Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2014 |
Accounting Policies [Abstract] | ' |
Summary of Significant Accounting Policies | ' |
Summary of Significant Accounting Policies |
|
Except for the updates discussed below, there have been no significant changes to the Company’s critical accounting policies during the nine months ended September 30, 2014 as compared to what was previously disclosed in the Company's Annual Report on Form 10-K ("Form 10-K") for the year ended December 31, 2013. |
|
Basis of Presentation |
|
The Company has prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial reporting. These consolidated financial statements have been prepared on the same basis as the Company's annual financial statements and, in the opinion of management, include all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of the Company's financial position, results of operations, and cash flows for the periods presented. The Company's financial position, results of operations and cash flows for the periods presented are not necessarily indicative of the results that may be expected for 2014. This is due in part to the seasonal nature of the business with a disproportionate amount of sales occurring in the fourth quarter, which begins on October 1 and ends on December 31. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") have been omitted in accordance with the rules and regulations of the SEC. These consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited financial statements and notes thereto for the fiscal year ended December 31, 2013, included in the Company’s Form 10-K filed with the SEC. |
|
For the three and nine months ended September 30, 2014 and September 30, 2013, there was no activity in other comprehensive loss, therefore, comprehensive loss equaled net loss. As a result, a separate Statement of Comprehensive Loss is not included in the accompanying consolidated financial statements. |
|
The results of the Company's Media business, which was sold on September 17, 2012, are classified as discontinued operations for the three and nine months ended September 30, 2013 in the Company's Consolidated Statements of Operations. The expenses primarily relate to post-transaction transition services provided by the Company. |
|
Certain prior period amounts have been reclassified to conform to the current period's presentation. In the Consolidated Statements of Cash Flows at September 30, 2013, there was $0.1 million of accrued royalties included in Accounts payable that have been reclassified to Accrued and other liabilities. |
|
Use of Estimates in Preparation of Consolidated Financial Statements |
|
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of such financial statements, as well as the reported amounts of revenue and expenses during the periods indicated. Estimates include, but are not limited to, orders in transit at the end of the reporting period, provision for returns, inventory valuation, Geek Points accruals, stock-based compensation, the fair values of certain assets acquired and liabilities assumed in a business combination, and income taxes. Actual results could differ from those estimates. |
|
Net Revenue |
|
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sale price is fixed or determinable, and collectibility is reasonably assured. Net revenue for the Website segment is derived from the online sale of consumer goods. Website net revenue includes shipping revenue and is presented net of returns and allowances, discounts and sales taxes. Net revenue for the Wholesale segment is derived primarily from the sale of certain exclusive products through the wholesale channel. Wholesale net revenue is presented net of discounts, allowances and sales taxes. |
|
Website revenue is deferred for orders shipped but not delivered before the end of the period. The amount recorded as deferred revenue is estimated because of the Company's high volume of transactions and the use of multiple shipping carriers. Estimates are used to determine which orders that shipped at the end of the reporting period were delivered and should be recognized as revenue. When calculating these estimates, the Company considers its historical experience of shipping transit times for domestic and international orders. On average, shipping transit times are approximately one to eight business days. As of September 30, 2014 and December 31, 2013, $0.9 million and $1.6 million, respectively, were recognized as deferred revenue for orders shipped at the end of the reporting period but not yet delivered to the customer. |
|
The Company also engages in the sale of gift certificates. When a gift certificate is sold, Website revenue is deferred until the certificate is redeemed and the products are delivered. Deferred revenue at September 30, 2014 and December 31, 2013 relating to gift certificates was $1.2 million at each period. |
|
The Company reserves an amount for estimated returns on website orders at the end of each reporting period. The Company provides website customers a 90-day right to return purchased products. These estimates are based on historical patterns and recent trends of customer returns. Reserves for returns at September 30, 2014 and December 31, 2013 were $0.1 million and $0.5 million, respectively. |
|
Business Combinations |
|
Business combinations are accounted for using the purchase method of accounting. The purchase price of an acquisition is allocated to the assets acquired, including intangible assets and liabilities assumed, based on their respective fair values at the acquisition date. Significant estimates and assumptions are required to value assets acquired and liabilities assumed at the acquisition date, including contingent consideration. Liabilities related to contingent consideration are remeasured at fair value in each subsequent reporting period. These estimates are inherently uncertain and subject to refinement and typically include the calculation of an appropriate discount rate and projection of cash flows associated with each acquired asset or assumed liability. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with corresponding adjustments to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the Consolidated Statement of Operations. |
|
Goodwill and Other Intangible Assets |
|
Identifiable intangible assets were recorded based on their estimated fair values in connection with the acquisition. The identifiable intangible assets are amortized on a straight-line basis over their respective useful lives ranging from three to five years. For the three months ended September 30, 2014, the total amortization expense was insignificant. Identifiable intangible assets with finite lives are reviewed for impairment when events and circumstances indicate that the carrying value may not be recoverable. |
|
Goodwill was recorded as the excess of the purchase price over the net assets acquired. The Company evaluates goodwill for impairment annually as of December 31, and when an event occurs or circumstances change that indicates that the carrying value may not be recoverable. Impairment of goodwill is tested at the reporting unit level by comparing the carrying value of the reporting unit's net assets, including goodwill, to the fair value of the reporting unit. Due to the recent timing of the acquisition, the Company has not yet completed the analysis to determine the assignment of goodwill to the reporting units. If the carrying amount of the reporting unit exceeds its fair value, a second step is performed to measure the amount of the impairment loss, if any. The preparation of the goodwill impairment analysis requires the Company to make significant estimates and assumptions with respect to the determination of fair values of tangible and intangible assets. These estimates and assumptions, which include future values, are often subjective and may differ significantly from period to period based on changes in the overall economic environment, changes in its business and changes in its strategy or its internal forecasts. |
|
Recently Adopted Accounting Pronouncements |
|
In July 2013, the Financial Accounting Standards Board issued authoritative guidance to amend previous guidance for income taxes and requires that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, with certain exceptions. This standard is effective for fiscal years beginning on or after December 15, 2013 and subsequent interim periods. The standard shall be applied prospectively to all unrecognized tax benefits that exist at the effective date. The adoption of this standard, which became effective January 1, 2014, did not have an impact on the Company's results of operations or its financial position. |
|
Recent Accounting Pronouncements |
|
In May 2014, the Financial Accounting Standards Board issued authoritative guidance, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated guidance will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that the guidance will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting. |