Note 2 - Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Significant Accounting Policies [Text Block]

Note 2 – Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Except as described herein, there have been no changes in the Company’s significant accounting policies as described in Note 2, Summary of Significant Accounting Policies, within the “Notes to Consolidated Financial Statements” accompanying the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and as required by Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the Securities and Exchange Commission (“SEC”) on April 16, 2021. These interim condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of the Company’s financial position and results of operations for the periods presented. All amounts and disclosures set forth in this Quarterly Report on Form 10-Q reflect adoption of these changes.

Principles of Consolidation

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

Use of Estimates

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

Contract Liabilities

Our contract liabilities consist of customer deposits and contractual guaranteed returns. Net contract liabilities are recorded in accrued expenses and other current liabilities and consisted of the following:

	June 30, 2021		December 31, 2020
Contract Liabilities - Customer Deposits	$	3,519	$	3,874
Contract Liabilities - Guaranteed Returns		25		60
	$	3,544	$	3,934

Disaggregation of Revenue

Revenue is disaggregated from contracts with customers by goods or services as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. See details in the tables below.

	Three Months Ended June 30, 2021		Three Months Ended June 30, 2020
Product Sales	$	17,914	$	12,144
Fulfillment Services		195		68
	$	18,109	$	12,212

	Six Months Ended June 30, 2021		Six Months Ended June 30, 2020
Product Sales	$	37,094	$	28,526
Fulfillment Services		476		115
	$	37,570	$	28,641

Fair Value of Financial Instruments

We apply the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 – inputs are quoted prices in active markets for identical assets that the reporting entity has the ability to access at the measurement date.

Level 2 – inputs are other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly.

Level 3 – inputs are unobservable inputs for the asset that are supported by little or no market activity and that are significant to the fair value of the underlying asset or liability.

The Company did not have any financial instruments that are measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020.

Accounts Receivable and Allowances

We grant credit to customers and generally do not require collateral or other security. We perform credit evaluations of our customers and provide for expected claims related to promotional items, customer discounts, shipping shortages, damages, and doubtful accounts based upon historical bad debt and claims experience. As of June 30, 2021, total allowances amounted to $1,476, of which $622 was related to doubtful accounts receivable. As of December 31, 2020, total allowances amounted to $2,101, of which $1,127 was related to doubtful accounts receivable.

Net Loss per Common Share

Basic net loss per common share (“Basic EPS”) is computed by dividing net loss by the weighted average number of common shares outstanding. Diluted net loss per common share (“Diluted EPS”) is computed by dividing net loss by the sum of the weighted average number of common shares outstanding and the dilutive potential common shares then outstanding. Potential dilutive common share equivalents consist of total shares issuable upon the exercise of outstanding stock options and warrants to acquire common stock using the treasury stock method and the average market price per share during the period. 

When calculating diluted loss per share, if the effects are dilutive, companies are required to add back to net loss the effects of the change in derivative liabilities related to warrants. Additionally, if the effects of the change in derivative liabilities are added back to net loss, companies are required to include the warrants outstanding related to the derivative liability in the calculation of the weighted average dilutive shares. 

The common shares used in the computation of our basic and diluted net loss per share are reconciled as follows: 

	Three Months Ended June 30,					Six Months Ended June 30,
	2021		2020			2021		2020
Numerator:
Net income (loss)	$	1,082	$	(1,362	)	$	1,465	$	(6,526	)
Effect of dilutive securities on net income (loss):
Common stock warrants		-		(886	)		-		-
Total net income (loss) for purpose of calculating diluted net income (loss) per common share	$	1,082	$	(2,248	)	$	1,465	$	(6,526	)
Number of shares used in per common share calculations:
Total shares for purpose of calculating basic net income (loss) per common share		259,092,833		257,210,800			259,606,931		256,985,474
Weighted-average effect of dilutive securities:
Common stock warrants		-		1,024,995			-		-
Total shares for purpose of calculating diluted net income (loss) per common share		259,092,833		258,235,795			259,606,931		256,985,474
Net income (loss) per common share:
Basic	$	0.01	$	(0.01	)	$	0.01	$	(0.03	)
Diluted	$	0.01	$	(0.01	)	$	0.01	$	(0.03	)

Significant Concentration of Credit Risk

Sales to our top three customers aggregated to approximately 34% and 25% of total sales for the three months ended June 30, 2021 and 2020, respectively and 31% and 26% of total sales for the six months ended June 30, 2021 and 2020, respectively. Sales to one of those customers were approximately 15% and 5% of total sales for the three months ended June 30, 2021 and 2020, respectively, and 5% and 10% of total sales for the six months ended June 30, 2021 and 2020, respectively. Accounts receivable from the top three customers were approximately 43% and 21% of total accounts receivable as of June 30, 2021 and December 31, 2020, respectively.  A single customer represents 2% and 10% of total accounts receivable as of June 30, 2021 and December 31, 2020, respectively, and this customer is a related party through a director who sits on both the Company’s board and that of the customer.

Leases

The Company accounts for leases in accordance with Accounting Standards Codification ("ASC") 842. The Company reviews all contracts and determines if the arrangement is or contains a lease, at inception. Operating leases are included in right-of-use (“ROU”) assets, current lease liabilities and long-term lease liabilities on the condensed consolidated balance sheets. The Company does not have any finance leases. 

Operating lease ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The Company uses its estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The operating lease ROU asset also includes any upfront lease payments made and excludes lease incentives and initial direct costs incurred. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases with a term of 12 months or less are not recorded on the balance sheet. The Company’s lease agreements do not contain any residual value guarantees.

New and Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments- Credit losses (Topic 326): Measurement of Credit losses on Financial Instruments. ASU 2016-13 requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Our status as a smaller reporting company allows us to defer adoption until the annual period, including interim periods within the annual period, beginning January 1, 2023. Management is currently evaluating the requirements of this guidance and has not yet determined the impact of the adoption on the Company's financial position or results from operations.