XML 32 R22.htm IDEA: XBRL DOCUMENT

Note 16 - License, Collaboration and Distribution Agreements

9 Months Ended

Sep. 30, 2022

License, Collaboration, and Distribution Agreements [Text Block]

NOTE 16. 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.

Product Sales Discounts and Allowances

The following table presents activities and ending reserve balances for each significant category of discounts and allowance, which constitute variable consideration for the nine months ended September 30, 2022 (in thousands):

	Chargebacks, Discounts for Prompt Payment			Other Customer Fees			Rebates			Total
Balance at December 31, 2021	$	1,150		$	83		$	56		$	1,289
Provision related to sales made in:
Current period	$	613		$	60		$	326		$	999
Payments and customer credits issued	$	(189	)	$	(55	)	$	(341	)	$	(585	)
Balance at September 30, 2022	$	1,574		$	88		$	41		$	1,703

Contract Assets and Liabilities

We receive payments from our distribution partners established in each contract. Amounts are recorded as accounts receivable when our right to consideration is unconditional. We may be required to defer recognition of revenue for upfront payments until we perform our obligations under these arrangements, and such amounts are recorded as deferred revenue upon receipt.

The following table presents contract assets and liabilities reported in the condensed consolidated balance sheets (in thousands):

	September 30,		December 31,
	2022		2021
Contract assets	$	11	$	19

Contract liabilities - current	$	1	$	54
Total contract liabilities	$	1	$	54

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. During the three months ended September 30, 2022 and 2021, the Company earned $0.2 million and $0.3 million, respectively, in sales revenue for its Avenova Spray product from these distribution and partner pharmacy agreements. The Company earned net sales revenue of $0.1 million and $0.7 million during the nine months ended September 30, 2022 and 2021, respectively, for its Avenova Spray product from these distribution and partner pharmacy agreements.

Under the prescription Avenova Spray product distribution arrangements, the Company had a reserve balance of $1.4 million and $0.9 million at September 30, 2022 and December 31, 2021, respectively. The reserve is included in accrued liabilities in the condensed consolidated balance sheets. The Company also recorded a prepayment of $11 thousand and $19 thousand for rebates related to these distribution agreements as of September 30, 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 and nine months ended September 30, 2022, the revenue generated from over-the-counter Avenova Spray was $1.6 million and $5.1 million, respectively. During the three and nine months ended September 30, 2021, the revenue generated from over-the-counter Avenova Spray was $1.6 million and $5.0 million, respectively.

DERMAdoctor

DERMAdoctor products are available through wholesale distribution relationships with third parties such as Costco, Amazon and others. The Company had a reserve balance of $0.3 million and $0.4 million as of September 30, 2022, and December 31, 2021, respectively. The contract liability is included in accrued liabilities in the condensed consolidated balance sheets.