10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-13458

SCOTT’S LIQUID GOLD-INC.

(Exact name of registrant as specified in its charter)

Colorado	84-0920811
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
8400 E. Crescent Parkway, Suite 450, Greenwood Village, CO	80111
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (303) 373-4860

Securities registered pursuant to Section 12(b) of the Exchange Act.

Title of each class	Trading Symbol	Name of exchange on which registered
None	None	None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of OPEN May 7, 2023 the registrant had OPEN 12,797,423 shares of its common stock, $0.10 par value per share, outstanding.

CAUTIONARY NOTE ON FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, in addition to historical information. All statements, other than statements of historical facts, included in this Report that address activities, events, or developments with respect to our financial condition, results of operations, or economic performance that we expect, believe, or anticipate will or may occur in the future, or that address plans and objectives of management for future operations, are forward-looking statements. You can typically identify forward-looking statements by the use of words, such as “may,” “could,” “should,” “assume,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “potential,” “plan,” and other similar words. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

The forward-looking statements contained in this Report are based on management’s current expectations and are subject to uncertainty and changes in circumstances. We cannot assure you that future developments affecting us will be those that we have anticipated. Forward-looking statements and our performance inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to:

•the impact of the COVID-19 pandemic on our business, suppliers, consumers, customers, and employees;

•disruptions or inefficiencies in the supply chain, including any impact of the COVID-19 pandemic;

•dependence on third-party vendors and on sales to major customers;

•regulations, economic conditions, and tariffs in the People’s Republic of China (“PRC”), as well as resumption of sales after exiting our agreement with our exclusive distributor in the PRC;

•a continued shift in the retail market from food and drug stores to mass merchandisers, club stores, dollar stores, e-commerce retailers, and subscription services;

•competition from large consumer products companies in the United States;

•competitive factors, including any decrease in distribution of (i.e., retail stores carrying) our significant products;

•new competitive products and/or technological changes;

•the need for effective advertising of our products and limited resources available for such advertising;

•unfavorable economic conditions;

•changing consumer preferences and the continued acceptance of each of our significant products in the marketplace;

•the degree of success of any new product or product line introduction by us;

•the degree of success of the integration of product lines or businesses we may acquire;

•changes in the regulation of our products, including applicable environmental, U.S. and international Food and Drug Administration regulations and process-audit compliance;

•the loss of any executive officer or other personnel;

•future losses which could affect our liquidity;

•other matters discussed in this Report, including the risks described in the Risk Factors section of this Report and in our Annual Report on Form 10-K for the year ended December 31, 2022 and subsequent Quarterly Reports on Form 10-Q.

We caution you that forward-looking statements are not guarantees of future performance and that actual results or performance may be materially different from those expressed or implied in the forward-looking statements. The forward-looking statements in this Report speak as of the filing date of this Report. Although we may from time to time voluntarily update our prior forward-looking statements, we undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may arise after the date of this Report.

TABLE OF CONTENTS

		Page
PART I
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 4.	Controls and Procedures	18
PART II
Item 1A.	Risk Factors	19
Item 6.	Exhibits	19

PART I

ITEM 1. FINANCIAL STATEMENTS.

SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)

	Three Months Ended
	March 31,
	2023			2022
Net sales	$	3,248		$	3,729
Cost of sales		1,849			1,886
Gross profit		1,399			1,843
Operating expenses:
Advertising		154			135
Selling		865			1,625
General and administrative		618			791
Intangible asset amortization		56			93
Total operating expenses		1,693			2,644
Loss from operations		(294	)		(801	)
Interest expense		(152	)		(82	)
Loss before income taxes and discontinued operations		(446	)		(883	)
Income tax benefit		4			-
Loss from continuing operations		(442	)		(883	)
Income from discontinued operations		811			432
Net income (loss)	$	369		$	(451	)
Basic and diluted net income (loss) per common shares:
Loss from continuing operations	$	(0.03	)	$	(0.07	)
Income from discontinued operations	$	0.06		$	0.03
Net income (loss)	$	0.03		$	(0.04	)
Weighted average shares outstanding:
Basic and diluted		12,797			12,739

See accompanying notes to these Condensed Consolidated Financial Statements.

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SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except par value amounts)

	March 31,			December 31,
	2023			2022
Assets
Current assets:
Cash	$	457		$	49
Accounts receivable, net		975			1,833
Inventories		2,940			3,457
Income taxes receivable		-			239
Prepaid expenses		462			243
Total current assets		4,834			5,821
Intangible assets, net		1,081			1,137
Operating lease right-of-use assets		2,428			2,491
Other assets		46			47
Assets of discontinued operations		-			1,235
Total assets	$	8,389		$	10,731
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	1,030		$	1,407
Accrued expenses		215			311
Current portion of long-term debt, net of debt issuance costs		1,205			3,384
Operating lease liabilities, current portion		275			270
Total current liabilities		2,725			5,372
Operating lease liabilities, net of current		2,441			2,512
Other liabilities		27			27
Total liabilities		5,193			7,911
Shareholders’ equity:
Preferred Stock, no par value, authorized 20,000 shares; no shares issued and outstanding		-			-
Common Stock; $0.10 par value, authorized 50,000 shares; issued and outstanding 12,797 shares (2023) and 12,797 shares (2022)		1,280			1,280
Capital in excess of par		7,919			7,912
Accumulated deficit		(6,003	)		(6,372	)
Total shareholders’ equity		3,196			2,820
Total liabilities and shareholders’ equity	$	8,389		$	10,731

See accompanying notes to these Condensed Consolidated Financial Statements.

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SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

(in thousands)

	Common Stock
	Shares		Amount		Capital in Excess of Par		(Accumulated Deficit) Retained Earnings			Total
Balance, December 31, 2022		12,797	$	1,280	$	7,912	$	(6,372	)	$	2,820
Stock-based compensation		-		-		7		-			7
Net income		-		-		-		369			369
Balance, March 31, 2023 (Unaudited)		12,797	$	1,280	$	7,919	$	(6,003	)	$	3,196
Balance, December 31, 2021		12,727	$	1,273	$	7,789	$	2,479		$	11,541
Stock-based compensation		-		-		35		-			35
Net loss		-		-		-		(451	)		(451	)
Restricted stock unit vesting		22		2		26		-			28
Balance, March 31, 2022 (Unaudited)		12,749	$	1,275	$	7,850	$	2,028		$	11,153

See accompanying notes to these Condensed Consolidated Financial Statements.

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SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	Three Months Ended
	March 31,
	2023			2022
Cash flows from operating activities:
Net income (loss)	$	369		$	(451	)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation and amortization		162			164
Stock-based compensation		7			63
Gain on disposal of discontinued operations		(787	)		-
Change in operating assets and liabilities:
Accounts receivable		858			1,117
Inventories		603			(497	)
Prepaid expenses and other assets		(218	)		14
Income taxes receivable		239			-
Accounts payable, accrued expenses, and other liabilities		(477	)		(414	)
Total adjustments to net income (loss)		387			447
Net cash provided by (used in) operating activities		756			(4	)
Cash flows from investing activities:
Proceeds from sale of discontinued operations		1,936			-
Purchase of software		-			(99	)
Net cash provided by (used in) investing activities		1,936			(99	)
Cash flows from financing activities:
Proceeds from term loans		250			-
Repayments on term loans		(30	)		(1,250	)
Proceeds from revolving credit facility		2,795			8,379
Repayments of revolving credit facility		(5,299	)		(7,899	)
Net cash used in financing activities		(2,284	)		(770	)
Net increase (decrease) in cash and restricted cash		408			(873	)
Cash and restricted cash, beginning of period		49			1,270
Cash and restricted cash, end of period	$	457		$	397
Supplemental disclosures:
Cash paid during the period for interest	$	47		$	95

See accompanying notes to these Condensed Consolidated Financial Statements.

4

SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(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 high quality products in two segments: household products and health and beauty care products.

(b) Principles of Consolidation

Our Condensed Consolidated Financial Statements include our accounts and those of our wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

On January 23, 2023, 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 Scott's Liquid Gold® brand, including the Wood Care and Floor Restore products. We have reflected the operations of the Scott's Liquid Gold® brand as discontinued operations for all periods presented, which was previously classified under our household products segment. See Note 3 for further information.

On December 15, 2022, 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 Prell® product line. We have reflected the operations of the Prell® product line as discontinued operations for all periods presented, which was previously classified under our health and beauty care segment. See Note 3 for further information.

(c) Basis of Presentation

The unaudited Condensed Consolidated Statements of Operations, Condensed Consolidated Balance Sheets, and Condensed Consolidated Statements of Cash Flows included in this Report have been prepared by the Company. In our opinion, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at March 31, 2023 and results of operations and cash flows for all periods have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These Condensed Consolidated Financial Statements should be read in conjunction with our financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022. The results of operations for the period ended March 31, 2023 are not necessarily indicative of the operating results for the full year and are unaudited.

(d) Use of Estimates

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, operating lease right-of-use assets and operating lease liabilities, and stock-based compensation. Actual results could differ from our estimates.

(e) Inventories Valuation and Reserves

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 estimate an inventory reserve 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.

Our remaining raw materials balance is to be sold to contract manufacturing partners based on production demand.

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(f) Leases

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.

(g) Intangible Assets

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 20 years. Amortization expense related to intangible assets is included in Operating Expenses on the Condensed 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. In the second quarter of 2022, our internal-use software was implemented for its intended use with an estimated useful life of five years. Amortization expense is recorded on a straight-line basis and is included in general and administrative expenses on the Condensed Consolidated Statements of Operations.

(h) Financial Instruments

Financial instruments which potentially subject us to concentrations of credit risk include cash, and accounts receivable. We maintain our cash balances in the form of bank demand deposits with financial institutions that we believe are creditworthy. Historically, we have maintained balances in various operating accounts in excess of federally insured limits. 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, receivables, other current assets, accounts payable, and accrued expenses approximate fair value due to the short-term nature of these financial instruments.

(i) Income Taxes

Income taxes reflect the tax effects of transactions reported in the Condensed 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 Condensed Consolidated Statements of Operations or accrued on the Condensed Consolidated Balance Sheets.

Income tax expense during interim periods is based on applying an estimated annual effective income tax rate to year-to-date income, plus any significant unusual or infrequently occurring items which are recorded in the interim period. The provision for income taxes for the three months ended March 31, 2023 differs from the amount that would be provided by applying the statutory U.S. federal income tax rate of 21% to pre-tax income primarily due to valuation allowance. The effective tax rate for the three months ended March 31, 2023 and 2022 was -0.9% and 0.0% respectively.

6

The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating income for the year, and permanent differences. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is obtained, additional information becomes known or as the tax environment changes.

In assessing the need for a valuation allowance, management must determine that there will be sufficient taxable income to realize deferred tax assets. Based upon the historical and anticipated future losses, management has determined that the deferred tax assets do not meet the more likely than not threshold for realizability. Accordingly, a valuation allowance has been recorded against the Company’s net deferred tax assets as of March 31, 2023, and December 31, 2022.

(j) Revenue Recognition

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 both 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.

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 were as follows:

	March 31, 2023		December 31, 2022
Trade promotions	$	259	$	361
Allowance for doubtful accounts		59		59
	$	318	$	420

(k) Advertising Costs

We expense advertising costs as incurred.

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(l) 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 RSU 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 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.

(m) Operating Costs and Expenses Classification

Cost of sales includes costs associated with the purchase of goods from our third-party manufacturing partners, which include labor, materials, and other expenses associated with the manufacturing of our products, freight-in, purchasing and receiving, quality control, repairs, maintenance, and other indirect costs. We classify freight-out as selling expenses. Other selling expenses consist primarily of costs for warehousing and distribution, sales and sales support personnel, brokerage commissions, customer compliance fines, and promotional costs. Freight-out costs included in selling expenses totaled $425 and $527 for the three months ended March 31, 2023 and 2022, 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.

(n) Supplier Finance Programs

During 2022, we entered into an agreement with a third-party financial institution and and agreement with an insurance agency which allows us to obtain extended payment terms for our insurance policies. The insurance policies can be canceled by the Company at any time with 10 days’ notice. The financial institution may cancel this agreement after providing 10 days’ notice if the Company does not pay any installment payment according to the terms of the agreement. We do not provide any forms of guarantees under these agreements. Payments of our obligations are included in cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows. Outstanding confirmed amounts are $145 and $217 as of March 31, 2023 and December 31, 2022, respectively, which will be recognized on the Condensed Consolidated Financial Statements as payments are due.

(o) Recently Issued Accounting Standards

In September 2022, the FASB issued Accounting Standards Update ("ASU)" No. 2022-04, "Liabilities-Supplier Finance Programs (Subtopic 405-50), Disclosure of Supplier Finance Program Obligations." This guidance requires annual and interim disclosures for entities that use supplier finance programs in connection with the purchase of goods and services. These amendments are effective for fiscal years beginning after December 15, 2022, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. We adopted this ASU as of January 1, 2023 on a prospective basis. As the guidance requires only additional disclosures, there were no effects of this standard on our financial position, results of operations and cash flows. See disclosure contained in Note 1(n).

Note 2. Going Concern

The accompanying Condensed Consolidated Financial Statements have been prepared assuming that the Company will continue as a going concern, which contemplates the continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. However, substantial doubt about the Company’s ability to continue as a going concern exists.

8

Primarily due to a decline in net sales, disruption of our international sales to China, and increases in costs associated with the manufacture and distribution of our products, the Company has sustained significant losses from operations in several reporting periods since 2019. In February 2023, the Company terminated its Loan and Security Agreement with UMB Bank, N.A. and repaid its revolving credit facility in full. The Company’s debt agreement with La Plata Capital, LLC matures on November 9, 2023. See Note 8 - “Long-Term Debt and Line of Credit” in the Notes to Condensed Consolidated Financial Statements for further information. Management’s assessment of cash flow forecasts indicate that, absent any other action, the Company likely will require additional liquidity to continue its operations over the next 12 months.

Management has implemented actions to reduce the Company’s operating expenses and has restructured debt facilities through the adjustments to the timing of required principal payments and covenant compliance periods. Management is considering additional various strategic actions including asset sales, obtaining additional debt or equity financing (potentially in conjunction with acquisitions), workforce reduction, deferring or eliminating certain capital expenditures, and further reduction of other operating expenses to ensure alignment with customer demand in order to address liquidity needs and pursue its business plan. The Company expects that these strategic actions will reduce expenses and outstanding debt balances and provide required liquidity for ongoing operations. However, given the impact of the economic downturn on the U.S., the Company may be unable to sell assets or access further equity or debt financing when needed. As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all.

The Condensed Consolidated Financial Statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties.

Note 3. Discontinued Operations

On January 23, 2023, we entered into an asset purchase agreement with a buyer, pursuant to which we agreed to sell all of our right, title and interest in and to certain assets of the Scott's Liquid Gold® Wood Care and Scott's Liquid Gold® Floor Restore product lines. The total consideration paid to us was $800, plus an amount equal to the value of the Scott's Liquid Gold® Wood Care and Scott's Liquid Gold® Floor Restore inventory of $1,136, subject to post-close adjustment. Additionally, the buyer will pay a royalty equal to 2% of gross sales for two years after the closing date (the "Scott's Liquid Gold® Royalty"). The Scott's Liquid Gold® Royalty resulted in recognition of a gain upon the sale of assets. Because the Scott's Liquid Gold® Royalty is variable consideration and is contingent on the outcome of future events that are largely outside of the Company’s control, the variable consideration from the Scott's Liquid Gold® Royalty has been fully constrained and no amount is included in the results from discontinued operations. Consideration for the Scott's Liquid Gold® Royalty is to be recognized as received from the buyer. The constraint on the variable consideration will be reassessed at each subsequent reporting period.

On December 15, 2022, 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 Prell® product line. The total consideration paid to us was $150, plus an amount equal to the value of the Prell® inventory of $330, subject to post-close adjustment. Additionally, the buyer will pay a royalty equal to 3% of collections on net sales for four years after the closing date (the “Prell® Royalty”). The Prell® Royalty resulted in recognition of a gain upon the sale of assets. For the three months ended March 31, 2023, there were no changes in the assessment of the Prell® Royalty, which will continue to be recognized as received from the buyer. The constraint on the variable consideration will be reassessed at each subsequent reporting period.

9

We have reflected the operations of the Scott's Liquid Gold® and Prell® product lines as discontinued operations. Our Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations report discontinued operations separate from continuing operations. Our Condensed 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 Condensed Consolidated Statements of Operations for the three months ended March 31:

	Three Months Ended March 31, 2023
	Prell®		Scott's Liquid Gold®			Total
Net sales	$	-	$	187		$	187
Cost of sales		-		95		$	95
Gross profit		-		92			92
Operating expenses:
Selling		-		28			28
General and administrative		-		22			22
Operating income from discontinued operations		-		42			42
Interest expense		-		(18	)		(18	)
Gain on sale of discontinued operations		-		787			787
Income from discontinued operations	$	-	$	811		$	811

	Three Months Ended March 31, 2022
	Prell®			Scott's Liquid Gold®			Total
Net sales	$	838		$	1,223		$	2,061
Cost of sales		496			474		$	970
Gross profit		342			749			1,091
Operating expenses:
Selling		290			289			579
Intangible asset amortization		12			-			12
Operating income from discontinued operations		40			460			500
Interest expense		(14	)		(54	)		(68	)
Income from discontinued operations	$	26		$	406		$	432

There were no capital expenditures or significant operating and investing noncash items related to discontinued operations during the years ended December 31, 2022 and 2021, respectively.

Reconciliation of the Major Classes of Assets and Liabilities of the Discontinued Operations to Amounts Presented Separately in the Condensed Consolidated Balance Sheets as of:
 

	March 31, 2023		December 31, 2022
Assets
Current assets:
Inventories	$	-	$	1,235
Total assets	$	-	$	1,235

All assets in the above table are related to the discontinued operations of Scott's Liquid Gold®. There were no assets related to Prell® as of March 31, 2023 and December 31, 2022, respectively.

10

Note 4. Stock-Based Compensation

On January 18, 2022, we granted 25 RSUs to an employee (the “2022 Individual Employee Grant”) with a grant date fair value of $10. The 2022 Individual Employee Grant vested one-third on the initial grant date, and the remaining two-thirds will vest on each anniversary of the grant date.

On March 2, 2022, we granted 15 shares of restricted stock to one executive all of which vested on the grant date with a fair value of $18.

Compensation cost related to stock options totaled $0 and $7 in the three months ended March 31, 2023 and 2022, respectively. The stock options were fully vested in the second quarter of 2022. 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 $7 and $56 for the three months ended March 31, 2023 and 2022, respectively. Approximately $64 of total unrecognized compensation costs related to non-vested RSUs is expected to be recognized throughout the year.

Note 5. 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) is as follows. The dilutive effect of stock options and RSUs are excluded for periods in which the impact is anti-dilutive and when the Company has a net loss because the impact is also anti-dilutive.

	Three Months Ended March 31,
	2023		2022
Common shares outstanding, beginning of the period		12,797		12,727
Weighted average common shares issued		-		12
Weighted average number of common shares outstanding		12,797		12,739
Dilutive effect of common share equivalents		-		-
Diluted weighted average number of common shares outstanding		12,797		12,739

Common stock equivalents (in thousands) that have been excluded from the calculation of earnings per share because they would have been anti-dilutive:
 

	Three Months Ended March 31,
	2023		2022
Stock options		138		213
Restricted stock units		38		63

Note 6. Segment Information

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 from operations.

11

The following provides information on our segments for the three months ended March 31:

	Three Months Ended March 31, 2023
	Household Products			Health and Beauty Care Products		Total
Net sales	$	1,975		$	1,273	$	3,248
(Loss) income from operations		(386	)		92		(294	)
Depreciation and amortization		130			47		177

	Three Months Ended March 31, 2022
	Household Products			Health and Beauty Care Products			Total
Net sales	$	1,987		$	1,742		$	3,729
Loss from operations		(793	)		(8	)		(801	)
Capital and intangible asset expenditures		113			-			113
Depreciation and amortization		297			155			452

Note 7. Intangible Assets

Intangible assets, which are comprised of our capitalized costs of software obtained for internal-use or are related to our acquisition of our Denorex®, Zincon®, and BIZ® brands, consisted of the following:

	As of March 31, 2023						As of December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Intangible assets:
Trade names	$	309	$	101	$	208	$	309	$	97	$	212
Formulas and batching processes		412		290		122		412		283		129
Internal-use software		898		150		748		898		105		793
Non-compete agreement		33		30		3		33		30		3
	$	1,652	$	571	$	1,081	$	1,652	$	515	$	1,137

Amortization expense for the three months ended March 31, 2023 and 2022 was $56 and $83, respectively.

Estimated amortization expense for 2023 and subsequent years is as follows:
 

Remainder of 2023	$	169
2024		225
2025		224
2026		215
2027		104
Thereafter		144
Total	$	1,081

Note 8. Long-Term Debt and Line-of-Credit

UMB Loan Agreement

On July 1, 2020, we entered into a Loan and Security Agreement (as amended, the “UMB Loan Agreement”) with UMB Bank, N.A. (“UMB”). Under the UMB Loan Agreement we obtained a $3,000 term loan, with equal monthly payments fully amortized over three years which was repaid in full in the second quarter of 2022, and a revolving credit facility, with a maximum commitment of $4,000 bearing interest at the one-month term SOFR rate + 6.83% with a floor of 7.75%.

On January 23, 2023, we entered in to the Consent and Seventh Amendment to Loan and Security Agreement, which consents to the sale of Scott's Liquid Gold® Wood Care and Scott's Liquid Gold® Floor restore assets, updates defined terms and financial covenants under the UMB Agreement , and reduces the maximum commitment on the revolving credit facility to $250.

12

The UMB Loan Agreement was terminated on February 27, 2023 and the revolving credit facility was paid in full on February 28, 2023. The loans were secured by all of the assets of the Company and its subsidiaries. Unamortized loan costs were $0 and $100 as of March 31, 2023 and December 31, 2022, respectively. Amortization of loan costs for the three months ended March 31, 2023 was $100, including $83 that were expensed as a result of the termination of the UMB Loan Agreement. Amortization of loan costs for the three months ended March 31, 2022 was $50.

La Plata Loan Agreement

On November 9, 2021, we entered into a loan and security agreement (as amended, 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 $250 term loan that bears interest at 15%, both of which mature on November 9, 2023. Interest-only payments are required on a monthly basis through June 30, 2023, with monthly principal and interest payments of $30K beginning on July 1, 2023. All remaining unpaid principal and interest are fully due on November 9, 2023. We repaid $1,000 of principal against the La Plata Loan Agreement during the first quarter of 2022.

The La Plata Loan Agreement requires compliance with affirmative, negative, and financial covenants, as determined on a monthly basis beginning in June 2023. The La Plata Loan Agreement is secured by all of the assets of the Company and all of its subsidiaries.

As of March 31, 2023, our La Plata term loan had an outstanding balance of $1,220. La Plata unamortized loan costs were $15 and $20 as of March 31, 2023 and December 31, 2022, respectively. Amortization expense for the three months ended March 31, 2023 and 2022 were $5 and $5, respectively.

Note 9. Leases

We have entered into a lease for our corporate headquarters with a remaining lease term of 8 years. This lease includes both lease and nonlease 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 this lease does 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.

Information related to leases was as follows:

	Three Months Ended March 31, 2023			Three Months Ended March 31, 2022
Operating lease information:
Operating lease cost	$	101		$	100
Operating cash flows from operating leases		100			100
Net assets obtained in exchange for new operating lease liabilities		-			-
Weighted average remaining lease term in years		7.67			8.67
Weighted average discount rate		5.1	%		5.1	%

13

Future minimum annual lease payments are as follows:
 

Remainder of 2023	$	305
2024		413
2025		420
2026		427
2027		434
Thereafter		1,305
Total minimum lease payments	$	3,304
Less imputed interest		(588	)
Total operating lease liability	$	2,716

14

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company’s Condensed Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2022. This Item 2 contains forward-looking statements. The matters discussed in these forward-looking statements are subject to risk, uncertainties, and other factors that could cause actual results to differ materially from those made, projected, or implied in the forward-looking statements. Please refer to "Item 1A. Risk Factors" in this Report and in our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of the uncertainties, risks and assumptions associated with these statements.

Executive Overview

Our Business

Scott’s Liquid Gold-Inc. exists to positively impact consumers’ lives in the markets we serve while creating shareholder value. We develop, market, and sell high-quality, high-value household and health and beauty care products nationally and internationally to mass merchandisers, drugstores, supermarkets, hardware stores, e-commerce retailers, other retail outlets, and to wholesale distributors.

Sale of Brands

On January 23, 2023, we sold the Scott's Liquid Gold® Wood Care and Scott's Liquid Gold® Floor Restore product lines to a company that markets and distributes wood care products. On December 15, 2022, we sold the Prell® brand to a company that markets and distributes natural hair and skincare products. We have reflected the operations of Scott's Liquid Gold® and Prell® as discontinued operations for all periods presented.

See Note 3 - “Discontinued Operations” in the Notes to Condensed Consolidated Financial Statements for further information on the sale of both brands.

In conjunction with the sale of the Scott’s Liquid Gold® brand, as discussed below, the Company may continue to use names “Scott’s Liquid Gold” and “SLG” for up to one year following the closing date of the agreement on January 23, 2023. Following this transitional name period, the Company will only be able to use the aforementioned names in connection with retaining records and other historical or archived documents and any use required by or permitted as a fair use or otherwise under applicable law.

15

Results of Operations

Three months ended March 31, 2023 compared to three months ended March 31, 2022

	Three Months Ended March 31, (in thousands)
							Increase / (Decrease)
	2023			2022			$			%
Net sales	$	3,248		$	3,729		$	(481	)		(12.9	%)
Cost of sales		1,849			1,886			(37	)		(2.0	%)
Gross profit		1,399			1,843			(444	)		(24.1	%)
		43.1	%		49.4	%
Operating expenses:
Advertising		154			135			19			14.1	%
Selling		865			1,625			(760	)		(46.8	%)
General and administrative		618			791			(173	)		(21.8	%)
Intangible asset amortization		56			93			(37	)		(39.8	%)
Total operating expenses		1,693			2,644			(951	)		(36.0	%)
Loss from operations		(294	)		(801	)		507			63.3	%
Interest expense		(152	)		(82	)		(70	)		(85.4	%)
Loss before income taxes and discontinued operations		(446	)		(883	)		437			49.5	%
Income tax benefit		4			-			4			100.0	%
Loss from continuing operations		(442	)		(883	)		441			49.9	%
Gain from discontinued operations, net of taxes		811			432			379			87.7	%
Net income (loss)	$	369		$	(451	)	$	820			181.9	%

Our operating results were primarily impacted by the following:

•Lower sales, gross profits, and gross margin decreased primarily due to the elimination of sales to our exclusive China distributor of Alpha® Skin Care products.

•Decrease in selling expenses due to the consolidation of third-party logistics partners and implementation of minimum order quantity thresholds with our customers.

•Decrease in general and administrative due to reductions in personnel and professional related costs.

•Decrease in intangible asset amortization from impairment of intangible assets in 2022.

•Increase in interest expense due to the accelerated recognition of unamortized loan costs from the termination of our credit facility with UMB debt payoff in February 2023.

•Results from discontinued operations, which are disclosed in Note 3 to the Condensed Consolidated Financial Statements.

16

Segment Results

Household products

The following table shows comparative net sales, gross margin, gross profit, loss from operations, volume, and percentage changes for household products between periods:

	Three Months Ended March 31, (in thousands)
							Increase / (Decrease)
	2023			2022			$			%
Net sales	$	1,975		$	1,987		$	(12	)		(0.6	%)
Gross profit	$	712		$	742		$	(30	)		(4.0	%)
Gross margin		36.1	%		37.3	%
Loss from operations	$	(386	)	$	(793	)	$	407			51.3	%

•Gross profit and gross margin were lower due to increases in the manufacture and cost of our products that we were not fully able to pass on to our customers.

•Loss from operations was offset due to decreases in selling expenses and general and administrative costs.

Health and beauty care products

The following table shows comparative net sales, gross margin, gross profit, loss from operations, volume and percentage changes for health and beauty care products between periods:

	Three Months Ended March 31, (in thousands)
							Increase / (Decrease)
	2023			2022			$			%
Net sales		1,273			1,742			(469	)		(26.9	%)
Gross profit	$	687		$	1,101		$	(414	)		(37.6	%)
Gross margin		54.0	%		63.2	%
Income (loss) from operations	$	92		$	(8	)	$	100			1,250.0	%

•Lower net sales and gross profits due to the elimination of sales to our exclusive China distributor of Alpha® Skin Care products.

•Income from operations due to decreases in selling expenses and general and administrative costs.

Liquidity and Capital Resources

Overview

Our primary sources of funds include cash expected to be generated from operations. Our principal uses of cash are to fund planned operating expenditures, interest payments, and principal payments on our debt. Management’s assessment of cash flow forecasts indicate that, absent any other action, the Company likely will require additional liquidity to continue its operations over the next 12 months. Working capital movements are influenced by the sourcing of finished goods inventories.

Financing Agreements

Please see Note 8 to our Condensed Consolidated Financial Statements for information on our La Plata Loan Agreement and UMB Loan Agreement, which was terminated in February 2023.

Liquidity and Changes in Cash Flows

At March 31, 2023, we had approximately $457 in cash on hand, an increase of $408 from December 31, 2022.

17

The following is a summary of cash provided by or (used in) each of the indicated types of activities:

	Three Months Ended March 31, (in thousands)
							Increase / (Decrease)
	2023			2022			$			%
Operating activities	$	756		$	(4	)	$	760			19,000.0	%
Investing activities		1,936			(99	)		2,035			2,055.6	%
Financing activities		(2,284	)		(770	)		(1,514	)		(196.6	%)

•Net cash provided by operating activities was primarily related to conversion of working capital from accounts receivable and offset by investments in finished goods inventories.

•Net cash provided by investing activities was due to the sale of our Scott's Liquid Gold® brand.

•Net cash used by financing activities was from repayments and termination of our UMB Loan Agreement and offset by proceeds from our La Plata Loan Agreement.

The accompanying Condensed Consolidated Financial Statements have been prepared assuming that the Company will continue as a going concern, which contemplates the continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. However, substantial doubt about the Company’s ability to continue as a going concern exists.

Primarily due to a decline in net sales, disruption of our international sales to China, and increases in costs associated with the manufacture and distribution of our products, the Company has sustained significant losses from operations in several reporting periods since 2019. All proceeds from the sale of our Scott's Liquid Gold brand in January 2023 were used to reduce outstanding debt. In February 2023, the Company terminated its Loan and Security Agreement with UMB Bank, N.A, and repaid its revolving credit facility in full. The Company’s debt agreement with La Plata Capital, LLC matures on November 9, 2023. Management’s assessment of cash flow forecasts indicate that, absent any other action, the Company likely will require additional liquidity to continue its operations over the next 12 months.

Management has implemented actions to reduce the Company’s operating expenses and has restructured debt facilities through the adjustments to the timing of required principal payments and covenant compliance periods. Management is considering additional various strategic actions including asset sales, obtaining additional debt or equity financing (potentially in conjunction with acquisitions), workforce reduction, deferring or eliminating certain capital expenditures, and further reduction of other operating expenses to ensure alignment with customer demand in order to address liquidity needs and pursue its business plan. The Company expects that these strategic actions will reduce expenses and outstanding debt balances and provide required liquidity for ongoing operations. However, given the impact of the economic downturn on the U.S., the Company may be unable to sell assets or access further equity or debt financing when needed. As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all.

The Condensed Consolidated Financial Statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of March 31, 2023, we conducted an evaluation, under the supervision and with the participation of our President and Chief Financial Officers of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended). Based on that evaluation, our President and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of March 31, 2023.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during the three months ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

18

PART II

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Report, you should carefully consider the factors discussed in Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and subsequent quarterly reports on Form 10-Q, which could materially affect our business, financial condition, or future results.

ITEM 6. EXHIBITS

Exhibit Number	Document
31.1	Rule 13a-14(a) Certification of the President.
31.2	Rule 13a-14(a) Certification of the Chief Financial Officer.
32.1*	Section 1350 Certification.
101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRLtags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document.
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Furnished, not filed.

19

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SCOTT’S LIQUID GOLD-INC.
By:	/s/ Tisha Pedrazzini
	Tisha Pedrazzini, President
	(Principal Executive Officer)
By:	/s/ David M. Arndt
	David M. Arndt, Chief Financial Officer
	(Principal Financial and Chief Accounting Officer)

Date: May 8, 2023

20

EX-31

EXHIBIT 31.1

CERTIFICATION

I, Tisha Pedrazzini, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Scott’s Liquid Gold-Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 8, 2023	/s/ Tisha Pedrazzini
	Tisha Pedrazzini
	President

EX-31

EXHIBIT 31.2

CERTIFICATION

I, David M. Arndt, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Scott’s Liquid Gold-Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 8, 2023	/s/ David M. Arndt
	David M. Arndt
	Chief Financial Officer

EX-32

EXHIBIT 32.1

CERTIFICATION OF ANNUAL REPORT ON FORM 10-Q OF

SCOTT’S LIQUID GOLD-INC.

FOR THE QUARTER ENDED MARCH 31, 2023

Each of the undersigned hereby certifies, for the purposes of Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his or her capacity as an officer of Scott’s Liquid Gold-Inc. (“Scott’s Liquid Gold”), that to his or her knowledge:

1. This Quarterly Report on Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Scott’s Liquid Gold.

This written statement is being furnished to the Securities and Exchange Commission as an exhibit to the Quarterly Report on Form 10-Q. A signed original of this statement has been provided to Scott’s Liquid Gold and will be retained by Scott’s Liquid Gold and furnished to the Securities and Exchange Commission or its staff upon request.

This Certification is executed as of May 8, 2023.

/s/ Tisha Pedrazzini

Tisha Pedrazzini

President

/s/ David M. Arndt

David M. Arndt

Chief Financial Officer

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2023	May 07, 2023
Cover [Abstract]
Entity Registrant Name	SCOTT’S LIQUID GOLD-INC.
Entity Central Index Key	0000088000
Document Type	10-Q
Document Period End Date	Mar. 31, 2023
Amendment Flag	false
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		12,797,423
Entity Interactive Data Current	Yes
Entity Shell Company	false
Entity File Number	001-13458
Entity Incorporation, State or Country Code	CO
Entity Tax Identification Number	84-0920811
Entity Address, Address Line One	8400 E. Crescent Parkway
Entity Address, Address Line Two	Suite 450
Entity Address, City or Town	Greenwood Village
Entity Address, State or Province	CO
Entity Address, Postal Zip Code	80111
City Area Code	(303)
Local Phone Number	373-4860
Document Quarterly Report	true
Document Transition Report	false
Entity Current Reporting Status	Yes

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Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Income Statement [Abstract]
Net sales	$ 3,248	$ 3,729
Cost of sales	1,849	1,886
Gross profit	1,399	1,843
Operating expenses:
Advertising	154	135
Selling	865	1,625
General and administrative	618	791
Intangible asset amortization	56	93
Total operating expenses	1,693	2,644
Loss from operations	(294)	(801)
Interest expense	(152)	(82)
Loss before income taxes and discontinued operations	(446)	(883)
Income tax benefit	4
Loss from continuing operations	(442)	(883)
Income from discontinued operations	811	432
Net income (loss)	$ 369	$ (451)
Basic net income (loss) per common shares:
Loss from continuing operations	$ (0.03)	$ (0.07)
Income from discontinued operations	0.06	0.03
Net income (loss)	0.03	(0.04)
Diluted net income (loss) per common shares:
Loss from continuing operations	(0.03)	(0.07)
Income from discontinued operations	0.06	0.03
Net income (loss)	$ 0.03	$ (0.04)
Weighted average shares outstanding:
Basic	12,797	12,739
Diluted	12,797	12,739

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Current assets:
Cash	$ 457	$ 49
Accounts receivable, net	975	1,833
Inventories	2,940	3,457
Income taxes receivable		239
Prepaid expenses	462	243
Total current assets	4,834	5,821
Intangible assets, net	1,081	1,137
Operating lease right-of-use assets	2,428	2,491
Other assets	46	47
Assets of discontinued operations		1,235
Total assets	8,389	10,731
Current liabilities:
Accounts payable	1,030	1,407
Accrued expenses	215	311
Current portion of long-term debt, net of debt issuance costs	1,205	3,384
Operating lease liabilities, current portion	275	270
Total current liabilities	2,725	5,372
Operating lease liabilities, net of current	2,441	2,512
Other liabilities	27	27
Total liabilities	5,193	7,911
Shareholders’ equity:
Preferred Stock, no par value, authorized 20,000 shares; no shares issued and outstanding
Common Stock; $0.10 par value, authorized 50,000 shares; issued and outstanding 12,797 shares (2023) and 12,797 shares (2022)	1,280	1,280
Capital in excess of par	7,919	7,912
Accumulated deficit	(6,003)	(6,372)
Total shareholders’ equity	3,196	2,820
Total liabilities and shareholders’ equity	$ 8,389	$ 10,731

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2023	Dec. 31, 2022
Statement Of Financial Position [Abstract]
Preferred stock, par value	$ 0	$ 0
Preferred stock, shares authorized	20,000,000	20,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock par value	$ 0.10	$ 0.10
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	12,797,000	12,797,000
Common stock, shares outstanding	12,797,000	12,797,000

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Condensed Consolidated Statements of Shareholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Capital in Excess of Par	(Accumulated Deficit) Retained Earnings
Beginning Balance, Value at Dec. 31, 2021	$ 11,541	$ 1,273	$ 7,789	$ 2,479
Beginning Balance, Shares at Dec. 31, 2021	12,727	12,727
Stock-based compensation, Value	$ 35		35
Restricted stock unit vesting	28	$ 2	26
Restricted stock unit vesting, Shares		22
Net income (loss)	(451)			(451)
Ending Balance, Value at Mar. 31, 2022	11,153	$ 1,275	7,850	2,028
Ending Balance, Shares at Mar. 31, 2022		12,749
Beginning Balance, Value at Dec. 31, 2022	$ 2,820	$ 1,280	7,912	(6,372)
Beginning Balance, Shares at Dec. 31, 2022	12,797	12,797
Stock-based compensation, Value	$ 7		7
Net income (loss)	369			369
Ending Balance, Value at Mar. 31, 2023	$ 3,196	$ 1,280	$ 7,919	$ (6,003)
Ending Balance, Shares at Mar. 31, 2023	12,797	12,797

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Cash flows from operating activities:
Net income (loss)	$ 369	$ (451)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation and amortization	162	164
Stock-based compensation	7	63
Gain on disposal of discontinued operations	(787)
Change in operating assets and liabilities:
Accounts receivable	858	1,117
Inventories	603	(497)
Prepaid expenses and other assets	(218)	14
Income taxes receivable	239
Accounts payable, accrued expenses, and other liabilities	(477)	(414)
Total adjustments to net income (loss)	387	447
Net cash provided by (used in) operating activities	756	(4)
Cash flows from investing activities:
Proceeds from sale of discontinued operations	1,936
Purchase of software		(99)
Net cash provided by (used in) investing activities	1,936	(99)
Cash flows from financing activities:
Proceeds from term loans	250
Repayments on term loans	(30)	(1,250)
Proceeds from revolving credit facility	2,795	8,379
Repayments of revolving credit facility	(5,299)	(7,899)
Net cash used in financing activities	(2,284)	(770)
Net increase (decrease) in cash and restricted cash	408	(873)
Cash and restricted cash, beginning of period	49	1,270
Cash and restricted cash, end of period	457	397
Supplemental disclosures:
Cash paid during the period for interest	$ 47	$ 95

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Organization and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Organization and Summary of Significant Accounting Policies

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 high quality products in two segments: household products and health and beauty care products.

(b) Principles of Consolidation

Our Condensed Consolidated Financial Statements include our accounts and those of our wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

On January 23, 2023, 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 Scott's Liquid Gold® brand, including the Wood Care and Floor Restore products. We have reflected the operations of the Scott's Liquid Gold® brand as discontinued operations for all periods presented, which was previously classified under our household products segment. See Note 3 for further information.

On December 15, 2022, 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 Prell® product line. We have reflected the operations of the Prell® product line as discontinued operations for all periods presented, which was previously classified under our health and beauty care segment. See Note 3 for further information.

(c) Basis of Presentation

The unaudited Condensed Consolidated Statements of Operations, Condensed Consolidated Balance Sheets, and Condensed Consolidated Statements of Cash Flows included in this Report have been prepared by the Company. In our opinion, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at March 31, 2023 and results of operations and cash flows for all periods have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These Condensed Consolidated Financial Statements should be read in conjunction with our financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022. The results of operations for the period ended March 31, 2023 are not necessarily indicative of the operating results for the full year and are unaudited.

(d) Use of Estimates

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, operating lease right-of-use assets and operating lease liabilities, and stock-based compensation. Actual results could differ from our estimates.

(e) Inventories Valuation and Reserves

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 estimate an inventory reserve 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.

Our remaining raw materials balance is to be sold to contract manufacturing partners based on production demand.

(f) Leases

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.

(g) Intangible Assets

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 20 years. Amortization expense related to intangible assets is included in Operating Expenses on the Condensed 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. In the second quarter of 2022, our internal-use software was implemented for its intended use with an estimated useful life of five years. Amortization expense is recorded on a straight-line basis and is included in general and administrative expenses on the Condensed Consolidated Statements of Operations.

(h) Financial Instruments

Financial instruments which potentially subject us to concentrations of credit risk include cash, and accounts receivable. We maintain our cash balances in the form of bank demand deposits with financial institutions that we believe are creditworthy. Historically, we have maintained balances in various operating accounts in excess of federally insured limits. 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, receivables, other current assets, accounts payable, and accrued expenses approximate fair value due to the short-term nature of these financial instruments.

(i) Income Taxes

Income taxes reflect the tax effects of transactions reported in the Condensed 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 Condensed Consolidated Statements of Operations or accrued on the Condensed Consolidated Balance Sheets.

Income tax expense during interim periods is based on applying an estimated annual effective income tax rate to year-to-date income, plus any significant unusual or infrequently occurring items which are recorded in the interim period. The provision for income taxes for the three months ended March 31, 2023 differs from the amount that would be provided by applying the statutory U.S. federal income tax rate of 21% to pre-tax income primarily due to valuation allowance. The effective tax rate for the three months ended March 31, 2023 and 2022 was -0.9% and 0.0% respectively.

The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating income for the year, and permanent differences. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is obtained, additional information becomes known or as the tax environment changes.

In assessing the need for a valuation allowance, management must determine that there will be sufficient taxable income to realize deferred tax assets. Based upon the historical and anticipated future losses, management has determined that the deferred tax assets do not meet the more likely than not threshold for realizability. Accordingly, a valuation allowance has been recorded against the Company’s net deferred tax assets as of March 31, 2023, and December 31, 2022.

(j) Revenue Recognition

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 both 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.

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 were as follows:

	March 31, 2023		December 31, 2022
Trade promotions	$	259	$	361
Allowance for doubtful accounts		59		59
	$	318	$	420

(k) Advertising Costs

We expense advertising costs as incurred.

(l) 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 RSU 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 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.

(m) Operating Costs and Expenses Classification

Cost of sales includes costs associated with the purchase of goods from our third-party manufacturing partners, which include labor, materials, and other expenses associated with the manufacturing of our products, freight-in, purchasing and receiving, quality control, repairs, maintenance, and other indirect costs. We classify freight-out as selling expenses. Other selling expenses consist primarily of costs for warehousing and distribution, sales and sales support personnel, brokerage commissions, customer compliance fines, and promotional costs. Freight-out costs included in selling expenses totaled $425 and $527 for the three months ended March 31, 2023 and 2022, 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.

(n) Supplier Finance Programs

During 2022, we entered into an agreement with a third-party financial institution and and agreement with an insurance agency which allows us to obtain extended payment terms for our insurance policies. The insurance policies can be canceled by the Company at any time with 10 days’ notice. The financial institution may cancel this agreement after providing 10 days’ notice if the Company does not pay any installment payment according to the terms of the agreement. We do not provide any forms of guarantees under these agreements. Payments of our obligations are included in cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows. Outstanding confirmed amounts are $145 and $217 as of March 31, 2023 and December 31, 2022, respectively, which will be recognized on the Condensed Consolidated Financial Statements as payments are due.

(o) Recently Issued Accounting Standards

In September 2022, the FASB issued Accounting Standards Update ("ASU)" No. 2022-04, "Liabilities-Supplier Finance Programs (Subtopic 405-50), Disclosure of Supplier Finance Program Obligations." This guidance requires annual and interim disclosures for entities that use supplier finance programs in connection with the purchase of goods and services. These amendments are effective for fiscal years beginning after December 15, 2022, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. We adopted this ASU as of January 1, 2023 on a prospective basis. As the guidance requires only additional disclosures, there were no effects of this standard on our financial position, results of operations and cash flows. See disclosure contained in Note 1(n).

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Going Concern

3 Months Ended

Mar. 31, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Going Concern

Note 2. Going Concern

The accompanying Condensed Consolidated Financial Statements have been prepared assuming that the Company will continue as a going concern, which contemplates the continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. However, substantial doubt about the Company’s ability to continue as a going concern exists.

Primarily due to a decline in net sales, disruption of our international sales to China, and increases in costs associated with the manufacture and distribution of our products, the Company has sustained significant losses from operations in several reporting periods since 2019. In February 2023, the Company terminated its Loan and Security Agreement with UMB Bank, N.A. and repaid its revolving credit facility in full. The Company’s debt agreement with La Plata Capital, LLC matures on November 9, 2023. See Note 8 - “Long-Term Debt and Line of Credit” in the Notes to Condensed Consolidated Financial Statements for further information. Management’s assessment of cash flow forecasts indicate that, absent any other action, the Company likely will require additional liquidity to continue its operations over the next 12 months.

Management has implemented actions to reduce the Company’s operating expenses and has restructured debt facilities through the adjustments to the timing of required principal payments and covenant compliance periods. Management is considering additional various strategic actions including asset sales, obtaining additional debt or equity financing (potentially in conjunction with acquisitions), workforce reduction, deferring or eliminating certain capital expenditures, and further reduction of other operating expenses to ensure alignment with customer demand in order to address liquidity needs and pursue its business plan. The Company expects that these strategic actions will reduce expenses and outstanding debt balances and provide required liquidity for ongoing operations. However, given the impact of the economic downturn on the U.S., the Company may be unable to sell assets or access further equity or debt financing when needed. As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all.

The Condensed Consolidated Financial Statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties.

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Discontinued Operations

3 Months Ended

Mar. 31, 2023

Discontinued Operations And Disposal Groups [Abstract]

Discontinued Operations

Note 3. Discontinued Operations

On January 23, 2023, we entered into an asset purchase agreement with a buyer, pursuant to which we agreed to sell all of our right, title and interest in and to certain assets of the Scott's Liquid Gold® Wood Care and Scott's Liquid Gold® Floor Restore product lines. The total consideration paid to us was $800, plus an amount equal to the value of the Scott's Liquid Gold® Wood Care and Scott's Liquid Gold® Floor Restore inventory of $1,136, subject to post-close adjustment. Additionally, the buyer will pay a royalty equal to 2% of gross sales for two years after the closing date (the "Scott's Liquid Gold® Royalty"). The Scott's Liquid Gold® Royalty resulted in recognition of a gain upon the sale of assets. Because the Scott's Liquid Gold® Royalty is variable consideration and is contingent on the outcome of future events that are largely outside of the Company’s control, the variable consideration from the Scott's Liquid Gold® Royalty has been fully constrained and no amount is included in the results from discontinued operations. Consideration for the Scott's Liquid Gold® Royalty is to be recognized as received from the buyer. The constraint on the variable consideration will be reassessed at each subsequent reporting period.

On December 15, 2022, 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 Prell® product line. The total consideration paid to us was $150, plus an amount equal to the value of the Prell® inventory of $330, subject to post-close adjustment. Additionally, the buyer will pay a royalty equal to 3% of collections on net sales for four years after the closing date (the “Prell® Royalty”). The Prell® Royalty resulted in recognition of a gain upon the sale of assets. For the three months ended March 31, 2023, there were no changes in the assessment of the Prell® Royalty, which will continue to be recognized as received from the buyer. The constraint on the variable consideration will be reassessed at each subsequent reporting period.

We have reflected the operations of the Scott's Liquid Gold® and Prell® product lines as discontinued operations. Our Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations report discontinued operations separate from continuing operations. Our Condensed 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 Condensed Consolidated Statements of Operations for the three months ended March 31:

	Three Months Ended March 31, 2023
	Prell®		Scott's Liquid Gold®			Total
Net sales	$	-	$	187		$	187
Cost of sales		-		95		$	95
Gross profit		-		92			92
Operating expenses:
Selling		-		28			28
General and administrative		-		22			22
Operating income from discontinued operations		-		42			42
Interest expense		-		(18	)		(18	)
Gain on sale of discontinued operations		-		787			787
Income from discontinued operations	$	-	$	811		$	811

	Three Months Ended March 31, 2022
	Prell®			Scott's Liquid Gold®			Total
Net sales	$	838		$	1,223		$	2,061
Cost of sales		496			474		$	970
Gross profit		342			749			1,091
Operating expenses:
Selling		290			289			579
Intangible asset amortization		12			-			12
Operating income from discontinued operations		40			460			500
Interest expense		(14	)		(54	)		(68	)
Income from discontinued operations	$	26		$	406		$	432

There were no capital expenditures or significant operating and investing noncash items related to discontinued operations during the years ended December 31, 2022 and 2021, respectively.

Reconciliation of the Major Classes of Assets and Liabilities of the Discontinued Operations to Amounts Presented Separately in the Condensed Consolidated Balance Sheets as of:
 

	March 31, 2023		December 31, 2022
Assets
Current assets:
Inventories	$	-	$	1,235
Total assets	$	-	$	1,235

All assets in the above table are related to the discontinued operations of Scott's Liquid Gold®. There were no assets related to Prell® as of March 31, 2023 and December 31, 2022, respectively.

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2023

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

Note 4. Stock-Based Compensation

On January 18, 2022, we granted 25 RSUs to an employee (the “2022 Individual Employee Grant”) with a grant date fair value of $10. The 2022 Individual Employee Grant vested one-third on the initial grant date, and the remaining two-thirds will vest on each anniversary of the grant date.

On March 2, 2022, we granted 15 shares of restricted stock to one executive all of which vested on the grant date with a fair value of $18.

Compensation cost related to stock options totaled $0 and $7 in the three months ended March 31, 2023 and 2022, respectively. The stock options were fully vested in the second quarter of 2022. 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 $7 and $56 for the three months ended March 31, 2023 and 2022, respectively. Approximately $64 of total unrecognized compensation costs related to non-vested RSUs is expected to be recognized throughout the year.

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Earnings Per Share

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

Earnings Per Share

Note 5. 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) is as follows. The dilutive effect of stock options and RSUs are excluded for periods in which the impact is anti-dilutive and when the Company has a net loss because the impact is also anti-dilutive.

	Three Months Ended March 31,
	2023		2022
Common shares outstanding, beginning of the period		12,797		12,727
Weighted average common shares issued		-		12
Weighted average number of common shares outstanding		12,797		12,739
Dilutive effect of common share equivalents		-		-
Diluted weighted average number of common shares outstanding		12,797		12,739

Common stock equivalents (in thousands) that have been excluded from the calculation of earnings per share because they would have been anti-dilutive:
 

	Three Months Ended March 31,
	2023		2022
Stock options		138		213
Restricted stock units		38		63

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Segment Information

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Segment Information

Note 6. Segment Information

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 from operations.

The following provides information on our segments for the three months ended March 31:

	Three Months Ended March 31, 2023
	Household Products			Health and Beauty Care Products		Total
Net sales	$	1,975		$	1,273	$	3,248
(Loss) income from operations		(386	)		92		(294	)
Depreciation and amortization		130			47		177

	Three Months Ended March 31, 2022
	Household Products			Health and Beauty Care Products			Total
Net sales	$	1,987		$	1,742		$	3,729
Loss from operations		(793	)		(8	)		(801	)
Capital and intangible asset expenditures		113			-			113
Depreciation and amortization		297			155			452

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Intangible Assets

3 Months Ended

Mar. 31, 2023

Goodwill And Intangible Assets Disclosure [Abstract]

Intangible Assets

Note 7. Intangible Assets

Intangible assets, which are comprised of our capitalized costs of software obtained for internal-use or are related to our acquisition of our Denorex®, Zincon®, and BIZ® brands, consisted of the following:

	As of March 31, 2023						As of December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Intangible assets:
Trade names	$	309	$	101	$	208	$	309	$	97	$	212
Formulas and batching processes		412		290		122		412		283		129
Internal-use software		898		150		748		898		105		793
Non-compete agreement		33		30		3		33		30		3
	$	1,652	$	571	$	1,081	$	1,652	$	515	$	1,137

Amortization expense for the three months ended March 31, 2023 and 2022 was $56 and $83, respectively.

Estimated amortization expense for 2023 and subsequent years is as follows:
 

Remainder of 2023	$	169
2024		225
2025		224
2026		215
2027		104
Thereafter		144
Total	$	1,081

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Long-Term Debt and Line-of-Credit

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Long-Term Debt and Line-of-Credit

Note 8. Long-Term Debt and Line-of-Credit

UMB Loan Agreement

On July 1, 2020, we entered into a Loan and Security Agreement (as amended, the “UMB Loan Agreement”) with UMB Bank, N.A. (“UMB”). Under the UMB Loan Agreement we obtained a $3,000 term loan, with equal monthly payments fully amortized over three years which was repaid in full in the second quarter of 2022, and a revolving credit facility, with a maximum commitment of $4,000 bearing interest at the one-month term SOFR rate + 6.83% with a floor of 7.75%.

On January 23, 2023, we entered in to the Consent and Seventh Amendment to Loan and Security Agreement, which consents to the sale of Scott's Liquid Gold® Wood Care and Scott's Liquid Gold® Floor restore assets, updates defined terms and financial covenants under the UMB Agreement , and reduces the maximum commitment on the revolving credit facility to $250.

The UMB Loan Agreement was terminated on February 27, 2023 and the revolving credit facility was paid in full on February 28, 2023. The loans were secured by all of the assets of the Company and its subsidiaries. Unamortized loan costs were $0 and $100 as of March 31, 2023 and December 31, 2022, respectively. Amortization of loan costs for the three months ended March 31, 2023 was $100, including $83 that were expensed as a result of the termination of the UMB Loan Agreement. Amortization of loan costs for the three months ended March 31, 2022 was $50.

La Plata Loan Agreement

On November 9, 2021, we entered into a loan and security agreement (as amended, 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 $250 term loan that bears interest at 15%, both of which mature on November 9, 2023. Interest-only payments are required on a monthly basis through June 30, 2023, with monthly principal and interest payments of $30K beginning on July 1, 2023. All remaining unpaid principal and interest are fully due on November 9, 2023. We repaid $1,000 of principal against the La Plata Loan Agreement during the first quarter of 2022.

The La Plata Loan Agreement requires compliance with affirmative, negative, and financial covenants, as determined on a monthly basis beginning in June 2023. The La Plata Loan Agreement is secured by all of the assets of the Company and all of its subsidiaries.

As of March 31, 2023, our La Plata term loan had an outstanding balance of $1,220. La Plata unamortized loan costs were $15 and $20 as of March 31, 2023 and December 31, 2022, respectively. Amortization expense for the three months ended March 31, 2023 and 2022 were $5 and $5, respectively.

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Leases

3 Months Ended

Mar. 31, 2023

Leases [Abstract]

Leases

Note 9. Leases

We have entered into a lease for our corporate headquarters with a remaining lease term of 8 years. This lease includes both lease and nonlease 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 this lease does 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.

Information related to leases was as follows:

	Three Months Ended March 31, 2023			Three Months Ended March 31, 2022
Operating lease information:
Operating lease cost	$	101		$	100
Operating cash flows from operating leases		100			100
Net assets obtained in exchange for new operating lease liabilities		-			-
Weighted average remaining lease term in years		7.67			8.67
Weighted average discount rate		5.1	%		5.1	%

Future minimum annual lease payments are as follows:
 

Remainder of 2023	$	305
2024		413
2025		420
2026		427
2027		434
Thereafter		1,305
Total minimum lease payments	$	3,304
Less imputed interest		(588	)
Total operating lease liability	$	2,716

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Organization and Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Principles of Consolidation

(b) Principles of Consolidation

Our Condensed Consolidated Financial Statements include our accounts and those of our wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

On January 23, 2023, 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 Scott's Liquid Gold® brand, including the Wood Care and Floor Restore products. We have reflected the operations of the Scott's Liquid Gold® brand as discontinued operations for all periods presented, which was previously classified under our household products segment. See Note 3 for further information.

On December 15, 2022, 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 Prell® product line. We have reflected the operations of the Prell® product line as discontinued operations for all periods presented, which was previously classified under our health and beauty care segment. See Note 3 for further information.

Basis of Presentation

(c) Basis of Presentation

The unaudited Condensed Consolidated Statements of Operations, Condensed Consolidated Balance Sheets, and Condensed Consolidated Statements of Cash Flows included in this Report have been prepared by the Company. In our opinion, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at March 31, 2023 and results of operations and cash flows for all periods have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These Condensed Consolidated Financial Statements should be read in conjunction with our financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022. The results of operations for the period ended March 31, 2023 are not necessarily indicative of the operating results for the full year and are unaudited.

Use of Estimates

(d) Use of Estimates

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, operating lease right-of-use assets and operating lease liabilities, and stock-based compensation. Actual results could differ from our estimates.

Inventories Valuation and Reserves

(e) Inventories Valuation and Reserves

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 estimate an inventory reserve 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.

Our remaining raw materials balance is to be sold to contract manufacturing partners based on production demand.

Leases

(f) Leases

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.

Intangible Assets

(g) Intangible Assets

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 20 years. Amortization expense related to intangible assets is included in Operating Expenses on the Condensed 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. In the second quarter of 2022, our internal-use software was implemented for its intended use with an estimated useful life of five years. Amortization expense is recorded on a straight-line basis and is included in general and administrative expenses on the Condensed Consolidated Statements of Operations.

Financial Instruments

(h) Financial Instruments

Financial instruments which potentially subject us to concentrations of credit risk include cash, and accounts receivable. We maintain our cash balances in the form of bank demand deposits with financial institutions that we believe are creditworthy. Historically, we have maintained balances in various operating accounts in excess of federally insured limits. 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, receivables, other current assets, accounts payable, and accrued expenses approximate fair value due to the short-term nature of these financial instruments.

Income Taxes

(i) Income Taxes

Income taxes reflect the tax effects of transactions reported in the Condensed 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 Condensed Consolidated Statements of Operations or accrued on the Condensed Consolidated Balance Sheets.

Income tax expense during interim periods is based on applying an estimated annual effective income tax rate to year-to-date income, plus any significant unusual or infrequently occurring items which are recorded in the interim period. The provision for income taxes for the three months ended March 31, 2023 differs from the amount that would be provided by applying the statutory U.S. federal income tax rate of 21% to pre-tax income primarily due to valuation allowance. The effective tax rate for the three months ended March 31, 2023 and 2022 was -0.9% and 0.0% respectively.

The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating income for the year, and permanent differences. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is obtained, additional information becomes known or as the tax environment changes.

In assessing the need for a valuation allowance, management must determine that there will be sufficient taxable income to realize deferred tax assets. Based upon the historical and anticipated future losses, management has determined that the deferred tax assets do not meet the more likely than not threshold for realizability. Accordingly, a valuation allowance has been recorded against the Company’s net deferred tax assets as of March 31, 2023, and December 31, 2022.

Revenue Recognition

(j) Revenue Recognition

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 both 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.

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 were as follows:

	March 31, 2023		December 31, 2022
Trade promotions	$	259	$	361
Allowance for doubtful accounts		59		59
	$	318	$	420

Advertising Costs

(k) Advertising Costs

We expense advertising costs as incurred.

Stock-based Compensation

(l) 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 RSU 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 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.

Operating Costs and Expenses Classification

(m) Operating Costs and Expenses Classification

Cost of sales includes costs associated with the purchase of goods from our third-party manufacturing partners, which include labor, materials, and other expenses associated with the manufacturing of our products, freight-in, purchasing and receiving, quality control, repairs, maintenance, and other indirect costs. We classify freight-out as selling expenses. Other selling expenses consist primarily of costs for warehousing and distribution, sales and sales support personnel, brokerage commissions, customer compliance fines, and promotional costs. Freight-out costs included in selling expenses totaled $425 and $527 for the three months ended March 31, 2023 and 2022, 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.

Supplier Finance Programs

(n) Supplier Finance Programs

During 2022, we entered into an agreement with a third-party financial institution and and agreement with an insurance agency which allows us to obtain extended payment terms for our insurance policies. The insurance policies can be canceled by the Company at any time with 10 days’ notice. The financial institution may cancel this agreement after providing 10 days’ notice if the Company does not pay any installment payment according to the terms of the agreement. We do not provide any forms of guarantees under these agreements. Payments of our obligations are included in cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows. Outstanding confirmed amounts are $145 and $217 as of March 31, 2023 and December 31, 2022, respectively, which will be recognized on the Condensed Consolidated Financial Statements as payments are due.

Recently Issued Accounting Standards

(o) Recently Issued Accounting Standards

In September 2022, the FASB issued Accounting Standards Update ("ASU)" No. 2022-04, "Liabilities-Supplier Finance Programs (Subtopic 405-50), Disclosure of Supplier Finance Program Obligations." This guidance requires annual and interim disclosures for entities that use supplier finance programs in connection with the purchase of goods and services. These amendments are effective for fiscal years beginning after December 15, 2022, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. We adopted this ASU as of January 1, 2023 on a prospective basis. As the guidance requires only additional disclosures, there were no effects of this standard on our financial position, results of operations and cash flows. See disclosure contained in Note 1(n).

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Organization and Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Summary of Customer Allowances for Trade Promotions and Allowance for Doubtful Accounts

Customer allowances for trade promotions and allowance for doubtful accounts were as follows:

	March 31, 2023		December 31, 2022
Trade promotions	$	259	$	361
Allowance for doubtful accounts		59		59
	$	318	$	420

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Discontinued Operations (Tables)

3 Months Ended

Mar. 31, 2023

Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]

Summary of Financial Information Related to 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 Condensed Consolidated Statements of Operations for the three months ended March 31:

	Three Months Ended March 31, 2023
	Prell®		Scott's Liquid Gold®			Total
Net sales	$	-	$	187		$	187
Cost of sales		-		95		$	95
Gross profit		-		92			92
Operating expenses:
Selling		-		28			28
General and administrative		-		22			22
Operating income from discontinued operations		-		42			42
Interest expense		-		(18	)		(18	)
Gain on sale of discontinued operations		-		787			787
Income from discontinued operations	$	-	$	811		$	811

	Three Months Ended March 31, 2022
	Prell®			Scott's Liquid Gold®			Total
Net sales	$	838		$	1,223		$	2,061
Cost of sales		496			474		$	970
Gross profit		342			749			1,091
Operating expenses:
Selling		290			289			579
Intangible asset amortization		12			-			12
Operating income from discontinued operations		40			460			500
Interest expense		(14	)		(54	)		(68	)
Income from discontinued operations	$	26		$	406		$	432

There were no capital expenditures or significant operating and investing noncash items related to discontinued operations during the years ended December 31, 2022 and 2021, respectively.

Reconciliation of the Major Classes of Assets and Liabilities of the Discontinued Operations to Amounts Presented Separately in the Condensed Consolidated Balance Sheets as of:
 

	March 31, 2023		December 31, 2022
Assets
Current assets:
Inventories	$	-	$	1,235
Total assets	$	-	$	1,235

All assets in the above table are related to the discontinued operations of Scott's Liquid Gold®. There were no assets related to Prell® as of March 31, 2023 and December 31, 2022, respectively.

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

Reconciliation of the Weighted Average Number of Common Shares Outstanding

A reconciliation of the weighted average number of common shares outstanding (in thousands) is as follows. The dilutive effect of stock options and RSUs are excluded for periods in which the impact is anti-dilutive and when the Company has a net loss because the impact is also anti-dilutive.

	Three Months Ended March 31,
	2023		2022
Common shares outstanding, beginning of the period		12,797		12,727
Weighted average common shares issued		-		12
Weighted average number of common shares outstanding		12,797		12,739
Dilutive effect of common share equivalents		-		-
Diluted weighted average number of common shares outstanding		12,797		12,739

Common Stock Equivalents Excluded From the Calculation of Earnings Per Share

Common stock equivalents (in thousands) that have been excluded from the calculation of earnings per share because they would have been anti-dilutive:
 

	Three Months Ended March 31,
	2023		2022
Stock options		138		213
Restricted stock units		38		63

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Segment Information (Tables)

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Information on Segments

The following provides information on our segments for the three months ended March 31:

	Three Months Ended March 31, 2023
	Household Products			Health and Beauty Care Products		Total
Net sales	$	1,975		$	1,273	$	3,248
(Loss) income from operations		(386	)		92		(294	)
Depreciation and amortization		130			47		177

	Three Months Ended March 31, 2022
	Household Products			Health and Beauty Care Products			Total
Net sales	$	1,987		$	1,742		$	3,729
Loss from operations		(793	)		(8	)		(801	)
Capital and intangible asset expenditures		113			-			113
Depreciation and amortization		297			155			452

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Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2023

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets

Intangible assets, which are comprised of our capitalized costs of software obtained for internal-use or are related to our acquisition of our Denorex®, Zincon®, and BIZ® brands, consisted of the following:

	As of March 31, 2023						As of December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Intangible assets:
Trade names	$	309	$	101	$	208	$	309	$	97	$	212
Formulas and batching processes		412		290		122		412		283		129
Internal-use software		898		150		748		898		105		793
Non-compete agreement		33		30		3		33		30		3
	$	1,652	$	571	$	1,081	$	1,652	$	515	$	1,137

Schedule of Estimated Amortization Expense

Estimated amortization expense for 2023 and subsequent years is as follows:
 

Remainder of 2023	$	169
2024		225
2025		224
2026		215
2027		104
Thereafter		144
Total	$	1,081

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Leases (Tables)

3 Months Ended

Mar. 31, 2023

Leases [Abstract]

Schedule of Information Related to Leases

Information related to leases was as follows:

	Three Months Ended March 31, 2023			Three Months Ended March 31, 2022
Operating lease information:
Operating lease cost	$	101		$	100
Operating cash flows from operating leases		100			100
Net assets obtained in exchange for new operating lease liabilities		-			-
Weighted average remaining lease term in years		7.67			8.67
Weighted average discount rate		5.1	%		5.1	%

Schedule of Future Minimum Annual Lease Payments

Future minimum annual lease payments are as follows:
 

Remainder of 2023	$	305
2024		413
2025		420
2026		427
2027		434
Thereafter		1,305
Total minimum lease payments	$	3,304
Less imputed interest		(588	)
Total operating lease liability	$	2,716

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Organization and Summary of Significant Accounting Policies - Additional Information (Details)	3 Months Ended
	Mar. 31, 2023 Segment
Accounting Policies [Abstract]
Number of business segment	2

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Organization and Summary of Significant Accounting Policies - Additional Information 1 (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Schedule Of Organization And Presentation Of Financial Statements [Line Items]
Significant financial instruments with off-balance sheet risk	$ 0
Interest and penalties recognized in condensed consolidated statements of income	0
Accrued interest or penalties related to uncertain tax positions	$ 0
U.S. federal income tax rate	21.00%	21.00%
Effective income tax rate	(0.90%)	0.00%
Minimum
Schedule Of Organization And Presentation Of Financial Statements [Line Items]
Useful lives of intangible assets	5 years
Maximum
Schedule Of Organization And Presentation Of Financial Statements [Line Items]
Useful lives of intangible assets	20 years

XML

Organization and Summary of Significant Accounting Policies - Summary of Customer Allowances for Trade Promotions and Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Accounting Policies [Abstract]
Trade promotions	$ 259	$ 361
Allowance for doubtful accounts	59	59
Trade promotions and allowance for doubtful accounts	$ 318	$ 420

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Organization and Summary of Significant Accounting Policies - Additional Information 2 (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Schedule Of Organization And Presentation Of Financial Statements [Line Items]
Payment for obligation outstanding amount	$ 145		$ 217
Selling Expenses
Schedule Of Organization And Presentation Of Financial Statements [Line Items]
Freight-out costs	$ 425	$ 527

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Organization and Summary of Significant Accounting Policies - Additional Information 3 (Details) - ASU 2020-04	Mar. 31, 2023
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Change in Accounting Principle, Accounting Standards Update, Adopted [true false]	true
Change in Accounting Principle, Accounting Standards Update, Adoption Date	Jan. 01, 2023
Change in Accounting Principle, Accounting Standards Update, Immaterial Effect [true false]	true

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Going Concern - Additional Information (Details)		3 Months Ended
	Nov. 09, 2021	Mar. 31, 2023
Revolving Credit Facility | La Plata Capital, LLC | Loan Agreement
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Credit facility, terminate date	Nov. 09, 2023	Nov. 09, 2023

XML

Discontinued Operations - Additional Information (Details) - USD ($)			12 Months Ended
	Jan. 23, 2023	Dec. 15, 2022	Dec. 31, 2022	Dec. 31, 2021
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Total consideration paid	$ 800,000
Inventories	$ 1,136,000
Royalty percentage	2.00%
Capital expenditure discontinued operations			$ 0	$ 0
Royalty fees payment period	2 years
Disposal of Product Line
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Inventories			1,235,000
Disposal group, including discontinued operation, assets			$ 1,235,000
Prell | Disposal of Product Line
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Total consideration paid		$ 150,000
Inventories		$ 330,000
Royalty percentage		3.00%

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Discontinued Operations - Summary of Financial Information Constituting Pretax Loss to After-Tax Loss of Discontinued Operations (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Operating expenses:
Income from discontinued operations	$ 811	$ 432
Disposal of Product Line
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Net sales	187	2,061
Cost of sales	95	970
Gross profit	92	1,091
Operating expenses:
Selling	28	579
General and administrative	22
Intangible asset amortization		12
Operating income from discontinued operations	42	500
Interest expense	(18)	(68)
Gain on sale of discontinued operations	787
Income from discontinued operations	811	432
Prell | Disposal of Product Line
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Net sales		838
Cost of sales		496
Gross profit		342
Operating expenses:
Selling		290
Intangible asset amortization		12
Operating income from discontinued operations		40
Interest expense		(14)
Income from discontinued operations		26
Scott's Liquid Gold | Disposal of Product Line
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Net sales	187	1,223
Cost of sales	95	474
Gross profit	92	749
Operating expenses:
Selling	28	289
General and administrative	22
Operating income from discontinued operations	42	460
Interest expense	(18)	(54)
Gain on sale of discontinued operations	787
Income from discontinued operations	$ 811	$ 406

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Discontinued Operations - Summary of Financial Information Constituting Major Classes of Assets and Liabilities of Discontinued Operations (Details) - USD ($) $ in Thousands	Jan. 23, 2023	Dec. 31, 2022
Current assets:
Inventories	$ 1,136
Disposal of Product Line
Current assets:
Inventories		$ 1,235
Total assets		$ 1,235

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Stock-Based Compensation - Additional Information (Details) - USD ($)			3 Months Ended
	Mar. 02, 2022	Jan. 18, 2022	Mar. 31, 2023	Mar. 31, 2022
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation			$ 7,000	$ 63,000
Tax benefit from recording non-cash expense relates to options granted to employees			$ 0
2022 Individual Employee Grant | Anniversary Grant Date
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting percentage			0.66%
Restricted Stock Units (RSUs)
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation			$ 7,000	56,000
Unrecognized compensation costs related to non-vested stock options			$ 64,000
Period over which compensation costs related to non-vested stock options recognize			1 year
Restricted Stock Units (RSUs) | 2022 Individual Employee Grant
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of restricted stock units granted		25
Restricted stock shares granted in period granted date fair value		$ 10,000
Vesting percentage		0.33%
Vesting description			The 2022 Individual Employee Grant vested one-third on the initial grant date, and the remaining two-thirds will vest on each anniversary of the grant date.
Restricted Stock Units (RSUs) | 2022 Individual Executive Grant | Anniversary Grant Date
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of restricted stock units granted	15
Restricted stock shares granted in period granted date fair value	$ 18,000
Stock Options
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation			$ 0	$ 7,000

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Earnings Per Share - Reconciliation of the Weighted Average Number of Common Shares Outstanding (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Earnings Per Share [Abstract]
Beginning Balance, Shares	12,797	12,727
Weighted average common shares issued		12
Weighted average number of common shares outstanding	12,797	12,739
Diluted weighted average number of common shares outstanding	12,797	12,739

XML

Earnings Per Share - Common Stock Equivalents Excluded From the Calculation of Earnings Per Share (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Stock Options
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from calculation of earnings per share	138	213
Restricted Stock Units
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from calculation of earnings per share	38	63

XML

Segment Information - Additional Information (Details)	3 Months Ended
	Mar. 31, 2023 Segment
Segment Reporting [Abstract]
Number of business segment	2

XML

Segment Information - Information on Segments (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Segment Reporting Information [Line Items]
Net sales	$ 3,248	$ 3,729
(Loss) income from operations	(294)	(801)
Capital and intangible asset expenditures		113
Depreciation and amortization	177	452
Household Products
Segment Reporting Information [Line Items]
Net sales	1,975	1,987
(Loss) income from operations	(386)	(793)
Capital and intangible asset expenditures		113
Depreciation and amortization	130	297
Health and Beauty Care Products
Segment Reporting Information [Line Items]
Net sales	1,273	1,742
(Loss) income from operations	92	(8)
Depreciation and amortization	$ 47	$ 155

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Intangible Assets - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 1,652	$ 1,652
Accumulated Amortization	571	515
Net Carrying Value	1,081	1,137
Trade Names
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	309	309
Accumulated Amortization	101	97
Net Carrying Value	208	212
Formulas and Batching Processes
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	412	412
Accumulated Amortization	290	283
Net Carrying Value	122	129
Internal-use Software
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	898	898
Accumulated Amortization	150	105
Net Carrying Value	748	793
Non-compete Agreement
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	33	33
Accumulated Amortization	30	30
Net Carrying Value	$ 3	$ 3

XML

Intangible Assets - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Goodwill And Intangible Assets Disclosure [Abstract]
Amortization expense of intangible assets	$ 56	$ 83

XML

Intangible Assets - Schedule of Estimated Amortization Expense (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Goodwill And Intangible Assets Disclosure [Abstract]
Remainder of 2023	$ 169
2024	225
2025	224
2026	215
2027	104
Thereafter	144
Total	$ 1,081

XML

Long-Term Debt and Line-of-Credit - Additional Information (Details) - USD ($) $ in Thousands					3 Months Ended		12 Months Ended
	Jan. 23, 2023	Aug. 10, 2022	Nov. 09, 2021	Jul. 01, 2020	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Debt Instrument [Line Items]
Repayments of term loan					$ 30	$ 1,250
UMB Bank, N.A | Loan Agreement | Term Loan
Debt Instrument [Line Items]
Term loan amount				$ 3,000
Term loan, frequency of commitment fee payment				monthly
Term loan, payment term				3 years
UMB Bank, N.A | Consent and Seventh Amendment to Loan and Security Agreement | Revolving Credit Facility
Debt Instrument [Line Items]
Credit facility, terminate date	Feb. 27, 2023
Unamortized loan costs					0		$ 100
Amortization of loan costs					100	50
Expense as a result of the termination of the UMB Loan Agreement					83
UMB Bank, N.A | Maximum | Loan Agreement | Revolving Credit Facility
Debt Instrument [Line Items]
Available borrowing capacity amount		$ 4,000
UMB Bank, N.A | Maximum | Consent and Seventh Amendment to Loan and Security Agreement | Revolving Credit Facility
Debt Instrument [Line Items]
Available borrowing capacity amount	$ 250
La Plata Capital, LLC
Debt Instrument [Line Items]
Debt outstanding					1,220
Unamortized loan costs					15		20
Amortization of loan costs					$ 5		$ 5
La Plata Capital, LLC | Loan Agreement | Revolving Credit Facility
Debt Instrument [Line Items]
Credit facility, terminate date			Nov. 09, 2023		Nov. 09, 2023
La Plata Capital, LLC | Loan Agreement | Term Loan
Debt Instrument [Line Items]
Term loan amount			$ 2,000
Repayments of term loan						$ 1,000
Debt outstanding effective interest rate			14.00%
Term loan, maturity date			Nov. 09, 2021
Term loan, monthly principal payments			$ 30
Term loan, payment terms					Interest-only payments are required on a monthly basis through June 30, 2023, with monthly principal and interest payments of $30K beginning on July 1, 2023. All remaining unpaid principal and interest are fully due on November 9, 2023
La Plata Capital, LLC | Loan Agreement | Term Loan Two
Debt Instrument [Line Items]
Term loan amount			$ 250
Debt outstanding effective interest rate			15.00%
Floor Rate | UMB Bank, N.A | Loan Agreement | Revolving Credit Facility
Debt Instrument [Line Items]
Debt instrument, variable interest rate		7.75%
SOFR Rate | UMB Bank, N.A | Loan Agreement | Revolving Credit Facility
Debt Instrument [Line Items]
Debt instrument, variable interest rate		6.83%
Debt Instrument, Maturity of Variable interest rate					one-month term SOFR rate

XML

Leases - Additional Information (Details)	Mar. 31, 2023
Maximum
Lessee Lease Description [Line Items]
Remaining lease terms	8 years

XML

Leases - Schedule of Information Related to Leases (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Operating lease information:
Operating lease cost	$ 101	$ 100
Operating cash flows from operating leases	$ 100	$ 100
Weighted average remaining lease term in years	7 years 8 months 1 day	8 years 8 months 1 day
Weighted average discount rate	5.10%	5.10%

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Leases - Schedule of Future Minimum Annual Lease Payments (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Leases [Abstract]
Remainder of 2023	$ 305
2024	413
2025	420
2026	427
2027	434
Thereafter	1,305
Total minimum lease payments	3,304
Less imputed interest	(588)
Total operating lease liability	$ 2,716