ProPhase Labs, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Restatement of Previously Issued Financial Statements

Restatement of Previously Issued Financial Statements

12 Months Ended

Dec. 31, 2017

Accounting Changes and Error Corrections [Abstract]

Restatement of Previously Issued Financial Statements

NOTE 2 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

The Company determined that when calculating its income tax provision related to the gain on sale of discontinued operations, it incorrectly utilized available net operating losses without considering the statutory limitations imposed by the state of Pennsylvania, and that it incorrectly allocated the amount of income tax benefit resulting from the reversal of certain valuation allowances to continuing operations, which resulted in an overstatement of income the tax benefit from continuing operations and an understatement of the gain on sale of discontinued operations, which is presented net of taxes. In the process of this determination, the Company determined that such information existed at December 31, 2017 which affected the income tax benefit/ provision from continuing and discontinued operations reported in the year ended December 31, 2017. The Company concluded that the impact of applying corrections for these errors and misstatements on the consolidated financial statements as of and for the year ended December 31, 2017 is material. As a result, the Company is restating its consolidated financial statements as of and for the year ended December 31, 2017. See below for a reconciliation of the previously reported amounts to the restated amounts.

The table below sets forth the consolidated balance sheet, including the balances as originally reported, adjustments and the as restated balances (in thousands):

	As of December 31, 2017
	As originally reported		Adjustments			As restated

Income tax receivable	$	502	$	(502	)	$	-
Total current assets		28,919		(502	)		28,417
Total assets	$	34,161	$	(502	)	$	33,659

Other current liabilities	$	310	$	740		$	1,050
Total current liabilities		1,072		740			1,812

Retained earnings		22,144		(1,242	)		20,902
Total stockholders’ equity		33,089		(1,242	)		31,847
Total liabilities and stockholders’ equity	$	34,161	$	(502	)	$	33,659

The table below sets for the consolidated statements of operations, including the balances as originally reported, adjustments, and the as restated amounts (in thousands):

	For the year ended December 31, 2017
	As originally reported		Adjustments			As restated

Income tax benefit from continuing operations	$	17,990	$	(16,569	)	$	1,421
Income (loss) from continuing operations		14,327		(16,569	)		(2,242	)

Gain on sale of discontinued operations, net of taxes		26,974		15,327			42,301
Income from discontinued operations		27,504		15,327			42,831
Net income		41,831		(1,242	)		40,589
Total comprehensive income		41,753		(1,242	)		40,511

Basic earnings per share:
Income (loss) from continuing operations	$	0.92	$	(1.06	)	$	(0.14	)
Income from discontinued operations		1.77		0.99			2.75
Net income	$	2.69	$	(0.08	)	$	2.61

Diluted earnings per share:
Income (loss) from continuing operations	$	0.92	$	(1.07	)	$	(0.14	)
Income from discontinued operations		1.75		0.98			2.73
Net income	$	2.67	$	(0.09	)	$	2.59

The table below sets forth the consolidated statements of cash flows from operating activities, including the balances as originally reported, adjustments and the as restated balances (in thousands):

	For the year ended December 31, 2017
	As originally reported			Adjustments			As restated

Net income	$	41,831		$	(1,242	)	$	40,589
Gain on sale of assets, net of taxes		(26,974	)		(15,327	)		(42,301	)
Income tax benefit		(17,990	)		16,569			(1,421	)
Income tax receivable		(502	)		502			-
Income taxes payable		(848	)		(502	)		(1,350	)
Net cash used in operating activities	$	(2,838	)	$	-		$	(2,838	)

The restatement had no impact on cash flows from investing activities or financing activities or net increase in cash.