ProPhase Labs, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Restatement of Previously Issued Financial Statements

Restatement of Previously Issued Financial Statements

6 Months Ended

Jun. 30, 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 June 30, 2017 which affected the income tax benefit/ provision from continuing and discontinued operations reported in the three and six months ended June 30, 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 three and six months ended June 30, 2017 is material. As a result, the Company is restating its consolidated financial statements as of and for the three and six months ended June 30, 2017. See below for a reconciliation of the previously reported amounts to the restated amounts.

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

	As of June 30, 2017
	As originally reported		Adjustments			As restated

Income taxes payable	$	-	$	751		$	751
Total current liabilities		3,473		751			4,224

Retained earnings		22,646		(751	)		21,895
Total stockholders' equity		46,626		(751	)		45,875
Total liabilities and stockholders' equity	$	50,099	$	-		$	50,099

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

	For the three months ended June 30, 2017
	As originally reported			Adjustments			As restated

Income tax benefit from continuing operations	$	-		$	574		$	574
Loss from continuing operations		(1,460	)		574			(886	)

Gain on sale of discontinued operations, net of taxes		(10	)		(574	)		(584	)
Loss from discontinued operations, net of tax		(845	)		(574	)		(1,419	)
Net loss		(2,305	)		-			(2,305	)

Basic loss per share:
Loss from continuing operations	$	(0.09	)	$	0.03		$	(0.06	)
Loss from discontinued operations		(0.05	)		(0.03	)		(0.08	)
Net loss	$	(0.14	)	$	0.00		$	(0.14	)

Diluted loss per share:
Loss from continuing operations	$	(0.09	)	$	0.03		$	(0.06	)
Loss from discontinued operations		(0.05	)		(0.03	)		(0.08	)
Net loss	$	(0.14	)	$	0.00		$	(0.14	)

	For the six months ended June 30, 2017
	As originally reported		Adjustments			As restated

Income tax benefit from continuing operations	$	18,123	$	(17,096	)	$	1,027
Income (loss) from continuing operations		15,464		(17,096	)		(1,632	)

Gain on sale of discontinued operations, net of taxes		26,339		16,345			42,684
Income from discontinued operations		26,869		16,345			43,214
Net income		42,333		(751	)		41,582

Basic earnings (loss) per share:
Income (loss) from continuing operations	$	0.91	$	(1.01	)	$	(0.10	)
Income income from discontinued operations		1.58		0.96			2.54
Net income	$	2.49	$	(0.05	)	$	2.44

Diluted earnings (loss) per share:
Income (loss) from continuing operations	$	0.87	$	(0.97	)	$	(0.10	)
Income from discontinued operations		1.52		0.92			2.44
Net income	$	2.39	$	(0.05	)	$	2.34

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

	For the six months ended June 30, 2017
	As originally reported			Adjustments			As restated

Net income	$	42,333		$	(751	)	$	41,582
Gain on sale of assets, net of taxes		(26,339	)		(16,345	)		(42,684	)
Change in valuation allowance, income tax		(19,473	)		18,446			(1,027	)
Other current liabilities		(100	)		(1,350	)		(1,450	)
Net cash used in operating activities	$	(667	)	$	-		$	(667	)

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