Summer Infant (SUMR) 10-Q 4 Nov 15 2015 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Oct. 03, 2015	Nov. 02, 2015
Document and Entity Information
Entity Registrant Name	Summer Infant, Inc.
Entity Central Index Key	1,314,772
Document Type	10-Q
Document Period End Date	Oct. 3, 2015
Amendment Flag	false
Current Fiscal Year End Date	--01-02
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		18,338,674
Document Fiscal Year Focus	2,015
Document Fiscal Period Focus	Q3

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Oct. 03, 2015	Jan. 03, 2015
CURRENT ASSETS
Cash and cash equivalents	$ 1,104	$ 1,272
Trade receivables, net of allowance for doubtful accounts	36,057	38,794
Inventory, net	43,622	44,010
Prepaid and other current assets	1,777	2,076
Deferred tax assets	1,194	1,194
TOTAL CURRENT ASSETS	83,754	87,346
Property and equipment, net	11,890	13,080
Intangible assets, net	20,326	20,679
Other assets	1,562	1,362
TOTAL ASSETS	117,532	122,467
CURRENT LIABILITIES
Accounts payable	31,818	21,878
Accrued expenses	4,756	8,628
Current portion of long-term debt (including capital leases)	2,089	1,641
TOTAL CURRENT LIABILITIES	38,663	32,147
Long-term debt, less current portion	51,436	57,097
Other liabilities	2,726	2,994
Deferred tax liabilities	2,418	2,378
TOTAL LIABILITIES	$ 95,243	$ 94,616
STOCKHOLDERS' EQUITY
Preferred Stock, $0.0001 par value, 1,000,000 authorized, none issued or outstanding at October 3, 2015 and January 3, 2015, respectively
Common Stock $0.0001 par value, authorized, issued and outstanding of 49,000,000, 18,610,323, and 18,338,674 at October 3, 2015 and 49,000,000, 18,415,934, and 18,144,285 at January 3, 2015, respectively	$ 2	$ 2
Treasury Stock at cost (271,649 shares at October 3, 2015 and January 3, 2015, respectively)	(1,283)	(1,283)
Additional paid-in capital	75,701	74,954
Accumulated deficit	(49,958)	(44,412)
Accumulated other comprehensive loss	(2,173)	(1,410)
TOTAL STOCKHOLDERS' EQUITY	22,289	27,851
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 117,532	$ 122,467

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Oct. 03, 2015	Jan. 03, 2015
Condensed Consolidated Balance Sheets
Preferred Stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred Stock, authorized	1,000,000	1,000,000
Preferred Stock, issued	0	0
Preferred Stock, outstanding	0	0
Common Stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common Stock, authorized	49,000,000	49,000,000
Common Stock, issued	18,610,323	18,415,934
Common Stock, outstanding	18,338,674	18,144,285
Treasury Stock at cost, shares	271,649	271,649

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 03, 2015	Sep. 30, 2014	Oct. 03, 2015	Sep. 30, 2014
Condensed Consolidated Statements of Operations
Net sales	$ 50,205	$ 51,020	$ 155,025	$ 154,390
Cost of goods sold	34,600	34,420	108,674	103,897
Gross profit	15,605	16,600	46,351	50,493
General & administrative expenses	12,953	10,107	35,235	29,503
Selling expense	4,119	4,456	13,295	13,742
Depreciation and amortization	1,275	1,369	3,927	4,132
Operating (loss) income	(2,742)	668	(6,106)	3,116
Interest expense, net	589	870	2,753	2,571
(Loss) income before income taxes	(3,331)	(202)	(8,859)	545
(Benefit) provision for income taxes	(1,500)	(64)	(3,313)	179
NET (LOSS) INCOME	$ (1,831)	$ (138)	$ (5,546)	$ 366
Net (loss) income per share:
BASIC (in dollars per share)	$ (0.10)	$ (0.01)	$ (0.30)	$ 0.02
DILUTED (in dollars per share)	$ (0.10)	$ (0.01)	$ (0.30)	$ 0.02
Weighted average shares outstanding:
BASIC (in shares)	18,309,381	18,086,441	18,239,490	18,029,659
DILUTED (in shares)	18,309,381	18,086,441	18,239,490	18,196,470

Condensed Consolidated Stateme5

Condensed Consolidated Statements of Comprehensive (Loss) Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 03, 2015	Sep. 30, 2014	Oct. 03, 2015	Sep. 30, 2014
Condensed Consolidated Statements of Comprehensive (Loss) Income
Net (loss) income	$ (1,831)	$ (138)	$ (5,546)	$ 366
Other comprehensive loss:
Changes in foreign currency translation adjustments	(371)	(431)	(763)	(144)
Comprehensive (loss) income	$ (2,202)	$ (569)	$ (6,309)	$ 222

Condensed Consolidated Stateme6

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Oct. 03, 2015	Sep. 30, 2014
Cash flows from operating activities:
Net (loss) income	$ (5,546)	$ 366
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities
Depreciation and amortization	3,897	4,132
Stock-based compensation	700	1,011
Changes in assets and liabilities:
Decrease (increase) in trade receivables	2,937	(3,868)
Decrease (increase) in inventory	630	(10,527)
Decrease in prepaid and other assets	139	160
Increase (decrease) in accounts payable and accrued expenses	5,720	3,614
Net cash provided by (used in) operating activities	8,477	(5,112)
Cash flows from investing activities:
Acquisitions of intangible assets	(472)	(227)
Acquisitions of property and equipment	(1,875)	(1,976)
Net cash used in investing activities	(2,347)	(2,203)
Cash flows from financing activities:
Proceeds from exercise of stock options	46	19
Proceeds from new Term Loan Facility	10,000
Proceeds from new FILO Facility	5,000
Repayment of Prior Term Loan	(12,500)	(1,125)
Net (repayment) borrowings on revolving facilities	(7,712)	7,861
Net cash (used in) provided by financing activities	(5,166)	6,755
Effect of exchange rate changes on cash and cash equivalents	(1,132)	62
Net decrease in cash and cash equivalents	(168)	(498)
Cash and cash equivalents at beginning of period	1,272	1,573
Cash and cash equivalents at end of period	1,104	1,075
Supplemental disclosure of cash flow information:
Cash paid for interest	1,818	2,106
Cash paid for income taxes	$ 236	$ 23

BASIS OF PRESENTATION AND SUMMA

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	9 Months Ended
	Oct. 03, 2015
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations The Company designs, markets and distributes branded juvenile health, safety and wellness products that are sold globally to large national retailers as well as independent retailers, primarily in North America. The Company currently markets its products in several product categories including monitoring, safety, nursery, baby gear, and feeding products. Most products are sold under our core brand names of Summer ® , SwaddleMe ® , Born Free ® , and Kiddopotamus®. Basis of Presentation and Principles of Consolidation The accompanying interim, condensed consolidated financial statements of the Company are unaudited, but in the opinion of management, reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results for the interim periods. Accordingly, they do not include all information and notes required by generally accepted accounting principles in the United States of America (“GAAP”) for complete financial statements. The results of operations for interim periods are not necessarily indicative of results to be expected for the entire fiscal year or any other period. The balance sheet at January 3, 2015 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. These interim condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes for the year ended January 3, 2015 included in its Annual Report on Form 10-K filed with the SEC on March 4, 2015. It is the Company’s policy to prepare its financial statements on the accrual basis of accounting in conformity with GAAP. The interim condensed consolidated financial statements include the accounts of its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in the consolidation. All dollar amounts included in the Notes to Condensed Consolidated Financial Statements are in thousands of U.S. dollars, except share and per share amounts. Revenue Recognition The Company records revenue when all of the following occur: persuasive evidence of an arrangement exists, product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. Sales are recorded net of provisions for returns and allowances, customer discounts, and other sales-related discounts. The Company bases its estimates for discounts, returns and allowances on negotiated customer terms and historical experience. Customers do not have the right to return products unless the products are defective. The Company records a reduction of sales for estimated future defective product deductions based on contractual terms and historical experience. Sales incentives or other consideration given by the Company to customers that are considered adjustments to the selling price of the Company’s products, such as markdowns, are reflected as reductions of revenue. Sales incentives and other consideration that represent costs incurred by the Company for assets or services received, such as the appearance of the Company’s products in a customer’s national circular ad, are reflected as selling expenses in the accompanying interim Condensed Consolidated Statements of Operations. Inventory Valuation Inventory is comprised mostly of finished goods and some component parts and is stated at the lower of cost using the first-in, first-out (“FIFO”) method, or market (net realizable value). The Company regularly reviews slow-moving and excess inventories, and writes down inventories to net realizable value if the ultimate expected net proceeds from the disposals of excess inventory are less than the carrying cost of the merchandise. Income Taxes Income taxes are computed using the asset and liability method of accounting. Under the asset and liability method, a deferred income tax asset or liability is recognized for estimated future tax effects attributable to temporary differences and carry-forwards. The measurement of deferred income tax assets is adjusted by a valuation allowance, if necessary, to recognize future tax benefits only to the extent, based on available evidence, that it is more likely than not that such benefits will be realized. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon adoption and in subsequent periods. As of October 3, 2015 and January 3, 2015, the Company did not have any material uncertain tax positions. No interest and penalties related to uncertain tax positions were accrued at October 3, 2015 and January 3, 2015. Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Accordingly, actual results could differ from those estimates. Net Income (Loss) Per Share Basic earnings (loss) per share for the Company are computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share includes the dilutive impact of outstanding stock options and unvested restricted shares. Translation of Foreign Currencies All assets and liabilities of the Company’s foreign subsidiaries, each of whose functional currency is in its local currency, are translated into U.S. dollars at the exchange rate in effect at the end of the quarter and the income and expense accounts of these affiliates have been translated at average rates prevailing during each respective quarter. Resulting translation adjustments are made to a separate component of stockholders’ equity within accumulated other comprehensive income or loss. Recently Issued Accounting Pronouncements In May 2014, the FASB issued new accounting guidance related to revenue recognition. This guidance was originally proposed to be effective for reporting periods beginning after December 15, 2016, however in July 2015, the FASB approved the delay in this guidance until reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements. In April 2015, the FASB issues ASU 2015-03, “Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” This guidance requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability. This guidance is effective for fiscal years beginning after December 15, 2015. The Company has evaluated the impact this guidance will have on its consolidated financial statements and expects the impact to be immaterial. In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory.” This guidance required inventory within the scope of ASU 2015-11 to be measured at the lower of cost and net realizable value. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This guidance is effective for fiscal years beginning after December 15, 2016. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.

DEBT

DEBT	9 Months Ended
	Oct. 03, 2015
DEBT
DEBT	2. DEBT Credit Facilities In April 2015, the Company and its wholly owned subsidiary, Summer Infant (USA), Inc., entered into an amended and restated loan and security agreement with Bank of America, N.A., as agent, providing for an asset-based credit facility (the “Credit Facility”). The Credit Facility replaced the Company’s prior credit facility with Bank of America. The Credit Facility consists of a $60,000 asset-based revolving credit facility, with a $10,000 letter of credit sub-line facility (the “Revolving Facility”), a $5,000 “first in last out” (FILO) revolving credit facility (the “FILO Facility”) and a $10,000 term loan facility (the “Term Loan Facility”). Pursuant to an accordion feature, the Credit Facility includes the ability to increase the Revolving Facility by an additional $15,000 upon the Company’s request and the agreement of the lenders participating in the increase. The total borrowing capacity under the Revolving Facility is based on a borrowing base, generally defined as 85% of the value of eligible accounts plus the lesser of (i) 70% of the value of eligible inventory or (ii) 85% of the net orderly liquidation value of eligible inventory, less reserves. The total borrowing capacity under the FILO Facility is based on a borrowing base, generally defined as a specified percentage of the value of eligible accounts that steps down over time, plus a specified percentage of the value of eligible inventory that steps down over time. The scheduled maturity date of the loans under the Revolving Facility and the Term Loan Facility is April 21, 2020, and loans under the FILO Facility terminate April 21, 2018, subject in each case to customary early termination provisions. Any termination of the Revolving Facility would require termination of the Term Loan Facility and the FILO Facility. All obligations under the Credit Facility are secured by substantially all of the Company’s assets. In addition, Summer Infant Canada Limited and Summer Infant Europe Limited, subsidiaries of the Company, are guarantors under the Credit Facility. Proceeds from the loans were used to (i) repay the Company’s outstanding term loan, (ii) pay fees and transaction expenses associated with the closing of the Credit Facility, (iii) pay obligations under the Credit Facility, and (iv) pay for lawful corporate purposes, including working capital. Borrowings under the Revolving Facility will bear interest, at the Company’s option, at a base rate or at LIBOR, plus applicable margins based on average quarterly availability and ranging between 1.75% and 2.25% on LIBOR borrowings and 0.25% and 0.75% on base rate borrowings. Loans under the FILO Facility and Term Loan Facility will bear interest, at the Company’s option, at a base rate or at LIBOR, plus a margin of 4.00% on LIBOR borrowings and 2.50% on base rate borrowings. Beginning on July 1, 2015, the Company is required to repay the Term Loan Facility in quarterly installments of $500. Beginning with the fiscal year ending January 2, 2016, the Company is required to prepay the Term Loan Facility in an amount equal to 50% of the Company’s “excess cash flow,” as such term is defined in the Credit Facility, at the end of each fiscal year. Under the Credit Facility, the Company must comply with certain financial covenants, including that the Company (i) maintain a fixed charge coverage ratio of at least 1.0 to 1.0 for the twelve consecutive fiscal months most recently ended and (ii) beginning with the quarter ending July 4, 2015, maintain a certain leverage ratio at the end of each fiscal quarter. For purposes of the financial covenants, consolidated EBITDA is defined as net income before interest, taxes, depreciation and amortization, plus certain customary expenses, fees, non-cash charges and up to $2,000 of specified inventory dispositions, and minus certain customary non-cash items increasing net income and other specified items. The Credit Facility contains customary affirmative and negative covenants. Among other restrictions, the Company is restricted in its ability to incur additional debt, make acquisitions or investments, dispose of assets, or make distributions unless in each case certain conditions are satisfied. The Credit Facility also contains customary events of default, including the occurrence of a material adverse event and the occurrence of a change of control. In the event of a default, all of the Company’s obligations under the Credit Facility may be declared immediately due and payable. For certain events of default relating to insolvency and receivership, all outstanding obligations immediately become due and payable. As of October 3, 2015, the base rate on loans was 4.0% and the LIBOR rate was 2.5%. The amount outstanding on the Revolving Facility at October 3, 2015 was $39,430. Total borrowing capacity under the Revolving Facility at October 3, 2015 was $49,372 and borrowing availability was $9,942. The amounts outstanding on the Term Loan Facility and FILO Facility at October 3, 2015 were $9,000 and $5,000, respectively. Prior Credit Facility and Term Loan . The Credit Facility replaced the Company’s prior credit facility with Bank of America and the Company’s prior term loan agreement with Salus Capital Partners, LLC. Prior to April 2015, the Company had a loan and security agreement with Bank of America N.A. that provided for an $80,000, asset-based revolving credit facility, with a $10,000 letter of credit sub-line facility. The Credit Facility was evaluated, by lender, to determine the proper accounting treatment for the transaction. Accordingly, debt exitinguishment accounting was used to account for the pay off of the prior term loan agreement with Salus Capital Partners, LLC and for the pay off of a member of the prior credit facility with Bank of America who did not continue in the Credit Facility resulting in the write off of $549 in remaining unamortized deferred financing costs and $135 in termination fees. Debt modification accounting was used for the remaining members of the prior credit facility resulting in their remaining unamortized deferred financing costs of $601 and the new financing costs of $1,054 to be capitalized and amortized over the life of the new debt beginning in the second quarter of 2015. Aggregate maturities of bank debt related to the Credit Facility are as follows: Year ending: 2015 $ 2016 2017 2018 2019 2020 Total $ Lease Amendment On May 13, 2015, Summer Infant (USA), Inc. (“Summer USA”), a wholly-owned subsidiary of the Company, entered into an amendment (the “Amendment”) to its lease dated March 24, 2009 (the “Lease”) with Faith Realty II, LLC (the “Landlord”), a company which is owned by Jason Macari, former CEO and director of Summer Infant, Inc. and his spouse. Pursuant to the terms of the original Lease, the Landlord leased the property located at 1275 Park East Drive, Woonsocket, Rhode Island to Summer USA for an annual rent of $390 for an initial seven-year term. Pursuant to the Amendment, (i) the initial term of the Lease was extended for two additional years, such that the initial term now ends on March 31, 2018, and the term of the Lease may be extended at Summer USA’s election for one additional term of three years (rather than five years) upon twelve months’ prior notice, (ii) the annual rent for the last two years of the newly amended initial term was set at $429 and the annual rent for the extension period, if elected, was set at $468 and (iii) the Landlord agreed to provide an aggregate improvement allowance of not more than $78 for the newly amended initial term, to be applied against Summer USA’s monthly rent, and an additional improvement allowance of $234 for the extension term, if elected, to be applied against Summer USA’s monthly rent during such extension term. The Amendment was reviewed and approved by the audit committee because it was a related party transaction.

INTANGIBLE ASSETS

INTANGIBLE ASSETS	9 Months Ended
	Oct. 03, 2015
INTANGIBLE ASSETS
INTANGIBLE ASSETS	3. INTANGIBLE ASSETS Intangible assets consisted of the following: October 3, January 3, 2015 2015 Brand names $ $ Patents and licenses Customer relationships Other intangibles Less: Accumulated amortization ) ) Intangible assets, net $ $ The amortization period for the majority of the intangible assets ranges from 5 to 20 years for those assets that have an estimated life; certain of the assets have indefinite lives (brand names). Total of intangibles not subject to amortization amounted to $12,308 as of October 3, 2015 and January 3, 2015.

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES	9 Months Ended
	Oct. 03, 2015
COMMITMENTS AND CONTINGENCIES.
COMMITMENTS AND CONTINGENCIES	4. COMMITMENTS AND CONTINGENCIES Litigation The Company is a party to routine litigation and administrative complaints incidental to its business. The Company does not believe that the resolution of any or all of such routine litigation and administrative complaints is likely to have a material adverse effect on the Company’s financial condition or results of operations, except as noted below. On May 27, 2015, the Company filed a Complaint against Carol E. Bramson, Annamaria Dooley, Kenneth N. Price, Carson J. Darling, Dulcie M. Madden, and Bruce Work in the United States District Court for the District of Rhode Island (Civil Action No. 1:15-CV-00218-5-LDA). The Complaint alleges theft and misappropriation of the Company’s confidential and proprietary trade secrets, intellectual property, and business, branding and marketing strategies. Ms. Bramson is a former member of the Company’s Board of Directors and the Company’s former Chief Executive Officer, Ms. Dooley is the Company’s former Senior Vice President of Product Development, and Mr. Price is the former President of Global Sales & Marketing of the Company. Mr. Darling and Ms. Madden are principals of Rest Devices, Inc., a former consultant to the Company (the “Rest Defendants”). The Complaint alleges violation of trade secrets, misappropriation of confidential information, breaches of fiduciary duties by Mmes. Bramson and Dooley and Mr. Price, conversion, breaches of contract by Mmes. Bramson and Dooley and Mr. Price, tortious interference with employment agreements, consulting agreements, and prospective business relations, unjust enrichment and other related claims, and seeks injunctive relief, return of the Company’s confidential and proprietary information, as well as other relief including compensatory damages. On June 23, 2015, the Rest Defendants filed a motion to dismiss the claims against them set forth in the Complaint, and the Company filed its opposition to the motion on July 3, 2015. On July 3, 2015, Mr. Price filed a motion to dismiss the claims against him set forth in the Complaint, and the Company filed its opposition to the motion on July 20, 2015. The Court has not yet ruled on Mr. Price’s motion to dismiss. On July 3, 2015, Mmes. Bramson and Dooley filed an answer to the Complaint, and asserted counterclaims against the Company, including (i) a claim by Ms. Bramson for contractual indemnification and (ii) claims by Mmes. Bramson and Dooley for indemnification under the Company’s bylaws, tortious interference with prospective business relations, unfair and deceptive trade practices and abuse of process. The Company filed a motion to dismiss certain counterclaims made by Mmes. Bramson and Dooley on July 27, 2015. Mmes. Bramson and Dooley filed an opposition to the Company’s motion to dismiss their counterclaims on October 8, 2015, and the Company filed its reply on October 22, 2015. The Court has not yet ruled on the Company’s motion to dismiss. In August 2015, the Court granted Ms. Bramson’s motion for advancement of certain indemnification expenses. On August 25, 2015, the Company and the Rest Defendants reached an agreement-in-principle with regard to a proposed settlement, and the Company subsequently withdrew its motion for a preliminary injunction. Following negotiation , as of November 1, 2015, the Company and the Rest Defendants entered into a confidential settlement agreement (the “Settlement Agreement”) pursuant to which the Company and the Rest Defendants mutually released claims against each other, and the Company has voluntarily dismiss ed all claims in the Complain t against the Rest Defendants. The Settlement Agreement did not release any claims against Mmes. Bramson or Dooley or Mr. Price, and the Company intends to continue to vigorously pursue this matter with respect to the remaining defendants and to protect its confidential and proprietary information. The Company has incurred significant expenses related to this lawsuit to date and may continue to incur expenses related to this lawsuit. The Company is also reviewing its accounting treatment of $315 in capitalized technology development costs incurred during its consulting agreement with Rest Devices, Inc. in light of the Settlement Agreement. The Company cannot predict the outcome of this lawsuit or for how long it will remain active.

SHARE BASED COMPENSATION

SHARE BASED COMPENSATION	9 Months Ended
	Oct. 03, 2015
SHARE BASED COMPENSATION
SHARE BASED COMPENSATION	5. SHARE BASED COMPENSATION The Company is authorized to issue up to 3,000,000 shares for equity awards under the Company’s 2006 Performance Equity Plan (“2006 Plan”) and 1,700,000 shares for equity awards under the Company’s 2012 Incentive Compensation Plan (“2012 Plan”). The Company’s stockholders approved an increase in the number of shares available under the 2012 Plan from 1,100,000 to 1,700,000 shares on August 4, 2015. Under the 2006 Plan and 2012 Plan, awards may be granted to participants in the form of non-qualified stock options, incentive stock options, restricted stock, deferred stock, restricted stock units and other stock-based awards. Subject to the provisions of the plans, awards may be granted to employees, officers, directors, advisors and consultants who are deemed to have rendered or are able to render significant services to the Company or its subsidiaries and who are deemed to have contributed or to have the potential to contribute to the Company’s success. The Company accounts for options under the fair value recognition standard. The application of this standard resulted in share-based compensation expense for the three months ended October 3, 2015 and September 30, 2014 of $280 and $468, respectively, and share-based compensation expense for the nine months ended October 3, 2015 and September 30, 2014 of $700 and $1,011, respectively. Share based compensation expense is included in selling, general and administrative expenses. The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the table below. The Company uses the simplified method to estimate the expected term of the options, but used an estimate for grants of “plain vanilla” stock options based on a formula prescribed by the Securities and Exchange Commission. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Share-based compensation expense recognized in the consolidated financial statements in 2015 and 2014 is based on awards that are ultimately expected to vest. As of October 3, 2015, there were 2,005,533 stock options outstanding and 234,268 unvested restricted shares outstanding. During the nine months ended October 3, 2015, the Company granted 485,750 stock options and granted 216,135 shares of restricted stock. The following table summarizes the weighted average assumptions used for stock options granted during the periods ended October 3, 2015 and September 30, 2014. 2015 2014 Expected life (in years) Risk-free interest rate % % Volatility % % Dividend yield % % Forfeiture rate % % As of October 3, 2015, there are 139,961 shares available to grant under the 2006 Plan and 806,000 shares available to grant under the 2012 Plan.

WEIGHTED AVERAGE COMMON SHARES

WEIGHTED AVERAGE COMMON SHARES	9 Months Ended
	Oct. 03, 2015
WEIGHTED AVERAGE COMMON SHARES
WEIGHTED AVERAGE COMMON SHARES	6. WEIGHTED AVERAGE COMMON SHARES Basic and diluted earnings or loss per share (“EPS”) is based upon the weighted average number of common shares outstanding during the period. The Company does not include the anti-dilutive effect of common stock equivalents, including stock options, in computing net income (loss) per diluted common share. The computation of diluted common shares for the three months and nine months ended October 3, 2015 excluded 2,005,533 stock options and 234,268 shares of restricted stock outstanding.

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS	9 Months Ended
	Oct. 03, 2015
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS	7. SUBSEQUENT EVENTS The Company has evaluated subsequent events through the filing date of this Quarterly Report and determined that no subsequent events occurred that would require recognition in the consolidated financial statements or disclosure in the notes thereto.

BASIS OF PRESENTATION AND SUM14

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	9 Months Ended
	Oct. 03, 2015
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition	Revenue Recognition The Company records revenue when all of the following occur: persuasive evidence of an arrangement exists, product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. Sales are recorded net of provisions for returns and allowances, customer discounts, and other sales-related discounts. The Company bases its estimates for discounts, returns and allowances on negotiated customer terms and historical experience. Customers do not have the right to return products unless the products are defective. The Company records a reduction of sales for estimated future defective product deductions based on contractual terms and historical experience. Sales incentives or other consideration given by the Company to customers that are considered adjustments to the selling price of the Company’s products, such as markdowns, are reflected as reductions of revenue. Sales incentives and other consideration that represent costs incurred by the Company for assets or services received, such as the appearance of the Company’s products in a customer’s national circular ad, are reflected as selling expenses in the accompanying interim Condensed Consolidated Statements of Operations.
Inventory Valuation	Inventory Valuation Inventory is comprised mostly of finished goods and some component parts and is stated at the lower of cost using the first-in, first-out (“FIFO”) method, or market (net realizable value). The Company regularly reviews slow-moving and excess inventories, and writes down inventories to net realizable value if the ultimate expected net proceeds from the disposals of excess inventory are less than the carrying cost of the merchandise.
Income Taxes	Income Taxes Income taxes are computed using the asset and liability method of accounting. Under the asset and liability method, a deferred income tax asset or liability is recognized for estimated future tax effects attributable to temporary differences and carry-forwards. The measurement of deferred income tax assets is adjusted by a valuation allowance, if necessary, to recognize future tax benefits only to the extent, based on available evidence, that it is more likely than not that such benefits will be realized. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon adoption and in subsequent periods. As of October 3, 2015 and January 3, 2015, the Company did not have any material uncertain tax positions. No interest and penalties related to uncertain tax positions were accrued at October 3, 2015 and January 3, 2015.
Use of Estimates	Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Accordingly, actual results could differ from those estimates.
Net Income (Loss) Per Share	Net Income (Loss) Per Share Basic earnings (loss) per share for the Company are computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share includes the dilutive impact of outstanding stock options and unvested restricted shares.
Translation of Foreign Currencies	Translation of Foreign Currencies All assets and liabilities of the Company’s foreign subsidiaries, each of whose functional currency is in its local currency, are translated into U.S. dollars at the exchange rate in effect at the end of the quarter and the income and expense accounts of these affiliates have been translated at average rates prevailing during each respective quarter. Resulting translation adjustments are made to a separate component of stockholders’ equity within accumulated other comprehensive income or loss.
Recently Issued Accounting Pronouncements	Recently Issued Accounting Pronouncements In May 2014, the FASB issued new accounting guidance related to revenue recognition. This guidance was originally proposed to be effective for reporting periods beginning after December 15, 2016, however in July 2015, the FASB approved the delay in this guidance until reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements. In April 2015, the FASB issues ASU 2015-03, “Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” This guidance requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability. This guidance is effective for fiscal years beginning after December 15, 2015. The Company has evaluated the impact this guidance will have on its consolidated financial statements and expects the impact to be immaterial. In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory.” This guidance required inventory within the scope of ASU 2015-11 to be measured at the lower of cost and net realizable value. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This guidance is effective for fiscal years beginning after December 15, 2016. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.

DEBT (Tables)

DEBT (Tables)	9 Months Ended
	Oct. 03, 2015
DEBT
Schedule of aggregate maturities of bank debt	Year ending: 2015 $ 2016 2017 2018 2019 2020 Total $

INTANGIBLE ASSETS (Tables)

INTANGIBLE ASSETS (Tables)	9 Months Ended
	Oct. 03, 2015
INTANGIBLE ASSETS
Schedule of intangible assets	October 3, January 3, 2015 2015 Brand names $ $ Patents and licenses Customer relationships Other intangibles Less: Accumulated amortization ) ) Intangible assets, net $ $

SHARE BASED COMPENSATION (Table

SHARE BASED COMPENSATION (Tables)	9 Months Ended
	Oct. 03, 2015
SHARE BASED COMPENSATION
Schedule of weighted average assumptions used for stock options granted	2015 2014 Expected life (in years) Risk-free interest rate % % Volatility % % Dividend yield % % Forfeiture rate % %

BASIS OF PRESENTATION AND SUM18

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Thousands	Oct. 03, 2015	Jan. 03, 2015
Income taxes
Accrued interest and penalties relating to uncertain tax positions	$ 0	$ 0

DEBT (Details)

DEBT (Details) $ in Thousands	Feb. 28, 2013USD ($)	Apr. 30, 2015USD ($)	Oct. 03, 2015USD ($)	Apr. 04, 2015USD ($)
Debt
Amount outstanding			$ 53,430
LIBOR
Debt
Applicable margin (as a percent)			2.50%
Base rate
Debt
Applicable margin (as a percent)			4.00%
Term Loan Facility
Debt
Maximum amount of credit available		$ 10,000
Required prepayment amount of excess cash flow beginning with fiscal year ending January 2, 2016 (as a percent)		50.00%
Quarterly payment due beginning July 1, 2015		$ 500
Amount outstanding			$ 9,000
BofA Agreement
Debt
Borrowing base as a percentage of eligible receivables		85.00%
Borrowing base as a percentage of eligible inventory		70.00%
Borrowing base as a percentage of net orderly liquidation value of eligible inventory and less reserves		85.00%
Number of most recent consecutive months used to measure fixed charge coverage ratio		12 months
BofA Agreement | LIBOR
Debt
Variable interest rate base		LIBOR
Variable rate basis at the end of the period		4.00%
BofA Agreement | Base rate
Debt
Variable interest rate base		base rate
Variable rate basis at the end of the period		2.50%
BofA Agreement | Minimum | LIBOR
Debt
Applicable margin (as a percent)		1.75%
BofA Agreement | Minimum | Base rate
Debt
Applicable margin (as a percent)		0.25%
BofA Agreement | Maximum | LIBOR
Debt
Applicable margin (as a percent)		2.25%
BofA Agreement | Maximum | Base rate
Debt
Applicable margin (as a percent)		0.75%
BofA Agreement | At February 28, 2014 | Maximum
Debt
Specified inventory dispositions for financial covenant EBITDA	$ 2,000
BofA Agreement | Beginning with the fiscal quarter ending July, 4, 2015 | Minimum
Debt
Fixed charge coverage ratio		1
BofA Agreement | Beginning with the quarter ending on June 30, 2012
Debt
Period of fixed charge coverage ratio	1 year
Asset-based revolving credit facility
Debt
Maximum amount of credit available		$ 60,000
Revolving Facility
Debt
Maximum amount of credit available		10,000	49,372
Additional borrowing capacity available upon Company request		15,000
Available borrowing capacity			9,942
Revolving Facility | Base rate
Debt
Amount outstanding			39,430
FILO Facility
Debt
Maximum amount of credit available		$ 5,000
Amount outstanding			$ 5,000
Prior asset-based revolving credit facility
Debt
Maximum amount of credit available				$ 80,000
Prior letter of credit sub-line facility
Debt
Maximum amount of credit available				$ 10,000

DEBT (Details 2)

DEBT (Details 2) - USD ($) $ in Thousands	9 Months Ended
	Oct. 03, 2015	Apr. 30, 2015	Apr. 04, 2015
Aggregate maturities of bank debt
2,015	$ 500
2,016	3,250
2,017	4,500
2,018	3,250
2,019	2,000
2,020	39,930
Total	53,430
Asset-based revolving credit facility
Aggregate maturities of bank debt
Maximum amount of credit available		$ 60,000
Revolving Facility
Aggregate maturities of bank debt
Maximum amount of credit available	49,372	10,000
FILO Facility
Aggregate maturities of bank debt
Total	5,000
Maximum amount of credit available		$ 5,000
Prior Loan Agreement | Debt extinguishment accounting
Debt extinguishment
Unamortized deferred financing costs	549
Termination fees	135
Prior Loan Agreement | Debt modification accounting
Debt extinguishment
Unamortized deferred financing costs capitalized	601
Financing costs capitalized	$ 1,054
Prior asset-based revolving credit facility
Aggregate maturities of bank debt
Maximum amount of credit available			$ 80,000
Prior letter of credit sub-line facility
Aggregate maturities of bank debt
Maximum amount of credit available			$ 10,000

DEBT (Details 3)

DEBT (Details 3) - Summer Infant (USA), Inc. $ in Thousands	May. 13, 2015USD ($)period
Original Lease
Lease Amendment
Annual rent	$ 390
Term of lease	7 years
Amended Lease Agreement
Lease Amendment
Prior notice required for extension	12 months
Initial Term | Amended Lease Agreement
Lease Amendment
Annual rent	$ 429
Extension of initial term	2 years
Number of years added to initial lease term | period	2
Initial Term | Amended Lease Agreement | Landlord
Lease Amendment
Leasehold improvement allowance	$ 78
Extension Term | Original Lease
Lease Amendment
Renewal term of lease	5 years
Extension Term | Amended Lease Agreement
Lease Amendment
Annual rent	$ 468
Renewal term of lease	3 years
Additional terms (in periods) | period	1
Extension Term | Amended Lease Agreement | Landlord
Lease Amendment
Leasehold improvement allowance	$ 234

INTANGIBLE ASSETS (Details)

INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	9 Months Ended
	Oct. 03, 2015	Jan. 03, 2015
Intangible assets
Intangible assets, gross	$ 27,717	$ 27,245
Less: accumulated amortization	(7,391)	(6,566)
Intangible assets, net	20,326	20,679
Intangibles not subject to amortization	$ 12,308	12,308
Minimum
Intangible assets
Amortization period of intangible assets	5 years
Maximum
Intangible assets
Amortization period of intangible assets	20 years
Patents and licenses
Intangible assets
Intangible assets, gross	$ 4,073	3,605
Customer relationship
Intangible assets
Intangible assets, gross	6,946	6,946
Other intangibles
Intangible assets
Intangible assets, gross	1,886	1,882
Brand names
Intangible assets
Intangible assets, gross	$ 14,812	$ 14,812

COMMITMENTS AND CONTINGENCIES (

COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands	Aug. 25, 2015USD ($)
Rest Devices, Inc | Consulting agreement | Technology Development
Commitments and contingencies
Capitalized costs	$ 315

SHARE BASED COMPENSATION (Detai

SHARE BASED COMPENSATION (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 03, 2015	Sep. 30, 2014	Oct. 03, 2015	Sep. 30, 2014	Aug. 04, 2015	Aug. 03, 2015
Stock options
Additional information related to share based compensation
Stock options granted (in shares)			485,750
Restricted shares
Additional information related to share based compensation
Granted (in shares)			216,135
2006 Plan and 2012 Plan
Additional information related to share based compensation
Share-based compensation expense	$ 280	$ 468	$ 700	$ 1,011
2006 Plan and 2012 Plan | Stock options
Additional information related to share based compensation
Stock options outstanding (in shares)	2,005,533		2,005,533
Weighted average assumptions
Expected life			5 years 3 months 18 days	5 years 3 months 18 days
Risk-free interest rate (as a percent)			1.60%	1.70%
Volatility (as a percent)			67.40%	67.00%
Dividend yield (as a percent)			0.00%	0.00%
Forfeiture rate (as a percent)			16.50%	13.30%
2006 Plan and 2012 Plan | Restricted shares
Additional information related to share based compensation
Unvested restricted shares outstanding	234,268		234,268
2006 Plan
Additional information related to share based compensation
Number of shares authorized under the plan	3,000,000		3,000,000
Shares available to grant	139,961		139,961
2012 Incentive Compensation Plan
Additional information related to share based compensation
Number of shares authorized under the plan	1,700,000		1,700,000		1,700,000	1,100,000
Shares available to grant	806,000		806,000

WEIGHTED AVERAGE COMMON SHARES

WEIGHTED AVERAGE COMMON SHARES (Details) - shares	3 Months Ended	9 Months Ended
	Oct. 03, 2015	Oct. 03, 2015
Stock options
Weighted average common shares
Anti-dilutive securities excluded from the computation of diluted earnings per share (in shares)	2,005,533	2,005,533
Restricted shares
Weighted average common shares
Anti-dilutive securities excluded from the computation of diluted earnings per share (in shares)	234,268	234,268