See accompanying notes to these Consolidated Financial Statements.
See accompanying notes to these Consolidated Financial Statements.
See accompanying notes to these Consolidated Financial Statements.
See accompanying notes to these Consolidated Financial Statements.
SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
(in thousands, except per share data)
Note 1. Organization and Summary of Significant Accounting Policies
(a)Company Background
Scott’s Liquid Gold-Inc., a Colorado corporation, was incorporated on February 15, 1954. Scott’s Liquid Gold-Inc. and its wholly-owned subsidiaries (collectively, the “Company,” “we,” “our” or “us”) develop, market, and sell quality household and health and beauty care products. Our business is comprised of two segments; household products and health and beauty care products.
(b) |
Principles of Consolidation |
Our Consolidated Financial Statements include our accounts and those of our wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.
On December 23, 2021, we entered into an asset purchase agreement with a buyer, pursuant to which we agreed to sell to all of our right, title and interest in and to certain assets of the Dryel® product line. We have reflected the operations the Dryel® product line as discontinued operations for all periods presented, which was previously classified under our household products segment. See Note 2 for further information.
(c) |
Basis of Presentation |
The accompanying consolidated financial statements have been prepared in accordance with GAAP and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain previously reported financial information has been reclassified to conform to the current year’s presentation.
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts in our financial statements of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include, but are not limited to, the realization of deferred tax assets, reserves for slow moving and obsolete inventory, customer returns and allowances, intangible asset useful lives and amortization method, fair value of assets acquired in business combinations, future cash flows associated with impairment testing of goodwill and other long-lived assets, and stock-based compensation. Actual results could differ from our estimates.
(e) |
Cash and Restricted Cash |
Cash and restricted cash consist of the following:
|
December 31, 2021 |
|
|
December 31, 2020 |
|
Cash |
$ |
770 |
|
|
$ |
5 |
|
Restricted Cash |
|
500 |
|
|
|
- |
|
|
$ |
1,270 |
|
|
$ |
5 |
|
(f)Inventories Valuation
Inventories consist of raw materials and finished goods and are stated at the lower of cost (first-in, first-out method) or net realizable value, which is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. We specifically identify impairment write downs for slow moving and obsolete products and raw materials based upon, among other things, an assessment of historical and anticipated sales of our products. In the event that actual results differ from our estimates, the results of future periods may be impacted.
During the years ended December 31, 2021 and 2020 respectively, we specifically identified slow moving and obsolete raw material and finished goods inventories, resulting in impairment charges that are reflected on the Consolidated Statements of Operations.
22
(g) |
Property and Equipment |
Property and equipment are recorded at historical cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets ranging from three to 20 years. Office furniture and office machines are estimated to have useful lives of 10 to 20 and three to five years, respectively. Maintenance and repairs are expensed as incurred. Improvements that extend the useful lives of the asset or provide improved efficiency are capitalized.
Lease assets and lease liabilities are recognized at the commencement of an arrangement where it is determined at inception that a lease exists. Lease assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using our incremental borrowing rate generally applicable to the location of the lease asset, unless the implicit rate is readily determinable. Lease terms include options to extend or terminate the lease when it is reasonably certain that those options will be exercised.
Certain nonlease components, such as maintenance and other services provided by the lessor, are included in the valuation of the lease. Leases with an initial term of 12 months or less, which are not material to our financial statements, are not recorded on the balance sheet, and the expense for these short-term leases and for operating leases is recognized on a straight-line basis over the lease term. Lease agreements with lease and nonlease components are combined as a single lease component.
(i) |
Intangible Assets and Goodwill |
Goodwill is subject to impairment tests at least annually or when events or changes in circumstances indicate that an asset may be impaired. Other intangible assets with finite lives, such as customer relationships, trade names, and formulas, are amortized over their estimated useful lives, generally ranging from 5 to 25 years. Amortization expense related to intangible assets is included in Operating Expenses on the Consolidated Statement of Operations.
Internal-use software costs recognized as an intangible asset relates to capitalizable costs of computer software obtained for internal-use as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350-40-30-1. All other internal-use software costs are expensed as incurred by the Company. Amortization will be recorded straight-line over the estimated useful life of the software once the software is ready for its intended use. As of December 31, 2021 our internal-use software was not ready for its intended use. The estimated useful life for internal-use software will be determined and periodically reassessed based on considerations for obsolescence, technology, competition, and other economic factors.
(j)Financial Instruments
Financial instruments which potentially subject us to concentrations of credit risk include cash and cash equivalents and accounts receivable. We maintain our cash balances in the form of bank demand deposits with financial institutions that we believe are creditworthy. We establish an allowance for doubtful accounts, which is generally not material to our financial statements, based upon factors surrounding the credit risk of specific customers, historical trends and other information. We have no significant financial instruments with off-balance sheet risk of accounting loss, such as foreign exchange contracts, option contracts or other foreign currency hedging arrangements.
The recorded amounts for cash and cash equivalents, receivables, other current assets, accounts payable, and accrued expenses approximate fair value due to the short-term nature of these financial instruments.
(k) |
Purchase Accounting for Acquisitions |
We apply the acquisition method of accounting for a business combination. In general, this methodology requires us to record assets acquired and liabilities assumed at their respective fair values at the date of acquisition. Any amount of the purchase price paid that is in excess of the estimated fair value of the net assets acquired is recorded as goodwill. For certain acquisitions, we also record a liability for contingent consideration based on estimated future business performance. We monitor our assumptions surrounding these estimated future cash flows and, if there is a significant change, would record an adjustment to the contingent consideration liability and a corresponding adjustment to either income or expense. We determine fair value using widely accepted valuation techniques, primarily discounted cash flow and market multiple analyses. These types of analyses require us to make assumptions and estimates regarding industry and economic factors, the profitability of future business strategies, discount rates and cash flow.
23
If actual results are not consistent with our assumptions and estimates, or our assumptions and estimates change due to new information, we may be exposed to an impairment charge in the future. If the contingent consideration paid for any of our acquisitions differs from the amount initially recorded, we would record either income or expense associated with the change in liability.
Income taxes reflect the tax effects of transactions reported in the Consolidated Financial Statements and consist of taxes currently payable plus deferred income taxes related to certain income and expenses recognized in different periods for financial and income tax reporting purposes. Deferred income tax assets and liabilities are recognized for the future income tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases. A valuation allowance is established when it is more-likely-than-not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which related temporary differences become deductible. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Taxes are reported based on tax positions that meet a more-likely-than-not standard and that are measured at the amount that is more-likely-than-not to be realized. Differences between financial and tax reporting which do not meet this threshold are required to be recorded as unrecognized tax benefits or expense. We classify penalty and interest expense related to income tax liabilities as an income tax expense. There are no significant interest and penalties recognized in the Consolidated Statements of Income or accrued on the Consolidated Balance Sheets.
The effective tax rate for the years ended December 31, 2021 and 2020 was -10.9% and 30.9% respectively, which can differ from the statutory income tax rate due to permanent book-to-tax differences. During the year ended 2021, the Company established a valuation allowance on our deferred tax asset, which is reflected in income tax expense on the Consolidated Statements of Operations. The valuation allowance represents our determination that, more likely than not, we will be unable to realize the value of such assets at this time due to the uncertainty of future profitability.
On March 27, 2020, President Trump signed into U.S. federal law the CARES Act, which is aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and generally supporting the U.S. economy. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. In particular, under the CARES Act, NOLs arising in 2018, 2019, and 2020 taxable years may be carried back to each of the preceding five years to generate a refund. The tax impact of the carryback of 2020 and 2019 losses were recorded in the first quarter 2021 and 2020 income tax provisions, respectively. We elected to defer our portion of social security tax payments, and we paid this liability in the third quarter of 2021.
Our revenue recognition policy is significant because the amount and timing of revenue is a key component of our results of operations. Certain criteria are required to be met in order to recognize revenue. If these criteria are not met, then the associated revenue is deferred until it is met. When consideration is received in advance of the delivery of goods or services, a contract liability is recorded. Our revenue contracts are identified when purchase orders are received and accepted from customers and represent a single performance obligation to sell our products to a customer.
Net sales reflect the transaction prices for contracts, which include products shipped at selling list prices reduced by variable consideration. Variable consideration includes estimates for expected customer allowances, promotional programs for consumers, and sales returns. Based on our customer-by-customer history, our variable consideration estimates are generally accurate and subsequent adjustments are generally immaterial.
Variable consideration is primarily comprised of customer allowances. Customer allowances primarily include reserves for trade promotions to support price features, displays, slotting fees, and other merchandising of our products to our customers. Promotional programs for consumers primarily include coupons, rebates, and certain other promotional programs, and do not represent a significant portion of variable consideration. The costs of customer allowances and promotional programs for consumers are estimated using either the expected value or most likely amount approach, depending on the nature of the allowance, using all reasonably available information, including our historical experience and current expectations. Customer allowances and promotional programs for consumers are reflected in the transaction price when sales are recorded. We may adjust our estimates based on actual results and consideration of other factors that cause allowances. In the event that actual results differ from our estimates, the results of future periods may be impacted.
24
Sales returns are generally not material to our financial statements, and do not comprise a significant portion of variable consideration. Estimates for sales returns are based on, among other things, an assessment of historical trends, information from customers, and anticipated returns related to current sales activity. These estimates are established in the period of sale and reduce our revenue in that period.
Sales are recorded at the time that control of the products is transferred to customers. In evaluating the timing of the transfer of control of products to customers, we consider several indicators, including significant risks and rewards of products, our right to payment, and the legal title of the products. Based on the assessment of control indicators, sales are generally recognized when products are delivered to customers.
We have also established an allowance for doubtful accounts. We estimate this allowance based upon, among other things, an assessment of the credit risk of specific customers and historical trends. We believe our allowance for doubtful accounts is adequate to absorb any losses which may arise. In the event that actual losses differ from our estimates, the results of future periods may be impacted.
Customer allowances for trade promotions and allowance for doubtful accounts at December 31 were as follows:
|
December 31, 2021 |
|
|
December 31, 2020 |
|
Trade promotions |
$ |
1,242 |
|
|
$ |
2,153 |
|
Allowance for doubtful accounts |
|
14 |
|
|
|
183 |
|
|
$ |
1,256 |
|
|
$ |
2,336 |
|
We expense advertising costs as incurred.
(o) |
Stock-Based Compensation |
We account for share based payments by recognizing compensation expense based upon the estimated fair value of the awards on the date of grant. We determine the estimated grant-date fair value of stock options with only service conditions using the Black-Scholes option pricing model. In order to calculate the fair value of the options, certain assumptions are made regarding the components of the model, including the estimated fair value of underlying common stock, risk-free interest rate, volatility, expected dividend yield and expected option life. Changes to the assumptions could cause significant adjustments to the valuation. We recognize compensation costs ratably over the vesting period using the straight-line method, which approximates the service period.
The Company issues restricted stock unit ("RSUs") awards with restrictions that lapse upon the passage of time (service vesting) and satisfaction of market conditions targeted to our Company’s stock price. For those restricted stock unit awards with only service vesting, the Company recognizes compensation cost on a straight-line basis over the service period. For awards with both market and service conditions, the Company starts recognizing compensation cost over the requisite service period, with the effect of the market conditions reflected in the calculation of the award's fair value at grant date. The Company values awards with only service vesting requirements based on the grant date share price. The Company values awards with market and service conditions using a Monte Carlo simulation. The Company determines the requisite service period for awards with both market and service conditions based on the longer of the explicit service period and the derived service period. Stock awards that contain market vesting conditions are included in the computations of diluted EPS reflecting the average number of shares that would be issued based on the highest 30-day average market price at the end during the reporting periods, if their effect is dilutive. If the condition is based on an average of market prices over some period of time, the corresponding average for the period is used.
(p) |
Operating Costs and Expenses Classification |
Cost of sales includes costs associated with purchasing finished goods from contract manufacturers, labor, freight-in, quality control, repairs, maintenance, and other indirect costs. We classify freight-out as selling expenses. Other selling expenses consist primarily of costs for sales and sales support personnel, brokerage commissions and promotional costs. Freight-out costs included in selling expenses totaled $3,580 and $2,601, for the years ended December 31, 2021 and 2020, respectively.
General and administrative expenses consist primarily of wages and benefits associated with management and administrative support departments, business insurance costs, professional fees, office facility related expenses and other general support costs.
25
On April 29, 2021, the Company announced that Mark E. Goldstein, the President and Chief Executive Officer of the Company and a member of the Board of Directors, retired effective as of April 26, 2021. In connection with Mr. Goldstein’s retirement, the Company and Mr. Goldstein entered into a Separation Agreement, Waiver and Release (the “Separation Agreement”), pursuant to which the Company will pay Mr. Goldstein $720 in severance payments (equal to 18 months base salary) over a period of 30 months and reimbursement for the costs of continuing health benefits for a period of 18 months. Severance costs of $805 were recognized in the second quarter of 2021 and are included in general and administrative expenses. Accrued severance costs are included in accrued expenses on the Consolidated Balance Sheets.
(q) |
Recently Issued Accounting Standards |
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). The purpose of ASU 2020-04 is to provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. This guidance primarily provides temporary optional expedients which simplify the accounting for contract modifications to existing debt agreements expected to arise from the market transition from LIBOR to alternative reference rates. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to apply amendments prospectively through December 31, 2022. The optional expedients were available to be used upon issuance of this guidance but we have not yet applied the guidance because we have not yet modified any of our existing contracts for reference rate reform. In January 2021, the FASB issued ASU 2021-01 which clarifies the scope of Topic 848, allowing derivatives affected by the discounting transition to apply certain optional expedients and exceptions for contract modifications and hedge accounting. ASU 2021-01 also adds background on the discounting transition and adds implementation guidance to clarify which optional expedients may be applied to derivative instruments. The Company is currently assessing the impact of ASU 2020-04 on our Consolidated Financial Statements.
(r) |
Recently Adopted Accounting Standards |
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). The new guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public companies, the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. This guidance was effective for the Company beginning on January 1, 2021 and did not have a material impact on the Company’s Consolidated Financial Statements.
Note 2. Discontinued Operations
On December 23, 2021, we entered into an asset purchase agreement with a buyer, pursuant to which we agreed to sell to all of our right, title and interest in and to certain assets of the Dryel® product line. The total consideration paid to us was $4,850, plus an amount equal to the value of the Dryel inventory of $440, subject to post-close adjustment. At closing, $500 of the total consideration is held in escrow for a twelve-month period following the closing date, to be released ratably in four installments in 2022. This consideration is reflected as Restricted Cash on the Consolidated Balance Sheets as of December 31, 2021. Dryel generated approximately $2,800 of net sales in the trailing twelve-month period ending December 31, 2021.
Under ASC 360, a long-lived asset group should be classified as held for sale if all of the established criteria are met. The sale of Dryel did not meet these criteria in either of the years ending December 31, 2021 and 2020, respectively, because we had not established an active program to locate a buyer and because the brand was not being marketed for sale. All efforts between the buyer and the Company occurred during the fourth quarter of 2021. As a result, there was no adjustment to fair value under ASC 360 guidance related to held for sale assets, and the difference between the consideration paid to us and the carrying amount of all assets is reflected in the loss on sale of discontinued operations.
We have reflected the operations
26
the Dryel® product line as discontinued operations. Our consolidated balance sheets and consolidated statements of operations report discontinued operations separate from continuing operations. Our consolidated statements of equity and statements of cash flows combine the results of continuing and discontinued operations. A summary of financial information related to our discontinued operations is as follows:
Reconciliation of the Line Items Constituting Pretax Loss from Discontinued Operations to the After-Tax Loss from Discontinued Operations in the Consolidated Statements of Operations for the years ended December 31:
|
Year Ended |
|
|
December 31, |
|
|
2021 |
|
|
2020 |
|
Net sales |
$ |
2,827 |
|
|
$ |
1,314 |
|
Cost of sales |
|
1,482 |
|
|
|
601 |
|
Gross profit |
|
1,345 |
|
|
|
713 |
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Selling |
|
625 |
|
|
|
285 |
|
General and administrative |
|
34 |
|
|
|
- |
|
Intangible asset amortization |
|
492 |
|
|
|
246 |
|
Income from discontinued operations before tax |
|
194 |
|
|
|
182 |
|
|
|
|
|
|
|
|
|
Interest expense |
|
(398 |
) |
|
|
(126 |
) |
Income tax benefit (expense) |
|
185 |
|
|
|
(13 |
) |
Impairment of goodwill and intangible assets |
|
- |
|
|
|
- |
|
Loss on sale of discontinued operations |
|
(834 |
) |
|
|
- |
|
(Loss) income from discontinued operations, net of tax |
$ |
(853 |
) |
|
$ |
43 |
|
There were no capital expenditures or significant operating and investing noncash items related to discontinued operations during the years ended December 31, 2021 and 2020, respectively.
Reconciliation of Major Classes of Assets and Liabilities of the Discontinued Operations to Amounts Presented Separately in the Consolidated Balance Sheets as of December 31:
|
2021 |
|
|
2020 |
|
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Inventories |
$ |
- |
|
|
$ |
180 |
|
|
|
|
|
|
|
|
|
Goodwill |
|
- |
|
|
|
1,457 |
|
Intangible assets, net |
|
- |
|
|
|
4,719 |
|
Total assets |
$ |
- |
|
|
$ |
6,356 |
|
The following summarizes the carrying values of goodwill, intangible assets, and the resulting loss on sale of discontinued operations associated with Dryel at the date of disposition:
Customer relationships |
$ |
2,663 |
|
Trade names |
|
1,064 |
|
Formulas and batching processes |
|
488 |
|
Non-compete |
|
12 |
|
Goodwill |
|
1,457 |
|
|
$ |
5,684 |
|
|
|
|
|
Proceeds from sale of Dryel |
|
4,850 |
|
Loss on sale |
$ |
(834 |
) |
27
Note 3. Inventories
Inventories, consisting of materials, labor and overhead at December 31 were comprised of the following:
|
2021 |
|
|
2020 |
|
Finished goods |
$ |
5,499 |
|
|
$ |
3,583 |
|
Raw materials |
|
1,186 |
|
|
|
1,151 |
|
Impairment of raw materials |
|
(1,008 |
) |
|
|
(746 |
) |
|
$ |
5,677 |
|
|
$ |
3,988 |
|
Note 4. Property and Equipment
Property and equipment at December 31 were comprised of the following:
|
2021 |
|
|
2020 |
|
Office furniture and equipment |
$ |
151 |
|
|
$ |
151 |
|
Other |
- |
|
|
|
34 |
|
|
|
151 |
|
|
|
185 |
|
Less accumulated depreciation |
|
(144 |
) |
|
|
(167 |
) |
|
$ |
7 |
|
|
$ |
18 |
|
Depreciation expense for the years ended December 31, 2021 and 2020 was $11 and $17, respectively.
Note 5. Acquisition
On June 25, 2020, we entered into an Asset Purchase Agreement (the “CR Brands Purchase Agreement”) with CR Brands, Inc., a Delaware corporation (“CR Brands”), and Sweep Acquisition Company, a Delaware corporation (“Sweep” and together with CR Brands, “Sellers”), pursuant to which we agreed to purchase from Sellers substantially all of the assets, properties, rights and interests of Sellers primarily used in the business of designing, formulating, marketing and selling laundry care products to retail and wholesale customers under the BIZ® and Dryel® brand names. The transactions contemplated by the CR Brands Purchase Agreement were consummated on July 1, 2020 (the “CR Brands Acquisition”). The Company concluded that the CR Brands Acquisition qualified as a business combination under ASC 805. The total cash consideration paid for the CR Brands Acquisition was $10,529. The CR Brands Acquisition included contingent consideration we valued at $35. During the year ended December 31, 2021, we determined that the initial contingent consideration was no longer likely to be realized. This adjustment is recorded to general and administrative expenses in the Consolidated Statement of Operations. The acquisition and related financial information are part of our household segment.
|
|
(a) |
Purchase Price Allocation |
The following summarizes the aggregate fair values of the assets acquired as part of the CR Brands Acquisition:
Inventories |
$ |
1,279 |
|
Intangible assets |
|
7,235 |
|
Goodwill |
|
2,050 |
|
Total assets acquired |
$ |
10,564 |
|
Intangible assets for the CR Brands Acquisition consist of the following:
|
Intangible Assets |
|
|
Useful Life |
|
Customer relationships |
$ |
4,500 |
|
|
|
9 years |
|
Trade names |
|
1,780 |
|
|
|
20 years |
|
Formulas and batching processes |
|
930 |
|
|
|
8 years |
|
Non-compete |
|
25 |
|
|
|
5 years |
|
|
$ |
7,235 |
|
|
|
|
|
28
|
|
(b) |
Pro Forma Results of Operations (Unaudited) |
The following table summarizes selected unaudited pro forma consolidated statements of operations data for the years ended December 31, 2020, as if the BIZ had been completed on January 1, 2020.
|
2020 |
|
Net sales |
$ |
32,402 |
|
Net loss |
|
(1,393 |
) |
This selected unaudited pro forma consolidated financial data is included only for the purpose of illustration and does not necessarily indicate what the operating results would have been if the BIZ had been completed on that date. Moreover, this information does not indicate what our future operating results will be. The information for 2020 prior to the acquisition of BIZ is based on prior accounting records maintained by CR Brands. In some cases, CR Brands’ accounting policies may differ materially from accounting policies adopted by the Company following acquisition of BIZ.
The pro forma amounts above reflect the application of accounting policies and adjustment of the results of the CR Brands Acquisition to reflect: (1) the additional amortization that would have been charged to the acquired intangible assets; (2) additional interest expense relating to the borrowings on our Chase line of credit and UMB term loan and revolving credit facility, respectively; and (3) the tax impacts.
Note 6. Goodwill and Intangible Assets
The changes in the carrying amount of goodwill by reporting unit for the fiscal years ended December 31, 2021 and 2020 were as follows:
|
Detergent |
|
|
Shampoo |
|
|
All-Purpose |
|
|
Total |
|
|
Balance, January 1, 2020 |
$ |
- |
|
|
$ |
1,520 |
|
|
$ |
1,710 |
|
|
$ |
3,230 |
|
|
Additions |
|
593 |
|
|
|
- |
|
|
|
- |
|
|
|
593 |
|
|
Impairment |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Balance, December 31, 2020 |
|
593 |
|
|
|
1,520 |
|
|
|
1,710 |
|
|
|
3,823 |
|
|
Additions |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Impairment |
|
(593 |
) |
|
|
(1,520 |
) |
|
|
- |
|
|
|
(2,113 |
) |
|
Balance, December 31, 2021 |
$ |
- |
|
|
$ |
- |
|
|
$ |
1,710 |
|
|
$ |
1,710 |
|
|
Goodwill related to the disposition of Dryel is included in long-term assets associated with discontinued operations on the consolidated balance sheets. The goodwill impairment charges related to our Detergent and Shampoo reporting units are more fully described below.
Intangible assets consisted of the following:
|
As of December 31, 2021 |
|
|
As of December 31, 2020 |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Value |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Value |
|
Intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships |
$ |
2,103 |
|
|
$ |
329 |
|
|
$ |
1,774 |
|
|
$ |
7,655 |
|
|
$ |
2,118 |
|
|
$ |
5,537 |
|
Trade names |
|
1,850 |
|
|
|
151 |
|
|
|
1,699 |
|
|
|
3,872 |
|
|
|
781 |
|
|
|
3,091 |
|
Formulas and batching processes |
|
1,370 |
|
|
|
452 |
|
|
|
918 |
|
|
|
1,369 |
|
|
|
319 |
|
|
|
1,050 |
|
Internal-use software (not placed in service) |
|
756 |
|
|
|
- |
|
|
|
756 |
|
|
|
286 |
|
|
|
- |
|
|
|
286 |
|
Non-compete agreement |
|
48 |
|
|
|
35 |
|
|
|
13 |
|
|
|
48 |
|
|
|
28 |
|
|
|
20 |
|
|
$ |
6,127 |
|
|
$ |
967 |
|
|
$ |
5,160 |
|
|
$ |
13,230 |
|
|
$ |
3,246 |
|
|
$ |
9,984 |
|
29
The change in the net carrying amounts of intangible assets during 2021 was primarily due to cash paid for our internal-use software, the impact of impairment charges related to intangible assets in our Shampoo and Detergent reporting units more fully described below, and amortization expense. Amortization expense for the years ended December 31, 2021 and 2020 was $1,111 and $1,005, respectively.
Estimated amortization expense for 2022 and subsequent years is as follows:
2022 |
$ |
420 |
|
2023 |
|
420 |
|
2024 |
|
419 |
|
2025 |
|
416 |
|
2026 |
|
416 |
|
Thereafter |
|
2,313 |
|
Total |
$ |
4,404 |
|
We made revisions to the internal forecasts relating to all reporting units during the fourth quarter of 2021 due primarily to the sale of our Dryel brand and the impact of rising costs associated with the manufacture and distribution of our products. Through our annual assessments conducted on December 31, 2021, The Company we concluded that the changes in circumstances in these reporting units triggered the need for a quantitative review of the carrying values of goodwill and certain intangible assets and resulted in impairment charges to each of our Detergent, All-Purpose, and Shampoo reporting units during the year ended December 31,2021, and resulted in the following impairment charges:
|
Intangible Assets |
|
|
Goodwill |
|
|
Total |
|
Detergent |
$ |
1,085 |
|
|
$ |
593 |
|
|
$ |
1,678 |
|
Shampoo |
|
2,966 |
|
|
|
1,520 |
|
|
|
4,486 |
|
All-Purpose |
|
130 |
|
|
|
- |
|
|
|
130 |
|
|
$ |
4,181 |
|
|
$ |
2,113 |
|
|
$ |
6,294 |
|
The Company used the income approach and market approach to determine the fair value of the reporting units that required significant judgments and estimates by management regarding several key inputs, including future cash flows consistent with management’s strategic plans, sales growth rates and the selection of royalty rate and a discount rate, among others. Estimating sales growth rates requires significant judgment by management in areas such as future economic conditions, category and industry growth rates, product pricing, consumer tastes and preferences and future expansion expectations.
Note 7. Long-Term Debt and Line-of-Credit
On July 1, 2020, we entered into a Loan and Security Agreement (the “UMB Loan Agreement”) with UMB Bank, N.A. (“UMB”) and we terminated our Credit Agreement, dated June 30, 2016, with JPMorgan Chase Bank, N.A., (as amended, the “Prior Credit Agreement”). Under the UMB Loan Agreement we obtained a $3,000 term loan, with equal monthly payments fully amortized over three years, and interest at the LIBOR Rate + 4.50% with a floor of 5.50%, and a revolving credit facility, with a maximum commitment of $7,000 with interest at the LIBOR Rate + 3.75%, with a floor of 4.75%. The revolving credit facility will terminate on July 1, 2023, unless terminated earlier pursuant to the terms of the Loan Agreement. The loans are secured by all of the assets of the Company and all of its subsidiaries. With UMB, we are assessing the impact of the discontinuation of LIBOR as a benchmark interest rate on the UMB Loan Agreement. We believe it will not be material as the Company.
On November 9, 2021, we entered into the Fourth Amendment to the UMB Loan and Security Agreement (“Fourth Amendment”), effective September 30, 2021, which, among other things, amends our tangible net worth and cumulative cash flow after debt service requirements, as well as the timing in which the minimum fixed charge coverage ratio is applicable.
In conjunction with the sale of Dryel, on December 23, 2021, we entered into a Consent to Sale with UMB under which we were required to pay all proceeds of the sale against our UMB revolving credit facility and pay down the outstanding principal on our term loan with UMB to $1,000.
The UMB Loan Agreement requires compliance with affirmative, negative, and financial covenants, as determined on a monthly basis. The UMB Loan Agreement also contains covenants typical of transactions of this type, including among others, limitations on the our ability to: create, incur or assume any indebtedness or lien on our assets; pay dividends or make other distributions; redeem, retire or acquire outstanding common stock, options, warrants or other rights; make fundamental changes to our
30
corporate structure or business; make investments or sell assets; or engage in certain other activities as set forth in the UMB Loan Agreement.
The Company was in compliance with the UMB Loan Agreement financial covenants as of December 31, 2021.
As of December 31, 2021, our UMB term loan and UMB revolving credit facility had an outstanding balance of $214 and $1,000 , respectively, with an all-in interest rate of 7.50% and 6.75%, respectively. UMB unamortized loan costs were $297 as of December 31, 2021.
On November 9, 2021, we entered into a loan and security agreement (the “La Plata Loan Agreement”) with La Plata Capital, LLC (“La Plata”). Under the La Plata Loan Agreement, we obtained a $2,000 term loan that bears interest at 14% and a maturity date of November 9, 2023. Interest-only payments are required on a monthly basis beginning in January 2022 and ending on December 1, 2022. Beginning on January 1, 2023, monthly principal payments of $30 are required in addition to accrued and unpaid interest. All remaining unpaid principal and interest are fully due on November 9, 2023.
The La Plata Loan Agreement requires compliance with affirmative, negative, and financial covenants, as determined on a monthly basis beginning in July 2022. The La Plata Loan Agreement is secured by all of the assets of the Company and all of its subsidiaries, subordinate to the security of the UMB Loan Agreement. In conjunction with this agreement, we also entered into an intercreditor and subordination agreement with UMB and La Plata, effective November 9, 2021.
The Company was in compliance with the La Plata Loan Agreement financial covenants as of December 31, 2021.
As of December 31, 2021, our La Plata term loan had an outstanding balance of $2,000. La Plata unamortized loan costs were $41 as of December 31, 2021.
As of December 31, 2021, the total principal payments due on our outstanding debt were as follows:
|
Revolving Credit Facility |
|
|
Term Loan |
|
|
Total |
|
2022 |
$ |
- |
|
|
$ |
1,000 |
|
|
$ |
1,000 |
|
2023 |
|
214 |
|
|
|
2,000 |
|
|
|
2,214 |
|
Total minimum principal payments |
$ |
214 |
|
|
$ |
3,000 |
|
|
$ |
3,214 |
|
Note 8. Leases
We have entered into leases for our corporate headquarters and office equipment with remaining lease terms up to 10 years. Some of these leases include both lease and non-lease components, which are accounted for as a single lease component as we have elected the practical expedient to combine these components for all leases. As most of the leases do not provide an implicit rate, we calculated the right-of-use assets and lease liabilities using our secured incremental borrowing rate at the lease commencement date. We currently do not have any finance leases outstanding.
On March 11, 2020, we executed an office lease for a new corporate headquarters. As of that date, we had the right to control the use of the asset, which qualified as an operating lease. There were no initial direct costs associated with our new office lease and our deposit is fully refundable.
31
Information related to leases was as follows:
|
2021 |
|
|
2020 |
|
Operating lease information: |
|
|
|
|
|
|
|
Operating lease cost |
$ |
411 |
|
|
$ |
355 |
|
Operating cash flows from operating leases |
|
411 |
|
|
|
61 |
|
Net assets obtained in exchange for new operating lease liabilities |
|
- |
|
|
|
3,156 |
|
|
|
|
|
|
|
|
|
Weighted average remaining lease term in years |
|
8.91 |
|
|
|
9.86 |
|
Weighted average discount rate |
|
5.1 |
% |
|
|
5.1 |
% |
Future minimum annual lease payments are as follows:
2022 |
|
399 |
|
2023 |
|
406 |
|
2024 |
|
413 |
|
2025 |
|
420 |
|
2026 |
|
427 |
|
Thereafter |
|
1,739 |
|
Total minimum lease payments |
$ |
3,804 |
|
Less imputed interest |
|
(773 |
) |
|
|
|
|
Total operating lease liability |
$ |
3,031 |
|
Note 9. Income Taxes
The provision for income tax attributable to continuing operations for the years ended December 31 is as follows:
|
2021 |
|
|
2020 |
|
Current provision (benefit): |
|
|
|
|
|
|
|
Federal |
$ |
60 |
|
|
$ |
(458 |
) |
State |
|
(21 |
) |
|
|
(28 |
) |
Total current provision (benefit) |
|
39 |
|
|
|
(486 |
) |
Deferred provision (benefit): |
|
|
|
|
|
|
|
Federal |
|
740 |
|
|
|
(141 |
) |
State |
|
229 |
|
|
|
(80 |
) |
Total deferred provision (benefit) |
|
969 |
|
|
|
(221 |
) |
Provision (benefit): |
|
|
|
|
|
|
|
Federal |
|
800 |
|
|
|
(599 |
) |
State |
|
208 |
|
|
|
(108 |
) |
Total provision (benefit) |
$ |
1,008 |
|
|
$ |
(707 |
) |
The current tax provision related to discontinued operations for the years ended December 31, 2021 and 2020 was $0 and $21, respectively. The deferred tax (benefit) related to discontinued operations for the years ended December 31, 2021 and 2020 was ($185) and ($8), respectively. These amounts are combined with amounts related to continuing operations on the consolidated statements of cash flows.
32
Income tax expense at the statutory tax rate is reconciled to the overall income tax expense for the years ended December 31 as follows:
|
2021 |
|
|
2020 |
|
Federal income tax at statutory rates |
$ |
(1,939 |
) |
|
$ |
(480 |
) |
State income taxes, net of federal tax effect |
|
(179 |
) |
|
|
(75 |
) |
Permanent differences |
|
(6 |
) |
|
|
2 |
|
Nondeductible stock-based compensation |
|
- |
|
|
|
5 |
|
Rate difference in NOL Carryback |
|
11 |
|
|
|
(167 |
) |
Other |
|
3 |
|
|
|
8 |
|
Change in valuation allowance |
|
3,118 |
|
|
|
- |
|
Provision (benefit) for income taxes |
$ |
1,008 |
|
|
$ |
(707 |
) |
ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is "more likely than not." Realization of the future tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carryforward period. The net deferred tax assets and liabilities as of December 31, 2021 and 2020 are comprised of the following:
|
2021 |
|
|
2020 |
|
Deferred tax assets: |
|
|
|
|
|
|
|
Net operating loss carryforwards |
$ |
531 |
|
|
$ |
42 |
|
Accounts receivable |
|
30 |
|
|
|
176 |
|
Inventories |
|
410 |
|
|
|
238 |
|
Accrued vacation and bonus |
|
161 |
|
|
|
60 |
|
Intangibles and Goodwill |
|
1,771 |
|
|
|
322 |
|
Operating lease liabilities |
|
697 |
|
|
|
801 |
|
Other |
|
168 |
|
|
|
59 |
|
Total deferred tax assets |
|
3,768 |
|
|
|
1,698 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
Operating lease right-of-use assets |
|
(629 |
) |
|
|
(729 |
) |
Prepaid expenses |
|
(21 |
) |
|
|
- |
|
Total deferred tax liabilities |
|
(650 |
) |
|
|
(729 |
) |
Net deferred tax asset, before allowance |
|
3,118 |
|
|
|
969 |
|
|
|
|
|
|
|
|
|
Valuation allowance |
|
(3,118 |
) |
|
|
- |
|
Net deferred tax asset |
$ |
- |
|
|
$ |
969 |
|
Net operating losses and tax credit carryforwards as of December 31, 2021 are as follows:
|
|
|
|
|
Expiration Years |
Net operating losses, state (After December 31, 2017) |
$ |
2,198 |
|
|
Do not expire |
Tax credits, federal |
$ |
4 |
|
|
2042 |
Accounting for uncertainty in income taxes is based on a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We recognize in our consolidated financial statements only those tax positions that are more-likely-than-not to be sustained as of the adoption date, based on the technical merits of the position. Each year we perform a comprehensive review of our material tax positions.
We believe that it is more likely than not we will not realize all the tax benefits of the deferred tax assets within the allowable carryforward period. Therefore, an appropriate valuation allowance has been provided. The valuation allowance as of December 31, 2021, primarily relates to net operating loss carryforwards. The increase in the valuation allowance during the year ended December 31, 2021, was primarily due to the establishment of the valuation allowance.
Our policy is to recognize interest and penalties related to uncertain tax benefits in income tax expense. As we had no uncertain tax benefits during 2021 and 2020, we had no accrued interest or penalties related to uncertain tax positions in either year.
33
We and our subsidiaries are subject to the following material taxing jurisdictions: United States and Colorado. The tax years that remain open to examination by the Internal Revenue Service are 2018 and years thereafter. The tax years that remain open to examination by the State of Colorado are 2017 and years thereafter.
Note 10. Shareholders’ Equity
In 2015, we adopted, and shareholders approved, an equity incentive plan for our employees, officers and directors (the “2015 Plan”).
Under the 2015 Plan, we awarded 60 RSUs to our three independent directors (the “2020 Director Grant”) on October 2, 2020.The 2020 Director Grant vested one-third on the initial grant date, October 2, 2020, and the remaining two-thirds will vest on each anniversary of the grant date.
On October 2, 2020, we awarded 240 RSUs to executives and employees (the “2020 Employee Grant”). On November 9, 2021, we awarded 107 RSUs to executives and employees (the “2021 Employee Grant”). The 2020 Employee Grant vested one-third on the initial grant date, October 2, 2020, and the remaining two-thirds will vest on each anniversary of the grant date. The 2021 Employee Grant vests in thirds on each anniversary of the grant date.
During 2021 and 2020, we did not grant any options to acquire shares of our common stock.
Compensation cost related to stock options recognized in operating results (included in general and administrative expenses) totaled $54 and $80 for the years ended December 31, 2021 and 2020, respectively. Approximately $12 of total unrecognized compensation costs related to non-vested stock options is expected to be recognized over the next two years, depending on the vesting provisions of the options. There was no tax benefit from recording the non-cash expense as it relates to the options granted to employees, as these were qualified stock options which are not normally tax deductible.
Compensation cost related to RSUs totaled $56 and $252 for the year ended December 31, 2021 and 2020, respectively. Approximately $277 of total unrecognized compensation costs related to non-vested RSUs is expected to be recognized over the next three years.
Stock option activity under the 2015 Plan is as follows:
|
Number of Options |
|
|
Weighted Average Exercise Price |
|
|
Weighted Average Remaining Contractual Life |
|
Aggregate Intrinsic Value |
|
2015 Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum number of shares under the plan |
|
2,000 |
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2019 |
|
675 |
|
|
$ |
1.66 |
|
|
3.3 years |
|
$ |
231 |
|
Granted |
|
- |
|
|
$ |
- |
|
|
|
|
|
|
|
Exercised |
|
(51 |
) |
|
$ |
1.31 |
|
|
|
|
|
|
|
Cancelled/Expired |
|
(154 |
) |
|
$ |
1.33 |
|
|
|
|
|
|
|
Outstanding, December 31, 2020 |
|
470 |
|
|
$ |
1.80 |
|
|
3.3 years |
|
$ |
125 |
|
Exercisable, December 31, 2020 |
|
389 |
|
|
$ |
1.71 |
|
|
3.4 years |
|
$ |
125 |
|
Available for issuance, December 31, 2020 |
|
1,530 |
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
- |
|
|
$ |
- |
|
|
|
|
|
|
|
Exercised |
|
(45 |
) |
|
$ |
1.26 |
|
|
|
|
|
|
|
Cancelled/Expired |
|
(118 |
) |
|
$ |
2.17 |
|
|
|
|
|
|
|
Outstanding, December 31, 2021 |
|
307 |
|
|
$ |
1.80 |
|
|
2.6 years |
|
$ |
45 |
|
Exercisable, December 31, 2021 |
|
289 |
|
|
$ |
1.76 |
|
|
2.7 years |
|
$ |
45 |
|
Available for issuance, December 31, 2021 |
|
1,693 |
|
|
|
|
|
|
|
|
|
|
|
34
A summary of additional information related to the options outstanding as of December 31, 2021 under the 2015 Plan is as follows:
Range of Exercise Prices |
|
Number of Options
(in thousands) |
|
|
Weighted Average Remaining Contractual Life |
|
Weighted Average Exercise Price |
|
2015 Plan |
|
|
|
|
|
|
|
|
|
|
$1.20-$1.25 |
|
|
94 |
|
|
3.7 years |
|
$ |
1.25 |
|
$1.26-$1.38 |
|
|
40 |
|
|
4.9 years |
|
$ |
1.26 |
|
$1.80-$2.25 |
|
|
173 |
|
|
1.5 years |
|
$ |
2.15 |
|
Total |
|
|
307 |
|
|
2.6 years |
|
$ |
1.66 |
|
Under our 2015 Plan, we have 1,335 shares available for future equity grants, which comprises our maximum shares available under the plan less all options and RSUs granted.
We have an Employee Stock Ownership Plan (“Plan”) to provide retirement benefits for our employees. The Plan is designed to invest primarily in our common stock and is non-contributory on the part of our employees. Contributions to the Plan are discretionary as determined by our Board of Directors. We expense the cost of contributions to the Plan. As of December 1, 2021, we terminated the Plan. No contributions were made to the Plan in 2021 and 2020. At December 31, 2021 and 2020, a total of 14 and 355 shares of our common stock, respectively, have been allocated and earned by our employees.
Note 11. Earnings per Share
Per share data is determined by using the weighted average number of common shares outstanding. Common equivalent shares are considered only for diluted earnings per share, unless considered anti-dilutive. Common equivalent shares, determined using the treasury stock method, result from stock options with exercise prices that are below the average market price of the common stock.
Basic earnings per share include no dilution and are computed by dividing income available to common shareholders by the weighted-average number of shares outstanding during the period. Diluted earnings per share reflect the potential of securities that could share in our earnings.
A reconciliation of the weighted average number of common shares outstanding (in thousands) for the years ended December 31 is as follows:
|
2021 |
|
|
2020 |
|
Common shares outstanding, beginning of the period |
|
12,618 |
|
|
|
12,462 |
|
Weighted average common shares issued |
|
60 |
|
|
|
173 |
|
Weighted average number of common shares outstanding |
|
12,678 |
|
|
|
12,635 |
|
Dilutive effect of common share equivalents |
|
- |
|
|
|
- |
|
Diluted weighted average number of common shares outstanding |
|
12,678 |
|
|
|
12,635 |
|
Common stock equivalents (in thousands) that have been excluded from the calculation of earnings per share as of December 31 because they would have been anti-dilutive are as follows:
|
2021 |
|
|
2020 |
|
Stock options |
|
188 |
|
|
|
261 |
|
Note 12. Income from Distribution Agreement Termination
On May 8, 2020, we entered into a settlement agreement with Montagne Jeunesse (“MJ”), the manufacturer of 7th Heaven skin care sachets, wherein both parties agreed to terminate our exclusive distribution agreement (the “Termination Agreement”). During the year ended December 31, 2020, we received two transition payments totaling $350, which is included in other income on the consolidated statements of operations. Further, $1.0 million of inventory was repurchased by MJ during the year ended December 31, 2020.
35
Note 13. Segment Information
Segments
We operate in two different segments: household products and health and beauty care products. We have chosen to organize our business around these segments based on differences in the products sold. Accounting policies for our segments are the same as those described in Note 1. We evaluate segment performance based on segment income or loss before income taxes.
The following provides information on our segments as of and for the years ended December 31:
|
2021 |
|
|
Household Products |
|
|
Health and Beauty Care Products |
|
|
Corporate |
|
|
Total |
|
Net sales |
$ |
14,152 |
|
|
$ |
18,929 |
|
|
$ |
- |
|
|
$ |
33,081 |
|
Loss from continuing operations |
|
(3,963 |
) |
|
|
(4,894 |
) |
|
|
- |
|
|
|
(8,857 |
) |
Identifiable assets |
|
13,207 |
|
|
|
6,398 |
|
|
|
1,264 |
|
|
|
20,869 |
|
Capital and intangible asset expenditures |
|
- |
|
|
|
- |
|
|
|
469 |
|
|
|
469 |
|
Depreciation and amortization |
|
1,202 |
|
|
|
618 |
|
|
|
- |
|
|
|
1,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 |
|
|
Household Products |
|
|
Health and Beauty Care Products |
|
|
Corporate |
|
|
Total |
|
Net sales |
$ |
12,003 |
|
|
$ |
16,955 |
|
|
$ |
- |
|
|
$ |
28,958 |
|
Income (loss) from operations |
|
52 |
|
|
|
(2,487 |
) |
|
|
- |
|
|
|
(2,435 |
) |
Identifiable assets |
|
20,413 |
|
|
|
11,068 |
|
|
|
2,075 |
|
|
|
33,556 |
|
Capital and intangible asset expenditures |
|
10,529 |
|
|
|
- |
|
|
|
17 |
|
|
|
10,546 |
|
Depreciation and amortization |
|
802 |
|
|
|
628 |
|
|
|
- |
|
|
|
1,430 |
|
Corporate assets noted above are comprised of our income tax receivable and internal-use software.
Customers
Net sales to significant customers were the following for the years ended December 31, 2021 and 2020, respectively:
|
2021 |
|
|
2020 |
|
Walmart |
$ |
11,102 |
|
|
$ |
8,829 |
|
Ulta |
|
6,764 |
|
|
|
4,790 |
|
Outstanding accounts receivable from significant customers represented the following percentages of our total accounts receivable as of December 31, 2021 and 2020, respectively:
|
2021 |
|
|
2020 |
|
Walmart |
|
51.7 |
% |
|
|
39.7 |
% |
Ulta |
|
2.9 |
% |
|
|
16.4 |
% |
36
A loss of any of our significant customers could have a material adverse effect on us because it is uncertain whether our consumer base served by these customers would purchase our products at other retail outlets. Our distribution agreement with HK NFS renewed on January 1, 2022 and is effective for a one-year term. This agreement automatically renews for additional successive one-year terms unless and until either party provides notice of nonrenewal at least 90 days before the end of the then-current term. No long-term contracts exist between us and our other significant customers.
Note 14. Commitments and Contingencies
As of December 31, 2021, the Company had no material commitments or contingencies.
Note 15. Subsequent Events
The Company performed a review of events subsequent to the balance sheet date through the date the financial statements were issued and determined that there were no such events requiring recognition or disclosure in the financial statements.
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