ProPhase Labs, Inc.
(NASDAQ:PRPH) (www.ProPhaseLabs.com) today reported its
financial results for the three months and six months ended June
30, 2017. As previously announced, effective March 29, 2017
and with the approval of the Company’s stockholders, the Company
completed the sale of assets comprised principally of the sale of
intellectual property rights and other assets relating to the
Cold-EEZE® brand and product line (collectively, referred to herein
as the “Cold-EEZE® Business”) to a wholly-owned subsidiary of Mylan
N.V. (“Mylan”). As a consequence of the sale of the
Cold-EEZE® Business, for the three months and six months ended June
30, 2017 and 2016, the Company has classified as discontinued
operations the (i) gain from the sale of the Cold-EEZE® Business,
(ii) all gains and losses attributable to the Cold-EEZE® Business
and (iii) the income tax expense attributed to the sale of the
Cold-EEZE® Business. Excluded from the sale of the Cold-EEZE®
Business were the Company’s accounts receivable and inventory, and
it also retained all liabilities associated with the Cold-EEZE®
Business operations arising prior to March 29, 2017.
We continue to own and operate our manufacturing
facility and manufacturing business in Lebanon, Pennsylvania, and
our headquarters in Doylestown, Pennsylvania. As part of the
sale of the Cold-EEZE® Business, we entered into a manufacturing
agreement to supply various Cold-EEZE® lozenge products to Mylan.
In addition, we produce over-the-counter drug and dietary
supplement lozenges and other products for other third party
customers. We are also pursuing a series of new product
development and pre-commercialization initiatives in the dietary
supplement category.
Net sales from continuing operations were $1.9
million for the three months ended June 30, 2017, as compared to
net sales of $1.0 million for the three months ended June 30,
2016.
The Company incurred a net loss from continuing
operations for the three months ended June 30, 2017, of $1.5
million, or ($0.09) per share, compared to a net loss of $1.3
million, or ($0.08) per share, for the three months ended June 30,
2016. The Company incurred a net loss from discontinued operations
for the three months ended June 30, 2017, of $845,000, or ($0.05)
per share, compared to net income from discontinued operations of
$198,000, or $0.01 per share, for the three months ended June 30,
2016.
Net sales from continuing operations were $2.7
million for the six months ended June 30, 2017, as compared to net
sales of $2.0 million for the six months ended June 30, 2016.
In addition, the loss from continuing operations before income
taxes was $2.6 million for the six months ended June 30, 2017, as
compared to $2.6 million for the six months ended June 30,
2016.
As a consequence of the sale of the Cold-EEZE®
Business, the Company realized a gain, net of income tax, of $26.3
million for the six months ended June 30, 2017. The gain on
the sale of the Cold-EEZE® Business is classified as a component of
our discontinued operations at June 30, 2017 and is net of
approximately $19.5 million for estimated income taxes arising from
the sale. For the six months ended June 30, 2017, the Company also
realized an income tax benefit from continuing operations of $18.1
million as a consequence of the utilization of the federal and
state net operating losses.
Utilization of net operating loss carryforwards
may be subject to certain statutory limitations. Based on the
Company’s preliminary analysis, it does not believe that the
current net operating loss carryforwards are subject to these
limitations as of June 30, 2017. However, until the Company
completes a final analysis upon filing of its 2017 income tax
return, there can be no assurances that the preliminary analysis is
accurate or complete. Should the Company identify any
limitations upon the completion of its final analysis, the impact
could be material to the financial statements and that the Company
could incur additional income tax expense arising from the sale of
the Cold-EEZE® Business.
The Company realized net income from continuing
operations for the six months ended June 30, 2017, of $15.5
million, or $0.91 per share, compared to a net loss of $2.6
million, or ($0.15) per share, for the six months ended June 31,
2016. The Company realized net income from discontinued
operations for the six months ended June 30, 2017, of $26.9
million, or $1.58 per share, compared to net income from
discontinued operations of $168,000, or $0.01 per share, for the
six months ended June 30, 2016.
Ted Karkus, the CEO of the Company, stated, “The
ProPhase Labs team succeeded in revitalizing the Cold-EEZE® brand
which culminated in the sale of the Cold-EEZE® Business in March
2017. The team delivered great value to our shareholders.”
Mr. Karkus added, “Pursuant to the terms of the
asset sale agreement with Mylan, our team provided a broad
range of transition services of the Cold-EEZE® Business to Mylan
during the second quarter of 2017 and we continued the manufacture
and supply of Cold-EEZE® lozenges for Mylan. As we look forward, we
are seeking to leverage our lozenge manufacturing business by
creating new third party manufacturing and private label
opportunities.”
Mr. Karkus also noted, “We started shipping our
new dietary supplement, Legendz XL®, to a major retail drug chain
during the first quarter 2017. Additionally, we have received
initial product acceptance with several regional retailers which we
started shipping during the second quarter of 2017 or are scheduled
to beginning shipments in the third quarter of 2017.
Mr. Karkus stated, “In addition to retail
distribution, we are developing an e-commerce and a
direct-to-consumer (“Direct Response”) strategy to drive consumers
to our Legendz XL® website or to various retail stores where our
products are carried. However, we will require significant
investment in marketing as well as significant additional
distribution within the various retail channels and e-commerce
venues in order to achieve a successful launch and build a
successful new product line.”
Additionally Mr. Karkus stated, “We are
considering investments in new manufacturing equipment to expand
our production capabilities and are also evaluating a range of
strategic alternatives for our manufacturing subsidiary. The
Company will continue to explore a wide range of opportunities in
the consumer products space, including new product technologies,
applications, product line extensions and other new product
opportunities. We are also analyzing opportunities,
investments and acquisitions in other sectors and industries.”
About the Company
ProPhase is a manufacturer, marketer and
distributor of a diversified range of homeopathic and health care
products that are offered to the general public. We are also
engaged in the research and development of other potential
over-the-counter (“OTC”) drugs and natural base health products,
including supplements, personal care and cosmeceutical products,
and intend to explore and evaluate opportunities outside of the
consumer products industry. For more information visit us at
www.ProPhaseLabs.com.
Forward Looking Statements
Except for the historical information contained
herein, this document contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including statements relating to the launch of our new line
of TK Supplements®, and our new product Legendz XL®.
Management believes that these forward-looking statements are
reasonable as and when made. However, such forward-looking
statements involve known and unknown risks, uncertainties, and
other factors that may cause actual results to differ materially
from those projected in the forward-looking statements. These
risks and uncertainties include, but are not limited to: the
difficulty of predicting the acceptance and demand for our
products, the impact of competitive products and pricing, costs
involved in the manufacture and marketing of products, the timely
development and launch of new products, and the risk factors listed
from time to time in our Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q and any subsequent SEC filings.
PROPHASE LABS, INC. &
SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(in thousands, except per share
amounts) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
1,905 |
|
|
$ |
1,021 |
|
|
$ |
2,676 |
|
|
$ |
2,037 |
|
Cost of
sales |
|
|
1,765 |
|
|
|
993 |
|
|
|
2,451 |
|
|
|
1,723 |
|
Gross profit |
|
|
140 |
|
|
|
28 |
|
|
|
225 |
|
|
|
314 |
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Sales and
marketing |
|
|
221 |
|
|
|
236 |
|
|
|
336 |
|
|
|
534 |
|
Administration |
|
|
1,306 |
|
|
|
943 |
|
|
|
2,387 |
|
|
|
2,146 |
|
Research and
development |
|
|
224 |
|
|
|
121 |
|
|
|
258 |
|
|
|
160 |
|
|
|
|
1,751 |
|
|
|
1,300 |
|
|
|
2,981 |
|
|
|
2,840 |
|
Other income (expense),
net |
|
|
151 |
|
|
|
(53 |
) |
|
|
97 |
|
|
|
(105 |
) |
|
|
|
|
|
|
|
|
|
Loss from continuing
operations before taxes |
|
|
(1,460 |
) |
|
|
(1,325 |
) |
|
|
(2,659 |
) |
|
|
(2,631 |
) |
|
|
|
|
|
|
|
|
|
Income tax benefit from
continuing operations |
|
|
- |
|
|
|
- |
|
|
|
18,123 |
|
|
|
- |
|
Income (loss) from
continuing operations |
|
|
(1,460 |
) |
|
|
(1,325 |
) |
|
|
15,464 |
|
|
|
(2,631 |
) |
|
|
|
|
|
|
|
|
|
Discontinued
operations: |
|
|
|
|
|
|
|
|
Income (loss)
from discontinued operations |
|
|
(835 |
) |
|
|
198 |
|
|
|
530 |
|
|
|
168 |
|
Gain on sale of
discontinued operations, net of taxes |
|
|
(10 |
) |
|
|
- |
|
|
|
26,339 |
|
|
|
- |
|
Income (loss) from
discontinued operations |
|
|
(845 |
) |
|
|
198 |
|
|
|
26,869 |
|
|
|
168 |
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
($2,305 |
) |
|
($1,127 |
) |
|
$ |
42,333 |
|
|
($2,463 |
) |
|
|
|
|
|
|
|
|
|
Basic earnings (loss)
per share: |
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations |
|
($0.09 |
) |
|
($0.08 |
) |
|
$ |
0.91 |
|
|
($0.15 |
) |
Income (loss) from
discontinued operations |
|
|
(0.05 |
) |
|
|
0.01 |
|
|
|
1.58 |
|
|
|
0.01 |
|
Net income
(loss) |
|
($0.14 |
) |
|
($0.07 |
) |
|
$ |
2.49 |
|
|
($0.14 |
) |
|
|
|
|
|
|
|
|
|
Diluted earnings (loss)
per share: |
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations |
|
($0.09 |
) |
|
($0.08 |
) |
|
$ |
0.87 |
|
|
($0.15 |
) |
Income (loss) from
discontinued operations |
|
|
(0.05 |
) |
|
|
0.01 |
|
|
|
1.52 |
|
|
|
0.01 |
|
Net income
(loss) |
|
($0.14 |
) |
|
($0.07 |
) |
|
$ |
2.39 |
|
|
($0.14 |
) |
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
16,943 |
|
|
|
17,081 |
|
|
|
17,030 |
|
|
|
17,081 |
|
Diluted |
|
|
16,943 |
|
|
|
17,081 |
|
|
|
17,680 |
|
|
|
17,081 |
|
|
|
|
|
|
|
|
|
|
PROPHASE LABS, INC. &
SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE SHEET
DATA |
(in thousands) |
(unaudited) |
|
|
|
|
|
June 30, |
|
December 31, |
|
|
|
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
37,280 |
|
$ |
441 |
Accounts receivable |
|
|
$ |
1,835 |
|
$ |
5,770 |
Inventory |
|
|
|
$ |
1,966 |
|
$ |
2,736 |
Total
current assets |
|
|
$ |
42,224 |
|
$ |
9,627 |
Total
assets |
|
|
$ |
50,099 |
|
$ |
12,802 |
|
|
|
|
|
|
|
Total
current liabilities |
|
$ |
3,473 |
|
$ |
6,840 |
Total
stockholders' equity |
|
$ |
46,626 |
|
$ |
5,962 |
|
|
|
|
|
|
|
Investor Contact
Ted Karkus, Chairman and CEO
ProPhase Labs, Inc.
(267) 880-1111
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