (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Retirement Benefits [Abstract] | ||||
Defined contribution plan amount | $ 20 | $ 20 | $ 63 | $ 66 |
Other Accrued Liabilities - Sch
Other Accrued Liabilities - Schedule of Other Current Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Other Liabilities Disclosure [Abstract] | ||
Accrued expenses | $ 87 | $ 167 |
Accrued benefits | 67 | 23 |
Accrued payroll | 64 | 195 |
Accrued vacation | 29 | 66 |
Sales tax payable | 3 | |
Income taxes payable | 106 | |
Deferred revenue | 118 | 206 |
Total other current liabilities | $ 365 | $ 766 |
Commitments and Contingencies_2
Commitments and Contingencies (Details Narrative) - Mylan and Escrow Agent [Member] - USD ($) $ in Thousands | Oct. 16, 2018 | May 31, 2018 | Sep. 30, 2019 | Sep. 29, 2018 |
Minimum [Member] | ||||
Escrow deposit | $ 2,500 | |||
Escrow Agreement [Member] | ||||
Escrow deposit | $ 5,000 | |||
Escrow receivable, description | The terms of the Escrow Agreement provide that if, as of September 29, 2018, 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. In addition, within two business days of March 29, 2019, 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. As described below, in August 2018, Mylan asserted an indemnification claim against us, for a yet to be determined amount. Accordingly, the distributions were not released to us on September 29, 2018 or March 29, 2019. | |||
Agreement termination date | Mar. 29, 2019 | |||
Losses against escrow amount | $ 160 | $ 800 |
Commitments and Contingencies -
Commitments and Contingencies - Schedule of Estimated Future Minimum Obligations (Details) - Employment Contracts [Member] $ in Thousands | Sep. 30, 2019USD ($) |
2019 | $ 31 |
2020 | 125 |
2021 | 595 |
2022 | 675 |
2023 | 675 |
Total | $ 2,101 |
Loss Per Share (Details Narrati
Loss Per Share (Details Narrative) - shares | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Options and warrants outstanding to acquire shares of common stock | 2,900,000 | 2,900,000 | 2,980,000 | ||
Common Stock Equivalents [Member] | |||||
Common stock equivalent and options excluded from earnings (loss) per share computation as anti-dilutive effect | 2,900,000 | 2,800,000 | 2,900,000 | 2,800,000 |
Significant Customers (Details
Significant Customers (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Net sales | $ 2,766 | $ 2,439 | $ 6,735 | $ 9,033 | |
Sales Revenue, Net [Member] | Third Party Contract Manufacturing Customer One [Member] | |||||
Concentration risk, percentage | 33.04% | 38.90% | 44.20% | 39.80% | |
Sales Revenue, Net [Member] | Third Party Contract Manufacturing Customer Two [Member] | |||||
Concentration risk, percentage | 30.10% | 30.40% | 27.20% | 39.00% | |
Sales Revenue, Net [Member] | Third Party Contract Manufacturing Customer Three [Member] | |||||
Concentration risk, percentage | 10.20% | 15.20% | |||
Accounts Receivable [Member] | Customer One [Member] | |||||
Concentration risk, percentage | 62.50% | ||||
Accounts Receivable [Member] | Customer Two [Member] | |||||
Concentration risk, percentage | 20.10% | ||||
Accounts Receivable [Member] | One Customer [Member] | |||||
Concentration risk, percentage | 82.00% |