Scott Liquid Gold : LIQUID GOLD-INC. REPORTS SECOND QUARTER RESULTS - Form 8-K

SCOTT'S LIQUID GOLD-INC. REPORTS SECOND QUARTER RESULTS

Second Quarter 2022 Highlights:

•

Second quarter 2022 net sales of $5.4 million vs. $6.5 million of same brand net sales in 2021

•

Net loss of $4.3 million in Q2 2022 vs. $1.1 million in 2021

•

Adjusted net loss from operations of $0.6 million in Q2 2022 and Q2 2021

o

Q2 2022 included impairment of goodwill and intangible assets of $3.6 million

o

Q2 2021 included restructuring costs of $0.8 million

•

Generated operating cash flow of $0.5 million

GREENWOOD VILLAGE, COLORADO - August 12, 2022 - Scott's Liquid Gold-Inc. (OTC: SLGD) today announced results for the three months ended June 30, 2022.

Second Quarter Financial Results

In the second quarter of 2022, net sales decreased primarily due to the sale of the Dryel brand and the conclusion of our agreement to distribute Batiste products, which collectively represented $1.9 million in sales in the second quarter of 2022. BIZ sales declined due to continued supply chain disruptions related to our powder booster products. Sales of our Alpha Skin Care products destined for the China market decreased, and subsequent to quarter-end we terminated our relationship with our exclusive distributor in China and commenced a new go-to-market strategy in that region.

Our net loss of $4.3 million was primarily driven by the $3.6 million impairment of goodwill and intangible assets related to our Kids N Pets and Messy Pet product lines.

Despite the decreased sales levels compared to a year ago, our adjusted net loss remained consistent between the second quarter of 2022 versus the same period in 2021 due to various improvements to our cost structure.

Management Commentary

"Despite a challenging operating environment, we remain committed to maximizing our value proposition for consumers across our entire portfolio of brands," said Tisha Pedrazzini, President of Scott's. "We have reduced overhead and continue to optimize and simplify our production and logistics networks. While inflation and supply chain shortages in select products continue to be a headwind, we continue to pursue marketing strategies that drive conversion while reducing expenditures and providing our customers the value that they have come to count on from Scott's."

SCOTT'S LIQUID GOLD-INC. & SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except per share data)

	Three months ended			Six Months Ended
	June 30,			June 30,
	2022			2021			2022			2021
Net sales	$	5,383			$	7,769			$	11,172			$	16,613
Cost of sales		3,108				4,662				5,978				9,525
Gross profit		2,275				3,107				5,194				7,088
Operating expenses:
Advertising		174				203				326				362
Selling		1,844				2,392				4,061				4,801
General and administrative		698				1,687				1,444				2,972
Intangible asset amortization		121				264				226				529
Impairment of goodwill and intangible assets		3,589				-				3,589				-
Total operating expenses		6,426				4,546				9,646				8,664
Loss from operations		(4,151	)			(1,439	)			(4,452	)			(1,576	)
Interest expense		(130	)			(76	)			(280	)			(110	)
Loss before income taxes and discontinued operations		(4,281	)			(1,515	)			(4,732	)			(1,686	)
Income tax (expense) benefit		(52	)			400				(52	)			445
Loss from continuing operations		(4,333	)			(1,115	)			(4,784	)			(1,241	)
Income (loss) from discontinued operations, net of taxes		-				49				-				(105	)
Net loss	$	(4,333	)		$	(1,066	)		$	(4,784	)		$	(1,346	)
Basic and diluted net loss per common shares:
Loss from continuing operations	$	(0.34	)		$	(0.08	)		$	(0.38	)		$	(0.10	)
Loss from discontinued operations	$	-			$	-			$	-			$	(0.01	)
Net loss	$	(0.34	)		$	(0.08	)		$	(0.38	)		$	(0.11	)
Weighted average shares outstanding:
Basic and diluted		12,749				12,618				12,745				12,618

SCOTT'S LIQUID GOLD-INC. & SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except par value amounts)

	June 30,			December 31,
	2022			2021
Assets
Current assets:
Cash	$	66			$	770
Restricted cash		250				500
Accounts receivable, net		1,693				3,516
Inventories		5,842				5,677
Income taxes receivable		275				320
Prepaid expenses		293				436
Total current assets		8,419				11,219
Property and equipment, net		4				7
Goodwill		838				1,710
Intangible assets, net		2,359				5,160
Operating lease right-of-use assets		2,614				2,735
Other assets		38				38
Total assets	$	14,272			$	20,869
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	2,161			$	2,647
Accrued expenses		626				747
Current portion of long-term debt		180				1,000
Operating lease liabilities, current portion		259				251
Total current liabilities		3,226				4,645
Long-term debt, net of current portion and debt issuance costs		1,528				1,876
Operating lease liabilities, net of current		2,649				2,780
Other liabilities		27				27
Total liabilities		7,430				9,328
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 12,749 shares (2022) and 12,727 shares (2021)		1,275				1,273
Capital in excess of par		7,872				7,789
(Accumulated deficit) retained earnings		(2,305	)			2,479
Total shareholders' equity		6,842				11,541
Total liabilities and shareholders' equity	$	14,272			$	20,869

SCOTT'S LIQUID GOLD-INC. & SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)

	Six Months Ended
	June 30,
	2022			2021
Cash flows from operating activities:
Net loss	$	(4,784	)		$	(1,346	)
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
Depreciation and amortization		339				905
Stock-based compensation		85				102
Deferred income taxes		-				(503	)
Impairment of goodwill and intangible assets		3,589				-
Change in operating assets and liabilities:
Accounts receivable		1,823				(211	)
Inventories		(165	)			(2,782	)
Prepaid expenses and other assets		143				166
Income taxes receivable		45				22
Accounts payable, accrued expenses, and other liabilities		(609	)			2,942
Total adjustments to net loss		5,250				641
Net cash provided by (used in) operating activities		466				(705	)
Cash flows from investing activities:
Purchase of software		(142	)			(113	)
Net cash used in investing activities		(142	)			(113	)
Cash flows from financing activities:
Repayments on term loans		(2,000	)			(500	)
Proceeds from revolving credit facility		14,737				19,517
Repayments of revolving credit facility		(14,015	)			(18,184	)
Net cash (used in) provided by financing activities		(1,278	)			833
Net (decrease) increase in cash and restricted cash		(954	)			15
Cash and restricted cash, beginning of period		1,270				5
Cash and restricted cash, end of period	$	316			$	20
Supplemental disclosures:
Cash paid during the period for interest	$	170			$	212

Note Regarding Forward-Looking Statements

This news release may contain "forward-looking statements" within the meaning of the federal securities laws that are intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" generally can be identified by the use of forward-looking terminology such as "assumptions," "target," "guidance," "strategy," "outlook," "plans," "projection," "may," "will," "would," "expect," "intend," "estimate," "anticipate," "believe", "potential," or "continue" (or the negative or other derivatives of each of these terms) or similar terminology.

Forward-looking statements convey our expectations, intentions, or forecasts about future events, circumstances, or results. All forward-looking statements, by their nature, are subject to assumptions, risks, and uncertainties, which may change over time and many of which are beyond our control. You should not rely on any forward-looking statement as a prediction or guarantee about the future. Actual future objectives, strategies, plans, prospects, performance, conditions, or results may differ materially from those set forth in any forward-looking statement. Some of the factors that may cause actual results or other future events or circumstances to differ from those in forward-looking statements are described in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 and the Company's subsequent Quarterly Reports on Form 10-Q and other periodic reports filed with the Securities and Exchange Commission. Any forward-looking statement made by us or on our behalf speaks only as of the date that it was made. We do not undertake to update any forward-looking statement to reflect the impact of events, circumstances, or results that arise after the date that the statement was made, except as required by applicable securities laws. You, however, should consult further disclosures (including disclosures of a forward-looking nature) that we may make in any subsequent filings with the Securities and Exchange Commission.

About Scott's Liquid Gold-Inc.

Scott's Liquid Gold-Inc. (SLG-Inc.) is a leading manufacturer and marketer of consumer products sold nationally and internationally to retail channels over the last 70 years. SLG-Inc. markets and distributes some of the most trusted and recognized consumer brand names, including its namesake wood cleaning products; Alpha Skin Care^®; Kids N Pets^®; Messy Pet^®; BIZ^®; Denorex^®; Prell^® and other brands.

Investor Relations Contact:

David Arndt

Chief Financial Officer

303.576.6027