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 June 30, 2019    

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.)
4880 Havana Street, Suite 400, Denver, CO	80239
(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 August 6, 2019, the registrant had 12,459,463shares 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:

• 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 dependence on the efforts of our exclusive distributor in the PRC to market and sell our products there;

• continuation of our distributorship agreement for Montagne Jeunesse skin care products and Batiste Dry Shampoos;

• 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;

• the availability of necessary raw materials and potential increases in the prices of these raw materials;

• 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, 2018 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	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
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 Income (Unaudited)

(in thousands, except per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net sales	$	6,382		$	10,807		$	13,187		$	18,235
Cost of sales		4,442			5,429			8,642			9,837
Gross Profit		1,940			5,378			4,545			8,398
Operating expenses:
Advertising		202			345			386			882
Selling		1,354			1,841			3,012			3,473
General and administrative		1,158			1,431			2,381			2,525
Total operating expenses		2,714			3,617			5,779			6,880
(Loss) income from operations		(774	)		1,761			(1,234	)		1,518
Interest income		30			-			61			-
Interest expense		(4	)		(48	)		(9	)		(72	)
Gain on sale of equipment		110			-			110			-
(Loss) income before income taxes		(638	)		1,713			(1,072	)		1,446
Income tax (expense) benefit		(78	)		(429	)		26			(359	)
Net (loss) income	$	(716	)	$	1,284		$	(1,046	)	$	1,087
Net (loss) income per common share
Basic	$	(0.06	)	$	0.11		$	(0.08	)	$	0.09
Diluted	$	(0.06	)	$	0.10		$	(0.08	)	$	0.09
Weighted average shares outstanding
Basic		12,436			12,024			12,422			11,977
Diluted		12,436			12,549			12,422			12,578

See accompanying notes to these Condensed Consolidated Financial Statements (Unaudited).

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SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except par value amounts)

	June 30,		December 31,
	2019		2018
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	7,957	$	6,232
Accounts receivable, net		1,912		3,047
Inventories, net		6,451		7,817
Income taxes receivable		508		508
Prepaid expenses		350		546
Total current assets		17,178		18,150
Property and equipment, net		1,013		971
Deferred tax asset		264		234
Goodwill		1,521		1,521
Intangible assets, net		5,218		5,528
Operating lease right-of-use assets		2,531		-
Other assets		71		71
Total assets	$	27,796	$	26,475
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	1,603	$	1,800
Accrued expenses		488		593
Operating lease liabilities, current portion		928		-
Total current liabilities		3,019		2,393
Operating lease liabilities, net of current		1,616		-
Total liabilities		4,635		2,393
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 12,459 shares (2019) and 12,408 shares (2018)		1,246		1,241
Capital in excess of par		7,183		7,063
Retained earnings		14,732		15,778
Total shareholders’ equity		23,161		24,082
Total liabilities and shareholders’ equity	$	27,796	$	26,475

See accompanying notes to these Condensed Consolidated Financial Statements (Unaudited).

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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		Retained Earnings			Total
Balance, December 31, 2018		12,408	$	1,241	$	7,063	$	15,778		$	24,082
Stock-based compensation		-		-		42		-			42
Net loss		-		-		-		(330	)		(330	)
Balance, March 31, 2019		12,408	$	1,241	$	7,105	$	15,448		$	23,794
Stock-based compensation		-		-		42		-			42
Stock options exercised		51		5		36		-			41
Net loss		-		-		-		(716	)		(716	)
Balance, June 30, 2019		12,459	$	1,246	$	7,183	$	14,732		$	23,161
Balance, December 31, 2017		11,886	$	1,189	$	6,441	$	13,551		$	21,181
Stock-based compensation		-		-		60		-			60
Stock options exercised		138		14		74		-			88
Net loss		-		-		-		(196	)		(196	)
Balance, March 31, 2018		12,024	$	1,203	$	6,575	$	13,355		$	21,133
Stock-based compensation		-		-		61		-			61
Net income		-		-		-		1,284			1,284
Balance, June 30, 2018		12,024	$	1,203	$	6,636	$	14,639		$	22,478

See accompanying notes to these Condensed Consolidated Financial Statements (Unaudited).

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SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	Six Months Ended
	June 30,
	2019			2018
Cash flows from operating activities:
Net (loss) income	$	(1,046	)	$	1,087
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		369			433
Stock-based compensation		84			121
Deferred income taxes		(30	)		(115	)
Gain on sale of equipment		(110	)		-
Change in operating assets and liabilities:
Accounts receivable		1,135			(908	)
Inventories		1,366			1,056
Prepaid expenses and other assets		196			(80	)
Income taxes receivable		-			(570	)
Accounts payable and accrued expenses		(289	)		758
Contract liability		-			259
Total adjustments to net income (loss)		2,721			954
Net cash provided by operating activities		1,675			2,041
Cash flows from investing activities:
Purchase of property and equipment		(101	)		(40	)
Proceeds from sale of equipment		110			-
Net cash provided (used) by investing activities		9			(40	)
Cash flows from financing activities:
Repayments of long-term debt		-			(1,200	)
Proceeds from exercise of stock options		41			89
Net cash provided (used) by financing activities		41			(1,111	)
Net increase in cash and cash equivalents		1,725			890
Cash and cash equivalents, beginning of period		6,232			4,114
Cash and cash equivalents, end of period	$	7,957		$	5,004
Supplemental disclosures:
Cash paid during the period for interest	$	9		$	34
Cash paid during the period for income taxes	$	-		$	1,044

See accompanying notes to these Condensed Consolidated Financial Statements (Unaudited).

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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, manufacture, market and sell quality household and skin and hair care products. We are also a distributor in the United States of skin and hair care products manufactured by two other companies. Our business is comprised of two segments: household products and skin and hair 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.

(c) Basis of Presentation

The unaudited Condensed Consolidated Statements of Income, 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 June 30, 2019 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, 2018. The results of operations for the period ended June 30, 2019 are not necessarily indicative of the operating results for the full year.

Due to changes in our business as we acquired and began manufacturing new products in recent periods, the Company implemented a change in the allocation of certain operational and administrative expenses between our two operating segments to more accurately reflect our operational activity. For comparison purposes, the Company presented 2018 results to reflect the revised allocation of these costs. This segment reporting change has no impact on our operating results. See Note 4 “Segment Information,” of the Notes to the Condensed Consolidated Financial Statements for further information.

(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, and stock-based compensation. Actual results could differ from our estimates.

(e) Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less at the date of acquisition to be cash equivalents.

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(f)InventoriesValuation 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, which is generally not material to our financial statements, 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.

Inventories were comprised of the following at:

	June 30, 2019			December 31, 2018
Finished goods	$	4,161		$	5,448
Raw materials		2,420			2,414
Inventory reserve for obsolescence		(130	)		(45	)
	$	6,451		$	7,817

(g) Property and Equipment

Property and equipment are recorded at historical cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets ranging from three to 20 years. Production equipment and production support equipment are estimated to have useful lives of 15 to 20 years and three to 10 years, respectively. Office furniture and office machines are estimated to have useful lives of 10 to 20 years and three to five years, respectively. Maintenance and repairs are expensed as incurred. Improvements that extend the useful lives of the asset or provide improved efficiency are capitalized.

(h) 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.

(i) Intangible Assets and Goodwill

Intangible assets consist of customer relationships, trade names, formulas, batching processes, and a non-compete agreement.  The fair value of the intangible assets is amortized over their estimated useful lives and range from a period of five to 15 years. Goodwill consists of the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired.

Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests, and in certain circumstances these assets are written down to fair value if impaired.

(j) Financial Instruments

Financial instruments which potentially subject us to concentrations of credit risk include cash and cash equivalents and accounts receivable. We maintain our cash balances in the form of bank demand deposits with financial institutions that we believe are creditworthy. During the six months ended June 30, 2019, 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.

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The recorded amounts for cash and cash equivalents, receivables, other current assets, accounts payable, and accrued expensesapproximate fair value due to the short-term nature of these financial instruments.

(k) 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 Income or accrued on the Condensed Consolidated Balance Sheets.

The effective tax rate for the six months ended June 30, 2019 and 2018 was 2.4% and 24.8% respectively, which can differ from the statutory income tax rate due to permanent book-to-tax differences or if the year-to-date pre-tax loss exceeds the amount of the anticipated full-year pre-tax loss.

(l) 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. Adjustments to the costs of customer allowances and promotional programs for consumers in subsequent periods are generally not material, as our promotions are typically of short duration, thereby reducing the uncertainty inherent in such estimates.

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 information from customers and assessments of historical trends. 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.

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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.

At June 30, 2019 and December 31, 2018 approximately $1,269 and $1,184, respectively, had been reserved as a reduction of accounts receivable. Trade promotions to our customers and incentives such as coupons to our consumers are deducted from gross sales and totaled $1,070 and $672 for the three months ended June 30, 2019 and 2018, respectively, and totaled $1,784 and $1,272 for the six months ended June 30, 2019 and 2018, respectively.

(m) Advertising Costs

We expense advertising costs as incurred.

(n) 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 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.

(o) Operating Costs and Expenses Classification

Cost of sales includes costs associated with manufacturing and distribution including labor, materials, freight-in, purchasing and receiving, quality control, repairs, maintenance, and other indirect costs, as well as warehousing and distribution costs. We classify freight-out as selling expenses. Other selling expenses consist primarily of costs for sales and sales support personnel, brokerage commissions, and promotional costs. Freight-out costs included in selling expenses totaled $555 and $539 for the three months ended June 30, 2019 and 2018, respectively, and totaled $1,221 and $1,160 for the six months ended June 30, 2019 and 2018, 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.

(p) Recently Issued Accounting Standards

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments —Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). This guidance, as amended by subsequent ASUs on the topic, requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. This guidance is effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. ASU 2016-13 is not expected to have a material impact on our financial statements.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). The new guidance modifies disclosure requirements related to fair value measurement.  The amendments in ASU 2018-13 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  Implementation on a prospective or retrospective basis varies by specific disclosure requirement.  Early adoption is permitted. The standard also allows for early adoption of any removed or modified disclosures upon issuance of this ASU while delaying adoption of the additional disclosures until their effective date. ASU 2018-13 is not expected to have a material impact on our financial statements.

(q) Recently Adopted Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). This guidance, as amended by subsequent ASUs on the topic, requires a lessee to

8

record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with such classification affecting the pattern of expense recognition in the income statement.

Effective January 1, 2019, we adopted the guidance and elected the option not to restate comparative periods. We also elected the package of practical expedients within the standard which permits us not to reassess prior conclusions about lease identification, lease classification, and initial direct costs. Additionally, we elected not to separate lease and non-lease components for all leases. The adoption of the new standard resulted in the recognition of operating lease liabilities on January 1, 2019 of approximately$141, with corresponding right of use assets, and no material cumulative effect adjustment to our Consolidated Balance Sheets, and $2,862 of net assets obtained in exchange for new operating lease liabilities during the six months ended June 30, 2019. Adoption of the new standard did not have a material impact on our Consolidated Statements of Income or Cash Flows.

Note 2. Stock-Based Compensation

During the six months ended June 30, 2019, we did not grant any options to acquire shares of our common stock.

During the six months ended June 30, 2018, we granted options to acquire: (i) 40 thousand shares of our common stock to employees at prices ranging between $2.17 to $3.35 per share; (ii) 105 thousand shares of our common stock to executive officers at prices ranging between $2.09 to $2.17 per share; and (iii) 90 thousand shares of our common stock to non-employee board members at a price of $2.17 per share.

The weighted average fair market value of the options granted during the six months ended June 30, 2018 were estimated on the date of grant, using a Black-Scholes option pricing model with the following assumptions:

	June 30, 2018
Expected life of options (using the “simplified” method)	4 years
Average risk-free interest rate	2.63%
Average expected volatility of stock	69%
Expected dividend rate	None
Fair value of options granted	$	246

Compensation cost related to stock options recognized in operating results (included in general and administrative expenses) totaled $84 and $121 in the six months ended June 30, 2019 and 2018, respectively. Approximately $239 of total unrecognized compensation costs related to non-vested stock options is expected to be recognized over the next three years, depending on the vesting provisions of the options. There was no tax benefit from recording the non-cash expense as it relates to the options granted to employees, as these were qualified stock options which are not normally tax deductible.

Note 3. 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:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Common shares outstanding, beginning of the period		12,408		12,024		12,408		11,886
Weighted average common shares issued		28		-		14		91
Weighted average number of common shares outstanding		12,436		12,024		12,422		11,977
Dilutive effect of common share equivalents		-		525		-		601
Diluted weighted average number of common shares outstanding		12,436		12,549		12,422		12,578

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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 June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Stock options		693		252		693		252

Note 4. Segment Information

We operate in two different segments: household products and skin and hair 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.

Due to changes in our business as we acquired and began to manufacture additional products in recent periods under our Skin and Hair Care Products segment, the Company implemented a change in the allocation of certain operational and administrative expenses to more accurately reflect our operational activity. For comparison purposes, the Company presented 2018 results to reflect the revised allocation of these costs.

The following provides information on our segments for the three and six months ended June 30:

	Three Months Ended June 30, 2019
	Household Products		Skin and Hair Care Products			Total
Net sales	$	1,233	$	5,149		$	6,382
Income (loss) from operations		15		(789	)		(774	)
Depreciation and amortization		20		163			183

	Three Months Ended June 30, 2018
	Household Products			Skin and Hair Care Products		Total
Net sales	$	1,364		$	9,443	$	10,807
(Loss) Income from operations		(66	)		1,827		1,761
Capital and intangible asset expenditures		18			22		40
Depreciation and amortization		32			195		227

	Six Months Ended June 30, 2019
	Household Products			Skin and Hair Care Products			Total
Net sales	$	2,437		$	10,750		$	13,187
Loss from operations		(155	)		(1,079	)		(1,234	)
Capital and intangible asset expenditures		101			-			101
Depreciation and amortization		42			327			369

	Six Months Ended June 30, 2018
	Household Products			Skin and Hair Care Products		Total
Net sales	$	2,716		$	15,519	$	18,235
(Loss) Income from operations		(174	)		1,692		1,518
Capital and intangible asset expenditures		18			22		40
Depreciation and amortization		68			365		433

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Note 5. Goodwill and Intangible Assets

Goodwill and intangible assets, which are related to our acquisition of our Prell^® and Denorex^® brands, consisted of the following:

	As of June 30, 2019						As of December 31, 2018
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Intangible assets:
Customer relationships	$	4,022	$	1,207	$	2,815	$	4,022	$	1,005	$	3,017
Trade names		2,362		472		1,890		2,362		393		1,969
Formulas and batching processes		669		167		502		669		140		529
Non-compete agreement		26		15		11		26		13		13
		7,079		1,861		5,218		7,079		1,551		5,528
Goodwill						1,521						1,521
Total intangible assets					$	6,739					$	7,049

Amortization expense for the three months ended June 30, 2019 and 2018 was $155, respectively. Amortization expense for the six months ended June 30, 2019 and 2018 was $310, respectively.

Estimated amortization expense for 2019 and subsequent years is as follows:

2019 (remaining)	$	310
2020		620
2021		618
2022		616
2023		616
Thereafter		2,438
Total	$	5,218

Note 6. Long-Term Debt and Line-of-Credit

On June 30, 2016, the Company and Neoteric Cosmetics, Inc., a wholly-owned subsidiary of the Company, collectively as borrowers, entered into a credit agreement (as amended, the “Credit Agreement”) with JPMorgan Chase Bank, N.A. (“Chase”), as lender, pursuant to which Chase provided a term loan and a revolving credit facility that were related to our acquisition of the Prell^®, Denorex^®, and Zincon^® brands.

In June 2018, we paid the remaining principal balance of the term loan in the amount of $1,000. There were no additional costs incurred associated with the prepayment of the term loan.

The revolving credit facility amount is $4,000 with interest of: (i) the LIBO Rate + 2.25%; or (ii) the Prime Rate, with a floor of the one month LIBO Rate + 2.25%, and will terminate on June 30, 2021 or any earlier date on which the revolving commitment is otherwise terminated pursuant to the Credit Agreement. Under the Credit Agreement we are obligated to pay quarterly an unused commitment fee equal to 0.25% per annum on the daily amount of the undrawn portion of the revolving line-of-credit. The revolving credit facility is collateralized by all of the assets of the Company.

The Credit Agreement subjects the Company to affirmative, negative, and financial covenants on a quarterly basis. The Company was in compliance with the covenants in the Credit Agreement as of June 30, 2019 and December 31, 2018, respectively.

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Note 7. Leases

We have entered into leases for our corporate headquarters, manufacturing and warehouse operations, and office equipment with remaining lease terms up to 3 years. Some of these leases include 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 most of the leases do not provide an implicit rate, we calculated the right-of-use assets and lease liabilities using our secured incremental borrowing rate at the lease commencement date. We currently do not have any finance leases outstanding.

Information related to leases was as follows:

	Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
Operating lease information:
Operating lease cost	$	268		$	529
Operating cash flows from operating leases		259			517
Net assets obtained in exchange for new operating lease liabilities		-			2,862
Weighted average remaining lease term in years		2.57			2.57
Weighted average discount rate		5.0	%		5.0	%

Future minimum annual lease payments are as follows:

2019 (remaining)	$	511
2020		1,048
2021		1,071
2022		88
Total minimum lease payments	$	2,718
Less imputed interest		(174	)
Total operating lease liability	$	2,544

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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 consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2018. 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, 2018 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, manufacture, market, and sell quality household and skin and hair care products nationally and internationally to mass merchandisers, drugstores, supermarkets, hardware stores, e-commerce retailers, other retail outlets, and to wholesale distributors.

Results of Operations

Three months ended June 30, 2019 compared to three months ended June 30, 2018

	Three Months Ended June 30, (in thousands)
							Increase / (Decrease)
	2019			2018			$			%
Net sales	$	6,382		$	10,807		$	(4,425	)		(40.9	%)
Cost of sales		4,442			5,429			(987	)		(18.2	%)
Gross profit		1,940			5,378			(3,438	)		(63.9	%)
Gross margin		30.4	%		49.8	%
Operating expenses:
Advertising		202			345			(143	)		(41.4	%)
Selling		1,354			1,841			(487	)		(26.5	%)
General and administrative		1,158			1,431			(273	)		(19.1	%)
Total operating expenses		2,714			3,617			(903	)		(25.0	%)
(Loss) income from operations		(774	)		1,761			(2,535	)		(144.0	%)
Interest income		30			-			30			100.0	%
Interest expense		(4	)		(48	)		44			91.7	%
Gain on sale of equipment		110			-			110			100.0	%
(Loss) income before income taxes		(638	)		1,713			(2,351	)		(137.2	%)
Income tax expense		(78	)		(429	)		351			81.8	%
Net (loss) income	$	(716	)	$	1,284		$	(2,000	)		(155.8	%)

Net (loss) income changed primarily due to the following:

• Decreases in net sales and gross profit, primarily driven by lower sales of Alpha^® Skin Care products due to regulatory changes imposed on OTC products by PRC’s NMPA (National Medical Products Administration). In response to these regulatory changes, we reformulated our 12% Alpha^® Skin Care Body Lotion into a new 6% body lotion product. We have since obtained approval for the new 6% body lotion and the product is positioned to resume sales. Despite obtaining approval for the new body lotion, economic, regulatory, and tariff conditions in the PRC remain uncertain. The remaining decrease in net sales and gross profit was primarily attributable to our distributed skin care products.

• The change in net (loss) income was partially offset by:

o Our focus on more efficient advertising platforms, including the elimination of television campaign investments in 2019.

13

o Our efforts to reduce selling costs through the reduction of brokerage commissions and internal labor costs.

o A decrease in general and administrative expenses due to severance costs in 2018.

o An initiative to dispose of idle equipment, which led to the recognition of a gain on the sale of production equipment that was no longer being utilized in the manufacture of our active product lines.

o Recognition of an income tax benefit due to the net loss before income taxes.

Segment Results

We implemented a change in the allocation of certain operational and administrative expenses to more precisely match the activity to which they relate. For comparison purposes, we presented 2018 results to reflect the revised allocation of these costs.

Household Products

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

	Three Months Ended June 30, (in thousands)
							Increase / (Decrease)
	2019			2018			$			%
Net sales	$	1,233		$	1,364		$	(131	)		(9.6	%)
Gross profit	$	572		$	728		$	(156	)		(21.4	%)
Gross margin		46.4	%		53.4	%
Income (loss) from operations	$	15		$	(66	)	$	81			122.7	%

• Net sales of household products decreased primarily from lower sales of the Scott’s Liquid Gold^® Wood Care product line due to increased competition.

• Income from operations was primarily attributable to our focus on more efficient advertising during 2019. Specifically, we produced and aired a television campaign for Scott’s Liquid Gold^® Wood Care products in 2018, but did not do so in 2019, which offset the reduced gross profit.

Skin and Hair Care Products

The following table shows comparative net sales, gross margin, gross profit, (loss) income from operations, volume and percentage changes for skin and hair care products between periods:

	Three Months Ended June 30, (in thousands)
							Increase / (Decrease)
	2019			2018			$			%
Net sales - distributed products	$	2,474		$	4,337		$	(1,863	)		(43.0	%)
Net sales - manufactured products		2,675			5,106			(2,431	)		(47.6	%)
Total skin and hair care net sales	$	5,149		$	9,443		$	(4,294	)		(45.5	%)
Gross profit	$	1,368		$	4,650		$	(3,282	)		(70.6	%)
Gross margin		26.6	%		49.2	%
(Loss) income from operations	$	(789	)	$	1,827		$	(2,616	)		(143.2	%)

• Net sales of distributed skin and hair care products decreased primarily due to lower sales of 7^th Heaven skin care products as a result of a substantial increase in competitive products for 7^th Heaven skin care products beginning in 2018. Lower sales of Batiste Dry Shampoo also contributed to the net sales decrease.

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• Net sales of manufactured skin and hair care products decreased primarily due to lower sales of Alpha^® Skin Care as a result of regulatory changes described above.

• The loss from operations is due to lower sales and gross profit. Gross margins also decreased due to lower sales of our higher-margin Alpha^® Skin Care products.

Six months ended June 30, 2019 compared to six months ended June 30, 2018

	Six Months Ended June 30, (in thousands)
							Increase / (Decrease)
	2019			2018			$			%
Net sales	$	13,187		$	18,235		$	(5,048	)		(27.7	%)
Cost of sales		8,642			9,837			(1,195	)		(12.1	%)
Gross profit		4,545			8,398			(3,853	)		(45.9	%)
Gross margin		34.5	%		46.1	%
Operating expenses:
Advertising		386			882			(496	)		(56.2	%)
Selling		3,012			3,473			(461	)		(13.3	%)
General and administrative		2,381			2,525			(144	)		(5.7	%)
Total operating expenses		5,779			6,880			(1,101	)		(16.0	%)
(Loss) income from operations		(1,234	)		1,518			(2,752	)		(181.3	%)
Interest income		61			-			61			100.0	%
Interest expense		(9	)		(72	)		63			87.5	%
Gain on sale of equipment		110			-			110			100.0	%
(Loss) income before income taxes		(1,072	)		1,446			(2,518	)		(174.1	%)
Income tax benefit (expense)		26			(359	)		385			107.2	%
Net (loss) income	$	(1,046	)	$	1,087		$	(2,133	)		(196.2	%)

Net (loss) income changed primarily due to the following:

• Decreases in net sales and gross profit, primarily driven by lower sales generated from our Skin and Hair Care Products segment, particularly our Alpha^® Skin Care products as a result of the PRC’s regulatory changes discussed above.

• The change in net (loss) income was partially offset by:

o Our reduction of advertising costs during 2019.

o Our efforts to reduce selling costs through the reduction of brokerage commissions.

o A decrease in general and administrative expenses due to severance costs in 2018 related to an executive officer that were not incurred in 2019.

o An initiative to dispose of idle equipment, which led to the recognition of a gain on the sale of production equipment that was no longer being utilized in the manufacture of our active product lines.

o Recognition of an income tax benefit due to the net loss before income taxes.

Segment Results

We implemented a change in the allocation of certain operational and administrative expenses to more precisely match the activity to which they relate. For comparison purposes, we presented 2018 results to reflect the revised allocation of these costs.

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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:

	Six Months Ended June 30, (in thousands)
							Increase / (Decrease)
	2019			2018			$			%
Net sales	$	2,437		$	2,716		$	(279	)		(10.3	%)
Gross profit	$	1,108		$	1,475		$	(367	)		(24.9	%)
Gross margin		45.5	%		54.3	%
Loss from operations	$	(155	)	$	(174	)	$	19			10.9	%

• Net sales of household products decreased primarily from lower sales of the Scott’s Liquid Gold^® Wood Care product line due to increased competition.

• Income from operations was primarily attributable to our focus on more efficient advertising during 2019. Specifically, we produced and aired a television campaign for Scott’s Liquid Gold^® Wood Care products in 2018, but did not do so in 2019, which was partially offset by lower gross profit.

Skin and Hair Care Products

The following table shows comparative net sales, gross margin, gross profit, (loss) income from operations, volume and percentage changes for skin and hair care products between periods:

	Six Months Ended June 30, (in thousands)
							Increase / (Decrease)
	2019			2018			$			%
Skin and hair care net sales
Distributed products	$	4,811		$	7,634		$	(2,823	)		(37.0	%)
Manufactured products		5,939			7,885			(1,946	)		(24.7	%)
Total skin and hair care net sales	$	10,750		$	15,519		$	(4,769	)		(30.7	%)
Gross profit	$	3,437		$	6,923		$	(3,486	)		(50.4	%)
Gross margin		32.0	%		44.6	%
(Loss) income from operations	$	(1,079	)	$	1,692		$	(2,771	)		(163.8	%)

• Net sales of distributed skin and hair care products decreased primarily due to lower sales of 7^th Heaven skin care products as a result of a substantial increase in competitive products for 7^th Heaven skin care products beginning in 2018. Lower sales of Batiste Dry Shampoo also contributed to the net sales decrease.

• Net sales of manufactured skin and hair care products decreased primarily due to lower sales of Alpha^® Skin Care as a result of the regulatory changes described above.

• Loss from operations is due to lower sales and gross profit. Gross margins decreased due to lower sales of our higher-margin Alpha^® Skin Care products.

Liquidity and Capital Resources

Our operational team’s efforts to reduce inventory levels resulted in a significant increase in available cash during the six months ended June 30, 2019. At June 30, 2019, we had our maximum commitment of $4,000 available and unused on our revolving credit facility, and approximately $7,957 in cash on hand, an increase of $1,725 when compared to the balance as of December 31, 2018.

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

16

	Six Months Ended June 30, (in thousands)
						Increase / (Decrease)
	2019		2018			$			%
Operating activities	$	1,675	$	2,041		$	(366	)		(17.9	%)
Investing activities		9		(40	)		49			122.5	%
Financing activities		41		(1,111	)		1,152			103.7	%

• Net cash from operating activities was primarily related to efforts to improve working capital by reducing levels of inventories and accounts receivable.

• Net cash from investing activities was related to capital expenditures for routine production and warehouse equipment as well as a gain on sale of equipment no longer used in production.

• Net cash from financing activities was related to cash received for stock option exercises.

We anticipate that our existing cash and our cash flow from operations, together with our current Credit Agreement with Chase, will be sufficient to meet our cash requirements for the 12 months following the filing date of this Report. During the first six months of 2019, we spent $101 on routine and maintenance production and warehouse equipment in our manufacturing facility.

We expect to make additional capital expenditures of approximately $120 in 2019 to improve our manufacturing capabilities and efficiencies and on production and warehouse equipment. In addition, we are in the process of selecting enterprise resource planning software. If we continue this process, we would see an increase in our capital expenditures in 2019 and 2020.

Financing Agreements

Please see Note 6 to our Condensed Consolidated Financial Statements for information on our Credit Agreement with Chase.

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ITEM  3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM  4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of June 30, 2019, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of June 30, 2019.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during the six months ended June 30, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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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, 2018 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 Chief Executive Officer.
31.2	Rule 13a-14(a) Certification of the Chief Financial Officer.
32.1*	Section 1350 Certification.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.

* Furnished, not filed.

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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/ Mark E. Goldstein
	Mark E. Goldstein
	President and Chief Executive Officer
	(Principal Executive Officer)
By:	/s/ Kevin A. Paprzycki
	Kevin A. Paprzycki
	Chief Financial Officer
	(Principal Financial and Chief Accounting Officer)

Date: August 7, 2019

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EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Mark E. Goldstein, 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: August 7, 2019	/s/ Mark E. Goldstein
	Mark E. Goldstein
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Kevin A. Paprzycki, 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: August 7, 2019	/s/ Kevin A. Paprzycki
	Kevin A. Paprzycki
	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF ANNUAL REPORT ON FORM 10-Q OF

SCOTT’S LIQUID GOLD-INC.

FOR THE QUARTER ENDED JUNE 30, 2019

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 capacity as an officer of Scott’s Liquid Gold-Inc. (“Scott’s Liquid Gold”), that to his 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 August 7, 2019.

/s/ Mark E. Goldstein

Mark E. Goldstein

President and Chief Executive Officer

/s/ Kevin A. Paprzycki 

Kevin A. Paprzycki

Chief Financial Officer

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 06, 2019
Document And Entity Information [Abstract]
Entity Registrant Name	Scott's Liquid Gold - Inc.
Entity Central Index Key	0000088000
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Amendment Flag	false
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
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		12,459,463
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	4880 Havana Street
Entity Address, Address Line Two	Suite 400
Entity Address, City or Town	Denver
Entity Address, State or Province	CO
Entity Address, Postal Zip Code	80239
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 Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Statement [Abstract]
Net sales	$ 6,382	$ 10,807	$ 13,187	$ 18,235
Cost of sales	4,442	5,429	8,642	9,837
Gross Profit	1,940	5,378	4,545	8,398
Operating expenses:
Advertising	202	345	386	882
Selling	1,354	1,841	3,012	3,473
General and administrative	1,158	1,431	2,381	2,525
Total operating expenses	2,714	3,617	5,779	6,880
(Loss) income from operations	(774)	1,761	(1,234)	1,518
Interest income	30		61
Interest expense	(4)	(48)	(9)	(72)
Gain on sale of equipment	110		110
(Loss) income before income taxes	(638)	1,713	(1,072)	1,446
Income tax (expense) benefit	(78)	(429)	26	(359)
Net (loss) income	$ (716)	$ 1,284	$ (1,046)	$ 1,087
Net (loss) income per common share
Basic	$ (0.06)	$ 0.11	$ (0.08)	$ 0.09
Diluted	$ (0.06)	$ 0.10	$ (0.08)	$ 0.09
Weighted average shares outstanding
Basic	12,436	12,024	12,422	11,977
Diluted	12,436	12,549	12,422	12,578

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 7,957	$ 6,232
Accounts receivable, net	1,912	3,047
Inventories, net	6,451	7,817
Income taxes receivable	508	508
Prepaid expenses	350	546
Total current assets	17,178	18,150
Property and equipment, net	1,013	971
Deferred tax asset	264	234
Goodwill	1,521	1,521
Intangible assets, net	5,218	5,528
Operating lease right-of-use assets	2,531
Other assets	71	71
Total assets	27,796	26,475
Current liabilities:
Accounts payable	1,603	1,800
Accrued expenses	488	593
Operating lease liabilities, current portion	928
Total current liabilities	3,019	2,393
Operating lease liabilities, net of current	1,616
Total liabilities	4,635	2,393
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 12,459 shares (2019) and 12,408 shares (2018)	1,246	1,241
Capital in excess of par	7,183	7,063
Retained earnings	14,732	15,778
Total shareholders’ equity	23,161	24,082
Total liabilities and shareholders’ equity	$ 27,796	$ 26,475

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2019	Dec. 31, 2018
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	12,459,000	12,408,000
Common stock, shares outstanding	12,459,000	12,408,000

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Condensed Consolidated Statements of Shareholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Capital in Excess of Par	Retained Earnings
Beginning Balance, Value at Dec. 31, 2017	$ 21,181	$ 1,189	$ 6,441	$ 13,551
Beginning Balance, Shares at Dec. 31, 2017	11,886	11,886
Stock-based compensation, Value	$ 60		60
Stock options exercised, Value	88	$ 14	74
Stock options exercised, Shares		138
Net income (loss)	(196)			(196)
Ending Balance, Value at Mar. 31, 2018	$ 21,133	$ 1,203	6,575	13,355
Ending Balance, Shares at Mar. 31, 2018	12,024	12,024
Beginning Balance, Value at Dec. 31, 2017	$ 21,181	$ 1,189	6,441	13,551
Beginning Balance, Shares at Dec. 31, 2017	11,886	11,886
Net income (loss)	$ 1,087
Ending Balance, Value at Jun. 30, 2018	22,478	$ 1,203	6,636	14,639
Ending Balance, Shares at Jun. 30, 2018		12,024
Beginning Balance, Value at Mar. 31, 2018	$ 21,133	$ 1,203	6,575	13,355
Beginning Balance, Shares at Mar. 31, 2018	12,024	12,024
Stock-based compensation, Value	$ 61		61
Net income (loss)	1,284			1,284
Ending Balance, Value at Jun. 30, 2018	22,478	$ 1,203	6,636	14,639
Ending Balance, Shares at Jun. 30, 2018		12,024
Beginning Balance, Value at Dec. 31, 2018	$ 24,082	$ 1,241	7,063	15,778
Beginning Balance, Shares at Dec. 31, 2018	12,408	12,408
Stock-based compensation, Value	$ 42		42
Net income (loss)	(330)			(330)
Ending Balance, Value at Mar. 31, 2019	$ 23,794	$ 1,241	7,105	15,448
Ending Balance, Shares at Mar. 31, 2019	12,408	12,408
Beginning Balance, Value at Dec. 31, 2018	$ 24,082	$ 1,241	7,063	15,778
Beginning Balance, Shares at Dec. 31, 2018	12,408	12,408
Net income (loss)	$ (1,046)
Ending Balance, Value at Jun. 30, 2019	$ 23,161	$ 1,246	7,183	14,732
Ending Balance, Shares at Jun. 30, 2019	12,459	12,459
Beginning Balance, Value at Mar. 31, 2019	$ 23,794	$ 1,241	7,105	15,448
Beginning Balance, Shares at Mar. 31, 2019	12,408	12,408
Stock-based compensation, Value	$ 42		42
Stock options exercised, Value	41	$ 5	36
Stock options exercised, Shares		51
Net income (loss)	(716)			(716)
Ending Balance, Value at Jun. 30, 2019	$ 23,161	$ 1,246	$ 7,183	$ 14,732
Ending Balance, Shares at Jun. 30, 2019	12,459	12,459

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities:
Net (loss) income	$ (1,046)	$ 1,087
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	369	433
Stock-based compensation	84	121
Deferred income taxes	(30)	(115)
Gain on sale of equipment	(110)
Change in operating assets and liabilities:
Accounts receivable	1,135	(908)
Inventories	1,366	1,056
Prepaid expenses and other assets	196	(80)
Income taxes receivable		(570)
Accounts payable and accrued expenses	(289)	758
Contract liability		259
Total adjustments to net income (loss)	2,721	954
Net cash provided by operating activities	1,675	2,041
Cash flows from investing activities:
Purchase of property and equipment	(101)	(40)
Proceeds from sale of equipment	110
Net cash provided (used) by investing activities	9	(40)
Cash flows from financing activities:
Repayments of long-term debt		(1,200)
Proceeds from exercise of stock options	41	89
Net cash provided (used) by financing activities	41	(1,111)
Net increase in cash and cash equivalents	1,725	890
Cash and cash equivalents, beginning of period	6,232	4,114
Cash and cash equivalents, end of period	7,957	5,004
Supplemental disclosures:
Cash paid during the period for interest	$ 9	34
Cash paid during the period for income taxes		$ 1,044

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Organization and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2019

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, manufacture, market and sell quality household and skin and hair care products. We are also a distributor in the United States of skin and hair care products manufactured by two other companies. Our business is comprised of two segments: household products and skin and hair 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.

(c) Basis of Presentation

The unaudited Condensed Consolidated Statements of Income, 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 June 30, 2019 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, 2018. The results of operations for the period ended June 30, 2019 are not necessarily indicative of the operating results for the full year.

Due to changes in our business as we acquired and began manufacturing new products in recent periods, the Company implemented a change in the allocation of certain operational and administrative expenses between our two operating segments to more accurately reflect our operational activity. For comparison purposes, the Company presented 2018 results to reflect the revised allocation of these costs. This segment reporting change has no impact on our operating results. See Note 4 “Segment Information,” of the Notes to the Condensed Consolidated Financial Statements for further information.

(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, and stock-based compensation. Actual results could differ from our estimates.

(e) Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less at the date of acquisition to be cash equivalents.

(f)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, which is generally not material to our financial statements, 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.

Inventories were comprised of the following at:

	June 30, 2019			December 31, 2018
Finished goods	$	4,161		$	5,448
Raw materials		2,420			2,414
Inventory reserve for obsolescence		(130	)		(45	)
	$	6,451		$	7,817

(g) Property and Equipment

Property and equipment are recorded at historical cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets ranging from three to 20 years. Production equipment and production support equipment are estimated to have useful lives of 15 to 20 years and three to 10 years, respectively. Office furniture and office machines are estimated to have useful lives of 10 to 20 years and three to five years, respectively. Maintenance and repairs are expensed as incurred. Improvements that extend the useful lives of the asset or provide improved efficiency are capitalized.

(h) 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.

(i) Intangible Assets and Goodwill

Intangible assets consist of customer relationships, trade names, formulas, batching processes, and a non-compete agreement.  The fair value of the intangible assets is amortized over their estimated useful lives and range from a period of five to 15 years. Goodwill consists of the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired.

Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests, and in certain circumstances these assets are written down to fair value if impaired.

(j) Financial Instruments

Financial instruments which potentially subject us to concentrations of credit risk include cash and cash equivalents and accounts receivable. We maintain our cash balances in the form of bank demand deposits with financial institutions that we believe are creditworthy. During the six months ended June 30, 2019, 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 and cash equivalents, receivables, other current assets, accounts payable, and accrued expenses approximate fair value due to the short-term nature of these financial instruments.

(k) 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 Income or accrued on the Condensed Consolidated Balance Sheets.

The effective tax rate for the six months ended June 30, 2019 and 2018 was 2.4% and 24.8% respectively, which can differ from the statutory income tax rate due to permanent book-to-tax differences or if the year-to-date pre-tax loss exceeds the amount of the anticipated full-year pre-tax loss.

(l) 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. Adjustments to the costs of customer allowances and promotional programs for consumers in subsequent periods are generally not material, as our promotions are typically of short duration, thereby reducing the uncertainty inherent in such estimates.

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 information from customers and assessments of historical trends. 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.

At June 30, 2019 and December 31, 2018 approximately $1,269 and $1,184, respectively, had been reserved as a reduction of accounts receivable. Trade promotions to our customers and incentives such as coupons to our consumers are deducted from gross sales and totaled $1,070 and $672 for the three months ended June 30, 2019 and 2018, respectively, and totaled $1,784 and $1,272 for the six months ended June 30, 2019 and 2018, respectively.

(m) Advertising Costs

We expense advertising costs as incurred.

(n) 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 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.

(o) Operating Costs and Expenses Classification

Cost of sales includes costs associated with manufacturing and distribution including labor, materials, freight-in, purchasing and receiving, quality control, repairs, maintenance, and other indirect costs, as well as warehousing and distribution costs. We classify freight-out as selling expenses. Other selling expenses consist primarily of costs for sales and sales support personnel, brokerage commissions, and promotional costs. Freight-out costs included in selling expenses totaled $555 and $539 for the three months ended June 30, 2019 and 2018, respectively, and totaled $1,221 and $1,160 for the six months ended June 30, 2019 and 2018, 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.

(p) Recently Issued Accounting Standards

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments —Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). This guidance, as amended by subsequent ASUs on the topic, requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. This guidance is effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. ASU 2016-13 is not expected to have a material impact on our financial statements.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). The new guidance modifies disclosure requirements related to fair value measurement.  The amendments in ASU 2018-13 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  Implementation on a prospective or retrospective basis varies by specific disclosure requirement.  Early adoption is permitted. The standard also allows for early adoption of any removed or modified disclosures upon issuance of this ASU while delaying adoption of the additional disclosures until their effective date. ASU 2018-13 is not expected to have a material impact on our financial statements.

(q) Recently Adopted Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). This guidance, as amended by subsequent ASUs on the topic, requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with such classification affecting the pattern of expense recognition in the income statement.

Effective January 1, 2019, we adopted the guidance and elected the option not to restate comparative periods. We also elected the package of practical expedients within the standard which permits us not to reassess prior conclusions about lease identification, lease classification, and initial direct costs. Additionally, we elected not to separate lease and non-lease components for all leases. The adoption of the new standard resulted in the recognition of operating lease liabilities on January 1, 2019 of approximately$141, with corresponding right of use assets, and no material cumulative effect adjustment to our Consolidated Balance Sheets, and $2,862 of net assets obtained in exchange for new operating lease liabilities during the six months ended June 30, 2019. Adoption of the new standard did not have a material impact on our Consolidated Statements of Income or Cash Flows.

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

Note 2. Stock-Based Compensation

During the six months ended June 30, 2019, we did not grant any options to acquire shares of our common stock.

During the six months ended June 30, 2018, we granted options to acquire: (i) 40 thousand shares of our common stock to employees at prices ranging between $2.17 to $3.35 per share; (ii) 105 thousand shares of our common stock to executive officers at prices ranging between $2.09 to $2.17 per share; and (iii) 90 thousand shares of our common stock to non-employee board members at a price of $2.17 per share.

The weighted average fair market value of the options granted during the six months ended June 30, 2018 were estimated on the date of grant, using a Black-Scholes option pricing model with the following assumptions:

	June 30, 2018
Expected life of options (using the “simplified” method)	4 years
Average risk-free interest rate	2.63%
Average expected volatility of stock	69%
Expected dividend rate	None
Fair value of options granted	$	246

Compensation cost related to stock options recognized in operating results (included in general and administrative expenses) totaled $84 and $121 in the six months ended June 30, 2019 and 2018, respectively. Approximately $239 of total unrecognized compensation costs related to non-vested stock options is expected to be recognized over the next three years, depending on the vesting provisions of the options. There was no tax benefit from recording the non-cash expense as it relates to the options granted to employees, as these were qualified stock options which are not normally tax deductible.

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Earnings Per Share

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Share

Note 3. 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:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Common shares outstanding, beginning of the period		12,408		12,024		12,408		11,886
Weighted average common shares issued		28		-		14		91
Weighted average number of common shares outstanding		12,436		12,024		12,422		11,977
Dilutive effect of common share equivalents		-		525		-		601
Diluted weighted average number of common shares outstanding		12,436		12,549		12,422		12,578

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 June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Stock options		693		252		693		252

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Segment Information

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Segment Information

Note 4. Segment Information

We operate in two different segments: household products and skin and hair 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.

Due to changes in our business as we acquired and began to manufacture additional products in recent periods under our Skin and Hair Care Products segment, the Company implemented a change in the allocation of certain operational and administrative expenses to more accurately reflect our operational activity. For comparison purposes, the Company presented 2018 results to reflect the revised allocation of these costs.

The following provides information on our segments for the three and six months ended June 30:

	Three Months Ended June 30, 2019
	Household Products		Skin and Hair Care Products			Total
Net sales	$	1,233	$	5,149		$	6,382
Income (loss) from operations		15		(789	)		(774	)
Depreciation and amortization		20		163			183

	Three Months Ended June 30, 2018
	Household Products			Skin and Hair Care Products		Total
Net sales	$	1,364		$	9,443	$	10,807
(Loss) Income from operations		(66	)		1,827		1,761
Capital and intangible asset expenditures		18			22		40
Depreciation and amortization		32			195		227

	Six Months Ended June 30, 2019
	Household Products			Skin and Hair Care Products			Total
Net sales	$	2,437		$	10,750		$	13,187
Loss from operations		(155	)		(1,079	)		(1,234	)
Capital and intangible asset expenditures		101			-			101
Depreciation and amortization		42			327			369

	Six Months Ended June 30, 2018
	Household Products			Skin and Hair Care Products		Total
Net sales	$	2,716		$	15,519	$	18,235
(Loss) Income from operations		(174	)		1,692		1,518
Capital and intangible asset expenditures		18			22		40
Depreciation and amortization		68			365		433

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Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Note 5. Goodwill and Intangible Assets

Goodwill and intangible assets, which are related to our acquisition of our Prell^® and Denorex^® brands, consisted of the following:

	As of June 30, 2019						As of December 31, 2018
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Intangible assets:
Customer relationships	$	4,022	$	1,207	$	2,815	$	4,022	$	1,005	$	3,017
Trade names		2,362		472		1,890		2,362		393		1,969
Formulas and batching processes		669		167		502		669		140		529
Non-compete agreement		26		15		11		26		13		13
		7,079		1,861		5,218		7,079		1,551		5,528
Goodwill						1,521						1,521
Total intangible assets					$	6,739					$	7,049

Amortization expense for the three months ended June 30, 2019 and 2018 was $155, respectively. Amortization expense for the six months ended June 30, 2019 and 2018 was $310, respectively.

Estimated amortization expense for 2019 and subsequent years is as follows:

2019 (remaining)	$	310
2020		620
2021		618
2022		616
2023		616
Thereafter		2,438
Total	$	5,218

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Long-Term Debt and Line-of-Credit

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Long-Term Debt and Line-of-Credit

Note 6. Long-Term Debt and Line-of-Credit

On June 30, 2016, the Company and Neoteric Cosmetics, Inc., a wholly-owned subsidiary of the Company, collectively as borrowers, entered into a credit agreement (as amended, the “Credit Agreement”) with JPMorgan Chase Bank, N.A. (“Chase”), as lender, pursuant to which Chase provided a term loan and a revolving credit facility that were related to our acquisition of the Prell^®, Denorex^®, and Zincon^® brands.

In June 2018, we paid the remaining principal balance of the term loan in the amount of $1,000. There were no additional costs incurred associated with the prepayment of the term loan.

The revolving credit facility amount is $4,000 with interest of: (i) the LIBO Rate + 2.25%; or (ii) the Prime Rate, with a floor of the one month LIBO Rate + 2.25%, and will terminate on June 30, 2021 or any earlier date on which the revolving commitment is otherwise terminated pursuant to the Credit Agreement. Under the Credit Agreement we are obligated to pay quarterly an unused commitment fee equal to 0.25% per annum on the daily amount of the undrawn portion of the revolving line-of-credit. The revolving credit facility is collateralized by all of the assets of the Company.

The Credit Agreement subjects the Company to affirmative, negative, and financial covenants on a quarterly basis. The Company was in compliance with the covenants in the Credit Agreement as of June 30, 2019 and December 31, 2018, respectively.

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Leases

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

Note 7. Leases

We have entered into leases for our corporate headquarters, manufacturing and warehouse operations, and office equipment with remaining lease terms up to 3 years. Some of these leases include 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 most of the leases do not provide an implicit rate, we calculated the right-of-use assets and lease liabilities using our secured incremental borrowing rate at the lease commencement date. We currently do not have any finance leases outstanding.

Information related to leases was as follows:

	Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
Operating lease information:
Operating lease cost	$	268		$	529
Operating cash flows from operating leases		259			517
Net assets obtained in exchange for new operating lease liabilities		-			2,862
Weighted average remaining lease term in years		2.57			2.57
Weighted average discount rate		5.0	%		5.0	%

Future minimum annual lease payments are as follows:

2019 (remaining)	$	511
2020		1,048
2021		1,071
2022		88
Total minimum lease payments	$	2,718
Less imputed interest		(174	)
Total operating lease liability	$	2,544

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Organization and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2019

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.

Basis of Presentation

(c) Basis of Presentation

The unaudited Condensed Consolidated Statements of Income, 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 June 30, 2019 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, 2018. The results of operations for the period ended June 30, 2019 are not necessarily indicative of the operating results for the full year.

Due to changes in our business as we acquired and began manufacturing new products in recent periods, the Company implemented a change in the allocation of certain operational and administrative expenses between our two operating segments to more accurately reflect our operational activity. For comparison purposes, the Company presented 2018 results to reflect the revised allocation of these costs. This segment reporting change has no impact on our operating results. See Note 4 “Segment Information,” of the Notes to the Condensed Consolidated Financial Statements for further information.

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, and stock-based compensation. Actual results could differ from our estimates.

Cash Equivalents

(e) Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less at the date of acquisition to be cash equivalents.

Inventories Valuation and Reserves

(f)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, which is generally not material to our financial statements, 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.

Inventories were comprised of the following at:

	June 30, 2019			December 31, 2018
Finished goods	$	4,161		$	5,448
Raw materials		2,420			2,414
Inventory reserve for obsolescence		(130	)		(45	)
	$	6,451		$	7,817

Property and Equipment

(g) Property and Equipment

Property and equipment are recorded at historical cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets ranging from three to 20 years. Production equipment and production support equipment are estimated to have useful lives of 15 to 20 years and three to 10 years, respectively. Office furniture and office machines are estimated to have useful lives of 10 to 20 years and three to five years, respectively. Maintenance and repairs are expensed as incurred. Improvements that extend the useful lives of the asset or provide improved efficiency are capitalized.

Leases

(h) 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 and Goodwill

(i) Intangible Assets and Goodwill

Intangible assets consist of customer relationships, trade names, formulas, batching processes, and a non-compete agreement.  The fair value of the intangible assets is amortized over their estimated useful lives and range from a period of five to 15 years. Goodwill consists of the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired.

Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests, and in certain circumstances these assets are written down to fair value if impaired.

Financial Instruments

(j) Financial Instruments

Financial instruments which potentially subject us to concentrations of credit risk include cash and cash equivalents and accounts receivable. We maintain our cash balances in the form of bank demand deposits with financial institutions that we believe are creditworthy. During the six months ended June 30, 2019, 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 and cash equivalents, receivables, other current assets, accounts payable, and accrued expenses approximate fair value due to the short-term nature of these financial instruments.

Income Taxes

(k) 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 Income or accrued on the Condensed Consolidated Balance Sheets.

The effective tax rate for the six months ended June 30, 2019 and 2018 was 2.4% and 24.8% respectively, which can differ from the statutory income tax rate due to permanent book-to-tax differences or if the year-to-date pre-tax loss exceeds the amount of the anticipated full-year pre-tax loss.

Revenue Recognition

(l) 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. Adjustments to the costs of customer allowances and promotional programs for consumers in subsequent periods are generally not material, as our promotions are typically of short duration, thereby reducing the uncertainty inherent in such estimates.

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 information from customers and assessments of historical trends. 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.

At June 30, 2019 and December 31, 2018 approximately $1,269 and $1,184, respectively, had been reserved as a reduction of accounts receivable. Trade promotions to our customers and incentives such as coupons to our consumers are deducted from gross sales and totaled $1,070 and $672 for the three months ended June 30, 2019 and 2018, respectively, and totaled $1,784 and $1,272 for the six months ended June 30, 2019 and 2018, respectively.

Advertising Costs

(m) Advertising Costs

We expense advertising costs as incurred.

Stock-based Compensation

(n) 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 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.

Operating Costs and Expenses Classification

(o) Operating Costs and Expenses Classification

Cost of sales includes costs associated with manufacturing and distribution including labor, materials, freight-in, purchasing and receiving, quality control, repairs, maintenance, and other indirect costs, as well as warehousing and distribution costs. We classify freight-out as selling expenses. Other selling expenses consist primarily of costs for sales and sales support personnel, brokerage commissions, and promotional costs. Freight-out costs included in selling expenses totaled $555 and $539 for the three months ended June 30, 2019 and 2018, respectively, and totaled $1,221 and $1,160 for the six months ended June 30, 2019 and 2018, 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.

Recently Issued Accounting Standards

(p) Recently Issued Accounting Standards

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments —Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). This guidance, as amended by subsequent ASUs on the topic, requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. This guidance is effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. ASU 2016-13 is not expected to have a material impact on our financial statements.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). The new guidance modifies disclosure requirements related to fair value measurement.  The amendments in ASU 2018-13 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  Implementation on a prospective or retrospective basis varies by specific disclosure requirement.  Early adoption is permitted. The standard also allows for early adoption of any removed or modified disclosures upon issuance of this ASU while delaying adoption of the additional disclosures until their effective date. ASU 2018-13 is not expected to have a material impact on our financial statements.

Recently Adopted Accounting Standards

(q) Recently Adopted Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). This guidance, as amended by subsequent ASUs on the topic, requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with such classification affecting the pattern of expense recognition in the income statement.

Effective January 1, 2019, we adopted the guidance and elected the option not to restate comparative periods. We also elected the package of practical expedients within the standard which permits us not to reassess prior conclusions about lease identification, lease classification, and initial direct costs. Additionally, we elected not to separate lease and non-lease components for all leases. The adoption of the new standard resulted in the recognition of operating lease liabilities on January 1, 2019 of approximately$141, with corresponding right of use assets, and no material cumulative effect adjustment to our Consolidated Balance Sheets, and $2,862 of net assets obtained in exchange for new operating lease liabilities during the six months ended June 30, 2019. Adoption of the new standard did not have a material impact on our Consolidated Statements of Income or Cash Flows.

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Organization and Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Composition of Inventory

Inventories were comprised of the following at:

	June 30, 2019			December 31, 2018
Finished goods	$	4,161		$	5,448
Raw materials		2,420			2,414
Inventory reserve for obsolescence		(130	)		(45	)
	$	6,451		$	7,817

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Weighted Average Fair Market Value of the Options Granted Estimated on the Date of Grant Assumptions

The weighted average fair market value of the options granted during the six months ended June 30, 2018 were estimated on the date of grant, using a Black-Scholes option pricing model with the following assumptions:

	June 30, 2018
Expected life of options (using the “simplified” method)	4 years
Average risk-free interest rate	2.63%
Average expected volatility of stock	69%
Expected dividend rate	None
Fair value of options granted	$	246

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2019

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:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Common shares outstanding, beginning of the period		12,408		12,024		12,408		11,886
Weighted average common shares issued		28		-		14		91
Weighted average number of common shares outstanding		12,436		12,024		12,422		11,977
Dilutive effect of common share equivalents		-		525		-		601
Diluted weighted average number of common shares outstanding		12,436		12,549		12,422		12,578

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 June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Stock options		693		252		693		252

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Information on Segments

The following provides information on our segments for the three and six months ended June 30:

	Three Months Ended June 30, 2019
	Household Products		Skin and Hair Care Products			Total
Net sales	$	1,233	$	5,149		$	6,382
Income (loss) from operations		15		(789	)		(774	)
Depreciation and amortization		20		163			183

	Three Months Ended June 30, 2018
	Household Products			Skin and Hair Care Products		Total
Net sales	$	1,364		$	9,443	$	10,807
(Loss) Income from operations		(66	)		1,827		1,761
Capital and intangible asset expenditures		18			22		40
Depreciation and amortization		32			195		227

	Six Months Ended June 30, 2019
	Household Products			Skin and Hair Care Products			Total
Net sales	$	2,437		$	10,750		$	13,187
Loss from operations		(155	)		(1,079	)		(1,234	)
Capital and intangible asset expenditures		101			-			101
Depreciation and amortization		42			327			369

	Six Months Ended June 30, 2018
	Household Products			Skin and Hair Care Products		Total
Net sales	$	2,716		$	15,519	$	18,235
(Loss) Income from operations		(174	)		1,692		1,518
Capital and intangible asset expenditures		18			22		40
Depreciation and amortization		68			365		433

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Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Goodwill and Intangible Assets

Goodwill and intangible assets, which are related to our acquisition of our Prell^® and Denorex^® brands, consisted of the following:

	As of June 30, 2019						As of December 31, 2018
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Intangible assets:
Customer relationships	$	4,022	$	1,207	$	2,815	$	4,022	$	1,005	$	3,017
Trade names		2,362		472		1,890		2,362		393		1,969
Formulas and batching processes		669		167		502		669		140		529
Non-compete agreement		26		15		11		26		13		13
		7,079		1,861		5,218		7,079		1,551		5,528
Goodwill						1,521						1,521
Total intangible assets					$	6,739					$	7,049

Schedule of Estimated Amortization Expense

Estimated amortization expense for 2019 and subsequent years is as follows:

2019 (remaining)	$	310
2020		620
2021		618
2022		616
2023		616
Thereafter		2,438
Total	$	5,218

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Leases (Tables)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Schedule of Information Related to Leases

Information related to leases was as follows:

	Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
Operating lease information:
Operating lease cost	$	268		$	529
Operating cash flows from operating leases		259			517
Net assets obtained in exchange for new operating lease liabilities		-			2,862
Weighted average remaining lease term in years		2.57			2.57
Weighted average discount rate		5.0	%		5.0	%

Schedule of Future Minimum Annual Lease Payments

Future minimum annual lease payments are as follows:

2019 (remaining)	$	511
2020		1,048
2021		1,071
2022		88
Total minimum lease payments	$	2,718
Less imputed interest		(174	)
Total operating lease liability	$	2,544

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Organization and Summary of Significant Accounting Policies - Additional Information (Details)	6 Months Ended
	Jun. 30, 2019 Segment
Accounting Policies [Abstract]
Number of business segment	2

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Organization and Summary of Significant Accounting Policies - Composition of Inventory (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Inventory Disclosure [Abstract]
Finished goods	$ 4,161	$ 5,448
Raw materials	2,420	2,414
Inventory reserve for obsolescence	(130)	(45)
Inventories, net	$ 6,451	$ 7,817

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Organization and Summary of Significant Accounting Policies - Additional Information 1 (Details) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Schedule Of Organization And Presentation Of Financial Statements [Line Items]
Significant financial instruments with off-balance sheet risk	$ 0		$ 0
Interest and penalties recognized in condensed consolidated statements of income			0
Accrued interest or penalties related to uncertain tax positions	0		$ 0
Effective income tax rate			2.40%	24.80%
Reserve for reduction in account receivable			$ 1,269,000		$ 1,184,000
Trade promotions to customers	$ 1,070,000	$ 672,000	$ 1,784,000	$ 1,272,000
Minimum
Schedule Of Organization And Presentation Of Financial Statements [Line Items]
Useful life of property, plant and equipment			3 years
Useful lives of intangible assets			5 years
Maximum
Schedule Of Organization And Presentation Of Financial Statements [Line Items]
Useful life of property, plant and equipment			20 years
Useful lives of intangible assets			15 years
Production Equipment | Minimum
Schedule Of Organization And Presentation Of Financial Statements [Line Items]
Useful life of property, plant and equipment			15 years
Production Equipment | Maximum
Schedule Of Organization And Presentation Of Financial Statements [Line Items]
Useful life of property, plant and equipment			20 years
Production Support Equipment | Minimum
Schedule Of Organization And Presentation Of Financial Statements [Line Items]
Useful life of property, plant and equipment			3 years
Production Support Equipment | Maximum
Schedule Of Organization And Presentation Of Financial Statements [Line Items]
Useful life of property, plant and equipment			10 years
Office Furniture and Equipment | Minimum
Schedule Of Organization And Presentation Of Financial Statements [Line Items]
Useful life of property, plant and equipment			10 years
Office Furniture and Equipment | Maximum
Schedule Of Organization And Presentation Of Financial Statements [Line Items]
Useful life of property, plant and equipment			20 years
Office Equipment | Minimum
Schedule Of Organization And Presentation Of Financial Statements [Line Items]
Useful life of property, plant and equipment			3 years
Office Equipment | Maximum
Schedule Of Organization And Presentation Of Financial Statements [Line Items]
Useful life of property, plant and equipment			5 years

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Organization and Summary of Significant Accounting Policies - Additional Information 2 (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Jan. 01, 2019
Schedule Of Organization And Presentation Of Financial Statements [Line Items]
Operating lease liabilities	$ 2,544		$ 2,544
Operating lease right of use assets	2,531		2,531
Net assets obtained in exchange for new operating lease liabilities			2,862
Accounting Standards Update 2016-02
Schedule Of Organization And Presentation Of Financial Statements [Line Items]
Operating lease liabilities					$ 141
Operating lease right of use assets					$ 141
Net assets obtained in exchange for new operating lease liabilities			2,862
Selling Expenses
Schedule Of Organization And Presentation Of Financial Statements [Line Items]
Freight-out costs	$ 555	$ 539	$ 1,221	$ 1,160

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Stock-Based Compensation - Additional Information (Details) - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of options granted	0
Stock-based compensation	$ 84,000	$ 121,000
Unrecognized compensation costs related to non-vested stock options	$ 239,000
Period over which compensation costs related to non-vested stock options recognize	3 years
Tax benefit from recording non-cash expense relates to options granted to employees	$ 0
General and Administrative Expense
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation	$ 84,000	$ 121,000
Employees
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of options granted		40,000
Executive Officer
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of options granted		105,000
Non-employee Board Member
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of options granted		90,000
Weighted average exercise price of options granted		$ 2.17
Minimum | Employees
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Weighted average exercise price of options granted		2.17
Minimum | Executive Officer
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Weighted average exercise price of options granted		2.09
Maximum | Employees
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Weighted average exercise price of options granted		3.35
Maximum | Executive Officer
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Weighted average exercise price of options granted		$ 2.17

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Stock-Based Compensation - Weighted Average Fair Market Value of the Options Granted Estimated on the Date of Grant Assumptions (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2018 USD ($)
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Expected life of options (using the “simplified” method)	4 years
Average risk-free interest rate	2.63%
Average expected volatility of stock	69.00%
Expected dividend rate	0.00%
Fair value of options granted	$ 246

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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		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018	Dec. 31, 2017
Earnings Per Share [Abstract]
Common shares outstanding, beginning of the period	12,459		12,459		12,408	12,408	12,024	11,886
Weighted average common shares issued	28		14	91
Weighted average number of common shares outstanding	12,436	12,024	12,422	11,977
Dilutive effect of common share equivalents		525		601
Diluted weighted average number of common shares outstanding	12,436	12,549	12,422	12,578

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Earnings Per Share - Common Stock Equivalents Excluded From the Calculation of Earnings Per Share (Details) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Stock Options
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from calculation of earnings per share	693	252	693	252

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Segment Information - Additional Information (Details)	6 Months Ended
	Jun. 30, 2019 Segment
Segment Reporting [Abstract]
Number of business segment	2

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Segment Information - Information on Segments (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Segment Reporting Information [Line Items]
Net sales	$ 6,382	$ 10,807	$ 13,187	$ 18,235
Income (loss) from operations	(774)	1,761	(1,234)	1,518
Capital and intangible asset expenditures		40	101	40
Depreciation and amortization	183	227	369	433
Household Products
Segment Reporting Information [Line Items]
Net sales	1,233	1,364	2,437	2,716
Income (loss) from operations	15	(66)	(155)	(174)
Capital and intangible asset expenditures		18	101	18
Depreciation and amortization	20	32	42	68
Skin And Hair Care Products
Segment Reporting Information [Line Items]
Net sales	5,149	9,443	10,750	15,519
Income (loss) from operations	(789)	1,827	(1,079)	1,692
Capital and intangible asset expenditures		22		22
Depreciation and amortization	$ 163	$ 195	$ 327	$ 365

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Goodwill and Intangible Assets - Schedule of Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 7,079	$ 7,079
Accumulated Amortization	1,861	1,551
Net Carrying Value	5,218	5,528
Goodwill	1,521	1,521
Total intangible assets	6,739	7,049
Customer Relationships
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	4,022	4,022
Accumulated Amortization	1,207	1,005
Net Carrying Value	2,815	3,017
Trade Names
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	2,362	2,362
Accumulated Amortization	472	393
Net Carrying Value	1,890	1,969
Formulas and Batching Processes
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	669	669
Accumulated Amortization	167	140
Net Carrying Value	502	529
Non-compete Agreement
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	26	26
Accumulated Amortization	15	13
Net Carrying Value	$ 11	$ 13

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Goodwill and Intangible Assets - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Goodwill And Intangible Assets Disclosure [Abstract]
Amortization expense of intangible assets	$ 155	$ 155	$ 310	$ 310

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Goodwill and Intangible Assets - Schedule of Estimated Amortization Expense (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Goodwill And Intangible Assets Disclosure [Abstract]
2019 (remaining)	$ 310
2020	620
2021	618
2022	616
2023	616
Thereafter	2,438
Net Carrying Value	$ 5,218	$ 5,528

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Long-Term Debt and Line-of-Credit - Additional Information (Details) - USD ($)	1 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Debt Instrument [Line Items]
Remaining principal balance amount paid			$ 1,200,000
JPMorgan Chase Bank, N. A. | Credit Agreement | Revolving Credit Facility
Debt Instrument [Line Items]
Credit facility amount		$ 4,000,000
Credit facility, terminate date		Jun. 30, 2021
Credit facility, frequency of commitment fee payment		quarterly
Unused commitment fee percentage		0.25%
JPMorgan Chase Bank, N. A. | Credit Agreement | LIBOR Rate | Revolving Credit Facility
Debt Instrument [Line Items]
Debt instrument, variable interest rate		2.25%
JPMorgan Chase Bank, N. A. | Credit Agreement | Floor Rate | Revolving Credit Facility
Debt Instrument [Line Items]
Debt instrument, variable interest rate		2.25%
JPMorgan Chase Bank, N. A. | Credit Agreement | Term Loan
Debt Instrument [Line Items]
Remaining principal balance amount paid	$ 1,000,000
Prepayment costs	$ 0

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Leases - Additional Information (Details)	6 Months Ended
	Jun. 30, 2019
Maximum
Lessee Lease Description [Line Items]
Remaining lease terms	3 years

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Leases - Schedule of Information Related to Leases (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2019 USD ($)
Operating lease information:
Operating lease cost	$ 268	$ 529
Operating cash flows from operating leases	$ 259	517
Net assets obtained in exchange for new operating lease liabilities		$ 2,862
Weighted average remaining lease term in years	2 years 6 months 25 days	2 years 6 months 25 days
Weighted average discount rate	5.00%	5.00%

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Leases - Schedule of Future Minimum Annual Lease Payments (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Leases [Abstract]
2019 (remaining)	$ 511
2020	1,048
2021	1,071
2022	88
Total minimum lease payments	2,718
Less imputed interest	(174)
Total operating lease liability	$ 2,544