Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2017 | Aug. 14, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | Differential Brands Group Inc. | |
Entity Central Index Key | 844,143 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 13,317,281 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2016 |
Current assets | |||
Cash and cash equivalents | $ 6,305 | $ 6,476 | $ 8,368 |
Accounts receivable, net | 16,982 | 20,225 | 14,339 |
Inventories, net | 30,623 | 23,977 | 26,759 |
Prepaid expenses and other current assets | 5,465 | 4,249 | 1,976 |
Total current assets | 59,375 | 54,927 | 51,442 |
Property and equipment, net | 9,651 | 10,620 | 13,003 |
Goodwill | 8,340 | 8,271 | 6,524 |
Intangible assets, net | 90,669 | 91,886 | 84,965 |
Other assets | 514 | 467 | 477 |
Total assets | 168,549 | 166,171 | 156,411 |
Current liabilities | |||
Accounts payable and accrued expenses | 20,206 | 19,930 | 20,838 |
Short term convertible notes | 13,436 | 13,137 | |
Current portion of long term debt | 1,875 | 1,250 | 875 |
Total current liabilities | 35,517 | 34,317 | 21,713 |
Deferred rent | 3,609 | 3,636 | 3,624 |
Line of credit | 17,492 | 12,742 | 12,000 |
Convertible notes | 13,242 | 12,660 | 12,251 |
Long term debt, net of current portion | 45,991 | 47,218 | 47,694 |
Deferred income taxes, net | 13,416 | 11,074 | 9,723 |
Other liabilities | 81 | ||
Total liabilities | 129,267 | 121,647 | 107,086 |
Commitments and contingencies (Note 13) | |||
Equity | |||
Series A convertible preferred stock, $0.10 par value: 50,000 shares authorized, issued and outstanding at June 30, 2017, December 31, 2016 and June 30, 2016, respectively | 5 | 5 | 5 |
Common stock, $0.10 par value: 100,000,000 shares authorized, 13,317,281, 13,239,125 and 12,379,000 shares issued and outstanding at June 30, 2017, December 31 2016 and June 30, 2016, respectively | 1,332 | 1,324 | 1,239 |
Additional paid-in capital | 59,962 | 59,154 | 56,093 |
Accumulated other comprehensive income (loss) | 125 | (221) | |
Accumulated deficit | (22,142) | (15,738) | (8,012) |
Total equity | 39,282 | 44,524 | 49,325 |
Total liabilities and equity | $ 168,549 | $ 166,171 | $ 156,411 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2016 |
CONSOLIDATED BALANCE SHEETS | |||
Convertible preferred stock, par value (in dollars per share) | $ 0.10 | $ 0.10 | $ 0.10 |
Convertible preferred stock, shares authorized | 50,000 | 50,000 | 50,000 |
Convertible preferred stock, shares issued | 50,000 | 50,000 | 50,000 |
Convertible preferred stock, shares outstanding | 50,000 | 50,000 | 50,000 |
Common stock, par value (in dollars per share) | $ 0.10 | $ 0.10 | $ 0.10 |
Common stock, shares authorized | 100,000,000 | 100,000,000 | 100,000,000 |
Common stock, shares issued | 13,317,281 | 13,239,125 | 12,379,000 |
Common stock, shares outstanding | 13,317,281 | 13,239,125 | 12,379,000 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME | ||||
Net sales | $ 36,453 | $ 32,373 | $ 76,555 | $ 66,088 |
Cost of goods sold | 20,234 | 19,862 | 41,733 | 37,240 |
Gross profit | 16,219 | 12,511 | 34,822 | 28,848 |
Operating expenses | ||||
Selling, general and administrative | 14,915 | 14,130 | 32,319 | 30,593 |
Depreciation and amortization | 1,527 | 1,501 | 3,032 | 2,863 |
Retail store impairment | 279 | |||
Total operating expenses | 16,442 | 15,631 | 35,351 | 33,735 |
Operating loss from continuing operations | (223) | (3,120) | (529) | (4,887) |
Interest expense, net | 2,207 | 1,995 | 4,254 | 3,336 |
Other expense, net | (12) | 11 | ||
Loss from continuing operations, before income tax | (2,418) | (5,115) | (4,794) | (8,223) |
Income tax provision (benefit) | 1,636 | (1,510) | 1,610 | 577 |
Loss from continuing operations | (4,054) | (3,605) | (6,404) | (8,800) |
Loss from discontinued operations, net of tax | (1,286) | |||
Net loss | (4,054) | (3,605) | (6,404) | (10,086) |
Other comprehensive loss, net of tax: | ||||
Net loss | (4,054) | (3,605) | (6,404) | (10,086) |
Foreign currency translation | 283 | 346 | ||
Other comprehensive loss | 283 | 346 | ||
Comprehensive loss | $ (3,771) | $ (3,605) | $ (6,058) | $ (10,086) |
Loss per common share - basic | ||||
Loss from continuing operations (in dollars per share) | $ (0.30) | $ (0.29) | $ (0.48) | $ (0.74) |
Loss from discontinued operations (in dollars per share) | (0.11) | |||
Loss per common share - basic (in dollars per share) | (0.30) | (0.29) | (0.48) | (0.85) |
Loss per common share - diluted | ||||
Loss from continuing operations (in dollars per share) | (0.30) | (0.29) | (0.48) | (0.74) |
Loss from discontinued operations (in dollars per share) | (0.11) | |||
Loss per common share - diluted (in dollars per share) | $ (0.30) | $ (0.29) | $ (0.48) | $ (0.85) |
Weighted average shares outstanding | ||||
Basic (in shares) | 13,309 | 12,380 | 13,298 | 11,852 |
Diluted (in shares) | 13,309 | 12,380 | 13,298 | 11,852 |
CONSOLIDATED STATEMENTS OF EQUI
CONSOLIDATED STATEMENTS OF EQUITY - USD ($) $ in Thousands | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Preferred member | Common member | Preferred Series A | Total |
Balance at Dec. 31, 2015 | $ 24,798 | $ 22,743 | $ 47,541 | |||||
Balance (in shares) at Dec. 31, 2015 | 5,100,000 | 4,900,000 | ||||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Net loss through RG Merger date | $ (1,058) | $ (1,016) | (2,074) | |||||
Redemption of Robert Graham unit holders | (29,313) | (28,905) | (58,218) | |||||
Contribution of Robert Graham in exchange for common shares | $ 883 | $ (13,634) | $ 5,573 | $ 7,178 | ||||
Contribution of Robert Graham in exchange for common shares (in shares) | 8,825,000 | (5,100,000) | (4,900,000) | |||||
Reverse acquisition with Robert Graham | $ 351 | 19,649 | 20,000 | |||||
Reverse acquisition with Robert Graham (in shares) | 3,509,000 | |||||||
Issuance of Series A convertible preferred stock, net of offering costs of $931 | 49,064 | $ 5 | 49,069 | |||||
Issuance of Series A convertible preferred stock (in shares) | 50,000 | |||||||
Stock-based compensation | 516 | 516 | ||||||
Issuance of restricted common stock | $ 5 | 498 | 503 | |||||
Issuance of restricted common stock (in shares) | 45,000 | |||||||
Net loss | (10,086) | |||||||
Net loss post RG Merger date | $ (8,012) | (8,012) | ||||||
Balance at Jun. 30, 2016 | $ 1,239 | 56,093 | (8,012) | $ 5 | $ 49,325 | |||
Balance (in shares) at Jun. 30, 2016 | 12,379,000 | 50,000 | 12,379,000 | |||||
Balance at Dec. 31, 2016 | $ 1,324 | 59,154 | $ (221) | (15,738) | $ 5 | $ 44,524 | ||
Balance (in shares) at Dec. 31, 2016 | 13,239,000 | 50,000 | 13,239,125 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Stock-based compensation | 900 | $ 900 | ||||||
Issuance of restricted common stock | $ 8 | (92) | (84) | |||||
Issuance of restricted common stock (in shares) | 78,000 | |||||||
Foreign currency translation | 346 | 346 | ||||||
Net loss | (6,404) | (6,404) | ||||||
Balance at Jun. 30, 2017 | $ 1,332 | $ 59,962 | $ 125 | $ (22,142) | $ 5 | $ 39,282 | ||
Balance (in shares) at Jun. 30, 2017 | 13,317,000 | 50,000 | 13,317,281 |
CONSOLIDATED STATEMENTS OF EQU6
CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) $ in Thousands | 6 Months Ended |
Jun. 30, 2016USD ($) | |
Preferred Series A | |
Issuance of convertible preferred stock, offering costs | $ 931 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Loss from continuing operations | $ (6,404) | $ (8,800) |
Adjustment to reconcile net loss from continuing operations to net cash (used in) provided by operating activities: | ||
Depreciation and amortization | 3,032 | 2,863 |
Retail store impairment | 279 | |
Amortization of deferred financing costs | 215 | 162 |
Amortization of convertible notes discount | 350 | 359 |
Paid-in-kind Interest | 770 | 92 |
Stock-based compensation | 900 | 1,019 |
Provision for bad debts | 194 | 31 |
Amortization of inventory step up | 383 | |
Deferred taxes | 2,289 | 270 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 3,081 | (1,339) |
Inventories | (6,591) | (411) |
Prepaid expenses and other assets | (1,253) | 217 |
Accounts payable and accrued expenses | 2,220 | (8,264) |
Deferred rent | (20) | 56 |
Net cash used in by continuing operating activities | (1,217) | (13,083) |
Net cash used in discontinued operations | (1,384) | |
Net cash used in by operating activities | (1,217) | (14,467) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Cash paid in reverse acquisition with Robert Graham, net of cash acquired | (6,538) | |
Refund of security deposit | 7 | |
Purchases of property and equipment | (601) | (1,125) |
Net cash used in investing activities | (594) | (7,663) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from issuance of Series A convertible preferred stock, net of offering costs | 49,881 | |
Proceeds from term debt | 50,000 | |
Repayment of long-term debt | (625) | (250) |
Proceeds from line of credit, net | 4,350 | 12,587 |
Repayment of terminated line of credit and loan payable | (23,349) | |
Payment of deferred financing costs | (124) | (1,584) |
Redemption of unit holders | (58,218) | |
(Repayments of) proceeds from customer cash advances | (1,707) | 831 |
Payment of accrued distribution to members | (1,366) | |
Taxes pai in lieu of shares issued for stock-based compensation | (251) | |
Net cash provided by financing activities | 1,643 | 28,532 |
Effect of exchange rate changes on cash | (3) | |
NET CHANGE IN CASH AND CASH EQUIVALENTS | (171) | 6,402 |
CASH AND CASH EQUIVALENTS, at beginning of period | 6,476 | 1,966 |
CASH AND CASH EQUIVALENTS, at end of period | 6,305 | 8,368 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 2,797 | 1,563 |
Income taxes paid | 116 | 507 |
Supplemental disclosures of non-cash investing and financing activities: | ||
Common stock issued in reverse acquisition with Robert Graham | 20,000 | |
Issuance of convertible notes | 16,473 | |
Debt discount recorded in connection with convertible notes | 4,673 | |
Contribution of Robert Graham in exchange for common shares | 12,751 | |
Reclassification from Other Assets to Offering Costs | 812 | |
Reclassification of other assets to deferred financing costs | $ 349 | |
Non-cash investing and financing activities: accrued capital expenditures | $ 79 |
Business Description and Basis
Business Description and Basis of Presentation | 6 Months Ended |
Jun. 30, 2017 | |
Business Description and Basis of Presentation | |
Business Description and Basis of Presentation | 1. Business Description and Basis of Presentation The condensed consolidated balance sheet as of December 31, 2016 has been derived from audited financial statements. The condensed consolidated financial statements as of and for the three and six months ended June 30, 2017 and 2016 and the related footnote information have been prepared on a basis consistent with the consolidated financial statements as of and for the years ended December 31, 2016 and 2015. In addition, these condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements and thus should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments), which management considers necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented. The results for the three and six months ended June 30, 2017 are not necessarily indicative of the results anticipated for the entire year ending December 31, 2017. The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“ GAAP ”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results may differ from those estimates. Differential Brands Group Inc. and subsidiaries ( “ we ,” “ us ,” the “Company ” or “ Differential ”) began operations in 1987 as Innovo, Inc. Since the Company’s founding, the Company has evolved from producing craft and accessory products to designing and selling apparel products bearing the Hudson®, Robert Graham® and SWIMS® brand names. The Company’s principal business activity involves the design, development and worldwide marketing of: apparel products, which include denim jeans, related casual wear and accessories bearing the brand name Hudson®; apparel products and accessories bearing the brand name Robert Graham®; footwear, apparel and accessories bearing the brand name SWIMS®. Our primary operating subsidiaries are Hudson Clothing, LLC (“ Hudson ”), Robert Graham Designs, LLC and Robert Graham Retail, LLC (collectively “ Robert Graham ”), and DFBG Swims, LLC (“ Swims ”). In addition, we have other non-operating subsidiaries. The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. As previously reported, on September 11, 2015, the Company completed the sale of certain operating and intellectual property assets related to the business operated under the brand names “Joe’s Jeans,” “Joe’s,” “Joe’s JD” and “else” (the “ Joe’s Business ”) to GBG USA Inc., a Delaware corporation (“ GBG ”), and the sale of certain intellectual property assets related to the Joe’s Business to Joe’s Holdings LLC, a Delaware limited liability company (“ Joe’s Holdings ”), for an aggregate purchase price of $80.0 million (the “ Joe’s Asset Sale ”). The Company also entered into the amended and restated revolving credit agreement (the “ CIT Amended and Restated Revolving Credit Agreement ”), dated September 11, 2015, which provided for a maximum credit availability of $7.5 million. On January 28, 2016, the Company completed the acquisition (the “ RG Merger ”) of all of the outstanding equity interests of RG Parent LLC and its subsidiaries (“ Robert Graham ” or “ RG ”), for an aggregate of $81.0 million in cash and 8,825,461 shares of the Company’s common stock, par value $0.10 per share (after giving effect to the Reverse Stock Split, as defined below). The aggregate cash consideration was used to repay $19.0 million of RG’s outstanding loans and indebtedness under its revolving credit agreement with J.P. Morgan Chase Bank, N.A. On the RG Merger’s closing date, all outstanding loans under the CIT Amended and Restated Revolving Credit Agreement were repaid and it was terminated in connection with entering into (i) a new credit and security agreement (as later amended, the “ ABL Credit Agreement ”) with Wells Fargo Bank, National Association, as lender, (ii) a new credit and security agreement with TCW Asset Management Company, as agent, and the lenders party thereto (as later amended, the “ Term Credit Agreement ”), and (iii) an amended and restated deferred purchase factoring agreement with CIT (the “ A&R Factoring Agreement ”). Effective upon consummation of the RG Merger, the Company effected a reverse stock split (the “ Reverse Stock Split ”) of the Company’s issued and outstanding common stock such that each 30 shares of issued and outstanding common stock were reclassified into one share of issued and outstanding common stock, which Reverse Stock Split did not change the par value or the amount of authorized shares of common stock. The primary purpose of the Reverse Stock Split was to increase the per-share market price of the Company’s common stock in order to maintain its listing on The Nasdaq Capital Market maintained by The Nasdaq Stock Market LLC. Unless otherwise indicated, all share amounts in this Quarterly Report on Form 10-Q (this “ Quarterly Report ”) have been adjusted to reflect the Reverse Stock Split. After the closing of the Joe’s Asset Sale on September 11, 2015, the Company retained and operated 32 Joe’s® brand retail stores, of which the Company transferred 18 retail stores to GBG on January 28, 2016 for no additional consideration. As of February 29, 2016, the remaining 14 Joe’s® brand retail stores were closed and as a result are reported in this Quarterly Report as discontinued operations for the six months ended June 30, 2016. On July 18, 2016, the Company completed the acquisition of all of the outstanding share capital of Norwegian private limited company SWIMS AS (“ SWIMS ”) for an aggregate consideration of (i) $12.0 million in cash, (ii) 702,943 shares of common stock and (iii) warrants to purchase an aggregate of 150,000 shares of common stock with an exercise price of $5.47 per share. The RG Merger has been accounted for as a reverse merger and recapitalization and as a result of the RG Merger, the former RG members own a majority of the Company’s issued and outstanding equity. Under the acquisition method, RG is deemed the accounting acquirer for financial reporting purposes, with the Company, as the legal acquirer, being viewed as the accounting acquiree. As a result, the assets, liabilities and operations reflected in the historical condensed consolidated financial statements and elsewhere in this Quarterly Report prior to the RG Merger are those of RG and are recorded at the historical cost basis and reflect RG’s historical financial condition and results of operations for comparative purposes. The Company’s condensed consolidated financial statements include: (i) from January 1, 2016 up to the day prior to the closing of the RG Merger on January 28, 2016, the results of operations and cash flows of RG; (ii) from and after the RG Merger’s closing date on January 28, 2016, the results of continuing operations, cash flows and, as applicable, the assets and liabilities of the combined company, comprising the Company’s Hudson business and RG; (iii) from and after the RG Merger’s closing date on January 28, 2016, the results of the discontinued operations from the Joe’s® brand retail stores that were not transferred to GBG but that closed as of February 29, 2016 ; and (iv) from and after the acquisition of SWIMS on July 18, 2016, the results of continuing operations and cash flows and, as applicable, the assets and liabilities of SWIMS. Prior to the RG Merger, RG and the Company had different fiscal year ends, with RG’s fiscal year ending on December 31 and the Company’s fiscal year ending on November 30. In connection with the RG Merger, the Company changed its fiscal year end to December 31. The Company’s reportable business segments are Wholesale, Consumer Direct and Corporate and other. For periods before the RG Merger’s closing date, the discussion of reportable segments reflects only the operations of RG. The Company manages, evaluates and aggregates its operating segments for segment reporting purposes primarily on the basis of business activity and operation. The Wholesale segment is comprised of sales of products to premium nationwide department stores, boutiques, specialty retailers, and select off-price and international customers. The Wholesale segment also includes expenses from sales and customer service departments, trade shows, warehouse distribution, design and production, and product samples. The Consumer Direct segment is comprised of sales to consumers through the Robert Graham® brand full-price retail stores and outlet stores, through the SWIMS® brand outlet stores and through the online e-commerce sites at www.hudsonjeans.com , www.robertgraham.us and www.swims.com. The information contained on, or that can be accessed through, these websites is not a part of this Quarterly Report and is not incorporated by reference herein. The Corporate and other segment is comprised of revenue from trademark licensing agreements and expenses from corporate operations, which include the executive, finance, legal, information technology and human resources departments and general brand marketing and advertising expenses associated with the Company’s brands. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2017 | |
Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Information regarding significant accounting policies is contained in Note 2, “Summary of Significant Accounting Policies” of the consolidated financial statements in the Annual Report on Form 10-K for the fiscal year ended December 31, 2016. Inventory and Reclassification During the three months ended March 31, 2017, the Company modified its capitalization of overhead costs allocated to inventory to include certain production costs that were previously excluded. These production expenses were previously included in cost of goods sold and selling, general and administrative expenses. These costs are now included in production overhead capitalized to inventory to better reflect the costs incurred to bring the Company’s inventory to a saleable condition after the recent change in the Company’s processes of sourcing inventory. This modification resulted in additional capitalization of $1.4 million of production overhead to the standard cost of inventory from production expenses. This modification has been accounted for on a prospective basis from January 1, 2017. The increase in inventories resulted in a $1.4 million non-cash benefit (or $0.11 per diluted share), which was comprised of a $0.3 million decrease in cost of goods sold and a $1.1 million decrease in selling, general and administrative expenses. In addition, the Company has reclassified delivery expenses, design costs, warehousing and handling costs and other inventory acquisition related costs to cost of goods sold, which were previously included in selling, general and administrative expenses. The classification of these costs in cost of goods sold more accurately reflects the cost of producing and distributing products. Additionally, this presentation enhances the comparability of the Company’s financial statements with industry peers. The change has been reflected in the condensed consolidated statements of operations in the prior periods to conform to the presentation in the current period. The impact of the reclassification resulted in an increase to cost of goods sold and a decrease to selling, general and administrative expenses in the amount of $4.6 million and $8.6 million for the three and six months ended June 30, 2016, respectively. Following is a reconciliation of the reclassification of costs from selling, general and administrative to cost of goods sold discussed above for the three and six months ended June 30, 2016 (in thousands): Three months ended June 30, 2016 Six months ended June 30, 2016 Before After As Previously After Reclass Reclass Reclass Reported Reclass Reclass Net sales $ 32,373 $ — $ 32,373 $ 66,088 $ — $ 66,088 Cost of goods sold 15,274 4,588 19,862 28,686 8,554 37,240 Gross profit 17,099 (4,588) 12,511 37,402 (8,554) 28,848 Operating expenses Selling, general and administrative 18,718 (4,588) 14,130 39,147 (8,554) 30,593 Depreciation and amortization 1,501 — 1,501 2,863 — 2,863 Retail store impairment — — — 279 — 279 Total operating expenses 20,219 (4,588) 15,631 42,289 (8,554) 33,735 Operating loss from continuing operations (3,120) — (3,120) (4,887) — (4,887) Interest expense 1,995 — 1,995 3,336 — 3,336 Other (income) expense, net — — — — — — Loss from continuing operations before income taxes (5,115) — (5,115) (8,223) — (8,223) Income tax provision (benefit) (1,510) — (1,510) 577 — 577 Loss from continuing operations (3,605) — (3,605) (8,800) — (8,800) Loss from discontinued operations, net of tax — — — (1,286) — (1,286) Net loss $ (3,605) $ — $ (3,605) $ (10,086) $ — $ (10,086) Cost of Goods Sold Cost of goods sold includes the following: the cost of merchandise; customs related taxes and duties; production costs; delivery expense; in-bound and outbound freight; obsolescence and shrink provisions; design costs; warehousing and handling costs and other inventory acquisition related costs. Financial Accounting Standards Recently Adopted In March 2016, the Financial Accounting Standards Board (“ FASB ”) issued Accounting Standards Update (“ ASU ”) No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements To Employee Share-Based Payment Accounting , which amends ASC Topic 718, relating to employee share-based payment accounting. This guidance simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within that reporting period. The Company adopted this standard in the first quarter of 2017 and there was no material impact on the condensed consolidated financial statements . In January 2017, the FASB issued ASU No. 2017-04, Intangibles —Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . Topic 350, Intangibles—Goodwill and Other (Topic 350) , currently requires an entity to perform a two-step test to determine the amount, if any, of goodwill impairment. ASU No. 2017-04 removes the second step of the test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. The ASC amendments are effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 with early adoption permitted. The Company adopted this standard in the first quarter of 2017 and there was no impact on the condensed consolidated financial statements. Recently Issued Financial Accounting Standards In April and March 2016, the FASB issued ASU No. 2016-10, Identifying Performance Obligations and Licensing , and ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) , respectively. ASU No. 2016-10 clarifies the implementation guidance on licensing and the identification of performance obligations considerations included in ASU No. 2014-09. ASU No. 2016-08 provides amendments to clarify the implementation guidance on principal versus agent considerations included in ASU No. 2014-09. In August 2015, the FASB issued ASU No. 2015-14, which defers the effective date of ASU No. 2014-09. ASU No. 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The effective date of this pronouncement is for fiscal years beginning after December 15, 2017 with early adoption permitted as of the original effective date. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Customers with Contracts (Topic 606) Narrow-Scope Improvements and Practical Expedients . ASU No. 2016-12 amends certain aspects of ASU No. 2014-09, Revenue from Customers with Contracts (Topic 606) . The amendments include the following: · Collectibility – ASU No. 2016-12 clarifies the objective of the entity’s collectibility assessment and contains new guidance on when an entity would recognize as revenue consideration it receives if the entity concludes that collectibility is not probable. · Presentation of sales tax and other similar taxes collected from customers – Entities are permitted to present revenue net of sales taxes collected on behalf of governmental authorities (i.e., to exclude from the transaction price sales taxes that meet certain criteria). · Noncash consideration – An entity’s calculation of the transaction price for contracts containing noncash consideration would include the fair value of the noncash consideration to be received as of the contract inception date. Further, subsequent changes in the fair value of noncash consideration after contract inception would be subject to the variable consideration constraint only if the fair value varies for reasons other than its form. · Contract modifications and completed contracts at transition – The ASU establishes a practical expedient for contract modifications at transition and defines completed contracts as those for which all (or substantially all) revenue was recognized under the applicable revenue guidance before the new revenue standard was initially adopted. · Transition technical correction – Entities that elect to use the full retrospective transition method to adopt the new revenue standard would no longer be required to disclose the effect of the change in accounting principle on the period of adoption (as is currently required by ASC No. 250-10-50-1(b)(2)); however, entities would still be required to disclose the effects on preadoption periods that were retrospectively adjusted. ASU No. 2016-12 is effective for annual and interim periods beginning on or after December 15, 2017, and early adoption is permitted as of the original effective date of December 31, 2016. The Company will adopt the new revenue standards in the first quarter of 2018. The Company has not selected a transition model. The Company is still completing the assessment of the impact these ASUs will have on its condensed consolidated financial statements; however at the current time the Company does not expect that the adoption of these ASUs will have a material impact on its consolidated financial condition or results of operations. The adoption of these ASUs will require enhanced disclosures. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) , which affects the accounting for leases. The guidance requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. The amendment also will require qualitative and quantitative disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. This ASU is effective for fiscal years beginning after December 15, 2018 and interim periods within that reporting period. Early application is permitted. The Company is currently assessing the impact of the new standard on its condensed consolidated financial statements, but anticipates an increase in assets and liabilities due to the recognition of the required right-of-use asset and corresponding liability for all lease obligations that are currently classified as operating leases, such as real estate leases for corporate headquarters, administrative offices, retail stores, and showrooms as well as additional disclosure on all our lease obligations. The income statement recognition of lease expense is not expected to significantly change from the current methodology. In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments . ASU No. 2016-15 amends the guidance in ASC 230 on the classification of certain cash receipts and payments in the statement of cash flows. The primary purpose of ASU No. 2016-15 is to reduce the diversity in practice that has resulted from the lack of consistent principles on this topic. ASU No. 2016-15 is effective for annual and interim periods beginning after December 15, 2017, and early adoption is permitted for all entities. Entities must apply the guidance retrospectively to all periods presented but may apply it prospectively from the earliest date practicable if retrospective application would be impracticable. The Company is currently evaluating the impact the adoption of ASU No. 2016-15 will have on its condensed consolidated financial statements. |
Factored Accounts and Receivabl
Factored Accounts and Receivables | 6 Months Ended |
Jun. 30, 2017 | |
Factored Accounts and Receivables | |
Factored Accounts and Receivables | 3. Factored Accounts and Receivables RG’s Former Factoring Agreement In December 2013, RG entered into a deferred purchase factoring arrangement and loan agreement with CIT. Under the agreement, RG assigned trade accounts receivable to a commercial factor with recourse, while retaining ownership of the assigned accounts receivable until the occurrence of a specified triggering event. In January 2016, in connection with the RG Merger, the Company terminated the deferred purchase factoring arrangement and loan agreement and entered into the A&R Factoring Agreement (as defined below). A&R Factoring Agreement In January 2016, in connection with the RG Merger, the Company entered into the A&R Factoring Agreement with CIT, through its subsidiaries, Robert Graham Designs LLC and Hudson, which replaced all prior agreements relating to factoring and inventory security. The A&R Factoring Agreement provides that the Company sell and assign to CIT certain accounts receivable, including accounts arising from or related to sales of inventory and the rendition of services. Under the A&R Factoring Agreement, the Company pays various factoring rates depending on the credit risk associated with the nature of the account. The A&R Factoring Agreement may be terminated by CIT upon 60 days’ written notice or immediately upon the occurrence of an event of default as defined in the agreement. The A&R Factoring Agreement may be terminated by the Company upon 60 days’ written notice prior to December 31, 2020 or annually with 60 days’ written notice prior to December 31 of each year thereafter. SWIMS Factoring Agreement In connection with the acquisition of SWIMS, SWIMS has maintained a preexisting Credit Assurance and Factoring Agreement between SWIMS and DNB Bank ASA (“ DNB ”), dated August 26, 2013 (the “ SWIMS Factoring Agreement ”). The SWIMS Factoring Agreement is a combined credit assurance and factoring agreement, pursuant to which SWIMS is granted financing of up to 80% of its preapproved outstanding invoiced receivables. DNB receives an annual commission based on invoiced revenues and a quarterly commission of the maximum financing amount plus other administrative costs. The SWIMS Factoring Agreement is secured with (a) first-priority lien on SWIMS’s (i) machinery and plant (up to NOK 10.0 million) and (ii) inventory (up to NOK 10.0 million) and (b) additional liens on SWIMS’s factoring in the amount of NOK 1.0 million (first lien), NOK 4.0 million (second lien), NOK 7.0 million (third lien) and NOK 2.5 million (fourth lien). The SWIMS Factoring Agreement may be terminated by SWIMS upon 14 days’ prior written notice for any reason and by DNB upon 14 days’ prior written notice for just cause. DNB may also terminate the SWIMS Factoring Agreement without any prior written notice in the event of a material breach by SWIMS. As of June 30, 2017, SWIMS had outstanding financing commitments on NOK 10.1 million (approximately $1.2 million as of June 30, 2017) of its preapproved outstanding invoiced receivables pursuant to the SWIMS Factoring Agreement. Accounts receivable consists of the following (in thousands): June 30, 2017 December 31, 2016 June 30, 2016 Non-recourse receivables assigned to factor $ 15,814 $ 20,226 $ 16,439 Client recourse receivables 1,900 1,634 500 Total receivables assigned to factor 17,714 21,860 16,939 Allowance for customer credits (4,010) (5,157) (4,784) Factored accounts receivable, net $ 13,704 $ 16,703 $ 12,155 Non-factored accounts receivable $ 4,459 $ 4,743 $ 3,419 Allowance for customer credits (997) (1,031) (1,126) Allowance for doubtful accounts (184) (190) (109) Non-factored accounts receivable, net $ 3,278 $ 3,522 $ 2,184 Total accounts receivable, net $ 16,982 $ 20,225 $ 14,339 Of the total amount of receivables sold by the Company as of June 30, 2017, December 31, 2016 and June 30, 2016, the Company holds the risk of payment of $1.9 million, $1.6 million and $0.5 million, respectively, in the event of non-payment by the customers. |
Inventories
Inventories | 6 Months Ended |
Jun. 30, 2017 | |
Inventories | |
Inventories | 4. Inventories Inventories are valued at net realizable value with cost determined by the first-in, first-out method. Inventories consisted of the following (in thousands): June 30, 2017 December 31, 2016 June 30, 2016 Finished goods $ 28,382 $ 22,537 $ 25,170 Finished goods consigned to others 1,419 1,179 1,299 Work in progress 595 42 19 Raw materials 227 219 271 Total inventories $ 30,623 $ 23,977 $ 26,759 |
Impairment of Long-Lived Assets
Impairment of Long-Lived Assets | 6 Months Ended |
Jun. 30, 2017 | |
Impairment of Long-Lived Assets | |
Impairment of Long-Lived Assets | 5. Impairment of Long-Lived Assets When the Company determines that the carrying value of long‑lived assets, such as property and equipment, may not be recoverable based upon the existence of one or more factors, and the carrying value exceeds the estimated undiscounted cash flows expected to be generated by the asset, impairment is measured based on a projected discounted cash flow method using a discount rate determined by management. These cash flows are calculated by netting future estimated sales against associated merchandise costs and other related expenses such as payroll, occupancy and marketing. The impairment loss calculations require management to apply judgment in estimating future cash flows and the discount rates that reflect the risk inherent in future cash flows. Future expected cash flows for retail store assets are based on management’s estimates of future cash flows over the remaining lease period or expected life, if shorter. The Company considers historical trends, expected future business trends and other factors when estimating each store’s future cash flow. The Company also considers factors such as: the local environment for each store location, including mall traffic and competition; the ability to successfully implement strategic initiatives; and the ability to control variable costs such as cost of goods sold and payroll, and in some cases, renegotiate lease costs. If actual results are not consistent with the assumptions and judgments used in estimating future cash flows and asset fair values, there may be additional exposure to future impairment losses that could be material to the results of operations. Retail store impairment charges of $279 thousand were recorded during the six months ended June 30, 2016 due to the closure of one store prior to the lease end date, which is included in the Consumer Direct segment. There was no impairment charge recorded related to the retail stores during the three and six months ended June 30, 2017 or for the three months ended June 30, 2016. |
Intangible Assets and Goodwill
Intangible Assets and Goodwill | 6 Months Ended |
Jun. 30, 2017 | |
Intangible Assets and Goodwill | |
Intangible Assets and Goodwill | 6. Intangible Assets and Goodwill Intangible assets are recorded at cost, less accumulated amortization. Amortization of intangible assets with finite lives is provided for over their estimated useful lives on a straight-line basis. The life of the trade names are indefinite. Intangible assets as of June 30, 2017 consisted of the following (in thousands): Amortization Gross Accumulated Net Period Amount Amortization Amount Trade names Indefinite $ 65,688 $ — $ 65,688 Customer relationships 7 to 15 Years 35,050 10,158 24,892 Non-compete agreements 3 Years 131 42 89 Total $ 100,869 $ 10,200 $ 90,669 Intangible assets as of December 31, 2016 consisted of the following (in thousands): Amortization Gross Accumulated Net Period Amount Amortization Amount Trade names Indefinite $ 65,480 $ — $ 65,480 Customer relationships 7 to 15 Years 34,997 8,699 26,298 Non-compete agreements 3 Years 128 20 108 Total $ 100,605 $ 8,719 $ 91,886 Intangible assets as of June 30, 2016 consisted of the following (in thousands): Amortization Gross Accumulated Net Period Amount Amortization Amount Trade names Indefinite $ 58,337 $ — $ 58,337 Customer relationships 13 to 15 Years 33,900 7,272 26,628 Total $ 92,237 $ 7,272 $ 84,965 Amortization expense related to the intangible assets amounted to approximately $0.7 million for both the three months ended June 30, 2017 and 2016. Amortization expense related to the intangible assets amounted to approximately $1.5 million and $1.3 million for the six months ended June 30, 2017 and 2016, respectively. As of June 30, 2017, the future amortization expense related to the finite-lived intangible assets is as follows (in thousands): 2017 Remainder of the year $ 1,491 2018 2,968 2019 2,948 2020 2,929 2021 2,924 Thereafter 11,721 $ 24,981 Goodwill consisted of the following as of June 30, 2017, December 31, 2016 and June 30, 2016 (in thousands): June 30, 2017 December 31, 2016 June 30, 2016 Beginning balance $ 8,271 $ 2,286 $ 2,286 Goodwill created by the RG Merger — 3,638 4,238 Goodwill created by the acquisition of SWIMS — 2,393 — Foreign currency adjustments 69 (46) — Ending balance $ 8,340 $ 8,271 $ 6,524 There was no impairment charge recorded related to intangible assets or goodwill during the three and six months ended June 30, 2017 and 2016. |
Debt and Preferred Stock
Debt and Preferred Stock | 6 Months Ended |
Jun. 30, 2017 | |
Debt and Preferred Stock | |
Debt and Preferred Stock | 7. Debt and Preferred Stock The five-year payment schedule of the Company’s convertible notes, line of credit and long-term debt as of June 30, 2017 is as follows (in thousands): Payments Due by Period Deferred Original Remainder of Financing Issue Carrying 2017 2018 2019 2020 2021 Total Costs, Net Discount, Net Value Short-term convertible note $ — $ 13,436 $ — $ — $ — $ 13,436 $ — $ — $ 13,436 Line of credit — — — 17,943 — 17,943 451 — 17,492 Long-term debt 625 2,500 3,750 5,000 37,000 48,875 1,009 — 47,866 Convertible notes — — — — 17,114 17,114 — 3,872 13,242 Total $ 625 $ 15,936 $ 3,750 $ 22,943 $ 54,114 $ 97,368 $ 1,460 $ 3,872 $ 92,036 JPM Credit Facility and Capex Loan of RG On December 23, 2013, RG entered into a $30.0 million revolving credit facility with JP Morgan Chase Bank (the “ JPM Loan Agreement ”), which was later amended such that $3.5 million of the revolving credit facility was reclassified to a term loan (the “ Capex Loan ”) . In January 2016, RG used the aggregate cash consideration received in the RG Merger to repay all $19.0 million of RG’s outstanding loans and indebtedness under the JPM Loan Agreement, including the Capex Loan. Line of Credit and Long-Term Debt – ABL Credit Agreement and Term Credit Agreement On January 28, 2016, in connection with consummation of the RG Merger, the Company and certain of its subsidiaries entered into (i) the ABL Credit Agreement; (ii) the Term Credit Agreement; and (iii) the A&R Factoring Agreement. See “Note 3 – Factored Accounts and Receivables” for a discussion of the A&R Factoring Agreement. The ABL Credit Agreement provides for a senior secured asset-based revolving credit facility (the “ Revolving Facility ”) with commitments in an aggregate principal amount of $40.0 million. The Term Credit Agreement provides for a senior secured term loan credit facility (the “ Term Facility ”) in an aggregate principal amount of $50 million. The Revolving Facility matures on October 30, 2020. The Term Facility matures on January 28, 2021. The amount available to be drawn under the Revolving Facility is based on the borrowing base values attributed to eligible accounts receivable and eligible inventory. The availability under the Revolving Facility as of June 30, 2017 was $8.6 million. Borrowings under the Revolving Facility and the Term Facility totaled $17.9 million and $48.9 million as of June 30, 2017, respectively. Certain of the Company’s subsidiaries are co-borrowers under the ABL Credit Agreement and the Term Credit Agreement. The obligations under the ABL Credit Agreement and the Term Credit Agreement are guaranteed by all of the Company’s domestic subsidiaries and are secured by substantially all of the Company’s assets, including the assets of its domestic subsidiaries. The ABL Credit Agreement provides that, subject to customary conditions, the Company, and certain of its subsidiaries that are borrowers, may seek to obtain incremental commitments under the Revolving Facility in an aggregate amount not to exceed $10.0 million. The Term Credit Agreement provides that, subject to customary conditions, the Company, and certain of its subsidiaries that are borrowers, may seek to obtain incremental term loans under the Term Facility in an aggregate amount not to exceed $50.0 million. The Company does not currently have any commitments for such incremental loans under either facility. There are no scheduled payments under the Revolving Facility. The Revolving Facility is required to be prepaid to the extent extensions of credit thereunder exceed the applicable borrowing base. Outstanding loans under the Revolving Facility may be prepaid at any time at the Company’s option without premium or penalty, other than customary "breakage" costs with respect to LIBOR loans. The Term Facility is subject to quarterly payments of principal as follows: (i) 0.25% for each of the first four fiscal quarters; (ii) 0.625% for each of the four fiscal quarters thereafter; (iii) 1.25% for each of the next following four fiscal quarters; (iv) 1.875% for each of the next following four fiscal quarters; and (v) 2.50% for each fiscal quarter thereafter, with the balance payable at maturity. The Term Facility includes mandatory prepayments customary for credit facilities of its nature, including, subject to certain exceptions: (i) 100% of the net cash proceeds from issuances of debt that is not permitted and certain equity issuances; (ii) 100% of the net cash proceeds from certain non-ordinary course asset sales, subject to customary exceptions and reinvestment rights; (iii) 100% of certain insurance proceeds and condemnation recoveries, subject to customary exceptions and reinvestment rights; (iv) 100% of the net cash proceeds from certain extraordinary receipts; and (v) a variable percentage of excess cash flow, ranging from 50% to 0% depending on our senior leverage ratio. Outstanding loans under the Term Facility may be prepaid at any time at the Company’s option subject to customary “breakage” costs with respect to LIBOR loans. Subject to certain exceptions, prepayments of loans under the Term Facility are subject to a prepayment premium of (i) 2.00% during the first year after the closing date and (ii) 1.00% during the second year after the closing date. Borrowings under the ABL Credit Agreement and Term Credit Agreement bear interest at a rate equal to either, at the Company’s option, an adjusted base rate or the LIBOR (subject to a 0.50% floor for borrowings under the Term Facility), in each case plus an applicable margin. The applicable margins for borrowing under the Term Facility (which varies based on our senior leverage ratio) range from 9.50% to 6.00% for base rate loans and 10.50% to 7.00% for LIBOR loans. The applicable margin for borrowings under the Revolving Facility is 0.50% for base rate loans and 1.75% for LIBOR loans. An unused commitment fee equal to 0.25% per annum of the average daily amount by which the total commitments under the Revolving Facility exceeds the outstanding usage under the Revolving Facility is payable monthly in arrears. The ABL Credit Agreement and Term Credit Agreement contain customary representations and warranties, events of default and covenants, including, among other things and subject to certain exceptions, covenants that restrict the ability of the Company and its subsidiaries, to incur additional indebtedness, create or permit liens on assets, engage in mergers or consolidations, dispose of assets, make prepayments of certain indebtedness, pay certain dividends and other restricted payments, make investments, and engage in transactions with affiliates. The Term Credit Agreement requires the Company to comply with various financial covenants to be tested. If an event of default under a credit agreement occurs and continues, the commitments may be terminated and the principal amount outstanding, together with all accrued and unpaid interest and other amounts owed may be declared immediately due and payable. To permit the acquisition of SWIMS, on July 18, 2016, the Company also entered into (i) a Consent and Amendment No. 1 to the ABL Credit Agreement and accompanying security agreement with Wells Fargo Bank, National Association, as lender, and (ii) a Consent and Amendment No. 1 to the Term Credit Agreement and accompanying security agreement with TCW Asset Management Company, as agent for the lenders and the lenders party thereto. Additionally, on March 27, 2017, the Company entered into (i) Amendment No. 2 to the Term Credit Agreement to modify certain defined terms, add a liquidity covenant, revise certain covenants and set an 8.75% base rate and 9.75% LIBOR rate for the period between March 27, 2017 and May 15, 2017, and (ii) Amendment No. 2 to the ABL Credit Agreement to conform certain defined terms to those in Amendment No. 2 in the Term Credit Agreement. As of June 30, 2017, the Company was in compliance with the financial and non-financial covenants included in the ABL Credit Agreement and the Term Credit Agreement. Modified Convertible Notes On September 8, 2015, the Company entered into the rollover agreement with the holders of convertible notes originally issued in connection with the acquisition of the Hudson business (“the Rollover Agreement ”), pursuant to which, on January 28, 2016, the holders of the notes contributed the notes to the Company in exchange for the following: · 1,167,317 shares of common stock; · a cash payment of approximately $8.6 million, before expenses; and · an aggregate principal amount of approximately $16. 5 million of modified convertible notes (the “ Modified Convertible Notes ”). The Modified Convertible Notes are structurally and contractually subordinated to our senior debt and will mature on July 28, 2021. The Modified Convertible Notes accrue interest quarterly on the outstanding principal amount at a rate of 6.5% per annum (which increased to 7% as of October 1, 2016 with respect to the Modified Convertible Notes issued to Fireman Capital CPF Hudson Co-Invest LP (“ Fireman ”)), which is payable 50% in cash and 50% in additional paid-in-kind notes; provided, however, that the Company may, in its sole discretion, elect to pay 100% of such interest in cash. Beginning on January 28, 2016, the Modified Convertible Notes are convertible by each of the holders into shares of our common stock, cash, or a combination of cash and common stock, at the Company’s election. If the Company elects to issue only shares of common stock upon conversion of the Modified Convertible Notes, each of the Modified Convertible Notes would be convertible, in whole but not in part, into a number of shares of the Company’s common stock equal to the “conversion amount” divided by the “market price.” The “conversion amount” is (a) the product of (i) the “market price”, multiplied by (ii) the quotient of (A) the principal amount, divided by (B) the conversion price, minus (b) the aggregate optional prepayment amounts paid to the holder. The “market price” is the average of the closing prices for our common stock over the 20-trading-day period immediately preceding the notice of conversion. If the Company elects to pay cash with respect to a conversion of the Modified Convertible Notes, the amount of cash to be paid per share will be equal to the conversion amount. The Company will have the right to prepay all or any portion of the principal amount of the Modified Convertible Notes at any time so long as the Company makes a pro rata prepayment on all of the Modified Convertible Notes. The following table is a summary of the recorded value of the Modified Convertible Notes as of June 30, 2017 (in thousands). The value of the convertible notes reflects the present value of the contractual cash flows from the Modified Convertible Notes and resulted in an original issue discount of $4.7 million that was recorded on January 28, 2016, the issuance date. June 30, 2017 Modified Convertible Notes - face value $ 16,473 Less: original issue discount (4,673) Modified Convertible Notes recorded value on issue date 11,800 PIK interest issued 641 Accumulated accretion of original issue debt discount 801 Modified Convertible Notes value $ 13,242 Short-Term Convertible Note In connection with the acquisition of SWIMS® in July 2016, the Company entered into certain financing arrangements with Tengram Capital Fund II, L.P. (“ Tengram II ”), an entity affiliated with the holder of the Company’s Series A Preferred Stock, TCP Denim, LLC, including a convertible note issued to Tengram II on July 18, 2016 (the “ SWIMS Convertible Note ”). The SWIMS Convertible Note accrues interest at a rate of 3.75% per annum, compounding on the first day of each month starting August 1, 2016, and will convert, at Tengram II’s option or on the revised maturity date of January 18, 2018 (see “Note 19 – Subsequent Events”), which had an original maturity date of January 18, 2017, if not already repaid in cash on or prior to that date, into up to 4,500,000 newly issued shares of our Series A-1 Preferred Stock at a conversion price of $3.00 per share. The Company is currently evaluating all options in order to assess the repayment of the SWIMS Convertible Note at maturity if it is not converted. The Series A-1 Preferred Stock will itself be convertible into shares of our common stock at an initial price of $3.00 per share (subject to adjustment), will be entitled to dividends at a rate of 10% per annum payable quarterly in arrears, will be senior to the common stock upon liquidation and will have voting rights on an as-converted basis alongside its common stock. The value of the SWIMS Convertible Note reflects the present value of the contractual cash flows and resulted in an original issue discount of $465 thousand that was recorded on July 18, 2016, the issuance date. See “Note 17 – Acquisition of SWIMS” and “Note 9 – Equity” for a discussion on the warrants issued in connection with the acquisition of SWIMS. The following table is a summary of the recorded value of the convertible note as of June 30, 2017 (in thousands). June 30, 2017 Short-term convertible notes - face value $ 13,000 Less: Original issue discount (465) Short-term convertible notes recorded value on issue date 12,535 PIK interest issued 436 Accumulated accretion of original issue debt discount 465 Short-term convertible notes value $ 13,436 SWIMS Overdraft Agreement In connection with the acquisition of SWIMS, SWIMS has maintained a preexisting Overdraft Facility Agreement between SWIMS and DNB Bank ASA (“ DNB ”), dated January 27, 2016 (the “ Overdraft Agreement ”). The Overdraft Agreement is an overdraft facility that provides SWIMS with access to up to NOK 6.0 million (approximately $0.7 million as of June 30, 2017) in total, divided between (a) an ordinary credit of NOK 3.5 million at an interest rate of 7.4% plus an additional quarterly fee of 0.4% on the outstanding principal in frame commissions and (b) an additional credit of NOK 2.5 million at an interest rate of 4.9% plus an additional quarterly fee of 0.5% on the outstanding principal in frame commissions. The Overdraft Agreement is secured with (a) first-priority liens on SWIMS’s (i) machinery and plant (up to NOK 10.0 million) and (ii) inventory (up to NOK 10.0 million) and (b) additional liens on SWIMS’s factoring in the amount of NOK 1.0 million (first lien), NOK 4.0 million (second lien), NOK 7.0 million (third lien) and NOK 2.5 million (fourth lien). For more information on the SWIMS Factoring Agreement, see “Note 3 – Factored Accounts and Receivables.” The Overdraft Agreement may be terminated by SWIMS upon 14 days’ prior written notice for any reason and by DNB upon 14 days’ prior written notice for just cause. DNB may also terminate the Overdraft Agreement without any prior written notice in the event of a material breach by SWIMS. As of June 30, 2017, there was no outstanding balance on the facility governed by the Overdraft Agreement. Total Interest Expense The following table is a summary of total interest expense as follows (in thousands): Three months ended June 30, Six months ended June 30, 2017 2016 2017 2016 Contractual coupon interest $ 1,939 $ 1,603 $ 3,689 $ 2,815 Amortization of discounts and deferred financing costs 268 392 565 521 Total interest expense $ 2,207 $ 1,995 $ 4,254 $ 3,336 Series A Preferred Stock In connection with the RG Merger, the Company entered into the RG Stock Purchase Agreement with TCP Denim, LLC pursuant to which the Company issued and sold to TCP Denim, LLC an aggregate of 50,000 shares of the Series A Preferred Stock, for an aggregate purchase price of $50.0 million in cash. The proceeds from the sale of Series A Preferred Stock were used to consummate the RG Merger. Under the form of certificate of designation for the Series A Preferred Stock, each share of Series A Preferred Stock entitles the holder to receive cumulative dividends when, as and if declared by the Board of Directors or a duly authorized committee thereof, payable quarterly, at an annual rate of 10%, plus accumulated and accrued dividends thereon through such date. To date, the Board of Directors or a duly authorized committee thereof has not declared any dividends on the Series A Preferred Stock. Additionally, if the Board of Directors declares or pays a dividend on the common stock, then each holder of the Series A Preferred Stock will be entitled to receive a cash dividend on an as-converted basis. Each holder of the Series A Preferred Stock is entitled to vote on an as-converted basis and together with the holders of common stock as a single class, subject to certain limitations. For so long as a to-be-determined percentage of the shares of the Series A Preferred Stock remains outstanding, the holders of the Series A Preferred Stock, exclusively and as a separate class, will be entitled to elect three members of the Board of Directors, each of whom may only be removed without cause by the affirmative vote of the holders of a majority of the shares of Series A Preferred Stock. The holders of the Series A Preferred Stock have separate class voting rights with respects to certain matters affecting their rights. Upon any liquidation event, holders of the Series A Preferred Stock are entitled to receive the greater of the liquidation preference on the date of determination and the amount that would be payable to the holders of the Series A Preferred Stock had such holders converted their shares of Series A Preferred Stock into shares of common stock immediately prior to such liquidation event. Each share of the Series A Preferred Stock is convertible, at the option of the holder thereof, at any time and without the payment of additional consideration by the holder, at an initial conversion price of $11.16. |
Fair Value Measurement of Finan
Fair Value Measurement of Financial Instruments | 6 Months Ended |
Jun. 30, 2017 | |
Fair Value Measurement of Financial Instruments | |
Fair Value Measurement of Financial Instruments | 8. Fair Value Measurement of Financial Instruments The fair value of financial instruments held (which consist of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses) do not differ materially from their recorded amounts because of the relatively short period of time between origination of the instruments and their expected realization. The carrying amounts of the line of credit and long-term debt approximate fair value because of the variable interest rates. The fair value of the convertible notes is based on the amount of future cash flows associated with the instrument discounted using the incremental borrowing rate, which are considered Level 3 liabilities. Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. ASC 820 , Fair Value Measurements and Disclosures also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value: Level 1—Quoted prices in active markets for identical assets or liabilities Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The following table presents the fair value hierarchy for liabilities measured at fair value on a non-recurring basis as of June 30, 2017, December 31, 2016 and June 30, 2016 (in thousands): Carrying Value Fair Value June 30, December 31, June 30, June 30, December 31, June 30, Financial Instrument Level 2017 2016 2016 2017 2016 2016 Convertible notes - short term $ 13,436 $ 13,137 $ — $ 13,436 $ 13,137 $ — Convertible notes - long term 13,242 12,660 12,251 11,250 11,250 10,960 $ 26,678 $ 25,797 $ 12,251 $ 24,686 $ 24,387 $ 10,960 The key assumptions for determining the fair value at June 30, 2017 included the remaining time to maturity of 4.08 years, volatility of 60%, and the risk-free interest rate of 1.72%. |
Equity
Equity | 6 Months Ended |
Jun. 30, 2017 | |
Equity | |
Equity | 9. Equity Stock Incentive Plans Amended and Restated 2004 Stock Incentive Plan In 2004, the Board of Directors adopted, and the Company’s shareholders approved the Stock Incentive Plan. In October 2011, the Board of Directors adopted, and the Company’s shareholders approved, the Amended and Restated 2004 Stock Incentive Plan (the “Amended and Restated Plan” ) to update the 2004 Stock Incentive Plan with respect to certain provisions and changes in the tax code since its original adoption. 2016 Stock Incentive Plan On October 5, 2016, the Board of Directors adopted the Differential Brands Group Inc. 2016 Stock Incentive Compensation Plan (the “ 2016 Stock Incentive Plan ”) which was approved by the Company’s shareholders on November 7, 2016. Under the 2016 Stock Incentive Plan, 3,529,109 shares of common stock have been reserved for issuance in connection with grants of nonqualified stock options, incentive stock options, stock appreciation rights (“ SARs ”), restricted stock, restricted stock units (“ RSUs ”), performance-based compensation awards, other stock-based awards, dividend equivalents and cash-based awards. The Company has granted RSUs, stock options and performance share units (“ PSUs ”) to its officers, non-employee directors, employees and consultants pursuant to the 2016 Plan. As of June 30, 2017, shares reserved for future issuance under the incentive plans include: (i) 444 shares of common stock issuable upon the exercise of stock options granted under the Amended and Restated Plan; and (ii) 3,152,494 shares of common stock issuable under the 2016 Stock Incentive Plan. As of June 30, 2017, no shares remained available for grant under the Amended and Restated Plan. Stock Options The following table summarizes stock option activity by incentive plan for the six months ended June 30, 2017 (in actual amounts): Amended and 2016 Stock Total Number Restated Plan Incentive Plan of Shares Outstanding at January 1, 2017 444 150,000 150,444 Granted — — — Exercised — — — Forfeited / Expired — — — Outstanding at June 30, 2017 444 150,000 150,444 The following table summarizes stock option activity for all incentive plans for the six months ended June 30, 2017 (in actual amounts): Weighted Weighted Average Aggregate Average Remaining Contractual Intrinsic Options Exercise Price Life (Years) Value Outstanding at January 1, 2017 150,444 $ 4.04 Granted — — Exercised — — Expired — — Forfeited — — Outstanding at June 30, 2017 150,444 $ 4.04 5.9 $ — Exercisable at June 30, 2017 50,444 $ 4.08 4.9 $ — For all stock compensation awards that contain graded vesting with time‑based service conditions, the Company has elected to apply a straight‑line recognition method to account for these awards. A total of $7 thousand and $0 stock-based compensation expense related to stock options was recognized during the three months ended June 30, 2017 and 2016, respectively. A total of $15 thousand and $0 stock-based compensation expense related to stock options was recognized during the six months ended June 30, 2017 and 2016, respectively. The stock option awards are measured at fair value on the grant date using the Black-Scholes option valuation model. Stock options granted to non-employees are re-valued at each reporting period. Key input assumptions used to estimate the fair value of stock options include the exercise price of the award, the expected option term, expected volatility over the option’s expected term, the risk-free interest rate over the option’s expected term and the expected annual dividend yield, if any. Effective as of January 1, 2017 upon adoption of ASU No. 2016-09 , the Company accounts for forfeitures as they occur. Prior to adoption of ASU No. 2016-09, the Company’s policy was to estimate forfeitures based on an analysis of the award recipients’ positions and the vesting period of the awards. Application of a forfeiture rate was not deemed necessary in prior periods. Thus, there was no impact to the financial statements upon this change in policy. Shares of common stock will be issued when the options are exercised. As of June 30, 2017, there was $71 thousand of total unrecognized compensation cost related to unvested stock options. The unrecognized compensation cost is expected to be recognized over a weighted‑average of 1.9 years. Restricted Stock Units The following table summarizes RSU activity for the six months ended June 30, 2017 (in actual amounts): Restricted Stock Units Number Of Weighted Average Grant Outstanding at January 1, 2017 800,843 $ 4.65 Granted 510,000 2.24 Vested 113,888 4.62 Forfeited 75,000 2.90 Outstanding at June 30, 2017 1,121,955 $ 3.67 A total of $0.5 million and $0.3 million of stock-based compensation expense was recognized related to RSUs during the three months ended June 30, 2017 and 2016, respectively. A total of $0.9 million and $1.0 million of stock-based compensation expense was recognized related to RSUs during the six months ended June 30, 2017 and 2016, respectively. As of June 30, 2017, there was $3.3 million of total unrecognized compensation cost related to unvested Restricted Stock Units. The unrecognized compensation cost is expected to be recognized over a weighted‑average of 2.0 years. Performance Share Units The Company granted 513,678 performance share units during 2016 which vest over three years if the performance targets set by the Compensation Committee are met. If less than 80 percent of the performance targets are reached, zero percent of the performance share units will vest. Unvested performance share units in any completed year will be eligible for vesting in subsequent years if the subsequent year performance target is exceeded and the excess is sufficient to make up for the prior year shortfall. As of June 30, 2017, since it is not deemed probable that the performance targets will be met, none of the shares have vested, and no expense has been recognized. Warrants The Company issued warrants in conjunction with the acquisition and financing of SWIMS (see “Note 17 – Acquisition of SWIMS”) that are currently exercisable, which have been classified as equity. In connection with the SWIMS acquisition, the Company issued to Tengram II a warrant for the purchase of 500,000 shares of common stock at an exercise price of $3.00 per share and has an estimated fair value of $465 thousand. The Company determined the fair value of the warrant at the date of grant using the Black-Scholes option pricing model based on the market value of the underlying common stock, an exercise price of $3.00 per share, an expected life (term) of 5 years, a volatility rate of 50%, based upon the expected volatility in market traded stock over the same period as the remaining term of the warrants, zero dividends, and a risk free interest rate of 1.14%. In addition, a 20% discount for lack of marketability was applied based upon the Rule 144 six-month restriction period. Also in connection with the SWIMS acquisition, the Company issued to the SWIMS Sellers (as defined in Note 17) warrants for the purchase of 150,000 shares of common stock with an exercise price of $5.47 per share that have an estimated fair value of $45 thousand. The Company determined the fair value of the warrants at the date of grant using the Black-Scholes option pricing model based on the market value of the underlying common stock, an exercise price of $5.47 per share, an expected life (term) of 3 years, a volatility rate of 45%, based upon the expected volatility in market traded stock over the same period as the remaining term of the warrants, zero dividends, and a risk free interest rate of 0.85% In addition, a 10% discount for lack of marketability was applied based upon the Rule 144 six-month restriction period. |
(Loss) Earnings per Share
(Loss) Earnings per Share | 6 Months Ended |
Jun. 30, 2017 | |
Loss per Share | |
(Loss) Earnings per Share | 10. Loss per Share Loss per share is computed using weighted average common shares and dilutive common equivalent shares outstanding. Potentially dilutive shares consist of outstanding stock options, unvested RSUs, unvested PSUs, warrants, convertible Series A Preferred Stock and shares issuable upon the assumed conversion of the Modified Convertible Notes and the SWIMS Convertible Note. A reconciliation of the numerator and denominator of basic and diluted loss per share is as follows (in thousands, except per share data): Three months ended June 30, Six months ended June 30, 2017 2016 2017 2016 Basic loss per share computation Numerator: Loss from continuing operations $ (4,054) $ (3,605) $ (6,404) $ (8,800) Loss from discontinued operations — — — (1,286) Net loss $ (4,054) $ (3,605) $ (6,404) $ (10,086) Denominator: Weighted average common shares outstanding 13,309 12,380 13,298 11,852 Loss per common share - basic Loss from continuing operations $ (0.30) $ (0.29) $ (0.48) $ (0.74) Loss from discontinued operations — - — (0.11) Loss per common share - basic $ (0.30) $ (0.29) $ (0.48) $ (0.85) Diluted loss per share computation Numerator: Loss from continuing operations $ (4,054) $ (3,605) $ (6,404) $ (8,800) Loss from discontinued operations — — — (1,286) Net loss $ (4,054) $ (3,605) $ (6,404) $ (10,086) Denominator: Weighted average common shares outstanding 13,309 12,380 13,298 11,852 Effect of dilutive securities: Options, RSUs, PSUs, warrants, Series A, convertible notes — — — — Dilutive common shares 13,309 12,380 13,298 11,852 Loss per common share - diluted Loss from continuing operations $ (0.30) $ (0.29) $ (0.48) $ (0.74) Loss from discontinued operations — — — (0.11) Loss per common share - diluted $ (0.30) $ (0.29) $ (0.48) $ (0.85) The following potential shares of common stock were excluded from diluted EPS as the Company had a net loss for the period (in thousands): Three months ended June 30, Six months ended June 30, 2017 2016 2017 2016 Outstanding stock options 150 — 150 — Unvested RSUs 1,122 700 1,122 700 Unvested PSUs 458 — 458 — Outstanding warrants 650 — 650 — Convertible Series A Preferred Stock 4,480 4,480 4,480 4,480 Modified Convertible Notes 1,227 1,187 1,227 1,187 SWIMS Convertible Note 4,479 — 4,479 — Loss per Share under Two− Class Method The Series A Preferred Stock has the non-forfeitable right to participate on an as converted basis at the conversion rate then in effect in any common stock dividends declared and as such, is considered a participating security. The Series A Preferred Stock is included in the computation of basic and diluted loss per share pursuant to the two-class method. Holders of the Series A Preferred Stock do not participate in undistributed net losses because they are not contractually obligated to do so. The computation of diluted loss per share attributable to common stockholders reflects the potential dilution that could occur if securities or other contracts to issue shares of common stock that are dilutive were exercised or converted into shares of common stock (or resulted in the issuance of shares of common stock) and would then share in the Company’s earnings. During the periods in which the Company record a loss from continuing operations attributable to common stockholders, securities would not be dilutive to net loss per share and conversion into shares of common stock is assumed not to occur. The following table provides a reconciliation of net loss to preferred stockholders and common stockholders for purposes of computing net loss per share for the three and six months ended June 30, 2017 and 2016 (in thousands, except per share amounts): Three months ended June 30, Six months ended June 30, 2017 2016 2017 2016 Net loss $ (4,054) $ (3,605) $ (6,404) $ (10,086) Less: preferred dividends 1,366 863 2,717 1,268 Net loss attributable to stockholders (5,420) (4,468) (9,121) (11,354) Participating securities - Series A Preferred Stock — — — — Net loss attributable to common stockholders $ (5,420) $ (4,468) $ (9,121) $ (11,354) Denominator: Weighted average common shares outstanding 13,309 12,380 13,298 11,852 Loss per common share - basic and diluted under two-class method $ (0.41) $ (0.36) $ (0.69) $ (0.96) |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2017 | |
Income Taxes | |
Income Taxes | 11. Income Taxes The Company accounts for income taxes under the asset and liability method; under this method, deferred assets and liabilities are determined based on differences between financial reporting and tax reporting bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Until the RG Merger on January 28, 2016, the Company was treated as a partnership for tax purposes. Pursuant to this status, taxable income or loss of the Company was included in the income tax returns of its owners. Consequently, no federal income tax provision was recorded through the RG Merger date. However, under state laws, certain taxes are imposed upon limited liability companies and were provided for through the RG Merger date. The effective tax rate from operations was an expense of -68% for the three months ended June 30, 2017 compared to a benefit of 30% for the three months ended June 30, 2016. The effective tax rate from operations was an expense of -34% for the six months ended June 30, 2017 compared to an expense of -7% for the six months ended June 30, 2016. The difference in the effective tax rate for the three months ended June 30, 2017, as compared to the three months ended June 30, 2016, was primarily due to a change in the ratio of year-to-date losses to forecasted loss. The projected tax expense for the year predominately consists of current state and foreign tax expenses and deferred taxes associated with our foreign subsidiary and our deferred tax liability for indefinite lived intangible assets. A valuation allowance is required if, based on the weight of available evidence, it is more likely than not that all or a portion of a deferred tax asset will not be realized. Quarterly, management reassesses the need for a valuation allowance. Realization of deferred income tax assets is dependent upon taxable income in prior carryback years, estimates of future taxable income, tax planning strategies and reversals of existing taxable temporary differences. Because of our lack of U.S. earnings history, the net U.S. deferred tax assets have been fully offset by a valuation allowance, excluding any deferred tax liabilities for long-lived intangibles. The Company has not provided for U.S. taxes on unremitted earnings of its foreign subsidiary as it is operating at a loss and has no earnings and profits to remit. As a result, deferred taxes were not provided related to the cumulative translation adjustments. Utilization of some of the federal and state net operating loss and credit carryforwards are subject to annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitations may result in the expiration of net operating losses and credits before utilization. The net operating losses are presented net of any expirations associated with such limitations. At June 30, 2017 and December 31, 2016, we had $0. 1 million of certain unrecognized tax benefits, included as a component of accounts payable and accrued expenses within the accompanying condensed consolidated balance sheets. There were no unrecognized tax benefits as of June 30, 2016. Interest and penalties related to uncertain tax positions, if any, are recorded in income tax expense. With few exceptions, the Company is no longer subject to U.S. federal, state or local income tax examination by taxing authorities for years prior to 2012. |
Segment Reporting and Operation
Segment Reporting and Operations by Geographic Areas | 6 Months Ended |
Jun. 30, 2017 | |
Segment Reporting and Operations by Geographic Areas | |
Segment Reporting and Operations by Geographic Areas | 12. Segment Reporting and Operations by Geographic Area Segment Reporting Effective January 1, 2017, the Company reclassified delivery expenses, design costs, warehousing and handling costs and other inventory acquisition related costs to cost of goods sold, which were previously included in selling, general and administrative expenses. See “Note 2 – Summary of Significant Accounting Policies.” In addition, effective January 1, 2017, the Company reclassified production and design costs from the Corporate and other segment to the Wholesale and Consumer Direct segments due to a change in how the business is being operated going forward. The change in presentation has been retrospectively applied to the prior period to conform to the current period presentation. The following table contains summarized financial information by reportable segment (in thousands): Three months ended June 30, Six months ended June 30, 2017 2016 2017 2016 Net sales: Wholesale $ 25,374 $ 22,755 $ 56,517 $ 48,332 Consumer Direct 10,425 9,097 18,771 16,736 Corporate and other 654 521 1,267 1,020 $ 36,453 $ 32,373 $ 76,555 $ 66,088 Gross profit: Wholesale $ 8,738 $ 6,028 $ 21,555 $ 17,014 Consumer Direct 6,827 5,962 12,000 10,814 Corporate and other 654 521 1,267 1,020 $ 16,219 $ 12,511 $ 34,822 $ 28,848 Operating expenses: Wholesale $ 3,168 $ 3,147 $ 7,629 $ 6,048 Consumer Direct 5,997 5,867 12,383 12,731 Corporate and other 7,277 6,617 15,339 14,956 $ 16,442 $ 15,631 $ 35,351 $ 33,735 Operating (loss) income: Wholesale $ 5,570 $ 2,881 $ 13,926 $ 10,966 Consumer Direct 830 95 (383) (1,917) Corporate and other (6,623) (6,096) (14,072) (13,936) $ (223) $ (3,120) $ (529) $ (4,887) Capital expenditures: Wholesale $ 5 $ 133 $ 15 $ 272 Consumer Direct 135 150 294 762 Corporate and other 141 33 228 91 $ 281 $ 316 $ 537 $ 1,125 June 30, 2017 December 31, 2016 June 30, 2016 Total assets: Wholesale $ 47,812 $ 44,793 $ 55,764 Consumer Direct 8,438 10,093 11,461 Corporate and other 112,299 111,285 89,186 $ 168,549 $ 166,171 $ 156,411 |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2017 | |
Commitments and Contingencies | |
Commitments and Contingencies | 13. Commitments and Contingencies Operating Leases The Company leases retail store locations and the corporate offices under operating lease agreements expiring on various dates through April 2026. Some of these leases require the Company to make periodic payments for property taxes, utilities and common area operating expenses. Certain retail store leases provide for rents based upon the minimum annual rental amount and a percentage of annual sales volume, generally ranging from 6 percent to 8 percent, when specific sales volumes are exceeded. Some leases include lease incentives, rent abatements and fixed rent escalations, which are amortized and recorded over the initial lease term on a straight-line basis from the possession date. As of June 30, 2017, the future minimum rental payments under non-cancelable operating leases with lease terms in excess of one year were as follows (in thousands): 2017 Remainder of the year $ 3,526 2018 6,363 2019 6,159 2020 6,042 2021 6,157 Thereafter 15,849 $ 44,096 Rent expense was $2.3 million for both the three months ended June 30, 2017 and 2016. Rent expense was $4.7 million and $4.6 million for the six months ended June 30, 2017 and 2016, respectively. Employment Agreements Certain of the Company’s officers and employees are under employment agreements with minimum required payments. Future minimum payments under these employment agreements total $1.2 million for the remainder of 2017, $2.0 million in 2018, and $0.7 million in 2019. Purchase Commitments As of June 30, 2017, the Company had open purchase commitments of $22.3 million. Advertising Commitments As of June 30, 2017, the Company had advertising commitments totaling $0.3 million related to the production of Robert Graham Fall / Winter 2017 catalogs. Litigation The Company is party to legal proceedings and claims in the ordinary course of business, including proceedings to protect its intellectual property rights. As part of the Company’s monitoring program for its intellectual property rights, from time to time, the Company files lawsuits in the United States and abroad for acts of trademark counterfeiting, trademark infringement, trademark dilution, patent infringement or breach of other state or foreign laws. These actions often result in seizure of counterfeit merchandise and negotiated settlements with defendants. Defendants sometimes raise the invalidity or unenforceability of the Company’s proprietary rights as affirmative defenses or counterclaims. In the opinion of management, based upon advice of legal counsel, the likelihood is remote that the impact of any pending proceedings and claims, either individually or in the aggregate, would have a material adverse effect on the consolidated financial condition, results of operations or cash flows. However, because the ultimate outcome of legal proceedings and claims involves judgments, estimates and inherent uncertainties, actual outcomes of these proceedings and claims may materially differ from current estimates. It is possible that resolution of one or more of the proceedings currently pending or threatened could result in losses material to the consolidated results of operations, liquidity or financial condition. On a quarterly basis, the Company reviews its legal proceedings and claims to determine if an unfavorable outcome is considered “remote,” “reasonably possible” or “probable” as defined by U.S. GAAP. If it is determined that an unfavorable outcome is probable and is reasonably estimable, potential litigation losses are accrued for. The liability the Company may ultimately incur with respect to such litigation matters, in the event of a negative outcome, may be in excess of amounts accrued for, if at all. If it is determines an unfavorable outcome is not probable or reasonably estimable, no accrual is made. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2017 | |
Related Party Transactions | |
Related Party Transactions | 14. Related Party Transactions Peter Kim The Company entered into several agreements, including a stock purchase agreement, a convertible note, a registration rights agreement, an employment agreement and a non-competition agreement with Peter Kim, the Founder and Vice Chairman of Hudson, in connection with the acquisition of Hudson. Additionally, in connection with the RG Merger, the Company entered into a Rollover Agreement pursuant to which the convertible notes were exchanged for a combination of cash, stock and Modified Convertible Notes, and a new employment and non-competition agreement with Mr. Kim. Mr. Kim’s employment agreement was amended on June 16, 2017. Mr. Kim also has rights under the Registration Rights Agreement described below with respect to shares of common stock issuable upon conversion of his Modified Convertible Notes. See “Note 7 – Debt and Preferred Stock.” As of June 30, 2017, the amount outstanding under the convertible note payable to Mr. Kim was $8.7 million with accrued interest of $142 thousand. Under the non-competition agreement with Differential and Hudson, which became effective as of the closing date of the RG Merger, Mr. Kim has agreed not to engage in, compete with or permit his name to be used by or in connection with any premium denim apparel business outside his role with Hudson that is competitive to Differential, Hudson or the Company’s respective subsidiaries for a period of up to three years from, as a result of the amendment to his employment agreement, June 16, 2017. The amendment to Mr. Kim’s employment agreement also involved (i) a change to his annual bonus opportunity, (ii) a modification of his severance arrangement, and (iii) a change to the definition of “Restricted Business” as set forth in the employment agreement. Registration Rights Agreement On the closing date of the RG Merger, the Company entered into a registration rights agreement (the “ Registration Rights Agreement ”) with TCP Denim, LLC and certain of its affiliates, who are our major stockholders of the Company, the noteholder party to the Rollover Agreement (including Mr. Kim and Fireman) and Michael Buckley, our Chief Executive Officer. Pursuant to the Registration Rights Agreement, and subject to certain limitations described therein, the Company is required to provide certain demand and piggyback registration rights to the parties to the Registration Rights Agreement. In particular, the Company is required to prepare and file a registration statement on Form S-1 or S-3 (or any similar form or successor thereto) for the registration under the Securities Act of shares of our common stock (i) issued to the parties to the Registration Rights Agreement in connection with the RG Merger Agreement and the Rollover Agreement and (ii) issuable upon conversion of the Series A Preferred Stock and the Modified Convertible Notes. Prior to the closing date of the RG Merger, the Company had a substantially similar registration rights agreement with the holders of the original convertible notes, which included Fireman and Mr. Kim. Employment Agreements with Officers The Company entered into employment agreements with Mr. Buckley, Mr. Kim and Bob Ross, our Chief Financial Officer. The agreements have varying initial terms, but Mr. Buckley’s and Mr. Ross’s contain automatic one-year renewals, unless terminated by either party, and provide for minimum base salaries adjusted for annual increases, incentive bonuses based upon the attainment of specified goals, and severance payments in the event of termination of employment, as defined in the employment contracts. Payments to Tengram Capital Partners, LP From time to time, we expect to reimburse Tengram Capital Partners, LP, an entity that is affiliated with our largest stockholders, for certain travel and other related expenses of its employees related to services performed on the Company’s behalf and at the Company’s request. For the three and six months ended June 30, 2017, we incurred expenses of $39 thousand and $62 thousand related to reimbursement of expenses, respectively. For the three months ended June 30, 2016, we incurred expenses of $84 thousand. For the six months ended June 30, 2016, we incurred expenses of $875 thousand, which included (i) $750 thousand of reimbursement for legal fees incurred by TCP Denim, LLC, in connection with the purchase of the Series A Preferred Stock and RG Merger; and (ii) $41 thousand of pre-RG Merger management fees that were paid by RG that are non-recurring as a result of the RG Merger. SWIMS® Transaction In connection with the acquisition of SWIMS in July 2016, the Company entered into certain financing arrangements with Tengram II, an entity affiliated with the holder of the Series A Preferred Stock, TCP Denim, LLC. See “Note 17 – Acquisition of SWIMS.” As of June 30, 2017, the amount outstanding under the convertible note payable to Tengram Capital Fund II, L.P was $13.4 million and accrued interest of $42 thousand. |
Discontinued Operations
Discontinued Operations | 6 Months Ended |
Jun. 30, 2017 | |
Discontinued Operations | |
Discontinued Operations | 15. Discontinued Operations On February 29, 2016, the Company completed the closure of 14 of its Joe’s® brand retail stores. In accordance with ASC 205-20, Presentation of Financial Statements – Discontinued Operations , the results of operations of the former Joe’s Business are reported as discontinued operations in the accompanying condensed consolidated statements of operations and comprehensive income (loss) for the six months ended June 30, 2016 because those operations were disposed of as of March 31, 2016. There were no discontinued operations for the three and six months ended June 30, 2017. The operations and cash flows of the 14 Joe’s® brand retail stores that were part of the Joe’s Business have been recorded as discontinued operations since the Company does not have any continuing involvement in the operations of such retail stores that were closed after the disposal transaction. There were no assets or liabilities from the discontinued operations as of June 30, 2017, December 31, 2016, and June 30, 2016. The operating results of discontinued operations for the six months ended June 30, 2017 and 2016 are as follows (in thousands): Six months ended June 30, 2017 2016 Net sales from discontinued operations $ — $ 1,208 Loss from discontinued operations before income tax $ — $ (1,286) Income tax provision — — Loss from discontinued operations $ — $ (1,286) |
RG Merger and Related Transacti
RG Merger and Related Transactions | 6 Months Ended |
Jun. 30, 2017 | |
RG Merger and Related Transactions | |
RG Merger and Related Transactions | 16. RG Merger and Related Transactions On January 28, 2016, the Company completed the RG Merger. In connection with the RG Merger, the Company also completed the issuance and sale of an aggregate of fifty thousand (50,000) shares of preferred stock designated as Series A Convertible Preferred Stock (the “ Series A Preferred Stock ”), for an aggregate purchase price of $50.0 million in cash, as contemplated by the stock purchase agreement, dated as of September 8, 2015 (the “ RG Stock Purchase Agreement ”), by and between the Company and TCP Denim, LLC. The Company used the proceeds from the RG Stock Purchase Agreement and the debt financing provided by the credit facilities under the ABL Credit and Term Credit Agreement (see “Note 7 – Debt and Preferred Stock”) to consummate the RG Merger and the transactions contemplated by the RG Merger Agreement. Also in connection with the completion of the RG Merger, the Company completed the exchange of $38.1 million in the aggregate principal amount of outstanding convertible notes for (i) 1,167,317 shares of common stock (after giving effect to the Reverse Stock Split); (ii) a cash payment of approximately $8.6 million; and (iii) an aggregate principal amount of approximately $16.5 million of the Modified Convertible Notes, as contemplated by the Rollover Agreement, between the Company and the holders of the convertible notes. In addition, in connection with the consummation of the RG Merger, the Company entered into (i) the ABL Credit Agreement with Wells Fargo Bank, National Association, as lender, (ii) the Term Credit Agreement with TCW Asset Management Company, and (iii) the A&R Factoring Agreement with CIT. See “Note 7 – Debt and Preferred Stock” for additional information about the ABL Credit Agreement and Term Credit Agreement and “Note 3 – Factored Accounts and Receivables” for additional information about the factoring agreement. RG Merger Consideration The RG Merger has been accounted for under the acquisition method of accounting with RG as the accounting acquirer. Under the acquisition method of accounting, tangible and intangible assets acquired and liabilities assumed are recorded based on their estimated fair values as of the closing date of the RG Merger. The excess of purchase price over the net assets acquired is recorded as goodwill. Purchased intangible assets with finite lives are amortized over their estimated useful lives. Goodwill and intangible assets with indefinite lives are not amortized but are tested at least annually for impairment or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The stock price used to determine the purchase price allocation is based on the closing price of the common stock as of January 28, 2016, which was $5.70. The equity consideration was based upon the assumption that 3,508,747 shares of common stock were outstanding, which included 2,342,000 shares of common stock outstanding and 1,167,000 total aggregate shares of common stock issued to convertible noteholders upon conversion of the convertible notes into shares of our common stock under the Rollover Agreement. As a result of the Rollover Agreement, immediately after giving effect to the RG Merger and related Merger Transactions, the holders of the Modified Convertible Notes owned approximately 14% of the combined company on an as-converted, fully diluted basis. Under the acquisition method of accounting, the total purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values. The following is the total purchase price (in thousands, except share and per share data): Assets acquired and liabilities assumed: Cash and cash equivalents $ 2,092 Factored accounts receivable 6,719 Accounts receivable 336 Inventories 11,378 Prepaid expenses and other current assets 2,278 Property and equipment 356 Other assets 352 Accounts payable and accrued expenses (15,417) Customer cash advances (893) Line of credit (4,683) Deferred income tax liability (9,677) Other liabilities (81) Buy-out payable (1,668) Intangible assets acquired: Trade name 32,300 Customer relationships 13,400 Total 36,792 Excess purchase price over net assets acquired 3,638 Total net assets acquired $ 40,430 Total purchase price: Cash paid to existing holders of convertible notes $ 8,630 Fair value of Modified Convertible Notes transferred to the existing holders of convertible notes 11,800 Equity consideration to the Company's stockholders and existing holders of convertible notes (3,508,747 common shares at $5.70) 20,000 Total Purchase Price $ 40,430 The assets acquired consisted of tangible and intangible assets and liabilities assumed. As a result of the fair value assessment, inventory acquired was stepped up to fair value by the amount of $0.4 million of which $0.2 million was sold in the first quarter of fiscal 2016 and $0.2 million was sold in the second quarter of fiscal 2016, and is included in cost of goods sold within the accompanying condensed consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2016. The fair value of the Modified Convertible Notes was determined with the assistance of a third-party valuation specialist. The face value of the Modified Convertible Notes in the amount of $16.5 million was discounted by $4.7 million to arrive at the fair value of the Modified Convertible Notes. The discount was calculated based on the present values of the contractual cash flows from the Modified Convertible Notes. The differences between the fair value of the consideration paid and the estimated fair value of the assets and liabilities has been recorded as goodwill. The significant factors that resulted in recognition of goodwill were: (a) the purchase price was based upon cash flow and return on capital projections assuming integrations of the companies; and (b) the calculation of the fair value of tangible and intangible assets acquired that qualified for recognition. The Company has determined that the useful life of the acquired trade name asset is indefinite, and therefore, no amortization expense will be recognized until the useful life is determined not to be indefinite. The useful life of the acquired customer relationships are finite and will be amortized over their useful lives. However, the assets will be tested for impairment if events or changes in circumstances indicate that the assets might be impaired. Additionally, a deferred tax liability has been established in the allocation of the purchase price with respect to the identified indefinite long-lived intangible assets acquired. The Company incurred $0.3 million of non-recurring acquisition-related transaction costs and $0.9 million of non-recurring restructuring expenses related to the RG Merger during the three months ended June 30, 2016, which are included in selling, general and administrative expense within the accompanying condensed consolidated statement of operations and comprehensive income (loss). The Company incurred $3.0 million of non-recurring acquisition-related transaction costs and $1.5 million of non-recurring restructuring expenses related to the RG Merger during the six months ended June 30, 2016, which are included in selling, general and administrative expenses within the accompanying condensed consolidated statement of operations and comprehensive income (loss). No acquisition-related transaction costs or restructuring expenses were incurred for the three and six months ended June 30, 2017 related to the RG Merger. See “Note 17 – Acquisition of SWIMS” for a presentation of the unaudited pro forma results for the three months ended June 30, 2017 and 2016, respectively, as if the RG Merger and SWIMS acquisition had occurred on January 1, 2016. These results are not intended to reflect actual operations had the acquisition occurred on January 1, 2016. |
Acquisition of SWIMS
Acquisition of SWIMS | 6 Months Ended |
Jun. 30, 2017 | |
Acquisition of SWIMS | |
Acquisition of SWIMS | 17. Acquisition of SWIMS On July 18, 2016, the Company completed the acquisition of all of the outstanding share capital of Norwegian private limited company SWIMS. SWIMS is a Scandinavian lifestyle brand known for its range of fashion-forward, water-resistant footwear and sportswear. The Company purchased SWIMS for aggregate consideration of (i) approximately $12.0 million in cash, (ii) 702,943 shares of our common stock and (iii) warrants to purchase an aggregate of 150,000 shares of common stock with an exercise price of $5.47 per share. The acquisition was completed pursuant to the Purchase Agreement, dated as of July 18, 2016 (the “ SWIMS Purchase Agreement ”), between the Company, its wholly-owned subsidiary DFBG Swims, the shareholders of SWIMS named therein (the “ SWIMS Sellers ”), Øystein Alexander Eskeland and Atle Søvik, acting jointly as the representatives of the SWIMS Sellers, and, for certain limited purposes, TCP Denim, LLC, TCP RG, LLC and TCP RG II, LLC. Pursuant to the SWIMS Purchase Agreement, DFBG Swims deposited approximately $0.3 million of the cash consideration into an escrow account for certain indemnification obligations of the SWIMS Sellers. To finance the acquisition, the Company issued the following to Tengram II: (i) a warrant for the purchase of 500,000 shares of common stock at an exercise price of $3.00 per share (the “ SWIMS Warrant ”); and (ii) the SWIMS Convertible Note, with principal of $13.0 million. See “Note 7 – Debt and Preferred Stock” for a discussion of the terms of the convertible note. The SWIMS Warrant has an estimated fair value of $0.5 million, which has been recorded as a debt discount against the proceeds of the SWIMS Convertible Note. Management estimated the fair value of the equity consideration issued with the assistance of a third-party appraisal firm. The estimation of fair value considered key assumptions for discount for lack of marketability and for inputs used in an option pricing model to value warrants. The acquisition qualified as a business combination and was accounted for under the acquisition method of accounting. Business acquisitions are accounted for under the acquisition method by assigning the purchase price to tangible and intangible assets acquired and liabilities assumed. Assets acquired and liabilities assumed are recorded at their fair values and the excess of the purchase price over the amounts assigned is recorded as goodwill. Purchased intangible assets with finite lives are amortized over their estimated useful lives. Goodwill and intangible assets with indefinite lives are not amortized but are tested at least annually for impairment or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The purchase price included the issuance of 702,943 shares of common stock that contain restrictions on resale with an estimated fair value of approximately $1.8 million and the issuance of warrants to purchase 150,000 shares of common stock in the aggregate with an estimated fair value of $45 thousand. Management estimated the fair value of the equity consideration issued with the assistance of a third-party appraisal firm. The estimation of fair value considered key assumptions for discount for lack of marketability and for inputs used in an option pricing model to value warrants. Included in the $13.8 million is approximately $0.3 million that is being held in escrow to support indemnification obligations. The following is the total purchase price allocation (in thousands, except share and per share data): Assets acquired and liabilities assumed: Cash and cash equivalents $ 189 Factored accounts receivable 1,552 Inventories 3,466 Prepaid expenses and other assets 647 Property and equipment 498 Accounts payable and accrued expenses (1,706) Deferred income tax liability (2,476) Intangible assets acquired: Trade name 7,286 Customer relationships 1,833 Non-compete agreements 130 Total 11,419 Excess purchase price over net assets acquired 2,393 Total net assets acquired $ 13,812 Total purchase price: Cash paid to sellers $ 12,017 Equity consideration issued to sellers (702,943 common shares at $2.49) 1,750 Fair value of warrants issued to sellers 45 Total Purchase Price $ 13,812 The purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The fair values of assets acquired and liabilities assumed represent management’s estimate of fair value based on information obtained from various sources, including management’s historical experience. As a result of the fair value assessment, inventory acquired was stepped up to fair value by the amount of $1.3 million which was sold and included in cost of goods sold within the condensed consolidated statement of operations and comprehensive income (loss) during the third quarter of fiscal 2016. The estimated fair value of the acquired tangible and intangible assets and liabilities assumed were determined using multiple valuation approaches depending on the type of tangible or intangible asset acquired, including but not limited to the income approach, the excess earnings method, the with versus without method, net realizable value method and the relief from royalty method approach. The amount of goodwill represents the excess of the purchase price over the net identifiable assets acquired and liabilities assumed. Goodwill primarily represents, among other factors, the value of synergies expected to be realized by integration with our Company and expected positive cash flow and return on capital projections from the integration. Goodwill arising from the acquisition of SWIMS was determined as the excess of the purchase price over the net acquisition date fair values of the acquired assets and the liabilities assumed, and is not deductible for income tax purposes subject to certain tax elections that are currently being considered. The Company has determined that the useful life of the acquired trade name asset is indefinite, and therefore, no amortization expense will be recognized until the useful life is determined not to be indefinite. The useful life of the acquired customer relationships and non-compete agreements are finite and are being amortized over their useful lives. However, the assets will be tested for impairment if events or changes in circumstances indicate that the assets might be impaired. Additionally, a deferred tax liability has been established in the allocation of the purchase price with respect to the identified indefinite long-lived intangible assets acquired. The Company incurred $0.4 million of non-recurring acquisition-related transaction costs related to the SWIMS acquisition during the three and six months ended June 30, 2016, which were incurred before the Company closed the SWIMS acquisition and are included in selling, general and administrative expense within the accompanying condensed consolidated statement of operations and comprehensive income (loss). No acquisition-related transaction costs for SWIMS were incurred for the three and six months ended June 30, 2017. Pro forma financial information The following table presents actual results for the three and six months ended June 30, 2017, and pro forma results for the three and six months ended June 30, 2016, as if the RG Merger and SWIMS acquisition had occurred on January 1, 2016 (in thousands, except per share data). The pro forma financial information presented includes the effects of adjustments related to the amortization of acquired tangible and intangible assets, and excludes other non-recurring transaction costs directly associated with the acquisition such as legal and other professional service fees. Statutory rates were used to calculate income taxes. Three months ended June 30, Six months ended June 30, 2017 2016 2017 2016 Net sales $ 36,453 $ 33,868 $ 76,555 $ 76,150 Net loss $ (4,054) $ (2,457) $ (6,404) $ (3,403) Weighted average common shares outstanding 13,309 11,852 13,298 11,852 Loss per common share - basic and diluted $ (0.30) $ (0.21) $ (0.48) $ (0.29) The pro forma financial information as presented above is for information purposes only and is not necessarily indicative of the actual results that would have been achieved had the RG Merger and SWIMS acquisition occurred at the beginning of the earliest period presented or the results that may be achieved in future periods. |
Restructuring
Restructuring | 6 Months Ended |
Jun. 30, 2017 | |
Restructuring | |
Restructuring | 18. Restructuring During the three and six months ended June 30, 2016, the Company recorded $0.9 million and $1.5 million of restructuring charges in connection with the RG Merger related to severance and benefit related costs, and termination of consulting arrangements. These charges are included in selling, general and administrative expenses within the accompanying condensed consolidated statements of operations and comprehensive income (loss). The Company made cash payments of $0.7 million and $1.2 million during the three and six months ended June 30, 2016, respectively, related to these restructuring expenses. Restructuring accruals of $0.3 million are included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheet as of June 30, 2016. There were no restructuring charges related to the RG Merger for the three and six months ended June 30, 2017. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2017 | |
Subsequent Events | |
Subsequent Events | 19. Subsequent Events Effective July 18, 2017, the Company and Tengram Fund II, which is affiliated with certain Tengram entities that are major stockholders of the Company, amended the maturity date of the SWIMS Convertible Note by extending the maturity date to January 18, 2018. Following this amendment, all other terms of the SWIMS Convertible Note remain the same, including the conversion of the Convertible Note upon the extended maturity date. For more information, see “Note 7 – Debt and Preferred Stock.” |
Summary of Significant Accoun27
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
Accounting Policies | |
Inventory and Reclassification | Inventory and Reclassification During the three months ended March 31, 2017, the Company modified its capitalization of overhead costs allocated to inventory to include certain production costs that were previously excluded. These production expenses were previously included in cost of goods sold and selling, general and administrative expenses. These costs are now included in production overhead capitalized to inventory to better reflect the costs incurred to bring the Company’s inventory to a saleable condition after the recent change in the Company’s processes of sourcing inventory. This modification resulted in additional capitalization of $1.4 million of production overhead to the standard cost of inventory from production expenses. This modification has been accounted for on a prospective basis from January 1, 2017. The increase in inventories resulted in a $1.4 million non-cash benefit (or $0.11 per diluted share), which was comprised of a $0.3 million decrease in cost of goods sold and a $1.1 million decrease in selling, general and administrative expenses. In addition, the Company has reclassified delivery expenses, design costs, warehousing and handling costs and other inventory acquisition related costs to cost of goods sold, which were previously included in selling, general and administrative expenses. The classification of these costs in cost of goods sold more accurately reflects the cost of producing and distributing products. Additionally, this presentation enhances the comparability of the Company’s financial statements with industry peers. The change has been reflected in the condensed consolidated statements of operations in the prior periods to conform to the presentation in the current period. The impact of the reclassification resulted in an increase to cost of goods sold and a decrease to selling, general and administrative expenses in the amount of $4.6 million and $8.6 million for the three and six months ended June 30, 2016, respectively. Following is a reconciliation of the reclassification of costs from selling, general and administrative to cost of goods sold discussed above for the three and six months ended June 30, 2016 (in thousands): Three months ended June 30, 2016 Six months ended June 30, 2016 Before After As Previously After Reclass Reclass Reclass Reported Reclass Reclass Net sales $ 32,373 $ — $ 32,373 $ 66,088 $ — $ 66,088 Cost of goods sold 15,274 4,588 19,862 28,686 8,554 37,240 Gross profit 17,099 (4,588) 12,511 37,402 (8,554) 28,848 Operating expenses Selling, general and administrative 18,718 (4,588) 14,130 39,147 (8,554) 30,593 Depreciation and amortization 1,501 — 1,501 2,863 — 2,863 Retail store impairment — — — 279 — 279 Total operating expenses 20,219 (4,588) 15,631 42,289 (8,554) 33,735 Operating loss from continuing operations (3,120) — (3,120) (4,887) — (4,887) Interest expense 1,995 — 1,995 3,336 — 3,336 Other (income) expense, net — — — — — — Loss from continuing operations before income taxes (5,115) — (5,115) (8,223) — (8,223) Income tax provision (benefit) (1,510) — (1,510) 577 — 577 Loss from continuing operations (3,605) — (3,605) (8,800) — (8,800) Loss from discontinued operations, net of tax — — — (1,286) — (1,286) Net loss $ (3,605) $ — $ (3,605) $ (10,086) $ — $ (10,086) |
Costs of Goods Sold | Cost of Goods Sold Cost of goods sold includes the following: the cost of merchandise; customs related taxes and duties; production costs; delivery expense; in-bound and outbound freight; obsolescence and shrink provisions; design costs; warehousing and handling costs and other inventory acquisition related costs. |
Financial Accounting Standards Recently Adopted and Recently Issued Financial Accounting Standards | Financial Accounting Standards Recently Adopted In March 2016, the Financial Accounting Standards Board (“ FASB ”) issued Accounting Standards Update (“ ASU ”) No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements To Employee Share-Based Payment Accounting , which amends ASC Topic 718, relating to employee share-based payment accounting. This guidance simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within that reporting period. The Company adopted this standard in the first quarter of 2017 and there was no material impact on the condensed consolidated financial statements . In January 2017, the FASB issued ASU No. 2017-04, Intangibles —Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . Topic 350, Intangibles—Goodwill and Other (Topic 350) , currently requires an entity to perform a two-step test to determine the amount, if any, of goodwill impairment. ASU No. 2017-04 removes the second step of the test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. The ASC amendments are effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 with early adoption permitted. The Company adopted this standard in the first quarter of 2017 and there was no impact on the condensed consolidated financial statements. Recently Issued Financial Accounting Standards In April and March 2016, the FASB issued ASU No. 2016-10, Identifying Performance Obligations and Licensing , and ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) , respectively. ASU No. 2016-10 clarifies the implementation guidance on licensing and the identification of performance obligations considerations included in ASU No. 2014-09. ASU No. 2016-08 provides amendments to clarify the implementation guidance on principal versus agent considerations included in ASU No. 2014-09. In August 2015, the FASB issued ASU No. 2015-14, which defers the effective date of ASU No. 2014-09. ASU No. 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The effective date of this pronouncement is for fiscal years beginning after December 15, 2017 with early adoption permitted as of the original effective date. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Customers with Contracts (Topic 606) Narrow-Scope Improvements and Practical Expedients . ASU No. 2016-12 amends certain aspects of ASU No. 2014-09, Revenue from Customers with Contracts (Topic 606) . The amendments include the following: · Collectibility – ASU No. 2016-12 clarifies the objective of the entity’s collectibility assessment and contains new guidance on when an entity would recognize as revenue consideration it receives if the entity concludes that collectibility is not probable. · Presentation of sales tax and other similar taxes collected from customers – Entities are permitted to present revenue net of sales taxes collected on behalf of governmental authorities (i.e., to exclude from the transaction price sales taxes that meet certain criteria). · Noncash consideration – An entity’s calculation of the transaction price for contracts containing noncash consideration would include the fair value of the noncash consideration to be received as of the contract inception date. Further, subsequent changes in the fair value of noncash consideration after contract inception would be subject to the variable consideration constraint only if the fair value varies for reasons other than its form. · Contract modifications and completed contracts at transition – The ASU establishes a practical expedient for contract modifications at transition and defines completed contracts as those for which all (or substantially all) revenue was recognized under the applicable revenue guidance before the new revenue standard was initially adopted. · Transition technical correction – Entities that elect to use the full retrospective transition method to adopt the new revenue standard would no longer be required to disclose the effect of the change in accounting principle on the period of adoption (as is currently required by ASC No. 250-10-50-1(b)(2)); however, entities would still be required to disclose the effects on preadoption periods that were retrospectively adjusted. ASU No. 2016-12 is effective for annual and interim periods beginning on or after December 15, 2017, and early adoption is permitted as of the original effective date of December 31, 2016. The Company will adopt the new revenue standards in the first quarter of 2018. The Company has not selected a transition model. The Company is still completing the assessment of the impact these ASUs will have on its condensed consolidated financial statements; however at the current time the Company does not expect that the adoption of these ASUs will have a material impact on its consolidated financial condition or results of operations. The adoption of these ASUs will require enhanced disclosures. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) , which affects the accounting for leases. The guidance requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. The amendment also will require qualitative and quantitative disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. This ASU is effective for fiscal years beginning after December 15, 2018 and interim periods within that reporting period. Early application is permitted. The Company is currently assessing the impact of the new standard on its condensed consolidated financial statements, but anticipates an increase in assets and liabilities due to the recognition of the required right-of-use asset and corresponding liability for all lease obligations that are currently classified as operating leases, such as real estate leases for corporate headquarters, administrative offices, retail stores, and showrooms as well as additional disclosure on all our lease obligations. The income statement recognition of lease expense is not expected to significantly change from the current methodology. In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments . ASU No. 2016-15 amends the guidance in ASC 230 on the classification of certain cash receipts and payments in the statement of cash flows. The primary purpose of ASU No. 2016-15 is to reduce the diversity in practice that has resulted from the lack of consistent principles on this topic. ASU No. 2016-15 is effective for annual and interim periods beginning after December 15, 2017, and early adoption is permitted for all entities. Entities must apply the guidance retrospectively to all periods presented but may apply it prospectively from the earliest date practicable if retrospective application would be impracticable. The Company is currently evaluating the impact the adoption of ASU No. 2016-15 will have on its condensed consolidated financial statements. |
Summary of Significant Accoun28
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Accounting Policies | |
Schedule of reclassification of costs from selling, general and administrative to cost of goods sold | Three months ended June 30, 2016 Six months ended June 30, 2016 Before After As Previously After Reclass Reclass Reclass Reported Reclass Reclass Net sales $ 32,373 $ — $ 32,373 $ 66,088 $ — $ 66,088 Cost of goods sold 15,274 4,588 19,862 28,686 8,554 37,240 Gross profit 17,099 (4,588) 12,511 37,402 (8,554) 28,848 Operating expenses Selling, general and administrative 18,718 (4,588) 14,130 39,147 (8,554) 30,593 Depreciation and amortization 1,501 — 1,501 2,863 — 2,863 Retail store impairment — — — 279 — 279 Total operating expenses 20,219 (4,588) 15,631 42,289 (8,554) 33,735 Operating loss from continuing operations (3,120) — (3,120) (4,887) — (4,887) Interest expense 1,995 — 1,995 3,336 — 3,336 Other (income) expense, net — — — — — — Loss from continuing operations before income taxes (5,115) — (5,115) (8,223) — (8,223) Income tax provision (benefit) (1,510) — (1,510) 577 — 577 Loss from continuing operations (3,605) — (3,605) (8,800) — (8,800) Loss from discontinued operations, net of tax — — — (1,286) — (1,286) Net loss $ (3,605) $ — $ (3,605) $ (10,086) $ — $ (10,086) |
Factored Accounts and Receiva29
Factored Accounts and Receivables (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Factored Accounts and Receivables | |
Schedule of factored accounts and receivables | Accounts receivable consists of the following (in thousands): June 30, 2017 December 31, 2016 June 30, 2016 Non-recourse receivables assigned to factor $ 15,814 $ 20,226 $ 16,439 Client recourse receivables 1,900 1,634 500 Total receivables assigned to factor 17,714 21,860 16,939 Allowance for customer credits (4,010) (5,157) (4,784) Factored accounts receivable, net $ 13,704 $ 16,703 $ 12,155 Non-factored accounts receivable $ 4,459 $ 4,743 $ 3,419 Allowance for customer credits (997) (1,031) (1,126) Allowance for doubtful accounts (184) (190) (109) Non-factored accounts receivable, net $ 3,278 $ 3,522 $ 2,184 Total accounts receivable, net $ 16,982 $ 20,225 $ 14,339 |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Inventories | |
Schedule of inventories | Inventories are valued at net realizable value with cost determined by the first-in, first-out method. Inventories consisted of the following (in thousands): June 30, 2017 December 31, 2016 June 30, 2016 Finished goods $ 28,382 $ 22,537 $ 25,170 Finished goods consigned to others 1,419 1,179 1,299 Work in progress 595 42 19 Raw materials 227 219 271 Total inventories $ 30,623 $ 23,977 $ 26,759 |
Intangible Assets and Goodwill
Intangible Assets and Goodwill (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Intangible Assets and Goodwill | |
Schedule of finite-lived intangible assets | . Intangible assets as of June 30, 2017 consisted of the following (in thousands): Amortization Gross Accumulated Net Period Amount Amortization Amount Trade names Indefinite $ 65,688 $ — $ 65,688 Customer relationships 7 to 15 Years 35,050 10,158 24,892 Non-compete agreements 3 Years 131 42 89 Total $ 100,869 $ 10,200 $ 90,669 Intangible assets as of December 31, 2016 consisted of the following (in thousands): Amortization Gross Accumulated Net Period Amount Amortization Amount Trade names Indefinite $ 65,480 $ — $ 65,480 Customer relationships 7 to 15 Years 34,997 8,699 26,298 Non-compete agreements 3 Years 128 20 108 Total $ 100,605 $ 8,719 $ 91,886 Intangible assets as of June 30, 2016 consisted of the following (in thousands): Amortization Gross Accumulated Net Period Amount Amortization Amount Trade names Indefinite $ 58,337 $ — $ 58,337 Customer relationships 13 to 15 Years 33,900 7,272 26,628 Total $ 92,237 $ 7,272 $ 84,965 |
Schedule of indefinite-lived intangible assets | Intangible assets as of June 30, 2017 consisted of the following (in thousands): Amortization Gross Accumulated Net Period Amount Amortization Amount Trade names Indefinite $ 65,688 $ — $ 65,688 Customer relationships 7 to 15 Years 35,050 10,158 24,892 Non-compete agreements 3 Years 131 42 89 Total $ 100,869 $ 10,200 $ 90,669 Intangible assets as of December 31, 2016 consisted of the following (in thousands): Amortization Gross Accumulated Net Period Amount Amortization Amount Trade names Indefinite $ 65,480 $ — $ 65,480 Customer relationships 7 to 15 Years 34,997 8,699 26,298 Non-compete agreements 3 Years 128 20 108 Total $ 100,605 $ 8,719 $ 91,886 Intangible assets as of June 30, 2016 consisted of the following (in thousands): Amortization Gross Accumulated Net Period Amount Amortization Amount Trade names Indefinite $ 58,337 $ — $ 58,337 Customer relationships 13 to 15 Years 33,900 7,272 26,628 Total $ 92,237 $ 7,272 $ 84,965 |
Schedule of estimated amortization expense | As of June 30, 2017, the future amortization expense related to the finite-lived intangible assets is as follows (in thousands): 2017 Remainder of the year $ 1,491 2018 2,968 2019 2,948 2020 2,929 2021 2,924 Thereafter 11,721 $ 24,981 |
Schedule of goodwill | Goodwill consisted of the following as of June 30, 2017, December 31, 2016 and June 30, 2016 (in thousands): June 30, 2017 December 31, 2016 June 30, 2016 Beginning balance $ 8,271 $ 2,286 $ 2,286 Goodwill created by the RG Merger — 3,638 4,238 Goodwill created by the acquisition of SWIMS — 2,393 — Foreign currency adjustments 69 (46) — Ending balance $ 8,340 $ 8,271 $ 6,524 |
Debt and Preferred Stock (Table
Debt and Preferred Stock (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Schedule of five year payment of term debt and line of credit and modified convertible notes | 7. Debt and Preferred Stock The five-year payment schedule of the Company’s convertible notes, line of credit and long-term debt as of June 30, 2017 is as follows (in thousands): Payments Due by Period Deferred Original Remainder of Financing Issue Carrying 2017 2018 2019 2020 2021 Total Costs, Net Discount, Net Value Short-term convertible note $ — $ 13,436 $ — $ — $ — $ 13,436 $ — $ — $ 13,436 Line of credit — — — 17,943 — 17,943 451 — 17,492 Long-term debt 625 2,500 3,750 5,000 37,000 48,875 1,009 — 47,866 Convertible notes — — — — 17,114 17,114 — 3,872 13,242 Total $ 625 $ 15,936 $ 3,750 $ 22,943 $ 54,114 $ 97,368 $ 1,460 $ 3,872 $ 92,036 |
Schedule of interest expense | The following table is a summary of total interest expense as follows (in thousands): Three months ended June 30, Six months ended June 30, 2017 2016 2017 2016 Contractual coupon interest $ 1,939 $ 1,603 $ 3,689 $ 2,815 Amortization of discounts and deferred financing costs 268 392 565 521 Total interest expense $ 2,207 $ 1,995 $ 4,254 $ 3,336 |
Modified Convertible Notes | |
Schedule of summary of recorded value of convertible debt | The following table is a summary of the recorded value of the Modified Convertible Notes as of June 30, 2017 (in thousands). The value of the convertible notes reflects the present value of the contractual cash flows from the Modified Convertible Notes and resulted in an original issue discount of $4.7 million that was recorded on January 28, 2016, the issuance date. June 30, 2017 Modified Convertible Notes - face value $ 16,473 Less: original issue discount (4,673) Modified Convertible Notes recorded value on issue date 11,800 PIK interest issued 641 Accumulated accretion of original issue debt discount 801 Modified Convertible Notes value $ 13,242 |
Short Term Convertible Notes | |
Schedule of summary of recorded value of convertible debt | The following table is a summary of the recorded value of the convertible note as of June 30, 2017 (in thousands). June 30, 2017 Short-term convertible notes - face value $ 13,000 Less: Original issue discount (465) Short-term convertible notes recorded value on issue date 12,535 PIK interest issued 436 Accumulated accretion of original issue debt discount 465 Short-term convertible notes value $ 13,436 |
Fair Value Measurement of Fin33
Fair Value Measurement of Financial Instruments (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Fair Value Measurement of Financial Instruments | |
Schedule of fair value hierarchy for liabilities measured at fair value on a recurring basis | The following table presents the fair value hierarchy for liabilities measured at fair value on a non-recurring basis as of June 30, 2017, December 31, 2016 and June 30, 2016 (in thousands): Carrying Value Fair Value June 30, December 31, June 30, June 30, December 31, June 30, Financial Instrument Level 2017 2016 2016 2017 2016 2016 Convertible notes - short term $ 13,436 $ 13,137 $ — $ 13,436 $ 13,137 $ — Convertible notes - long term 13,242 12,660 12,251 11,250 11,250 10,960 $ 26,678 $ 25,797 $ 12,251 $ 24,686 $ 24,387 $ 10,960 |
Equity (Tables)
Equity (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Equity | |
Summary of stock option activity by plan | The following table summarizes stock option activity by incentive plan for the six months ended June 30, 2017 (in actual amounts): Amended and 2016 Stock Total Number Restated Plan Incentive Plan of Shares Outstanding at January 1, 2017 444 150,000 150,444 Granted — — — Exercised — — — Forfeited / Expired — — — Outstanding at June 30, 2017 444 150,000 150,444 |
Schedule of exercise prices for options outstanding and exercisable | The following table summarizes stock option activity by incentive plan for the six months ended June 30, 2017 (in actual amounts): Amended and 2016 Stock Total Number Restated Plan Incentive Plan of Shares Outstanding at January 1, 2017 444 150,000 150,444 Granted — — — Exercised — — — Forfeited / Expired — — — Outstanding at June 30, 2017 444 150,000 150,444 The following table summarizes stock option activity for all incentive plans for the six months ended June 30, 2017 (in actual amounts): Weighted Weighted Average Aggregate Average Remaining Contractual Intrinsic Options Exercise Price Life (Years) Value Outstanding at January 1, 2017 150,444 $ 4.04 Granted — — Exercised — — Expired — — Forfeited — — Outstanding at June 30, 2017 150,444 $ 4.04 5.9 $ — Exercisable at June 30, 2017 50,444 $ 4.08 4.9 $ — |
Summary of the status of restricted common stock and RSUs and changes | Restricted Stock Units The following table summarizes RSU activity for the six months ended June 30, 2017 (in actual amounts): Restricted Stock Units Number Of Weighted Average Grant Outstanding at January 1, 2017 800,843 $ 4.65 Granted 510,000 2.24 Vested 113,888 4.62 Forfeited 75,000 2.90 Outstanding at June 30, 2017 1,121,955 $ 3.67 |
(Loss) Earnings per Share (Tabl
(Loss) Earnings per Share (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Loss per Share | |
Schedule of reconciliation of numerator and denominator of basic and diluted (loss) earnings per share | Three months ended June 30, Six months ended June 30, 2017 2016 2017 2016 Basic loss per share computation Numerator: Loss from continuing operations $ (4,054) $ (3,605) $ (6,404) $ (8,800) Loss from discontinued operations — — — (1,286) Net loss $ (4,054) $ (3,605) $ (6,404) $ (10,086) Denominator: Weighted average common shares outstanding 13,309 12,380 13,298 11,852 Loss per common share - basic Loss from continuing operations $ (0.30) $ (0.29) $ (0.48) $ (0.74) Loss from discontinued operations — - — (0.11) Loss per common share - basic $ (0.30) $ (0.29) $ (0.48) $ (0.85) Diluted loss per share computation Numerator: Loss from continuing operations $ (4,054) $ (3,605) $ (6,404) $ (8,800) Loss from discontinued operations — — — (1,286) Net loss $ (4,054) $ (3,605) $ (6,404) $ (10,086) Denominator: Weighted average common shares outstanding 13,309 12,380 13,298 11,852 Effect of dilutive securities: Options, RSUs, PSUs, warrants, Series A, convertible notes — — — — Dilutive common shares 13,309 12,380 13,298 11,852 Loss per common share - diluted Loss from continuing operations $ (0.30) $ (0.29) $ (0.48) $ (0.74) Loss from discontinued operations — — — (0.11) Loss per common share - diluted $ (0.30) $ (0.29) $ (0.48) $ (0.85) |
Schedule of reconciliation of basic and diluted (loss) earnings per share, two class method | Three months ended June 30, Six months ended June 30, 2017 2016 2017 2016 Net loss $ (4,054) $ (3,605) $ (6,404) $ (10,086) Less: preferred dividends 1,366 863 2,717 1,268 Net loss attributable to stockholders (5,420) (4,468) (9,121) (11,354) Participating securities - Series A Preferred Stock — — — — Net loss attributable to common stockholders $ (5,420) $ (4,468) $ (9,121) $ (11,354) Denominator: Weighted average common shares outstanding 13,309 12,380 13,298 11,852 Loss per common share - basic and diluted under two-class method $ (0.41) $ (0.36) $ (0.69) $ (0.96) |
Segment Reporting and Operati36
Segment Reporting and Operations by Geographic Areas (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Segment Reporting and Operations by Geographic Areas | |
Summary of financial information concerning reportable segments | Three months ended June 30, Six months ended June 30, 2017 2016 2017 2016 Net sales: Wholesale $ 25,374 $ 22,755 $ 56,517 $ 48,332 Consumer Direct 10,425 9,097 18,771 16,736 Corporate and other 654 521 1,267 1,020 $ 36,453 $ 32,373 $ 76,555 $ 66,088 Gross profit: Wholesale $ 8,738 $ 6,028 $ 21,555 $ 17,014 Consumer Direct 6,827 5,962 12,000 10,814 Corporate and other 654 521 1,267 1,020 $ 16,219 $ 12,511 $ 34,822 $ 28,848 Operating expenses: Wholesale $ 3,168 $ 3,147 $ 7,629 $ 6,048 Consumer Direct 5,997 5,867 12,383 12,731 Corporate and other 7,277 6,617 15,339 14,956 $ 16,442 $ 15,631 $ 35,351 $ 33,735 Operating (loss) income: Wholesale $ 5,570 $ 2,881 $ 13,926 $ 10,966 Consumer Direct 830 95 (383) (1,917) Corporate and other (6,623) (6,096) (14,072) (13,936) $ (223) $ (3,120) $ (529) $ (4,887) Capital expenditures: Wholesale $ 5 $ 133 $ 15 $ 272 Consumer Direct 135 150 294 762 Corporate and other 141 33 228 91 $ 281 $ 316 $ 537 $ 1,125 June 30, 2017 December 31, 2016 June 30, 2016 Total assets: Wholesale $ 47,812 $ 44,793 $ 55,764 Consumer Direct 8,438 10,093 11,461 Corporate and other 112,299 111,285 89,186 $ 168,549 $ 166,171 $ 156,411 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Commitments and Contingencies | |
Schedule of future minimum rental payments under non-cancelable retail operating leases with lease terms in excess of one year | As of June 30, 2017, the future minimum rental payments under non-cancelable operating leases with lease terms in excess of one year were as follows (in thousands): 2017 Remainder of the year $ 3,526 2018 6,363 2019 6,159 2020 6,042 2021 6,157 Thereafter 15,849 $ 44,096 |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Discontinued Operations | |
Schedule of the operating results of discontinued operations | Six months ended June 30, 2017 2016 Net sales from discontinued operations $ — $ 1,208 Loss from discontinued operations before income tax $ — $ (1,286) Income tax provision — — Loss from discontinued operations $ — $ (1,286) |
RG Merger Consideration (Tables
RG Merger Consideration (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
RG Merger Consideration | |
Schedule of total consideration allocated to the assets based on their estimated fair values as of the date of the completion of the acquisition | Assets acquired and liabilities assumed: Cash and cash equivalents $ 2,092 Factored accounts receivable 6,719 Accounts receivable 336 Inventories 11,378 Prepaid expenses and other current assets 2,278 Property and equipment 356 Other assets 352 Accounts payable and accrued expenses (15,417) Customer cash advances (893) Line of credit (4,683) Deferred income tax liability (9,677) Other liabilities (81) Buy-out payable (1,668) Intangible assets acquired: Trade name 32,300 Customer relationships 13,400 Total 36,792 Excess purchase price over net assets acquired 3,638 Total net assets acquired $ 40,430 Total purchase price: Cash paid to existing holders of convertible notes $ 8,630 Fair value of Modified Convertible Notes transferred to the existing holders of convertible notes 11,800 Equity consideration to the Company's stockholders and existing holders of convertible notes (3,508,747 common shares at $5.70) 20,000 Total Purchase Price $ 40,430 |
Acquisition of SWIMS (Tables)
Acquisition of SWIMS (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Acquisition of SWIMS | |
Schedule of preliminary estimated purchase price allocation | Assets acquired and liabilities assumed: Cash and cash equivalents $ 189 Factored accounts receivable 1,552 Inventories 3,466 Prepaid expenses and other assets 647 Property and equipment 498 Accounts payable and accrued expenses (1,706) Deferred income tax liability (2,476) Intangible assets acquired: Trade name 7,286 Customer relationships 1,833 Non-compete agreements 130 Total 11,419 Excess purchase price over net assets acquired 2,393 Total net assets acquired $ 13,812 Total purchase price: Cash paid to sellers $ 12,017 Equity consideration issued to sellers (702,943 common shares at $2.49) 1,750 Fair value of warrants issued to sellers 45 Total Purchase Price $ 13,812 |
Schedule of unaudited pro forma results | Three months ended June 30, Six months ended June 30, 2017 2016 2017 2016 Net sales $ 36,453 $ 33,868 $ 76,555 $ 76,150 Net loss $ (4,054) $ (2,457) $ (6,404) $ (3,403) Weighted average common shares outstanding 13,309 11,852 13,298 11,852 Loss per common share - basic and diluted $ (0.30) $ (0.21) $ (0.48) $ (0.29) |
Business Description and Basi41
Business Description and Basis of Presentation (Details) $ / shares in Units, $ in Thousands | Jul. 18, 2016USD ($)$ / sharesshares | Feb. 29, 2016store | Jan. 28, 2016USD ($)store$ / sharesshares | Sep. 11, 2015USD ($)store | Jun. 30, 2017segment$ / shares | Dec. 31, 2016$ / shares | Jun. 30, 2016$ / shares |
Common stock, par value (in dollars per share) | $ / shares | $ 0.10 | $ 0.10 | $ 0.10 | ||||
Number of reportable business segments | segment | 3 | ||||||
RG Parent, LLC | |||||||
Cash payment | $ | $ 81,000 | ||||||
Number of shares of common stock issued | shares | 8,825,461 | ||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.10 | ||||||
Repayments of revolving credit facility | $ | $ 19,000 | ||||||
Reverse stock split ratio (as a percent) | 33.33 | ||||||
SWIMS | |||||||
Cash payment | $ | $ 12,017 | ||||||
Number of shares of common stock issued | shares | 702,943 | ||||||
Warrants issued (in shares) | shares | 150,000 | ||||||
Exercise price (in dollars per share) | $ / shares | $ 5.47 | ||||||
SWIMS | Common Stock | |||||||
Number of shares of common stock issued | shares | 702,943 | ||||||
SWIMS | Warrants | |||||||
Warrants issued (in shares) | shares | 150,000 | ||||||
Exercise price (in dollars per share) | $ / shares | $ 5.47 | ||||||
Cit Revolving Facility | |||||||
Maximum borrowing capacity | $ | $ 7,500 | ||||||
Joe's brand retail stores | |||||||
Total consideration | $ | $ 80,000 | ||||||
Number of Joe's brand stores retained and operated | store | 32 | ||||||
Number of Joe's brand stores transferred | store | 18 | ||||||
Number of Joe's brand retail stores closed | store | 14 |
Summary of Significant Accoun42
Summary of Significant Accounting Policies - (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Change in Accounting Estimate [Abstract] | ||||
Net sales | $ 36,453 | $ 32,373 | $ 76,555 | $ 66,088 |
Cost of Goods Sold. | 20,234 | 19,862 | 41,733 | 37,240 |
Gross profit | 16,219 | 12,511 | 34,822 | 28,848 |
Operating expenses | ||||
Selling, general and administrative | 14,915 | 14,130 | 32,319 | 30,593 |
Depreciation and amortization | 1,527 | 1,501 | 3,032 | 2,863 |
Retail store impairment | 279 | |||
Total operating expenses | 16,442 | 15,631 | 35,351 | 33,735 |
Operating loss from continuing operations | (223) | (3,120) | (529) | (4,887) |
Interest expense, net | 2,207 | 1,995 | 4,254 | 3,336 |
Other expense, net | (12) | 11 | ||
Loss from continuing operations, before income tax | (2,418) | (5,115) | (4,794) | (8,223) |
Income tax provision (benefit) | 1,636 | (1,510) | 1,610 | 577 |
Loss from continuing operations | (4,054) | (3,605) | (6,404) | (8,800) |
Loss from discontinued operations, net of tax | (1,286) | |||
Net loss | $ (4,054) | $ (3,605) | (6,404) | (10,086) |
Increase in inventory | $ 6,591 | $ 411 | ||
Increase in diluted earnings per share | $ (0.30) | $ (0.29) | $ (0.48) | $ (0.74) |
Change in estimate | ||||
Change in Accounting Estimate [Abstract] | ||||
Cost of Goods Sold. | $ (300) | |||
Operating expenses | ||||
Selling, general and administrative | (1,100) | |||
Operating loss from continuing operations | (1,400) | |||
Increase in inventory | $ (1,400) | |||
Increase in diluted earnings per share | $ 0.11 | |||
Before reclass | ||||
Change in Accounting Estimate [Abstract] | ||||
Net sales | $ 32,373 | $ 66,088 | ||
Cost of Goods Sold. | 15,274 | 28,686 | ||
Gross profit | 17,099 | 37,402 | ||
Operating expenses | ||||
Selling, general and administrative | 18,718 | 39,147 | ||
Depreciation and amortization | 1,501 | 2,863 | ||
Retail store impairment | 279 | |||
Total operating expenses | 20,219 | 42,289 | ||
Operating loss from continuing operations | (3,120) | (4,887) | ||
Interest expense, net | 1,995 | 3,336 | ||
Loss from continuing operations, before income tax | (5,115) | (8,223) | ||
Income tax provision (benefit) | (1,510) | 577 | ||
Loss from continuing operations | (3,605) | (8,800) | ||
Loss from discontinued operations, net of tax | (1,286) | |||
Net loss | (3,605) | (10,086) | ||
Reclass | ||||
Change in Accounting Estimate [Abstract] | ||||
Cost of Goods Sold. | 4,588 | 8,554 | ||
Gross profit | (4,588) | (8,554) | ||
Operating expenses | ||||
Selling, general and administrative | (4,588) | (8,554) | ||
Total operating expenses | $ (4,588) | $ (8,554) |
Factored Accounts and Receiva43
Factored Accounts and Receivables (Details) $ in Thousands, NOK in Millions | 1 Months Ended | ||||
Jan. 31, 2016 | Jun. 30, 2017NOK | Jun. 30, 2017USD ($) | Dec. 31, 2016USD ($) | Jun. 30, 2016USD ($) | |
Accounts receivable, inventory advances and due from factor | |||||
Non-recourse receivables assigned to factor | $ 15,814 | $ 20,226 | $ 16,439 | ||
Client recourse receivables | 1,900 | 1,634 | 500 | ||
Total receivables assigned to factor | 17,714 | 21,860 | 16,939 | ||
Allowance for customer credits | (4,010) | (5,157) | (4,784) | ||
Factor accounts receivable, net | 13,704 | 16,703 | 12,155 | ||
Non-factored accounts receivable | 4,459 | 4,743 | 3,419 | ||
Allowance for customer credits | (997) | (1,031) | (1,126) | ||
Allowance for doubtful accounts | (184) | (190) | (109) | ||
Non factored accounts receivable, net | 3,278 | 3,522 | 2,184 | ||
Total accounts receivable, net | 16,982 | 20,225 | 14,339 | ||
Risk of payment in the event of non-payment by the customers | 1,900 | $ 1,600 | $ 500 | ||
A&R Factoring Agreement | |||||
Accounts receivable, inventory advances and due from factor | |||||
Required notice period for termination of the agreement by factor | 60 days | ||||
Required written notice period for termination of the agreement prior to December 31, 2020 | 60 days | ||||
DFBG Swims | Factoring Agreement | DNB Bank | |||||
Accounts receivable, inventory advances and due from factor | |||||
Amount outstanding | NOK 10.1 | $ 1,200 | |||
DFBG Swims | Factoring Agreement | DNB Bank | Maximum | |||||
Accounts receivable, inventory advances and due from factor | |||||
Financing Percentage on preapproved outstanding invoiced receivables | 80.00% | 80.00% | |||
DFBG Swims | Factoring Agreement | DNB Bank | Machinery and Plant Lien | Maximum | |||||
Accounts receivable, inventory advances and due from factor | |||||
Collateral amount | NOK | NOK 10 | ||||
DFBG Swims | Factoring Agreement | DNB Bank | Inventory Lien | Maximum | |||||
Accounts receivable, inventory advances and due from factor | |||||
Collateral amount | NOK | 10 | ||||
DFBG Swims | Factoring Agreement | DNB Bank | Factoring, First Lien | |||||
Accounts receivable, inventory advances and due from factor | |||||
Collateral amount | NOK | 1 | ||||
DFBG Swims | Factoring Agreement | DNB Bank | Factoring, Second Lien | |||||
Accounts receivable, inventory advances and due from factor | |||||
Collateral amount | NOK | 4 | ||||
DFBG Swims | Factoring Agreement | DNB Bank | Factoring, Third Lien | |||||
Accounts receivable, inventory advances and due from factor | |||||
Collateral amount | NOK | 7 | ||||
DFBG Swims | Factoring Agreement | DNB Bank | Factoring, Fourth Lien | |||||
Accounts receivable, inventory advances and due from factor | |||||
Collateral amount | NOK | NOK 2.5 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2016 |
Inventories | |||
Finished goods | $ 28,382 | $ 22,537 | $ 25,170 |
Finished goods consigned to others | 1,419 | 1,179 | 1,299 |
Work in progress | 595 | 42 | 19 |
Raw materials | 227 | 219 | 271 |
Inventories, net | $ 30,623 | $ 23,977 | $ 26,759 |
Impairment of Long-Lived Asse45
Impairment of Long-Lived Assets (Details) $ in Thousands | Feb. 29, 2016store | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($)store |
Impairment of Long-Lived Assets | |||||
Impairment charges | $ | $ 0 | $ 0 | $ 0 | $ 279 | |
Number of Stores Closed | store | 14 | 1 |
Intangible Assets and Goodwil46
Intangible Assets and Goodwill - Intangibles (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Intangible assets | |||||
Store impairment charges | $ 279 | ||||
Gross Amount | $ 100,869 | $ 92,237 | $ 100,869 | 92,237 | $ 100,605 |
Definite, Accumulated Amortization | 10,200 | 7,272 | 10,200 | 7,272 | 8,719 |
Definite, Net Amount | 24,981 | 24,981 | |||
Net Amount | 90,669 | 84,965 | 90,669 | 84,965 | 91,886 |
Amortization expense related to the intangible assets | 700 | 700 | 1,500 | 1,300 | |
Estimated amortization expense | |||||
2017 Remainder of the year | 1,491 | 1,491 | |||
2,018 | 2,968 | 2,968 | |||
2,019 | 2,948 | 2,948 | |||
2,020 | 2,929 | 2,929 | |||
2,021 | 2,924 | 2,924 | |||
Thereafter | 11,721 | 11,721 | |||
Total | 24,981 | 24,981 | |||
Trade names. | |||||
Intangible assets | |||||
Gross Amount | 58,337 | 58,337 | 65,480 | ||
Indefinite, Amount | 65,688 | 58,337 | 65,688 | 58,337 | 65,480 |
Customer relationships | |||||
Intangible assets | |||||
Definite, Gross Amount | 35,050 | 33,900 | 35,050 | 33,900 | 34,997 |
Definite, Accumulated Amortization | 10,158 | 7,272 | 10,158 | 7,272 | 8,699 |
Definite, Net Amount | 24,892 | 26,628 | 24,892 | 26,628 | 26,298 |
Estimated amortization expense | |||||
Total | 24,892 | $ 26,628 | $ 24,892 | $ 26,628 | $ 26,298 |
Non compete agreements | |||||
Intangible assets | |||||
Amortization period | 3 years | 3 years | |||
Definite, Gross Amount | 131 | $ 131 | $ 128 | ||
Definite, Accumulated Amortization | 42 | 42 | 20 | ||
Definite, Net Amount | 89 | 89 | 108 | ||
Estimated amortization expense | |||||
Total | $ 89 | $ 89 | $ 108 | ||
Minimum | Customer relationships | |||||
Intangible assets | |||||
Amortization period | 7 years | 13 years | 7 years | ||
Maximum | Customer relationships | |||||
Intangible assets | |||||
Amortization period | 15 years | 15 years | 15 years |
Intangible Assets and Goodwil47
Intangible Assets and Goodwill - Goodwill (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Goodwill | |||||
Goodwill, Beginning Balance | $ 8,271 | $ 2,286 | $ 2,286 | ||
Foreign currency adjustment | 69 | (46) | |||
Goodwill, Ending Balance | $ 8,340 | $ 6,524 | 8,340 | 6,524 | 8,271 |
Impairment charge | $ 0 | $ 0 | $ 0 | 0 | |
RG | |||||
Goodwill | |||||
Goodwill created | $ 4,238 | 3,638 | |||
SWIMS | |||||
Goodwill | |||||
Goodwill created | $ 2,393 |
Debt and Preferred Stock (Detai
Debt and Preferred Stock (Details) $ / shares in Units, $ in Thousands | Mar. 27, 2017 | Jul. 18, 2016USD ($) | Jan. 28, 2016USD ($)item$ / sharesshares | Jan. 18, 2016$ / sharesshares | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Dec. 31, 2016USD ($) | Oct. 01, 2016 | Dec. 23, 2015USD ($) |
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Remainder of 2017 | $ 625 | ||||||||
2,018 | 15,936 | ||||||||
2,019 | 3,750 | ||||||||
2,020 | 22,943 | ||||||||
2,021 | 54,114 | ||||||||
Total | 97,368 | ||||||||
Deferred Financing Costs, net | 1,460 | ||||||||
Original Issue Discount, net | 3,872 | ||||||||
Carrying Value | 92,036 | ||||||||
Aggregate amount | $ 49,881 | ||||||||
Aggregate original issue discount | $ 4,700 | ||||||||
Recorded value of the convertible note | |||||||||
Less: Original issue discount | (3,872) | ||||||||
Total | 97,368 | ||||||||
Accumulated accretion of original issue debt discount | 350 | 359 | |||||||
Modified Convertible Notes value | 13,242 | $ 12,251 | $ 12,660 | ||||||
Short term convertible notes | 13,436 | $ 13,137 | |||||||
Tengram Capital Partners, LP | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Total | 13,400 | ||||||||
Recorded value of the convertible note | |||||||||
Total | 13,400 | ||||||||
SWIMS | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Cash payment | $ 12,017 | ||||||||
Aggregate principal amount of modified convertible notes | 13,812 | ||||||||
Preferred Series A | TCP Denim, LLC | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Shares issued (in shares) | shares | 50,000 | ||||||||
Aggregate amount | $ 50,000 | ||||||||
Dividend rate (as a percent) | 10.00% | ||||||||
Number of Board of Directors that the preferred stockholders can elect | item | 3 | ||||||||
Conversion price (in dollars per share) | $ / shares | $ 11.16 | ||||||||
Convertible Notes - Short Term | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
2,018 | 13,436 | ||||||||
Total | 13,436 | ||||||||
Carrying Value | 13,436 | ||||||||
Recorded value of the convertible note | |||||||||
Total | 13,436 | ||||||||
Term Loan Credit Agreement | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Remainder of 2017 | 625 | ||||||||
2,018 | 2,500 | ||||||||
2,019 | 3,750 | ||||||||
2,020 | 5,000 | ||||||||
2,021 | 37,000 | ||||||||
Total | 48,875 | ||||||||
Deferred Financing Costs, net | 1,009 | ||||||||
Carrying Value | 47,866 | ||||||||
Recorded value of the convertible note | |||||||||
Total | 48,875 | ||||||||
Line of credit | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
2,020 | 17,943 | ||||||||
Total | 17,943 | ||||||||
Deferred Financing Costs, net | 451 | ||||||||
Carrying Value | 17,492 | ||||||||
Recorded value of the convertible note | |||||||||
Total | 17,943 | ||||||||
Convertible notes | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
2,021 | 17,114 | ||||||||
Total | 17,114 | ||||||||
Original Issue Discount, net | 3,872 | ||||||||
Carrying Value | 13,242 | ||||||||
Recorded value of the convertible note | |||||||||
Less: Original issue discount | (3,872) | ||||||||
Total | 17,114 | ||||||||
JPM Loan Agreement | RG | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Aggregate principal amount | $ 30,000 | ||||||||
Capex loan | RG | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Aggregate principal amount | $ 3,500 | ||||||||
Revolving Facility | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Carrying Value | 17,900 | ||||||||
Aggregate principal amount | $ 40,000 | ||||||||
Availability | 8,600 | ||||||||
Commitment fee (as a percent) | 0.25% | ||||||||
Revolving Facility | Maximum | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Aggregate principal amount | $ 10,000 | ||||||||
Revolving Facility | Base Rate | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Margin on variable rate basis (as a percent) | 0.50% | ||||||||
Revolving Facility | LIBOR rate loans | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Margin on variable rate basis (as a percent) | 1.75% | ||||||||
Term Facility | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Carrying Value | 48,900 | ||||||||
Aggregate principal amount | $ 50,000 | ||||||||
Base rate floor (as a percent) | 0.50% | ||||||||
Required quarterly repayments of principal for the first four fiscal quarters (as a percent) | 0.25% | ||||||||
Required quarterly repayments of principal for the second four fiscal quarters (as a percent) | 0.625% | ||||||||
Required quarterly repayments of principal for the third four fiscal quarters (as a percent) | 1.25% | ||||||||
Required quarterly repayments of principal for the fourth four fiscal quarters (as a percent) | 1.875% | ||||||||
Required quarterly repayments of principal thereafter (as a percent) | 2.50% | ||||||||
Prepayment exception amounts (as a percent) | 100.00% | ||||||||
Prepayment premium during first year (as a percent) | 2.00% | ||||||||
Prepayment premium during second year (as a percent) | 1.00% | ||||||||
Term Facility | Minimum | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Prepayment exception amounts (as a percent) | 0.00% | ||||||||
Term Facility | Maximum | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Prepayment exception amounts (as a percent) | 50.00% | ||||||||
Term Facility | Base Rate | Minimum | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Margin on variable rate basis (as a percent) | 6.00% | ||||||||
Term Facility | Base Rate | Maximum | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Margin on variable rate basis (as a percent) | 9.50% | ||||||||
Term Facility | LIBOR rate loans | Minimum | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Margin on variable rate basis (as a percent) | 7.00% | ||||||||
Term Facility | LIBOR rate loans | Maximum | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Margin on variable rate basis (as a percent) | 10.50% | ||||||||
Credit Facilities | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Aggregate principal amount | $ 50,000 | ||||||||
Credit Facilities | Base Rate | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Margin on variable rate basis (as a percent) | 8.75% | ||||||||
Credit Facilities | LIBOR rate loans | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Margin on variable rate basis (as a percent) | 9.75% | ||||||||
Modified Convertible Notes | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Total | 11,800 | ||||||||
Original Issue Discount, net | 4,673 | ||||||||
Amount of interest payable in cash (as a percent) | 50.00% | ||||||||
Amount of interest payable in kind (as a percent) | 50.00% | ||||||||
Amount of interest payable in cash, discretionary (as a percent) | 100.00% | ||||||||
Recorded value of the convertible note | |||||||||
Face value | 16,473 | ||||||||
Less: Original issue discount | (4,673) | ||||||||
Total | 11,800 | ||||||||
PIK interest issued | 641 | ||||||||
Accumulated accretion of original issue debt discount | 801 | ||||||||
Modified Convertible Notes value | 13,242 | ||||||||
Modified Convertible Notes | Conversion of Convertible Notes into Common Stock | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Annual rate on outstanding principal amount (as a percent) | 6.50% | 7.00% | |||||||
Shares issued (in shares) | shares | 1,167,317 | ||||||||
Cash payment | $ 8,600 | ||||||||
Aggregate principal amount of modified convertible notes | $ 16,500 | ||||||||
Trading days immediately preceding the notice of conversion used for calculation of average of the closing prices for the common stock | item | 20 | ||||||||
Convertible Notes Due January 2017 | Tengram Capital Partners, LP | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Annual rate on outstanding principal amount (as a percent) | 3.75% | ||||||||
Recorded value of the convertible note | |||||||||
Face value | $ 13,000 | ||||||||
Convertible Notes Due January 2017 | Preferred Series A-1 | Tengram Capital Partners, LP | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Dividend rate (as a percent) | 10.00% | ||||||||
Conversion price (in dollars per share) | $ / shares | $ 3 | ||||||||
Convertible Notes Due January 2017 | Maximum | Preferred Series A-1 | Tengram Capital Partners, LP | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Number of shares issuable upon conversion of the debt | shares | 4,500,000 | ||||||||
Short Term Convertible Notes | |||||||||
Five year payment schedule of debt for the promissory notes, long term debt and convertible notes | |||||||||
Total | 12,535 | ||||||||
Original Issue Discount, net | 465 | ||||||||
Recorded value of the convertible note | |||||||||
Face value | 13,000 | ||||||||
Less: Original issue discount | (465) | ||||||||
Total | 12,535 | ||||||||
PIK interest issued | 436 | ||||||||
Accumulated accretion of original issue debt discount | 465 | ||||||||
Short term convertible notes | $ 13,436 |
Debt and Preferred Stock - Over
Debt and Preferred Stock - Overdraft and Factoring Agreement (Details) - DFBG Swims - DNB Bank $ in Millions | Jun. 30, 2017NOK | Jun. 30, 2017USD ($) | Jan. 27, 2016NOK | Jan. 27, 2016USD ($) | Jan. 26, 2016NOK |
Overdraft Agreement | |||||
Line of Credit Facility [Line Items] | |||||
Amount outstanding | NOK 0 | ||||
Overdraft Agreement | Maximum | |||||
Line of Credit Facility [Line Items] | |||||
Maximum borrowing capacity | NOK 6,000,000 | $ 0.7 | |||
Overdraft Agreement | Machinery and Plant Lien | Maximum | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | 10,000,000 | ||||
Overdraft Agreement | Inventory Lien | Maximum | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | 10,000,000 | ||||
Overdraft Agreement | Factoring, First Lien | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | 1,000,000 | ||||
Overdraft Agreement | Factoring, Second Lien | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | 4,000,000 | ||||
Overdraft Agreement | Factoring, Third Lien | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | 7,000,000 | ||||
Overdraft Agreement | Factoring, Fourth Lien | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | NOK 2,500,000 | ||||
Ordinary Credit | |||||
Line of Credit Facility [Line Items] | |||||
Annual rate on outstanding principal amount (as a percent) | 7.40% | 7.40% | |||
Quarterly fee percent | 0.40% | 0.40% | |||
Ordinary Credit | Maximum | |||||
Line of Credit Facility [Line Items] | |||||
Maximum borrowing capacity | NOK 3,500,000 | ||||
Additional Credit | |||||
Line of Credit Facility [Line Items] | |||||
Annual rate on outstanding principal amount (as a percent) | 4.90% | 4.90% | |||
Quarterly fee percent | 0.50% | 0.50% | |||
Additional Credit | Maximum | |||||
Line of Credit Facility [Line Items] | |||||
Maximum borrowing capacity | NOK 2,500,000 | ||||
Factoring Agreement | |||||
Line of Credit Facility [Line Items] | |||||
Amount outstanding | NOK 10,100,000 | $ 1.2 | |||
Factoring Agreement | Maximum | |||||
Line of Credit Facility [Line Items] | |||||
Financing Percentage on preapproved outstanding invoiced receivables | 80.00% | 80.00% | |||
Factoring Agreement | Machinery and Plant Lien | Maximum | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | NOK 10,000,000 | ||||
Factoring Agreement | Inventory Lien | Maximum | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | 10,000,000 | ||||
Factoring Agreement | Factoring, First Lien | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | 1,000,000 | ||||
Factoring Agreement | Factoring, Second Lien | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | 4,000,000 | ||||
Factoring Agreement | Factoring, Third Lien | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | 7,000,000 | ||||
Factoring Agreement | Factoring, Fourth Lien | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | NOK 2,500,000 |
Debt and Preferred Stock - Inte
Debt and Preferred Stock - Interest Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Components of interest expense | ||||
Contractual coupon interest | $ 1,939 | $ 1,603 | $ 3,689 | $ 2,815 |
Amortization of discount and deferred financing | 268 | 392 | 565 | 521 |
Total interest expense | $ 2,207 | $ 1,995 | $ 4,254 | $ 3,336 |
Fair Value Measurement of Fin51
Fair Value Measurement of Financial Instruments (Details) - USD ($) $ in Thousands | 6 Months Ended | ||
Jun. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2016 | |
Fair value disclosures | |||
Convertible notes - short term | $ 13,436 | $ 13,137 | |
Convertible notes | $ 13,242 | 12,660 | $ 12,251 |
Fair value assumptions | |||
Time to maturity | 4 years 29 days | ||
Volatility rate | 60.00% | ||
Risk-free interest rate | 1.72% | ||
Carrying Value | |||
Fair value disclosures | |||
Convertible notes - short term | $ 13,436 | 13,137 | |
Convertible notes | 13,242 | 12,660 | 12,251 |
Loan payable | 26,678 | 25,797 | 12,251 |
Fair Value | |||
Fair value disclosures | |||
Convertible notes - short term | 13,436 | 13,137 | |
Convertible notes | 11,250 | 11,250 | 10,960 |
Loan payable | $ 24,686 | $ 24,387 | $ 10,960 |
Equity - Incentive Plan (Detail
Equity - Incentive Plan (Details) - shares | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2017 | Dec. 31, 2016 | Nov. 07, 2016 | |
Stock Incentive Plans | |||
Shares of common stock | 513,678 | ||
Shares Reserved For Future Issuance | |||
Number of shares available for issuance | 0 | ||
RSUs | |||
Stock Incentive Plans | |||
Shares of common stock | 510,000 | ||
Restated Plan | |||
Shares Reserved For Future Issuance | |||
Shares of common stock issuable | 444 | ||
2016 Plan | |||
Stock Incentive Plans | |||
Number of shares reserved for future issuance | 3,529,109 | ||
Shares Reserved For Future Issuance | |||
Shares of common stock issuable | 3,152,494 |
Equity - Plan Activity (Details
Equity - Plan Activity (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | Jun. 30, 2017 | |
Options Outstanding and Exercisable | ||||||
Exercise Price (in dollars per share) | $ 4.04 | $ 4.04 | $ 4.04 | $ 4.04 | ||
Stock option activity | ||||||
Outstanding at the beginning of the period (in shares) | 150,444 | |||||
Outstanding at the end of the period (in shares) | 150,444 | 150,444 | 150,444 | |||
Outstanding and exercisable at (in shares) | 50,444 | |||||
Weighted average exercise price | ||||||
Outstanding at the beginning of the period (in dollars per share) | $ 4.04 | |||||
Outstanding at the end of the period (in dollars per share) | $ 4.04 | $ 4.04 | $ 4.04 | |||
Outstanding and exercisable (in dollars per share) | $ 4.08 | |||||
Weighted average remaining contractual Life | ||||||
Outstanding at the end of the period | 5 years 10 months 24 days | |||||
Exercisable at the end of the period | 4 years 10 months 24 days | |||||
Unrecognized compensation cost | ||||||
Stock based compensation expense recognized | $ 0 | |||||
Volatility rate | 60.00% | |||||
Risk-free interest rate | 1.72% | |||||
stock options | ||||||
Unrecognized compensation cost | ||||||
Stock based compensation expense recognized | $ 7,000 | $ 0 | $ 15,000 | $ 0 | ||
Total unrecognized compensation cost | $ 71,000 | |||||
Expected option term | 1 year 10 months 24 days | |||||
Amended And Restated Plan | ||||||
Stock option activity | ||||||
Outstanding at the beginning of the period (in shares) | 444 | |||||
Outstanding at the end of the period (in shares) | 444 | 444 | 444 | |||
2016 Plan | ||||||
Stock option activity | ||||||
Outstanding at the beginning of the period (in shares) | 150,000 | |||||
Outstanding at the end of the period (in shares) | 150,000 | 150,000 | 150,000 |
Equity - Restricted Stock Units
Equity - Restricted Stock Units (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Restricted Stock Units | |||||
Granted (in shares) | 513,678 | ||||
Weighted-Average Grant-Date Fair Value | |||||
Outstanding at the end of the period (in shares) | 150,444 | 150,444 | 150,444 | ||
Unrecognized compensation cost | |||||
Stock based compensation expense recognized | $ 0 | ||||
Vesting period | 3 years | ||||
If less than 80 percent of performance target is reached | 0.00% | ||||
RSUs | |||||
Restricted Stock Units | |||||
Outstanding at the beginning of the period (in shares) | 800,843 | ||||
Granted (in shares) | 510,000 | ||||
Vested (in shares) | 113,888 | ||||
Forfeited (in shares) | 75,000 | ||||
Outstanding at the end of the period (in shares) | 1,121,955 | 1,121,955 | 800,843 | ||
Weighted-Average Grant-Date Fair Value | |||||
Outstanding at the beginning of the period (in dollars per share) | $ 4.65 | ||||
Granted (in dollars per share) | 2.24 | ||||
Vested (in dollars per share) | 4.62 | ||||
Forfeited (in dollars per share) | 2.90 | ||||
Outstanding at the end of the period (in dollars per share) | $ 3.67 | $ 3.67 | $ 4.65 | ||
Unrecognized compensation cost | |||||
Weighted-average period for recognition of unrecognized compensation cost | 2 years | ||||
Stock based compensation expense recognized | $ 500,000 | $ 300,000 | $ 900,000 | $ 1,000,000 | |
Total unrecognized compensation | $ 3,300,000 | $ 3,300,000 |
Equity - Warrants (Details)
Equity - Warrants (Details) - USD ($) $ / shares in Units, $ in Thousands | Jul. 18, 2016 | Jun. 30, 2017 |
Fair value assumptions | ||
Time to maturity | 4 years 29 days | |
Volatility rate | 60.00% | |
Risk-free interest rate | 1.72% | |
SWIMS | ||
Class of Warrant or Right [Line Items] | ||
Fair value of warrants issued | $ 45 | |
Exercise price (in dollars per share) | $ 5.47 | |
Warrants | SWIMS | ||
Class of Warrant or Right [Line Items] | ||
Shares of common stock | 150,000 | |
Fair value of warrants issued | $ 45 | |
Exercise price (in dollars per share) | $ 5.47 | |
Fair value assumptions | ||
Time to maturity | 3 years | |
Volatility rate | 45.00% | |
Dividend rate | 0.00% | |
Risk-free interest rate | 0.85% | |
Discount rate | 10.00% | |
Restriction period | 6 months | |
Warrants | Tengram Capital Partners, LP | ||
Class of Warrant or Right [Line Items] | ||
Exercise price (in dollars per share) | $ 3 | |
Warrants | Tengram Capital Partners, LP | SWIMS | ||
Class of Warrant or Right [Line Items] | ||
Shares of common stock | 500,000 | |
Fair value of warrants issued | $ 465 | |
Exercise price (in dollars per share) | $ 3 | |
Fair value assumptions | ||
Time to maturity | 5 years | |
Volatility rate | 50.00% | |
Dividend rate | 0.00% | |
Risk-free interest rate | 1.14% | |
Discount rate | 20.00% | |
Restriction period | 6 years |
Loss per Share (Details)
Loss per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Basic loss per share computation: | ||||
Loss from continuing operations (in dollars per share) | $ (0.30) | $ (0.29) | $ (0.48) | $ (0.74) |
Loss from continuing operations | $ (4,054) | $ (3,605) | $ (6,404) | $ (8,800) |
Loss from discontinued operations (in dollars per share) | $ (0.11) | |||
Loss from discontinued operations, net of tax | $ (1,286) | |||
Loss per common share - basic (in dollars per share) | $ (0.30) | $ (0.29) | $ (0.48) | $ (0.85) |
Net loss | $ (4,054) | $ (3,605) | $ (6,404) | $ (10,086) |
Denominator: | ||||
Weighted average common shares outstanding (in shares) | 13,309 | 12,380 | 13,298 | 11,852 |
Diluted loss per share computation: | ||||
Loss from continuing operations (in dollars per share) | $ (0.30) | $ (0.29) | $ (0.48) | $ (0.74) |
Loss from continuing operations | $ (4,054) | $ (3,605) | $ (6,404) | $ (8,800) |
Loss from discontinued operations, net of tax | $ (1,286) | |||
Loss from discontinued operations (in dollars per share) | $ (0.11) | |||
Loss per common share - dilutive (in dollars per share) | $ (0.30) | $ (0.29) | $ (0.48) | $ (0.85) |
Net loss | $ (4,054) | $ (3,605) | $ (6,404) | $ (10,086) |
Denominator: | ||||
Weighted average common shares outstanding (in shares) | 13,309 | 12,380 | 13,298 | 11,852 |
Dilutive potential common shares (in shares) | 13,309 | 12,380 | 13,298 | 11,852 |
Modified Convertible Notes | ||||
Numerator: | ||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 1,227 | 1,187 | 1,227 | 1,187 |
Convertible Notes Due January 2017 | ||||
Numerator: | ||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 4,479 | 4,479 | ||
Preferred Series A | ||||
Numerator: | ||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 4,480 | 4,480 | 4,480 | 4,480 |
Warrants | ||||
Numerator: | ||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 650 | 650 | ||
stock options | ||||
Numerator: | ||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 150 | 150 | ||
RSUs | ||||
Numerator: | ||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 1,122 | 700 | 1,122 | 700 |
PSUs | ||||
Numerator: | ||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 458 | 458 |
Loss per Share - Two Class Meth
Loss per Share - Two Class Method (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Loss per Share | ||||
Net loss | $ (4,054) | $ (3,605) | $ (6,404) | $ (10,086) |
Less: Preferred dividends | 1,366 | 863 | 2,717 | 1,268 |
Net loss attributable to stockholders | (5,420) | (4,468) | (9,121) | (11,354) |
Net loss attributable to common stockholders | $ (5,420) | $ (4,468) | $ (9,121) | $ (11,354) |
Denominator: | ||||
Weighted average common shares outstanding (in shares) | 13,309 | 12,380 | 13,298 | 11,852 |
(Loss) earnings per common share - basic and diluted under two class method (in dollars per share) | $ (0.41) | $ (0.36) | $ (0.69) | $ (0.96) |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | Jan. 28, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Mar. 31, 2017 | Dec. 31, 2016 |
Income Taxes | |||||||
Federal income tax provision | $ 0 | ||||||
Effective tax rate | (68.00%) | 30.00% | (34.00%) | (7.00%) | |||
Unrecognized tax benefits | $ 0 | $ 0 | $ 100,000 | $ 100,000 | |||
Deferred: | |||||||
Total | $ 1,636,000 | $ (1,510,000) | $ 1,610,000 | $ 577,000 |
Segment Reporting and Operati59
Segment Reporting and Operations by Geographic Areas (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Segment information | |||||
Net sales | $ 36,453 | $ 32,373 | $ 76,555 | $ 66,088 | |
Gross profit | 16,219 | 12,511 | 34,822 | 28,848 | |
Operating expenses | 16,442 | 15,631 | 35,351 | 33,735 | |
Operating (loss) income | (223) | (3,120) | (529) | (4,887) | |
Capital expenditures | 281 | 316 | 537 | 1,125 | |
Total assets | 168,549 | 156,411 | 168,549 | 156,411 | $ 166,171 |
Wholesale | |||||
Segment information | |||||
Net sales | 25,374 | 22,755 | 56,517 | 48,332 | |
Gross profit | 8,738 | 6,028 | 21,555 | 17,014 | |
Operating expenses | 3,168 | 3,147 | 7,629 | 6,048 | |
Operating (loss) income | 5,570 | 2,881 | 13,926 | 10,966 | |
Capital expenditures | 5 | 133 | 15 | 272 | |
Total assets | 47,812 | 55,764 | 47,812 | 55,764 | 44,793 |
Consumer Direct | |||||
Segment information | |||||
Net sales | 10,425 | 9,097 | 18,771 | 16,736 | |
Gross profit | 6,827 | 5,962 | 12,000 | 10,814 | |
Operating expenses | 5,997 | 5,867 | 12,383 | 12,731 | |
Operating (loss) income | 830 | 95 | (383) | (1,917) | |
Capital expenditures | 135 | 150 | 294 | 762 | |
Total assets | 8,438 | 11,461 | 8,438 | 11,461 | 10,093 |
Corporate and Other | |||||
Segment information | |||||
Net sales | 654 | 521 | 1,267 | 1,020 | |
Gross profit | 654 | 521 | 1,267 | 1,020 | |
Operating expenses | 7,277 | 6,617 | 15,339 | 14,956 | |
Operating (loss) income | (6,623) | (6,096) | (14,072) | (13,936) | |
Capital expenditures | 141 | 33 | 228 | 91 | |
Total assets | $ 112,299 | $ 89,186 | $ 112,299 | $ 89,186 | $ 111,285 |
Commitments and Contingencies60
Commitments and Contingencies (Details) | 6 Months Ended |
Jun. 30, 2017 | |
Minimum | |
Contingent Consideration Payments, Buy-Out Agreement and Earnout Subordination Agreement | |
Percentage of annual sales volume | 6.00% |
Maximum | |
Contingent Consideration Payments, Buy-Out Agreement and Earnout Subordination Agreement | |
Percentage of annual sales volume | 8.00% |
Commitments and Contingencies -
Commitments and Contingencies - Agreements (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Future Lease Obligations | ||||
2017 Remainder of the year | $ 3,526 | |||
2,018 | 6,363 | |||
2,019 | 6,159 | |||
2,020 | 6,042 | |||
2,021 | 6,157 | |||
Thereafter | 15,849 | |||
Future minimum rental payments | 44,096 | |||
Rent expense | $ 2,300 | $ 2,300 | 4,700 | $ 4,600 |
Employment agreements | ||||
2,017 | 1,200 | |||
2,018 | 2,000 | |||
2,019 | 700 | |||
Purchase Commitments | ||||
Other commitments | ||||
Purchase commitments | 22,300 | |||
Advertising Commitments | ||||
Other commitments | ||||
Purchase commitments | $ 300 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Related party transactions | ||||
Convertible note payable balance | $ 97,368 | $ 97,368 | ||
Period for automatic renewal of the term of the employment | 1 year | |||
Tengram Capital Partners, LP | ||||
Related party transactions | ||||
Convertible note payable balance | 13,400 | $ 13,400 | ||
Accrued interest | 42 | 42 | ||
Total related party expenses | 39 | $ 84 | 62 | $ 875 |
Related party expenses, Legal fee component | 750 | |||
Acquisition related costs | $ 41 | |||
Peter Kim | ||||
Related party transactions | ||||
Convertible note payable balance | 8,700 | 8,700 | ||
Accrued interest | $ 142 | $ 142 | ||
Term of non-compete agreement | 3 years |
Discontinued Operations (Detail
Discontinued Operations (Details) $ in Thousands | Feb. 29, 2016store | Jun. 30, 2016USD ($)store | Jun. 30, 2017USD ($) | Mar. 31, 2017USD ($) | Dec. 31, 2016USD ($) |
Operating results of discontinued operations | |||||
Number of stores closed | store | 14 | 1 | |||
Loss from discontinued operations, net of tax | $ (1,286) | ||||
Joe's brand retail stores | Discontinued Operations, Disposed of by Means Other than Sale, Closure | |||||
Operating results of discontinued operations | |||||
Net Sales from discontinued operations | 1,208 | ||||
Loss from discontinued operations before income tax | (1,286) | ||||
Loss from discontinued operations, net of tax | (1,286) | ||||
Noncurrent Assets | |||||
Assets of held for sale | $ 0 | $ 0 | |||
Noncurrent Liabilities | |||||
Liabilities held for sale | $ 0 | $ 0 | $ 0 |
RG Merger and Related Transac64
RG Merger and Related Transactions (Details) - USD ($) $ in Thousands | Jan. 28, 2016 | Jun. 30, 2016 |
Business Acquisition [Line Items] | ||
Aggregate amount | $ 49,881 | |
Modified Convertible Notes | Conversion of Convertible Notes into Common Stock | ||
Business Acquisition [Line Items] | ||
Shares issued (in shares) | 1,167,317 | |
Cash payment | $ 8,600 | |
Aggregate principal amount of modified convertible notes | $ 16,500 | |
TCP Denim, LLC | Preferred Series A | ||
Business Acquisition [Line Items] | ||
Shares issued (in shares) | 50,000 | |
Aggregate amount | $ 50,000 | |
RG Parent, LLC | ||
Business Acquisition [Line Items] | ||
Principal amount of outstanding convertible notes exchanged | 38,100 | |
Cash payment | 81,000 | |
Aggregate principal amount of modified convertible notes | $ 40,430 | |
RG Parent, LLC | Modified Convertible Notes | Conversion of Convertible Notes into Common Stock | ||
Business Acquisition [Line Items] | ||
Shares issued (in shares) | 1,167,317 | |
Aggregate principal amount of modified convertible notes | $ 16,500 | |
RG Parent, LLC | TCP Denim, LLC | Preferred Series A | ||
Business Acquisition [Line Items] | ||
Shares issued (in shares) | 50,000 | |
Aggregate amount | $ 50,000 |
RG Merger and Related Transac65
RG Merger and Related Transactions - Consideration (Details) - USD ($) $ / shares in Units, $ in Thousands | Jan. 28, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 |
Business Acquisition | |||||||
Common stock, shares outstanding | 13,317,281 | 12,379,000 | 13,317,281 | 12,379,000 | 13,239,125 | ||
Common stock, par value (in dollars per share) | $ 0.10 | $ 0.10 | $ 0.10 | $ 0.10 | $ 0.10 | ||
Original issue discount | $ 3,872 | $ 3,872 | |||||
Revenue | 36,453 | $ 32,373 | 76,555 | $ 66,088 | |||
Income from continuing operations | (4,054) | (3,605) | (6,404) | (8,800) | |||
Assets acquired and liabilities assumed: | |||||||
Excess purchase price over net assets acquired | 8,340 | 6,524 | 8,340 | 6,524 | $ 8,271 | $ 2,286 | |
Unaudited pro forma results | |||||||
Net sales | 36,453 | 33,868 | 76,555 | 76,150 | |||
Net loss | $ (4,054) | $ (2,457) | $ (6,404) | $ (3,403) | |||
Weighted average common shares outstanding (in shares) | 13,309 | 11,852 | 13,298 | 11,852 | |||
Loss per common share - basic and diluted (in dollars per share) | $ (0.30) | $ (0.21) | $ (0.48) | $ (0.29) | |||
Modified Convertible Notes | |||||||
Business Acquisition | |||||||
Convertible notes face value | $ 16,473 | $ 16,473 | |||||
Original issue discount | 4,673 | 4,673 | |||||
RG Parent, LLC | |||||||
Business Acquisition | |||||||
Closing share price (in dollars per share) | $ 5.70 | ||||||
Common stock outstanding assumed | 3,508,747 | ||||||
Common stock, shares outstanding | 2,342,000 | ||||||
Total aggregates shares issued to convertible noteholders upon conversion | 1,167,000 | ||||||
Principal amount of outstanding convertible notes exchanged | $ 38,100 | ||||||
Common stock, par value (in dollars per share) | $ 0.10 | ||||||
Modified convertible notes ownership right (as a percent) | 14.00% | ||||||
Inventory adjustment to fair value | $ 400 | ||||||
Assets acquired and liabilities assumed: | |||||||
Cash and cash equivalents | 2,092 | ||||||
Factored accounts receivable | 6,719 | ||||||
Accounts receivable | 336 | ||||||
Inventories | 11,378 | ||||||
Prepaid expenses and other current assets | 2,278 | ||||||
Property and equipment | 356 | ||||||
Other assets | 352 | ||||||
Accounts payable and accrued expenses | (15,417) | ||||||
Customer cash advances | (893) | ||||||
Line of credit | (4,683) | ||||||
Deferred income tax liability | (9,677) | ||||||
Other liabilities | (81) | ||||||
Buy-out payable | (1,668) | ||||||
Intangible assets acquired - Indefinite lived | 32,300 | ||||||
Intangible assets acquired - Finite lived | 13,400 | ||||||
Total | 36,792 | ||||||
Excess purchase price over net assets acquired | 3,638 | ||||||
Total net assets acquired | 40,430 | ||||||
Total Purchase Price | |||||||
Cash paid to existing holders of convertible notes | 8,630 | ||||||
Fair value of Modified Convertible Notes transferred to the existing holders of convertible notes | 11,800 | ||||||
Equity consideration to the Company's Common stockholders and existing holders of convertible notes (3,508,747 shares at $5.70) | 20,000 | ||||||
Total purchase price | $ 40,430 | ||||||
Share Price | $ 5.70 | ||||||
RG Parent, LLC | Modified Convertible Notes | |||||||
Business Acquisition | |||||||
Convertible notes face value | $ 16,500 | ||||||
Original issue discount | 4,700 | ||||||
Cost of goods sold | RG Parent, LLC | |||||||
Business Acquisition | |||||||
Inventory adjustment to fair value | $ 200 | $ 200 | |||||
Selling, General and Administrative Expenses | RG Parent, LLC | |||||||
Total Purchase Price | |||||||
Non-recurring expense related to merger | 300 | 0 | |||||
Non-recurring restructuring expenses | $ 0 | $ 900 | $ 0 | $ 1,500 | |||
Conversion of Convertible Notes into Common Stock | Modified Convertible Notes | |||||||
Total Purchase Price | |||||||
Total purchase price | 16,500 | ||||||
Conversion of Convertible Notes into Common Stock | RG Parent, LLC | Modified Convertible Notes | |||||||
Total Purchase Price | |||||||
Total purchase price | $ 16,500 |
Acquisition of SWIMS (Details)
Acquisition of SWIMS (Details) - USD ($) $ / shares in Units, $ in Thousands | Jul. 18, 2016 | Jan. 18, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract] | ||||||||
Excess purchase price over net assets acquired | $ 8,340 | $ 6,524 | $ 8,340 | $ 6,524 | $ 8,271 | $ 2,286 | ||
Business Acquisition, Pro Forma Information [Abstract] | ||||||||
Net sales | 36,453 | 33,868 | 76,555 | 76,150 | ||||
Net loss | $ (4,054) | $ (2,457) | $ (6,404) | $ (3,403) | ||||
Weighted average common shares outstanding (in shares) | 13,309 | 11,852 | 13,298 | 11,852 | ||||
Loss per common share - basic and diluted (in dollars per share) | $ (0.30) | $ (0.21) | $ (0.48) | $ (0.29) | ||||
Tengram Capital Partners, LP | ||||||||
Business Acquisition [Line Items] | ||||||||
Acquisition related costs | $ 41 | |||||||
Tengram Capital Partners, LP | Warrants | ||||||||
Business Acquisition [Line Items] | ||||||||
Warrants Number Issued | 500,000 | |||||||
Exercise price (in dollars per share) | $ 3 | |||||||
Tengram Capital Partners, LP | Convertible Notes Due January 2017 | ||||||||
Business Acquisition [Line Items] | ||||||||
Convertible notes face value | $ 13,000 | |||||||
Interest rate (as a percent) | 3.75% | |||||||
Tengram Capital Partners, LP | Preferred Series A-1 | Convertible Notes Due January 2017 | ||||||||
Business Acquisition [Line Items] | ||||||||
Conversion price (in dollars per share) | $ 3 | |||||||
Dividend rate (as a percent) | 10.00% | |||||||
Tengram Capital Partners, LP | Preferred Series A-1 | Convertible Notes Due January 2017 | Maximum | ||||||||
Business Acquisition [Line Items] | ||||||||
Number of shares issuable upon conversion of the debt | 4,500,000 | |||||||
SWIMS | ||||||||
Business Acquisition [Line Items] | ||||||||
Cash payment | $ 12,017 | |||||||
Number of shares of common stock issued | 702,943 | |||||||
Equity issued | $ 1,750 | |||||||
Warrants Number Issued | 150,000 | |||||||
Exercise price (in dollars per share) | $ 5.47 | |||||||
Escrow deposit | $ 300 | |||||||
Fair value of warrants issued | 45 | |||||||
Inventory adjustment to fair value | 1,300 | |||||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract] | ||||||||
Cash and cash equivalents | 189 | |||||||
Factored accounts receivable | 1,552 | |||||||
Inventories | 3,466 | |||||||
Prepaid expenses and other current assets | 647 | |||||||
Property and equipment | 498 | |||||||
Accounts payable and accrued expenses | (1,706) | |||||||
Deferred income tax liability | (2,476) | |||||||
Total | 11,419 | |||||||
Excess purchase price over net assets acquired | 2,393 | |||||||
Total net assets acquired | 13,812 | |||||||
Total Purchase Price | ||||||||
Cash paid to sellers | 12,017 | |||||||
Equity consideration issued to sellers | 1,750 | |||||||
Fair value of warrants issued | 45 | |||||||
Total purchase price | 13,812 | |||||||
SWIMS | Selling, General and Administrative Expenses | ||||||||
Business Acquisition [Line Items] | ||||||||
Acquisition related costs | $ 0 | $ 400 | $ 0 | $ 400 | ||||
SWIMS | Customer relationships | ||||||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract] | ||||||||
Intangible assets acquired | 1,833 | |||||||
SWIMS | Non compete agreements | ||||||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract] | ||||||||
Intangible assets acquired | 130 | |||||||
SWIMS | Trade names | ||||||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract] | ||||||||
Intangible assets acquired | $ 7,286 | |||||||
SWIMS | Common Stock | ||||||||
Business Acquisition [Line Items] | ||||||||
Number of shares of common stock issued | 702,943 | |||||||
Equity issued | $ 1,800 | |||||||
Total Purchase Price | ||||||||
Equity consideration issued to sellers | 1,800 | |||||||
SWIMS | Warrants | ||||||||
Business Acquisition [Line Items] | ||||||||
Equity issued | $ 45 | |||||||
Warrants Number Issued | 150,000 | |||||||
Exercise price (in dollars per share) | $ 5.47 | |||||||
Fair value of warrants issued | $ 45 | |||||||
Total Purchase Price | ||||||||
Equity consideration issued to sellers | 45 | |||||||
Fair value of warrants issued | $ 45 | |||||||
SWIMS | Tengram Capital Partners, LP | Warrants | ||||||||
Business Acquisition [Line Items] | ||||||||
Exercise price (in dollars per share) | $ 3 | |||||||
Fair value of warrants issued | $ 465 | |||||||
Total Purchase Price | ||||||||
Fair value of warrants issued | $ 465 |
Restructuring (Details)
Restructuring (Details) - RG Parent, LLC - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Restructuring | ||||
Restructuring payments | $ 1.2 | $ 0.7 | ||
Accrued restructuring charges | $ 0.3 | 0.3 | ||
Selling, General and Administrative Expenses | ||||
Restructuring | ||||
Non-recurring restructuring expenses | $ 0 | $ 0.9 | $ 0 | $ 1.5 |