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Note 16 - License, Collaboration and Distribution Agreements

3 Months Ended

Mar. 31, 2022

License, Collaboration, and Distribution Agreements [Text Block]

NOTE 16. LICENSE, COLLABORATION AND DISTRIBUTION AGREEMENTS

Transactions under the Company’s major distribution agreements are recognized upon transfer of control of product sold to its major distribution partners at the amount of consideration that the Company expects to be entitled to. The Company records contract liabilities for the amounts that are estimated to be subject to significant reversal, including allowances for services, discounts, rebate programs, and product returns.

The following table presents changes in the Company's contract assets and liabilities for the three months ended March 31, 2022 (in thousands):

	Balance at December 31, 2021		Additions		Deductions			Balance at the end of the Period
Contract liabilities: deferred revenue	$	2	$	69	$	(2	)	$	69
Contract liabilities: accrued liabilities (includes contract assets)		1,270		842		(201	)		1,911
Total	$	1,272	$	911	$	(203	)	$	1,980

For the three months ended March 31, 2022 and 2021, the Company recognized the following revenue (in thousands):

	Three Months Ended March 31,
	2022		2021
Revenue recognized in the period from:
Amounts included in contract liabilities at the beginning of the period:
Performance obligations satisfied	$	201	$	575
New activities in the period:
Performance obligations satisfied		2,428		1,232

	$	2,629	$	1,807

Avenova Spray Pharmacy Distribution Agreements and Specialty Pharmacies

Avenova Spray is made available in local pharmacies and major pharmacy retail chains under nationwide distribution agreements with McKesson Corporation, Cardinal Health and AmerisourceBergen. We have also entered into direct agreements with preferred pharmacy networks as part of our Partner Pharmacy Program. The Company incurred net sales loss of $199 thousand during the three months ended March 31, 2022, and net sales revenue of $122 thousand during the three months ended March 31, 2021 for its Avenova Spray product from these distribution and partner pharmacy agreements. The net loss during the three months ended March 31, 2022, was the result of an increase in returns for expired product from a major pharmacy retail chain.

Under the prescription Avenova Spray product distribution arrangements, the Company had a contract liability balance of $1.3 million and $0.9 million as of March 31, 2022 and December 31, 2021, respectively. The contract liability is included in accrued liabilities in the condensed consolidated balance sheets. The Company also recorded a prepayment of $3 thousand and $19 thousand for rebates related to these distribution agreements as of March 31, 2022 and December 31, 2021, respectively, that is recorded in the prepaid expenses and other current assets in the condensed consolidated balance sheets (see Note 5, “Prepaid Expenses and Other Current Assets”).

Over-the-Counter Sales of Avenova Spray

Avenova Spray was launched online on June 1, 2019 direct to U.S. customers. Avenova Spray is offered primarily for sale on Amazon.com, the Company’s website (Avenova.com) and Walmart.com. Avenova Spray was launched at select CVS stores and online on CVS.com in February 2021. These channels provide the Company with more stable pricing and provide customers with easy access to our product. During the three months ended March 31, 2022 and 2021, the revenue generated from over-the-counter Avenova Spray was $1.4 million and $1.2 million, respectively.

DERMAdoctor

DERMAdoctor products are available through wholesale distribution relationships with third parties such as Costco, Amazon and others. The Company had a contract liability balance of $0.6 million and $0.4 million as of March 31, 2022, and December 31, 2021, respectively. The contract liability is included in accrued liabilities in the condensed consolidated balance sheets.