Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Aug. 14, 2018 | |
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, 2018 | |
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 | 14,079,480 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 | Jun. 30, 2017 |
Current assets | |||
Cash and cash equivalents | $ 5,029 | $ 8,250 | $ 6,305 |
Accounts receivable, net | 18,067 | 22,246 | 16,982 |
Inventories | 31,330 | 31,733 | 30,623 |
Prepaid expenses and other current assets | 7,111 | 4,832 | 5,465 |
Total current assets | 61,537 | 67,061 | 59,375 |
Property and equipment, net | 7,690 | 8,417 | 9,651 |
Goodwill | 8,409 | 8,380 | 8,340 |
Intangible assets, net | 87,954 | 89,332 | 90,669 |
Other assets | 2,207 | 484 | 514 |
Total assets | 167,797 | 173,674 | 168,549 |
Current liabilities | |||
Accounts payable and accrued expenses | 26,010 | 22,204 | 20,206 |
Short-term convertible note | 13,694 | 13,436 | |
Current portion of long-term debt | 3,750 | 2,813 | 1,875 |
Total current liabilities | 29,760 | 38,711 | 35,517 |
Line of credit | 20,428 | 21,254 | 17,492 |
Convertible notes | 14,521 | 13,866 | 13,242 |
Long-term debt, net of current portion | 43,173 | 44,896 | 45,991 |
Deferred income taxes, net | 5,355 | 6,650 | 13,416 |
Other liabilities | 3,790 | 3,554 | 3,609 |
Total liabilities | 117,027 | 128,931 | 129,267 |
Commitments and contingencies (Note 14) | |||
Equity | |||
Common stock, $0.10 par value: 100,000,000 shares authorized, 14,079,480, 13,488,366 and 13,317,281 shares issued and outstanding at June 30, 2018, December 31, 2017 and June 30, 2017, respectively | 1,408 | 1,349 | 1,332 |
Additional paid-in capital | 75,676 | 61,314 | 59,962 |
Accumulated other comprehensive income (loss) | 412 | 271 | 125 |
Accumulated deficit | (27,190) | (18,196) | (22,142) |
Total equity | 50,770 | 44,743 | 39,282 |
Total liabilities and equity | 167,797 | 173,674 | 168,549 |
Series A | |||
Equity | |||
Convertible preferred stock | 5 | $ 5 | $ 5 |
Series A-1 | |||
Equity | |||
Convertible preferred stock | $ 459 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2018 | Dec. 31, 2017 | Jun. 30, 2017 |
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 | 14,079,480 | 13,488,366 | 13,317,281 |
Common stock, shares outstanding | 14,079,480 | 13,488,366 | 13,317,281 |
Series A | |||
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 |
Series A-1 | |||
Convertible preferred stock, par value (in dollars per share) | $ 0.10 | $ 0.10 | $ 0.10 |
Convertible preferred stock, shares authorized | 4,587,964 | 0 | 0 |
Convertible preferred stock, shares issued | 4,587,964 | 0 | 0 |
Convertible preferred stock, shares outstanding | 4,587,964 | 0 | 0 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) | ||||
Net sales | $ 35,965 | $ 36,453 | $ 74,784 | $ 76,555 |
Cost of goods sold | 21,485 | 20,234 | 44,103 | 41,733 |
Gross profit | 14,480 | 16,219 | 30,681 | 34,822 |
Operating expenses | ||||
Selling, general and administrative | 18,670 | 14,915 | 33,963 | 32,319 |
Depreciation and amortization | 1,412 | 1,527 | 2,874 | 3,032 |
Total operating expenses | 20,082 | 16,442 | 36,837 | 35,351 |
Operating loss | (5,602) | (223) | (6,156) | (529) |
Interest expense | 2,419 | 2,207 | 4,635 | 4,254 |
Other expense (income), net | 103 | (12) | 102 | 11 |
Loss before income taxes | (8,124) | (2,418) | (10,893) | (4,794) |
Income tax (benefit) provision | (2,440) | 1,636 | (1,124) | 1,610 |
Net loss | (5,684) | (4,054) | (9,769) | (6,404) |
Net loss attributable to common stockholders (Note 11) | (7,531) | (5,420) | (13,378) | (9,121) |
Net loss | (5,684) | (4,054) | (9,769) | (6,404) |
Other comprehensive (loss) income, net of tax: | ||||
Foreign currency translation adjustment | (622) | 283 | 141 | 346 |
Other comprehensive (loss) income | (622) | 283 | 141 | 346 |
Comprehensive loss | $ (6,306) | $ (3,771) | $ (9,628) | $ (6,058) |
Loss per common share - basic | ||||
Loss per common share - basic (in dollars per share) | $ (0.54) | $ (0.41) | $ (0.97) | $ (0.69) |
Loss per common share - diluted | ||||
Loss per common share - diluted (in dollars per share) | $ (0.54) | $ (0.41) | $ (0.97) | $ (0.69) |
Weighted average shares outstanding | ||||
Basic (in shares) | 13,980 | 13,309 | 13,766 | 13,298 |
Diluted (in shares) | 13,980 | 13,309 | 13,766 | 13,298 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY - USD ($) $ in Thousands | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Preferred Series A | Preferred Series A-1 | Total |
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 | |||||
Increase (Decrease) in Stockholders' Equity | |||||||
Stock-based compensation | 900 | 900 | |||||
Issuance of restricted common stock, net of taxes withheld | $ 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 | ||||
Increase (Decrease) in Stockholders' Equity | |||||||
Balance | $ 1,349 | 61,314 | 271 | (17,421) | $ 5 | $ 45,518 | |
Impact of change in accounting policy | 775 | 775 | |||||
Balance at Dec. 31, 2017 | $ 1,349 | 61,314 | 271 | (18,196) | $ 5 | $ 44,743 | |
Balance (in shares) at Dec. 31, 2017 | 13,488,000 | 50,000 | 13,488,366 | ||||
Increase (Decrease) in Stockholders' Equity | |||||||
Issuance of Series A-1 convertible preferred stock | 13,305 | $ 459 | $ 13,764 | ||||
Issuance of Series A-1 convertible preferred stock (in shares) | 4,588,000 | ||||||
Stock-based compensation | 1,507 | 1,507 | |||||
Issuance of restricted common stock, net of taxes withheld | $ 59 | (450) | (391) | ||||
Issuance of restricted common stock (in shares) | 591,000 | ||||||
Foreign currency translation | 141 | 141 | |||||
Net loss | (9,769) | (9,769) | |||||
Balance at Jun. 30, 2018 | $ 1,408 | $ 75,676 | $ 412 | $ (27,190) | $ 5 | $ 459 | $ 50,770 |
Balance (in shares) at Jun. 30, 2018 | 14,079,000 | 50,000 | 4,588,000 | 14,079,480 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (9,769) | $ (6,404) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 2,874 | 3,032 |
Amortization of deferred financing costs | 220 | 215 |
Amortization of convertible notes discount | 368 | 350 |
Paid-in-kind interest | 828 | 770 |
Stock-based compensation | 1,507 | 900 |
Provision for bad debts | 96 | 194 |
Loss on disposal of assets | 4 | |
Deferred taxes | (1,318) | 2,289 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 6,176 | 3,081 |
Inventories | 88 | (6,591) |
Prepaid expenses and other assets | (1,426) | (1,253) |
Accounts payable and accrued expenses | 321 | 2,220 |
Other liabilities | 183 | (20) |
Net cash provided by (used in) operating activities | 152 | (1,217) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Refund of security deposit | 7 | |
Purchases of property and equipment | (770) | (601) |
Net cash used in investing activities | (770) | (594) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Repayment of long-term debt | (938) | (625) |
(Repayment of) proceeds from line of credit, net | (1,354) | 4,350 |
Payment of deferred financing costs | (124) | |
Repayment of customer cash advances | (1,707) | |
Taxes paid in lieu of shares issued for stock-based compensation | (391) | (251) |
Net cash (used in) provided by financing activities | (2,683) | 1,643 |
Effect of exchange rate changes on cash and cash equivalents | 80 | (3) |
NET CHANGE IN CASH AND CASH EQUIVALENTS | (3,221) | (171) |
CASH AND CASH EQUIVALENTS, at beginning of period | 8,250 | 6,476 |
CASH AND CASH EQUIVALENTS, at end of period | 5,029 | 6,305 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 3,252 | 2,797 |
Income taxes paid | 170 | 116 |
Supplemental disclosures of non-cash investing and financing activities: | ||
Conversion of Short-Term Convertible Note | 13,764 | |
Unpaid purchases of property and equipment | $ 41 | $ 79 |
Business Description and Basis
Business Description and Basis of Presentation | 6 Months Ended |
Jun. 30, 2018 | |
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, 2017 of Differential Brands Group Inc. and its subsidiaries ( “ we ,” “ us ,” the “Company ” or “ Differential ”) has been derived from audited financial statements of the Company. The condensed consolidated financial statements as of and for the three and six months ended June 30, 2018 and 2017 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, 2017 and 2016. In addition, these condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“ U.S. GAAP ”) 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. GAAP 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, 2017. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) that 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, 2018 are not necessarily indicative of the results anticipated for the entire year ending December 31, 2018. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results may differ from those estimates. The Company 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. Currently, the Company’s principal business activity involves the design, development and worldwide marketing of: (i) apparel products, which include denim jeans, related casual wear and accessories bearing the brand name Hudson®; (ii) apparel products and accessories bearing the brand name Robert Graham®; and (iii) 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 ” or “ RG ”), 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. In connection with the acquisition of all of the outstanding equity interests of RG Parent LLC and its subsidiaries on January 28, 2016 (the “ RG Merger ”), we entered into (i) a credit and security agreement (as later amended, the “ ABL Credit Agreement ”) with Wells Fargo Bank, National Association, as lender, (ii) a 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 Commercial Services, Inc. (“ CIT ”), a unit of CIT Group (the “ A&R Factoring Agreement ”). On July 18, 2016, the Company completed the acquisition of all of the outstanding share capital of Norwegian private limited company SWIMS AS (“ SWIMS ”). Recent Developments On June 27, 2018, the Company entered into a Purchase and Sale Agreement (the “ Purchase Agreement ”) with Global Brands Group Holding Limited (“ GBG ”) and GBG USA Inc., a wholly-owned subsidiary of GBG (“ GBG USA ”), to purchase a significant part of GBG’s and its subsidiaries’ North American business, including the wholesale, retail and e-commerce operations, comprising all of their North American kids business, all of their North American accessories business and a majority of their West Coast and Canadian fashion businesses (collectively, the “ Business ”) for a purchase price of $1.38 billion, to be paid in cash and subject to adjustment (the “ Purchase Price ”). The acquisition contemplated by the Purchase Agreement (the “ GBG Transaction ”) is expected to close in the third quarter of 2018, which will result in the combination of the Business with the Company’s existing omnichannel platform, comprised of the Robert Graham, Hudson and Swims brands. The Company incurred $4.6 million of acquisition related expenses during the three and six months ended June 30, 2018, included in selling, general and administrative within the accompanying condensed consolidated statements of operations and comprehensive income (loss). In addition, the Company incurred $0.5 million of deferred financing costs which are included in prepaid expenses and other current assets within the accompanying condensed consolidated balance sheet as of June 30, 2018. Acquisition related costs included in accounts payable and accrued expenses within the accompanying condensed consolidated balance sheet totaled $5.1 million as of June 30, 2018. Ares Capital Management LLC (“ Ares ”), HPS Investment Partners, LLC (“ HPS ”) and GSO Capital Partners LP (“ GSO ”), on one hand, and the Company, on the other hand, entered into Debt Commitment Letters, pursuant to which, subject to the terms and conditions set forth therein, Ares, HPS and GSO have agreed to provide fully committed debt financing for the GBG Transaction (the “ Debt Financing ”). Among the conditions to the funding of the Debt Financing, the Company has agreed to raise an aggregate of $150 million of equity capital in the form of cash investments in shares of common stock of the Company (such equity issuance, together with shares of common stock of the Company to be issued to GSO in connection with the Debt Financing, the “ Equity Issuance ”). Concurrently with the Equity Issuance, certain affiliates of Tengram Capital Partners, L.P. (the “ Tengram Stockholders ”) have also agreed to convert, in accordance with their respective terms, all of their shares of Series A Convertible Preferred Stock and Series A-1 Convertible Preferred Stock into shares of the Company’s common stock. Following such conversion and pro forma for the GBG Transaction, the Company will not have any shares of preferred stock issued and outstanding. The closing of the GBG Transaction is subject to satisfaction or waiver of customary closing conditions, including (i) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act; (ii) the approval of the GBG Transaction by GBG’s stockholders in accordance with applicable Hong Kong listing rules; (iii) the approval of the Equity Issuance by the Company’s stockholders pursuant to NASDAQ listing requirements; (iv) each of GBG and the Company having delivered all required closing deliverables (including certain third party consents in the case of GBG); and (v) the entry into a mutually agreed transition services agreement. As of the date of this filing, (i) the parties were granted early termination of the applicable waiting period under the Hart-Scott Rodino Antitrust Improvements Act effective as of August 10, 2018, (ii) the Company has received requisite shareholder approval under NASDAQ listing standards for the issuance of up to 60 million shares of the Company’s common stock (assuming a maximum offering size of up to $175 million) in connection with the GBG Transaction and has filed a preliminary information statement with the Securities and Exchange Commission related thereto, and (iii) GBG has received requisite approval of the GBG Transaction from its shareholders at a recently scheduled meeting of its shareholders held on August 2, 2018. There can be no assurance that all of the closing conditions required to be satisfied or waived in order to consummate the GBG Transaction will be satisfied or waived or that if such closing conditions are satisfied or waived that the GBG Transaction will be consummated. The Purchase Agreement contains certain customary termination rights, including that each of the Company and GBG has the right to terminate the Purchase Agreement on or after 5:00 p.m. New York City Time on October 31, 2018 if the closing conditions to the Transaction have not been fulfilled by such date. If GBG terminates the Purchase Agreement due solely to the Company’s failure to consummate the Transaction because the Company does not receive the Debt Financing in accordance with the terms and conditions of the Debt Commitment Letters, the Company will be required to pay GBG a termination fee of $2.5 million. If either party terminates the Purchase Agreement due to a willful breach of the Purchase Agreement by the other party that causes a closing condition to fail, the breaching party will be required to pay the terminating party a termination fee of $5 million. The Company’s reportable business segments are “Wholesale”, “Consumer Direct” and “Corporate and other”. 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 ecommerce 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, 2018 | |
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, 2017. Correction of an Immaterial Error During the 2017 year end close, the Company determined that basic and diluted Earnings per Share (“ EPS ”) had been incorrectly stated in the prior period financial statements. Historically, cumulative preferred dividends for the period were not included in the Company’s calculation of EPS. However, in accordance with Accounting Standards Codification (“ ASC ”) 260, Earnings per Share , income available to common stockholders is to be computed by deducting the dividends accumulated for the period on cumulative preferred stock. The Company’s Series A Convertible Preferred Stock entitles the holder to receive cumulative dividends when, as and if declared by the Board of Directors, payable at an annual rate of 10% through the date on which the liquidation preference is paid to the holder in connection with the liquidation of the Company or the date on which such Series A Convertible Preferred Stock is otherwise re-acquired by the Company. The amount of the cumulative dividend accrued on the Series A Convertible Preferred Stock has been disclosed previously in the Company’s filings. The Company has corrected the calculation of basic and diluted EPS to include the accrued cumulative preferred dividends for the period. Management evaluated the materiality of the error from a quantitative and qualitative perspective and concluded that this adjustment was not material to the Company’s presentation and disclosures, and has no impact on the Company’s financial position, results of operations and cash flows. Accordingly, no amendments to previously filed reports are required. However, the Company has elected to revise the historical condensed consolidated financial information presented herein to reflect the correction of this error for the prior periods presented and to conform to the current period presentation. As a result of this correction, for the three months ended June 30, 2017, basic and diluted loss per common share was corrected from a loss of $0.30 per share to a loss of $0.41 per share and for the six months ended June 30, 2017, basic and diluted loss per common share was corrected from a loss of $0.48 per share to a loss of $0.69 per share. As previously announced, if the GBG Transaction is consummated, the Tengram Stockholders have agreed to convert, in accordance with their respective terms, all of their shares of Series A Convertible Preferred Stock and Series A-1 Convertible Preferred Stock into shares of the Company’s common stock, which comprise all of such preferred stock that is currently issued and outstanding. Revenue Recognition The Company adopted ASC 606, Revenue from Contracts with Customers , with a date of initial application of January 1, 2018. As a result, the Company has changed its accounting policy for revenue recognition as described below. The Company applied ASC 606 using the modified retrospective approach – i.e. by recognizing the cumulative effect of initially applying ASC 606 as an adjustment to the opening balance of equity at January 1, 2018. Therefore, the comparative information has not been adjusted and continues to be reported under ASC 605. The details of the significant changes and quantitative impact of the changes are set out below. The Company applied the modified retrospective approach only to contracts that were not complete as of the date of the initial application, January 1, 2018. Effective January 1, 2018, wholesale revenues are recorded when a contract with the customer is agreed to by both parties and product has been transferred, which occurs at the point of shipment from the Company’s warehouse, and recorded at the transaction price based on the amount the Company expects to receive. Collection is probable as the majority of shipments occur to reputable credit worthy businesses and through factored relationships which guarantee payment. Estimated reductions to revenue for customer allowances are recorded based upon history as a percentage of sales and current outstanding chargebacks. The Company may allow for returns based upon pre-approval or in the case of damaged goods. Such returns are estimated based on historical experience and also specific claims filed by the customer. Beginning January 1, 2018, a refund liability is included in accounts payable and accrued expenses within the accompanying condensed consolidated balance sheet, which was previously recorded net of accounts receivable. Also, effective January 1, 2018, the Company records a return asset receivable in prepaid expenses and other current assets within the accompanying condensed consolidated balance sheet. Prior to January 1, 2018, inventory expected to be returned was recorded within inventories. The return asset receivable is evaluated for impairment each period. The Company recorded a decrease of $569 thousand to opening accumulated deficit as of January 1, 2018 to record the return asset receivable and related impairment charge. Retail store revenue is recognized at the time the customer takes possession of the related merchandise. Ecommerce sales of products ordered through the Company’s retail internet sites known as www.hudsonjeans.com , www.robertgraham.us and www.swims.com are recognized at the point of shipment to the customer. Prior to January 1, 2018, revenue for ecommerce sales was recorded at the point of delivery to the customer. The Company recorded an adjustment to opening accumulated deficit as of January 1, 2018, an increase of $39 thousand, to reflect the change in accounting policy. Ecommerce revenue is reduced by an estimate for returns based on the historical rate of return as a percent of sales. Retail store revenue and ecommerce revenue exclude sales taxes. Revenue from licensing arrangements is recognized based on actual sales when the Company expects royalties to exceed the minimum guarantee. For licensing arrangements in which the Company does not expect royalties to exceed the minimum guarantee, an estimate of the transaction price is recognized on a straight-line basis over the term of the contract. A contract asset is recorded for revenue recognized in advance of the contract payment terms, which is included in other assets within the accompanying condensed consolidated balance sheet. Nonrefundable upfront fees are recorded as a contract liability and revenue is recognized straight-line over the term of the contract. Contract liabilities are included in other liabilities within the accompanying condensed consolidated balance sheet. Prior to January 1, 2018, revenue from licensing arrangements was recognized when earned in accordance with the terms of the underlying agreements and deemed collectible, generally based upon the higher of (a) the contractually guaranteed minimum royalty or (b) actual net sales data received from licensees. The Company recorded an adjustment to opening accumulated deficit as of January 1, 2018, an increase of $1.3 million, to reflect the change in accounting policy. Amounts related to shipping and handling that are billed to customers are considered to be activities to fulfill a promise to transfer the goods and are reflected in net sales, and the related costs are reflected in cost of goods sold within the accompanying condensed consolidated statements of operations and comprehensive income (loss). This accounting policy is consistent with the Company’s treatment of shipping and handling revenue prior to January 1, 2018. The following tables summarize the impact of adopting ASC 606 on the Company’s condensed consolidated balance sheet as of January 1, 2018: Impact of changes in accounting policies Balances with adoption of ASC 606 Adjustments Balances without adoption of ASC 606 Accounts receivable, net $ 24,398 $ 2,152 $ 22,246 Inventories 31,389 (344) 31,733 Prepaid expenses and other current assets 5,584 752 4,832 Other assets 1,828 1,344 484 Accounts payable and accrued expenses 25,281 3,077 22,204 Other liabilities 3,606 52 3,554 Accumulated deficit (17,421) 775 (18,196) The following tables summarize the impact of adopting ASC 606 on the Company’s condensed consolidated financial statements as of and for the three and six months ended June 30, 2018: Condensed Consolidated Statement of Operations Impact of changes in accounting policies for the three months ended June 30, 2018 for the six months ended June 30, 2018 As reported Adjustments Balances without adoption of ASC 606 As reported Adjustments Balances without adoption of ASC 606 Net sales $ 35,965 $ (161) $ 35,804 $ 74,784 $ (180) $ 74,604 Cost of goods sold 21,485 (50) 21,435 44,103 (124) 43,979 Gross profit 14,480 (111) 14,369 30,681 (56) 30,625 Operating expenses Selling, general and administrative 18,670 — 18,670 33,963 — 33,963 Depreciation and amortization 1,412 — 1,412 2,874 — 2,874 Total operating expenses 20,082 — 20,082 36,837 — 36,837 Operating loss (5,602) (111) (5,713) (6,156) (56) (6,212) Interest expense 2,419 — 2,419 4,635 — 4,635 Other expense (income), net 103 — 103 102 — 102 Loss before income taxes (8,124) (111) (8,235) (56) Income tax (benefit) provision (2,440) — (2,440) (1,124) — (1,124) Net loss $ (5,684) $ (111) $ (5,795) $ (9,769) $ (56) $ (9,825) Condensed Consolidated Balance Sheet Impact of changes in accounting policies as of June 30, 2018 As reported Adjustments Balances without adoption of ASC 606 Cash and cash equivalents $ 5,029 $ — $ 5,029 Accounts receivable, net 18,067 (2,126) 15,941 Inventories 31,330 389 31,719 Prepaid expenses and other current assets 7,111 (672) 6,439 Property and equipment, net 7,690 — 7,690 Goodwill 8,409 — 8,409 Intangible assets, net 87,954 — 87,954 Other assets 2,207 (1,434) 773 Total assets $ 167,797 $ (3,843) $ 163,954 Accounts payable and accrued expenses $ 26,010 $ (2,724) $ 23,286 Short-term convertible note — — — Current portion of long-term debt 3,750 — 3,750 Line of credit 20,428 — 20,428 Convertible notes 14,521 — 14,521 Long-term debt, net of current portion 43,173 — 43,173 Deferred income taxes, net 5,355 — 5,355 Other liabilities 3,790 (288) 3,502 Total liabilities 117,027 (3,012) 114,015 Series A convertible preferred stock 5 — 5 Series A-1 convertible preferred stock 459 — 459 Common stock 1,408 — 1,408 Additional paid-in capital 75,676 — 75,676 Accumulated other comprehensive income (loss) 412 — 412 Accumulated deficit (27,190) (831) (28,021) Total equity 50,770 (831) 49,939 Total liabilities and equity $ 167,797 $ (3,843) $ 163,954 Condensed Consolidated Statement of Cash Flows Impact of changes in accounting policies for the six months ended June 30, 2018 As reported Adjustments Balances without adoption of ASC 606 Net loss $ (9,769) $ (56) $ (9,825) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 2,874 — 2,874 Amortization of deferred financing costs 220 — 220 Amortization of convertible notes discount 368 — 368 Paid-in-kind interest 828 — 828 Stock-based compensation 1,507 — 1,507 Provision for bad debts 96 — 96 Loss on disposal of assets 4 — 4 Deferred taxes (1,318) — (1,318) Changes in operating assets and liabilities: Accounts receivable 6,176 173 6,349 Inventories 88 29 117 Prepaid expenses and other assets (1,426) 90 (1,336) Accounts payable and accrued expenses 321 — 321 Other liabilities 183 (236) (53) Net cash provided by operating activities 152 — 152 Net cash used in investing activities (770) — (770) Net cash used in financing activities (2,683) — (2,683) Effect of exchange rate changes on cash and cash equivalents 80 — 80 Net change in cash and cash equivalents (3,221) — (3,221) Cash and cash equivalents, at beginning of period 8,250 — 8,250 Cash and cash equivalents, at end of period $ 5,029 $ — $ 5,029 Financial Accounting Standards Recently Adopted In May 2014, the Financial Accounting Standards Board (“ FASB ”) issued Accounting Standards Update (“ ASU ”) No. 2014-09, Revenue from Contracts with Customers , ASC 606. This amendment prescribes that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The amendment supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition , and most industry-specific guidance throughout the Industry Topics of the Codification. For the Company’s annual and interim reporting periods the mandatory adoption date of ASC 606 is January 1, 2018, and two methods of adoption are allowed, either a full retrospective adoption or a modified retrospective adoption. In August 2015, the FASB issued ASU No. 2015-14, which deferred the effective date of ASU No. 2014-09 to the first quarter of 2018. In March 2016, April 2016, May 2016, December 2016 and May 2017, the FASB issued ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12, ASU No. 2016-20, and ASU No. 2017-10, respectively, as clarifications to ASU No. 2014-09. ASU No. 2016-08 clarifies how to identify the unit of accounting for the principal versus agent evaluation, how to apply the control principle to certain types of arrangements, such as service transactions, and reframed the indicators in the guidance to focus on evidence that an entity is acting as a principal rather than as an agent. ASU No. 2016-10 clarifies the existing guidance on identifying performance obligations and licensing implementation. ASU No. 2016-12 adds practical expedients related to the transition for contract modifications and further defines a completed contract, clarifies the objective of the collectability assessment and how revenue is recognized if collectability is not probable, and when non-cash considerations should be measured. ASU No. 2016-20 corrects or improves guidance in 13 narrow focus aspects of the guidance. ASU No. 2017-10 clarifies that the grantor in a service concession arrangement is the operating entity’s customer for purposes of revenue recognition. The effective dates for these ASUs are the same as the effective date for ASU No. 2014-09, for the Company’s annual and interim periods beginning January 1, 2018. These ASUs also require enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows. The Company adopted the new revenue standards in the first quarter of 2018 using the modified retrospective approach. Please see above for a description of the changes. 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 adopted ASU No. 2016-15 in the first quarter of 2018 and there was no impact on the condensed consolidated financial statements. Recently Issued Financial Accounting Standards In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) , which affects the accounting for leases and in July 2018, the FASB issued ASU No. 2018-10 which amends certain guidance under Topic 842. 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 its lease obligations. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses — Measurement of Credit Losses on Financial Instruments , an accounting standards update that introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. This includes accounts receivable, trade receivables, loans, held-to-maturity debt securities, net investments in leases and certain off-balance sheet credit exposures. The guidance also modifies the impairment model for available-for-sale debt securities. The update is effective for fiscal years beginning after December 15, 2019 and interim periods within that reporting period. The Company is currently assessing the potential effects this update may have on its condensed consolidated financial statements and related disclosures. In February 2018, the FASB issued ASU No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income . ASU No. 2018-02 permits entities to reclassify tax effects stranded in accumulated other comprehensive income as a result of tax reform to retained earnings. This ASU gives entities the option to reclassify these amounts and requires new disclosures, regardless of whether they elect to do so. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption in any period is permitted. The Company is currently evaluating the impact the adoption of ASU No. 2018-02 will have on its condensed consolidated financial statements. |
Factored Accounts and Receivabl
Factored Accounts and Receivables | 6 Months Ended |
Jun. 30, 2018 | |
Factored Accounts and Receivables | |
Factored Accounts and Receivables | 3. Factored Accounts and Receivables 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 and Hudson. Following the SWIMS acquisition, SWIMS became a party to the A&R Factoring Agreement pursuant to a joinder agreement dated November 16, 2016. The A&R Factoring Agreement provides that the Company sell and assign to CIT certain domestic 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 international 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, 2018, SWIMS had outstanding financing commitments on NOK 10.9 million (approximately $1.3 million as of June 30, 2018) of its preapproved outstanding invoiced receivables pursuant to the SWIMS Factoring Agreement. Accounts receivable consists of the following (in thousands): June 30, 2018 December 31, 2017 June 30, 2017 Non-recourse receivables assigned to factor $ 14,232 $ 19,566 $ 15,814 Client recourse receivables 1,841 1,473 1,900 Total receivables assigned to factor 16,073 21,039 17,714 Allowance for customer credits (1,453) (3,597) (4,010) Total factored accounts receivable, net $ 14,620 $ 17,442 $ 13,704 Non-factored accounts receivable $ 4,513 $ 5,974 $ 4,459 Allowance for customer credits (625) (863) (997) Allowance for doubtful accounts (441) (307) (184) Total non-factored accounts receivable, net $ 3,447 $ 4,804 $ 3,278 Total accounts receivable, net $ 18,067 $ 22,246 $ 16,982 Of the total amount of receivables sold by the Company as of June 30, 2018, December 31, 2017 and June 30, 2017, the Company holds the risk of payment of approximately $1.8 million, $1.5 million and $1.9 million, respectively, in the event of non-payment by the customers. |
Inventories
Inventories | 6 Months Ended |
Jun. 30, 2018 | |
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, 2018 December 31, 2017 June 30, 2017 Finished goods $ 30,123 $ 29,721 $ 28,382 Finished goods consigned to others 773 1,524 1,419 Work in progress 106 218 595 Raw materials 328 270 227 Total inventories $ 31,330 $ 31,733 $ 30,623 |
Impairment of Long-Lived Assets
Impairment of Long-Lived Assets | 6 Months Ended |
Jun. 30, 2018 | |
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. There was no impairment charge recorded related to the retail stores during both the three and six months ended June 30, 2018 and 2017. |
Intangible Assets and Goodwill
Intangible Assets and Goodwill | 6 Months Ended |
Jun. 30, 2018 | |
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 lives of the trade names are indefinite. Intangible assets as of June 30, 2018 consisted of the following (in thousands): Amortization Gross Accumulated Net Period Amount Amortization Amount Trade names Indefinite $ 65,897 $ — $ 65,897 Customer relationships 7 to 15 Years 35,103 13,093 22,010 Non-compete agreements 3 Years 135 88 47 Total $ 101,135 $ 13,181 $ 87,954 Intangible assets as of December 31, 2017 consisted of the following (in thousands): Amortization Gross Accumulated Net Period Amount Amortization Amount Trade names Indefinite $ 65,812 $ — $ 65,812 Customer relationships 7 to 15 Years 35,081 11,629 23,452 Non-compete agreements 3 Years 133 65 68 Total $ 101,026 $ 11,694 $ 89,332 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 Amortization expense related to the intangible assets amounted to approximately $0.7 million for both the three months ended June 30, 2018 and 2017 and approximately $1.5 million for both the six months ended June 30, 2018 and 2017. As of June 30, 2018, the future amortization expense related to the finite-lived intangible assets is as follows (in thousands): 2018 Remainder of the year $ 1,495 2019 2,956 2020 2,936 2021 2,932 2022 2,932 Thereafter 8,806 $ 22,057 Goodwill consisted of the following as of June 30, 2018, December 31, 2017 and June 30, 2017 (in thousands): June 30, 2018 December 31, 2017 June 30, 2017 Beginning balance $ 8,380 $ 8,271 $ 8,271 Foreign currency adjustments 29 109 69 Ending balance $ 8,409 $ 8,380 $ 8,340 There was no impairment charge recorded related to intangible assets or goodwill during the three and six months ended June 30, 2018 and 2017. |
Contracts with Customers
Contracts with Customers | 6 Months Ended |
Jun. 30, 2018 | |
Contracts with Customers | |
Contracts with Customers | 7. Contracts with Customers The Company had contract assets and contract liabilities from customers of $1.4 million and $0.3 million, respectively, as of June 30, 2018. Upon adoption of ASC 606 as of January 1, 2018, the Company recorded contract assets and contract liabilities of $1.3 million and $0.1 million, respectively (see Note 2 – “Summary of Significant Accounting Policies” above for a further discussion on the adoption of ASC 606). Receivables from contracts with customers included in accounts receivable, net within the accompanying condensed consolidated balance sheet were $0.7 million and $0.3 million as of June 30, 2018 and January 1, 2018, respectively. The contract assets relate to the Company’s right to consideration in exchange for the Company’s completed performance under the contract and granting the right to use the intellectual property, but not billed as of the reporting date. The contract assets are transferred to accounts receivable when the rights become unconditional. Receipt of payments from customers is based on minimum guarantee schedules as established in the contracts plus royalties earned on sales exceeding the minimum guarantee. The contract liabilities relate to the advance consideration received from customers for upfront license fees for which revenue is recognized on a straight-line basis over the term of the contract. Significant changes in the contract assets and the contract liability balances during the six months ended June 30, 2018 are as follows (in thousands): Contract Assets Contract Liabilities Beginning balance at January 1, 2018 $ 1,344 $ 52 Revenue recognized from performance obligations satisfied in the current period 910 (18) Transferred to accounts receivables from contract assets recognized at the beginning of the period (757) — Contract liabilities recognized related to upfront license fees — 300 Other (63) (46) Ending balance at June 30, 2018 $ 1,434 $ 288 The Company evaluates contract assets and receivables from contracts with customers for impairment each period. There was no impairment of contract assets or receivables from contracts with customers during the three and six months ended June 30, 2018. The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of June 30, 2018 (in thousands). Revenue expected to be recognized related to variable consideration for sales-based royalty promised in exchange for a license of intellectual property is not included in the table below. License arrangements in which royalty revenue is recognized based on actual sales extend through December 2023. Revenue recognized for variable consideration under license arrangements for the three and six months ended June 30, 2018 was $0.4 million and $0.8 million, respectively. Remainder of 2018 2019 2020 2021 2022 Total Royalty license contracts with customers $ 942 1,767 1,751 1,035 283 $ 5,778 |
Debt
Debt | 6 Months Ended |
Jun. 30, 2018 | |
Debt | |
Debt | 8. Debt The payment schedule of the Company’s line of credit, long-term debt and convertible notes as of June 30, 2018 is as follows (in thousands): Payments Due by Period Deferred Original Remainder of Financing Issue Carrying 2018 2019 2020 2021 Total Costs, Net Discount, Net Value Line of credit $ 538 $ — $ 20,206 $ — $ 20,744 $ 316 $ — $ 20,428 Long-term debt 1,875 3,750 5,000 37,000 47,625 702 — 46,923 Convertible notes — — — 17,685 17,685 — 3,164 14,521 Total $ 2,413 $ 3,750 $ 25,206 $ 54,685 $ 86,054 $ 1,018 $ 3,164 $ 81,872 Line of Credit and Long-Term Debt – ABL Credit Agreement and Term Credit Agreement On January 28, 2016, 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, 2018 was $6.5 million. Borrowings under the Revolving Facility and the Term Facility totaled $20.2 million and $47.6 million as of June 30, 2018, 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 for the fiscal year beginning after January 1, 2016; (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 1.00% during the second year after the closing date of the Term Credit Agreement. 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 9.75% to 6.00% for base rate loans and 10.75% 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 entered into amendments to the ABL Credit Agreement and the Term Credit Agreement. Additionally, on March 27, 2017 and March 27, 2018, the Company entered into further amendments to these agreements to modify certain defined terms, add a liquidity covenant, revise certain other covenants and modify the applicable base and LIBOR rates. As of June 30, 2018, in connection with management’s attention and the expenses incurred related to our evaluation and entering into a Purchase Agreement with GBG and GBG USA, to purchase a significant part of GBG’s and its subsidiaries’ North American business, the Company was not in compliance with certain financial covenants included in the ABL Credit Agreement and the Term Credit Agreement. On August 13, 2018, the Company received a waiver related to its failure to comply with certain required financial covenants applicable to its second quarter obligations. For additional information, see “Part II. Other Information – Item 5. Other Information.” 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 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 the Company’s 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, 2018 (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, 2018 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 1,212 Accumulated accretion of original issue debt discount 1,509 Modified Convertible Notes value $ 14,521 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 Convertible 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 accrued interest at a rate of 3.75% per annum, compounding on the first day of each month starting August 1, 2016, and was convertible, at Tengram II’s option or on the revised maturity date of January 18, 2018, which had an original maturity date of January 18, 2017, if not already repaid in cash on or prior to that date, into newly issued shares of our Series A-1 preferred stock, par value $0.10 per share (the “ Series A-1 Preferred Stock ”), at a conversion price of $3.00 per share. On January 18, 2018, the SWIMS Convertible Note matured and automatically converted into newly issued shares of the Company’s Series A-1 Preferred Stock, at a conversion price of $3.00 per share. The outstanding balance of the Convertible Note, together with any accrued and unpaid interest thereon, converted into 4,587,964 shares of Series A-1 Preferred Stock. Upon the issuance of such shares of Series A-1 Preferred Stock by the Company to Tengram II, the Convertible Note was settled in its entirety. The Series A-1 Preferred Stock is convertible into shares of the Company’s common stock, par value $0.10 per share (the “ Common Stock ”), at an initial price of $3.00 per share (subject to adjustment), is entitled to dividends at a rate of 10% per annum payable quarterly in arrears, is senior to the common stock upon liquidation and has voting rights on an as-converted basis alongside its common stock. SWIMS Overdraft Agreement In connection with the acquisition of SWIMS, SWIMS has maintained a preexisting Overdraft Facility Agreement between SWIMS and DNB, dated January 27, 2016 (the “ SWIMS Overdraft Agreement ”). The SWIMS 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, 2018) 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 SWIMS 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 SWIMS 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 SWIMS Overdraft Agreement without any prior written notice in the event of a material breach by SWIMS. As of June 30, 2018, the outstanding balance on the facility governed by the SWIMS Overdraft Agreement was NOK 4.4 million (approximately $0.5 million). Total Interest Expense The following table is a summary of total interest expense (in thousands): Three months ended June 30, Six months ended June 30, 2018 2017 2018 2017 Contractual coupon interest $ 2,121 $ 1,939 $ 4,047 $ 3,689 Amortization of discounts and deferred financing costs 298 268 588 565 Total interest expense $ 2,419 $ 2,207 $ 4,635 $ 4,254 |
Fair Value Measurement of Finan
Fair Value Measurement of Financial Instruments | 6 Months Ended |
Jun. 30, 2018 | |
Fair Value Measurement of Financial Instruments | |
Fair Value Measurement of Financial Instruments | 9. 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. Under ASC 820 , Fair Value Measurements and Disclosures, 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 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, 2018, December 31, 2017 and June 30, 2017 (in thousands): Carrying Value Fair Value June 30, December 31, June 30, June 30, December 31, June 30, Financial Instrument Level 2018 2017 2017 2018 2017 2017 Convertible notes - short-term $ — $ 13,694 $ 13,436 $ — $ 13,694 $ 13,436 Convertible notes - long-term 14,521 13,866 13,242 11,700 11,700 11,250 $ 14,521 $ 27,560 $ 26,678 $ 11,700 $ 25,394 $ 24,686 The key assumptions for determining the fair value at June 30, 2018 included the remaining time to maturity of 3.12 years, volatility of 60%, and the risk-free interest rate of 2.04%. |
Equity
Equity | 6 Months Ended |
Jun. 30, 2018 | |
Equity | |
Equity | 10. 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 2004 Stock Incentive Plan. In September 2011, the Board of Directors adopted, and in October 2011, 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 Internal Revenue Code of 1986 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, 2018, 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) 1,133,078 shares of common stock issuable under the 2016 Stock Incentive Plan. As of June 30, 2018, 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, 2018 (in actual amounts): Amended and 2016 Stock Total Number Restated Plan Incentive Plan of Shares Outstanding at January 1, 2018 444 70,277 70,721 Granted — — — Exercised — — — Forfeited / Expired — — — Outstanding at June 30, 2018 444 70,277 70,721 The following table summarizes stock option activity for all incentive plans for the six months ended June 30, 2018 (in actual amounts): Weighted Weighted Average Aggregate Average Remaining Contractual Intrinsic Options Exercise Price Life (Years) Value Outstanding at January 1, 2018 70,721 $ 4.07 Granted — — Exercised — — Expired — — Forfeited — — Outstanding at June 30, 2018 70,721 $ 4.07 4.05 $ — Exercisable at June 30, 2018 70,721 $ 4.07 4.05 $ — 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 $0 and $7 thousand stock-based compensation expense related to stock options was recognized during the three months ended June 30, 2018 and 2017, respectively. A total of $0 and $15 thousand stock-based compensation expense related to stock options was recognized during the six months ended June 30, 2018 and 2017, respectively. As of June 30, 2018, there was no unrecognized compensation cost related to unvested stock options. The stock option awards are measured at fair value on the grant date using the Black-Scholes option valuation model. 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. The Company accounts for forfeitures as they occur. Shares of common stock will be issued when the options are exercised. Restricted Stock Units The following table summarizes RSU activity for the six months ended June 30, 2018 (in actual amounts): Restricted Stock Units Number Of Weighted Average Grant Outstanding at January 1, 2018 745,702 $ 3.68 Granted 1,023,485 1.23 Vested 891,723 1.85 Forfeited — — Outstanding at June 30, 2018 877,464 $ 2.69 A total of $0.9 million and $0.5 million of stock-based compensation expense was recognized related to RSUs during the three months ended June 30, 2018 and 2017, respectively. A total of $1.5 million and $0.9 million of stock-based compensation expense was recognized related to RSUs during the six months ended June 30, 2018 and 2017, respectively. As of June 30, 2018, there was $1.6 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 1.6 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, 2018, it is not deemed probable that the performance targets will be met, none of the shares have vested, and no expense has been recognized. 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 Company’s Series A Convertible Preferred Stock, par value $0.10 per share (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. As previously announced, if the GBG Transaction is consummated, the Tengram Stockholders have agreed to convert, in accordance with their respective terms, all of their shares of Series A Preferred Stock into shares of the Company’s common stock. Series A-1 Preferred Stock On January 18, 2018, the SWIMS Convertible Note originally issued on July 18, 2016 to Tengram II, as amended, with a principal amount of $13.0 million, matured and automatically converted into newly issued shares of Series A-1 Preferred Stock, at a conversion price of $3.00 per share. The outstanding balance of the SWIMS Convertible Note, together with any accrued and unpaid interest thereon, converted into 4,587,964 shares of Series A-1 Preferred Stock. The Series A-1 Preferred Stock is currently convertible on a one-to-one basis into shares of Common Stock. Under the form of certificate of designation for the Series A-1 Preferred Stock, each share of Series A-1 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-1 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. The Series A-1 Preferred Stock is senior to the Common Stock upon a liquidation and has as-converted voting rights alongside the Common Stock. As previously announced, if the GBG Transaction is consummated, the Tengram Stockholders have agreed to convert, in accordance with their respective terms, all of their shares of Series A-1 Preferred Stock into shares of the Company’s common stock. Warrants The Company issued warrants in conjunction with the acquisition and financing of SWIMS that are currently exercisable and 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 (the “ SWIMS Warrant ”) 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. The SWIMS Warrant expires on July 18, 2021. Also in connection with the SWIMS acquisition, the Company issued to the shareholders of SWIMS (the “ SWIMS Sellers ”) 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. The SWIMS Sellers warrants expire on July 18, 2019. |
Loss per Share
Loss per Share | 6 Months Ended |
Jun. 30, 2018 | |
Loss per Share | |
Loss per Share | 11. 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, convertible Series A-1 Preferred Stock and shares issuable upon the assumed conversion of the Modified Convertible Notes and the SWIMS Convertible Note. Loss per share for the three and six months ended June 30, 2017 has been corrected to include the effect of the preferred dividends, see “Note 2 – Summary of Significant Accounting Policies” for additional information. 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, 2018 2017 2018 2017 Basic loss per share computation Numerator: Net loss $ (5,684) $ (4,054) $ (9,769) $ (6,404) Less: preferred dividends (1,847) (1,366) (3,609) (2,717) Net loss attributable to common stockholders $ (7,531) $ (5,420) $ (13,378) $ (9,121) Denominator: Weighted average common shares outstanding 13,980 13,309 13,766 13,298 Loss per common share - basic $ (0.54) $ (0.41) $ (0.97) $ (0.69) Diluted loss per share computation Numerator: Net loss $ (5,684) $ (4,054) $ (9,769) $ (6,404) Less: preferred dividends (1,847) (1,366) (3,609) (2,717) Net loss attributable to common stockholders $ (7,531) $ (5,420) $ (13,378) $ (9,121) Denominator: Weighted average common shares outstanding 13,980 13,309 13,766 13,298 Effect of dilutive securities: Options, RSUs, PSUs, warrants, Series A, Series A-1, convertible notes — — — — Dilutive common shares 13,980 13,309 13,766 13,298 Loss per common share - diluted $ (0.54) $ (0.41) $ (0.97) $ (0.69) 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, 2018 2017 2018 2017 Outstanding stock options 71 150 71 150 Unvested RSUs 877 1,122 877 1,122 Unvested PSUs 403 458 403 458 Outstanding warrants 650 650 650 650 Convertible Series A Preferred Stock 4,480 4,480 4,480 4,480 Convertible Series A-1 Preferred Stock 4,588 — 4,588 — Modified Convertible Notes 1,268 1,227 1,268 1,227 SWIMS Convertible Note — 4,479 — 4,479 Loss per Share under Two−Class Method The Series A and Series A-1 Convertible Preferred Stock have 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, are considered participating securities. Both the Series A and Series A-1 Convertible Preferred Stock are included in the computation of basic and diluted loss per share pursuant to the two-class method. Holders of the Series A and Series A-1 Convertible 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, 2018 and 2017 (in thousands, except per share amounts): Three months ended June 30, Six months ended June 30, 2018 2017 2018 2017 Net loss $ (5,684) $ (4,054) $ (9,769) $ (6,404) Less: preferred dividends (1,847) (1,366) (3,609) (2,717) Net loss attributable to stockholders (7,531) (5,420) (13,378) (9,121) Participating securities - Series A and Series A-1 Convertible Preferred Stock — — — — Net loss attributable to common stockholders $ (7,531) $ (5,420) $ (13,378) $ (9,121) Denominator: Weighted average common shares outstanding 13,980 13,309 13,766 13,298 Loss per common share - basic and diluted under two-class method $ (0.54) $ (0.41) $ (0.97) $ (0.69) |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2018 | |
Income Taxes | |
Income Taxes | 12. 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. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “ Tax Act ”). The Tax Act establishes new tax laws that may affect the Company’s financial results, including, but not limited to: (1) a reduction of the U.S. federal corporate tax rate from 34% to 21%; (2) limitation of the deduction for interest expense; (3) a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries; (4) a new provision designed to tax global intangible low-taxed income (“ GILTI ”); (5) limitations on the deductibility of certain executive compensation; and (6) limitations on the use of Federal Tax Credit to reduce the U.S. income tax liability. The SEC staff issued Staff Accounting Bulletin 118, (“ SAB 118 ”) and the FASB issued ASU No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 , which provide guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. Effective January 1, 2018, the Tax Act creates a new requirement to include in U.S. income global intangible low-taxed income (GILTI). The FASB Staff Q&A, Topic 740, No. 5, Accounting for GILTI , states that an entity can make an accounting policy election to either (1) treat taxes due on future U.S. inclusions related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factor such amounts into a company’s measurement of its deferred taxes (the “deferred method”). The Company selected the period cost method to record the tax effects of GILTI in its financial statements. For the three and six months ended June 30, 2018, GILTI related to current-year operations only is included in the estimated annual effective tax rate. The effective tax rate from operations was a benefit of 30% for the three months ended June 30, 2018 compared to an expense of 68% for the three months ended June 30, 2017. The effective tax rate from operations was a benefit of 10% for the six months ended June 30, 2018 compared to an expense of 34% for the six months ended June 30, 2017. The difference in the effective tax rate for the three and six months ended June 30, 2018, as compared to the three and six months ended June 30, 2017, was primarily due to a change in the ratio of year-to-date losses to forecasted losses. The projected tax expense for the year predominately consists of current state and foreign tax expenses and deferred taxes associated with the Company’s foreign subsidiary and the Company’s 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 a portion of the deferred tax liabilities for long-lived intangibles, unless they can be scheduled to reverse against deferred tax assets with unlimited carryforward periods. The Company has not provided for U.S. taxes on unremitted earnings of its foreign subsidiary, as the Company does not expect to remit earnings and profits for such subsidiary to the U.S. 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, 2018, December 31, 2017 and June 30, 2017, the Company 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. 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 2013. |
Segment Reporting
Segment Reporting | 6 Months Ended |
Jun. 30, 2018 | |
Segment Reporting | |
Segment Reporting | 13. Segment Reporting The following table contains summarized financial information by reportable segment (in thousands): Three months ended June 30, Six months ended June 30, 2018 2017 2018 2017 Net sales: Wholesale $ 23,821 $ 25,374 $ 52,399 $ 56,517 Consumer Direct 11,237 10,425 20,694 18,771 Corporate and other 907 654 1,691 1,267 $ 35,965 $ 36,453 $ 74,784 $ 76,555 Gross profit: Wholesale $ 6,644 $ 8,738 $ 16,094 $ 21,555 Consumer Direct 6,929 6,827 12,896 12,000 Corporate and other 907 654 1,691 1,267 $ 14,480 $ 16,219 $ 30,681 $ 34,822 Operating expenses: Wholesale $ 2,781 $ 3,168 $ 6,366 $ 7,629 Consumer Direct 5,986 5,997 11,890 12,383 Corporate and other 11,315 7,277 18,581 15,339 $ 20,082 $ 16,442 $ 36,837 $ 35,351 Operating income (loss): Wholesale $ 3,863 $ 5,570 $ 9,728 $ 13,926 Consumer Direct 943 830 1,006 (383) Corporate and other (10,408) (6,623) (16,890) (14,072) $ (5,602) $ (223) $ (6,156) $ (529) Capital expenditures: Wholesale $ 38 $ 5 $ 156 $ 15 Consumer Direct 83 135 176 294 Corporate and other 152 141 329 228 $ 273 $ 281 $ 661 $ 537 June 30, 2018 December 31, 2017 June 30, 2017 Total assets: Wholesale $ 50,154 $ 53,958 $ 47,812 Consumer Direct 6,978 7,633 8,438 Corporate and other 110,665 112,083 112,299 $ 167,797 $ 173,674 $ 168,549 |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies | |
Commitments and Contingencies | 14. Commitments and Contingencies 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 determined an unfavorable outcome is not probable or reasonably estimable, no accrual is made. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2018 | |
Related Party Transactions | |
Related Party Transactions | 15. 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 8 – Debt.” As of June 30, 2018, the amount outstanding under the convertible note payable to Mr. Kim was $9.0 million with accrued interest of $146 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 one of the major stockholders of the Company, the noteholders party to the Rollover Agreement (including Mr. Kim and Fireman) and Michael Buckley, the Company’s 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, if demanded, 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 Convertible 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 Mr. Ross, the Company’s 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 months ended June 30, 2018 and 2017, the Company incurred expenses of $59 thousand and $39 thousand related to reimbursement of expenses, respectively. For the six months ended June 30, 2018 and 2017, the Company incurred expenses of $59 thousand and $62 thousand related to reimbursement of expenses, respectively. 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. On January 18, 2018, the SWIMS Convertible Note matured and automatically converted into newly issued shares of the Company’s Series A-1 Preferred Stock, at a conversion price of $3.00 per share. The outstanding balance of the SWIMS Convertible Note, together with any accrued and unpaid interest thereon, converted into 4,587,964 shares of Series A-1 Preferred Stock. Upon the issuance of such shares of Series A-1 Preferred Stock by the Company to Tengram II, the SWIMS Convertible Note was settled in its entirety. As previously announced, if the GBG Transaction is consummated, the Tengram Stockholders have agreed to convert, in accordance with their respective terms, all of their shares of Series A-1 Preferred Stock into shares of the Company’s common stock. |
Summary of Significant Accoun22
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies | |
Correction of an Immaterial Error | Correction of an Immaterial Error During the 2017 year end close, the Company determined that basic and diluted Earnings per Share (“ EPS ”) had been incorrectly stated in the prior period financial statements. Historically, cumulative preferred dividends for the period were not included in the Company’s calculation of EPS. However, in accordance with Accounting Standards Codification (“ ASC ”) 260, Earnings per Share , income available to common stockholders is to be computed by deducting the dividends accumulated for the period on cumulative preferred stock. The Company’s Series A Convertible Preferred Stock entitles the holder to receive cumulative dividends when, as and if declared by the Board of Directors, payable at an annual rate of 10% through the date on which the liquidation preference is paid to the holder in connection with the liquidation of the Company or the date on which such Series A Convertible Preferred Stock is otherwise re-acquired by the Company. The amount of the cumulative dividend accrued on the Series A Convertible Preferred Stock has been disclosed previously in the Company’s filings. The Company has corrected the calculation of basic and diluted EPS to include the accrued cumulative preferred dividends for the period. Management evaluated the materiality of the error from a quantitative and qualitative perspective and concluded that this adjustment was not material to the Company’s presentation and disclosures, and has no impact on the Company’s financial position, results of operations and cash flows. Accordingly, no amendments to previously filed reports are required. However, the Company has elected to revise the historical condensed consolidated financial information presented herein to reflect the correction of this error for the prior periods presented and to conform to the current period presentation. As a result of this correction, for the three months ended June 30, 2017, basic and diluted loss per common share was corrected from a loss of $0.30 per share to a loss of $0.41 per share and for the six months ended June 30, 2017, basic and diluted loss per common share was corrected from a loss of $0.48 per share to a loss of $0.69 per share. As previously announced, if the GBG Transaction is consummated, the Tengram Stockholders have agreed to convert, in accordance with their respective terms, all of their shares of Series A Convertible Preferred Stock and Series A-1 Convertible Preferred Stock into shares of the Company’s common stock, which comprise all of such preferred stock that is currently issued and outstanding. |
Revenue Recognition | Revenue Recognition The Company adopted ASC 606, Revenue from Contracts with Customers , with a date of initial application of January 1, 2018. As a result, the Company has changed its accounting policy for revenue recognition as described below. The Company applied ASC 606 using the modified retrospective approach – i.e. by recognizing the cumulative effect of initially applying ASC 606 as an adjustment to the opening balance of equity at January 1, 2018. Therefore, the comparative information has not been adjusted and continues to be reported under ASC 605. The details of the significant changes and quantitative impact of the changes are set out below. The Company applied the modified retrospective approach only to contracts that were not complete as of the date of the initial application, January 1, 2018. Effective January 1, 2018, wholesale revenues are recorded when a contract with the customer is agreed to by both parties and product has been transferred, which occurs at the point of shipment from the Company’s warehouse, and recorded at the transaction price based on the amount the Company expects to receive. Collection is probable as the majority of shipments occur to reputable credit worthy businesses and through factored relationships which guarantee payment. Estimated reductions to revenue for customer allowances are recorded based upon history as a percentage of sales and current outstanding chargebacks. The Company may allow for returns based upon pre-approval or in the case of damaged goods. Such returns are estimated based on historical experience and also specific claims filed by the customer. Beginning January 1, 2018, a refund liability is included in accounts payable and accrued expenses within the accompanying condensed consolidated balance sheet, which was previously recorded net of accounts receivable. Also, effective January 1, 2018, the Company records a return asset receivable in prepaid expenses and other current assets within the accompanying condensed consolidated balance sheet. Prior to January 1, 2018, inventory expected to be returned was recorded within inventories. The return asset receivable is evaluated for impairment each period. The Company recorded a decrease of $569 thousand to opening accumulated deficit as of January 1, 2018 to record the return asset receivable and related impairment charge. Retail store revenue is recognized at the time the customer takes possession of the related merchandise. Ecommerce sales of products ordered through the Company’s retail internet sites known as www.hudsonjeans.com , www.robertgraham.us and www.swims.com are recognized at the point of shipment to the customer. Prior to January 1, 2018, revenue for ecommerce sales was recorded at the point of delivery to the customer. The Company recorded an adjustment to opening accumulated deficit as of January 1, 2018, an increase of $39 thousand, to reflect the change in accounting policy. Ecommerce revenue is reduced by an estimate for returns based on the historical rate of return as a percent of sales. Retail store revenue and ecommerce revenue exclude sales taxes. Revenue from licensing arrangements is recognized based on actual sales when the Company expects royalties to exceed the minimum guarantee. For licensing arrangements in which the Company does not expect royalties to exceed the minimum guarantee, an estimate of the transaction price is recognized on a straight-line basis over the term of the contract. A contract asset is recorded for revenue recognized in advance of the contract payment terms, which is included in other assets within the accompanying condensed consolidated balance sheet. Nonrefundable upfront fees are recorded as a contract liability and revenue is recognized straight-line over the term of the contract. Contract liabilities are included in other liabilities within the accompanying condensed consolidated balance sheet. Prior to January 1, 2018, revenue from licensing arrangements was recognized when earned in accordance with the terms of the underlying agreements and deemed collectible, generally based upon the higher of (a) the contractually guaranteed minimum royalty or (b) actual net sales data received from licensees. The Company recorded an adjustment to opening accumulated deficit as of January 1, 2018, an increase of $1.3 million, to reflect the change in accounting policy. Amounts related to shipping and handling that are billed to customers are considered to be activities to fulfill a promise to transfer the goods and are reflected in net sales, and the related costs are reflected in cost of goods sold within the accompanying condensed consolidated statements of operations and comprehensive income (loss). This accounting policy is consistent with the Company’s treatment of shipping and handling revenue prior to January 1, 2018. The following tables summarize the impact of adopting ASC 606 on the Company’s condensed consolidated balance sheet as of January 1, 2018: Impact of changes in accounting policies Balances with adoption of ASC 606 Adjustments Balances without adoption of ASC 606 Accounts receivable, net $ 24,398 $ 2,152 $ 22,246 Inventories 31,389 (344) 31,733 Prepaid expenses and other current assets 5,584 752 4,832 Other assets 1,828 1,344 484 Accounts payable and accrued expenses 25,281 3,077 22,204 Other liabilities 3,606 52 3,554 Accumulated deficit (17,421) 775 (18,196) The following tables summarize the impact of adopting ASC 606 on the Company’s condensed consolidated financial statements as of and for the three and six months ended June 30, 2018: Condensed Consolidated Statement of Operations Impact of changes in accounting policies for the three months ended June 30, 2018 for the six months ended June 30, 2018 As reported Adjustments Balances without adoption of ASC 606 As reported Adjustments Balances without adoption of ASC 606 Net sales $ 35,965 $ (161) $ 35,804 $ 74,784 $ (180) $ 74,604 Cost of goods sold 21,485 (50) 21,435 44,103 (124) 43,979 Gross profit 14,480 (111) 14,369 30,681 (56) 30,625 Operating expenses Selling, general and administrative 18,670 — 18,670 33,963 — 33,963 Depreciation and amortization 1,412 — 1,412 2,874 — 2,874 Total operating expenses 20,082 — 20,082 36,837 — 36,837 Operating loss (5,602) (111) (5,713) (6,156) (56) (6,212) Interest expense 2,419 — 2,419 4,635 — 4,635 Other expense (income), net 103 — 103 102 — 102 Loss before income taxes (8,124) (111) (8,235) (56) Income tax (benefit) provision (2,440) — (2,440) (1,124) — (1,124) Net loss $ (5,684) $ (111) $ (5,795) $ (9,769) $ (56) $ (9,825) Condensed Consolidated Balance Sheet Impact of changes in accounting policies as of June 30, 2018 As reported Adjustments Balances without adoption of ASC 606 Cash and cash equivalents $ 5,029 $ — $ 5,029 Accounts receivable, net 18,067 (2,126) 15,941 Inventories 31,330 389 31,719 Prepaid expenses and other current assets 7,111 (672) 6,439 Property and equipment, net 7,690 — 7,690 Goodwill 8,409 — 8,409 Intangible assets, net 87,954 — 87,954 Other assets 2,207 (1,434) 773 Total assets $ 167,797 $ (3,843) $ 163,954 Accounts payable and accrued expenses $ 26,010 $ (2,724) $ 23,286 Short-term convertible note — — — Current portion of long-term debt 3,750 — 3,750 Line of credit 20,428 — 20,428 Convertible notes 14,521 — 14,521 Long-term debt, net of current portion 43,173 — 43,173 Deferred income taxes, net 5,355 — 5,355 Other liabilities 3,790 (288) 3,502 Total liabilities 117,027 (3,012) 114,015 Series A convertible preferred stock 5 — 5 Series A-1 convertible preferred stock 459 — 459 Common stock 1,408 — 1,408 Additional paid-in capital 75,676 — 75,676 Accumulated other comprehensive income (loss) 412 — 412 Accumulated deficit (27,190) (831) (28,021) Total equity 50,770 (831) 49,939 Total liabilities and equity $ 167,797 $ (3,843) $ 163,954 Condensed Consolidated Statement of Cash Flows Impact of changes in accounting policies for the six months ended June 30, 2018 As reported Adjustments Balances without adoption of ASC 606 Net loss $ (9,769) $ (56) $ (9,825) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 2,874 — 2,874 Amortization of deferred financing costs 220 — 220 Amortization of convertible notes discount 368 — 368 Paid-in-kind interest 828 — 828 Stock-based compensation 1,507 — 1,507 Provision for bad debts 96 — 96 Loss on disposal of assets 4 — 4 Deferred taxes (1,318) — (1,318) Changes in operating assets and liabilities: Accounts receivable 6,176 173 6,349 Inventories 88 29 117 Prepaid expenses and other assets (1,426) 90 (1,336) Accounts payable and accrued expenses 321 — 321 Other liabilities 183 (236) (53) Net cash provided by operating activities 152 — 152 Net cash used in investing activities (770) — (770) Net cash used in financing activities (2,683) — (2,683) Effect of exchange rate changes on cash and cash equivalents 80 — 80 Net change in cash and cash equivalents (3,221) — (3,221) Cash and cash equivalents, at beginning of period 8,250 — 8,250 Cash and cash equivalents, at end of period $ 5,029 $ — $ 5,029 |
Financial Accounting Standards Recently Adopted and Recently Issued Financial Accounting Standards | Financial Accounting Standards Recently Adopted In May 2014, the Financial Accounting Standards Board (“ FASB ”) issued Accounting Standards Update (“ ASU ”) No. 2014-09, Revenue from Contracts with Customers , ASC 606. This amendment prescribes that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The amendment supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition , and most industry-specific guidance throughout the Industry Topics of the Codification. For the Company’s annual and interim reporting periods the mandatory adoption date of ASC 606 is January 1, 2018, and two methods of adoption are allowed, either a full retrospective adoption or a modified retrospective adoption. In August 2015, the FASB issued ASU No. 2015-14, which deferred the effective date of ASU No. 2014-09 to the first quarter of 2018. In March 2016, April 2016, May 2016, December 2016 and May 2017, the FASB issued ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12, ASU No. 2016-20, and ASU No. 2017-10, respectively, as clarifications to ASU No. 2014-09. ASU No. 2016-08 clarifies how to identify the unit of accounting for the principal versus agent evaluation, how to apply the control principle to certain types of arrangements, such as service transactions, and reframed the indicators in the guidance to focus on evidence that an entity is acting as a principal rather than as an agent. ASU No. 2016-10 clarifies the existing guidance on identifying performance obligations and licensing implementation. ASU No. 2016-12 adds practical expedients related to the transition for contract modifications and further defines a completed contract, clarifies the objective of the collectability assessment and how revenue is recognized if collectability is not probable, and when non-cash considerations should be measured. ASU No. 2016-20 corrects or improves guidance in 13 narrow focus aspects of the guidance. ASU No. 2017-10 clarifies that the grantor in a service concession arrangement is the operating entity’s customer for purposes of revenue recognition. The effective dates for these ASUs are the same as the effective date for ASU No. 2014-09, for the Company’s annual and interim periods beginning January 1, 2018. These ASUs also require enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows. The Company adopted the new revenue standards in the first quarter of 2018 using the modified retrospective approach. Please see above for a description of the changes. 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 adopted ASU No. 2016-15 in the first quarter of 2018 and there was no impact on the condensed consolidated financial statements. Recently Issued Financial Accounting Standards In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) , which affects the accounting for leases and in July 2018, the FASB issued ASU No. 2018-10 which amends certain guidance under Topic 842. 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 its lease obligations. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses — Measurement of Credit Losses on Financial Instruments , an accounting standards update that introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. This includes accounts receivable, trade receivables, loans, held-to-maturity debt securities, net investments in leases and certain off-balance sheet credit exposures. The guidance also modifies the impairment model for available-for-sale debt securities. The update is effective for fiscal years beginning after December 15, 2019 and interim periods within that reporting period. The Company is currently assessing the potential effects this update may have on its condensed consolidated financial statements and related disclosures. In February 2018, the FASB issued ASU No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income . ASU No. 2018-02 permits entities to reclassify tax effects stranded in accumulated other comprehensive income as a result of tax reform to retained earnings. This ASU gives entities the option to reclassify these amounts and requires new disclosures, regardless of whether they elect to do so. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption in any period is permitted. The Company is currently evaluating the impact the adoption of ASU No. 2018-02 will have on its condensed consolidated financial statements. |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies | |
Summarize the impact of adopting ASC 606 on the Company’s condensed consolidated financial statements | The following tables summarize the impact of adopting ASC 606 on the Company’s condensed consolidated balance sheet as of January 1, 2018: Impact of changes in accounting policies Balances with adoption of ASC 606 Adjustments Balances without adoption of ASC 606 Accounts receivable, net $ 24,398 $ 2,152 $ 22,246 Inventories 31,389 (344) 31,733 Prepaid expenses and other current assets 5,584 752 4,832 Other assets 1,828 1,344 484 Accounts payable and accrued expenses 25,281 3,077 22,204 Other liabilities 3,606 52 3,554 Accumulated deficit (17,421) 775 (18,196) The following tables summarize the impact of adopting ASC 606 on the Company’s condensed consolidated financial statements as of and for the three and six months ended June 30, 2018: Condensed Consolidated Statement of Operations Impact of changes in accounting policies for the three months ended June 30, 2018 for the six months ended June 30, 2018 As reported Adjustments Balances without adoption of ASC 606 As reported Adjustments Balances without adoption of ASC 606 Net sales $ 35,965 $ (161) $ 35,804 $ 74,784 $ (180) $ 74,604 Cost of goods sold 21,485 (50) 21,435 44,103 (124) 43,979 Gross profit 14,480 (111) 14,369 30,681 (56) 30,625 Operating expenses Selling, general and administrative 18,670 — 18,670 33,963 — 33,963 Depreciation and amortization 1,412 — 1,412 2,874 — 2,874 Total operating expenses 20,082 — 20,082 36,837 — 36,837 Operating loss (5,602) (111) (5,713) (6,156) (56) (6,212) Interest expense 2,419 — 2,419 4,635 — 4,635 Other expense (income), net 103 — 103 102 — 102 Loss before income taxes (8,124) (111) (8,235) (56) Income tax (benefit) provision (2,440) — (2,440) (1,124) — (1,124) Net loss $ (5,684) $ (111) $ (5,795) $ (9,769) $ (56) $ (9,825) Condensed Consolidated Balance Sheet Impact of changes in accounting policies as of June 30, 2018 As reported Adjustments Balances without adoption of ASC 606 Cash and cash equivalents $ 5,029 $ — $ 5,029 Accounts receivable, net 18,067 (2,126) 15,941 Inventories 31,330 389 31,719 Prepaid expenses and other current assets 7,111 (672) 6,439 Property and equipment, net 7,690 — 7,690 Goodwill 8,409 — 8,409 Intangible assets, net 87,954 — 87,954 Other assets 2,207 (1,434) 773 Total assets $ 167,797 $ (3,843) $ 163,954 Accounts payable and accrued expenses $ 26,010 $ (2,724) $ 23,286 Short-term convertible note — — — Current portion of long-term debt 3,750 — 3,750 Line of credit 20,428 — 20,428 Convertible notes 14,521 — 14,521 Long-term debt, net of current portion 43,173 — 43,173 Deferred income taxes, net 5,355 — 5,355 Other liabilities 3,790 (288) 3,502 Total liabilities 117,027 (3,012) 114,015 Series A convertible preferred stock 5 — 5 Series A-1 convertible preferred stock 459 — 459 Common stock 1,408 — 1,408 Additional paid-in capital 75,676 — 75,676 Accumulated other comprehensive income (loss) 412 — 412 Accumulated deficit (27,190) (831) (28,021) Total equity 50,770 (831) 49,939 Total liabilities and equity $ 167,797 $ (3,843) $ 163,954 Condensed Consolidated Statement of Cash Flows Impact of changes in accounting policies for the six months ended June 30, 2018 As reported Adjustments Balances without adoption of ASC 606 Net loss $ (9,769) $ (56) $ (9,825) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 2,874 — 2,874 Amortization of deferred financing costs 220 — 220 Amortization of convertible notes discount 368 — 368 Paid-in-kind interest 828 — 828 Stock-based compensation 1,507 — 1,507 Provision for bad debts 96 — 96 Loss on disposal of assets 4 — 4 Deferred taxes (1,318) — (1,318) Changes in operating assets and liabilities: Accounts receivable 6,176 173 6,349 Inventories 88 29 117 Prepaid expenses and other assets (1,426) 90 (1,336) Accounts payable and accrued expenses 321 — 321 Other liabilities 183 (236) (53) Net cash provided by operating activities 152 — 152 Net cash used in investing activities (770) — (770) Net cash used in financing activities (2,683) — (2,683) Effect of exchange rate changes on cash and cash equivalents 80 — 80 Net change in cash and cash equivalents (3,221) — (3,221) Cash and cash equivalents, at beginning of period 8,250 — 8,250 Cash and cash equivalents, at end of period $ 5,029 $ — $ 5,029 |
Factored Accounts and Receiva24
Factored Accounts and Receivables (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Factored Accounts and Receivables | |
Schedule of factored accounts and receivables | Accounts receivable consists of the following (in thousands): June 30, 2018 December 31, 2017 June 30, 2017 Non-recourse receivables assigned to factor $ 14,232 $ 19,566 $ 15,814 Client recourse receivables 1,841 1,473 1,900 Total receivables assigned to factor 16,073 21,039 17,714 Allowance for customer credits (1,453) (3,597) (4,010) Total factored accounts receivable, net $ 14,620 $ 17,442 $ 13,704 Non-factored accounts receivable $ 4,513 $ 5,974 $ 4,459 Allowance for customer credits (625) (863) (997) Allowance for doubtful accounts (441) (307) (184) Total non-factored accounts receivable, net $ 3,447 $ 4,804 $ 3,278 Total accounts receivable, net $ 18,067 $ 22,246 $ 16,982 |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
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, 2018 December 31, 2017 June 30, 2017 Finished goods $ 30,123 $ 29,721 $ 28,382 Finished goods consigned to others 773 1,524 1,419 Work in progress 106 218 595 Raw materials 328 270 227 Total inventories $ 31,330 $ 31,733 $ 30,623 |
Intangible Assets and Goodwill
Intangible Assets and Goodwill (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Intangible Assets and Goodwill | |
Schedule of intangible assets | Intangible assets as of June 30, 2018 consisted of the following (in thousands): Amortization Gross Accumulated Net Period Amount Amortization Amount Trade names Indefinite $ 65,897 $ — $ 65,897 Customer relationships 7 to 15 Years 35,103 13,093 22,010 Non-compete agreements 3 Years 135 88 47 Total $ 101,135 $ 13,181 $ 87,954 Intangible assets as of December 31, 2017 consisted of the following (in thousands): Amortization Gross Accumulated Net Period Amount Amortization Amount Trade names Indefinite $ 65,812 $ — $ 65,812 Customer relationships 7 to 15 Years 35,081 11,629 23,452 Non-compete agreements 3 Years 133 65 68 Total $ 101,026 $ 11,694 $ 89,332 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 |
Schedule of future amortization expense related to finite-lived intangible assets | As of June 30, 2018, the future amortization expense related to the finite-lived intangible assets is as follows (in thousands): 2018 Remainder of the year $ 1,495 2019 2,956 2020 2,936 2021 2,932 2022 2,932 Thereafter 8,806 $ 22,057 |
Schedule of goodwill | Goodwill consisted of the following as of June 30, 2018, December 31, 2017 and June 30, 2017 (in thousands): June 30, 2018 December 31, 2017 June 30, 2017 Beginning balance $ 8,380 $ 8,271 $ 8,271 Foreign currency adjustments 29 109 69 Ending balance $ 8,409 $ 8,380 $ 8,340 |
Contracts with Customers (Table
Contracts with Customers (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Contracts with Customers | |
Summary of significant changes in the contract assets and the contract liability balances | Significant changes in the contract assets and the contract liability balances during the six months ended June 30, 2018 are as follows (in thousands): Contract Assets Contract Liabilities Beginning balance at January 1, 2018 $ 1,344 $ 52 Revenue recognized from performance obligations satisfied in the current period 910 (18) Transferred to accounts receivables from contract assets recognized at the beginning of the period (757) — Contract liabilities recognized related to upfront license fees — 300 Other (63) (46) Ending balance at June 30, 2018 $ 1,434 $ 288 |
Summary of royalty license contracts with customers | Remainder of 2018 2019 2020 2021 2022 Total Royalty license contracts with customers $ 942 1,767 1,751 1,035 283 $ 5,778 |
Debt (Tables)
Debt (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Debt | |
Schedule of five year payment of term debt and line of credit and modified convertible notes | The payment schedule of the Company’s line of credit, long-term debt and convertible notes as of June 30, 2018 is as follows (in thousands): Payments Due by Period Deferred Original Remainder of Financing Issue Carrying 2018 2019 2020 2021 Total Costs, Net Discount, Net Value Line of credit $ 538 $ — $ 20,206 $ — $ 20,744 $ 316 $ — $ 20,428 Long-term debt 1,875 3,750 5,000 37,000 47,625 702 — 46,923 Convertible notes — — — 17,685 17,685 — 3,164 14,521 Total $ 2,413 $ 3,750 $ 25,206 $ 54,685 $ 86,054 $ 1,018 $ 3,164 $ 81,872 |
Schedule of summary of recorded value of convertible debt | June 30, 2018 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 1,212 Accumulated accretion of original issue debt discount 1,509 Modified Convertible Notes value $ 14,521 |
Schedule of interest expense | The following table is a summary of total interest expense (in thousands): Three months ended June 30, Six months ended June 30, 2018 2017 2018 2017 Contractual coupon interest $ 2,121 $ 1,939 $ 4,047 $ 3,689 Amortization of discounts and deferred financing costs 298 268 588 565 Total interest expense $ 2,419 $ 2,207 $ 4,635 $ 4,254 |
Fair Value Measurement of Fin29
Fair Value Measurement of Financial Instruments (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Fair Value Measurement of Financial Instruments | |
Schedule of fair value hierarchy for liabilities measured at fair value on a non-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, 2018, December 31, 2017 and June 30, 2017 (in thousands): Carrying Value Fair Value June 30, December 31, June 30, June 30, December 31, June 30, Financial Instrument Level 2018 2017 2017 2018 2017 2017 Convertible notes - short-term $ — $ 13,694 $ 13,436 $ — $ 13,694 $ 13,436 Convertible notes - long-term 14,521 13,866 13,242 11,700 11,700 11,250 $ 14,521 $ 27,560 $ 26,678 $ 11,700 $ 25,394 $ 24,686 |
Equity (Tables)
Equity (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
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, 2018 (in actual amounts): Amended and 2016 Stock Total Number Restated Plan Incentive Plan of Shares Outstanding at January 1, 2018 444 70,277 70,721 Granted — — — Exercised — — — Forfeited / Expired — — — Outstanding at June 30, 2018 444 70,277 70,721 |
Schedule of stock option activity in the aggregate | The following table summarizes stock option activity for all incentive plans for the six months ended June 30, 2018 (in actual amounts): Weighted Weighted Average Aggregate Average Remaining Contractual Intrinsic Options Exercise Price Life (Years) Value Outstanding at January 1, 2018 70,721 $ 4.07 Granted — — Exercised — — Expired — — Forfeited — — Outstanding at June 30, 2018 70,721 $ 4.07 4.05 $ — Exercisable at June 30, 2018 70,721 $ 4.07 4.05 $ — |
Summary of the status of restricted common stock and RSUs and changes | The following table summarizes RSU activity for the six months ended June 30, 2018 (in actual amounts): Restricted Stock Units Number Of Weighted Average Grant Outstanding at January 1, 2018 745,702 $ 3.68 Granted 1,023,485 1.23 Vested 891,723 1.85 Forfeited — — Outstanding at June 30, 2018 877,464 $ 2.69 |
Loss per Share (Tables)
Loss per Share (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Loss per Share | |
Schedule of reconciliation of numerator and denominator of basic and diluted (loss) earnings per share | 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, 2018 2017 2018 2017 Basic loss per share computation Numerator: Net loss $ (5,684) $ (4,054) $ (9,769) $ (6,404) Less: preferred dividends (1,847) (1,366) (3,609) (2,717) Net loss attributable to common stockholders $ (7,531) $ (5,420) $ (13,378) $ (9,121) Denominator: Weighted average common shares outstanding 13,980 13,309 13,766 13,298 Loss per common share - basic $ (0.54) $ (0.41) $ (0.97) $ (0.69) Diluted loss per share computation Numerator: Net loss $ (5,684) $ (4,054) $ (9,769) $ (6,404) Less: preferred dividends (1,847) (1,366) (3,609) (2,717) Net loss attributable to common stockholders $ (7,531) $ (5,420) $ (13,378) $ (9,121) Denominator: Weighted average common shares outstanding 13,980 13,309 13,766 13,298 Effect of dilutive securities: Options, RSUs, PSUs, warrants, Series A, Series A-1, convertible notes — — — — Dilutive common shares 13,980 13,309 13,766 13,298 Loss per common share - diluted $ (0.54) $ (0.41) $ (0.97) $ (0.69) |
Schedule of potential shares of common stock | 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, 2018 2017 2018 2017 Outstanding stock options 71 150 71 150 Unvested RSUs 877 1,122 877 1,122 Unvested PSUs 403 458 403 458 Outstanding warrants 650 650 650 650 Convertible Series A Preferred Stock 4,480 4,480 4,480 4,480 Convertible Series A-1 Preferred Stock 4,588 — 4,588 — Modified Convertible Notes 1,268 1,227 1,268 1,227 SWIMS Convertible Note — 4,479 — 4,479 |
Schedule of reconciliation of basic and diluted (loss) earnings per share, two class method | 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, 2018 and 2017 (in thousands, except per share amounts): Three months ended June 30, Six months ended June 30, 2018 2017 2018 2017 Net loss $ (5,684) $ (4,054) $ (9,769) $ (6,404) Less: preferred dividends (1,847) (1,366) (3,609) (2,717) Net loss attributable to stockholders (7,531) (5,420) (13,378) (9,121) Participating securities - Series A and Series A-1 Convertible Preferred Stock — — — — Net loss attributable to common stockholders $ (7,531) $ (5,420) $ (13,378) $ (9,121) Denominator: Weighted average common shares outstanding 13,980 13,309 13,766 13,298 Loss per common share - basic and diluted under two-class method $ (0.54) $ (0.41) $ (0.97) $ (0.69) |
Segment Reporting (Tables)
Segment Reporting (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Segment Reporting | |
Summary of financial information concerning reportable segments | The following table contains summarized financial information by reportable segment (in thousands): Three months ended June 30, Six months ended June 30, 2018 2017 2018 2017 Net sales: Wholesale $ 23,821 $ 25,374 $ 52,399 $ 56,517 Consumer Direct 11,237 10,425 20,694 18,771 Corporate and other 907 654 1,691 1,267 $ 35,965 $ 36,453 $ 74,784 $ 76,555 Gross profit: Wholesale $ 6,644 $ 8,738 $ 16,094 $ 21,555 Consumer Direct 6,929 6,827 12,896 12,000 Corporate and other 907 654 1,691 1,267 $ 14,480 $ 16,219 $ 30,681 $ 34,822 Operating expenses: Wholesale $ 2,781 $ 3,168 $ 6,366 $ 7,629 Consumer Direct 5,986 5,997 11,890 12,383 Corporate and other 11,315 7,277 18,581 15,339 $ 20,082 $ 16,442 $ 36,837 $ 35,351 Operating income (loss): Wholesale $ 3,863 $ 5,570 $ 9,728 $ 13,926 Consumer Direct 943 830 1,006 (383) Corporate and other (10,408) (6,623) (16,890) (14,072) $ (5,602) $ (223) $ (6,156) $ (529) Capital expenditures: Wholesale $ 38 $ 5 $ 156 $ 15 Consumer Direct 83 135 176 294 Corporate and other 152 141 329 228 $ 273 $ 281 $ 661 $ 537 June 30, 2018 December 31, 2017 June 30, 2017 Total assets: Wholesale $ 50,154 $ 53,958 $ 47,812 Consumer Direct 6,978 7,633 8,438 Corporate and other 110,665 112,083 112,299 $ 167,797 $ 173,674 $ 168,549 |
Business Description and Basi33
Business Description and Basis of Presentation (Details) shares in Millions, $ in Millions | Jun. 27, 2018USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2018USD ($)segmentshares |
Number of reportable business segments | segment | 3 | ||
Global Brands Group Holding Limited (“GBG”) | |||
Purchase price | $ 1,380 | ||
Acquisition related costs | $ 4.6 | $ 4.6 | |
Prepaid expenses and other current assets | 0.5 | 0.5 | |
Accounts payable and accrued expenses | 5.1 | $ 5.1 | |
Number of shares of common stock issuable | shares | 60 | ||
Value of issuable common stock | 175 | $ 175 | |
Termination fee | 2.5 | 2.5 | |
Termination fee required to pay by breaching party | $ 5 | 5 | |
Global Brands Group Holding Limited (“GBG”) | Debt Commitment Letters | |||
Equity capital in the form of cash investments | $ 150 |
Summary of Significant Accoun34
Summary of Significant Accounting Policies - (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | |||||||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jan. 01, 2018 | Dec. 31, 2017 | Jun. 30, 2017 | Dec. 31, 2016 | |
Earnings Per Share, Basic and Diluted [Abstract] | |||||||||
Dividend rate (as a percent) | 10.00% | ||||||||
Basic and Diluted Loss per Common Share | $ (0.54) | $ (0.41) | $ (0.97) | $ (0.69) | |||||
Change in accounting estimate | |||||||||
Net sales | $ 35,965 | $ 36,453 | $ 74,784 | $ 76,555 | |||||
Cost of Goods Sold. | 21,485 | 20,234 | 44,103 | 41,733 | |||||
Gross profit | 14,480 | 16,219 | 30,681 | 34,822 | |||||
Operating expenses | |||||||||
Selling, general and administrative | 18,670 | 14,915 | 33,963 | 32,319 | |||||
Depreciation and amortization | 1,412 | 1,527 | 2,874 | 3,032 | |||||
Total operating expenses | 20,082 | 16,442 | 36,837 | 35,351 | |||||
Operating loss | (5,602) | (223) | (6,156) | (529) | |||||
Interest expense | 2,419 | 2,207 | 4,635 | 4,254 | |||||
Other expense (income), net | 103 | (12) | 102 | 11 | |||||
Loss before income taxes | (8,124) | (2,418) | (10,893) | (4,794) | |||||
Income tax (benefit) provision | (2,440) | 1,636 | (1,124) | 1,610 | |||||
Net loss | (5,684) | (4,054) | (9,769) | (6,404) | |||||
Cash and cash equivalents | 5,029 | 6,305 | 8,250 | 6,476 | $ 5,029 | $ 8,250 | $ 6,305 | $ 6,476 | |
Accounts receivable, net | 18,067 | 22,246 | 16,982 | ||||||
Inventories | 31,330 | 31,733 | 30,623 | ||||||
Prepaid expenses and other current assets | 7,111 | 4,832 | 5,465 | ||||||
Property and equipment, net | 7,690 | 8,417 | 9,651 | ||||||
Goodwill | 8,409 | 8,380 | 8,340 | 8,271 | |||||
Intangible assets, net | 87,954 | 89,332 | 90,669 | ||||||
Other assets | 2,207 | 484 | 514 | ||||||
Total assets | 167,797 | 173,674 | 168,549 | ||||||
Accounts payable and accrued expenses | 26,010 | 22,204 | 20,206 | ||||||
Short-term convertible note | 13,694 | 13,436 | |||||||
Current portion of long-term debt | 3,750 | 2,813 | 1,875 | ||||||
Line of credit | 20,428 | 21,254 | 17,492 | ||||||
Convertible notes | 14,521 | 13,866 | 13,242 | ||||||
Long-term debt, net of current portion | 43,173 | 44,896 | 45,991 | ||||||
Deferred income taxes, net | 5,355 | 6,650 | 13,416 | ||||||
Total liabilities | 117,027 | 128,931 | 129,267 | ||||||
Common stock | 1,408 | 1,349 | 1,332 | ||||||
Additional paid-in capital | 75,676 | 61,314 | 59,962 | ||||||
Accumulated other comprehensive income (loss) | 412 | 271 | 125 | ||||||
Accumulated deficit | (27,190) | (18,196) | (22,142) | ||||||
Total equity | 50,770 | 44,743 | 39,282 | 44,524 | |||||
Total liabilities and equity | 167,797 | 173,674 | 168,549 | ||||||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||
Net loss | (5,684) | (4,054) | (9,769) | (6,404) | |||||
Depreciation and amortization | 1,412 | 1,527 | 2,874 | 3,032 | |||||
Amortization of deferred financing costs | 220 | 215 | |||||||
Amortization of convertible notes discount | 368 | 350 | |||||||
Paid-in-kind interest | 828 | 770 | |||||||
Stock-based compensation | 1,507 | 900 | |||||||
Provision for bad debts | 96 | 194 | |||||||
Loss on disposal of assets | 4 | ||||||||
Deferred taxes | (1,318) | 2,289 | |||||||
Changes in operating assets and liabilities: | |||||||||
Accounts receivable | 6,176 | 3,081 | |||||||
Inventories | 88 | (6,591) | |||||||
Prepaid expenses and other assets | (1,426) | (1,253) | |||||||
Accounts payable and accrued expenses | 321 | 2,220 | |||||||
Other liabilities | 183 | (20) | |||||||
Net cash provided by (used in) operating activities | 152 | (1,217) | |||||||
Net cash used in investing activities | (770) | (594) | |||||||
Net cash (used in) provided by financing activities | (2,683) | 1,643 | |||||||
Effect of exchange rate changes on cash and cash equivalents | 80 | (3) | |||||||
Net change in cash and cash equivalents | (3,221) | (171) | |||||||
CASH AND CASH EQUIVALENTS, at beginning of period | 8,250 | 6,476 | |||||||
CASH AND CASH EQUIVALENTS, at end of period | 5,029 | 6,305 | 5,029 | 6,305 | |||||
Wholesale | |||||||||
Change in accounting estimate | |||||||||
Net sales | 23,821 | 25,374 | 52,399 | 56,517 | |||||
Gross profit | 6,644 | 8,738 | 16,094 | 21,555 | |||||
Operating expenses | |||||||||
Total operating expenses | 2,781 | 3,168 | 6,366 | 7,629 | |||||
Operating loss | 3,863 | $ 5,570 | 9,728 | $ 13,926 | |||||
Total assets | 50,154 | 53,958 | 47,812 | ||||||
Accumulated deficit | $ (569) | ||||||||
Retail | |||||||||
Operating expenses | |||||||||
Accumulated deficit | 39 | ||||||||
Licensing | |||||||||
Operating expenses | |||||||||
Accumulated deficit | 1,300 | ||||||||
Preferred Series A | |||||||||
Operating expenses | |||||||||
Total equity | 5 | 5 | $ 5 | $ 5 | |||||
ASU 2014-09 | |||||||||
Operating expenses | |||||||||
Selling, general and administrative | 18,670 | 33,963 | |||||||
Depreciation and amortization | 1,412 | 2,874 | |||||||
Total operating expenses | 20,082 | 36,837 | |||||||
Operating loss | (5,602) | (6,156) | |||||||
Interest expense | (2,419) | (4,635) | |||||||
Other expense (income), net | 103 | 102 | |||||||
Loss before income taxes | 8,124 | 10,893 | |||||||
Income tax (benefit) provision | (2,440) | (1,124) | |||||||
Net loss | (5,684) | (9,769) | |||||||
Cash and cash equivalents | 5,029 | 8,250 | 5,029 | 8,250 | |||||
Accounts receivable, net | 18,067 | 24,398 | |||||||
Inventories | 31,330 | 31,389 | |||||||
Prepaid expenses and other current assets | 7,111 | 5,584 | |||||||
Property and equipment, net | 7,690 | ||||||||
Goodwill | 8,409 | ||||||||
Intangible assets, net | 87,954 | ||||||||
Other assets | 2,207 | 1,828 | |||||||
Total assets | 167,797 | ||||||||
Accounts payable and accrued expenses | 26,010 | 25,281 | |||||||
Current portion of long-term debt | 3,750 | ||||||||
Line of credit | 20,428 | ||||||||
Convertible notes | 14,521 | ||||||||
Long-term debt, net of current portion | 43,173 | ||||||||
Deferred income taxes, net | 5,355 | ||||||||
Other liabilities | 3,790 | 3,606 | |||||||
Total liabilities | 117,027 | ||||||||
Common stock | 1,408 | ||||||||
Additional paid-in capital | 75,676 | ||||||||
Accumulated other comprehensive income (loss) | 412 | ||||||||
Accumulated deficit | (27,190) | (17,421) | |||||||
Total equity | 50,770 | ||||||||
Total liabilities and equity | 167,797 | ||||||||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||
Net loss | (9,769) | ||||||||
Depreciation and amortization | 1,412 | 2,874 | |||||||
Amortization of deferred financing costs | 220 | ||||||||
Amortization of convertible notes discount | 368 | ||||||||
Paid-in-kind interest | 828 | ||||||||
Stock-based compensation | 1,507 | ||||||||
Provision for bad debts | (96) | ||||||||
Loss on disposal of assets | 4 | ||||||||
Deferred taxes | (1,318) | ||||||||
Changes in operating assets and liabilities: | |||||||||
Accounts receivable | 6,176 | ||||||||
Inventories | 88 | ||||||||
Prepaid expenses and other assets | (1,426) | ||||||||
Accounts payable and accrued expenses | 321 | ||||||||
Other liabilities | 183 | ||||||||
Net cash provided by (used in) operating activities | 152 | ||||||||
Net cash used in investing activities | (770) | ||||||||
Net cash (used in) provided by financing activities | (2,683) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | 80 | ||||||||
Net change in cash and cash equivalents | (3,221) | ||||||||
CASH AND CASH EQUIVALENTS, at beginning of period | 8,250 | ||||||||
CASH AND CASH EQUIVALENTS, at end of period | 5,029 | 5,029 | |||||||
ASU 2014-09 | Preferred Series A | |||||||||
Operating expenses | |||||||||
Convertible preferred stock | 5 | ||||||||
ASU 2014-09 | Series A-1 preferred stock | |||||||||
Operating expenses | |||||||||
Convertible preferred stock | 459 | ||||||||
Adjustments | ASU 2014-09 | |||||||||
Operating expenses | |||||||||
Operating loss | (111) | (56) | |||||||
Loss before income taxes | 111 | 56 | |||||||
Net loss | (111) | (56) | |||||||
Accounts receivable, net | (2,126) | 2,152 | |||||||
Inventories | 389 | (344) | |||||||
Prepaid expenses and other current assets | (672) | 752 | |||||||
Other assets | (1,434) | 1,344 | |||||||
Total assets | (3,843) | ||||||||
Accounts payable and accrued expenses | (2,724) | 3,077 | |||||||
Other liabilities | (288) | 52 | |||||||
Total liabilities | (3,012) | ||||||||
Accumulated deficit | (831) | 775 | |||||||
Total equity | (831) | ||||||||
Total liabilities and equity | (3,843) | ||||||||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||
Net loss | (56) | ||||||||
Changes in operating assets and liabilities: | |||||||||
Accounts receivable | 173 | ||||||||
Inventories | 29 | ||||||||
Prepaid expenses and other assets | 90 | ||||||||
Other liabilities | (236) | ||||||||
Balances without adoption of ASC 606 | ASU 2014-09 | |||||||||
Operating expenses | |||||||||
Selling, general and administrative | 18,670 | 33,963 | |||||||
Depreciation and amortization | 1,412 | 2,874 | |||||||
Total operating expenses | 20,082 | 36,837 | |||||||
Operating loss | (5,713) | (6,212) | |||||||
Interest expense | (2,419) | (4,635) | |||||||
Other expense (income), net | 103 | 102 | |||||||
Loss before income taxes | 8,235 | 10,949 | |||||||
Income tax (benefit) provision | (2,440) | (1,124) | |||||||
Net loss | (5,795) | (9,825) | |||||||
Cash and cash equivalents | 5,029 | 8,250 | 5,029 | $ 8,250 | |||||
Accounts receivable, net | 15,941 | 22,246 | |||||||
Inventories | 31,719 | 31,733 | |||||||
Prepaid expenses and other current assets | 6,439 | 4,832 | |||||||
Property and equipment, net | 7,690 | ||||||||
Goodwill | 8,409 | ||||||||
Intangible assets, net | 87,954 | ||||||||
Other assets | 773 | 484 | |||||||
Total assets | 163,954 | ||||||||
Accounts payable and accrued expenses | 23,286 | 22,204 | |||||||
Current portion of long-term debt | 3,750 | ||||||||
Line of credit | 20,428 | ||||||||
Convertible notes | 14,521 | ||||||||
Long-term debt, net of current portion | 43,173 | ||||||||
Deferred income taxes, net | 5,355 | ||||||||
Other liabilities | 3,502 | 3,554 | |||||||
Total liabilities | 114,015 | ||||||||
Common stock | 1,408 | ||||||||
Additional paid-in capital | 75,676 | ||||||||
Accumulated other comprehensive income (loss) | 412 | ||||||||
Accumulated deficit | (28,021) | $ (18,196) | |||||||
Total equity | 49,939 | ||||||||
Total liabilities and equity | 163,954 | ||||||||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||
Net loss | (9,825) | ||||||||
Depreciation and amortization | 1,412 | 2,874 | |||||||
Amortization of deferred financing costs | 220 | ||||||||
Amortization of convertible notes discount | 368 | ||||||||
Paid-in-kind interest | 828 | ||||||||
Stock-based compensation | 1,507 | ||||||||
Provision for bad debts | (96) | ||||||||
Loss on disposal of assets | 4 | ||||||||
Deferred taxes | (1,318) | ||||||||
Changes in operating assets and liabilities: | |||||||||
Accounts receivable | 6,349 | ||||||||
Inventories | 117 | ||||||||
Prepaid expenses and other assets | (1,336) | ||||||||
Accounts payable and accrued expenses | 321 | ||||||||
Other liabilities | (53) | ||||||||
Net cash provided by (used in) operating activities | 152 | ||||||||
Net cash used in investing activities | (770) | ||||||||
Net cash (used in) provided by financing activities | (2,683) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | 80 | ||||||||
Net change in cash and cash equivalents | (3,221) | ||||||||
CASH AND CASH EQUIVALENTS, at beginning of period | 8,250 | ||||||||
CASH AND CASH EQUIVALENTS, at end of period | 5,029 | 5,029 | |||||||
Balances without adoption of ASC 606 | ASU 2014-09 | Preferred Series A | |||||||||
Operating expenses | |||||||||
Convertible preferred stock | 5 | ||||||||
Balances without adoption of ASC 606 | ASU 2014-09 | Series A-1 preferred stock | |||||||||
Operating expenses | |||||||||
Convertible preferred stock | $ 459 | ||||||||
As Previously Reported | |||||||||
Earnings Per Share, Basic and Diluted [Abstract] | |||||||||
Basic and Diluted Loss per Common Share | $ 0.30 | $ 0.48 | |||||||
Product | |||||||||
Change in accounting estimate | |||||||||
Net sales | 35,965 | $ 36,453 | 74,784 | $ 76,555 | |||||
Product | ASU 2014-09 | |||||||||
Change in accounting estimate | |||||||||
Net sales | 35,965 | 74,784 | |||||||
Cost of Goods Sold. | 21,485 | 44,103 | |||||||
Gross profit | 14,480 | 30,681 | |||||||
Product | Adjustments | ASU 2014-09 | |||||||||
Change in accounting estimate | |||||||||
Net sales | (161) | (180) | |||||||
Cost of Goods Sold. | (50) | (124) | |||||||
Gross profit | (111) | (56) | |||||||
Product | Balances without adoption of ASC 606 | ASU 2014-09 | |||||||||
Change in accounting estimate | |||||||||
Net sales | 35,804 | 74,604 | |||||||
Cost of Goods Sold. | 21,435 | 43,979 | |||||||
Gross profit | $ 14,369 | $ 30,625 |
Factored Accounts and Receiva35
Factored Accounts and Receivables (Details) $ in Thousands, kr in Millions | 1 Months Ended | 6 Months Ended | |||
Jan. 31, 2016 | Jun. 30, 2018NOK (kr) | Jun. 30, 2018USD ($) | Dec. 31, 2017USD ($) | Jun. 30, 2017USD ($) | |
Accounts receivable, inventory advances and due from factor | |||||
Non-recourse receivables assigned to factor | $ 14,232 | $ 19,566 | $ 15,814 | ||
Client recourse receivables | 1,841 | 1,473 | 1,900 | ||
Total receivables assigned to factor | 16,073 | 21,039 | 17,714 | ||
Allowance for customer credits | (1,453) | (3,597) | (4,010) | ||
Total factored accounts receivable, net | 14,620 | 17,442 | 13,704 | ||
Non-factored accounts receivable | 4,513 | 5,974 | 4,459 | ||
Allowance for customer credits | (625) | (863) | (997) | ||
Allowance for doubtful accounts | (441) | (307) | (184) | ||
Total non-factored accounts receivable, net | 3,447 | 4,804 | 3,278 | ||
Total accounts receivable, net | 18,067 | 22,246 | 16,982 | ||
Risk of payment in the event of non-payment by the customers | 1,800 | $ 1,500 | $ 1,900 | ||
AandR 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 | ||||
Factoring Agreement | DNB Bank | |||||
Accounts receivable, inventory advances and due from factor | |||||
Required notice period for termination of the agreement by factor | 14 days | ||||
Number of days notice required for termination of agreement | 14 days | ||||
DFBG Swims | Factoring Agreement | |||||
Accounts receivable, inventory advances and due from factor | |||||
Required notice period for termination of the agreement by factor | 14 days | ||||
Number of days notice required for termination of agreement | 14 days | ||||
DFBG Swims | Factoring Agreement | DNB Bank | |||||
Accounts receivable, inventory advances and due from factor | |||||
Amount outstanding | kr 10.9 | $ 1,300 | |||
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 | kr | kr 10 | ||||
DFBG Swims | Factoring Agreement | DNB Bank | Inventory Lien | Maximum | |||||
Accounts receivable, inventory advances and due from factor | |||||
Collateral amount | kr | 10 | ||||
DFBG Swims | Factoring Agreement | DNB Bank | Factoring, First Lien | |||||
Accounts receivable, inventory advances and due from factor | |||||
Collateral amount | kr | 1 | ||||
DFBG Swims | Factoring Agreement | DNB Bank | Factoring, Second Lien | |||||
Accounts receivable, inventory advances and due from factor | |||||
Collateral amount | kr | 4 | ||||
DFBG Swims | Factoring Agreement | DNB Bank | Factoring, Third Lien | |||||
Accounts receivable, inventory advances and due from factor | |||||
Collateral amount | kr | 7 | ||||
DFBG Swims | Factoring Agreement | DNB Bank | Factoring, Fourth Lien | |||||
Accounts receivable, inventory advances and due from factor | |||||
Collateral amount | kr | kr 2.5 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 | Jun. 30, 2017 |
Inventories | |||
Finished goods | $ 30,123 | $ 29,721 | $ 28,382 |
Finished goods consigned to others | 773 | 1,524 | 1,419 |
Work in progress | 106 | 218 | 595 |
Raw materials | 328 | 270 | 227 |
Total inventories | $ 31,330 | $ 31,733 | $ 30,623 |
Impairment of Long-Lived Asse37
Impairment of Long-Lived Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Impairment of Long-Lived Assets | ||||
Impairment charges | $ 0 | $ 0 | $ 0 | $ 0 |
Intangible Assets and Goodwil38
Intangible Assets and Goodwill - Intangibles (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Intangible assets | |||||
Intangible assets, Gross Amount | $ 101,135 | $ 100,869 | $ 101,135 | $ 100,869 | $ 101,026 |
Finite-lived intangible assets, Accumulated Amortization | 13,181 | 10,200 | 13,181 | 10,200 | 11,694 |
Finite-lived intangible assets, Net Amount | 22,057 | 22,057 | |||
Intangible assets, Net Amount | 87,954 | 90,669 | 87,954 | 90,669 | 89,332 |
Amortization expense related to the intangible assets | 700 | 700 | 1,500 | 1,500 | |
Future amortization expense related to finite-lived intangibles | |||||
2018 Remainder of the year | 1,495 | 1,495 | |||
2,019 | 2,956 | 2,956 | |||
2,020 | 2,936 | 2,936 | |||
2,021 | 2,932 | 2,932 | |||
2,022 | 2,932 | 2,932 | |||
Thereafter | 8,806 | 8,806 | |||
Total | 22,057 | 22,057 | |||
Trade names | |||||
Intangible assets | |||||
Intangible assets, Gross Amount | 65,897 | 65,688 | 65,897 | 65,688 | 65,812 |
Indefinite-lived intangible assets, Amount | 65,897 | 65,688 | 65,897 | 65,688 | 65,812 |
Customer relationships | |||||
Intangible assets | |||||
Finite-lived intangible assets, Gross Amount | 35,103 | 35,050 | 35,103 | 35,050 | 35,081 |
Finite-lived intangible assets, Accumulated Amortization | 13,093 | 10,158 | 13,093 | 10,158 | 11,629 |
Finite-lived intangible assets, Net Amount | 22,010 | 24,892 | 22,010 | 24,892 | 23,452 |
Future amortization expense related to finite-lived intangibles | |||||
Total | 22,010 | 24,892 | $ 22,010 | $ 24,892 | $ 23,452 |
Non-compete agreements | |||||
Intangible assets | |||||
Amortization period | 3 years | 3 years | 3 years | ||
Finite-lived intangible assets, Gross Amount | 135 | 131 | $ 135 | $ 131 | $ 133 |
Finite-lived intangible assets, Accumulated Amortization | 88 | 42 | 88 | 42 | 65 |
Finite-lived intangible assets, Net Amount | 47 | 89 | 47 | 89 | 68 |
Future amortization expense related to finite-lived intangibles | |||||
Total | $ 47 | $ 89 | $ 47 | $ 89 | $ 68 |
Minimum | Customer relationships | |||||
Intangible assets | |||||
Amortization period | 7 years | 7 years | 7 years | ||
Maximum | Customer relationships | |||||
Intangible assets | |||||
Amortization period | 15 years | 15 years | 15 years |
Intangible Assets and Goodwil39
Intangible Assets and Goodwill - Goodwill (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Goodwill | |||||
Goodwill, Beginning Balance | $ 8,380 | $ 8,271 | $ 8,271 | ||
Foreign currency adjustments | 29 | 69 | 109 | ||
Goodwill, Ending Balance | $ 8,409 | $ 8,340 | 8,409 | 8,340 | $ 8,380 |
Impairment charge | $ 0 | $ 0 | $ 0 | $ 0 |
Contracts with Customers (Detai
Contracts with Customers (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2018 | Jun. 30, 2018 | Jan. 01, 2018 | |
Contract assets from customers | $ 1,434 | $ 1,344 | $ 1,434 | $ 1,300 |
Contract liabilities from customers | 288 | 52 | 288 | 100 |
Significant changes in the contract assets balances | ||||
Beginning balance | 1,344 | |||
Revenue recognized from performance obligations satisfied in the current period | 910 | |||
Transferred to accounts receivables from contract assets recognized at the beginning of the period | (757) | |||
Other | (63) | |||
Ending balance | 1,434 | 1,434 | ||
Significant changes in the contract liability balances | ||||
Beginning balance | 52 | |||
Revenue recognized from performance obligations satisfied in the current period | (18) | |||
Contract liabilities recognized related to upfront license fees | 300 | |||
Other | (46) | |||
Ending balance | 288 | 288 | ||
Impairment of contract assets or receivables from contracts with customers | 0 | |||
Revenue recognized for variable consideration under license arrangements | $ 400 | $ 800 | ||
Royalty license contracts with customers | ||||
Remainder of 2018 | 942 | |||
2,019 | 1,767 | |||
2,020 | 1,751 | |||
2,021 | 1,035 | |||
2,022 | 283 | |||
Total | 5,778 | |||
Accounts receivable | ||||
Receivables from contracts with customers | $ 700 | $ 300 |
Debt (Details)
Debt (Details) $ / shares in Units, $ in Thousands, kr in Millions | Jan. 18, 2018USD ($)$ / sharesshares | Jan. 28, 2016USD ($)itemshares | Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($)$ / shares | Jun. 30, 2018NOK (kr) | Jun. 30, 2018USD ($)$ / shares | Dec. 31, 2017USD ($)$ / shares | Oct. 01, 2016 | Jul. 18, 2016 |
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Remainder of 2018 | $ 2,413 | ||||||||
2,019 | 3,750 | ||||||||
2,020 | 25,206 | ||||||||
2,021 | 54,685 | ||||||||
Total | 86,054 | ||||||||
Deferred Financing Costs, Net | 1,018 | ||||||||
Original Issue Discount, Net | 3,164 | ||||||||
Carrying Value | 81,872 | ||||||||
Dividend rate (as a percent) | 10.00% | ||||||||
Aggregate original issue discount | $ 4,700 | ||||||||
Long-term Debt, Gross | $ 86,054 | ||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.10 | $ 0.10 | $ 0.10 | ||||||
Recorded value of the convertible note | |||||||||
Less: Original issue discount | $ (3,164) | ||||||||
Total | 86,054 | ||||||||
Accumulated accretion of original issue debt discount | $ 368 | $ 350 | |||||||
Modified Convertible Notes value | 13,242 | 14,521 | $ 13,866 | ||||||
Short-term convertible note | $ 13,436 | $ 13,694 | |||||||
Series A-1 preferred stock | Tengram Capital Partners, LP | Common Stock | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.10 | ||||||||
Line of credit | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Remainder of 2018 | 538 | ||||||||
2,020 | 20,206 | ||||||||
Total | 20,744 | ||||||||
Deferred Financing Costs, Net | 316 | ||||||||
Carrying Value | 20,428 | ||||||||
Long-term Debt, Gross | 20,744 | ||||||||
Recorded value of the convertible note | |||||||||
Total | 20,744 | ||||||||
Term Loan Credit Agreement | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Remainder of 2018 | 1,875 | ||||||||
2,019 | 3,750 | ||||||||
2,020 | 5,000 | ||||||||
2,021 | 37,000 | ||||||||
Total | 47,625 | ||||||||
Deferred Financing Costs, Net | 702 | ||||||||
Carrying Value | 46,923 | ||||||||
Long-term Debt, Gross | 47,625 | ||||||||
Recorded value of the convertible note | |||||||||
Total | 47,625 | ||||||||
Convertible notes | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
2,021 | 17,685 | ||||||||
Total | 17,685 | ||||||||
Original Issue Discount, Net | 3,164 | ||||||||
Carrying Value | 14,521 | ||||||||
Long-term Debt, Gross | 17,685 | ||||||||
Recorded value of the convertible note | |||||||||
Less: Original issue discount | (3,164) | ||||||||
Total | 17,685 | ||||||||
Revolving Facility | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Carrying Value | 20,200 | ||||||||
Aggregate principal amount | 40,000 | ||||||||
Aggregate principal amount, incremental commitments | $ 10,000 | ||||||||
Availability | 6,500 | ||||||||
Commitment fee (as a percent) | 0.25% | ||||||||
Revolving Facility | Base Rate | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Margin on variable rate basis (as a percent) | 0.50% | ||||||||
Revolving Facility | LIBOR rate loans | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Margin on variable rate basis (as a percent) | 1.75% | ||||||||
Term Facility | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Carrying Value | 47,600 | ||||||||
Aggregate principal amount | $ 50,000 | ||||||||
Aggregate principal amount, incremental commitments | $ 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 second year (as a percent) | 1.00% | ||||||||
Term Facility | Minimum | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Prepayment exception amounts (as a percent) | 0.00% | ||||||||
Term Facility | Maximum | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Prepayment exception amounts (as a percent) | 50.00% | ||||||||
Term Facility | Base Rate | Minimum | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Margin on variable rate basis (as a percent) | 6.00% | ||||||||
Term Facility | Base Rate | Maximum | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Margin on variable rate basis (as a percent) | 9.75% | ||||||||
Term Facility | LIBOR rate loans | Minimum | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Margin on variable rate basis (as a percent) | 7.00% | ||||||||
Term Facility | LIBOR rate loans | Maximum | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Margin on variable rate basis (as a percent) | 10.75% | ||||||||
Modified Convertible Notes | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
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% | ||||||||
Long-term Debt, Gross | 11,800 | ||||||||
Recorded value of the convertible note | |||||||||
Face value | 16,473 | ||||||||
Less: Original issue discount | (4,673) | ||||||||
Total | 11,800 | ||||||||
PIK interest issued | 1,212 | ||||||||
Accumulated accretion of original issue debt discount | $ 1,509 | ||||||||
Modified Convertible Notes value | 14,521 | ||||||||
Modified Convertible Notes | Conversion of Convertible Notes into Common Stock | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
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 2018 | Tengram Capital Partners, LP | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Annual rate on outstanding principal amount (as a percent) | 3.75% | ||||||||
Convertible Notes Due January 2018 | Series A-1 preferred stock | Tengram Capital Partners, LP | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Dividend rate (as a percent) | 10.00% | ||||||||
Number of shares issuable upon conversion of the debt | shares | 4,587,964 | ||||||||
Conversion price (in dollars per share) | $ / shares | $ 3 | ||||||||
Preferred Stock, par value (in dollars per share) | $ / shares | $ 0.10 | ||||||||
Recorded value of the convertible note | |||||||||
Face value | $ 13,000 | ||||||||
Convertible Notes Due January 2018 | Series A-1 preferred stock | SWIMS | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Number of shares issuable upon conversion of the debt | shares | 4,587,964 | ||||||||
Conversion price (in dollars per share) | $ / shares | $ 3 | ||||||||
Overdraft Agreement | SWIMS | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Outstanding balance | kr 4.4 | $ 500 |
Debt - Overdraft and Factoring
Debt - Overdraft and Factoring Agreement (Details) kr in Millions, $ in Millions | 6 Months Ended | ||||
Jun. 30, 2018NOK (kr) | Jun. 30, 2018USD ($) | Jan. 27, 2016NOK (kr) | Jan. 27, 2016USD ($) | Jan. 26, 2016NOK (kr) | |
Factoring Agreement | DNB Bank | |||||
Line of Credit Facility [Line Items] | |||||
Number of days notice required for termination of agreement | 14 days | ||||
Required notice period for termination of the agreement by factor | 14 days | ||||
DFBG Swims | Overdraft Agreement | DNB Bank | Maximum | |||||
Line of Credit Facility [Line Items] | |||||
Maximum borrowing capacity | kr 6 | $ 0.7 | |||
DFBG Swims | Overdraft Agreement | Machinery and Plant Lien | DNB Bank | Maximum | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | 10 | ||||
DFBG Swims | Overdraft Agreement | Inventory Lien | DNB Bank | Maximum | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | 10 | ||||
DFBG Swims | Overdraft Agreement | Factoring, First Lien | DNB Bank | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | 1 | ||||
DFBG Swims | Overdraft Agreement | Factoring, Second Lien | DNB Bank | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | 4 | ||||
DFBG Swims | Overdraft Agreement | Factoring, Third Lien | DNB Bank | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | 7 | ||||
DFBG Swims | Overdraft Agreement | Factoring, Fourth Lien | DNB Bank | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | kr 2.5 | ||||
DFBG Swims | Ordinary Credit | DNB Bank | |||||
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% | |||
DFBG Swims | Ordinary Credit | DNB Bank | Maximum | |||||
Line of Credit Facility [Line Items] | |||||
Maximum borrowing capacity | kr 3.5 | ||||
DFBG Swims | Additional Credit | DNB Bank | |||||
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% | |||
DFBG Swims | Additional Credit | DNB Bank | Maximum | |||||
Line of Credit Facility [Line Items] | |||||
Maximum borrowing capacity | kr 2.5 | ||||
DFBG Swims | Factoring Agreement | |||||
Line of Credit Facility [Line Items] | |||||
Number of days notice required for termination of agreement | 14 days | ||||
Required notice period for termination of the agreement by factor | 14 days | ||||
DFBG Swims | Factoring Agreement | DNB Bank | |||||
Line of Credit Facility [Line Items] | |||||
Amount outstanding | kr 10.9 | $ 1.3 | |||
DFBG Swims | Factoring Agreement | DNB Bank | Maximum | |||||
Line of Credit Facility [Line Items] | |||||
Financing Percentage on preapproved outstanding invoiced receivables | 80.00% | 80.00% | |||
DFBG Swims | Factoring Agreement | Machinery and Plant Lien | DNB Bank | Maximum | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | kr 10 | ||||
DFBG Swims | Factoring Agreement | Inventory Lien | DNB Bank | Maximum | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | 10 | ||||
DFBG Swims | Factoring Agreement | Factoring, First Lien | DNB Bank | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | 1 | ||||
DFBG Swims | Factoring Agreement | Factoring, Second Lien | DNB Bank | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | 4 | ||||
DFBG Swims | Factoring Agreement | Factoring, Third Lien | DNB Bank | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | 7 | ||||
DFBG Swims | Factoring Agreement | Factoring, Fourth Lien | DNB Bank | |||||
Line of Credit Facility [Line Items] | |||||
Collateral amount | kr 2.5 |
Debt - Interest Expense (Detail
Debt - Interest Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Components of interest expense | ||||
Contractual coupon interest | $ 2,121 | $ 1,939 | $ 4,047 | $ 3,689 |
Amortization of discounts and deferred financing costs | 298 | 268 | 588 | 565 |
Total interest expense | $ 2,419 | $ 2,207 | $ 4,635 | $ 4,254 |
Fair Value Measurement of Fin44
Fair Value Measurement of Financial Instruments (Details) - USD ($) $ in Thousands | 6 Months Ended | ||
Jun. 30, 2018 | Dec. 31, 2017 | Jun. 30, 2017 | |
Fair value disclosures | |||
Convertible notes - short term | $ 13,694 | $ 13,436 | |
Convertible notes - long-term | $ 14,521 | 13,866 | 13,242 |
Nonrecurring | Carrying Value | |||
Fair value disclosures | |||
Loan payable | 14,521 | 27,560 | 26,678 |
Nonrecurring | Fair Value | |||
Fair value disclosures | |||
Loan payable | 11,700 | 25,394 | 24,686 |
Nonrecurring | Level 3 | Carrying Value | |||
Fair value disclosures | |||
Convertible notes - short term | 13,694 | 13,436 | |
Convertible notes - long-term | 14,521 | 13,866 | 13,242 |
Nonrecurring | Level 3 | Fair Value | |||
Fair value disclosures | |||
Convertible notes - short term | 13,694 | 13,436 | |
Convertible notes - long-term | $ 11,700 | $ 11,700 | $ 11,250 |
Fair value assumptions | |||
Time to maturity (in years) | 3 years 1 month 13 days | ||
Volatility rate (as a percent) | 60.00% | ||
Risk-free interest rate (as a percent) | 2.04% |
Equity - Incentive Plan (Detail
Equity - Incentive Plan (Details) - shares | Jun. 30, 2018 | Nov. 07, 2016 |
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 | 1,133,078 | |
Amended And Restated Plan | ||
Shares Reserved For Future Issuance | ||
Shares of common stock issuable | 444 | |
Number of shares available for issuance | 0 |
Equity - Plan Activity (Details
Equity - Plan Activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Options Outstanding and Exercisable | ||||
Exercise Price (in dollars per share) | $ 4.07 | $ 4.07 | ||
Stock option activity | ||||
Outstanding at the beginning of the period (in shares) | 70,721 | |||
Outstanding at the end of the year (in shares) | 70,721 | 70,721 | ||
Exercisable at the end of the period (in shares) | 70,721 | 70,721 | ||
Weighted average exercise price | ||||
Outstanding at the beginning of the period (in dollars per share) | $ 4.07 | |||
Outstanding at the end of the period (in dollars per share) | $ 4.07 | 4.07 | ||
Exercisable at the end of the period (in dollars per share) | $ 4.07 | $ 4.07 | ||
Additional Disclosures | ||||
Outstanding at the end of the period, Weighted Average Remaining Contractual Life (Years) | 4 years 18 days | |||
Exercisable at the end of the period, Weighted Average Remaining Contractual Life (Years) | 4 years 18 days | |||
Stock options | ||||
Unrecognized compensation cost | ||||
Stock based compensation expense recognized | $ 0 | $ 7 | $ 0 | $ 15 |
Total unrecognized compensation cost | $ 0 | $ 0 | ||
Amended And Restated Plan | ||||
Stock option activity | ||||
Outstanding at the beginning of the period (in shares) | 444 | |||
Outstanding at the end of the year (in shares) | 444 | 444 | ||
2016 Plan | ||||
Stock option activity | ||||
Outstanding at the beginning of the period (in shares) | 70,277 | |||
Outstanding at the end of the year (in shares) | 70,277 | 70,277 |
Equity - Restricted Stock Units
Equity - Restricted Stock Units (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2016 | |
RSUs | |||||
Restricted Stock Units | |||||
Outstanding at the beginning of the period (in shares) | 745,702 | ||||
Granted (in shares) | 1,023,485 | ||||
Vested (in shares) | 891,723 | ||||
Outstanding at the end of the period (in shares) | 877,464 | 877,464 | |||
Weighted-Average Grant-Date Fair Value | |||||
Outstanding at the beginning of the period (in dollars per share) | $ 3.68 | ||||
Granted (in dollars per share) | 1.23 | ||||
Vested (in dollars per share) | 1.85 | ||||
Outstanding at the end of the period (in dollars per share) | $ 2.69 | $ 2.69 | |||
Unrecognized compensation cost | |||||
Weighted-average period for recognition of unrecognized compensation cost | 1 year 7 months 6 days | ||||
Stock based compensation expense recognized | $ 0.9 | $ 0.5 | $ 1.5 | $ 0.9 | |
Total unrecognized compensation | $ 1.6 | 1.6 | |||
PSUs | |||||
Restricted Stock Units | |||||
Granted (in shares) | 513,678 | ||||
Unrecognized compensation cost | |||||
Vesting period (in years) | 3 years | ||||
Stock based compensation expense recognized | $ 0 | ||||
If less than 80 percent of performance target is reached | 0.00% |
Equity - Preferred Stock (Detai
Equity - Preferred Stock (Details) $ / shares in Units, $ in Millions | Jan. 18, 2018USD ($)$ / sharesshares | Jan. 28, 2016USD ($)item$ / sharesshares | Jun. 30, 2018$ / shares | Dec. 31, 2017$ / shares | Jun. 30, 2017$ / shares |
Dividend rate (as a percent) | 10.00% | ||||
Common stock, par value (in dollars per share) | $ 0.10 | $ 0.10 | $ 0.10 | ||
TCP Denim, LLC | Preferred Series A | |||||
Shares issued (in shares) | shares | 50,000 | ||||
Aggregate amount | $ | $ 50 | ||||
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) | $ 11.16 | ||||
Preferred Stock, par value (in dollars per share) | $ 0.10 | ||||
Convertible Notes Due January 2018 | Tengram Capital Partners, LP | Series A-1 preferred stock | |||||
Convertible notes face value | $ | $ 13 | ||||
Dividend rate (as a percent) | 10.00% | ||||
Conversion price (in dollars per share) | $ 3 | ||||
Number of shares issuable upon conversion of the debt | shares | 4,587,964 | ||||
Conversion ratio | 1 | ||||
Preferred Stock, par value (in dollars per share) | $ 0.10 | ||||
SWIMS | Convertible Notes Due January 2018 | Series A-1 preferred stock | |||||
Conversion price (in dollars per share) | $ 3 | ||||
Number of shares issuable upon conversion of the debt | shares | 4,587,964 | ||||
Common Stock | Tengram Capital Partners, LP | Series A-1 preferred stock | |||||
Common stock, par value (in dollars per share) | $ 0.10 |
Equity - Warrants (Details)
Equity - Warrants (Details) - Warrants - SWIMS $ / shares in Units, $ in Thousands | Jul. 18, 2016USD ($)$ / sharesshares |
Class of Warrant or Right [Line Items] | |
Shares of common stock | shares | 150,000 |
Fair value of warrants issued | $ | $ 45 |
Exercise price (in dollars per share) | $ / shares | $ 5.47 |
Fair value assumptions | |
Time to maturity (in years) | 3 years |
Volatility rate (as a percent) | 45.00% |
Dividend rate | 0.00% |
Risk-free interest rate (as a percent) | 0.85% |
Discount rate | 10.00% |
Restriction period | 6 months |
Tengram Capital Partners, LP | |
Class of Warrant or Right [Line Items] | |
Shares of common stock | shares | 500,000 |
Fair value of warrants issued | $ | $ 465 |
Exercise price (in dollars per share) | $ / shares | $ 3 |
Fair value assumptions | |
Time to maturity (in years) | 5 years |
Volatility rate (as a percent) | 50.00% |
Dividend rate | 0.00% |
Risk-free interest rate (as a percent) | 1.14% |
Discount rate | 20.00% |
Restriction period | 6 months |
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, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Numerator: | ||||
Net loss | $ (5,684) | $ (4,054) | $ (9,769) | $ (6,404) |
Less: preferred dividends | (1,847) | (1,366) | (3,609) | (2,717) |
Net loss attributable to common stockholders | $ (7,531) | $ (5,420) | $ (13,378) | $ (9,121) |
Denominator: | ||||
Weighted average common shares outstanding (in shares) | 13,980 | 13,309 | 13,766 | 13,298 |
Loss per common share - basic (in dollars per share) | $ (0.54) | $ (0.41) | $ (0.97) | $ (0.69) |
Numerator: | ||||
Net loss | $ (5,684) | $ (4,054) | $ (9,769) | $ (6,404) |
Less: preferred dividends | (1,847) | (1,366) | (3,609) | (2,717) |
Net loss attributable to common stockholders | $ (7,531) | $ (5,420) | $ (13,378) | $ (9,121) |
Denominator: | ||||
Weighted average common shares outstanding (in shares) | 13,980 | 13,309 | 13,766 | 13,298 |
Dilutive common shares | 13,980 | 13,309 | 13,766 | 13,298 |
Loss per common share - diluted (in dollars per share) | $ (0.54) | $ (0.41) | $ (0.97) | $ (0.69) |
Modified Convertible Notes | ||||
Denominator: | ||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 1,268 | 1,227 | 1,268 | 1,227 |
Convertible Notes Due January 2018 | ||||
Denominator: | ||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 4,479 | 4,479 | ||
Preferred Series A | ||||
Denominator: | ||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 4,480 | 4,480 | 4,480 | 4,480 |
Series A-1 | ||||
Denominator: | ||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 4,588 | 4,588 | ||
Warrants | ||||
Denominator: | ||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 650 | 650 | 650 | 650 |
Stock options | ||||
Denominator: | ||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 71 | 150 | 71 | 150 |
RSUs | ||||
Denominator: | ||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 877 | 1,122 | 877 | 1,122 |
PSUs | ||||
Denominator: | ||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 403 | 458 | 403 | 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, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Loss per Share | ||||
Net loss | $ (5,684) | $ (4,054) | $ (9,769) | $ (6,404) |
Less: preferred dividends | (1,847) | (1,366) | (3,609) | (2,717) |
Net loss attributable to stockholders | (7,531) | (5,420) | (13,378) | (9,121) |
Net loss attributable to common stockholders (Note 11) | $ (7,531) | $ (5,420) | $ (13,378) | $ (9,121) |
Denominator: | ||||
Weighted average common shares outstanding (in shares) | 13,980 | 13,309 | 13,766 | 13,298 |
Loss per common share - basic and diluted under two-class method (in dollars per share) | $ (0.54) | $ (0.41) | $ (0.97) | $ (0.69) |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Income Taxes | |||||
U.S. federal corporate tax rate | 21.00% | 34.00% | |||
Effective tax rate | 30.00% | 68.00% | 10.00% | 34.00% | |
Unrecognized tax benefits | $ 0.1 | $ 0.1 | $ 0.1 | $ 0.1 | $ 0.1 |
Segment Reporting (Details)
Segment Reporting (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Segment information | |||||
Net sales | $ 35,965 | $ 36,453 | $ 74,784 | $ 76,555 | |
Gross profit | 14,480 | 16,219 | 30,681 | 34,822 | |
Operating expenses | 20,082 | 16,442 | 36,837 | 35,351 | |
Operating income (loss) | (5,602) | (223) | (6,156) | (529) | |
Capital expenditures | 273 | 281 | 661 | 537 | |
Total assets | 167,797 | 168,549 | 167,797 | 168,549 | $ 173,674 |
Wholesale | |||||
Segment information | |||||
Net sales | 23,821 | 25,374 | 52,399 | 56,517 | |
Gross profit | 6,644 | 8,738 | 16,094 | 21,555 | |
Operating expenses | 2,781 | 3,168 | 6,366 | 7,629 | |
Operating income (loss) | 3,863 | 5,570 | 9,728 | 13,926 | |
Capital expenditures | 38 | 5 | 156 | 15 | |
Total assets | 50,154 | 47,812 | 50,154 | 47,812 | 53,958 |
Consumer Direct | |||||
Segment information | |||||
Net sales | 11,237 | 10,425 | 20,694 | 18,771 | |
Gross profit | 6,929 | 6,827 | 12,896 | 12,000 | |
Operating expenses | 5,986 | 5,997 | 11,890 | 12,383 | |
Operating income (loss) | 943 | 830 | 1,006 | (383) | |
Capital expenditures | 83 | 135 | 176 | 294 | |
Total assets | 6,978 | 8,438 | 6,978 | 8,438 | 7,633 |
Corporate and other | |||||
Segment information | |||||
Net sales | 907 | 654 | 1,691 | 1,267 | |
Gross profit | 907 | 654 | 1,691 | 1,267 | |
Operating expenses | 11,315 | 7,277 | 18,581 | 15,339 | |
Operating income (loss) | (10,408) | (6,623) | (16,890) | (14,072) | |
Capital expenditures | 152 | 141 | 329 | 228 | |
Total assets | 110,665 | 112,299 | 110,665 | 112,299 | $ 112,083 |
Product | |||||
Segment information | |||||
Net sales | $ 35,965 | $ 36,453 | $ 74,784 | $ 76,555 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Jan. 18, 2018 | |
Related party transactions | |||||
Convertible note payable balance | $ 86,054 | $ 86,054 | |||
Period for automatic renewal of the term of the employment | 1 year | ||||
Tengram Capital Partners, LP | |||||
Related party transactions | |||||
Total related party expenses | 59 | $ 39 | $ 59 | $ 62 | |
Peter Kim | |||||
Related party transactions | |||||
Convertible note payable balance | 9,000 | 9,000 | |||
Accrued interest | $ 146 | $ 146 | |||
Term of non-compete agreement | 3 years | ||||
Series A-1 preferred stock | Tengram Capital Partners, LP | Convertible Notes Due January 2018 | |||||
Related party transactions | |||||
Preferred Stock, par value (in dollars per share) | $ 0.10 | ||||
Conversion price (in dollars per share) | $ 3 | ||||
Number of shares issuable upon conversion of the debt | 4,587,964 |