Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Organization [Policy Text Block]

Organization

Twinlab Consolidated Holdings, Inc. (the “Company”, “Twinlab,” “we,” “our” and “us”) was incorporated on

October

24,

2013

under the laws of the State of Nevada as Mirror Me, Inc. On

August

7,

2014,

we amended our articles of incorporation and changed our name to Twinlab Consolidated Holdings, Inc.

Nature of Operations [Policy Text Block]

Nature of Operations

We are an integrated manufacturer, marketer, distributor and retailer of branded nutritional supplements and other natural products sold to and through domestic health and natural food stores, mass market retailers, specialty stores retailers, on-line retailers and websites. Internationally, we market and distribute branded nutritional supplements and other natural products to and through health and natural product distributors and retailers.

Our products include vitamins, minerals, specialty supplements and sports nutrition products sold under the Twinlab® brand name (including the Twinlab® Fuel brand of sports nutrition products); a market leader in the healthy aging and beauty from within categories sold under the Reserveage™ Nutrition and ResVitale® brand names; diet and energy products sold under the Metabolife® brand name; the Re-Body® brand name; and a full line of herbal teas sold under the Alvita® brand name. To accommodate consumer preferences, our products come in various formulations and delivery forms, including capsules, tablets, softgels, chewables, liquids, sprays, powders and whole herbs. These products are sold primarily through health and natural food stores and national and regional drug store chains, supermarkets, and mass-market retailers.

We also perform contract manufacturing services for private label products.  Our contract manufacturing business involves the manufacture of custom products to the specifications of a customer who requires finished product under the customer’s own brand name.  We do not market these private label products as our business is to manufacture and sell the products to the customer, who then markets and sells the products to retailers or end consumers.

Nutricap Purchase Agreement [Policy Text Block]

Nutricap Purchase Agreement

As further discussed in Note

3,

on

February

6,

2015,

our subsidiary, NutraScience Labs, Inc. (“NutraScience”) acquired the customer relationships of Nutricap Labs, LLC (“Nutricap”), a provider of dietary supplement contract manufacturing services.

Organic Holdings Purchase Agreement [Policy Text Block]

Organic Holdings Purchase Agreement

As further discussed in Note

4,

on

October

5,

2015,

our subsidiary, Twinlab Consolidation Corporation (“TCC”) acquired all the outstanding equity interests of Organic Holdings, LLC (“Organic Holdings”) a marketer and distributor of nutritional products.

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. Significant management estimates include those with respect to returns and allowances, allowance for doubtful accounts, reserves for inventory obsolescence, the recoverability of long-lived assets, intangibles and goodwill and the estimated value of warrants and derivative liabilities.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

Revenue from product sales, net of estimated returns and allowances, is recognized when evidence of an arrangement is in place, related prices are fixed and determinable, contractual obligations have been satisfied, title and risk of loss have been transferred to the customer and collection of the resulting receivable is reasonably assured. Shipping terms are generally freight on board shipping point. We sell predominately in the North American and European markets, with international sales transacted in U.S. dollars.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments

We apply the following fair value hierarchy, which prioritizes the inputs used to measure fair value into

three

levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level

1

– inputs are quoted prices in active markets for identical assets that the reporting entity has the ability to access at the measurement date.

Level

2

– inputs are other than quoted prices included within Level

1

that are observable for the asset, either directly or indirectly.

Level

3

– inputs are unobservable inputs for the asset that are supported by little or no market activity and that are significant to the fair value of the underlying asset or liability.

The following table summarizes our financial instruments that are measured at fair value on a recurring basis as of

December

31,

2016

and

2015:

December 31, 2016	Total		Level 1		Level 2		Level 3
Derivative liabilities	$	6,455	$	-	$	-	$	6,455

December 31, 2015	Total		Level 1		Level 2		Level 3
Derivative liabilities	$	33,091	$	-	$	-	$	33,091

Receivables, Trade and Other Accounts Receivable, Allowance for Doubtful Accounts, Policy [Policy Text Block]

Accounts Receivable and Allowances

We grant credit to customers and generally do not require collateral or other security. We perform credit evaluations of our customers and provide for expected claims related to promotional items; customer discounts; shipping shortages; damages; and doubtful accounts based upon historical bad debt and claims experience. As of

December

31,

2016,

total allowances amounted to

$2,365,

of which

$481

was related to doubtful accounts receivable. As of

December

31,

2015,

total allowances amounted to

$1,494,

of which

$60

was related to doubtful accounts receivable.

Inventory, Policy [Policy Text Block]

Inventories

Inventories are stated at the lower of cost or market. Costs are determined using the weighted average cost method, and are reduced by an estimated reserve for obsolete inventory.

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation, including amounts amortized under capital leases, is calculated on the straight-line method over the estimated useful lives of the related assets, which are

7

to

10

years for machinery and equipment,

8

years for furniture and fixtures and

3

years for computers. Leasehold improvements are amortized over the shorter of the useful life of the asset or the term of the lease.

Normal repairs and maintenance are expensed as incurred. When assets are retired or otherwise disposed of, the related cost and accumulated depreciation or amortization is removed from the accounts and any gain or loss is included in the results of operations.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Intangible Assets

Intangible assets consist primarily of trademarks and customer relationships, which are amortized on a straight-line basis over their estimated useful lives ranging from

3

to

30

years. The valuation and classification of these assets and the assignment of amortizable lives involve significant judgment and the use of estimates.

We believe that our long-term growth strategy supports our fair value conclusions. For intangible assets, the recoverability of these amounts is dependent upon achievement of our projections and the execution of key initiatives related to revenue growth and improved profitability.

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

Goodwill

The excess of the cost over the fair value of net assets of acquired businesses is recorded as goodwill. Goodwill is not subject to amortization, but is reviewed for impairment annually, or more frequently whenever events or changes in circumstances indicate the carrying value of goodwill

may

not be recoverable. An impairment charge would be recorded to the extent the carrying value of goodwill exceeds its estimated fair value. The testing of goodwill under established guidelines for impairment requires significant use of judgment and assumptions. Changes in forecasted operations and other assumptions could materially affect the estimated fair values. Changes in business conditions could potentially require adjustments to these asset valuations.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Impairment of Long-Lived Assets

Long-lived assets, including intangible assets subject to amortization, are reviewed for impairment when changes in circumstances indicate that the carrying amount of the asset

may

not be recoverable. If the carrying amount of the asset exceeds the expected undiscounted cash flows of the asset, an impairment charge is recognized equal to the amount by which the carrying amount exceeds fair value. The testing of these intangibles under established guidelines for impairment requires significant use of judgment and assumptions. Changes in forecasted operations and other assumptions could materially affect the estimated fair values. Changes in business conditions could potentially require adjustments to these asset valuations.

Goodwill and Intangible Assets, Intangible Assets, Indefinite-Lived, Policy [Policy Text Block]

Indefinite-L

ived Intangible Assets

Indefinite-lived intangible assets relating to the asset acquisition of Organic Holdings are determined to have an indefinite useful economic life and as such are not amortized. Indefinite-lived intangible assets are tested for impairment annually which consists of a comparison of the fair value of the asset with its carrying value. The total indefinite-lived intangible assets as of

December

31,

2016

and

2015

was

$5,900

.

Shipping and Handling Cost, Policy [Policy Text Block]

Shipping and Handling Costs

Shipping and handling fees when billed to customers are included as a component of net sales. The total costs associated with shipping and handling are included as a component of cost of sales and totaled

$3,335

and

$4,132

in

2016

and

2015,

respectively.

Advertising Costs, Policy [Policy Text Block]

Advertising and Promotion Costs

We advertise our branded products through national and regional media and through cooperative advertising programs with customers. Costs for cooperative advertising programs are expensed as earned by customers and recorded in selling, general and administrative expenses. Our advertising expenses were

$3,161

and

$2,509

in

2016

and

2015,

respectively. Customers are also offered in-store promotional allowances and certain products are also promoted with direct to consumer rebate programs. Costs for these promotional programs are recorded as incurred as a reduction to net sales.

Research and Development Expense, Policy [Policy Text Block]

Research and Development Costs

Research and development costs are expensed as incurred and totaled

$1,226

and

$1,577

in

2016

and

2015,

respectively.

Income Tax, Policy [Policy Text Block]

Income Taxes

We account for income taxes using an asset and liability approach. Deferred income taxes are determined by applying currently enacted tax laws and rates to cumulative temporary differences between the carrying value of assets and liabilities for financial statement and income tax purposes. Valuation allowances against deferred income tax assets are recorded when management concludes that it is more likely than not that such deferred income tax assets will not be realized.

Our federal and state income tax returns prior to the year ended

December

31,

2012

are closed, and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.

We recognize interest and penalties associated with uncertain tax positions as part of selling, general and administrative expenses and include accrued interest and penalties with the related tax liability in the consolidated balance sheets.

We

may

from time to time be assessed interest and/or penalties by major taxing jurisdictions, although any such assessments historically have been minimal and immaterial to our consolidated financial results. In the event we receive an assessment for interest and/or penalties, it has been classified in the consolidated statement of comprehensive loss as selling, general and administrative expenses.

We have concluded that there are no significant uncertain tax positions requiring disclosure, and there are no material amounts of unrecognized tax benefits.

Fair Value of Warrants Issued, Policy [Policy Text Block]

Value of Warrants Issued with Debt

We estimate the grant date value of certain warrants issued with debt, using an outside professional valuation firm, which uses the Monte Carlo option lattice model. We record

the amounts as interest expense or debt discount, depending on the terms of the agreement. These estimates involve multiple inputs and assumptions, including the market price of the Company’s common stock, stock price volatility and other assumptions to project

earnings before interest, taxes, depreciation and amortization (“EBITDA”) and other reset events. These inputs and assumptions are subject to management’s judgment and can vary materially from period to period.

Derivatives, Policy [Policy Text Block]

Derivative Liabilities

We have recorded certain warrants as derivative liabilities at estimated fair value, as determined based on our use of an outside professional valuation firm, due to the variable terms of the warrant agreements. The value of the derivative liabilities is generally estimated using the Monte Carlo option lattice model with multiple inputs and assumptions, including the market price of the Company’s common stock, stock price volatility and other assumptions to project EBITDA and other reset events. These inputs and assumptions are subject to management’s judgment and can vary materially from period to period.

Sale Leaseback Transactions, Policy [Policy Text Block]

Deferred gain on sale of assets

We entered into a sale-leaseback arrangement relating to our office facilities in

2013.

Under the terms of the arrangement, we sold an office building and surrounding land and then leased the property back under a

15

-year operating lease. We recorded a deferred gain for the amount of the gain on the sale of the asset, to be recognized as a reduction of rent expense over the life of the lease. Accordingly, we recorded amortization of deferred gain as a reduction of rental expense of

$163

for

2016

and

2015.

As of

December

31,

2016

and

2015,

unamortized deferred gain on sale of assets was

$1,727

and

$1,890,

respectively.

 

Earnings Per Share, Policy [Policy Text Block]

Net Income (Loss) per Common Share

Basic net income or loss per common share (Basic EPS) is computed by dividing net income or loss by the weighted average number of common shares outstanding. Diluted net income or loss per common share (Diluted EPS) is computed by dividing net income or loss by the sum of the weighted average number of common shares outstanding and the dilutive potential common shares then outstanding. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect.

Potential common shares consist of shares issuable upon the exercise of common stock warrants and options, shares issuable from restricted stock grants, and shares issuable pursuant to convertible notes; however, only shares related to warrant derivatives are considered in the table below since all other potential common shares would be anti-dilutive.  The following table reflects the calculation of basic and diluted net loss per common share for the fiscal years ended

December

31,

2016

and

2015:

	For the Years Ended December 31,
	2016			2015
Numerator:
Net loss	$	(684	)	$	(36,410	)
Effect of dilutive securities on net loss:
Common stock warrants		(24,661	)		-
Total net less for purpose of calculating diluted net loss per common share	$	(25,345	)	$	(36,410	)
Number of shares used in per common share calculations:
Total shares for purposes of calculating basic net loss per common share		261,726,723			241,064,203
Weighted-average effect of dilutive securities:
Common stock warrants		11,460,788			-
Total shares for purpose of calculating diluted net loss per common share		273,187,511			241,064,203
Net loss per common share:
Basic	$	(0.00	)	$	(0.15	)
Diluted	$	(0.09	)	$	(0.15	)

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Significant Concentration of Credit Risk

Sales to our top

three

customers aggregated to approximately

27%

and

23%

of total consolidated sales in

2016

and

2015,

respectively. Sales to

one

of those customers were approximately

12%

and

15%

of total sales in

2016

and

2015,

respectively

. Accounts receivable from these customers were approximately

29%

and

24%

of total accounts receivable as of

December

31,

2016

and

2015,

respectively

.

New Accounting Pronouncements, Policy [Policy Text Block]

R

ecent Accounting Pronouncements

In

January

2017,

the FASB issued ASU No.

2017

-

04,

“Simplifying the Test for Goodwill Impairment (Topic

350)”

which removes Step

2

of the goodwill impairment test that requires a hypothetical purchase price allocation.  A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.  The amendments in this ASU are effective for fiscal years beginning after

December

15,

2019.

  Early adoption is permitted after

January

1,

2017.

  

We do not expect the new guidance to have a significant impact on our consolidated financial statements or related disclosures.

In

August

2016,

the FASB issued ASU No.

2016

-

15,

“Statement of Cash Flows (Topic

230)”,

which clarifies the classification of certain cash receipts and payments in the statement of cash flows. The amendments in this ASU are effective for public business entities for fiscal years beginning after

December

15,

2017,

including interim periods. We do not expect the new guidance to have a significant impact on our consolidated financial statements or related disclosures.

In

March

2016,

the FASB issued ASU No.

2016

-

09,

 “Stock Compensation (Topic

718)”,

which is intended to simplify several aspects of the accounting for share-based payment award transactions, including the income tax impacts, the classification on the statement of cash flows, and forfeitures. The amendments in this ASU are effective for fiscal years beginning after

December

15,

2016,

including interim periods. We have not yet determined the impact on our consolidated financial statements of the adoption of this new accounting pronouncement.

In

February

2016,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016

-

02,

“Leases (Topic

842)”.

The amendments in this ASU revise the accounting related to lessee accounting. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases. The new lease guidance also simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. The amendments in this ASU are effective for public companies for fiscal years beginning after

December

15,

2018

and are to be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. We have not yet determined the impact on our consolidated financial statements of the adoption of this new accounting pronouncement.

In

May

2014,

August

2015

and

May

2016,

the Financial Accounting Standards Board (FASB) issued ASU

2014

-

09,

 

Revenue from Contracts with Customers

, ASU

2015

-

14

 

Revenue from Contracts with Customers, Deferral of the Effective Date

, and ASU

2016

-

12

 

Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients

, respectively, which implement ASC Topic

606.

ASC Topic

606

outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance under US GAAP, including industry-specific guidance. It also requires entities to disclose both quantitative and qualitative information that enable financial statements users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in these ASUs are effective for annual periods beginning after

December

15,

2017,

and interim periods therein, which will be effective for the Company for the year ending

December

31,

2018.

Early adoption is permitted for annual periods beginning after

December

15,

2016.

These ASUs

may

be applied retrospectively to all prior periods presented, or retrospectively with a cumulative adjustment to retained earnings in the year of adoption. The Company is assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations and liquidity.

Although there are several other new accounting pronouncements issued or proposed by the FASB, which we have adopted or will adopt, as applicable, we do not believe any of these accounting pronouncements has had or will have a material impact on our consolidated financial position or results of operations.