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Document and Entity Information

v2.4.0.8
Document and Entity Information
6 Months Ended
Jun. 30, 2015
Aug. 12, 2015
Document And Entity Information [Abstract]    
Entity Registrant Name ProPhase Labs, Inc.  
Entity Central Index Key 0000868278  
Document Type 10-Q  
Document Period End Date Jun. 30, 2015  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   16,330,776
Trading Symbol PRPH  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2015  

Condensed Consolidated Balance Sheets

v2.4.0.8
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
ASSETS    
Cash and cash equivalents (Note 2) $ 3,761 $ 2,926
Accounts receivable, net 1,245 5,836
Inventory (Note 2) 3,705 3,292
Prepaid expenses and other current assets 468 1,404
Total current assets 9,179 13,458
Property, plant and equipment, net of accumulated depreciation of $4,508 and $4,341, respectively (Note 2) 2,860 2,599
Total assets 12,039 16,057
LIABILITIES:    
Accounts payable 646 667
Accrued advertising and other allowances 2,297 3,685
Other current liabilities 634 889
Total current liabilities 3,577 5,241
Other long term obligations (Note 5) 100 100
Commitments and contingencies (Note 5)      
STOCKHOLDERS' EQUITY:    
Preferred stock, authorized 1,000,000, $.0005 par value, no shares issued (Note 3)      
Common stock, $.0005 par value; authorized 50,000,000; issued 25,563,593 and 25,125,113 shares, respectively (Note 3) 13 13
Additional paid-in-capital 55,256 54,664
Accumulated deficit (16,165) (13,219)
Treasury stock, at cost 9,232,817 shares (30,742) (30,742)
Total stockholders' equity 8,362 10,716
Total liabilities and stockholders' equity $ 12,039 $ 16,057

Condensed Consolidated Balance Sheets (Parenthetical)

v2.4.0.8
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
Statement of Financial Position [Abstract]    
Accumulated depreciation $ 4,508 $ 4,341
Preferred stock, shares authorized 1,000,000 0
Preferred stock, par value $ 0.0005 $ 0.0005
Preferred stock, shares issued      
Common stock, par value $ 0.0005 $ 0.0005
Common stock, shares authorized 50,000,000 50,000,000
Common stock, shares issued 25,563,593 25,125,113
Treasury stock, shares 9,232,817 9,232,817

Condensed Consolidated Statements of Operations (Unaudited)

v2.4.0.8
Condensed Consolidated Statements of Operations (Unaudited) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Income Statement [Abstract]        
Net sales (Note 2) $ 2,191 $ 1,797 $ 8,051 $ 7,968
Cost of sales (Note 2) 1,184 1,005 3,382 3,196
Gross profit 1,007 792 4,669 4,772
Operating expenses:        
Sales and marketing 710 852 3,522 3,849
Administration 1,591 2,804 3,612 4,311
Research and development 272 273 480 551
Total operating expense 2,573 3,929 7,614 8,711
Loss from operations (1,566) (3,137) (2,945) (3,939)
Interest expense, net    (1) (1) (3)
Loss before income tax (1,566) (3,138) (2,946) (3,942)
Income tax (Note 4)            
Net loss $ (1,566) $ (3,138) $ (2,946) $ (3,942)
Basic and diluted loss per share:        
Net loss $ (0.10) $ (0.19) $ (0.18) $ (0.24)
Weighted average common shares outstanding:        
Basic and diluted 16,020 16,944 15,956 16,709

Condensed Consolidated Statement of Stockholders' Equity (Unaudited)

v2.4.0.8
Condensed Consolidated Statement of Stockholders' Equity (Unaudited) (USD $)
In Thousands, except Share data
Common Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Deficit [Member]
Treasury Stock [Member]
Total
Balance at Dec. 31, 2014 $ 13 $ 54,664 $ (13,219) $ (30,742) $ 10,716
Balance, shares at Dec. 31, 2014 15,892,296        
Net loss       (2,946)    (2,946)
Share-based compensation expense (Note 3)    68       68
Common shares issued (Note 3)    524       524
Common shares issued (Note 3), shares 438,480        
Balance at Jun. 30, 2015 $ 13 $ 55,256 $ (16,165) $ (30,742) $ 8,362
Balance, shares at Jun. 30, 2015 16,330,776        

Condensed Consolidated Statements of Cash Flows (Unaudited)

v2.4.0.8
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Cash flows from operating activities:    
Net loss $ (2,946) $ (3,942)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:    
Depreciation and amortization 167 133
Share-based compensation expense 68 128
Gain on sale of equipment (9)   
Changes in operating assets and liabilities:    
Accounts receivable 4,591 2,976
Inventory (413) (727)
Accounts payable (21) 388
Accrued advertising and other allowances (1,388) 231
Other operating assets and liabilities, net 681 1,777
Net cash provided by operating activities 730 964
Cash flows from investing activities:    
Capital expenditures (428) (78)
Proceeds from the sale of equipment 9   
Net cash used in investing activities (419) (78)
Cash flows from financing activities:    
Proceeds from issuance of common stock 524 4,826
Net cash provided by financing activities 524 4,826
Net increase in cash and cash equivalents 835 5,712
Cash and cash equivalents at beginning of period 2,926 1,638
Cash and cash equivalents at end of period $ 3,761 $ 7,350

Organization and Business

v2.4.0.8
Organization and Business
6 Months Ended
Jun. 30, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Business

Note 1 – Organization and Business

 

ProPhase Labs, Inc. (“we”, “us” or the “Company”), was initially organized in Nevada in July 1989. Effective June 18, 2015, we changed our state of incorporation from the State of Nevada to the State of Delaware. We are a manufacturer, marketer and distributor of a diversified range of homeopathic and health care products that are offered to the general public. We are also engaged in the research and development of potential over-the-counter (“OTC”) drug, natural base health products along with supplement, personal care and cosmeceutical products.

 

Our primary business is the manufacture, distribution, marketing and sale of OTC heath care and cold remedy products to consumers through national chain, regional, specialty and local retail stores. Our flagship brand is Cold-EEZEÒ and our principal product is Cold-EEZEÒ Cold Remedy zinc gluconate lozenges, proven in clinical studies to reduce the duration of the common cold. In addition to Cold-EEZE® Cold Remedy lozenges, we market and distribute non-lozenge forms of our proprietary zinc gluconate formulation, (i) Cold-EEZE® Cold Remedy QuickMelts® and (ii) Cold-EEZE® Cold Remedy Oral Spray. Each of our Cold-EEZE® Cold Remedy QuickMelts® products are based on our proprietary zinc gluconate formulation in combination with certain natural (i) immune system support, (ii) energy, (iii) sleep and relaxation, and/or (iv) cold and flu symptom relieving active ingredients. We expect to ship in the third quarter of Fiscal 2015 three new Cold-EEZE® product line extensions: (i) a Cold-EEZE® Multi-Symptom Relief for Cold and Flu lozenge, (ii) a Cold-EEZE® Daytime and Nighttime Multi-Symptom Relief in liquid forms for each of adults and children, and (iii) Cold-EEZEÒ Natural Allergy Relief caplets for indoor and outdoor allergies. Cold-EEZEÒ is an established product in the health care and cold remedy market. For the three and six months ended June 30, 2015 and 2014, we operated in one reporting segment and our revenues have come principally from our OTC health care and cold remedy products.

 

We use a December 31 year-end for financial reporting purposes. References herein to “Fiscal 2015” shall mean the fiscal year ended December 31, 2015 and references to other “Fiscal” years shall mean the year, which ended on December 31 of the year indicated. The term “we”, “us” or the “Company” as used herein also refer, where appropriate, to the Company, together with its subsidiaries unless the context otherwise requires.

Summary of Significant Accounting Policies

v2.4.0.8
Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 2015
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

Note 2 – Summary of Significant Accounting Policies

 

Basis of Presentation

 

The unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and within the rules of the Securities and Exchange Commission (“SEC”) applicable to interim financial statements and therefore do not include all disclosures that might normally be required for financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying unaudited condensed consolidated financial statements have been prepared by management without audit and should be read in conjunction with our consolidated financial statements, including the notes thereto, appearing in our Annual Report on Form 10-K for the year ended December 31, 2014. 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 six months ended June 30, 2015 are not necessarily indicative of operating results that may be achieved over the course of the full year.  

 

Seasonality of the Business

 

Our net sales are derived principally from our OTC heath care and cold remedy products. Currently, our sales are influenced by and subject to fluctuations in the timing of purchase and the ultimate level of demand for our products which are a function of the timing, length and severity of each cold season. Generally, a cold season is defined as the period of September to March when the incidence of the common cold rises as a consequence of the change in weather and other factors. We generally experience in the first, third and fourth quarter higher levels of net sales along with a corresponding increase in marketing and advertising expenditures designed to promote our products during the cold season. Revenues and related marketing costs are generally at their lowest levels in the second quarter when consumer demand generally declines. We track health and wellness trends and develop retail promotional strategies to align our production scheduling, inventory management and marketing programs to optimize consumer purchases.

 

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 and intangible assets, impairment of property and equipment and intangible assets, income tax valuations and assumptions related to accrued advertising. When providing for the appropriate sales returns, allowances, cash discounts and cooperative incentive promotion costs (“Sales Allowances”), 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.

 

Our primary product, Cold-EEZE® Cold Remedy lozenges, utilizes a proprietary zinc gluconate formulation which has been clinically proven to reduce the severity and duration of common cold symptoms. Factors considered in estimating the appropriate sales returns and allowances for this product include it being (i) a unique product with limited competitors, (ii) competitively priced, (iii) promoted, (iv) unaffected for remaining shelf-life as there is no product expiration date and (v) monitored for inventory levels at major customers and third-party consumption data. In addition to Cold-EEZE® Cold Remedy lozenges, we market and distribute a variety of Cold-EEZE® Cold Remedy QuickMelts® and a Cold-EEZE® Cold Remedy Oral Spray. We also manufacture, market and distribute an organic cough drop and a Vitamin C supplement (“Organix®”). Each of the Cold-EEZE® Cold Remedy Oral Spray and QuickMelts® products, and Organix® products carry shelf-life expiration dates for which we aggregate such new product market experience data and update our sales returns and allowances estimates accordingly. Sales allowances estimates are tracked at the specific customer and product line levels and are tested on an annual historical basis, and reviewed quarterly. Additionally, we monitor current developments by customer, market conditions and any other occurrences that could affect the expected provisions relative to net sales for the period presented.

 

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. 

 

Inventory Valuation

 

Inventory is valued at the lower of cost, determined on a first-in, first-out basis (FIFO), or market. Inventory items are analyzed to determine cost and the market value and appropriate valuation adjustments are established. At June 30, 2015 and December 31, 2014, the financial statements include adjustments to reduce inventory for excess or obsolete inventory of $389,000 and $797,000, respectively. The components of inventory are as follows (in thousands):

 

    June 30, 2015     December 31, 2014  
             
Raw materials   $ 931     $ 798  
Work in process     234       418  
Finished goods     2,540       2,076  
    $ 3,705     $ 3,292  

 

Property, Plant and Equipment

 

Property, plant and equipment are recorded at cost. We use the straight-line method in computing depreciation for financial reporting purposes. Depreciation expense is computed in accordance with the following ranges of estimated asset lives: building and improvements - ten to thirty-nine years; machinery and equipment - three to seven years; computer software - three years; and furniture and fixtures – five years.

 

Concentration of Risks

 

Future revenues, costs, margins, and profits will continue to be influenced by our ability to maintain our manufacturing availability and capacity together with our marketing and distribution capabilities and the regulatory requirements associated with the development of OTC and other personal care products in order to compete on a national level and/or international level.

 

Our business is subject to federal and state laws and regulations adopted for the health and safety of users of our products. Our OTC heath care and cold remedy 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 and trade accounts receivable.

 

We maintain cash and cash equivalents with certain major financial institutions. As of June 30, 2015, our cash balance was $3.8 million and our bank balance was $4.1 million. Of the total bank balance, $583,000 was covered by federal depository insurance and $3.5 million was uninsured at June 30, 2015.

 

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 broad range of customers includes many 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 June 30, 2015 and December 31, 2014.

 

Our revenues are principally generated from the sale of OTC heath care and cold remedy products which represented approximately 89% and 91% of total revenues for the six months ended June 30, 2015 and 2014, respectively. A significant portion of our business is highly seasonal, which causes major variations in operating results from quarter to quarter. The first, third and fourth quarters generally represent the largest sales volume for the OTC health care and cold remedy products. For the three and six months ended June 30, 2015 and 2014, our net sales were principally related to domestic markets.

 

Long-lived Assets

 

We review our carrying value of our long-lived assets with definite lives whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. When indicators of impairment exist, we determine whether the estimated undiscounted sum of the future cash flows of such assets is less than their carrying amounts. If less, an impairment loss is recognized in the amount, if any, by which the carrying amount of such assets exceeds their respective fair values. The determination of fair value is based on quoted market prices in active markets, if available, or independent appraisals; sales price negotiations; or projected future cash flows discounted at a rate determined by management to be commensurate with our business risk. The estimation of fair value utilizing discounted forecasted cash flows includes significant judgments regarding assumptions of revenue, operating and marketing costs; selling and administrative expenses; interest rates; property and equipment additions and retirements; industry competition; and general economic and business conditions, among other factors.

 

Fair value is based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, a three-tier fair value hierarchy prioritizes the inputs used to measure fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

 

Fair Value of Financial Instruments

 

Cash and cash equivalents, accounts receivable and accounts payable are reflected in the Condensed Consolidated Financial Statements at carrying value which approximates fair value because of the short-term maturity of these instruments.

 

Revenue Recognition

 

Sales are recognized at the time ownership is transferred to the customer. Revenue is reduced for trade promotions, estimated sales returns, cash discounts and other allowances in the same period as the related sales are recorded. We make estimates of potential future product returns and other allowances related to current period revenue. We analyze historical returns, current trends, and changes in customer and consumer demand when evaluating the adequacy of the sales returns and other allowances. 

 

Our return policy accommodates returns for (i) discontinued products, (ii) store closings and (iii) products that have reached or exceeded their designated expiration date. We do not impose a period of time within which product may be returned. All requests for product returns must be submitted to us for pre-approval. The main components of our returns policy are: (i) we will accept returns that are due to damaged product that is un-saleable and such return request activity falls within an acceptable range, (ii) we will accept returns for products that have reached or exceeded designated expiration dates and (iii) we will accept returns in the event that we discontinue a product provided that the customer will have the right to return only such items that it purchased directly from us. We will not accept return requests pertaining to customer inventory “Overstocking” or “Resets”. We will only accept return requests for product in its intended package configuration. We reserve the right to terminate shipment of product to customers who have made unauthorized deductions contrary to our return policy or pursue other methods of reimbursement. We compensate the customer for authorized returns by means of a credit applied to amounts owed or to be owed and in the case of discontinued product only, also by way of an exchange. We do not have any significant product exchange history.

 

As of June 30, 2015 and December 31, 2014, we included a provision for sales allowances of $32,000 and $129,000, respectively, which are reported as a reduction to sales and account receivables. Additionally, accrued advertising and other allowances as of June 30, 2015 included (i) $1.5 million for estimated future sales returns and (ii) $730,000 for cooperative incentive promotion costs. As of December 31, 2014, accrued advertising and other allowances included (i) $1.5 million for estimated future sales returns and (ii) $2.1 million for cooperative incentive promotion costs.

 

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 June 30, 2015 and 2014 were $442,000 and $1.1 million, respectively. Advertising and incentive promotion expenses incurred for the six months ended June 30, 2015 and 2014 were $3.6 million and $4.5 million, respectively. Included in prepaid expenses and other current assets was $263,000 and $885,000 at June 30, 2015 and December 31, 2014, respectively, relating to prepaid advertising and promotion expenses.

 

Shipping and Handling

 

Product sales carry shipping and handling charges to the purchaser, included as part of the invoiced price, which is classified as revenue. In all cases, costs related to this revenue are recorded in cost of sales.

 

Stock Based Compensation

 

We recognize all share-based payments to employees and directors, including grants of stock options, as compensation expense in the financial statements based on their fair values. Fair values of stock options are determined through the use of the Black-Scholes option pricing model. The compensation cost is recognized as an expense over the requisite service period of the award, which usually coincides with the vesting period.

 

Stock and stock options for the purchase of our common stock, $0.0005 par value, (“Common Stock”) have been granted to both employees and non-employees pursuant to the terms of certain agreements and stock option plans (see Note 3). Stock options are exercisable during a period determined by us, but in no event later than ten years from the date granted. For the three months ended June 30, 2015 and 2014, we charged to operations $34,000 and $64,000, respectively, for share-based compensation expense for the aggregate fair value of stock grants issued and vested stock options earned. For the six months ended June 30, 2015 and 2014, we charged to operations $68,000 and $128,000, respectively, for share-based compensation expense for the aggregate fair value of stock grants issued and vested stock options earned.

 

Variable Interest Entity

 

On March 22, 2010, we, Phosphagenics Limited (“PSI Parent”), an Australian corporation, Phosphagenics Inc. (“PSI”), a Delaware corporation and subsidiary of PSI Parent, and Phusion Laboratories, LLC (the “Joint Venture”), a Delaware limited liability company, entered into a Limited Liability Company Agreement (the “LLC Agreement”) of the Joint Venture and additional related agreements for the purpose of developing and commercializing, for worldwide distribution and sale, a wide range of non-prescription remedies using PSI Parent’s proprietary patented TPM™ technology (“TPM”). The Joint Venture, of which we own a 50% membership interest, qualifies as a variable interest entity (“VIE”), we are the current primary beneficiary and we have consolidated the Joint Venture beginning with the quarter ended March 31, 2010 (see Note 6).

 

Research and Development

 

Research and development costs are charged to operations in the period incurred. Research and development costs for the three months ended June 30, 2015 and 2014 were $272,000 and $273,000, respectively. Research and development costs for the six months ended June 30, 2015 and 2014 were $480,000 and $551,000, respectively. Research and development costs are principally related to new product development initiatives and costs associated with our OTC health care and cold remedy products.

 

Income Taxes

 

We utilize the asset and liability approach which requires the recognition of deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our financial statements or tax returns. In estimating future tax consequences, we generally consider all expected future events other than enactments of changes in the tax law or rates. Until we have sufficient taxable income to offset the temporary timing differences attributable to operations and the tax deductions attributable to option, warrant and stock activities are assured, a valuation allowance equaling the total deferred tax asset is being provided (see Note 4).

 

We utilize a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than fifty percent likely of being realized upon ultimate settlement. Any interest or penalties related to income taxes will be recorded as interest or administrative expense, respectively.

 

As a result of our continuing tax losses, we have recorded a full valuation allowance against a net deferred tax asset. Additionally, we have not recorded a liability for unrecognized tax benefits. 

 

Recently Issued Accounting Standards

 

In May 2014, the FASB issued new accounting guidance ASU No. 2014-09, “Revenue from Contracts with Customers”, on revenue recognition. The new standard provides for a single five-step model to be applied to all revenue contracts with customers as well as requires additional financial statement disclosures that will enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. Companies have an option to use either a retrospective approach or cumulative effect adjustment approach to implement the standard. There is no option for early adoption. This ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2016. On July 9, 2015 the FASB agreed to delay the effective date of ASU 2014-09 by one year. The new effective date for ASU 2014-09 is for the annual reporting period beginning after December 15, 2017 and for annual periods and interim periods thereafter. We are currently assessing the impact of this update, and believe that its adoption will not have a material impact on our consolidated financial statements.

 

In June 2014, the FASB issued new accounting guidance ASU 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The amendments in this update require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Companies should apply existing guidance in ASC 718, “Compensation - Stock Compensation”, as it relates to awards with performance conditions that affect vesting to account for such awards. The amendments in this update will be effective as of January 1, 2016. Earlier adoption is permitted. We may apply the amendments in this update either: (1) prospectively to all awards granted or modified after the effective date; or (2) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If a retrospective transition is adopted, the cumulative effect of applying this update as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. In addition, if a retrospective transition is adopted, we may use hindsight in measuring and recognizing the compensation cost. We are currently assessing the impact of this update, and believe that its adoption on January 1, 2016 will not have a material impact on our consolidated financial statements.

 

In August 2014, the FASB issued ASU 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. The amendments in this update state that in connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued, when applicable). The amendments in this update are effective for the annual reporting period beginning after December 15, 2016 and for annual periods and interim periods thereafter. Early application is permitted. The adoption of ASU 2014-15 is not expected to have a material impact on our consolidated financial statements.

 

In February 2015, the FASB issued guidance that changes the evaluation criteria for consolidation and related disclosure requirements. This guidance introduces evaluation criteria specific to limited partnerships and other similar entities, as well as amends the criteria for evaluating variable interest entities with which the reporting entity is involved and certain investment funds. The guidance will become effective for us at the beginning of our first quarter of Fiscal 2017. We do not expect the adoption of this guidance will have a material impact on our consolidated financial statements. 

 

In July 2015, the FASB issued an accounting standards update that requires an entity to measure inventory balances at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendments in this update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. We are currently assessing the impact of this update, and believe that its adoption on January 1, 2017 will not have a material impact on our consolidated financial statements.

Transactions Affecting Stockholders' Equity

v2.4.0.8
Transactions Affecting Stockholders' Equity
6 Months Ended
Jun. 30, 2015
Stockholders' Equity Note [Abstract]  
Transactions Affecting Stockholders' Equity

Note 3 – Transactions Affecting Stockholders’ Equity

 

Our authorized capital stock consists of 50 million shares of Common Stock and 1 million shares of preferred stock, $.0005 par value (“Preferred Stock”).

 

Preferred Stock

 

On June 16, 2015, our shareholders approved the change our state of incorporation from the State of Nevada to the State of Delaware pursuant to a plan of conversion (“Conversion Plan”) and the filing of a certificate of incorporation in the State of Delaware. The Preferred Stock authorized under our certificate of incorporation may be issued from time to time in one or more series. As of June 30, 2015, 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 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.

 

Stockholder Rights Plan

 

On September 8, 1998, our Board of Directors declared a dividend distribution of Common Stock Purchase Rights (each individually, a “Right” and collectively, the “Rights”) payable to the stockholders of record on September 25, 1998, thereby creating a Stockholder Rights Plan (the “Rights Agreement”). The Plan was subsequently amended effective each of (i) May 23, 2008, (ii) August 18, 2009 and (iii) June 18, 2014. The Rights Agreement, as amended and restated, provides that each Right entitles the stockholder of record to purchase from the Company that number of shares of Common Stock having a combined market value equal to two times the Rights exercise price of $45. The Rights are not exercisable until the distribution date, which will be the earlier of a public announcement that a person or group of affiliated or associated persons has acquired 15% or more of the outstanding shares of Common Stock, or the announcement of an intention by a similarly constituted party to make a tender or exchange offer resulting in the ownership of 15% or more of the outstanding shares of Common Stock (such person, the “acquirer”). The Rights Agreement allows for an exemption for Ted Karkus, the Company’s Chairman and Chief Executive Officer, to acquire up to 20% of our Common Stock without our Board of Directors declaring a dividend distribution. 

 

The dividend has the effect of diluting the acquirer by giving our other stockholders a 50% discount on our Common Stock’s current market value for exercising the Rights. In the event of a cashless exercise of the Right and the acquirer has acquired less than 50% beneficial ownership of the Company, a stockholder may exchange one Right for one share of Common Stock of the Company. The Rights Agreement, as amended, includes a provision pursuant to which our Board of Directors may exempt from the provisions of the Rights Agreement an offer for all outstanding shares of our Common Stock that the directors determine to be fair and not inadequate and to otherwise be in the best interests of the Company and its stockholders, after receiving advice from one or more investment banking firms. The expiration date of the Rights Agreement, as amended, is June 18, 2024.

 

2012 Equity Line of Credit

 

On November 21, 2012, we entered into the equity line of credit agreement (such arrangement, the “2012 Equity Line”) with Dutchess Opportunity Fund II, LP (“Dutchess”) whereby Dutchess committed to purchase, subject to certain restrictions and conditions, up to 2,500,000 shares of our Common Stock, over a period of 36 months from the first trading day following the effectiveness of the registration statement registering the resale of shares purchased by Dutchess pursuant to the 2012 Equity Line. On November 26, 2012, we filed a registration statement with the SEC to register for sale for up to 2,500,000 shares of our Common Stock and the registration statement was deemed effective by the SEC on December 12, 2012. We amended this registration statement effective May 29, 2014 to withdraw and remove from registration all unissued and unsold shares. We also agreed with Dutchess to terminate the 2012 Equity Line as of May 28, 2014.

 

During the period January 1, 2014 through May 23, 2014, we sold an aggregate of 698,207 shares of Common Stock to Dutchess under and pursuant to the 2012 Equity Line and we derived net proceeds of $1.2 million. The sales of the shares under the 2012 Equity Line were deemed to be exempt from registration under the Securities Act of 1933, as amended in reliance upon Section 4(2) (or Regulation D promulgated thereunder).

 

2014 Equity Line of Credit

 

The Company and Dutchess executed a new equity line of credit agreement (such arrangement, the “2014 Equity Line”) dated May 28, 2014 whereby Dutchess committed to purchase, subject to certain restrictions and conditions, up to 3,000,000 shares of the Company’s Common Stock, over a period of 36 months from the effectiveness of the registration statement registering the resale of shares purchased by Dutchess pursuant to the 2014 Equity Line. On May 29, 2014, we filed a registration statement with the SEC to register for sale up to 3,000,000 shares of our Common Stock and the registration statement was declared effective by the SEC on June 4, 2014.

 

During the three months ended June 30, 2015, we sold an aggregate of 438,480 shares of our Common Stock to Dutchess under and pursuant to the 2014 Equity Line and we derived net proceeds of $524,000. During the three months ended June 30, 2014, we sold an aggregate of 2,500,000 shares of our Common Stock to Dutchess under and pursuant to the 2014 Equity Line and we derived net proceeds of $3.6 million. The sales of the shares under the 2014 Equity Line were deemed to be exempt from registration under the Securities Act of 1933, as amended in reliance upon Section 4(a)(2) (or Regulation D promulgated thereunder). At June 30, 2015, there were no shares of our Common Stock available for sale under the terms of the 2014 Equity Line. As a consequence of the utilization of the 2014 Equity Line, on July 23, 2015 we filed a post-effective amendment to the underlying registration statement for the 2014 Equity Line to terminate the registration statement (see Note 8). 

 

The 1997 Option Plan

 

On December 2, 1997, our Board of Directors approved a Stock Option Plan (the “1997 Plan”), which was amended in 2005, the 1997 Plan provided for the granting of up to 4.5 million shares of Common Stock. Under the 1997 Plan, we were permitted to grant options to employees, officers or directors of the Company at variable percentages of the market value of stock at the date of grant. No incentive stock option could be exercisable more than ten years after the date of grant or five years after the date of grant where the individual owns more than ten percent of the total combined voting power of all classes of stock. Stockholders approved the 1997 Plan in Fiscal 1998. No options were granted under this Plan for the six months ended June 30, 2015 or 2014.

 

We are precluded from issuing any additional options or grants in the future under the 1997 Plan pursuant to the terms of the plan document. Options previously granted continue to be available for exercise at any time prior to such options’ respective expiration dates, but in no event later than ten years from the date granted. At June 30, 2015, there were 26,500 options outstanding under the 1997 Plan with an expiration date of December 2015.

 

The 2010 Equity Compensation Plan

 

On May 5, 2010, our stockholders approved the 2010 Equity Compensation Plan which was subsequently amended, restated and approved by stockholders on April 24, 2011 and further amended and approved by stockholders on May 6, 2013 (the “2010 Plan”). The 2010 Plan provides that the total number of shares of Common Stock that may be issued under the 2010 Plan is equal to 2.5 million shares. No options were granted under the 2010 Plan for the six months ended June 30, 2015 or 2014. At June 30, 2015, there were 19,659 shares of Common Stock that may be issued pursuant to the terms of the 2010 Equity Compensation Plan.

 

There were no stock options exercised for the six months ended June 30, 2015 or 2014.

 

The 2010 Directors’ Equity Compensation Plan

 

On May 5, 2010, our stockholders approved the 2010 Directors’ Equity Compensation Plan which was subsequently amended and approved by stockholders on May 6, 2013. A primary purpose of the 2010 Directors’ Equity Compensation Plan is to provide us with the ability to pay all or a portion of the fees of directors in restricted stock instead of cash. The 2010 Directors’ Equity Compensation Plan provides that the total number of shares of Common Stock that may be issued under the 2010 Directors’ Equity Compensation Plan is equal to 425,000. For the six months ended June 30, 2015 or 2014, no shares were granted to directors. At June 30, 2015, there were 147,808 shares of Common Stock that may be issued pursuant to the terms of the 2010 Directors’ Equity Compensation Plan.

 

Treasury Stock Acquired Pursuant to a Settlement Agreement

 

Effective September 4, 2014, we consummated a definitive, global Settlement Agreement (“Settlement Agreement”) resolving all of our litigation with certain of the Company’s former managers and with certain stockholders. The Settlement Agreement amicably resolved these disputes and provided, in part, that certain parties (i) returned to the Company 3,896,764 shares of the Company’s Common Stock for which they are listed as the record owners to the Company; and (ii) paid $440,000 to the Company. In addition, the Company paid $500,000 to the benefit of one of the defendants and $37,000 to a third party, to defray certain costs and expenses associated with the Settlement Agreement.

 

The 3,896,764 shares of Common Stock received pursuant to the terms of the Settlement Agreement were recorded as treasury stock and as an additional contribution to our additional paid-in capital, valued at $5.1 million, or $1.31 per share, representing the fair value of the shares at September 4, 2014.

Income Taxes

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Income Taxes
6 Months Ended
Jun. 30, 2015
Income Tax Disclosure [Abstract]  
Income Taxes

Note 4 – Income Taxes

 

As of December 31, 2014, we have net operating loss carry-forwards of approximately $38.6 million for federal purposes that will expire beginning in Fiscal 2020 through Fiscal 2033. Additionally, there are net operating loss carry-forwards of approximately $20.1 million for state purposes that will expire beginning in Fiscal 2018 through Fiscal 2033. Until sufficient taxable income to offset the temporary timing differences attributable to operations and the tax deductions attributable to option, warrant and stock are assured, a valuation allowance equaling the total deferred tax asset is being provided. Management believes that this allowance is required due to the uncertainty of realizing these tax benefits in the future.

Commitments and Contingencies

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Commitments and Contingencies
6 Months Ended
Jun. 30, 2015
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 5 – Commitments and Contingencies

 

Godfrey Settlement Agreement

 

In November 2004, we commenced an action against John C. Godfrey, Nancy Jane Godfrey, and Godfrey Science and Design, Inc. (together the “Godfreys”) for injunctive relief regarding the ownership of the Cold-EEZE® trademark. The Godfreys subsequently asserted against us counterclaims and sought monetary damages and injunctive and declaratory relief relative to the Cold-EEZE® trademark and other intellectual property.

 

On December 20, 2012, we and the Godfreys, including the Estate of Nancy Jane Godfrey, entered into a Settlement Agreement and Mutual General Release (the “Godfrey Settlement Agreement”), pursuant to which we resolved all disputes, including claims asserted by us and counterclaims asserted against us in the action. Pursuant to the terms of the Godfrey Settlement Agreement, we paid the Godfreys $2.1 million in December 2012 and we agreed to make four additional annual payments of $100,000 due in December of each of the next four years. Each annual payment in the amount of $100,000 will accrue interest at the per annum rate of 3.25%. The second annual installment of $100,000 plus accrued interest of $10,000 was paid in December 2014. Under the Godfrey Settlement Agreement, the Godfreys assigned, transferred and conveyed to us all of their right, title, and interest in U.S. Trademark Registration No. 1,838,542 for the trademark Cold-EEZE®, among other intellectual property associated with such trademark. At each of June 30, 2015 and December 31, 2014, other current liabilities and other long term obligations include $100,000 and $100,000, respectively, for the two remaining annual installment payments.

 

Direct Response Contract

 

On June 30, 2015, we and Pacific Custom Video Productions Inc. (“PCV”) executed a Direct Response Production Agreement (“DRPA”) to produce a series of direct response television commercials for certain dietary supplement products currently in development by the Company. The estimated cost of the commercial development is $300,000. In addition, the Company has agreed to pay to PCV a performance incentive in the form of a royalty or commission of 3% of net sales collected, as defined in the agreement, of certain dietary supplement products to be marketed and promoted with PCV. The marketing and promotion of certain dietary supplement products with PCV are projected to commence late in the fourth quarter of Fiscal 2015 or the first quarter of Fiscal 2016 based upon product availability and other factors. As of June 30, 2015, there were no performance incentive payments earned under the DRPA. 

 

We have estimated future minimum obligations over the next five years, including the remainder of Fiscal 2015, as follows (in thousands):

 

Fiscal Year   Employment
Contracts
    Direct Response
Contract
    Godfrey Settlement
Agreement
    Total  
2015     512       300       100       912  
2016     1,025       -       100       1,125  
2017     1,025       -       -       1,025  
2018     -       -       -       -  
2019     -       -       -       -  
Total   $ 2,562     $ 300     $ 200     $ 3,062  

 

Joint Venture

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Joint Venture
6 Months Ended
Jun. 30, 2015
Investments in and Advances to Affiliates, Schedule of Investments [Abstract]  
Joint Venture

Note 6 – Joint Venture

 

On March 22, 2010, we, PSI Parent, PSI and the Joint Venture entered into the LLC Agreement of the Joint Venture and additional related agreements for the purpose of developing and commercializing, for worldwide distribution and sale, a wide range of non-prescription remedies using PSI Parent’s proprietary patented TPM. TPM facilitates the delivery and depth of penetration of active molecules in pharmaceutical, nutraceutical, and other products.

 

In connection with the LLC Agreement, PSI Parent granted to us, pursuant to the terms of a License Agreement, dated March 22, 2010 (the “Original License Agreement”), (i) an exclusive, royalty-free, world-wide (subject to certain limitations), paid-up license to exploit OTC drugs and certain other products that embody certain of PSI Parent’s TPM-related patents and related know-how (collectively, the “PSI Technology”) and (ii) a non-exclusive, royalty-free, world-wide (subject to certain limitations), paid-up license to exploit certain compounds that embody the PSI Technology for use in a product combining one or more of such compounds with an OTC drug or in a product that is part of a regimen that includes the application of an OTC drug.

 

Pursuant to the Original License Agreement, we issued 1,440,000 shares of our Common Stock having an aggregate value of approximately $2.6 million to PSI Parent (such shares, the “PSI Shares”) and made a one-time payment to PSI Parent of $1.0 million in March 2010. We recorded an intangible asset valued at $3.6 million in March 2010 for the acquisition of the PSI Technology license.

 

As previously announced in September 2014, we are implementing a series of new product development and pre-commercialization initiatives principally in the dietary supplement category. While several of our product development initiatives have advanced, including those specific to the dietary supplement category, our Phusion product development initiatives have not progressed to management’s satisfaction. At this time, management believes that any products embodying the licensed technology to be developed by Phusion will not be available until Fiscal 2016 or 2017 at the earliest, and may be more limited than previously forecasted and may encompass fewer products or have limited retail distribution. 

 

During the third quarter of Fiscal 2014, our evaluation of the Company’s progress in its new product development pipeline and delays in Phusion product development caused management to reassess projections (including income projections) relied upon in December 2013. Accordingly, management performed an impairment analysis for the period ended September 30, 2014 for the licensed technology. As a consequence of our impairment assessment, we determined that a full impairment occurred of the intangible asset, licensed technology. As a consequence, we charged to operations a $3.6 million impairment charge during the third quarter of Fiscal 2014.

 

On October 17, 2014, we initiated a demand for arbitration with the American Arbitration Association, case number 01-14-0001-7373. This demand for arbitration pertains to our Phusion joint venture and the matter is against Phosphagenics, Inc. and Phosphagenics LTD (collectively known as the “Phosphagenics Entities”). We have raised certain claims based upon the alleged Phosphagenics Entities’ breach of a certain amended and restated licenses agreement for the exploitation of certain intellectual property and, separately, breach of the Phusion joint venture operating agreement as between the Company and the Phosphagenics Entities. The Phosphagenics Entities have made counter claims of breaches against the Company and Phusion. This matter is at its preliminary stage and at this time, no prediction as to the outcome of this action can be made.

Earnings (Loss) Per Share

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Earnings (Loss) Per Share
6 Months Ended
Jun. 30, 2015
Earnings Per Share [Abstract]  
Earnings (Loss) Per Share

Note 7 – Earnings (Loss) Per Share

 

Basic earnings (loss) per share is computed by dividing net income or loss attributable to common stockholders by the weighted-average number of shares of our Common Stock outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock or resulted in the issuance of Common Stock that shared in the earnings of the entity. Diluted earnings per share also utilize the treasury stock method which prescribes a theoretical buy-back of shares from the theoretical proceeds of all options and warrants outstanding during the period. Options and warrants outstanding to acquire shares of our Common Stock at June 30, 2015 and 2014 were 1,739,500 and 1,632,500, respectively.

 

For the three and six months ended June 30, 2015 and 2014 dilutive earnings per share is the same as basic earnings per share due to (i) the inclusion of Common Stock, in the form of stock options and warrants (“Common Stock Equivalents”), would have an anti-dilutive effect on the loss per share or (ii) there were no Common Stock Equivalents for the respective period. For the three months ended June 30, 2015 and 2014, there were 271,594 and 559,318 Common Stock Equivalents, respectively, which were in the money, that were excluded from the earnings per share computation. For the six months ended June 30, 2015 and 2014, there were 314,342 and 571,736 Common Stock Equivalents, respectively, which were in the money, that were excluded from the earnings per share computation

 

A reconciliation of the applicable numerators and denominators of the income statement periods presented, as reflected in the results of continuing operations, is as follows (in thousands, except per share amounts):

 

    Three Months Ended     Three Months Ended     Six Months Ended     Six Months Ended  
    June 30, 2015     June 30, 2014     June 30, 2015     June 30, 2014  
    Loss     Shares     EPS     Loss     Shares     EPS     Loss     Shares     EPS     Loss     Shares     EPS  
Basic earnings (loss) per share   ($ 1,566 )     16,020     ($ 0.10 )   ($ 3,138 )     16,944     ($ 0.19 )   ($ 2,946 )     15,956     ($ 0.18 )   ($ 3,942 )     16,709     ($ 0.24 )
                                                                                                 
Dilutives: Options     -       -       -       -       -       -       -       -       -       -       -       -  
                                                                                                 
Diluted income (loss) per share   ($ 1,566 )     16,020     ($ 0.10 )   ($ 3,138 )     16,944     ($ 0.19 )   ($ 2,946 )     15,956     ($ 0.18 )   ($ 3,942 )     16,709     ($ 0.24 )

Subsequent Event

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Subsequent Event
6 Months Ended
Jun. 30, 2015
Subsequent Events [Abstract]  
Subsequent Event

Note 8 – Subsequent Event

 

On July 30, 2015, we entered into an equity line of credit agreement (such arrangement, the “2015 Equity Line”) with Dutchess. Pursuant to the 2015 Equity Line, Dutchess committed to purchase, subject to certain restrictions and conditions, up to 3,200,000 shares of our Common Stock, over a period of 36 months from the effectiveness of the registration statement registering the resale of shares purchased by Dutchess pursuant to the Investment Agreement.

 

We may, at our discretion, draw on the 2015 Equity Line from time to time, as and when we determine appropriate in accordance with the terms and conditions of the 2015 Equity Line. The maximum number of shares that we are entitled to put to Dutchess in any one draw down notice shall not exceed 500,000 shares with a purchase price calculated in accordance with the 2015 Equity Line. We may deliver a notice for a subsequent put from time to time, following the one day pricing period for the prior put.

 

The purchase price shall be set at ninety-five percent (95%) of the VWAP of the Common Stock during the one trading day immediately following our put notice. We have the right to withdraw all or any portion of any put, except that portion of the put that has already been sold to a third party, including any portion of a put that is below the minimum acceptable price set forth on the put notice, before the closing. In the event Dutchess receives more than a five percent (5%) return on the net sales for a specific put, Dutchess must remit such excess proceeds to us; however, in the event Dutchess receives less than a five percent (5%) return on the net sales for a specific put, Dutchess will have the right to deduct from the proceeds of the put amount on the applicable closing date so Dutchess’s return will equal five percent (5%).

 

There are put restrictions applied on days between the draw down notice date and the closing date with respect to that particular put. During such time, we are entitled to deliver another draw down notice. In addition, Dutchess will not be obligated to purchase shares if Dutchess’ total number of shares beneficially held at that time would exceed 4.99% of the number of shares of Common Stock as determined in accordance with Rule 13d-1(j) of the Securities Exchange Act of 1934, as amended. In addition, we are not permitted to draw on the facility unless there is an effective registration statement to cover the resale of the shares.

 

Pursuant to the terms of the 2015 Equity Line, we are obligated to file one or more registrations statements with the SEC to register the resale by Dutchess of the shares of Common Stock issued or issuable under the 2015 Equity Line. In addition, we are obligated to use all commercially reasonable efforts to have the registration statement declared effective by the SEC within 90 days after the registration statement is filed. On August 4, 2015, we filed the registration statement for the underlying shares of the 2015 Equity Line with the SEC.

Summary of Significant Accounting Policies (Policies)

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Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2015
Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

 

The unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and within the rules of the Securities and Exchange Commission (“SEC”) applicable to interim financial statements and therefore do not include all disclosures that might normally be required for financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying unaudited condensed consolidated financial statements have been prepared by management without audit and should be read in conjunction with our consolidated financial statements, including the notes thereto, appearing in our Annual Report on Form 10-K for the year ended December 31, 2014. 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 six months ended June 30, 2015 are not necessarily indicative of operating results that may be achieved over the course of the full year.

Seasonality of the Business

Seasonality of the Business

 

Our net sales are derived principally from our OTC heath care and cold remedy products. Currently, our sales are influenced by and subject to fluctuations in the timing of purchase and the ultimate level of demand for our products which are a function of the timing, length and severity of each cold season. Generally, a cold season is defined as the period of September to March when the incidence of the common cold rises as a consequence of the change in weather and other factors. We generally experience in the first, third and fourth quarter higher levels of net sales along with a corresponding increase in marketing and advertising expenditures designed to promote our products during the cold season. Revenues and related marketing costs are generally at their lowest levels in the second quarter when consumer demand generally declines. We track health and wellness trends and develop retail promotional strategies to align our production scheduling, inventory management and marketing programs to optimize consumer purchases.

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 and intangible assets, impairment of property and equipment and intangible assets, income tax valuations and assumptions related to accrued advertising. When providing for the appropriate sales returns, allowances, cash discounts and cooperative incentive promotion costs (“Sales Allowances”), 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.

 

Our primary product, Cold-EEZEÒ Cold Remedy lozenges, utilizes a proprietary zinc gluconate formulation which has been clinically proven to reduce the severity and duration of common cold symptoms. Factors considered in estimating the appropriate sales returns and allowances for this product include it being (i) a unique product with limited competitors, (ii) competitively priced, (iii) promoted, (iv) unaffected for remaining shelf-life as there is no product expiration date and (v) monitored for inventory levels at major customers and third-party consumption data. In addition to Cold-EEZE® Cold Remedy lozenges, we market and distribute a variety of Cold-EEZE® Cold Remedy QuickMelts® and a Cold-EEZE® Cold Remedy Oral Spray. We also manufacture, market and distribute an organic cough drop and a Vitamin C supplement (“Organix®”). Each of the Cold-EEZE® Cold Remedy Oral Spray and QuickMelts® products, and Organix® products carry shelf-life expiration dates for which we aggregate such new product market experience data and update our sales returns and allowances estimates accordingly. Sales allowances estimates are tracked at the specific customer and product line levels and are tested on an annual historical basis, and reviewed quarterly. Additionally, we monitor current developments by customer, market conditions and any other occurrences that could affect the expected provisions relative to net sales for the period presented.

Cash Equivalents

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.

Inventory Valuation

Inventory Valuation

 

Inventory is valued at the lower of cost, determined on a first-in, first-out basis (FIFO), or market. Inventory items are analyzed to determine cost and the market value and appropriate valuation adjustments are established. At June 30, 2015 and December 31, 2014, the financial statements include adjustments to reduce inventory for excess or obsolete inventory of $389,000 and $797,000, respectively. The components of inventory are as follows (in thousands):

 

    June 30, 2015     December 31, 2014  
             
Raw materials   $ 931     $ 798  
Work in process     234       418  
Finished goods     2,540       2,076  
    $ 3,705     $ 3,292  

Property, Plant and Equipment

Property, Plant and Equipment

 

Property, plant and equipment are recorded at cost. We use the straight-line method in computing depreciation for financial reporting purposes. Depreciation expense is computed in accordance with the following ranges of estimated asset lives: building and improvements - ten to thirty-nine years; machinery and equipment - three to seven years; computer software - three years; and furniture and fixtures – five years.

Concentration of Risks

Concentration of Risks

 

Future revenues, costs, margins, and profits will continue to be influenced by our ability to maintain our manufacturing availability and capacity together with our marketing and distribution capabilities and the regulatory requirements associated with the development of OTC and other personal care products in order to compete on a national level and/or international level.

 

Our business is subject to federal and state laws and regulations adopted for the health and safety of users of our products. Our OTC heath care and cold remedy 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 and trade accounts receivable.

 

We maintain cash and cash equivalents with certain major financial institutions. As of June 30, 2015, our cash balance was $3.8 million and our bank balance was $4.1 million. Of the total bank balance, $583,000 was covered by federal depository insurance and $3.5 million was uninsured at June 30, 2015.

 

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 broad range of customers includes many 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 June 30, 2015 and December 31, 2014. 

 

Our revenues are principally generated from the sale of OTC heath care and cold remedy products which represented approximately 89% and 91% of total revenues for the six months ended June 30, 2015 and 2014, respectively. A significant portion of our business is highly seasonal, which causes major variations in operating results from quarter to quarter. The first, third and fourth quarters generally represent the largest sales volume for the OTC health care and cold remedy products. For the three and six months ended June 30, 2015 and 2014, our net sales were principally related to domestic markets.

Long-lived Assets

Long-lived Assets

 

We review our carrying value of our long-lived assets with definite lives whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. When indicators of impairment exist, we determine whether the estimated undiscounted sum of the future cash flows of such assets is less than their carrying amounts. If less, an impairment loss is recognized in the amount, if any, by which the carrying amount of such assets exceeds their respective fair values. The determination of fair value is based on quoted market prices in active markets, if available, or independent appraisals; sales price negotiations; or projected future cash flows discounted at a rate determined by management to be commensurate with our business risk. The estimation of fair value utilizing discounted forecasted cash flows includes significant judgments regarding assumptions of revenue, operating and marketing costs; selling and administrative expenses; interest rates; property and equipment additions and retirements; industry competition; and general economic and business conditions, among other factors.

 

Fair value is based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, a three-tier fair value hierarchy prioritizes the inputs used to measure fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

 

Cash and cash equivalents, accounts receivable and accounts payable are reflected in the Condensed Consolidated Financial Statements at carrying value which approximates fair value because of the short-term maturity of these instruments.

Revenue Recognition

Revenue Recognition

 

Sales are recognized at the time ownership is transferred to the customer. Revenue is reduced for trade promotions, estimated sales returns, cash discounts and other allowances in the same period as the related sales are recorded. We make estimates of potential future product returns and other allowances related to current period revenue. We analyze historical returns, current trends, and changes in customer and consumer demand when evaluating the adequacy of the sales returns and other allowances.

 

Our return policy accommodates returns for (i) discontinued products, (ii) store closings and (iii) products that have reached or exceeded their designated expiration date. We do not impose a period of time within which product may be returned. All requests for product returns must be submitted to us for pre-approval. The main components of our returns policy are: (i) we will accept returns that are due to damaged product that is un-saleable and such return request activity falls within an acceptable range, (ii) we will accept returns for products that have reached or exceeded designated expiration dates and (iii) we will accept returns in the event that we discontinue a product provided that the customer will have the right to return only such items that it purchased directly from us. We will not accept return requests pertaining to customer inventory “Overstocking” or “Resets”. We will only accept return requests for product in its intended package configuration. We reserve the right to terminate shipment of product to customers who have made unauthorized deductions contrary to our return policy or pursue other methods of reimbursement. We compensate the customer for authorized returns by means of a credit applied to amounts owed or to be owed and in the case of discontinued product only, also by way of an exchange. We do not have any significant product exchange history.

 

As of June 30, 2015 and December 31, 2014, we included a provision for sales allowances of $32,000 and $129,000, respectively, which are reported as a reduction to sales and account receivables. Additionally, accrued advertising and other allowances as of June 30, 2015 included (i) $1.5 million for estimated future sales returns and (ii) $730,000 for cooperative incentive promotion costs. As of December 31, 2014, accrued advertising and other allowances included (i) $1.5 million for estimated future sales returns and (ii) $2.1 million for cooperative incentive promotion costs.

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 June 30, 2015 and 2014 were $442,000 and $1.1 million, respectively. Advertising and incentive promotion expenses incurred for the six months ended June 30, 2015 and 2014 were $3.6 million and $4.5 million, respectively. Included in prepaid expenses and other current assets was $263,000 and $885,000 at June 30, 2015 and December 31, 2014, respectively, relating to prepaid advertising and promotion expenses.

Shipping and Handling

Shipping and Handling

 

Product sales carry shipping and handling charges to the purchaser, included as part of the invoiced price, which is classified as revenue. In all cases, costs related to this revenue are recorded in cost of sales.

Stock Based Compensation

Stock Based Compensation

 

We recognize all share-based payments to employees and directors, including grants of stock options, as compensation expense in the financial statements based on their fair values. Fair values of stock options are determined through the use of the Black-Scholes option pricing model. The compensation cost is recognized as an expense over the requisite service period of the award, which usually coincides with the vesting period.

 

Stock and stock options for the purchase of our common stock, $0.0005 par value, (“Common Stock”) have been granted to both employees and non-employees pursuant to the terms of certain agreements and stock option plans (see Note 3). Stock options are exercisable during a period determined by us, but in no event later than ten years from the date granted. For the three months ended June 30, 2015 and 2014, we charged to operations $34,000 and $64,000, respectively, for share-based compensation expense for the aggregate fair value of stock grants issued and vested stock options earned. For the six months ended June 30, 2015 and 2014, we charged to operations $68,000 and $128,000, respectively, for share-based compensation expense for the aggregate fair value of stock grants issued and vested stock options earned.

Variable Interest Entity

Variable Interest Entity

 

On March 22, 2010, we, Phosphagenics Limited (“PSI Parent”), an Australian corporation, Phosphagenics Inc. (“PSI”), a Delaware corporation and subsidiary of PSI Parent, and Phusion Laboratories, LLC (the “Joint Venture”), a Delaware limited liability company, entered into a Limited Liability Company Agreement (the “LLC Agreement”) of the Joint Venture and additional related agreements for the purpose of developing and commercializing, for worldwide distribution and sale, a wide range of non-prescription remedies using PSI Parent’s proprietary patented TPM™ technology (“TPM”). The Joint Venture, of which we own a 50% membership interest, qualifies as a variable interest entity (“VIE”), we are the current primary beneficiary and we have consolidated the Joint Venture beginning with the quarter ended March 31, 2010 (see Note 6).

Research and Development

Research and Development

 

Research and development costs are charged to operations in the period incurred. Research and development costs for the three months ended June 30, 2015 and 2014 were $272,000 and $273,000, respectively. Research and development costs for the six months ended June 30, 2015 and 2014 were $480,000 and $551,000, respectively. Research and development costs are principally related to new product development initiatives and costs associated with our OTC health care and cold remedy products.

Income Taxes

Income Taxes

 

We utilize the asset and liability approach which requires the recognition of deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our financial statements or tax returns. In estimating future tax consequences, we generally consider all expected future events other than enactments of changes in the tax law or rates. Until we have sufficient taxable income to offset the temporary timing differences attributable to operations and the tax deductions attributable to option, warrant and stock activities are assured, a valuation allowance equaling the total deferred tax asset is being provided (see Note 4).

 

We utilize a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than fifty percent likely of being realized upon ultimate settlement. Any interest or penalties related to income taxes will be recorded as interest or administrative expense, respectively.

 

As a result of our continuing tax losses, we have recorded a full valuation allowance against a net deferred tax asset. Additionally, we have not recorded a liability for unrecognized tax benefits. 

Recently Issued Accounting Standards

Recently Issued Accounting Standards

 

In May 2014, the FASB issued new accounting guidance ASU No. 2014-09, “Revenue from Contracts with Customers”, on revenue recognition. The new standard provides for a single five-step model to be applied to all revenue contracts with customers as well as requires additional financial statement disclosures that will enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. Companies have an option to use either a retrospective approach or cumulative effect adjustment approach to implement the standard. There is no option for early adoption. This ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2016. On July 9, 2015 the FASB agreed to delay the effective date of ASU 2014-09 by one year. The new effective date for ASU 2014-09 is for the annual reporting period beginning after December 15, 2017 and for annual periods and interim periods thereafter. We are currently assessing the impact of this update, and believe that its adoption will not have a material impact on our consolidated financial statements.

 

In June 2014, the FASB issued new accounting guidance ASU 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The amendments in this update require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Companies should apply existing guidance in ASC 718, “Compensation - Stock Compensation”, as it relates to awards with performance conditions that affect vesting to account for such awards. The amendments in this update will be effective as of January 1, 2016. Earlier adoption is permitted. We may apply the amendments in this update either: (1) prospectively to all awards granted or modified after the effective date; or (2) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If a retrospective transition is adopted, the cumulative effect of applying this update as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. In addition, if a retrospective transition is adopted, we may use hindsight in measuring and recognizing the compensation cost. We are currently assessing the impact of this update, and believe that its adoption on January 1, 2016 will not have a material impact on our consolidated financial statements.

 

In August 2014, the FASB issued ASU 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. The amendments in this update state that in connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued, when applicable). The amendments in this update are effective for the annual reporting period beginning after December 15, 2016 and for annual periods and interim periods thereafter. Early application is permitted. The adoption of ASU 2014-15 is not expected to have a material impact on our consolidated financial statements.

 

In February 2015, the FASB issued guidance that changes the evaluation criteria for consolidation and related disclosure requirements. This guidance introduces evaluation criteria specific to limited partnerships and other similar entities, as well as amends the criteria for evaluating variable interest entities with which the reporting entity is involved and certain investment funds. The guidance will become effective for us at the beginning of our first quarter of Fiscal 2017. We do not expect the adoption of this guidance will have a material impact on our consolidated financial statements. 

 

In July 2015, the FASB issued an accounting standards update that requires an entity to measure inventory balances at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendments in this update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. We are currently assessing the impact of this update, and believe that its adoption on January 1, 2017 will not have a material impact on our consolidated financial statements.

Summary of Significant Accounting Policies (Tables)

v2.4.0.8
Summary of Significant Accounting Policies (Tables)
6 Months Ended
Jun. 30, 2015
Accounting Policies [Abstract]  
Components of Inventory

The components of inventory are as follows (in thousands):

 

    June 30, 2015     December 31, 2014  
             
Raw materials   $ 931     $ 798  
Work in process     234       418  
Finished goods     2,540       2,076  
    $ 3,705     $ 3,292  

Commitments and Contingencies (Tables)

v2.4.0.8
Commitments and Contingencies (Tables)
6 Months Ended
Jun. 30, 2015
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 2015, as follows (in thousands):

 

Fiscal Year     Employment
Contracts
    Direct Response
Contract
    Godfrey
Settlement
Agreement
    Total  
2015       512       300       100       912  
2016       1,025       -       100       1,125  
2017       1,025       -       -       1,025  
2018       -       -       -       -  
2019       -       -       -       -  
Total     $ 2,562     $ 300     $ 200     $ 3,062  

Earnings (Loss) Per Share (Tables)

v2.4.0.8
Earnings (Loss) Per Share (Tables)
6 Months Ended
Jun. 30, 2015
Earnings Per Share [Abstract]  
Schedule of Reconciliation of Applicable Numerators and Denominators of Income Statement Periods

A reconciliation of the applicable numerators and denominators of the income statement periods presented, as reflected in the results of continuing operations, is as follows (in thousands, except per share amounts):

 

    Three Months Ended     Three Months Ended     Six Months Ended     Six Months Ended  
    June 30, 2015     June 30, 2014     June 30, 2015     June 30, 2014  
    Loss     Shares     EPS     Loss     Shares     EPS     Loss     Shares     EPS     Loss     Shares     EPS  
Basic earnings (loss) per share   ($ 1,566 )     16,020     ($ 0.10 )   ($ 3,138 )     16,944     ($ 0.19 )   ($ 2,946 )     15,956     ($ 0.18 )   ($ 3,942 )     16,709     ($ 0.24 )
                                                                                                 
Dilutives: Options     -       -       -       -       -       -       -       -       -       -       -       -  
                                                                                                 
Diluted income (loss) per share   ($ 1,566 )     16,020     ($ 0.10 )   ($ 3,138 )     16,944     ($ 0.19 )   ($ 2,946 )     15,956     ($ 0.18 )   ($ 3,942 )     16,709     ($ 0.24 )

Summary of Significant Accounting Policies (Details Narrative)

v2.4.0.8
Summary of Significant Accounting Policies (Details Narrative) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Dec. 30, 2014
Dec. 31, 2014
Adjustments to reduce inventory for excess or obsolete inventory $ 389   $ 389     $ 797
Cash balance 3,800   3,800      
Bank balance 4,100   4,100      
Amount of bank balance covered by federal depository incurance 583   583      
Amount of bank balance uninsured 3,500   3,500      
Percentage of total revenues     89.00% 91.00%    
Provision for sales allowances     32   129  
Marketing and advertising expense 442 1,100 3,600 4,500    
Prepaid advertising and other current expenses 263   263     885
Common stock, par value $ 0.0005   $ 0.0005     $ 0.0005
Share-based compensation expense 34 64 68 128    
Percentage of own membership interest 50.00%   50.00%      
Research and development 272 273 480 551    
Estimated Future Sales Return [Member]
           
Accrued liabilities 1,500   1,500   1,500  
Cooperative Incentive [Member]
           
Accrued liabilities $ 730   $ 730   $ 2,100  
Building and Improvements [Member] | Minimum [Member]
           
Ranges of estimated asset lives     10 years      
Building and Improvements [Member] | Maximum [Member]
           
Ranges of estimated asset lives     39 years      
Machinery and Equipment [Member] | Minimum [Member]
           
Ranges of estimated asset lives     3 years      
Machinery and Equipment [Member] | Maximum [Member]
           
Ranges of estimated asset lives     7 years      
Computer Software [Member]
           
Ranges of estimated asset lives     3 years      
Furniture and Fixtures [Member]
           
Ranges of estimated asset lives     5 years      

Summary of Significant Accounting Policies - Components of Inventory (Details)

v2.4.0.8
Summary of Significant Accounting Policies - Components of Inventory (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
Accounting Policies [Abstract]    
Raw materials $ 931 $ 798
Work in process 234 418
Finished goods 2,540 2,076
Total inventory $ 3,705 $ 3,292

Transactions Affecting Stockholders' Equity (Details Narrative)

v2.4.0.8
Transactions Affecting Stockholders' Equity (Details Narrative) (USD $)
In Thousands, except Share data, unless otherwise specified
6 Months Ended 0 Months Ended 5 Months Ended 0 Months Ended 3 Months Ended 6 Months Ended 0 Months Ended 0 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Dec. 31, 2014
Nov. 21, 2012
2012 Equity Line of Credit [Member]
May 23, 2014
2012 Equity Line of Credit [Member]
Dutchess [Member]
May 28, 2014
2014 Equity Line of Credit [Member]
Jun. 30, 2015
2014 Equity Line of Credit [Member]
Dutchess [Member]
Jun. 30, 2014
2014 Equity Line of Credit [Member]
Dutchess [Member]
Jun. 30, 2015
Stockholder Rights Plan [Member]
Jun. 30, 2015
Stockholder Rights Plan [Member]
Ted Karkus [Member]
Dec. 02, 1997
Plan 1997 [Member]
Jun. 30, 2015
Plan 1997 [Member]
Jun. 30, 2015
2010 Equity Compensation Plan [Member]
May 05, 2015
2010 Equity Compensation Plan [Member]
Jun. 30, 2015
2010 Directors' Equity Compensation Plan [Member]
May 05, 2015
2010 Directors' Equity Compensation Plan [Member]
Sep. 04, 2014
Settlement Agreement [Member]
Common stock, shares authorized 50,000,000   50,000,000                            
Preferred stock, shares authorized 1,000,000   0                            
Preferred stock, par value $ 0.0005   $ 0.0005                            
Rights exercise price                 $ 45                
Equity method investment ownership percentage required for rights exercisable under right agreement                 15.00%                
Equity method investment ownership percentage 50.00%                 20.00%              
Percentage of discount on exercise of right                 50.00%                
Rights agreement expiration date                 Jun. 18, 2024                
Maximum number of common stock authorized for issuance       2,500,000                          
Stock issued during period shares         698,207 3,000,000 438,480 2,500,000                  
Net proceeds form agreement         $ 1,200                        
Common stock, shares issued 25,563,593   25,125,113                            
Proceeds from issuance of common stock 524 4,826         524 3,600                  
Plan provided for the granting shares of common stock                     4,500,000            
Options outstanding - shares                       26,500          
Plan provides total number of shares of common stock issued                           2,500,000   425,000  
Available for grant, shares                         19,659   147,808    
Number of treasury stock acquired under the agreement                                 3,896,764
Treasury stock, paid amount                                 440
Settlement amount paid to defendants                                 500
Settlement amount paid to third party                                 37
Fair value of treasury stock $ 30,742   $ 30,742                           $ 5,100
Treasury stock, per share                                 $ 1.31

Income Taxes (Details Narrative)

v2.4.0.8
Income Taxes (Details Narrative) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 30, 2014
Domestic Tax Authority [Member]
 
Net operating loss carry-forwards $ 38,600
Operating loss carry forwards expiration dates description Fiscal 2020 through Fiscal 2033
State and Local Jurisdiction [Member]
 
Operating loss carry forwards expiration dates description Fiscal 2018 through Fiscal 2033
Operating loss carryforwards, state $ 20,100

Commitments and Contingencies (Details Narrative)

v2.4.0.8
Commitments and Contingencies (Details Narrative) (USD $)
In Thousands, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2015
Dec. 30, 2014
Dec. 31, 2012
Dec. 31, 2014
Payments for legal settlements     $ 2,100  
Additional payment of legal settlements   100    
Additional royalties and commissions, accrual interest percentage     3.25%  
Additional payment accrued interest   10    
Additional annual installment includes in other current liability 100      
Additional annual installment includes in other long term obligation       100
Estimated cost of commercial development 300      
Percentage of incentives form of royalty of net sales 3.00%      
Year One [Member]
       
Additional payment of legal settlements     100  
Year Two [Member]
       
Additional payment of legal settlements     100  
Year Three [Member]
       
Additional payment of legal settlements     100  
Year Four [Member]
       
Additional payment of legal settlements     $ 100  

Commitments and Contingencies - Schedule of Estimated Future Minimum Obligations (Details)

v2.4.0.8
Commitments and Contingencies - Schedule of Estimated Future Minimum Obligations (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2015
2015 $ 912
2016 1,125
2017 1,025
2018   
2019   
Total 3,062
Godfrey Settlement Agreement [Member]
 
2015 100
2016 100
2017   
2018   
2019   
Total 200
Employment Contracts [Member]
 
2015 512
2016 1,025
2017 1,025
2018   
2019   
Total 2,562
Direct Response Contract [Member]
 
2015 300
2016   
2017   
2018   
2019   
Total $ 300

Joint Venture (Details Narrative)

v2.4.0.8
Joint Venture (Details Narrative) (USD $)
In Thousands, except Share data, unless otherwise specified
6 Months Ended 12 Months Ended 1 Months Ended
Jun. 30, 2015
Dec. 30, 2014
Mar. 31, 2010
PSI Technology License [Member]
Mar. 31, 2010
PSI Parent [Member]
Schedule of Investments [Line Items]        
Stock issued during period, shares, new issues       1,440,000
Stock issued during period, value, new issues $ 524     $ 2,600
Payments to fund joint venture investments       1,000
Intangible assets, net     3,600  
Asset impairment charges   $ 3,600    

Earnings (Loss) Per Share (Details Narrative)

v2.4.0.8
Earnings (Loss) Per Share (Details Narrative)
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Earnings Per Share [Abstract]        
Class of warrant or right, outstanding 1,739,500 1,632,500 1,739,500 1,632,500
Common stock equivalents 271,594 559,318 314,342 571,736

Earnings (Loss) Per Share - Schedule of Reconciliation of Applicable Numerators and Denominators of Income Statement Periods (Details)

v2.4.0.8
Earnings (Loss) Per Share - Schedule of Reconciliation of Applicable Numerators and Denominators of Income Statement Periods (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Earnings Per Share [Abstract]        
Basic EPS - Loss $ (1,566) $ (3,138) $ (2,946) $ (3,942)
Basic EPS - Shares 16,020 16,944 15,956 16,709
Basic EPS - EPS $ (0.10) $ (0.19) $ (0.18) $ (0.24)
Options - Loss            
Options - Shares            
Options - EPS            
Diluted EPS - Loss $ (1,566) $ (3,138) $ (2,946) $ (3,942)
Diluted EPS - Shares 16,020 16,944 15,956 16,709
Diluted EPS - EPS $ (0.10) $ (0.19) $ (0.18) $ (0.24)

Subsequent Event (Details Narrative)

v2.4.0.8
Subsequent Event (Details Narrative) (2015 Equity Line [Member], Subsequent Event [Member)
0 Months Ended
Jul. 30, 2015
2015 Equity Line [Member] | Subsequent Event [Member
 
Maximum number of shares agreed to purchase 3,200,000
Maximum number of common stock authorized for issuance for each put 500,000
Equity line, purchase price percentage 95.00%
Investor right to use excess proceeds, maximum percentage 5.00%
Maximum percentage of ownership held by investor to purchase shares in equity line of credit 4.99%