The following excerpt is from the company's SEC filing.
for the Three Months and Nine Months Ended September 30, 2016
DOYLESTOWN, Pennsylvania – November 14, 2016.
ProPhase Labs, Inc.
, www.ProPhaseLabs.com) today reported its net sales were $5.2 million for the three months ended September 30, 2016 as compared to net sales of $4.4 million for the three months ended September 30, 2015. The Company realized a net income for the three months ended September 30, 2016, of $167,000, or $0.01 per share, compared to net income of $602,000, or $0.04 per share, for the three months ended September 30, 2015.
The Company’s sales a re derived principally from its over-the-counter (“OTC”) health care and cold remedy products. As a consequence, a significant portion of our business is highly seasonal, which may cause significant variations in operating results from quarter to quarter. The category of cough and cold product sales, including our Cold-EEZE
sales, are highly correlated to the incidence of upper respiratory illness.
Results for the third quarter of 2016 compared to the third quarter of 2015 principally reflect the net effect of (i) an increase in net sales of $798,000 principally due to an increase in contract manufacturing net sales of $876,000, (ii) a decrease of $181,000 in operating costs due principally to a decrease in legal and professional costs relating to litigation matters, offset by (iii) a decrease in gross margins due to (a) the initial distribution expenses and sales allowances attributed to the launch of the new Cold-EEZE
Gummies Multi-Symptom Relief for Cold and Flu, (b) a decrease in the absorption of fixed production costs, (c) fluctuations in our product mix shipped from period to period, (d) an increase in certain commodity costs to convert in July 2016 to non-GMO ingredients for our lozenge products, (e) an increase in contract manufacturing operations which carry lower margins, and (iv) an increase in interest expense of $52,000.
The Company generated net sales for the nine months ended September 30, 2016 of $13.4 million, as compared to $12.4 million for the nine months ended September 30, 2015. The Company incurred a net loss for the nine months ended September 30, 2016 of $2.3 million, or ($0.13) per share, compared to a net loss of $2.3 million, or ($0.14) per share, for the nine months ended September 30, 2015.
Results for the nine months ended September 30, 2016 as compared to the nine months ended September 30, 2015 principally reflect the net effect of (i) an increase in net sales of $964,000 principally due to an increase of $2.0 million in our contract manufacturing operations, (ii) a decrease of $1.4 million in operating costs due principally to a decrease in legal and professional costs relating to litigation matters, offset by (iii) a decrease in gross margins due to (a) the initial distribution expenses and sales allowances attributed to the launch of the new Cold-EEZE
Gummies Multi-Symptom Relief for Cold and Flu, (b) a decrease in the absorption of fixed production costs, (c) fluctuations in our product mix shipped from period to period, (d) an increase in certain commodity costs to convert in July 2016 to non-GMO ingredients for our lozenge products, (e) an increase in contract manufacturing operations which carry lower margins, and (iv) an increase in interest expense of $155,000.
The decrease in net sales of OTC health care and cold remedy products for the nine months ended September 30, 2016 as compared to the nine months ended September 30, 2015 was due to the timing of customer purchases, product mix shipped from period to period and lower consumer demand as a consequence of several factors including the decreased incidence and severity of upper respiratory illnesses, principally from January through March 2016 as compared to the prior year January through March 2015. According to IMS Health (a healthcare industry information provider), key industry statistics reveal that the incidence of upper respiratory illness across the country declined approximately 11% for the period January through March 2016 as compared to the prior year January through March 2015. The category of cough and cold product sales, including our Cold-EEZE
sales, are highly correlated to the incidence of upper respiratory illness.
Ted Karkus, the CEO of the Company, stated, “Our historical product development efforts have been largely focused on successfully leveraging the Cold-EEZE
brand. As the 2016-2017 cold season
nears, the Cold-EEZE
brand is well positioned for growth driven by a number of important factors including: (i) the introduction of a new gummi form to shorten your cold and relieve symptoms— Cold-EEZE
Gummies Multi-Symptom Relief for Cold and Flu (shipments began in July 2016), which has received strong and broad retail acceptance and distribution, (ii) a net improvement in the depth and breadth of retail distribution, including net additions of SKUs, new retailers and new channels of distribution, (iii) a significant packaging refresh improving consumer communication, (iv) improved shelf positioning at certain retail outlets, (v) critical merchandising programs with key retail accounts and (vi) the completion of the transition of Cold-EEZE
lozenges to non-GMO ingredients.”
Mr. Karkus continued, “In order to offset the seasonality of our current revenues and our dependence on the severity of the cold season, we have developed a new product line of over the counter dietary supplements, branded as “TK Supplements
. Our lead product is Legendz XL
, a men’s dietary supplement in the male enhancement category (
). We recently completed a broad series of clinical studies which support important product claims. Through media and digital testing, we have optimized the wording of these claims which have now been incorporated in our product packaging and marketing communication. Our next goal is to introduce Legendz XL
in retail stores, leveraging our existing infrastructure and retail distribution platform. If we are successful in achieving retail distribution (which is typically a 9-12 month process), we will then ramp up the media spend for our Direct Response TV spots to support this retail launch with the added benefit that it would also generate additional direct to consumer sales. As with any new product launch, we anticipate losses from the TK Supplements
initiatives as we optimize our strategy. We also have developed additional dietary supplements for future introduction at the appropriate time.”
Mr. Karkus finished, “As previously announced, we continue to explore strategic alternatives including the potential sale of our flagship Cold-EEZE
brand as well as exploring opportunities to acquire businesses that could take ProPhase Labs in new directions.”
About ProPhase Labs
ProPhase Labs is a diversified natural health medical science company. It is a leading marketer of the Cold-EEZE
cold remedy brand as well as other cold and flu relief products. Cold-EEZE
cold remedy zinc gluconate lozenges are clinically proven to significantly reduce the duration of the common cold. Cold-EEZE
cold remedy customers include leading national chain, regional, specialty and local retail stores. ProPhase Labs has several wholly owned subsidiaries including a manufacturing unit, which consists of an FDA registered facility to manufacture Cold-EEZE
cold remedy lozenges and fulfill other contract manufacturing opportunities. For more information visit us at
Forward Looking Statements
Except for the historical information contained herein, this document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to the launch of our new line of TK Supplements
, and our new product Legendz XL
. Management believes that these forward-looking statements are reasonable as and when made. However, such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those projected in the forward-looking statements. These risks and uncertainties include, but are not limited to: the difficulty of predicting the acceptance and demand for our products, the impact of competitive products and pricing, costs involved in the manufacture and marketing of products, the timely development and launch of new products, and the risk factors listed from time to time in our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and any subsequent SEC filings.
Ted Karkus, Chairman and CEO
ProPhase Labs, Inc.
(215) 345-0919 x 0
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.
PROPHASE LABS, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Three Months Ended
Cost of sales
Sales and marketing
Research and development
Income (loss) from operations
Interest expense, net
Income (loss) before income tax
Net income (loss)
Basic income (loss) per share:
Diluted income (loss) per share:
Weighted average common shares outstanding:
CONDENSED CONSOLIDATED BALANCE SHEET DATA
December 31, 2015
Cash and cash equivalents
Total current assets
Total current liabilities
Other long term obligations
Total stockholders’ equity
The above information was disclosed in a filing to the SEC. To see the filing, click here.
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