ProPhase Labs, Inc. (NASDAQ:PRPH)
(www.ProPhaseLabs.com) today reported its financial results for the
three months and nine months ended September 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 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 nine months ended September 30,
2017 and 2016, the Company has classified as discontinued
operations the (i) gain from the sale of the Cold-EEZE® Business,
(ii) all income and expenses 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.
The Company continues to own and operate its
manufacturing facility and manufacturing business in Lebanon,
Pennsylvania, and its headquarters in Doylestown,
Pennsylvania. As part of the sale of the Cold-EEZE® Business,
the Company entered into a manufacturing and supply agreement to
supply various Cold-EEZE® lozenge products to Mylan.
In addition, the Company produces
over-the-counter drug and dietary supplement lozenges and other
products for other third party customers in addition to performing
operational tasks such as warehousing, customer order processing
and shipping. The Company is also pursuing a series of new
product development and pre-commercialization initiatives in the
dietary supplement category.
Net sales from continuing operations were $3.0
million for the three months ended September 30, 2017, as compared
to net sales of $1.4 million for the three months ended September
30, 2016. The increase in net sales from period to period is
due principally to an increase in the timing of shipments of
lozenge-based products, including shipments to Mylan under the
terms of the manufacturing agreement.
The Company incurred a net loss from continuing
operations for the three months ended September 30, 2017 of
$777,000, or ($0.05) per share, as compared to a net loss of
$786,000, or ($0.05) per share, for the three months ended
September 30, 2016. The Company realized net income from
discontinued operations for the three months ended September 30,
2016 of $953,000, or $0.06 per share.
Net sales from continuing operations were $5.7
million for the nine months ended September 30, 2017, as compared
to net sales of $3.4 million for the nine months ended September
30, 2016. In addition, the loss from continuing operations
before income taxes was $3.4 million for the nine months ended
September 30, 2017, as compared to $3.4 million for the nine months
ended September 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 nine months ended September 30, 2017. The
gain on the sale of the Cold-EEZE® Business is classified as a
component of discontinued operations at September 30, 2017 and is
net of approximately $19.5 million for estimated income taxes
arising from the sale. For the nine months ended September 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 September 30, 2017. However, until the
Company completes a final tax analysis for the 2017 fiscal year,
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 nine months ended September 30, 2017 of $14.7
million, or $0.88 per share, compared to a net loss of $3.4
million, or ($0.20) per share, for the nine months ended September
30, 2016. The Company realized net income from discontinued
operations for the nine months ended September 30, 2017 of $26.9
million, or $1.61 per share, compared to net income from
discontinued operations of $1.1 million, or $0.07 per share, for
the nine months ended September 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 purchase agreement with Mylan, our team continued to provide
a broad range of transition services with respect to the Cold-EEZE®
Business to Mylan during the third 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 half of 2017. Additionally, we have received
initial product acceptance with several regional retailers to whom
we started shipping during the second and third quarters 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 and to various retail stores where our
products are carried. As part of this initiative, we recently
formed a new wholly-owned subsidiary ProPhase Digital Media
(“PDM”). PDM will be a marketing division of our Company and will
initially focus on marketing our dietary supplements, including our
lead dietary supplement, Legendz XL®, direct to consumers through
digital and e-mail communications, but may, in the future, be
expanded to provide marketing services to other third parties.
We anticipate initial market testing within the next couple
of months. As we implement our dietary supplement strategy,
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.”
Mr. Karkus added “In September 2017, we returned
value to our shareholders in the amount of approximately $9.9
million by accepting for purchase 4,323,335 shares that were
tendered at a purchase price of $2.30 per share reducing the number
of shares of our outstanding common stock by 25.8%.”
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. We 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
also continue to analyze opportunities, investments and
acquisitions in technology, biotechnology and other sectors and
industries.”
On November 10, 2017, the Company also announced
its intention to commence a tender offer to purchase up to
1,700,000 shares of its common stock at a price per share of $2.30
per share. The Company anticipates that the tender offer will
be launched on or before November 20, 2017 and will remain open for
at least 20 business days from initiation. As of November 10,
2017, the Company has approximately $27.7 million in cash and cash
equivalents and marketable securities, a portion of which will be
used to fund the tender offer.
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. The Company is
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®, our new product Legendz XL® and our new
wholly-owned subsidiary, ProPhase Digital Media. 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.
Investor ContactTed Karkus, Chairman and
CEOProPhase Labs, Inc.(267) 880-1111
|
ProPhase Labs, Inc. and
Subsidiaries |
Condensed Consolidated Statements of
Operations |
(in thousands, except per share
amounts) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, 2017 |
|
|
|
September 30, 2016 |
|
|
|
September 30, 2017 |
|
|
|
September 30, 2016 |
|
|
|
|
|
|
|
|
|
Net sales |
$ |
3,040 |
|
|
$ |
1,402 |
|
|
$ |
5,716 |
|
|
$ |
3,439 |
|
|
|
|
|
|
|
|
|
Cost of
sales |
|
2,608 |
|
|
|
1,205 |
|
|
|
5,060 |
|
|
|
2,929 |
|
|
|
|
|
|
|
|
|
Gross profit |
|
432 |
|
|
|
197 |
|
|
|
656 |
|
|
|
510 |
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
Sales and
marketing |
|
150 |
|
|
|
153 |
|
|
|
486 |
|
|
|
686 |
|
Administration |
|
1,124 |
|
|
|
734 |
|
|
|
3,510 |
|
|
|
2,881 |
|
Research and
development |
|
60 |
|
|
|
43 |
|
|
|
318 |
|
|
|
202 |
|
|
|
1,334 |
|
|
|
930 |
|
|
|
4,314 |
|
|
|
3,769 |
|
Other income (expense),
net |
|
125 |
|
|
|
(53 |
) |
|
|
222 |
|
|
|
(158 |
) |
|
|
|
|
|
|
|
|
Loss from continuing
operations before |
|
|
|
|
|
|
|
income
taxes |
|
(777 |
) |
|
|
(786 |
) |
|
|
(3,436 |
) |
|
|
(3,417 |
) |
|
|
|
|
|
|
|
|
Income tax benefit from
continuing operations |
|
- |
|
|
|
- |
|
|
|
18,113 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations |
|
(777 |
) |
|
|
(786 |
) |
|
|
14,677 |
|
|
|
(3,417 |
) |
|
|
|
|
|
|
|
|
Discontinued
operations: |
|
|
|
|
|
|
|
Income from
discontinued operations |
|
- |
|
|
|
953 |
|
|
|
530 |
|
|
|
1,121 |
|
Gain on sale of
discontinued operations, net of taxes |
|
- |
|
|
|
- |
|
|
|
26,349 |
|
|
|
- |
|
Income from
discontinued operations |
|
- |
|
|
|
953 |
|
|
|
26,879 |
|
|
|
1,121 |
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
(777 |
) |
|
$ |
167 |
|
|
$ |
41,556 |
|
|
$ |
(2,296 |
) |
|
|
|
|
|
|
|
|
Other comprehensive
income (loss): |
|
|
|
|
|
|
|
Unrealized loss
on marketable securities |
|
(35 |
) |
|
|
- |
|
|
|
(35 |
) |
|
|
- |
|
Total comprehensive
income (loss) |
$ |
(812 |
) |
|
$ |
167 |
|
|
$ |
41,521 |
|
|
$ |
(2,296 |
) |
|
|
|
|
|
|
|
|
Basic earnings (loss)
per share: |
|
|
|
|
|
|
|
Income (loss) from
continuing operations |
|
($0.05 |
) |
|
|
($0.05 |
) |
|
|
$0.88 |
|
|
|
($0.20 |
) |
Income from
discontinued continued operations |
|
- |
|
|
|
0.06 |
|
|
|
1.61 |
|
|
|
0.07 |
|
Net income
(loss) |
|
($0.05 |
) |
|
|
$0.01 |
|
|
|
$2.49 |
|
|
|
($0.13 |
) |
|
|
|
|
|
|
|
|
Diluted earnings (loss)
per share: |
|
|
|
|
|
|
|
Income (loss) from
continuing operations |
|
($0.05 |
) |
|
|
($0.04 |
) |
|
|
$0.86 |
|
|
|
($0.20 |
) |
Income from
discontinued continued operations |
|
- |
|
|
|
0.05 |
|
|
|
1.57 |
|
|
|
0.07 |
|
Net income
(loss) |
|
($0.05 |
) |
|
|
$0.01 |
|
|
|
$2.43 |
|
|
|
($0.13 |
) |
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
15,967 |
|
|
|
17,081 |
|
|
|
16,661 |
|
|
|
17,081 |
|
Diluted |
|
15,967 |
|
|
|
17,600 |
|
|
|
17,118 |
|
|
|
17,081 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ProPhase Labs, Inc. and
Subsidiaries |
Condensed Consolidated Balance Sheet
Data |
(in thousands) |
(unaudited) |
|
|
|
|
|
September 30, |
|
December 31, |
|
|
|
|
2017 |
|
2016 |
|
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
3,897 |
|
$ |
441 |
Marketable securities, available for sale |
$ |
23,641 |
|
$ |
- |
Escrow receivable, current |
|
$ |
2,500 |
|
$ |
- |
Accounts receivable |
|
|
$ |
1,113 |
|
$ |
5,770 |
Inventory |
|
|
|
$ |
1,992 |
|
$ |
2,736 |
Total
current assets |
|
|
$ |
33,733 |
|
$ |
9,627 |
Total
assets |
|
|
$ |
39,082 |
|
$ |
12,802 |
|
|
|
|
|
|
|
Total
current liabilities |
|
$ |
2,432 |
|
$ |
6,840 |
Total
stockholders' equity |
|
$ |
36,650 |
|
$ |
5,962 |
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