Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Aug. 10, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | Youngevity International, Inc. | |
Entity Central Index Key | 1,569,329 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer | No | |
Is Entity a Voluntary Filer | No | |
Is Entity's Reporting Status Current | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Trading Symbol | YGYI | |
Entity Common Stock, Shares Outstanding | 21,561,217 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,018 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Current Assets | ||
Cash and cash equivalents | $ 700 | $ 673 |
Accounts receivable, trade | 6,754 | 4,314 |
Income tax receivable | 196 | 106 |
Inventory | 22,867 | 22,073 |
Prepaid expenses and other current assets | 5,031 | 3,999 |
Total current assets | 35,548 | 31,165 |
Property and equipment, net | 13,650 | 13,707 |
Deferred tax assets | 149 | 286 |
Intangible assets, net | 21,093 | 20,908 |
Goodwill | 6,323 | 6,323 |
Total assets | 76,763 | 72,389 |
Current Liabilities | ||
Accounts payable | 10,444 | 11,728 |
Accrued distributor compensation | 4,263 | 4,277 |
Accrued expenses | 7,722 | 5,437 |
Deferred revenues | 4,888 | 3,386 |
Line of credit | 2,914 | 3,808 |
Other current liabilities | 862 | 1,144 |
Capital lease payable, current portion | 1,191 | 983 |
Notes payable, current portion | 146 | 176 |
Convertible notes payable, current portion | 2,931 | 2,828 |
Warrant derivative liability | 2,177 | 3,365 |
Contingent acquisition debt, current portion | 582 | 587 |
Total current liabilities | 38,120 | 37,719 |
Capital lease payable, net of current portion | 629 | 694 |
Notes payable, net of current portion | 4,308 | 4,372 |
Convertible notes payable, net of debt discount | 3,615 | 8,336 |
Contingent acquisition debt, net of current portion | 14,261 | 13,817 |
Total liabilities | 60,933 | 64,938 |
Commitments and contingencies (Note 1) | ||
Stockholders' Equity | ||
Common Stock, $0.001 par value: 50,000,000 shares authorized; 21,536,019 and 19,723,285 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively | 22 | 20 |
Additional paid-in capital | 182,475 | 171,405 |
Accumulated deficit | (166,615) | (163,693) |
Accumulated other comprehensive loss | (52) | (281) |
Total stockholders' equity | 15,830 | 7,451 |
Total Liabilities and Stockholders' Equity | 76,763 | 72,389 |
Series A Preferred Stock [Member] | ||
Stockholders' Equity | ||
Preferred Stock, $0.001 par value: 5,000,000 shares authorized | 0 | 0 |
Series B Preferred Stock [Member] | ||
Stockholders' Equity | ||
Preferred Stock, $0.001 par value: 5,000,000 shares authorized | $ 0 | $ 0 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2018 | Dec. 31, 2017 |
Equity: | ||
Convertible Preferred Stock, par value | $ 0.001 | $ 0.001 |
Convertible Preferred Stock, shares authorized | 5,000,000 | 5,000,000 |
Common Stock, par value | $ 0.001 | $ 0.001 |
Common Stock, shares authorized | 50,000,000 | 50,000,000 |
Common Stock, shares issued | 21,536,019 | 19,723,285 |
Common Stock, shares outstanding | 21,536,019 | 19,723,285 |
Series A Preferred Stock [Member] | ||
Equity: | ||
Convertible Preferred Stock, shares issued | 161,135 | 161,135 |
Convertible Preferred Stock, shares outstanding | 161,135 | 161,135 |
Series B Preferred Stock [Member] | ||
Equity: | ||
Convertible Preferred Stock, shares issued | 328,541 | 0 |
Convertible Preferred Stock, shares outstanding | 328,541 | 0 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Condensed Consolidated Statements Of Operations | ||||
Revenues | $ 44,255 | $ 41,527 | $ 87,249 | $ 80,260 |
Cost of revenues | 18,873 | 17,425 | 36,855 | 34,292 |
Gross profit | 25,382 | 24,102 | 50,394 | 45,968 |
Operating expenses | ||||
Distributor compensation | 16,487 | 16,686 | 32,065 | 32,105 |
Sales and marketing | 3,076 | 2,901 | 6,575 | 6,576 |
General and administrative | 5,166 | 5,191 | 11,077 | 10,363 |
Total operating expenses | 24,729 | 24,778 | 49,717 | 49,044 |
Operating income (loss) | 653 | (676) | 677 | (3,076) |
Interest expense, net | (1,549) | (1,258) | (3,261) | (2,455) |
Change in fair value of warrant derivative liability | 192 | (1,341) | 904 | (731) |
Extinguishment loss on debt | 0 | 0 | (1,082) | 0 |
Total other expense | (1,357) | (2,599) | (3,439) | (3,186) |
Loss before income taxes | (704) | (3,275) | (2,762) | (6,262) |
Income tax (benefit) provision | (90) | (545) | 160 | (1,473) |
Net loss | (614) | (2,730) | (2,922) | (4,789) |
Preferred stock dividends | (42) | (3) | (45) | (6) |
Net loss attributable to common stockholders | $ (656) | $ (2,733) | $ (2,967) | $ (4,795) |
Net (loss) income per share, basic | $ (0.03) | $ (0.14) | $ (0.14) | $ (0.24) |
Net (loss) income per share, diluted | $ (0.03) | $ (.14) | $ (0.14) | $ (.24) |
Weighted average shares outstanding, basic | 21,506,883 | 19,651,705 | 20,630,383 | 19,643,486 |
Weighted average shares outstanding, diluted | 21,506,883 | 19,651,705 | 20,630,383 | 19,643,486 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Condensed Consolidated Statements Of Comprehensive Income Loss | ||||
Net (loss) income | $ (614) | $ (2,730) | $ (2,922) | $ (4,789) |
Foreign currency translation | 28 | (67) | 229 | (14) |
Total other comprehensive loss | 28 | (67) | 229 | (14) |
Comprehensive loss | $ (586) | $ (2,797) | $ (2,693) | $ (4,803) |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Cash Flows from Operating Activities: | ||
Net loss | $ (2,922) | $ (4,789) |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||
Depreciation and amortization | 2,594 | 2,099 |
Stock-based compensation expense | 452 | 485 |
Amortization of debt discounts and issuance costs | 844 | 771 |
Amortization of prepaid advisory fees | 98 | 28 |
Change in fair value of warrant derivative liability | (904) | 731 |
Expenses allocated in profit sharing agreement | 0 | (420) |
Change in fair value of contingent acquisition debt | (1,459) | (680) |
Extinguishment loss on debt | 1,082 | 0 |
Changes in inventory reserves | (700) | 0 |
Deferred taxes | 137 | 0 |
Changes in operating assets and liabilities, net of effect from business combinations: | ||
Accounts receivable | (2,440) | (1,437) |
Inventory | (94) | 818 |
Prepaid expenses and other current assets | (585) | 299 |
Accounts payable | (1,135) | 1,319 |
Accrued distributor compensation | (14) | 669 |
Deferred revenues | 1,502 | (22) |
Accrued expenses and other liabilities | 1,958 | 1,426 |
Income taxes receivable | (90) | (1,473) |
Net Cash Used In Operating Activities | (1,676) | (176) |
Cash Flows from Investing Activities: | ||
Acquisitions, net of cash acquired | (50) | (175) |
Purchases of property and equipment | (160) | (499) |
Net Cash Used in Investing Activities | (210) | (674) |
Cash Flows from Financing Activities: | ||
Proceeds from issuance of convertible preferred stock, net of offering costs | 3,289 | 0 |
Proceeds from the exercise of stock options | 3 | 21 |
Proceeds from factoring company | 0 | 1,652 |
Payments net of proceeds on line of credit | (894) | 0 |
Payments of notes payable | (94) | (104) |
Payments of contingent acquisition debt | (78) | (204) |
Payments of capital leases | (542) | (495) |
Net Cash Provided by Financing Activities | 1,684 | 870 |
Foreign Currency Effect on Cash | 229 | 14 |
Net increase in cash and cash equivalents | 27 | 34 |
Cash and Cash Equivalents, Beginning of Period | 673 | 869 |
Cash and Cash Equivalents, End of Period | 700 | 903 |
Supplemental Disclosures of Cash Flow Information Cash paid during the period for: | ||
Interest | 2,427 | 1,730 |
Income taxes | 30 | 31 |
Supplemental Disclosures of Noncash Investing and Financing Activities | ||
Purchases of property and equipment funded by capital leases | 680 | 256 |
Acquisitions of net assets in exchange for contingent acquisition debt, net of purchase price adjustments (see Note 4) | 1,877 | 2,670 |
Stock issued for services (see Note 9) | 545 | 150 |
Conversion of 2017 Notes to Common Stock (see Note 6) | 7,254 | 0 |
Dividends declared but not paid at end of period (see Note 9) | 39 | 0 |
Change in warrant derivative liability to equity classification, Warrant Modification (see Note 7) | $ 284 | $ 0 |
Basis of Presentation and Descr
Basis of Presentation and Description of Business | 6 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
Basis of Presentation and Description of Business | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to such rules and regulations. Youngevity International, Inc. (the “Company”) consolidates all wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The statements presented as of June 30, 2018 and for the three and six months ended June 30, 2018 and 2017 are unaudited. In the opinion of management, these financial statements reflect all normal recurring and other adjustments necessary for a fair presentation, and to make the financial statements not misleading. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Form 10-K for the year ended December 31, 2017, filed with the SEC on March 30, 2018. The results for interim periods are not necessarily indicative of the results for the entire year. Nature of Business The Company, founded in 1996, develops and distributes health and nutrition related products through its global independent direct selling network, also known as multi-level marketing, and sells coffee products to commercial customers. The Company operates in two business segments, its direct selling segment where products are offered through a global distribution network of preferred customers and distributors and its commercial coffee segment where products are sold directly to businesses. The Company operates through the following wholly-owned domestic subsidiaries: AL Global Corporation, which operates its direct selling networks, CLR Roasters, LLC (“CLR”), its commercial coffee business, 2400 Boswell LLC, MK Collaborative LLC, Youngevity Global LLC and the wholly-owned foreign subsidiaries: Youngevity Australia Pty. Ltd., Youngevity NZ, Ltd., Siles Plantation Family Group S.A. (“Siles”), located in Nicaragua, Youngevity Mexico S.A. de CV, Youngevity Israel, Ltd., Youngevity Russia, LLC, Youngevity Colombia S.A.S, Youngevity International Singapore Pte. Ltd., Mialisia Canada, Inc. and Legacy for Life Limited (Hong Kong). The Company also operates through the BellaVita Group LLC, with operations in Taiwan, Hong Kong, Singapore, Indonesia, Malaysia and Japan. The Company also operates subsidiary branches of Youngevity Global LLC in the Philippines and Taiwan. Segment Information The Company has two reportable segments: direct selling and commercial coffee. The direct selling segment develops and distributes health and wellness products through its global independent direct selling network also known as multi-level marketing. The commercial coffee segment is a coffee roasting and distribution company specializing in gourmet coffee. The determination that the Company has two reportable segments is based upon the guidance set forth in Accounting Standards Codification (“ASC”) Topic 280, “Segment Reporting.” Liquidity and Going Concern The accompanying condensed consolidated financial statements have been prepared and presented on a basis assuming the Company will continue as a going concern. The Company has sustained significant net losses during the six months ended June 30, 2018 of $2,922,000 and $4,789,000 for the six months ended June 30, 2017. Net cash used in operating activities was $1,676,000 for the six months ended June 30, 2018 compared to net cash used in operating activities of $176,000 for the six months ended June 30, 2017. The Company does not currently believe that its existing cash resources are sufficient to meet the Company’s anticipated needs over the next twelve months from the date hereof. Based on its current cash levels and its current rate of cash requirements, the Company will need to raise additional capital and/or will need to further reduce its expenses from current levels. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company anticipates revenues to continue to grow and it intends to make necessary cost reductions related to international operations that are not performing and reduce non-essential expenses. The Company is also considering multiple alternatives including, but not limited to, additional equity financings and debt financings. On March 30, 2018, the Company completed its best efforts offering of Series B Convertible Preferred Stock (“Series B Offering”), pursuant to which the Company sold 381,173 shares of Series B Convertible Preferred Stock at an offering price of $9.50 per share and received gross proceeds of $3,621,143. The net proceeds to the Company from the Series B Offering were $3,289,861 after deducting commissions, closing and issuance costs. The shares of Series B Convertible Preferred Stock issued in the Company’s 2018 best efforts offering of the Series B Offering were sold pursuant to the Company’s Registration Statement, which was declared effective on February 13, 2018. The notes (the “2017 Notes”) issued by the Company in its private placement that was consummated in 2017 (the “2017 Private Placement”) provided that they automatically convert into shares of the Company’s common stock upon receipt of proceeds of at least $3,000,000 in subsequent offerings. Upon the receipt of the proceeds of the Series B Offering, the 2017 Notes in the principal amount of $7,254,349 automatically converted into 1,577,033 shares of common stock. Depending on market conditions, there can be no assurance that additional capital will be available when needed or that, if available, it will be obtained on terms favorable to the Company or to its stockholders. Failure to raise additional funds from the issuance of equity securities and failure to implement cost reductions could adversely affect the Company’s ability to operate as a going concern. The financial statements do not include any adjustments that might be necessary from the outcome of this uncertainty. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense for each reporting period. Estimates are used in accounting for, among other things, allowances for doubtful accounts, deferred taxes, and related valuation allowances, fair value of derivative liabilities, uncertain tax positions, loss contingencies, fair value of options granted under the Company’s stock-based compensation plan, fair value of assets and liabilities acquired in business combinations, capital leases, asset impairments, estimates of future cash flows used to evaluate impairments, useful lives of property, equipment and intangible assets, value of contingent acquisition debt, inventory obsolescence, and sales returns. Actual results may differ from previously estimated amounts and such differences may be material to the consolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected prospectively in the period they occur. Cash and Cash Equivalents The Company considers only its monetary liquid assets with original maturities of three months or less as cash and cash equivalents. Line of Credit - Loan and Security Agreement CLR had a factoring agreement (“Factoring Agreement”) with Crestmark Bank (“Crestmark”) related to accounts receivable resulting from sales of certain CLR products. Effective May 1, 2016, CLR entered into a third amendment to the Factoring Agreement. Under the terms of the third amendment, all new receivables assigned to Crestmark were “Client Risk Receivables” and no further credit approvals were required to be provided by Crestmark. Additionally, the third amendment expanded the factoring facility to include advanced borrowings against eligible inventory up to 50% of landed cost of finished goods inventory that meet certain criteria, not to exceed the lesser of $1,000,000 or 85% of the value of the accounts receivables already advanced with a maximum overall borrowing of $3,000,000. Interest accrued on the outstanding balance and a factoring commission was charged for each invoice factored which was calculated as the greater of $5.00 or 0.75% to 0.875% of the gross invoice amount and was recorded as interest expense. In addition, the Company and the Company’s CEO, Mr. Wallach, entered into a Guaranty and Security Agreement with Crestmark guaranteeing payments in the event that CLR were to default. The third amendment was effective until February 1, 2019. On November 16, 2017, CLR entered into a new Loan and Security Agreement (“Agreement”) with Crestmark which amended and restated the original Factoring Agreement dated February 12, 2010 with Crestmark and subsequent agreement amendments thereto. CLR is provided with a line of credit related to accounts receivables resulting from sales of certain products that includes borrowings to be advanced against acceptable eligible inventory related to CLR. Effective December 29, 2017, CLR entered into a First Amendment to the Agreement, to include an increase in the maximum overall borrowing to $6,250,000. The loan amount may not exceed an amount which is the lesser of (a) $6,250,000 or (b) the sum of up (i) to 85% of the value of the eligible accounts; plus, (ii) the lesser of $1,000,000 or 50% of eligible inventory or 50% of (i) above, plus (iii) the lesser of $250,000 or eligible inventory or 75% of certain specific inventory identified within the Agreement. The Agreement contains certain financial and nonfinancial covenants with which the Company must comply to maintain its borrowing availability and avoid penalties. The outstanding principal balance of the Agreement bears interest based upon a year of 360 days with interest being charged for each day the principal amount is outstanding including the date of actual payment. The interest rate is a rate equal to the prime rate plus 2.50% with a floor of 6.75%. In addition, other fees expenses are incurred if the maintenance of the loan in accordance with the Agreement. Other fees may be incurred if in the event the minimum loan balance of $2,000,000 is not maintained. The Agreement is effective until November 16, 2020. The Company and the Company’s CEO, Mr. Wallach, have entered into a Corporate Guaranty and Personal Guaranty, respectively, with Crestmark guaranteeing payments in the event that the Company’s commercial coffee segment CLR were to default. In addition, the Company’s President and Chief Financial Officer, Mr. Briskie, personally entered into a Guaranty of Validity representing the Company’s financials so long as the indebtedness is owing to Crestmark, maintaining certain covenants and guarantees. The Company’s outstanding line of credit liability related to the Agreement was approximately $2,914,000 and $3,808,000 as of June 30, 2018 and December 31, 2017, respectively. Related Party Transactions Richard Renton Richard Renton is a member of the Board of Directors and owns and operates WVNP, Inc., a supplier of certain inventory items sold by the Company. The Company made purchases of approximately $63,000 and $59,000 from WVNP Inc., for the three months ended June 30, 2018 and 2017, respectively, and $117,000 and $81,000 for the six months ended June 30, 2018 and 2017, respectively. In addition, Mr. Renton is a distributor of the Company and does earn commissions on product sales. Paul Sallwasser Mr. Paul Sallwasser is a member of the board directors and owns a note (the “2014 Note”) issued in the Company’s private placement consummated in 2014 (the “2014 Private Placement”) in the principal amount of $75,000 convertible into 10,714 shares of common stock and a warrant (the “2014 Warrant”) issued in the 2014 Private Placement exercisable for 14,673 shares of common stock. Mr. Sallwasser acquired in the 2017 Private Placement a 2017 Note in the principal amount of $37,615 convertible into 8,177 shares of common stock and a warrant (the “2017 Warrant”) issued in the 2017 Private Placement exercisable for 5,719 shares of common stock. Mr. Sallwasser also acquired in the 2017 Private Placement in exchange for a note (the “2015 Note”) he owned, acquired in the Company’s private placement consummated in 2015 (the “2015 Private Placement”), a 2017 Note in the principal amount of $5,000 convertible into 1,087 shares of common stock and a 2017 Warrant exercisable for 543 shares of common stock. He also owns 58,129 shares of common stock and an option to purchase 5,000 shares of common stock that are immediately exercisable. On March 30, 2018, the Company completed its Series B Offering, and in accordance with the terms of the 2017 Notes, Mr. Sallwasser’s 2017 Notes converted to 9,264 shares of the Company’s common stock. Other Relationship Transactions Hernandez, Hernandez, Export Y Company The Company’s coffee segment, CLR, is associated with Hernandez, Hernandez, Export Y Company (“H&H”), a Nicaragua company, through sourcing arrangements to procure Nicaraguan green coffee beans and in March 2014 as part of the Siles acquisition, CLR engaged the owners of H&H as employees to manage Siles. The Company made purchases of approximately $3,339,000 and $2,788,000 from this supplier for the three months ended June 30, 2018 and 2017, respectively and $7,073,000 and $5,174,000 for the six months ended June 30, 2018 and 2017, respectively. In addition, CLR sold approximately $859,000 and $1,056,000 for the three months ended June 30, 2018 and 2017, respectively and $3,302,000 and $1,547,000 for the six months ended June 30, 2018 and 2017, respectively, of green coffee beans to H&H Coffee Group Export, a Florida based company which is affiliated with H&H. H&H Coffee Group Export also participated in the Company’s Series B Offering and purchased 126,316 shares of Series B Convertible Preferred Stock at $9.50 per share for an aggregate investment of $1,200,000. Revenue Recognition The Company recognizes revenue from product sales when the following four criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, or services have been rendered, the selling price is fixed or determinable, and collectability is reasonably assured. The Company ships the majority of its direct selling segment products directly to the distributors primarily via UPS, USPS or FedEx and receives substantially all payments for these sales in the form of credit card transactions. The Company regularly monitors its use of credit card or merchant services to ensure that its financial risk related to credit quality and credit concentrations is actively managed. Revenue is recognized upon passage of title and risk of loss to customers when product is shipped from the fulfillment facility. The Company ships the majority of its coffee segment products via common carrier and invoices its customer for the products. Revenue is recognized when the title and risk of loss is passed to the customer under the terms of the shipping arrangement, typically, FOB shipping point. The Company also charges fees to become a distributor, and earn a position in the network genealogy, which are recognized as revenue in the period received. The Company’s distributors are required to pay a one-time enrollment fee and receive a welcome kit specific to that country or region that consists of forms, policy and procedures, selling aids, access to the Company’s distributor website and a genealogy position with no down line distributors. Sales revenue and a reserve for estimated returns are recorded net of sales tax. Deferred Revenues and Costs As of June 30, 2018, and December 31, 2017, the balance in deferred revenues was approximately $4,888,000 and $3,386,000, respectively. Deferred revenue related to the Company’s direct selling segment is attributable to the Heritage Makers product line and also for future Company convention and distributor events. In addition, the Company recognizes deferred revenue from the commercial coffee segment. Deferred revenue related to Heritage Makers was approximately $2,261,000 and $1,882,000, as of June 30, 2018, and December 31, 2017, respectively. The deferred revenue represents Heritage Maker’s obligation for points purchased by customers that have not yet been redeemed for product. Cash received for points sold is recorded as deferred revenue. Revenue is recognized when customers redeem the points and the product is shipped. Deferred costs relate to Heritage Makers prepaid commissions that are recognized in expense at the time the related revenue is recognized. As of June 30, 2018, and December 31, 2017, the balance in deferred costs was approximately $455,000 and $433,000, respectively, and is included in prepaid expenses and current assets. Deferred revenue related to CLR as of June 30, 2018 and December 31, 2017 was approximately $2,391,000 and $1,291,000, respectively, and represents deposits on customer orders that have not yet been completed and shipped. Deferred revenue related to pre-enrollment in upcoming conventions and distributor events of approximately $236,000 and $213,000, as of June 30, 2018 and December 31, 2017, respectively, relate primarily to the Company’s 2018 events. The Company does not recognize this revenue until the event occurs. Plantation Costs The Company’s commercial coffee segment includes the results of Siles, which is a 500-acre coffee plantation and a dry-processing facility located on 26 acres located in Matagalpa, Nicaragua. Siles is a wholly-owned subsidiary of CLR, and the results of CLR include the depreciation and amortization of capitalized costs, development and maintenance and harvesting costs of Siles. In accordance with GAAP plantation maintenance and harvesting costs for commercially producing coffee farms are charged against earnings when the coffee is sold. Deferred harvest costs accumulate throughout the year and are expensed over the remainder of the year as the coffee is sold. The difference between actual harvest costs incurred and the amount of harvest costs recognized as expense is recorded as either an increase or decrease in deferred harvest costs, which is reported as an asset and included with prepaid expenses and other current assets in the condensed consolidated balance sheets. Once the harvest is complete, the harvest costs are then recognized as inventory. During the three months ended June 30, 2018 the Company completed its 2018 harvest and recognized $439,000 in inventory costs. Deferred cost associated with the 2019 harvest was $100,000 as of June 30, 2018 and deferred cost associated with the 2018 harvest was $400,000 as of December 31, 2017. The 2019 harvest is expected to be completed during the Company’s second quarter of 2019. Stock-based Compensation The Company accounts for stock-based compensation in accordance with ASC Topic 718, “ Compensation – Stock Compensation,” The Company accounts for equity instruments issued to non-employees in accordance with authoritative guidance for equity-based payments to non-employees. Stock options issued to non-employees are accounted for at their estimated fair value, determined using the Black-Scholes option-pricing model. The fair value of options granted to non-employees is re-measured as they vest, and the resulting increase in value, if any, is recognized as expense during the period the related services are rendered. Income Taxes The Company accounts for income taxes in accordance with ASC Topic 740, "Income Taxes," under the asset and liability method which includes the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this approach, deferred taxes are recorded for the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial statement and tax basis of assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. The effects of future changes in income tax laws or rates are not anticipated. Income taxes for the interim periods are computed using the effective tax rates estimated to be applicable for the full fiscal year, as adjusted for any discrete taxable events that occur during the period. The Company files income tax returns in the United States (“U.S.”) on a federal basis and in many U.S. state and foreign jurisdictions. Certain tax years remain open to examination by the major taxing jurisdictions to which the Company is subject. Commitments and Contingencies The Company is from time to time, the subject of claims and suits arising out of matters related to the Company’s business. The Company is party to litigation at the present time and may become party to litigation in the future. In general, litigation claims can be expensive, and time consuming to bring or defend against and could result in settlements or damages that could significantly affect financial results. It is not possible to predict the final resolution of the current litigation to which the Company is party to, and the impact of certain of these matters on the Company’s business, results of operations, and financial condition could be material. Regardless of the outcome, litigation has adversely impacted the Company’s business because of defense costs, diversion of management resources and other factors. Recently Issued Accounting Pronouncements In February 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-02, Income Statement - Reporting Comprehensive Income Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation In July 2017, the FASB issued ASU 2017-11, Earnings Per Share Distinguishing Liabilities from Equity Derivatives and Hedging Accounting for Certain Financial Instruments with Down Round Features Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows Classification of Certain Cash Receipts and Cash Payments, In March 2016, the FASB issued ASU 2016-09, Compensation–Stock Compensation Improvements to Employee Share-Based Payment Accounting. In January 2017, the FASB issued ASU 2017-04, Intangibles — Goodwill and Other Simplifying the Test for Goodwill Impairment In February 2016, the FASB issued ASU 2016-02, Leases In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers |
Basic and Diluted Net Loss Per
Basic and Diluted Net Loss Per Share | 6 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
Basic and Diluted Net Loss Per Share | Basic loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted loss per share is computed by dividing net loss attributable to common stockholders by the sum of the weighted-average number of common shares outstanding during the period and the weighted-average number of dilutive common share equivalents outstanding during the period, using the treasury stock method. Dilutive common share equivalents are comprised of stock options, restricted stock, warrants, convertible preferred stock and common stock associated with the Company's convertible notes based on the average stock price for each period using the treasury stock method. Potentially dilutive shares are excluded from the computation of diluted net loss per share when their effect is anti-dilutive. In periods where a net loss is presented, all potentially dilutive securities are anti-dilutive and are excluded from the computation of diluted net loss per share. Potentially dilutive securities were 6,560,761 for the three and six months ended June 30, 2018. Potentially dilutive securities were 5,282,208 for the three and six months ended June 30, 2017. |
Inventory and Costs of Revenues
Inventory and Costs of Revenues | 6 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
Inventory and Costs of Revenues | Inventory is stated at the lower of cost or net realizable value net of the valuation allowance. Cost is determined using the first-in, first-out method. The Company records an inventory reserve for estimated excess and obsolete inventory based upon historical turnover, market conditions and assumptions about future demand for its products. When applicable, expiration dates of certain inventory items with a definite life are taken into consideration. Inventories consist of the following (in thousands): As of June 30, 2018 December 31, 2017 Finished goods $ 11,438 $ 10,994 Raw materials 13,193 12,143 24,631 23,137 Reserve for excess and obsolete (1,764 ) (1,064 ) Inventory, net $ 22,867 $ 22,073 Cost of revenues includes the cost of inventory, shipping and handling costs, royalties associated with certain products, transaction banking costs, warehouse labor costs and depreciation on certain assets. |
Acquisitions and Business Combi
Acquisitions and Business Combinations | 6 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
Acquisitions and Business Combinations | The Company accounts for business combinations under the acquisition method and allocates the total purchase price for acquired businesses to the tangible and identified intangible assets acquired and liabilities assumed, based on their estimated fair values. When a business combination includes the exchange of the Company’s common stock, the value of the common stock is determined using the closing market price as of the date such shares were tendered to the selling parties. The fair values assigned to tangible and identified intangible assets acquired and liabilities assumed are based on management or third-party estimates and assumptions that utilize established valuation techniques appropriate for the Company’s industry and each acquired business. Goodwill is recorded as the excess, if any, of the aggregate fair value of consideration exchanged for an acquired business over the fair value (measured as of the acquisition date) of total net tangible and identifiable intangible assets acquired. A liability for contingent consideration, if applicable, is recorded at fair value as of the acquisition date. In determining the fair value of such contingent consideration, management estimates the amount to be paid based on probable outcomes and expectations on financial performance of the related acquired business. The fair value of contingent consideration is reassessed quarterly, with any change in the estimated value charged to operations in the period of the change. Increases or decreases in the fair value of the contingent consideration obligations can result from changes in actual or estimated revenue streams, discount periods, discount rates and probabilities that contingencies will be met. During the six months ended June 30, 2018, the Company entered into two acquisitions, which are detailed below. The acquisitions were conducted in an effort to expand the Company’s distributor network, enhance and expand its product portfolio, and diversify its product mix. As a result of the Company’s business combinations, the Company’s distributors and customers will have access to the acquired company’s products and acquired company’s distributors and clients will gain access to products offered by the Company. As such, the major purpose for all of the business combinations was to increase revenue and profitability. The acquisitions were structured as asset purchases which resulted in the recognition of certain intangible assets. During the six months ended June 30, 2018 the Company adjusted the purchase price for a 2017 acquisition which resulted in an adjustment to the related intangibles and contingent debt in the amount of $583,000. In addition, during the three months ended June 30, 2018 the Company removed the contingent debt associated with the Nature’s Pearl Corporation acquisition from 2016 due to a breach of the asset purchase agreement by Nature's Pearl and amended certain terms of the existing agreement. As a result the Company is no longer obligated under the related asset purchase agreement to make payments. The Company recorded a reduction to the acquisition debt in the amount of approximately $1,246,000 with a corresponding credit to general and administrative expense in the Statement of Operations. 2018 Acquisitions Doctor’s Wellness Solutions Global LP (ViaViente) On March 1, 2018, the Company acquired certain assets of Doctor’s Wellness Solutions Global LP The ViaViente Miracle The Company is obligated to make monthly payments based on a percentage of the ViaViente distributor revenue derived from sales of the Company’s products and a percentage of royalty revenue derived from sales of ViaViente’s products until the earlier of the date that is five (5) years from the closing date or such time as the Company has paid to ViaViente aggregate cash payments of the ViaViente distributor revenue and royalty revenue equal to the maximum aggregate purchase price of $3,000,000. The contingent consideration’s estimated fair value at the date of acquisition was $1,375,000 as determined by management using a discounted cash flow methodology. The acquisition related costs, such as legal costs and other professional fees were minimal and expensed as incurred. The assets acquired were recorded at estimated fair values as of the date of the acquisition. The fair values of the acquired assets have not been finalized pending further information that may impact the valuation of certain assets or liabilities. The preliminary purchase price allocation is as follows (in thousands): Intangibles $ 1,375 Total purchase price $ 1,375 The preliminary fair value of intangible assets acquired, which consisted of customer relationships, distributor organization and trademarks and tradenames was determined through the use of a discounted cash flow methodology are being amortized over their estimated useful life of ten (10) years using the straight-line method which is believed to approximate the time-line within which the economic benefit of the underlying intangible asset will be realized. The Company expects to finalize the valuations within one (1) year from the acquisition date. The revenue impact from the ViaViente acquisition, included in the condensed consolidated statements of operations for the three and six months ended June 30, 2018 was approximately $512,000 and $691,000, respectively. The pro-forma effect assuming the business combination with ViaViente discussed above had occurred at the beginning of the year is not presented as the information was not available. Nature Direct On February 12, 2018, the Company acquired certain assets and liabilities of Nature Direct. Nature Direct, a manufacturer and distributor of essential-oil based nontoxic cleaning and care products for personal, home and professional use. The Company is obligated to make monthly payments based on a percentage of the Nature Direct distributor revenue derived from sales of the Company’s products and a percentage of royalty revenue derived from sales of the Nature Direct products until the earlier of the date that is twelve (12) years from the closing date or such time as the Company has paid to Nature Direct aggregate cash payments of the Nature Direct distributor revenue and royalty revenue equal to the maximum aggregate purchase price of $2,600,000. The contingent consideration’s estimated fair value at the date of acquisition was $1,085,000 as determined by management using a discounted cash flow methodology. The acquisition related costs, such as legal costs and other professional fees were minimal and expensed as incurred. The Company received approximately $90,000 of inventories from Nature Direct and has agreed to pay for the inventory and assumed liabilities of $50,000. This payment is applied to the maximum aggregate purchase price. The assets acquired were recorded at estimated fair values as of the date of the acquisition. The fair values of the acquired assets have not been finalized pending further information that may impact the valuation of certain assets or liabilities. The preliminary purchase price allocation is as follows (in thousands): Intangibles $ 1,085 Inventory 90 Assumed liabilities 50 Payment for inventory (90 ) Total purchase price $ 1,135 The preliminary fair value of intangible assets acquired, which consisted of customer relationships, distributor organization and trademarks and tradenames was determined through the use of a discounted cash flow methodology are being amortized over their estimated useful life of ten (10) years using the straight-line method which is believed to approximate the time-line within which the economic benefit of the underlying intangible asset will be realized. The Company expects to finalize the valuations within one (1) year from the acquisition date. The revenue impact from the Nature Direct acquisition, included in the condensed consolidated statements of operations for the three and six months ended June 30, 2018 was approximately $384,000 and $655,000, respectively. The pro-forma effect assuming the business combination with Nature Direct discussed above had occurred at the beginning of the year is not presented as the information was not available. |
Intangible Assets and Goodwill
Intangible Assets and Goodwill | 6 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
Intangible Assets and Goodwill | Intangible Assets Intangible assets are comprised of distributor organizations, trademarks and tradenames, customer relationships and internally developed software. The Company's acquired intangible assets, which are subject to amortization over their estimated useful lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. An impairment loss is recognized when the carrying amount of an intangible asset exceeds its fair value. Intangible assets consist of the following (in thousands): June 30, 2018 December 31, 2017 Cost Accumulated Amortization Net Cost Accumulated Amortization Net Distributor organizations $ 16,793 $ 9,057 $ 7,736 $ 16,204 $ 8,363 $ 7,841 Trademarks and trade names 8,324 1,525 6,799 7,779 1,229 6,550 Customer relationships 11,706 5,360 6,346 10,966 4,711 6,255 Internally developed software 720 508 212 720 458 262 Intangible assets $ 37,543 $ 16,450 $ 21,093 $ 35,669 $ 14,761 $ 20,908 Amortization expense related to intangible assets was approximately $857,000 and $690,000 for the three months ended June 30, 2018 and 2017, respectively. Amortization expense related to intangible assets was approximately $1,692,000 and $1,335,000 for the six months ended June 30, 2018 and 2017, respectively. Trade names, which do not have legal, regulatory, contractual, competitive, economic, or other factors that limit the useful lives are considered indefinite lived assets and are not amortized but are tested for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. As of June 30, 2018 and December 31, 2017, approximately $1,649,000 in trademarks from business combinations have been identified as having indefinite lives. Goodwill Goodwill is recorded as the excess, if any, of the aggregate fair value of consideration exchanged for an acquired business over the fair value (measured as of the acquisition date) of total net tangible and identified intangible assets acquired. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, “Intangibles — Goodwill and Other”, The Company first assesses qualitative factors to determine whether it is more likely than not (a likelihood of more than 50%) that goodwill is impaired. After considering the totality of events and circumstances, the Company determines whether it is more likely than not that goodwill is not impaired. If impairment is indicated, then the Company conducts the two-step impairment testing process. The first step compares the Company’s fair value to its net book value. If the fair value is less than the net book value, the second step of the test compares the implied fair value of the Company’s goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, the Company would recognize an impairment loss equal to that excess amount. The testing is generally performed at the “reporting unit” level. A reporting unit is the operating segment, or a business one level below that operating segment (referred to as a component) if discrete financial information is prepared and regularly reviewed by management at the component level. The Company has determined that its reporting units for goodwill impairment testing are the Company’s reportable segments. As such, the Company analyzes its goodwill balances separately for the commercial coffee reporting unit and the direct selling reporting unit. The goodwill balance as of June 30, 2018 and December 31, 2017 was $6,323,000. There were no triggering events indicating impairment of goodwill or intangible assets during the three and six months ended June 30, 2018 and 2017. Goodwill consists of the following (in thousands): June 30, 2018 December 31, 2017 Goodwill, commercial coffee $ 3,314 $ 3,314 Goodwill, direct selling 3,009 3,009 Total goodwill $ 6,323 $ 6,323 |
Convertible Notes Payable
Convertible Notes Payable | 6 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
Convertible Notes Payable | Total convertible notes payable as of June 30, 2018 and December 31, 2017, net of debt discount outstanding consisted of the amount set forth in the following table (in thousands): June 30, 2018 December 31, 2017 8% Convertible Notes due July and August 2019 (2014 Notes), principal $ 4,750 $ 4,750 Debt discounts (1,135 ) (1,659 ) Carrying value of 2014 Notes 3,615 3,091 8% Convertible Notes due October and November 2018 (2015 Notes), principal 3,000 3,000 Debt discounts (69 ) (172 ) Carrying value of 2015 Notes 2,931 2,828 8% Convertible Notes due July and August 2020 (2017 Notes), principal - 7,254 Fair value of bifurcated embedded conversion option of 2017 Notes - 200 Debt discounts - (2,209 ) Carrying value of 2017 Notes - 5,245 Total carrying value of convertible notes payable $ 6,546 $ 11,164 July 2014 Private Placement Between July 31, 2014 and September 10, 2014 the Company entered into Note Purchase Agreements related to the 2014 Private Placement with seven accredited investors pursuant to which the Company raised aggregate gross proceeds of $4,750,000 and sold units consisting of five (5) year senior secured convertible Notes in the aggregate principal amount of $4,750,000 that are convertible into 678,568 shares of common stock, at a conversion price of $7.00 per share, and warrants to purchase 929,346 shares of common stock at an exercise price of $4.60 per share. The 2014 Notes bear interest at a rate of eight percent (8%) per annum and interest is paid quarterly in arrears with all principal and unpaid interest due between July and September 2019. As of June 30, 2018 and December 31, 2017 the principal amount of $4,750,000 remains outstanding. The Company has the right to prepay the 2014 Notes at any time after the one-year anniversary date of the issuance of the 2014 Notes at a rate equal to 110% of the then outstanding principal balance and any unpaid accrued interest. The notes are secured by Company pledged assets and rank senior to all debt of the Company other than certain senior debt that has been previously identified as senior to the convertible notes debt. Additionally, Stephan Wallach, the Company’s Chief Executive Officer, has also personally guaranteed the repayment of the 2014 Notes, subject to the terms of a Guaranty Agreement executed by him with the investors. In addition, Mr. Wallach has agreed not to sell, transfer or pledge 1.5 million shares of the common stock that he owns so long as his personal guaranty is in effect. The Company recorded debt discounts of $4,750,000 related to the beneficial conversion feature of $1,053,000 and $3,697,000 related to the detachable warrants. The beneficial conversion feature discount and the detachable warrants discount are amortized to interest expense over the life of the 2014 Notes. As of June 30, 2018 and December 31, 2017, the remaining balance of the debt discounts is approximately $1,030,000 and $1,504,000, respectively. The quarterly amortization of the debt discounts is approximately $237,000 and is recorded as interest expense. With respect to the aggregate offering, the Company paid $490,000 in expenses including placement agent fees. The issuance costs are amortized to interest expense over the term of the 2014 Notes. As of June 30, 2018 and December 31, 2017 the remaining balance of the issuance costs is approximately $105,000 and $155,000, respectively. The quarterly amortization of the issuance costs is approximately $25,000 and is recorded as interest expense. Unamortized debt discounts and issuance costs are included with convertible notes payable, net of debt discount on the condensed consolidated balance sheets. November 2015 Private Placement Between October 13, 2015 and November 25, 2015, the Company entered into Note Purchase Agreements related to the 2015 Private Placement with three (3) accredited investors pursuant to which the Company raised cash proceeds of $3,187,500 in the offering and converted $4,000,000 of debt from the Company’s private placement consummated in January 2015 to this offering in consideration of the sale of aggregate units consisting of three-year senior secured convertible notes in the aggregate principal amount of $7,187,500, convertible into 1,026,784 shares of common stock, at a conversion price of $7.00 per share, subject to adjustment as provided therein; and five-year warrants (the “2015 Warrants”) exercisable to purchase 479,166 shares of the Company’s common stock at a price per share of $9.00. The 2015 Notes bear interest at a rate of eight percent (8%) per annum and interest is paid quarterly in arrears with all principal and unpaid interest due at maturity on October 12, 2018. In connection with the 2017 Private Placement, three (3) investors from the 2015 Private Placement, converted their 2015 Notes in the aggregate amount of $4,200,349 including principal and accrued interest thereon into 2017 Notes for an equal principal amount in the 2017 Private Placement. The remaining principal balance in the 2015 Note of $3,000,000 remains outstanding as of June 30, 2018. The Company accounted for the conversion of the 2015 Notes as an extinguishment in accordance with ASC 470-20 and ASC 470-50 as such the related debt discounts and issuance costs were adjusted appropriately. The Company recorded at issuance debt discounts associated with the 2015 Notes of $309,000 related to the beneficial conversion feature of $15,000 and $294,000 related to the detachable warrants. The beneficial conversion feature discount and the detachable warrants discount are amortized to interest expense over the life of the 2015 Notes. As of June 30, 2018 and December 31, 2017 the remaining balances of the debt discounts is approximately $14,000 and $36,000 respectively. The quarterly amortization of the remaining debt discount is approximately $11,000 and is recorded as interest expense. With respect to the aggregate offering, the Company paid $786,000 in expenses including placement agent fees. The issuance costs are amortized to interest expense over the term of the 2015 Notes. As of June 30, 2018 and December 31, 2017, the remaining balance of the issuance cost is approximately $36,000 and $92,000, respectively. The quarterly amortization of the remaining issuance costs is approximately $28,000 and is recorded as interest expense. In addition, the Company issued warrants to the placement agent in connection with the 2015 Notes which were valued at approximately $384,000. As of June 30, 2018 and December 31, 2017, the remaining balance of the warrant issuance cost is approximately $19,000 and $45,000, respectively. The quarterly amortization of the remaining warrant issuance costs is approximately $13,000 and is recorded as interest expense. Unamortized debt discounts and issuance costs are included with convertible notes payable, net of debt discount on the condensed consolidated balance sheets. July 2017 Private Placement Between July and August 2017, the Company entered into Note Purchase Agreements with accredited investors in the 2017 Private Placement pursuant to which the Company raised gross cash proceeds of $3,054,000 in the offering and converted $4,200,349 of debt from the 2015 Notes, including principal and accrued interest to the 2017 Private Placement for an aggregate principal amount of $7,254,349. The Company's use of the proceeds from the 2017 Private Placement was for working capital purposes. The 2017 Notes automatically convert to common stock prior to the maturity date, as a result of the Company completing a common stock, preferred stock or other equity-linked securities with aggregate gross proceeds of no less than $3,000,000 for the purpose of raising capital. On March 30, 2018, the Company completed the Series B Offering, pursuant to which the Company sold 381,173 shares of Series B Convertible Preferred Stock and received gross proceeds of $3,621,143, which triggered the automatic conversion of the 2017 Notes to common stock. The 2017 Notes consisted of three-year senior secured convertible notes in the aggregate principal amount of $7,254,349, which converted into 1,577,033 shares of common stock, at a conversion price of $4.60 per share, and three-year warrants exercisable to purchase 970,581 shares of the Company’s common stock at a price per share of $5.56 (the “2017 Warrants”). The 2017 Warrants were not impacted by the automatic conversion of the 2017 Notes. The 2017 Notes maturity date was July 28, 2020 and bore interest at a rate of eight percent (8%) per annum. The Company had the right to prepay the 2017 Notes at any time after the one-year anniversary date of the issuance of the 2017 Notes at a rate equal to 110% of the then outstanding principal balance and accrued interest. The 2017 Notes provided for full ratchet price protection on the conversion price for a period of nine months after their issuance and subject to adjustments. For twelve (12) months following the closing, the investors in the 2017 Private Placement had the right to participate in any future equity financings, subject to certain conditions. The Company accounted for the automatic conversion of the 2017 Notes as an extinguishment in accordance with ASC 470-20 and ASC 470-50, and as such the related debt discounts, issuance costs and bifurcated embedded conversion feature were adjusted as part of accounting for the conversion. The Company recorded a non-cash extinguishment loss on debt of $1,082,000 during the six months ended June 30, 2018 as a result of the conversion of the 2017 Notes. This loss represents the difference between the carrying value of the 2017 Notes and embedded conversion feature and the fair value of the shares that were issued. The fair value of the shares issued were based on the stock price on the date of the conversion. The Company paid a placement fee of $321,248, issued the placement agent three-year warrants to purchase 179,131 shares of the Company’s common stock at an exercise price of $5.56 per share, and issued the placement agent 22,680 shares of the Company’s common stock. The Company recorded at issuance debt discounts associated with the 2017 Notes of $330,000 related to the bifurcated embedded conversion feature. The embedded conversion feature was being amortized to interest expense over the term of the 2017 Notes. During the six months ended June 30, 2018 the Company recorded $28,000 of amortization related to the debt discount cost. Upon issuance of the 2017 Notes, the Company recognized issuance costs of approximately $1,601,000, resulting from the allocated portion of offering proceeds to the separable warrant liabilities. The issuance costs were being amortized to interest expense over the term of the 2017 Notes. During the six months ended June 30, 2018 the Company recorded $136,000 of amortization related to the warrant issuance cost. With respect to the aggregate offering, the Company paid $634,000 in issuance costs. The issuance costs were being amortized to interest expense over the term of the 2017 Notes. During the six months ended June 30, 2018 the Company recorded $53,000 of amortization related to the issuance costs. |
Derivative Liability
Derivative Liability | 6 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
Derivative Liability | The Company recognizes and measures the warrants and the embedded conversion features issued in conjunction with the Company’s July 2017, November 2015 and July 2014 Private Placements in accordance with ASC Topic 815, Derivatives and Hedging Derivative liabilities are recorded at their estimated fair value (see Note 8, below) at the issuance date and are revalued at each subsequent reporting date. The Company will continue to revalue the derivative liability on each subsequent balance sheet date until the securities to which the derivative liabilities relate are exercised or expire. Various factors are considered in the pricing models the Company uses to value the derivative liabilities, including its current stock price, the remaining life, the volatility of its stock price, and the risk-free interest rate. Future changes in these factors may have a significant impact on the computed fair value of the liability. As such, the Company expects future changes in the fair values to continue and may vary significantly from period to period. The warrant and embedded liability and revaluations have not had a cash impact on working capital, liquidity or business operations. Warrants The estimated fair value of the outstanding warrant liabilities was $2,177,000 and $3,365,000 as of June 30, 2018 and December 31, 2017, respectively. In January 2018, the Company approved an amendment (the “Warrant Amendment”) to its warrant agreements issued to the placement agent, pursuant to which warrants were issued to purchase 179,131 shares of the Company’s common stock as compensation associated with the Company’s July 2017 Private Placement (see Note 6, above.) The Warrant Amendment amended the transfer provisions of the warrants and removed the down-round price protection provision. As a result of this change in terms, the Company considered the guidance of ASC 815-40-35-8 in regard to the appropriate treatment related to the modification of these warrants that were initially classified as derivative liabilities. In accordance with the guidance, the warrants should now be classified as equity instruments. The Company determined that the liability associated with the warrants should be remeasured and adjusted to fair value on the date of the modification with the offset to be recorded through earnings and then the fair value of the warrants should be reclassified to equity. The Company recorded the change in the fair value of the July 2017 warrants as of the date of modification to earnings. The fair value of the modified warrants as of the date of modification, in the amount of $284,000 was reclassified from warrant derivative liability to additional paid in capital as a result of the change in classification of the warrants. The Company did not reverse any previous gains or losses associated with the warrant derivative liability during the period that the warrant was classified as a liability. Increases or decreases in the fair value of the derivative liability are included as a component of total other expense in the accompanying condensed consolidated statements of operations for the respective period. The changes to the derivative liability for warrants resulted in a decrease of $192,000 and an increase of $1,341,000 for the three months ended June 30, 2018 and 2017, respectively. The changes to the derivative liability for warrants resulted in a decrease of $904,000 and an increase of $731,000 for the six months ended June 30, 2018 and 2017, respectively. The estimated fair value of the warrants was computed as of June 30, 2018 and December 31, 2017 using the Monte Carlo option pricing model, using the following assumptions: June 30, 2018 December 31, 2017 Stock price volatility 61.59 % 61.06 % Risk-free interest rates 2.55 % 1.96 % Annual dividend yield 0 % 0 % Expected life 1.08-2.29 years 1.58-2.78 years In addition, management assessed the probabilities of future financing assumptions in the valuation models. Embedded Conversion Derivatives Upon issuance of the 2017 Notes, the Company recorded an embedded conversion option which was classified as a derivative of $330,000. The estimated fair value of the embedded conversion option was $200,000 as of December 31, 2017 and was a component of Convertible Notes Payable, net on the Company’s balance sheet using the following assumptions; stock price $4.13, conversion price $4.60, stock price volatility 60.98%-61.31%, risk-free rate 1.9%, and expected life 2.57-2.63. On March 30, 2018, the Company completed the Series B Offering and raised in excess of $3,000,000 of gross proceeds which triggered an automatic conversion of the 2017 Notes to common stock. As a result, the related embedded conversion option was extinguished with the 2017 Notes (see Note 6, above). The Company did not revalue the embedded conversion liability associated with the 2017 Notes as of March 30, 2018 as the change in the fair value was insignificant. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 6 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
Fair Value of Financial Instruments | Fair value measurements are performed in accordance with the guidance provided by ASC Topic 820, “Fair Value Measurements and Disclosures.” ASC Topic 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Assets and liabilities recorded at fair value in the financial statements are categorized based upon the hierarchy of levels of judgment associated with the inputs used to measure their fair value. Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows: Level 1 – Quoted prices in active markets for identical assets or liabilities that an entity has the ability to access. Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3 – Unobservable inputs that are supportable by little or no market activity and that are significant to the fair value of the asset or liability. The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, capital lease obligations and deferred revenue approximate their fair values based on their short-term nature. The carrying amount of the Company’s long-term notes payable approximates its fair value based on interest rates available to the Company for similar debt instruments and similar remaining maturities. The estimated fair value of the contingent consideration related to the Company's business combinations is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument. In connection with the Company’s Private Placements, the Company issued warrants to purchase shares of its common stock and recorded embedded conversion features which are accounted for as derivative liabilities (see Note 6 and 7 above.) The estimated fair value of the derivatives is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument. The following table details the fair value measurement within the fair value hierarchy of the Company’s financial instruments, which includes the Level 3 liabilities (in thousands): Fair Value at June 30, 2018 Total Level 1 Level 2 Level 3 Liabilities: Contingent acquisition debt, current portion $ 582 $ - $ - $ 582 Contingent acquisition debt, less current portion 14,261 - - 14,261 Warrant derivative liability 2,177 - - 2,177 Total liabilities $ 17,020 $ - $ - $ 17,020 Fair Value at December 31, 2017 Total Level 1 Level 2 Level 3 Liabilities: Contingent acquisition debt, current portion $ 587 $ - $ - $ 587 Contingent acquisition debt, less current portion 13,817 - - 13,817 Warrant derivative liability 3,365 - - 3,365 Embedded conversion option derivative 200 - - 200 Total liabilities $ 17,969 $ - $ - $ 17,969 The following table reflects the activity for the Company’s warrant derivative liability associated with the Company’s 2017, 2015 and 2014 Private Placements measured at fair value using Level 3 inputs (in thousands): Warrant Derivative Liability Balance at December 31, 2017 $ 3,365 Issuance - Adjustments to estimated fair value (904 ) Adjustment related to the modification of warrants (Note 7) (284 ) Balance at June 30, 2018 $ 2,177 The following table reflects the activity for the Company’s embedded conversion feature derivative liability associated with the Company’s 2017 Private Placement Notes measured at fair value using Level 3 inputs (in thousands): Embedded Conversion Feature Derivative Liability Balance at December 31, 2017 $ 200 Issuance - Adjustment related to the conversion of the 2017 Notes (200 ) Balance at June 30, 2018 $ - The following table reflects the activity for the Company’s contingent acquisition liabilities measured at fair value using Level 3 inputs (in thousands): Contingent Consideration Balance at December 31, 2017 $ 14,404 Level 3 liabilities acquired 2,460 Level 3 liabilities settled (78 ) Adjustments to liabilities included in earnings (1,459 ) Adjustment to purchase price allocation (484 ) Balance at June 30, 2018 $ 14,843 The fair value of the contingent acquisition liabilities is evaluated each reporting period using projected revenues, discount rates, and projected timing of revenues. Projected contingent payment amounts are discounted back to the current period using a discount rate. Projected revenues are based on the Company’s most recent internal operational budgets and long-range strategic plans. In some cases, there is no maximum amount of contingent consideration that can be earned by the sellers. Increases in projected revenues will result in higher fair value measurements. Increases in discount rates and the time to payment will result in lower fair value measurements. Increases (decreases) in any of those inputs in isolation may result in a significantly lower (higher) fair value measurement. During the three and six months ended June 30, 2018 the net adjustment to the fair value of the contingent acquisition debt was a decrease of $1,246,000 and $1,459,000, respectively. The decrease of $1,246,000 was a result of the removal of the contingent debt associated with its Nature’s Pearl Corporation acquisition from 2016 whereby the Company was no longer obligated under the related asset purchase agreement to make payments (see Note 4, above). During the three and six months ended June 30, 2017 the net adjustment to the change in the fair value of contingent acquisition debt was a decrease of $680,000. |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
Stockholders' Equity | The Company’s Articles of Incorporation, as amended, authorize the issuance of two classes of stock to be designated “Common Stock” and “Preferred Stock”. The total number of shares of stock which the Company has authority to issue is 50,000,000 shares of common stock, par value $.001 per share and 5,000,000 shares of preferred stock, par value $.001 per share, of which 161,135 shares have been designated as Series A convertible preferred stock (“Series A Convertible Preferred”) and 1,052,631 has been designated as Series B convertible preferred stock (“Series B Convertible Preferred”). Common Stock As of June 30, 2018, and December 31, 2017 there were 21,536,019 and 19,723,285 shares of common stock outstanding, respectively. The holders of the common stock are entitled to one vote for each share held at all meetings of stockholders (and written actions in lieu of meetings). Convertible Preferred Stock Series A Convertible Preferred Stock The Company has 161,135 shares of Series A Convertible Preferred Stock outstanding as of June 30, 2018, and December 31, 2017 and accrued dividends of approximately $130,000 and $124,000, respectively. The holders of the Series A Convertible Preferred Stock are entitled to receive a cumulative dividend at a rate of 8.0% per year, payable annually either in cash or shares of the Company's common stock at the Company's election. Each share of Series A Convertible Preferred is convertible into common stock at a conversion rate of .10. The holders of Series A Convertible Preferred are entitled to receive payments upon liquidation, dissolution or winding up of the Company before any amount is paid to the holders of common stock. The holders of Series A Convertible Preferred have no voting rights, except as required by law. Series B Convertible Preferred Stock On March 30, 2018, the Company completed the Series B Offering, pursuant to which the Company sold 381,173 shares of Series B Convertible Preferred Stock at an offering price of $9.50 per share and received gross proceeds in aggregate of $3,621,143. The net proceeds to the Company from the Series B Offering were $3,289,861 after deducting commissions, closing and issuance costs. The Company has 328,541 shares of Series B Convertible Preferred Stock outstanding as of June 30, 2018, and zero at December 31, 2017. During the three months ended June 30, 2018, the Company received notice of conversion for 52,632 shares of Series B Convertible Preferred Stock which converted to 105,264 shares of common stock. The shares of Series B Convertible Preferred Stock issued in the Series B Offering were sold pursuant to the Company’s Registration Statement, which was declared effective on February 13, 2018. Upon the receipt of the proceeds of the Series B Offering, the 2017 Notes in the principal amount of $7,254,349 automatically converted into 1,577,033 shares of common stock (see Note 6, above.) Pursuant to the Certificate of Designation, the Company has agreed to pay cumulative dividends on the Series B Convertible Preferred Stock from the date of original issue at a rate of 5.0% per annum payable quarterly in arrears on or about the last day of March, June, September and December of each year, beginning June 30, 2018. The Series B Convertible Preferred Stock ranks senior to the Company’s outstanding Series A Convertible Preferred Stock and the common stock with respect to dividend rights and rights upon liquidation, dissolution or winding up. Holders of the Series B Convertible Preferred Stock have limited voting rights. Each share of Series B Convertible Preferred Stock is initially convertible at any time, in whole or in part, at the option of the holders, at an initial conversion price of $4.75 per share, into two (2) shares of common stock and automatically converts into two (2) shares of common stock on its two-year anniversary of issuance. Distributions to Preferred Stockholders On June 20, 2018 the Company’s board of directors declared a quarterly cash dividend of $0.12 per share for the Series B Convertible Preferred Stock shareholders as of the record date of June 27, 2018 which was paid on July 2, 2018. Warrant Modification Agreements In January 2018, the Company approved an amendment (the “Warrant Amendment”) to its warrant agreements issued to the placement agent, pursuant to which warrants were issued to purchase 179,131 shares of the Company’s common stock as compensation associated with the Company’s July 2017 Private Placement (see Note 6, above.) The Warrant Amendment amended the transfer provisions of the warrants and removed the down-round price protection provision. As a result of this change in terms, the Company considered the guidance of ASC 815-40-35-8 in regard to the appropriate treatment related to the modification of these warrants that were initially classified as derivative liabilities. In accordance with the guidance, the warrants should now be classified as equity instruments (see Note 7, above.) Amendments to Articles of Incorporation or Bylaws On March 2, 2018, the Company filed a Certificate of Designation of Powers, Preferences and Rights of Series B Convertible Preferred Stock with the Secretary of State of the State of Delaware (the “Certificate of Designation”). On March 14, 2018, the Company filed a Certificate of Correction to the Certificate of Designation to correct two typographical errors in the Certificate of Designation (the “Certificate of Correction”). Repurchase of Common Stock On December 11, 2012, the Company has authorized a share repurchase program to repurchase up to 750,000 of the Company's issued and outstanding shares of common stock from time to time on the open market or via private transactions through block trades. A total of 196,594 shares have been repurchased to-date as of June 30, 2018 at a weighted-average cost of $5.30. There were no repurchases during the six months ended June 30, 2018. The remaining number of shares authorized for repurchase under the plan as of June 30, 2018 is 553,406. Advisory Agreements On September 1, 2015, the Company entered into an agreement with ProActive Capital As of June 30, 2018, the Company has issued 20,000 shares of restricted common stock in connection with this agreement and accrued for the estimated per share value on each subsequent six (6) month periods based on the price of Company’s common stock at each respective date. As of June 30, 2018, the Company has accrued for 10,000 shares of restricted stock that have not been issued. The fair value of the shares to be issued are recorded as prepaid advisory fees and are included in prepaid expenses and other current assets on the Company’s condensed consolidated balance sheets and is amortized on a pro-rata basis over the term of the respective periods. During the three months ended June 30, 2018 and 2017, the Company recorded expense of approximately $11,000 and $14,000, respectively, and $24,000 and $28,000, during the six months ended June 30, 2018 and 2017 in connection with amortization of the stock issuance. On April 1, 2018, the Company entered into an agreement with Ignition Capital, LLC On April 1, 2018, the Company entered into an agreement with Greentree Financial Group, Inc. Warrants As of June 30, 2018, warrants to purchase 2,748,183 shares of the Company's common stock at prices ranging from $2.00 to $10.00 were outstanding. All warrants are exercisable as of June 30, 2018 and expire at various dates through February 2023 and have a weighted average remaining term of approximately 1.65 years and are included in the table below as of June 30, 2018. Warrants – Preferred Stock Offering During the six months ended June 30, 2018, the Company issued the selling agent in connection with the Series B Offering 38,117 warrants as compensation, exercisable at $5.70 per share and expire in February 2023. The Company determined that the warrants should be classified as equity instruments and used the Black-Scholes option-pricing model (“Black-Scholes”) to estimate the fair value of the warrants issued to the selling agent of $75,000 as of the issuance date March 30, 2018. The warrants remain outstanding as of June 30, 2018. Warrants Activity A summary of the warrant activity for the six months ended June 30, 2018 is presented in the following table: Number of Warrants Balance at December 31, 2017 2,710,066 Issued 38,117 Expired / cancelled - Exercised - Balance at June 30, 2018 2,748,183 Stock Options On May 16, 2012, the Company established the 2012 Stock Option Plan (“Plan”) authorizing the granting of options for up to 4,000,000 shares of common stock. The purpose of the Plan is to promote the long-term growth and profitability of the Company by (i) providing key people and consultants with incentives to improve stockholder value and to contribute to the growth and financial success of the Company and (ii) enabling the Company to attract, retain and reward the best available persons for positions of substantial responsibility. The Plan allows for the grant of: (a) incentive stock options; (b) nonqualified stock options; (c) stock appreciation rights; (d) restricted stock; and (e) other stock-based and cash-based awards to eligible individuals qualifying under Section 422 of the Internal Revenue Code, in any combination (collectively, “Options”). At June 30, 2018, the Company had 1,885,034 shares of common stock available for issuance under the Plan. A summary of the Plan stock option activity for the six months ended June 30, 2018 is presented in the following table: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contract Life (years) Aggregate Intrinsic Value (in thousands) Outstanding December 31, 2017 1,584,523 $ 4.76 6.16 $ 126 Issued - - Canceled / expired (39,342 ) 5.25 Exercised (437 ) 5.40 - Outstanding June 30, 2018 1,544,744 $ 4.74 5.75 $ 125 Exercisable June 30, 2018 1,010,899 $ 4.57 4.53 $ 87 The weighted-average fair value per share of the granted options for the six months ended June 30, 2017 was approximately $3.08. There were no options granted during the six months ended June 30, 2018. Stock-based compensation expense included in the condensed consolidated statements of operations was $123,000 and $358,000 for the three months ended June 30, 2018 and 2017, respectively, and $245,000 and $485,000 for the six months ended June 30, 2018 and 2017, respectively. As of June 30, 2018, there was approximately $1,298,000 of total unrecognized compensation expense related to unvested stock options granted under the Plan. The expense is expected to be recognized over a weighted-average period of 3.04 years. The Company uses the Black-Scholes to estimate the fair value of stock options. The use of a valuation model requires the Company to make certain assumptions with respect to selected model inputs. Expected volatility is calculated based on the historical volatility of the Company’s stock price over the expected term of the option. The expected life is based on the contractual life of the option and expected employee exercise and post-vesting employment termination behavior. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of the grant. Restricted Stock Units On August 9, 2017, the Company issued restricted stock units for an aggregate of 500,000 shares of common stock, to its employees and consultants. These shares of common stock will be issued upon vesting of the restricted stock units. Full vesting occurs on the sixth-year anniversary of the grant date, with 10% vesting on the third-year, 15% on the fourth-year, 50% on the fifth-year and 25% on the sixth-year anniversary of the vesting commencement date. The fair value of each restricted stock unit issued to employees is based on the closing stock price on the grant date of $4.53 and restricted stock units issued to consultants are revalued as they vest and is recognized as stock-based compensation expense over the vesting term of the award. Number of Shares Balance at December 31, 2017 500,000 Issued - Canceled (12,500 ) Balance at June 30, 2018 487,500 Stock-based compensation expense included in the condensed consolidated statements of operations was $92,000 and $207,000 for the three and six months ended June 30, 2018, respectively. The Company did not have restricted stock units as of the six months ended June 30, 2017. As of June 30, 2018, total unrecognized stock-based compensation expense related to restricted stock units to employees and consultants was approximately $1,896,000, which will be recognized over a weighted average period of 5.11 years. |
Segment and Geographical Inform
Segment and Geographical Information | 6 Months Ended |
Jun. 30, 2018 | |
Notes to Financial Statements | |
Segment and Geographical Information | The Company is a leading omni-direct lifestyle company offering a hybrid of the direct selling business model that also offers e-commerce and the power of social selling. Assembling a virtual Main Street of products and services under one corporate entity, Youngevity offers products from top selling retail categories: health/nutrition, home/family, food/beverage (including coffee), spa/beauty, apparel/jewelry, as well as innovative services. The Company operates in two segments: the direct selling segment where products are offered through a global distribution network of preferred customers and distributors and the commercial coffee segment where roasted and green coffee bean products are sold directly to businesses. The Company’s segments reflect the manner in which the business is managed and how the Company allocates resources and assesses performance. The Company’s chief operating decision maker is the Chief Executive Officer. The Company’s chief operating decision maker evaluates segment performance primarily based on revenue and segment operating income. The principal measures and factors the Company considered in determining the number of reportable segments were revenue, gross margin percentage, sales channel, customer type and competitive risks. In addition, each reporting segment has similar products and customers, similar methods of marketing and distribution and a similar regulatory environment. The accounting policies of the segments are consistent with those described in the summary of significant accounting policies. Segment revenue excludes intercompany revenue eliminated in the consolidation. The following tables present certain financial information for each segment (in thousands): Three months ended Six months ended June 30, June 30, 2018 2017 2018 2017 Revenues Direct selling $ 36,846 $ 35,538 $ 72,157 $ 68,780 Commercial coffee 7,409 5,989 15,092 11,480 Total revenues $ 44,255 $ 41,527 $ 87,249 $ 80,260 Gross profit Direct selling $ 25,087 $ 24,195 $ 49,822 $ 46,050 Commercial coffee 295 (93 ) 572 (82 ) Total gross profit $ 25,382 $ 24,102 $ 50,394 $ 45,968 Operating income (loss) Direct selling $ 1,376 $ 595 $ 2,157 $ (1,159 ) Commercial coffee (723 ) (1,271 ) (1,480 ) (1,917 ) Total operating income (loss) $ 653 $ (676 ) $ 677 $ (3,076 ) Net (loss) income Direct selling $ 723 $ (135 ) $ 132 $ (1,647 ) Commercial coffee (1,337 ) (2,595 ) (3,054 ) (3,142 ) Total net loss $ (614 ) $ (2,730 ) $ (2,922 ) $ (4,789 ) Capital expenditures Direct selling $ 28 $ 346 $ 115 $ 474 Commercial coffee 51 101 730 281 Total capital expenditures $ 79 $ 447 $ 845 $ 755 As of June 30, 2018 December 31, 2017 Total assets Direct selling $ 44,926 $ 44,082 Commercial coffee 31,837 28,307 Total assets $ 76,763 $ 72,389 Total tangible assets, net located outside the United States were approximately $5.3 million as of June 30, 2018 and December 31, 2017. The Company conducts its operations primarily in the United States. For the three months ended June 30, 2018 and 2017 approximately 14% and 10%, respectively, of the Company’s sales were derived from sales outside the United States. For the six months ended June 30, 2018 and 2017 approximately 14% and 10%, respectively, of the Company’s sales were derived from sales outside the United States. The following table displays revenues attributable to the geographic location of the customer (in thousands): Three months ended Six months ended June 30, June 30, 2018 2017 2018 2017 Revenues United States $ 37,980 $ 37,378 $ 75,373 $ 72,212 International 6,275 4,149 11,876 8,048 Total revenues $ 44,255 $ 41,527 $ 87,249 $ 80,260 |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2018 | |
Subsequent Events | |
Subsequent Events | On July 31, 2018, CLR entered into a 5-year contract for the sale and processing of over 41 million pounds of green coffee on an annual basis. Revenue for this contract covers the period 2019 through 2023 with first shipments expected to begin in January of 2019. On July 24, 2018, the Company’s board of directors (the “Board”) awarded to David Briskie, the Company’s President and Chief Financial Officer, options to purchase 250,000 shares of the Company’s common stock. In addition, the Board awarded to certain members of senior management and consultants 397,500 shares of the Company’s common stock. The options are exercisable for a period of ten years from the grant date, vest pro rata on a monthly basis for 36 months and have an exercise price of $3.92 per share. On July 23, 2018, the Company’s Board awarded to each non-employee member of the Board options to purchase 61,655 shares of the Company’s common stock, which options are exercisable for a period of ten years from the grant date, vest on July 23, 2019 (the one-year anniversary of the grant date) and have an exercise price of $4.29 per share. On July 18, 2018, the Company entered into lending agreements with three separate entities and received loans in the total amount of $2 million to be paid back by the Company with periodic payments, including accrued interest, over an 8-month period. |
Basis of Presentation and Des18
Basis of Presentation and Description of Business (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Basis Of Presentation And Description Of Business Policies | |
Basis of Presentation | The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to such rules and regulations. Youngevity International, Inc. (the “Company”) consolidates all wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The statements presented as of June 30, 2018 and for the three and six months ended June 30, 2018 and 2017 are unaudited. In the opinion of management, these financial statements reflect all normal recurring and other adjustments necessary for a fair presentation, and to make the financial statements not misleading. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Form 10-K for the year ended December 31, 2017, filed with the SEC on March 30, 2018. The results for interim periods are not necessarily indicative of the results for the entire year. |
Nature of Business | The Company, founded in 1996, develops and distributes health and nutrition related products through its global independent direct selling network, also known as multi-level marketing, and sells coffee products to commercial customers. The Company operates in two business segments, its direct selling segment where products are offered through a global distribution network of preferred customers and distributors and its commercial coffee segment where products are sold directly to businesses. The Company operates through the following wholly-owned domestic subsidiaries: AL Global Corporation, which operates its direct selling networks, CLR Roasters, LLC (“CLR”), its commercial coffee business, 2400 Boswell LLC, MK Collaborative LLC, Youngevity Global LLC and the wholly-owned foreign subsidiaries: Youngevity Australia Pty. Ltd., Youngevity NZ, Ltd., Siles Plantation Family Group S.A. (“Siles”), located in Nicaragua, Youngevity Mexico S.A. de CV, Youngevity Israel, Ltd., Youngevity Russia, LLC, Youngevity Colombia S.A.S, Youngevity International Singapore Pte. Ltd., Mialisia Canada, Inc. and Legacy for Life Limited (Hong Kong). The Company also operates through the BellaVita Group LLC, with operations in Taiwan, Hong Kong, Singapore, Indonesia, Malaysia and Japan. The Company also operates subsidiary branches of Youngevity Global LLC in the Philippines and Taiwan. |
Segment Information | The Company has two reportable segments: direct selling and commercial coffee. The direct selling segment develops and distributes health and wellness products through its global independent direct selling network also known as multi-level marketing. The commercial coffee segment is a coffee roasting and distribution company specializing in gourmet coffee. The determination that the Company has two reportable segments is based upon the guidance set forth in Accounting Standards Codification (“ASC”) Topic 280, “Segment Reporting.” |
Liquidity and Going Concern | The accompanying condensed consolidated financial statements have been prepared and presented on a basis assuming the Company will continue as a going concern. The Company has sustained significant net losses during the six months ended June 30, 2018 of $2,922,000 and $4,789,000 for the six months ended June 30, 2017. Net cash used in operating activities was $1,676,000 for the six months ended June 30, 2018 compared to net cash used in operating activities of $176,000 for the six months ended June 30, 2017. The Company does not currently believe that its existing cash resources are sufficient to meet the Company’s anticipated needs over the next twelve months from the date hereof. Based on its current cash levels and its current rate of cash requirements, the Company will need to raise additional capital and will need to further reduce its expenses from current levels. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company anticipates revenues to continue to grow and it intends to make necessary cost reductions related to international operations that are not performing and reduce non-essential expenses. The Company is also considering multiple alternatives including, but not limited to, additional equity financings and debt financings. On March 30, 2018, the Company completed its best efforts offering of Series B Convertible Preferred Stock (“Series B Offering”), pursuant to which the Company sold 381,173 shares of Series B Convertible Preferred Stock at an offering price of $9.50 per share and received gross proceeds of $3,621,143. The net proceeds to the Company from the Series B Offering were $3,289,861 after deducting commissions, closing and issuance costs. The shares of Series B Convertible Preferred Stock issued in the Company’s 2018 best efforts offering of the Series B Offering were sold pursuant to the Company’s Registration Statement, which was declared effective on February 13, 2018. The notes (the “2017 Notes”) issued by the Company in its private placement that was consummated in 2017 (the “2017 Private Placement”) provided that they automatically convert into shares of the Company’s common stock upon receipt of proceeds of at least $3,000,000 in subsequent offerings. Upon the receipt of the proceeds of the Series B Offering, the 2017 Notes in the principal amount of $7,254,349 automatically converted into 1,577,033 shares of common stock. Depending on market conditions, there can be no assurance that additional capital will be available when needed or that, if available, it will be obtained on terms favorable to the Company or to its stockholders. Failure to raise additional funds from the issuance of equity securities and failure to implement cost reductions could adversely affect the Company’s ability to operate as a going concern. The financial statements do not include any adjustments that might be necessary from the outcome of this uncertainty. |
Use of Estimates | The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense for each reporting period. Estimates are used in accounting for, among other things, allowances for doubtful accounts, deferred taxes, and related valuation allowances, fair value of derivative liabilities, uncertain tax positions, loss contingencies, fair value of options granted under the Company’s stock-based compensation plan, fair value of assets and liabilities acquired in business combinations, capital leases, asset impairments, estimates of future cash flows used to evaluate impairments, useful lives of property, equipment and intangible assets, value of contingent acquisition debt, inventory obsolescence, and sales returns. Actual results may differ from previously estimated amounts and such differences may be material to the consolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected prospectively in the period they occur. |
Cash and Cash Equivalents | The Company considers only its monetary liquid assets with original maturities of three months or less as cash and cash equivalents. |
Line of Credit - Loan and Security Agreement | CLR had a factoring agreement (“Factoring Agreement”) with Crestmark Bank (“Crestmark”) related to accounts receivable resulting from sales of certain CLR products. Effective May 1, 2016, CLR entered into a third amendment to the Factoring Agreement. Under the terms of the third amendment, all new receivables assigned to Crestmark were “Client Risk Receivables” and no further credit approvals were required to be provided by Crestmark. Additionally, the third amendment expanded the factoring facility to include advanced borrowings against eligible inventory up to 50% of landed cost of finished goods inventory that meet certain criteria, not to exceed the lesser of $1,000,000 or 85% of the value of the accounts receivables already advanced with a maximum overall borrowing of $3,000,000. Interest accrued on the outstanding balance and a factoring commission was charged for each invoice factored which was calculated as the greater of $5.00 or 0.75% to 0.875% of the gross invoice amount and was recorded as interest expense. In addition, the Company and the Company’s CEO, Mr. Wallach, entered into a Guaranty and Security Agreement with Crestmark guaranteeing payments in the event that CLR were to default. The third amendment was effective until February 1, 2019. On November 16, 2017, CLR entered into a new Loan and Security Agreement (“Agreement”) with Crestmark which amended and restated the original Factoring Agreement dated February 12, 2010 with Crestmark and subsequent agreement amendments thereto. CLR is provided with a line of credit related to accounts receivables resulting from sales of certain products that includes borrowings to be advanced against acceptable eligible inventory related to CLR. Effective December 29, 2017, CLR entered into a First Amendment to the Agreement, to include an increase in the maximum overall borrowing to $6,250,000. The loan amount may not exceed an amount which is the lesser of (a) $6,250,000 or (b) the sum of up (i) to 85% of the value of the eligible accounts; plus, (ii) the lesser of $1,000,000 or 50% of eligible inventory or 50% of (i) above, plus (iii) the lesser of $250,000 or eligible inventory or 75% of certain specific inventory identified within the Agreement. The Agreement contains certain financial and nonfinancial covenants with which the Company must comply to maintain its borrowing availability and avoid penalties. The outstanding principal balance of the Agreement bears interest based upon a year of 360 days with interest being charged for each day the principal amount is outstanding including the date of actual payment. The interest rate is a rate equal to the prime rate plus 2.50% with a floor of 6.75%. In addition, other fees expenses are incurred for the maintenance of the loan in accordance with the Agreement. Other fees may be incurred in the event the minimum loan balance of $2,000,000 is not maintained. The Agreement is effective until November 16, 2020. The Company and the Company’s CEO, Mr. Wallach, have entered into a Corporate Guaranty and Personal Guaranty, respectively, with Crestmark guaranteeing payments in the event that the Company’s commercial coffee segment CLR were to default. In addition, the Company’s President and Chief Financial Officer, Mr. Briskie, personally entered into a Guaranty of Validity representing the Company’s financials so long as the indebtedness is owing to Crestmark, maintaining certain covenants and guarantees. The Company’s outstanding line of credit liability related to the Agreement was approximately $2,914,000 and $3,808,000 as of June 30, 2018 and December 31, 2017, respectively. |
Related Party Transactions | Richard Renton Richard Renton is a member of the Board of Directors and owns and operates WVNP, Inc., a supplier of certain inventory items sold by the Company. The Company made purchases of approximately $63,000 and $59,000 from WVNP Inc., for the three months ended June 30, 2018 and 2017, respectively, and $117,000 and $81,000 for the six months ended June 30, 2018 and 2017, respectively. In addition, Mr. Renton is a distributor of the Company and does earn commissions on product sales. Paul Sallwasser Mr. Paul Sallwasser is a member of the board directors and owns a note (the “2014 Note”) issued in the Company’s private placement consummated in 2014 (the “2014 Private Placement”) in the principal amount of $75,000 convertible into 10,714 shares of common stock and a warrant (the “2014 Warrant”) issued in the 2014 Private Placement exercisable for 14,673 shares of common stock. Mr. Sallwasser acquired in the 2017 Private Placement a 2017 Note in the principal amount of $37,615 convertible into 8,177 shares of common stock and a warrant (the “2017 Warrant”) issued in the 2017 Private Placement exercisable for 5,719 shares of common stock. Mr. Sallwasser also acquired in the 2017 Private Placement in exchange for a note (the “2015 Note”) he owned, acquired in the Company’s private placement consummated in 2015 (the “2015 Private Placement”), a 2017 Note in the principal amount of $5,000 convertible into 1,087 shares of common stock and a 2017 Warrant exercisable for 543 shares of common stock. He also owns 58,129 shares of common stock and an option to purchase 5,000 shares of common stock that are immediately exercisable. On March 30, 2018, the Company completed its Series B Offering, and in accordance with the terms of the 2017 Notes, Mr. Sallwasser’s 2017 Notes converted to 9,264 shares of the Company’s common stock. |
Other Relationship Transactions | Hernandez, Hernandez, Export Y Company The Company’s coffee segment, CLR, is associated with Hernandez, Hernandez, Export Y Company (“H&H”), a Nicaragua company, through sourcing arrangements to procure Nicaraguan green coffee beans and in March 2014 as part of the Siles acquisition, CLR engaged the owners of H&H as employees to manage Siles. The Company made purchases of approximately $3,339,000 and $2,788,000 from this supplier for the three months ended June 30, 2018 and 2017, respectively and $7,073,000 and $5,174,000 for the six months ended June 30, 2018 and 2017, respectively. In addition, CLR sold approximately $859,000 and $1,056,000 for the three months ended June 30, 2018 and 2017, respectively and $3,302,000 and $1,547,000 for the six months ended June 30, 2018 and 2017, respectively, of green coffee beans to H&H Coffee Group Export, a Florida based company which is affiliated with H&H. H&H Coffee Group Export also participated in the Company’s Series B Offering and purchased 126,316 shares of Series B Convertible Preferred Stock at $9.50 per share for an aggregate investment of $1,200,000. |
Revenue Recognition | The Company recognizes revenue from product sales when the following four criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, or services have been rendered, the selling price is fixed or determinable, and collectability is reasonably assured. The Company ships the majority of its direct selling segment products directly to the distributors primarily via UPS, USPS or FedEx and receives substantially all payments for these sales in the form of credit card transactions. The Company regularly monitors its use of credit card or merchant services to ensure that its financial risk related to credit quality and credit concentrations is actively managed. Revenue is recognized upon passage of title and risk of loss to customers when product is shipped from the fulfillment facility. The Company ships the majority of its coffee segment products via common carrier and invoices its customer for the products. Revenue is recognized when the title and risk of loss is passed to the customer under the terms of the shipping arrangement, typically, FOB shipping point. The Company also charges fees to become a distributor, and earn a position in the network genealogy, which are recognized as revenue in the period received. The Company’s distributors are required to pay a one-time enrollment fee and receive a welcome kit specific to that country or region that consists of forms, policy and procedures, selling aids, access to the Company’s distributor website and a genealogy position with no down line distributors. Sales revenue and a reserve for estimated returns are recorded net of sales tax. |
Deferred Revenues and Costs | As of June 30, 2018, and December 31, 2017, the balance in deferred revenues was approximately $4,888,000 and $3,386,000, respectively. Deferred revenue related to the Company’s direct selling segment is attributable to the Heritage Makers product line and also for future Company convention and distributor events. In addition, the Company recognizes deferred revenue from the commercial coffee segment. Deferred revenue related to Heritage Makers was approximately $2,261,000 and $1,882,000, as of June 30, 2018, and December 31, 2017, respectively. The deferred revenue represents Heritage Maker’s obligation for points purchased by customers that have not yet been redeemed for product. Cash received for points sold is recorded as deferred revenue. Revenue is recognized when customers redeem the points and the product is shipped. Deferred costs relate to Heritage Makers prepaid commissions that are recognized in expense at the time the related revenue is recognized. As of June 30, 2018, and December 31, 2017, the balance in deferred costs was approximately $455,000 and $433,000, respectively, and is included in prepaid expenses and current assets. Deferred revenue related to CLR as of June 30, 2018 and December 31, 2017 was approximately $2,391,000 and $1,291,000, respectively, and represents deposits on customer orders that have not yet been completed and shipped. Deferred revenue related to pre-enrollment in upcoming conventions and distributor events of approximately $236,000 and $213,000, as of June 30, 2018 and December 31, 2017, respectively, relate primarily to the Company’s 2018 events. The Company does not recognize this revenue until the event occurs. |
Plantation Costs | The Company’s commercial coffee segment includes the results of Siles, which is a 500-acre coffee plantation and a dry-processing facility located on 26 acres located in Matagalpa, Nicaragua. Siles is a wholly-owned subsidiary of CLR, and the results of CLR include the depreciation and amortization of capitalized costs, development and maintenance and harvesting costs of Siles. In accordance with GAAP plantation maintenance and harvesting costs for commercially producing coffee farms are charged against earnings when the coffee is sold. Deferred harvest costs accumulate throughout the year and are expensed over the remainder of the year as the coffee is sold. The difference between actual harvest costs incurred and the amount of harvest costs recognized as expense is recorded as either an increase or decrease in deferred harvest costs, which is reported as an asset and included with prepaid expenses and other current assets in the condensed consolidated balance sheets. Once the harvest is complete, the harvest costs are then recognized as inventory. During the three months ended June 30, 2018 the Company completed its 2018 harvest and recognized $439,000 in inventory costs. Deferred cost associated with the 2019 harvest was $100,000 as of June 30, 2018 and deferred cost associated with the 2018 harvest was $400,000 as of December 31, 2017. The 2019 harvest is expected to be completed during the Company’s second quarter of 2019. |
Stock-based Compensation | The Company accounts for stock-based compensation in accordance with ASC Topic 718, “ Compensation – Stock Compensation,” The Company accounts for equity instruments issued to non-employees in accordance with authoritative guidance for equity-based payments to non-employees. Stock options issued to non-employees are accounted for at their estimated fair value, determined using the Black-Scholes option-pricing model. The fair value of options granted to non-employees is re-measured as they vest, and the resulting increase in value, if any, is recognized as expense during the period the related services are rendered. |
Income Taxes | The Company accounts for income taxes in accordance with ASC Topic 740, "Income Taxes," under the asset and liability method which includes the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this approach, deferred taxes are recorded for the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial statement and tax basis of assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. The effects of future changes in income tax laws or rates are not anticipated. Income taxes for the interim periods are computed using the effective tax rates estimated to be applicable for the full fiscal year, as adjusted for any discrete taxable events that occur during the period. The Company files income tax returns in the United States (“U.S.”) on a federal basis and in many U.S. state and foreign jurisdictions. Certain tax years remain open to examination by the major taxing jurisdictions to which the Company is subject. |
Commitments and Contingencies | The Company is from time to time, the subject of claims and suits arising out of matters related to the Company’s business. The Company is party to litigation at the present time and may become party to litigation in the future. In general, litigation claims can be expensive, and time consuming to bring or defend against and could result in settlements or damages that could significantly affect financial results. It is not possible to predict the final resolution of the current litigation to which the Company is party to, and the impact of certain of these matters on the Company’s business, results of operations, and financial condition could be material. Regardless of the outcome, litigation has adversely impacted the Company’s business because of defense costs, diversion of management resources and other factors. |
Recently Issued Accounting Pronouncements | In February 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-02, Income Statement - Reporting Comprehensive Income Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation In July 2017, the FASB issued ASU 2017-11, Earnings Per Share Distinguishing Liabilities from Equity Derivatives and Hedging Accounting for Certain Financial Instruments with Down Round Features Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows Classification of Certain Cash Receipts and Cash Payments, In March 2016, the FASB issued ASU 2016-09, Compensation–Stock Compensation Improvements to Employee Share-Based Payment Accounting. In January 2017, the FASB issued ASU 2017-04, Intangibles — Goodwill and Other Simplifying the Test for Goodwill Impairment In February 2016, the FASB issued ASU 2016-02, Leases In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers |
Inventory and Costs of Revenu19
Inventory and Costs of Revenues (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Inventory And Cost Of Sales Tables | |
Inventories | As of June 30, 2018 December 31, 2017 Finished goods $ 11,438 $ 10,994 Raw materials 13,193 12,143 24,631 23,137 Reserve for excess and obsolete (1,764 ) (1,064 ) Inventory, net $ 22,867 $ 22,073 |
Acquisitions and Business Com20
Acquisitions and Business Combinations (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
ViaViente [Member] | |
Assets acquired and liabilities assumed | Intangibles $ 1,375 Total purchase price $ 1,375 |
Nature Direct [Member] | |
Assets acquired and liabilities assumed | Intangibles $ 1,085 Inventory 90 Assumed liabilities 50 Payment for inventory (90 ) Total purchase price $ 1,135 |
Intangible Assets and Goodwill
Intangible Assets and Goodwill (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Intangible Assets And Goodwill Tables | |
Intangible Assets and Goodwill | June 30, 2018 December 31, 2017 Cost Accumulated Amortization Net Cost Accumulated Amortization Net Distributor organizations $ 16,793 $ 9,057 $ 7,736 $ 16,204 $ 8,363 $ 7,841 Trademarks and trade names 8,324 1,525 6,799 7,779 1,229 6,550 Customer relationships 11,706 5,360 6,346 10,966 4,711 6,255 Internally developed software 720 508 212 720 458 262 Intangible assets $ 37,543 $ 16,450 $ 21,093 $ 35,669 $ 14,761 $ 20,908 |
Goodwill | June 30, 2018 December 31, 2017 Goodwill, commercial coffee $ 3,314 $ 3,314 Goodwill, direct selling 3,009 3,009 Total goodwill $ 6,323 $ 6,323 |
Convertible Notes Payable (Tabl
Convertible Notes Payable (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Debt Tables | |
Convertible note oustanding | June 30, 2018 December 31, 2017 8% Convertible Notes due July and August 2019 (2014 Notes), principal $ 4,750 $ 4,750 Debt discounts (1,135 ) (1,659 ) Carrying value of 2014 Notes 3,615 3,091 8% Convertible Notes due October and November 2018 (2015 Notes), principal 3,000 3,000 Debt discounts (69 ) (172 ) Carrying value of 2015 Notes 2,931 2,828 8% Convertible Notes due July and August 2020 (2017 Notes), principal - 7,254 Fair value of bifurcated embedded conversion option of 2017 Notes - 200 Debt discounts - (2,209 ) Carrying value of 2017 Notes - 5,245 Total carrying value of convertible notes payable $ 6,546 $ 11,164 |
Derivative Liability (Tables)
Derivative Liability (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Derivative Liability Tables | |
Monte Carlo fair value of warrants | June 30, 2018 December 31, 2017 Stock price volatility 61.59 % 61.06 % Risk-free interest rates 2.55 % 1.96 % Annual dividend yield 0 % 0 % Expected life 1.08-2.29 years 1.58-2.78 years |
Fair Value of Financial Instr24
Fair Value of Financial Instruments (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Fair Value Of Financial Instruments Tables | |
Fair value measurement within the three levels of value hierarchy | Fair Value at June 30, 2018 Total Level 1 Level 2 Level 3 Liabilities: Contingent acquisition debt, current portion $ 582 $ - $ - $ 582 Contingent acquisition debt, less current portion 14,261 - - 14,261 Warrant derivative liability 2,177 - - 2,177 Total liabilities $ 17,020 $ - $ - $ 17,020 Fair Value at December 31, 2017 Total Level 1 Level 2 Level 3 Liabilities: Contingent acquisition debt, current portion $ 587 $ - $ - $ 587 Contingent acquisition debt, less current portion 13,817 - - 13,817 Warrant derivative liability 3,365 - - 3,365 Embedded conversion option derivative 200 - - 200 Total liabilities $ 17,969 $ - $ - $ 17,969 |
Fair value warrant derivative liability | The following table reflects the activity for the Company’s warrant derivative liability associated with the Company’s 2017, 2015 and 2014 Private Placements measured at fair value using Level 3 inputs (in thousands): Warrant Derivative Liability Balance at December 31, 2017 $ 3,365 Issuance - Adjustments to estimated fair value (904 ) Adjustment related to the modification of warrants (Note 7) (284 ) Balance at June 30, 2018 $ 2,177 |
Fair value embedded conversion feature | The following table reflects the activity for the Company’s embedded conversion feature derivative liability associated with the Company’s 2017 Private Placement Notes measured at fair value using Level 3 inputs (in thousands): Embedded Conversion Feature Derivative Liability Balance at December 31, 2017 $ 200 Issuance - Adjustment related to the conversion of the 2017 Notes (200 ) Balance at June 30, 2018 $ - |
Fair value Level 3 contingent acquisition liabilities | The following table reflects the activity for the Company’s contingent acquisition liabilities measured at fair value using Level 3 inputs (in thousands): Contingent Consideration Balance at December 31, 2017 $ 14,404 Level 3 liabilities acquired 2,460 Level 3 liabilities settled (78 ) Adjustments to liabilities included in earnings (1,459 ) Adjustment to purchase price allocation (484 ) Balance at June 30, 2018 $ 14,843 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Stock Option Plan Tables | |
Warrant Activity | Number of Warrants Balance at December 31, 2017 2,710,066 Issued 38,117 Expired / cancelled - Exercised - Balance at June 30, 2018 2,748,183 |
Summary of Plan Options | Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contract Life (years) Aggregate Intrinsic Value (in thousands) Outstanding December 31, 2017 1,584,523 $ 4.76 6.16 $ 126 Issued - - Canceled / expired (39,342 ) 5.25 Exercised (437 ) 5.40 - Outstanding June 30, 2018 1,544,744 $ 4.74 5.75 $ 125 Exercisable June 30, 2018 1,010,899 $ 4.57 4.53 $ 87 Number of Shares Balance at December 31, 2017 500,000 Issued - Canceled (12,500 ) Balance at June 30, 2018 487,500 |
Segment and Geographical Info26
Segment and Geographical Information (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Segment And Geographical Information Tables | |
Segment information revenue | Three months ended Six months ended June 30, June 30, 2018 2017 2018 2017 Revenues Direct selling $ 36,846 $ 35,538 $ 72,157 $ 68,780 Commercial coffee 7,409 5,989 15,092 11,480 Total revenues $ 44,255 $ 41,527 $ 87,249 $ 80,260 Gross profit Direct selling $ 25,087 $ 24,195 $ 49,822 $ 46,050 Commercial coffee 295 (93 ) 572 (82 ) Total gross profit $ 25,382 $ 24,102 $ 50,394 $ 45,968 Operating income (loss) Direct selling $ 1,376 $ 595 $ 2,157 $ (1,159 ) Commercial coffee (723 ) (1,271 ) (1,480 ) (1,917 ) Total operating income (loss) $ 653 $ (676 ) $ 677 $ (3,076 ) Net (loss) income Direct selling $ 723 $ (135 ) $ 132 $ (1,647 ) Commercial coffee (1,337 ) (2,595 ) (3,054 ) (3,142 ) Total net loss $ (614 ) $ (2,730 ) $ (2,922 ) $ (4,789 ) Capital expenditures Direct selling $ 28 $ 346 $ 115 $ 474 Commercial coffee 51 101 730 281 Total capital expenditures $ 79 $ 447 $ 845 $ 755 |
Segment information assets | As of June 30, 2018 December 31, 2017 Total assets Direct selling $ 44,926 $ 44,082 Commercial coffee 31,837 28,307 Total assets $ 76,763 $ 72,389 |
Segment information geographical | Three months ended Six months ended June 30, June 30, 2018 2017 2018 2017 Revenues United States $ 37,980 $ 37,378 $ 75,373 $ 72,212 International 6,275 4,149 11,876 8,048 Total revenues $ 44,255 $ 41,527 $ 87,249 $ 80,260 |
Basis of Presentation and Des27
Basis of Presentation and Description of Business (Details Narrative) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Basis Of Presentation And Description Of Business Details Narrative | ||
Accounts receivable, trade | $ 6,754 | $ 4,314 |
Inventory | 22,867 | 22,073 |
Deferred revenues | $ 4,888 | $ 3,386 |
Basic and Diluted Net Loss Pe28
Basic and Diluted Net Loss Per Share (Details) - $ / shares | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Loss per Share - Basic | ||||
Denominator for basic loss per share | 21,506,883 | 19,651,705 | 20,630,383 | 19,643,486 |
Loss per common share – basic | $ (0.03) | $ (0.14) | $ (0.14) | $ (0.24) |
Loss per Share - Diluted | ||||
Denominator for diluted loss per share | 21,506,883 | 19,651,705 | 20,630,383 | 19,643,486 |
Denominator for diluted loss per share | 21,506,883 | 19,651,705 | 20,630,383 | 19,643,486 |
Loss per common share - diluted | $ (0.03) | $ (.14) | $ (0.14) | $ (.24) |
Basic and Diluted Net Loss Pe29
Basic and Diluted Net Loss Per Share (Details Narrative) - shares | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Basic And Diluted Net Loss Per Share Details | ||
Anti dilutive securities | 6,560,761 | 5,282,208 |
Inventory and Costs of Revenu30
Inventory and Costs of Revenues (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Inventory And Cost Of Sales Details | ||
Finished goods | $ 11,438 | $ 10,994 |
Raw materials | 13,193 | 12,143 |
Total inventory | 24,631 | 23,137 |
Reserve for excess and obsolete inventory | (1,764) | (1,064) |
Total inventory, net | $ 22,867 | $ 22,073 |
Acquisitions and Business Com31
Acquisitions and Business Combinations (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2018USD ($) | |
Nature Direct [Member] | |
Total purchase price | $ 1,135 |
Nature Direct [Member] | IntangibleMember | |
Total purchase price | 1,085 |
Nature Direct [Member] | Inventory [Member] | |
Total purchase price | 90 |
Nature Direct [Member] | Assumed liabilities [Member] | |
Total purchase price | 50 |
Nature Direct [Member] | Payment for inventory [Member] | |
Total purchase price | 90 |
ViaViente [Member] | |
Total purchase price | 1,375 |
ViaViente [Member] | Intangibles [Member] | |
Total purchase price | $ 1,375 |
Acquisitions and Business Com32
Acquisitions and Business Combinations (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Revenue | $ 44,255 | $ 41,527 | $ 87,249 | $ 80,260 |
Nature Direct [Member] | ||||
Fair value at date of acquisition | 1,085 | |||
ViaViente [Member] | ||||
Fair value at date of acquisition | $ 1,375 |
Intangible Assets and Goodwil33
Intangible Assets and Goodwill (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Distributor organizations [Member] | ||
Cost | $ 16,793 | $ 16,204 |
Accumulated Amortization | 9,057 | 8,363 |
Net | 7,736 | 7,841 |
Trademarks and trade names [Member] | ||
Cost | 8,324 | 7,779 |
Accumulated Amortization | 1,525 | 1,229 |
Net | 6,799 | 6,550 |
Customer relationships [Member] | ||
Cost | 11,706 | 10,966 |
Accumulated Amortization | 5,360 | 4,711 |
Net | 6,346 | 6,255 |
Internally developed software [Member] | ||
Cost | 720 | 720 |
Accumulated Amortization | 508 | 458 |
Net | 212 | 262 |
Intangible assets [Member] | ||
Cost | 37,543 | 35,669 |
Accumulated Amortization | 16,450 | 14,761 |
Net | $ 21,093 | $ 20,908 |
Intangible Assets and Goodwil34
Intangible Assets and Goodwill (Details 1) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Goodwill | $ 6,323 | $ 6,323 |
Commercial Coffee [Member] | ||
Goodwill | 3,314 | 3,314 |
Direct Selling [Member] | ||
Goodwill | $ 3,009 | $ 3,009 |
Intangible Assets and Goodwil35
Intangible Assets and Goodwill (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Intangible Assets And Goodwill Details Narrative | |||||
Amortization expense | $ 857 | $ 690 | $ 1,692 | $ 1,335 | |
Trademarks | 1,649 | 1,649 | $ 1,649 | ||
Goodwill balance | $ 6,323 | $ 6,323 | $ 6,323 |
Convertible Notes Payable (Deta
Convertible Notes Payable (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Total convertible notes payable, net of debt discount | $ 3,615 | $ 8,336 |
Convertible notes payable, current | 2,931 | 2,828 |
Convertible Notes Payable 1 [Member] | ||
Convertible notes issued | 4,750 | 4,750 |
Net debt issuance costs | (1,135) | (1,659) |
Total convertible notes payable, net of debt discount | 3,615 | 3,091 |
Convertible Notes Payable 2 [Member] | ||
Convertible notes issued | 3,000 | 3,000 |
Net debt issuance costs | (69) | (172) |
Total convertible notes payable, net of debt discount | 2,931 | 2,828 |
Convertible Notes Payable 3 [Member] | ||
Convertible notes issued | 0 | 7,254 |
Fair value of bifurcated embedded conversion option | 0 | 200 |
Net debt issuance costs | 0 | (2,209) |
Total convertible notes payable, net of debt discount | $ 0 | $ 5,245 |
Convertible Notes Payable (De37
Convertible Notes Payable (Details Narrative) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
November 2015 Private Placement [Member] | ||
Principal outstanding amount remains | $ 0 | $ 0 |
July 2014 Private Placement [Member] | ||
Principal outstanding amount remains | $ 4,750 | $ 4,750 |
Derivative Liability (Details)
Derivative Liability (Details) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
Stock price volatility | 61.59% | 61.06% |
Risk-free interest rate | 2.55% | 1.96% |
Annual dividend yield | 0.00% | 0.00% |
Minimum [Member] | ||
Expected life | 1 year 29 days | 2 years 9 months 11 days |
Maximum [Member] | ||
Expected life | 2 years 3 months 14 days | 1 year 6 months 29 days |
Fair Value of Financial Instr39
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Liabilities: | ||
Contingent acquisition debt, current portion | $ 582 | $ 587 |
Contingent acquisition debt, less current portion | 14,261 | 13,817 |
Warrant derivative liability | 2,177 | 3,365 |
Embedded conversion option derivative | 200 | |
Total liabilities | 17,020 | 17,969 |
Level 1 [Member] | ||
Liabilities: | ||
Contingent acquisition debt, current portion | 582 | 0 |
Contingent acquisition debt, less current portion | 14,261 | 0 |
Warrant derivative liability | 2,177 | 0 |
Embedded conversion option derivative | 0 | |
Total liabilities | 17,020 | 0 |
Level 2 [Member] | ||
Liabilities: | ||
Contingent acquisition debt, current portion | 0 | 0 |
Contingent acquisition debt, less current portion | 0 | 0 |
Warrant derivative liability | 0 | 0 |
Embedded conversion option derivative | 0 | |
Total liabilities | 0 | 0 |
Level 3 [Member] | ||
Liabilities: | ||
Contingent acquisition debt, current portion | 0 | 587 |
Contingent acquisition debt, less current portion | 0 | 13,817 |
Warrant derivative liability | 0 | 3,365 |
Embedded conversion option derivative | 200 | |
Total liabilities | $ 0 | $ 17,969 |
Fair Value of Financial Instr40
Fair Value of Financial Instruments (Details 1) $ in Thousands | 6 Months Ended |
Jun. 30, 2018USD ($) | |
Derivative liability, beginning of period | $ 17,969 |
Derivative liability, end of period | 17,020 |
Level 3 [Member] | |
Derivative liability, beginning of period | 17,969 |
Derivative liability, end of period | 0 |
Level 3 [Member] | Embedded Derivative Financial Instruments [Member] | |
Derivative liability, beginning of period | 200 |
Adjustment to derivative liability | (200) |
Derivative liability, end of period | 0 |
Level 3 [Member] | Private Placement [Member] | |
Derivative liability, beginning of period | 3,365 |
Derivative liability, end of period | 2,177 |
Level 3 [Member] | Private Placement [Member] | Estimate of Fair Value Measurement [Member] | |
Adjustment to derivative liability | (904) |
Level 3 [Member] | Private Placement [Member] | Warrant [Member] | |
Adjustment to derivative liability | $ (284) |
Fair Value of Financial Instr41
Fair Value of Financial Instruments (Details 2) $ in Thousands | 6 Months Ended |
Jun. 30, 2018USD ($) | |
Derivative liability, beginning of period | $ 17,969 |
Derivative liability, end of period | 17,020 |
Level 3 [Member] | |
Derivative liability, beginning of period | 17,969 |
Derivative liability, end of period | 0 |
Level 3 [Member] | Embedded Derivative Financial Instruments [Member] | |
Derivative liability, beginning of period | 200 |
Adjustment to derivative liability | (200) |
Derivative liability, end of period | $ 0 |
Fair Value of Financial Instr42
Fair Value of Financial Instruments (Details 3) - Level 3 [Member] $ in Thousands | 6 Months Ended |
Jun. 30, 2018USD ($) | |
Contingent acquisition liabiliies, beginning of period | $ 14,404 |
Level 3 liabilities acquired | 2,460 |
Level 3 liabilities settled | (78) |
Adjustments to liabilities included in earnings | (1,459) |
Adjustment to purchase price allocation | (484) |
Contingent acquisition liabiliies, end of period | $ 14,843 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) | 6 Months Ended |
Jun. 30, 2018shares | |
Warrant [Member] | |
Number of Shares | |
Outstanding, beginning of period | 2,710,066 |
Issued | 38,117 |
Expired / cancelled | 0 |
Exercised | 0 |
Outstanding, end of period | 2,748,183 |
Stock Option [Member] | |
Number of Shares | |
Outstanding, beginning of period | 1,584,523 |
Issued | 0 |
Expired / cancelled | (39,342) |
Exercised | (437) |
Outstanding, end of period | 1,544,744 |
Stockholders' Equity (Details 1
Stockholders' Equity (Details 1) $ / shares in Units, $ in Thousands | 6 Months Ended |
Jun. 30, 2018USD ($)$ / sharesshares | |
Warrant [Member] | |
Number of Shares | |
Outstanding, beginning of period | 2,710,066 |
Granted | 38,117 |
Canceled / expired | 0 |
Exercised | 0 |
Outstanding, end of period | 2,748,183 |
Stock Option [Member] | |
Number of Shares | |
Outstanding, beginning of period | 1,584,523 |
Granted | 0 |
Canceled / expired | (39,342) |
Exercised | (437) |
Outstanding, end of period | 1,544,744 |
Exercisable, end of period | 1,010,899 |
Outstanding, beginning of period | $ / shares | $ 4.76 |
Granted | $ / shares | 0 |
Canceled / expired | $ / shares | 5.25 |
Exercised | $ / shares | 5.40 |
Outstanding, end of period | $ / shares | 4.74 |
Exercisable, end of period | $ / shares | $ 4.57 |
Weighted Average Remaining Contract Life (years) Outstanding, Beginning | 6 years 1 month 28 days |
Weighted Average Remaining Contract Life (years) Outstanding, Ending | 5 years 9 months |
Weighted Average Remaining Contract Life (years) Exerciseable, Ending | 4 years 6 months 11 days |
Aggregate Intrinsic Value | |
Outstanding, beginning of period | $ | $ 126 |
Exercised | $ | 0 |
Outstanding, end of period | $ | 125 |
Exercisable, end of period | $ | $ 87 |
Restricted Stock [Member] | |
Number of Shares | |
Outstanding, beginning of period | 500,000 |
Granted | 0 |
Canceled / expired | (12,500) |
Outstanding, end of period | 487,500 |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - shares | Jun. 30, 2018 | Dec. 31, 2017 |
Common Stock, shares outstanding | 21,536,019 | 19,723,285 |
Series A Preferred Stock [Member] | ||
Convertible Preferred Stock, shares outstanding | 161,135 | 161,135 |
Series B Preferred Stock [Member] | ||
Convertible Preferred Stock, shares outstanding | 328,541 | 0 |
Segment and Geographical Info46
Segment and Geographical Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Revenues | $ 44,255 | $ 41,527 | $ 87,249 | $ 80,260 |
Gross profit | 25,382 | 24,102 | 50,394 | 45,968 |
Operating income (loss) | 653 | (676) | 677 | (3,076) |
Net (loss) income | (614) | (2,730) | (2,922) | (4,789) |
Capital expenditures | 79 | 447 | 845 | 755 |
Direct Selling [Member] | ||||
Revenues | 36,846 | 35,538 | 72,157 | 68,780 |
Gross profit | 25,087 | 24,195 | 49,822 | 46,050 |
Operating income (loss) | 1,376 | 595 | 2,157 | (1,159) |
Net (loss) income | 723 | (135) | 132 | (1,647) |
Capital expenditures | 28 | 346 | 115 | 474 |
Commercial Coffee [Member] | ||||
Revenues | 7,409 | 5,989 | 15,092 | 11,480 |
Gross profit | 295 | (93) | 572 | (82) |
Operating income (loss) | (723) | (1,271) | (1,480) | (1,917) |
Net (loss) income | (1,337) | (2,595) | (3,054) | (3,142) |
Capital expenditures | $ 51 | $ 101 | $ 730 | $ 281 |
Segment and Geographical Info47
Segment and Geographical Information (Details 1) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Total assets | $ 76,763 | $ 72,389 |
Direct Selling [Member] | ||
Total assets | 44,926 | 44,082 |
Commercial Coffee [Member] | ||
Total assets | $ 31,837 | $ 28,307 |
Segment and Geographical Info48
Segment and Geographical Information (Details 2) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Total revenues | $ 44,255 | $ 41,527 | $ 87,249 | $ 80,260 |
United States [Member] | ||||
Total revenues | 37,980 | 37,378 | 75,373 | 72,212 |
International [Member] | ||||
Total revenues | $ 6,275 | $ 4,149 | $ 11,876 | $ 8,048 |
Segment and Geographical Info49
Segment and Geographical Information (Details Narrative) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
International [Member] | ||
Tangible assets | $ 5,300 | $ 5,300 |