Nevada
|
|
77-0664193
|
(State or other jurisdiction of incorporation or
organization)
|
|
(I.R.S. Employer Identification No.)
|
4400 Vanowen St.
Burbank, CA
|
|
91505
|
(Address of principal executive offices)
|
|
(Zip code)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
N/A
|
|
|
Large accelerated filer
|
|
☐ |
|
Accelerated filer
|
|
☐ |
Non-accelerated filer
|
|
☒ |
|
Smaller reporting company
|
|
☒ |
|
|
|
|
Emerging growth company
|
|
☐ |
|
Page
|
PART I
|
|
1
|
|
5
|
|
12
|
|
12
|
|
13
|
|
15
|
|
|
|
PART II
|
|
16
|
|
17
|
|
17
|
|
31
|
|
31
|
|
31
|
|
32
|
|
35
|
|
|
|
PART III
|
|
36
|
|
39
|
|
43
|
|
45
|
|
47
|
|
|
|
PART IV
|
|
48
|
|
|
|
48
|
|
|
|
49
|
|
For the Years Ended December 31,
|
|||
|
2019
|
% of Total
|
2018
|
% of Total
|
Distribution
Channel
|
|
|
|
|
Specialty
|
$35,812
|
45%
|
$35,690
|
41%
|
International
|
22,691
|
28%
|
32,143
|
36%
|
FDM
|
21,164
|
27%
|
20,280
|
23%
|
Total
|
$79,667
|
100%
|
$88,113
|
100%
|
Location
|
|
Function
|
|
Approximate
Square Feet
|
Expiration
Date of Lease
|
Monthly
Rent
|
Burbank,
CA
|
|
Company
Headquarters, MP Sports Science Center
|
|
27,226
|
September 30,
2022
|
$38,620
|
Spring Hill,
TN
|
|
Warehouse and
distribution
|
|
52,740
|
June 30,
2020*
|
$24,176
|
Denver,
CO
|
|
Former Company
Headquarters
|
|
30,302
|
December
31,2020
|
$11,616
|
Centennial,
CO
|
|
Denver
Administrative Office
|
|
10,289
|
July 30,
2020
|
$8,318
|
($
in thousands)
|
For the Years Ended
December 31,
|
|
|
|
|
2019
|
2018
|
$ Change
|
% Change
|
Revenue,
net
|
$79,667
|
$88,113
|
$(8,446)
|
(10)%
|
Cost
of revenue
|
70,979
|
69,719
|
1,260
|
2
|
Gross
profit
|
8,688
|
18,394
|
(9,706)
|
(53)
|
Operating
expenses:
|
|
|
|
|
Advertising
and promotion
|
2,487
|
2,939
|
(452)
|
(15)
|
Salaries
and benefits
|
7,910
|
8,328
|
(418)
|
(5)
|
Selling,
general and administrative
|
8,899
|
11,610
|
(2,711)
|
(23)
|
Research
and development
|
893
|
751
|
142
|
19
|
Professional
fees
|
3,606
|
2,598
|
1,008
|
39
|
Total
operating expenses
|
23,795
|
26,226
|
(2,431)
|
(9)
|
Loss
from operations
|
(15,107)
|
(7,832)
|
7,275
|
93
|
Other
(expense) income:
|
|
|
|
|
(Loss)
gain on settlement of obligations
|
(125)
|
1,074
|
(1,199)
|
(112)
|
Interest
and other expense, net
|
(3,609)
|
(3,897)
|
(288)
|
(7)
|
Loss
before provision for income taxes
|
(18,841)
|
(10,655)
|
8,186
|
77
|
Provision
for income taxes
|
86
|
100
|
(14)
|
(14)
|
Net
loss
|
$(18,927)
|
$(10,755)
|
$8,171
|
76%
|
|
For the Years Ended
December 31,
|
|
|
2019
|
2018
|
Revenue,
net
|
100%
|
100%
|
Cost
of revenue
|
89
|
79
|
Gross
profit
|
11
|
21
|
Operating
expenses:
|
|
|
Advertising
and promotion
|
3
|
3
|
Salaries
and benefits
|
10
|
9
|
Selling,
general and administrative
|
11
|
13
|
Research
and development
|
1
|
1
|
Professional
fees
|
5
|
3
|
Total
operating expenses
|
30
|
29
|
Loss
from operations
|
(19)
|
(8)
|
Other
(expense) income:
|
|
|
(Loss)
gain on settlement obligations
|
—
|
1
|
Interest
and other expense, net
|
(5)
|
(4)
|
Loss
before provision for income taxes
|
(24)
|
(11)
|
Provision
for income taxes
|
—
|
—
|
Net
loss
|
(24)%
|
(11)%
|
|
For the Years Ended December 31,
|
|||
|
2019
|
% of Total
|
2018
|
% of Total
|
Distribution
Channel
|
|
|
|
|
Specialty
|
$35,812
|
45%
|
$35,690
|
41%
|
International
|
22,691
|
28%
|
32,143
|
36%
|
FDM
|
21,164
|
27%
|
20,280
|
23%
|
Total
|
$79,667
|
100%
|
$88,113
|
100%
|
|
For the Year
Ended December 31,
|
|
|
2019
|
2018
|
|
|
|
Interest expense,
related party
|
$(1,597)
|
$(2,160)
|
Interest expense,
related party debt discount
|
(60)
|
(60)
|
Interest expense,
other
|
(894)
|
(486)
|
Interest expense,
secured borrowing arrangement
|
(1,205)
|
(1,094)
|
Foreign currency
transaction loss
|
(236)
|
(115)
|
Other
|
383
|
18
|
Total
interest and other expense, net
|
$(3,609)
|
$(3,897)
|
|
For the Years
Ended December 31,
|
|
|
2019
|
2018
|
Consolidated
Statements of Cash Flows Data:
|
|
|
Net cash (used in)
provided by operating activities
|
$(6,524)
|
$1,981
|
Net cash used in
investing activities
|
(13)
|
(132)
|
Net cash provided
by (used in) financing activities
|
5,742
|
(5,726)
|
Effect of exchange
rate changes on cash
|
10
|
(34)
|
Net change in
cash
|
$(785)
|
$(3,911)
|
|
Year ended
|
Year ended
|
|
Dec. 31, 2019
|
Dec. 31, 2018
|
Net loss
|
$(18,927)
|
$(10,755)
|
|
|
|
Non-GAAP
adjustments:
|
|
|
Stock-based
compensation
|
284
|
496
|
Loss
on disposal of property and equipment
|
5
|
—
|
Interest
and other expense, net
|
3,609
|
3,897
|
Depreciation
and amortization of property and equipment
|
339
|
529
|
Amortization
of intangible assets
|
320
|
320
|
Bad
debt expense
|
21
|
1,848
|
Income
taxes
|
86
|
100
|
|
|
|
Adjusted EBITDA
|
$(14,263)
|
$(3,565)
|
A.
|
Pressure
to achieve sales targets gave rise to the premature and/or
inappropriate recognition of revenues, typically occurring at or
near the end of financial reporting periods;
|
|
|
B.
|
The
Company’s internal controls failed and/or were not adequate
to ensure that there was effective testing of period end sales
cutoff, including a proper review and comparison of invoice dates
and related proof of delivery; and
|
C.
|
Inadequate
segregation of duties, allowing for an improper alignment of sales
and operations under common leadership.
|
Name
|
|
Age
|
|
Position
|
Ryan Drexler
|
|
49
|
|
Chief Executive
Officer, President and Chairman of the Board of
Directors
|
Allen
Sciarillo
|
|
55
|
|
Chief Financial
Officer
|
William
Bush
|
|
55
|
|
Director
|
John J.
Desmond
|
|
70
|
|
Director
|
Name
|
|
Date of
Award
|
|
Date
Filed
|
|
StockAwards
|
William
J. Bush
|
|
7/1/2019
|
|
9/16/2019
|
|
238,095
|
|
|
|
|
|
|
|
John J.
Desmond
|
|
7/1/2019
|
|
9/16/2019
|
|
357,143
|
Name
|
2019
Base Salary
|
Ryan
Drexler
|
$700,000
|
Brian
Casutto
|
$400,000
|
Name and
Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards($)
|
Option
Awards($)
|
All
Other
Compensation ($)
|
Total($)
|
|
|
|
|
|
|
|
|
Ryan Drexler
(1)
|
|
|
|
|
|
|
|
Chairman of the
Board,
|
2019
|
700,000
|
—
|
—
|
—
|
600(3)
|
700,600
|
Chief Executive
Officer and President
|
2018
|
681,250
|
709,690
|
—
|
—
|
1,900(4)
|
1,392,840
|
|
|
|
|
|
|
|
|
Brian
Casutto(2)
|
2019
|
400,000
|
—
|
—
|
—
|
61,000(3)
|
461,000
|
Executive Vice
President of Sales and Operations
|
2018
|
400,000
|
244,542
|
—
|
—
|
71,129(4)
|
715,671
|
|
Drexler
|
Casutto
|
Miscellaneous
(a)
|
$—
|
$—
|
Automobile Expenses
(b)
|
—
|
12,000
|
Housing
Costs(c)
|
—
|
38,500
|
Insurance
Premiums
|
600
|
10,500
|
TOTAL
|
$600
|
$61,000
|
|
Drexler
|
Casutto
|
Miscellaneous (a)
|
$1,900
|
$10,559
|
Automobile Expenses (b)
|
—
|
10,223
|
Housing Costs(c)
|
—
|
40,700
|
Insurance
Premiums
|
—
|
9,647
|
TOTAL
|
$1,900
|
$71,129
|
Name
|
Fees Earned
or Paid in Cash ($)
|
Stock Awards
(1)
($)
|
All Other
Compensation (2)
($)
|
Total
($)
|
John J.
Desmond
|
$100,000
|
$150,000
|
$91,800
|
$341,800
|
William J.
Bush
|
140,000
|
100,000
|
70,300
|
310,300
|
|
Shares Beneficially Owned
|
|
|
Common Stock (1)
|
|
Name of Beneficial
Owner
|
Shares
|
% (2)
|
Named Executive
Officers:
|
|
|
Ryan Drexler
(3)
|
18,516,023
|
55.7%
|
Brian
Casutto
|
125,000
|
*
|
Non-Employee
Directors:
|
|
|
William
Bush
|
492,181
|
1.5%
|
John J.
Desmond
|
587,357
|
1.8%
|
Officers and
Directors as a Group (four persons):
|
19,720,561
|
59.3%
|
(1)
|
This
column lists beneficial ownership of voting securities as
calculated under SEC rules which generally attribute beneficial
ownership of securities to persons who possess sole or shared
voting power or investment power with respect to those securities
and includes shares of our common stock issuable pursuant to the
exercise of stock options, warrants, preferred stock or other
securities that are immediately exercisable or convertible or
exercisable or convertible within 60 days of August 18, 2020.
Otherwise, except to the extent noted below, each director, named
executive officer or entity has sole voting and investment power
over the shares reported. Standard brokerage accounts may include
nonnegotiable provisions regarding set-offs or similar
rights.
|
(2)
|
Percent
of total voting power represents voting power with respect to
33,101,866 shares of common stock
outstanding as of August 18, 2020, plus 137,362 options to purchase
common shares as if these options were exercised (33,239,228 common
shares).
|
(3)
|
Ryan
Drexler, the Company’s Chief Executive Officer, President and
Chairman of the Board of Directors is the sole member of Consac,
LLC, and as such has voting and investment power over the
securities owned by the stockholder. These shares are also included
in the beneficial owners of more than five percent table
below.
|
|
Shares Beneficially Owned
|
|
|
Common Stock
(1)
|
|
Name of Beneficial
Owner
|
Shares
|
% (2)
|
Wynnefield Capital
(3)
|
1,931,305
|
5.8%
|
Ryan Drexler
(4)
|
18,516,023
|
55.7%
|
Amerop Holdings,
Inc. (5)
|
3,648,355
|
11.0%
|
(1)
|
This
column lists beneficial ownership of voting securities as
calculated under SEC rules which generally attribute beneficial
ownership of securities to persons who possess sole or shared
voting power or investment power with respect to those securities
and includes shares of our common stock issuable pursuant to the
exercise of stock options, warrants, preferred stock or other
securities that are immediately exercisable or convertible or
exercisable or convertible within 60 days of August 18, 2020.
Otherwise, except to the extent noted below, each director, named
executive officer or entity has sole voting and investment power
over the shares reported. Standard brokerage accounts may include
nonnegotiable provisions regarding set-offs or similar
rights.
|
(2)
|
Percent
of total voting power represents voting power with respect to
33,101,866 shares of common stock
outstanding as of August 18, 2020. To compute the percentage of
outstanding shares of common stock held by each person and unless
otherwise noted, any share of common stock which such person has
the right to acquire pursuant to the exercise of stock options
exercisable within 60 days of August 18, 2020 or upon conversion of
convertible debt is deemed to be outstanding, but is not deemed to
be outstanding for the purpose of computing the percentage
ownership of any other person.
|
(3)
|
Joshua
Landes and Nelson Obus may be deemed to hold an indirect beneficial
interest in these shares, which are directly beneficially owned by
Wynnefield Partners Small Cap Value, L.P., Wynnefield Partners
Small Cap Value, L.P. I, Wynnefield Small Cap Value Offshore Fund
and Wynnefield Capital, Inc. Profit Sharing Plan because they are
co-managing members of Wynnefield Capital Management, LLC and
principal executive officers of Wynnefield Capital, Inc. The
principal place of business for Wynnefield Capital is 450 Seventh
Avenue, Suite 509, New York, New York 10123. This information is
based on a Schedule 13D/A filed on August 22, 2019 with the SEC.
|
(4)
|
Ryan
Drexler, the Company’s Chief Executive Officer, President and
Chairman of the Board of Directors, and as such has voting and
investment power over the securities owned by the stockholder.
These shares are also included in the Named Executive Officers
portion of the Management Beneficial Ownership table above. Mr.
Drexler disclaims such beneficial ownership except to the extent of
his pecuniary interests therein.
|
(5)
|
Amerop Holdings, Inc. and Leonard P. Wessell III may be deemed to
hold an indirect beneficial interest to 1,463,839 of these shares.
White Winston Select Asset Funds, LLC, Todd M. Enright, Mark
Blundell, Donald Feagan, and Robert Mahoney may be deemed to hold
an indirect beneficial interest in these shares. White Winston
Select Asset Fund Series Fund MP-18, LLC reported sole voting power
with respect to 3,648,355 shares. The address of White Winston
Select Asset Funds Series Fund MP-18, LLC is 265 Franklin St.,
Suite 1702, Boston, MA 02110. This information is based on a
Schedule 13D filed on November 8,
2019 with the SEC.
|
|
PLAN
CATEGORY
|
Number of securities
to be issued upon exercise of outstanding options
|
Weighted average
exercise price of outstanding options
|
Number of securities remaining
available for future issuance under equity compensation
plans
|
Equity compensation
plans approved by security holders:
|
|
|
|
2015 Incentive
Compensation Plan
|
171,703
|
$1.89
|
576,494
|
Total
|
171,703
|
$1.89
|
576,494
|
|
2019
|
2018
|
Audit fees
(1)
|
$438,000
|
$559,000
|
(1)
|
Represents
the aggregate fees billed for the audit of the Company’s
financial statements.
|
|
A.
|
Financial
Statements and Financial Statement Schedules.
|
|
1.
|
Financial
Statements.
|
|
2.
|
Financial
Statement Schedules.
|
|
B.
|
Exhibits.
|
|
MUSCLEPHARM
CORPORATION (the “Registrant”)
|
|
|
|
|
|
|
Dated: August 24,
2020
|
By:
|
/s/ Allen
Sciarillo
|
|
|
|
Chief Financial
Officer
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
Ryan
Drexler
|
|
Chief Executive
Officer, President and Chairman of the Board of
Directors
|
|
August 24,
2020
|
Ryan
Drexler
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/
Allen
Sciarillo
|
|
Chief Financial Officer |
|
August 24,
2020
|
Allen
Sciarillo
|
|
(Principal
Financial Officer and Principal Accounting
Officer)
|
|
|
|
|
|
|
|
/s/ John J.
Desmond
|
|
Director
|
|
August 24,
2020
|
John J.
Desmond
|
|
|
|
|
|
|
|
|
|
/s/
William
Bush
|
|
Director
|
|
August 24,
2020
|
William
Bush
|
|
|
|
|
Financial
Statements:
|
|
F-1
|
|
F-2
|
|
F-3
|
|
F-4
|
|
F-5
|
|
F-7
|
|
F-8
|
|
December 31,
2019
|
December 31,
2018
|
|
|
|
ASSETS
|
|
|
Current
assets:
|
|
|
Cash
|
$1,532
|
$2,317
|
Accounts
receivable, net
|
4,807
|
6,273
|
Inventory
|
4,720
|
13,661
|
Prepaid expenses
and other current assets
|
1,104
|
576
|
Total current
assets
|
12,163
|
22,827
|
Property and
equipment, net
|
216
|
513
|
Intangible assets,
net
|
676
|
997
|
Operating lease
right-of-use assets
|
1,175
|
—
|
Other
assets
|
310
|
264
|
TOTAL
ASSETS
|
$14,540
|
$24,601
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
Current
liabilities:
|
|
|
Obligation under
secured borrowing arrangement
|
$4,443
|
$1,285
|
Line of
credit
|
4,204
|
1,500
|
Operating lease
liability, current
|
624
|
—
|
Convertible note
with a related party, net of discount
|
1,287
|
17,940
|
Accounts
payable
|
26,178
|
24,797
|
Accrued and other
liabilities
|
4,805
|
6,543
|
Accrued
restructuring charges, current
|
—
|
493
|
Total current
liabilities
|
41,541
|
52,558
|
Accrued
restructuring charges, long-term
|
—
|
30
|
Operating lease
liability, long-term
|
723
|
—
|
Other long-term
liabilities
|
228
|
208
|
Total
liabilities
|
42,492
|
52,796
|
Commitments and
contingencies (Note 9)
|
|
|
Stockholders'
deficit:
|
|
|
Common stock, par
value of $0.001 per share; 100,000,000 shares authorized,
33,876,033 and 16,190,288 shares issued as of December 31, 2019 and
December 31, 2018, respectively; 33,000,412 and 15,314,667 shares
outstanding as of December 31, 2019 and December 31, 2018,
respectively
|
31
|
15
|
Additional paid-in
capital
|
177,914
|
158,944
|
Treasury stock, at
cost; 875,621 shares
|
(10,039)
|
(10,039)
|
Accumulated other
comprehensive loss
|
—
|
(238)
|
Accumulated
deficit
|
(195,858)
|
(176,877)
|
TOTAL
STOCKHOLDERS’ DEFICIT
|
(27,952)
|
(28,195)
|
TOTAL LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
$14,540
|
$24,601
|
|
For the Years Ended December 31,
|
|
|
2019
|
2018
|
Revenue,
net
|
$79,667
|
$88,113
|
Cost
of revenue
|
70,979
|
69,719
|
Gross
profit
|
8,688
|
18,394
|
Operating
expenses:
|
|
|
Advertising
and promotion
|
2,487
|
2,939
|
Salaries
and benefits
|
7,910
|
8,328
|
Selling,
general and administrative
|
8,899
|
11,610
|
Research
and development
|
893
|
751
|
Professional
fees
|
3,606
|
2,598
|
Total
operating expenses
|
23,795
|
26,226
|
Loss
from operations
|
(15,107)
|
(7,832)
|
Other
(expense) income:
|
|
|
(Loss)
gain on settlement of obligations
|
(125)
|
1,074
|
Interest
and other expense, net
|
(3,609)
|
(3,897)
|
Loss
before provision for income taxes
|
(18,841)
|
(10,655)
|
Provision
for income taxes
|
86
|
100
|
Net
loss
|
$(18,927)
|
$(10,755)
|
|
|
|
Net
loss per share, basic and diluted
|
$(0.92)
|
$(0.72)
|
|
|
|
Weighted
average shares used to compute net loss per share, basic and
diluted
|
20,475,313
|
15,023,872
|
|
For the Years
Ended
December
31,
|
|
|
2019
|
2018
|
Net
loss
|
$(18,927)
|
$(10,755)
|
Other comprehensive
loss:
|
|
|
Change in foreign
currency translation adjustment
|
(184)
|
(88)
|
Comprehensive
loss
|
$(19,111)
|
$(10,843)
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
Additional
|
|
Other
|
|
Total
|
|
Common Stock
|
Paid-in
|
Treasury
|
Comprehensive
|
Accumulated
|
Stockholders’
|
|
|
Shares
|
Amount
|
Capital
|
Stock
|
Loss
|
Deficit
|
Deficit
|
Balance—December
31, 2017 (as restated)
|
14,983,554
|
$14
|
$158,396
|
$(10,039)
|
$(150)
|
$(165,069)
|
$(16,848)
|
Adjustment
due to adoption of ASC 606 (Note 2)
|
—
|
—
|
—
|
—
|
—
|
(1,053)
|
(1,053)
|
Balance—December
31, 2017 (as restated)
|
14,983,554
|
$14
|
$158,396
|
$(10,039)
|
$(150)
|
$(166,122)
|
$(17,901)
|
Stock-based
compensation for issuance and amortization of restricted stock
awards to employees, executives and directors
|
250,000
|
1
|
479
|
—
|
—
|
—
|
480
|
Stock-based
compensation for issuance of stock options to an executive and a
director
|
—
|
—
|
16
|
—
|
—
|
—
|
16
|
Issuance
of shares of common stock related to the payment of interest on a
related party note
|
81,113
|
—
|
53
|
—
|
—
|
—
|
53
|
Change
in foreign currency translation adjustment
|
—
|
—
|
—
|
—
|
(88)
|
—
|
(88)
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(10,755)
|
(10,755)
|
Balance—December
31, 2018
|
15,314,667
|
$15
|
$158,944
|
$(10,039)
|
$(238)
|
$(176,877)
|
$(28,195)
|
|
Common
Stock
|
Additional
Paid-in
|
Treasury
|
Accumulated
Other
Comprehensive
|
Accumulated
|
Total
Stockholders’
|
|
|
Shares
|
Amount
|
Capital
|
Stock
|
Loss
|
Deficit
|
Deficit
|
Balance—December
31, 2018
|
15,314,667
|
$15
|
$158,944
|
$(10,039)
|
$(238)
|
$(176,877)
|
$(28,195)
|
Stock-based
compensation for issuance and amortization of restricted stock
awards to employees, executives and directors
|
595,238
|
—
|
284
|
—
|
—
|
—
|
284
|
Issuance of shares
of common stock related to the settlement of
litigation
|
150,000
|
—
|
60
|
—
|
—
|
—
|
60
|
Issuance of shares
of common stock related to the conversion of a related party
note
|
16,216,216
|
16
|
17,984
|
—
|
—
|
—
|
18,000
|
Issuance of shares
of common stock in exchange for services
|
724,291
|
—
|
642
|
—
|
—
|
—
|
642
|
Change in foreign
currency translation adjustment
|
—
|
—
|
—
|
—
|
238
|
(54)
|
184
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(18,927)
|
(18,927)
|
Balance—December
31, 2019
|
33,000,412
|
$31
|
$177,914
|
$(10,039)
|
$—
|
$(195,858)
|
$(27,952)
|
|
For the Years Ended December 31,
|
|
|
2019
|
2018
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
Net
loss
|
$(18,927)
|
$(10,755)
|
Adjustments
to reconcile net loss to net cash (used in) provided by operating
activities:
|
|
|
Depreciation
and amortization of property and equipment
|
339
|
529
|
Amortization
of intangible assets
|
320
|
320
|
Bad
debt expense
|
21
|
1,848
|
Loss
on disposal of property and equipment
|
5
|
—
|
Amortization
of debt discount
|
60
|
59
|
Inventory
provision
|
82
|
(161)
|
Stock-based
compensation
|
284
|
496
|
Issuance of common
stock to non-employees
|
702
|
—
|
Write off of
cumulative translation adjustments
|
175
|
(54)
|
Changes
in operating assets and liabilities:
|
|
|
Accounts
receivable
|
1,444
|
1,931
|
Inventory
|
8,859
|
(3,937)
|
Prepaid
expenses and other current assets
|
(528)
|
418
|
Other
assets
|
710
|
(39)
|
Accounts
payable and accrued liabilities
|
(70)
|
11,518
|
Accrued
restructuring charges
|
—
|
(192)
|
Net
cash (used in) provided by operating activities
|
(6,524)
|
1,981
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
Purchase
of property and equipment
|
(13)
|
(132)
|
Net
cash used in investing activities
|
(13)
|
(132)
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
Proceeds
from line of credit
|
3,239
|
—
|
Payments
on line of credit
|
(535)
|
(1,500)
|
Proceeds
from secured borrowing arrangement, net of reserves
|
44,091
|
36,939
|
Payments
on secured borrowing arrangement, net of fees
|
(40,933)
|
(41,039)
|
Repayment
of finance lease obligations
|
(120)
|
(126)
|
Net
cash provided by (used in) financing activities
|
5,742
|
(5,726)
|
Effect
of exchange rate changes on cash
|
10
|
(34)
|
NET
CHANGE IN CASH
|
(785)
|
(3,911)
|
CASH
— BEGINNING OF PERIOD
|
2,317
|
6,228
|
CASH
— END OF PERIOD
|
$1,532
|
$2,317
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
Cash
paid for interest
|
$1,401
|
$3,435
|
Cash
paid for taxes
|
$77
|
$172
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH ACTIVITIES:
|
|
|
Property
and equipment acquired in conjunction with finance
leases
|
$29
|
$—
|
Operating
lease right-of-use assets and lease obligations (ASC
842)
|
$2,117
|
$—
|
Conversion of
related party note through issuance of shares
|
$18,000
|
$—
|
Interest paid
through issuance of shares of common stock
|
$—
|
$53
|
|
As of
December 31,
|
|
|
2019
|
2018
|
Accounts
receivable
|
$8,419
|
$14,647
|
Less: allowance for
discounts and returns
|
(2,901)
|
(5,574)
|
Less: allowance for
doubtful accounts
|
(711)
|
(2,800)
|
Accounts
receivable, net
|
$4,807
|
$6,273
|
|
For the Years
Ended December 31,
|
|
|
2019
|
2018
|
Allowance for
discounts and returns, beginning balance
|
$5,574
|
$2,387
|
Charges against
revenues
|
26,941
|
33,500
|
Utilization of
reserve
|
(29,614)
|
(30,313)
|
Allowance for
discounts and returns, ending balance
|
$2,901
|
$5,574
|
|
a.
|
Nature of Goods and Services
|
|
b.
|
When Performance Obligations are Satisfied
|
|
c.
|
Variable Consideration
|
|
d.
|
Practical Expedients
|
|
Balance at December 31, 2017
|
Adjustment
|
Balance at January 1, 2018
|
Accounts
receivable, net
|
$11,105
|
$(1,053)
|
$10,052
|
Accumulated
deficit
|
$(165,069)
|
$(1,053)
|
$(166,122)
|
|
Percentage
of Net Revenue for the
Years Ended
December 31,
|
Percentage of Net Accounts Receivable as of December
31,
|
||
|
2019
|
2018
|
2019
|
2018
|
Customers
|
|
|
|
|
Costco
|
33%
|
29%
|
*
|
16%
|
Amazon
|
13%
|
13%
|
*
|
22%
|
iHerb
|
17%
|
13%
|
35%
|
*
|
|
For the
Years
Ended December 31,
|
|
Vendor
|
2019
|
2018
|
Nutra
Blend
|
22%
|
16%
|
S.K.
Laboratories
|
34%
|
26%
|
4Excelsior
|
*
|
14%
|
Bakery
Barn
|
*
|
14%
|
Prinova
|
*
|
23%
|
Property and
Equipment
|
|
Estimated Useful Life
|
Furniture,
fixtures and equipment
|
|
3 - 7
years
|
Leasehold
improvements
|
|
Lesser of estimated useful
life or remaining lease term
|
Manufacturing and
lab equipment
|
|
3 - 5
years
|
Vehicles
|
|
3 - 5
years
|
Displays
|
|
5
years
|
Website
|
|
3
years
|
|
As of
December 31,
|
|
|
2019
|
2018
|
Furniture, fixtures
and equipment
|
$2,592
|
$3,511
|
Leasehold
improvements
|
236
|
236
|
Vehicles
|
39
|
39
|
Displays
|
453
|
453
|
Website
|
497
|
497
|
Property and
equipment, gross
|
3,817
|
4,736
|
Less: accumulated
depreciation and amortization
|
(3,601)
|
(4,223)
|
Property and
equipment, net
|
$216
|
$513
|
|
As of December
31, 2019
|
|||
|
Gross Value
|
Accumulated
Amortization
|
Net Carrying
Value
|
Remaining
Weighted-Average Useful Lives (years)
|
Amortized
Intangible Assets
|
|
|
|
|
Brand (apparel
rights)
|
$2,244
|
$(1,568)
|
$676
|
2.1
|
Total intangible
assets
|
$2,244
|
$(1,568)
|
$676
|
|
|
As of December
31, 2018
|
|||
|
Gross Value
|
Accumulated
Amortization
|
Net Carrying
Value
|
Remaining
Weighted-Average Useful Lives (years)
|
Amortized
Intangible Assets
|
|
|
|
|
Brand (apparel
rights)
|
$2,244
|
$(1,247)
|
$997
|
3.1
|
Total intangible
assets
|
$2,244
|
$(1,247)
|
$997
|
|
For the Year Ending December 31,
|
|
2020
|
$320
|
2021
|
320
|
2022
|
36
|
Total amortization
expense
|
$676
|
|
Balance Sheet
Classification
|
December 31,
2019
|
Assets
|
|
|
Operating
|
ROU assets,
net
|
$1,175
|
Finance
|
Property and
equipment, net
|
57
|
Total
Assets
|
|
1,232
|
|
|
|
Liabilities
|
|
|
Current
liabilities:
|
|
|
Operating
|
Operating lease
liability - current
|
$624
|
Finance
|
Current accrued
liability
|
54
|
Total current
liabilities
|
|
678
|
|
|
|
Non-current
liabilities:
|
|
|
Operating
|
Operating lease
liability - long term
|
723
|
Finance
|
Other long term
liabilities
|
—
|
Total non-current
liabilities
|
|
723
|
Total lease
liabilities
|
$1,401
|
|
Income Statement
Classification
|
Year Ended
December 31, 2019
|
|
|
|
Operating lease
cost
|
Selling, general
and administrative
|
$1,041
|
|
|
|
Finance lease
cost:
|
|
|
Amortization of ROU
asset
|
Selling, general
and administrative
|
119
|
Interest on lease
liabilities
|
Selling, general
and administrative
|
6
|
Total finance lease
cost
|
|
125
|
|
|
|
Variable lease
payments
|
Selling, general
and administrative
|
219
|
Sublease
income
|
Other
income
|
(380)
|
|
|
|
Total lease
cost
|
|
$1,005
|
|
Year Ended December
31, 2019
|
Cash paid for
amounts included in the measurement of lease liabilities (in
thousands):
|
|
Operating cash
flows from operating leases
|
$770
|
Operating cash
flows from finance leases
|
6
|
Financing cash
flows from finance leases
|
120
|
|
|
The weighted
average remaining lease term was as follows:
|
|
Operating leases
(in years)
|
2.3
|
Finance leases (in
years)
|
0.5
|
The weighted
average discount rate was as follows:
|
|
Operating
leases
|
18%
|
Finance
leases
|
5%
|
|
Operating
|
Finance
|
|
|
|
2020
|
$808
|
$55
|
2021
|
481
|
—
|
2022
|
369
|
—
|
Thereafter
|
—
|
—
|
Total future
undiscounted lease payments
|
1,658
|
55
|
Less amounts
representing interest
|
(311)
|
(1)
|
Present value of
lease liabilities
|
$1,347
|
$54
|
|
For the Year
Ended December 31,
|
|
|
2019
|
2018
|
|
|
|
Interest expense,
related party
|
$(1,597)
|
$(2,160)
|
Interest expense,
related party debt discount
|
(60)
|
(60)
|
Interest expense,
other
|
(894)
|
(486)
|
Interest expense,
secured borrowing arrangement
|
(1,205)
|
(1,094)
|
Foreign currency
transaction loss
|
(236)
|
(115)
|
Other
|
383
|
18
|
Total
interest and other expense, net
|
$(3,609)
|
$(3,897)
|
|
As of
December 31,
|
|
|
2019
|
2018
|
Refinanced
convertible note, related party
|
$1,287
|
$18,000
|
Revolving line of
credit, related party
|
1,239
|
—
|
Obligations under
secured borrowing arrangement
|
4,443
|
1,285
|
Line of credit
– inventory financing
|
2,965
|
1,500
|
Notes
payable
|
247
|
—
|
Unamortized debt
discount, related party
|
—
|
(60)
|
Total
debt
|
10,181
|
20,725
|
Less: current
portion
|
(10,130)
|
(20,725)
|
Long term
debt
|
$51
|
$—
|
Transaction Type
|
Quantity (Shares)
|
Valuation
|
Range of
Value per Share
|
Stock
issued for note conversion
|
16,216,216
|
$18,000
|
$1.11
|
Stock
issued for consulting services
|
22,222
|
10
|
0.45
|
Stock
issued in relation to Biozone settlement
|
150,000
|
60
|
0.40
|
Restricted
stock issued to directors
|
595,238
|
250
|
0.42
|
Stock
issued for advertising services
|
702,069
|
632
|
0.90
|
Total
|
17,685,745
|
$18,952
|
$0.40 to 1.11
|
Transaction Type
|
Quantity (Shares)
|
Valuation
|
Range of
Value per Share
|
Stock
issued to related party for interest
|
81,113
|
$53
|
0.65
|
Stock
issued to directors
|
250,000
|
250
|
1.00
|
Total
|
331,113
|
$303
|
$0.65 to 1.00
|
|
Unvested
Restricted Stock Awards
|
|
|
Number
of
Shares
|
Weighted
Average
Grant Date Fair
Value
|
Unvested
balance – December 31, 2017
|
487,267
|
$2.32
|
Granted
|
250,000
|
1.00
|
Vested
|
(539,767)
|
2.18
|
Unvested
balance – December 31, 2018
|
197,500
|
1.05
|
Granted
|
838,942
|
0.42
|
Vested
|
(346,310)
|
0.78
|
Unvested
balance – December 31, 2019
|
690,132
|
$0.42
|
|
For the Year
Ended
December 31, 2016
|
Expected
term of options
|
6.5
years
|
Expected
volatility-range used
|
118.4%
-131.0%
|
Expected
volatility-weighted average
|
125.7%
|
Risk-free
interest rate-range used
|
1.27%
-1.71%
|
|
Options Pursuant to the 2015 Plan
|
Weighted Average Exercise Price Per Share
|
Weighted Average Fair Value of Options
|
Weighted Average Remaining Contractual Life (Years)
|
Aggregate Intrinsic Value
|
Issued
and outstanding as of December 31, 2017
|
171,703
|
$1.89
|
$1.72
|
8.15
|
$—
|
Granted
|
—
|
—
|
—
|
—
|
—
|
Exercised
|
—
|
—
|
—
|
—
|
—
|
Forfeited
|
—
|
—
|
—
|
—
|
—
|
Issued
and outstanding as of December 31, 2018
|
171,703
|
$1.89
|
$1.72
|
7.17
|
$—
|
Granted
|
—
|
—
|
—
|
—
|
—
|
Exercised
|
—
|
—
|
—
|
—
|
—
|
Forfeited
|
—
|
—
|
—
|
—
|
—
|
Issued
and outstanding as of December 31, 2019
|
171,703
|
$1.89
|
$1.72
|
6.17
|
$—
|
Exercisable
as of December 31, 2019
|
171,703
|
$1.89
|
$1.72
|
6.17
|
$—
|
|
For the Years
Ended
December
31,
|
|
|
2019
|
2018
|
Net
loss
|
$(18,927)
|
$(10,755)
|
Weighted average
common shares used in computing net loss per share, basic and
diluted
|
20,475,313
|
15,023,872
|
Net loss per share,
basic and diluted
|
$(0.92)
|
$(0.72)
|
|
As of December
31,
|
|
|
2019
|
2018
|
Stock
options
|
171,703
|
171,703
|
Warrants
|
1,289,378
|
1,389,378
|
Unvested restricted
stock
|
690,132
|
179,500
|
Convertible
notes
|
931,974
|
16,216,216
|
Total common stock
equivalents
|
3,083,187
|
17,956,797
|
|
For the
Years Ended December 31,
|
|
|
2019
|
2018
|
Domestic
|
$(18,831)
|
$(10,396)
|
Foreign
|
(10)
|
(259)
|
Loss before
provision for income taxes
|
$(18,841)
|
$(10,655)
|
|
As of December 31,
|
|
|
2019
|
2018
|
Deferred
tax assets:
|
|
|
Net
operating loss carryforwards
|
$28,505
|
$23,625
|
Other
|
3,784
|
3,235
|
Gross
deferred tax assets
|
32,289
|
26,860
|
Valuation
allowance
|
(32,289)
|
(26,860)
|
Net
deferred tax assets
|
$—
|
$—
|
|
For the Years
Ended December 31,
|
|
|
2019
|
2018
|
Current income tax
expense:
|
|
|
Federal
|
$—
|
$—
|
State
|
54
|
61
|
Foreign
|
32
|
39
|
|
86
|
100
|
Deferred income tax
provision:
|
|
|
Federal
|
—
|
—
|
State
|
—
|
—
|
Foreign
|
—
|
—
|
|
—
|
—
|
Provision for
income taxes, net
|
$86
|
$100
|
|
For the Years
Ended December 31,
|
|
|
2019
|
2018
|
Expected provision
at statutory federal rate
|
$(3,957)
|
$(2,249)
|
State tax —
net of federal benefit
|
48
|
35
|
Foreign
income/losses taxed at different rates
|
34
|
94
|
Other
|
11
|
38
|
Change in valuation
allowance
|
3,950
|
2,182
|
Income tax
expense
|
$86
|
$100
|
Gross UTB’s
as of December 31, 2018
|
$39
|
Additions for tax
positions taken in the current year
|
89
|
Deductions for tax
positions taken in a prior year
|
—
|
Gross UTB’s
as of December 31, 2019
|
$128
|
|
For the Years
Ended
December
31,
|
|
|
2019
|
2018
|
Revenue,
net:
|
|
|
United
States
|
$56,976
|
$55,970
|
International
|
22,691
|
32,143
|
Total revenue,
net
|
$79,667
|
$88,113
|
|
December
31, 2017
|
||
|
As
Previously Reported
|
Restatement
Adjustments
|
Restated
(Unaudited)
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash
|
$6,228
|
$—
|
$6,228
|
Accounts
receivable, net of allowance for doubtful accounts of $1,363 as of
December 31, 2017
|
16,668
|
(5,563)
|
11,105
|
Inventory
|
6,572
|
2,991
|
9,563
|
Prepaid
expenses and other current assets
|
994
|
—
|
994
|
Total
current assets
|
30,462
|
(2,572)
|
27,890
|
Property
and equipment, net
|
1,822
|
(912)
|
910
|
Intangible
assets, net
|
1,317
|
—
|
1,317
|
Other
assets
|
225
|
—
|
225
|
TOTAL
ASSETS
|
$33,826
|
$(3,484)
|
$30,342
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
Current
liabilities:
|
|
|
|
Obligation
under secured borrowing arrangement
|
$5,385
|
$—
|
$5,385
|
Line
of credit
|
3,000
|
—
|
3,000
|
Accounts
payable
|
11,742
|
(4)
|
11,738
|
Accrued
liabilities
|
7,761
|
(378)
|
7,383
|
Accrued
restructuring charges, current
|
595
|
—
|
595
|
Total
current liabilities
|
28,483
|
(382)
|
28,101
|
Convertible
note with a related party, net of discount
|
16,669
|
1,212
|
17,881
|
Accrued
restructuring charges, long-term
|
120
|
—
|
120
|
Other
long-term liabilities
|
1,088
|
—
|
1,088
|
TOTAL
LIABILITIES
|
46,360
|
830
|
47,190
|
Commitments
and contingencies (Note 9)
|
|
|
|
Stockholders'
deficit:
|
|
|
|
Common
stock, par value of $0.001 per share; 100,000,000 shares
authorized; 15,859,175 shares issued as of December 31, 2017,
respectively; 14,983,554 shares outstanding as of December 31,
2017
|
14
|
—
|
14
|
Additional
paid-in capital
|
159,608
|
(1,212)
|
158,396
|
Treasury
stock, at cost; 875,621 shares
|
(10,039)
|
—
|
(10,039)
|
Accumulated
other comprehensive loss
|
(150)
|
—
|
(150)
|
Accumulated
deficit
|
(161,967)
|
(3,102)
|
(165,069)
|
TOTAL
STOCKHOLDERS’ DEFICIT
|
(12,534)
|
(4,314)
|
(16,848)
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
$33,826
|
$(3,484)
|
$30,342
|
|
Year Ended December 31, 2017
|
||
|
As Previously Reported
|
Restatement Adjustments
|
Restated (Unaudited)
|
Revenue,
net
|
$102,155
|
$(8,569)
|
$93,586
|
Cost
of revenue
|
71,710
|
(1,068)
|
70,642
|
Gross
profit
|
30,445
|
(7,501)
|
22,944
|
Operating
expenses:
|
|
|
|
Advertising
and promotion
|
9,352
|
(6,917)
|
2,435
|
Salaries
and benefits
|
10,134
|
—
|
10,134
|
Selling,
general and administrative
|
12,071
|
1,511
|
13,582
|
Research
and development
|
642
|
—
|
642
|
Professional
fees
|
3,378
|
(148)
|
3,230
|
Gain
on settlement of accounts payable
|
(430)
|
—
|
(430)
|
Impairment
of assets
|
180
|
(180)
|
—
|
Total
operating expenses
|
35,327
|
(5,734)
|
29,593
|
Loss
from operations
|
(4,882)
|
(1,767)
|
(6,649)
|
Other
(expense) income:
|
|
|
|
Loss
on settlement of obligations
|
(1,877)
|
—
|
(1,877)
|
Interest
and other expense, net
|
(4,072)
|
231
|
(3,841)
|
Loss
before provision for income taxes
|
(10,831)
|
(1,536)
|
(12,367)
|
Provision
for income taxes
|
142
|
—
|
142
|
Net
loss
|
$(10,973)
|
$(1,536)
|
$(12,509)
|
|
|
|
|
Net
loss per share, basic and diluted
|
$(0.79)
|
$(0.09)
|
$(0.88)
|
|
|
|
|
Weighted
average shares used to compute net loss per share, basic and
diluted
|
13,877,686
|
337,713
|
14,215,399
|
|
Year Ended December 31, 2017
|
||
|
As Previously Reported
|
Restatement Adjustments
|
Restated
(Unaudited)
|
Accumulated
Deficit at January 1, 2017
|
$(150,994)
|
$(1,566)
|
$(152,560)
|
Net
loss
|
(10,973)
|
(1,536)
|
(12,509)
|
Accumulated
deficit at December 31, 2017
|
$(161,967)
|
$(3,102)
|
$(165,069)
|
The
unaudited restated consolidated statements of cash flows for the
year ended December 31, 2017 is presented below (in
thousands):
|
|
||
|
Year
Ended December 31, 2017
|
||
|
As Previously Reported
|
Restatement
Adjustments
|
Restated (Unaudited)
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
Net
loss
|
$(10,973)
|
$(1,536)
|
$(12,509)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
Depreciation
and amortization of property and equipment
|
1,320
|
912
|
2,232
|
Amortization
of intangible assets
|
320
|
—
|
320
|
Bad
debt expense
|
1,524
|
—
|
1,524
|
Gain
on settlement of accounts payable
|
(430)
|
—
|
(430)
|
Loss
on disposal of property and equipment
|
31
|
—
|
31
|
Amortization
of debt discount and issuance costs
|
545
|
—
|
545
|
Stock-based
compensation
|
2,096
|
—
|
2,096
|
Write
off of prepaid financing costs
|
275
|
—
|
275
|
Changes
in operating assets and liabilities:
|
|
|
|
Accounts
receivable
|
(4,619)
|
2,564
|
(2,055)
|
Inventory
|
2,124
|
(1,558)
|
566
|
Prepaid
expenses and other current assets
|
849
|
—
|
849
|
Other
assets
|
(77)
|
—
|
(77)
|
Accounts
payable and accrued liabilities
|
1,991
|
(382)
|
1,609
|
Accrued
restructuring charges
|
(107)
|
—
|
(107)
|
Net
cash provided by operating activities
|
(5,131)
|
—
|
(5,131)
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
Purchase
of property and equipment
|
(37)
|
—
|
(37)
|
Net
used in provided by investing activities
|
(37)
|
—
|
(37)
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
Proceeds
from line of credit
|
3,000
|
—
|
3,000
|
Net
proceeds from convertible notes with a related party
|
871
|
—
|
871
|
Proceeds
from secured borrowing arrangement, net of reserves
|
33,692
|
—
|
33,692
|
Payments
on secured borrowing arrangement, net of fees
|
(30,988)
|
—
|
(30,988
|
Repayment
of capital lease obligations
|
(139)
|
—
|
(139
|
Net
cash provided by financing activities
|
6,436
|
—
|
6,436
|
Effect
of exchange rate changes on cash
|
17
|
—
|
17
|
NET
CHANGE IN CASH
|
1,285
|
—
|
1,285
|
CASH
— BEGINNING OF PERIOD
|
4,943
|
—
|
4,943
|
CASH
— END OF PERIOD
|
$6,228
|
$—
|
$6,228
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
Cash
paid for interest
|
$2,445
|
$—
|
$2,445
|
Cash
paid for taxes
|
$106
|
$—
|
$106
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
|
|
|
|
Conversion
feature related to Refinanced Convertible Note
|
$1,212
|
$(1,212)
|
$—
|
|
March
31, 2018
|
||
|
As
Previously Reported
|
Restatement
Adjustments
|
Restated
(Unaudited)
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash
|
$5,114
|
$—
|
$5,114
|
Accounts
receivable, net of allowance for doubtful accounts of $1,518 as of
March 31, 2018
|
16,925
|
(6,182)
|
10,743
|
Inventory
|
7,738
|
2,364
|
10,102
|
Prepaid
giveaways
|
111
|
—
|
111
|
Prepaid
expenses and other current assets
|
895
|
170
|
1,065
|
Total
current assets
|
30,783
|
(3,648)
|
27,135
|
Property
and equipment, net
|
1,632
|
(856)
|
776
|
Intangible
assets, net
|
1,237
|
—
|
1,237
|
Other
assets
|
239
|
—
|
239
|
TOTAL
ASSETS
|
$33,891
|
$(4,504)
|
$29,387
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
Current
liabilities:
|
|
|
|
Obligation
under secured borrowing arrangement
|
$5,547
|
$—
|
$5,547
|
Line
of credit
|
2,000
|
—
|
2,000
|
Accounts
payable
|
14,897
|
320
|
15,217
|
Accrued
liabilities
|
7,441
|
(230)
|
7,211
|
Accrued
restructuring charges, current
|
560
|
—
|
560
|
Total
current liabilities
|
30,445
|
90
|
30,535
|
Convertible
note with a related party, net of discount
|
16,917
|
979
|
17,896
|
Accrued
restructuring charges, long-term
|
110
|
—
|
110
|
Other
long-term liabilities
|
1,060
|
—
|
1,060
|
Total
liabilities
|
48,532
|
1,069
|
49,601
|
Commitments
and contingencies (Note 9)
|
|
|
|
Stockholders'
deficit:
|
|
|
|
Common
stock, par value of $0.001 per share, 100,000,000 shares
authorized; 15,940,288 shares issued as of March 31, 2018;
15,064,667 shares outstanding as of March 31, 2018
|
14
|
—
|
14
|
Additional
paid-in capital
|
159,798
|
(1,212)
|
158,586
|
Treasury
stock, at cost; 875,621 shares
|
(10,039)
|
—
|
(10,039)
|
Accumulated
other comprehensive loss
|
(142)
|
—
|
(142)
|
Accumulated
deficit
|
(164,272)
|
(4,361)
|
(168,633)
|
TOTAL
STOCKHOLDERS’ DEFICIT
|
(14,641)
|
(5,573)
|
(20,214)
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
$33,891
|
$(4,504)
|
$29,387
|
|
Three Months Ended March 31, 2018
|
||
|
As Previously Reported
|
Restatement Adjustments
|
Restated (Unaudited)
|
Revenue,
net
|
$26,547
|
$(2,360)
|
$24,187
|
Cost
of revenue
|
18,328
|
837
|
19,165
|
Gross
profit
|
8,219
|
(3,197)
|
5,022
|
Operating
expenses:
|
|
|
|
Advertising
and promotion
|
3,661
|
(2,847)
|
814
|
Salaries
and benefits
|
2,154
|
—
|
2,154
|
Selling,
general and administrative
|
2,546
|
(59)
|
2,487
|
Research
and development
|
212
|
—
|
212
|
Professional
fees
|
572
|
148
|
720
|
Total
operating expenses
|
9,145
|
(2,758)
|
6,387
|
Loss
from operations
|
(926)
|
(439)
|
(1,365)
|
Other
(expense) income:
|
|
|
|
Interest
and other expense, net
|
(1,310)
|
233
|
(1,077)
|
Loss
before provision for income taxes
|
(2,236)
|
(206)
|
(2,442)
|
Provision
for income taxes
|
69
|
—
|
69
|
Net
loss
|
$(2,305)
|
$(206)
|
$(2,511)
|
|
|
|
|
Net
loss per share, basic and diluted
|
$(0.16)
|
$(0.01)
|
$(0.17)
|
|
|
|
|
Weighted
average shares used to compute net loss per share, basic and
diluted
|
14,615,677
|
341,540
|
14,957,217
|
|
Three Months Ended March 31, 2018
|
||
|
As Previously Reported
|
Restatement
Adjustments
|
Restated (Unaudited)
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
Net
loss
|
$(2,305)
|
$(206)
|
$(2,511)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
Depreciation
and amortization
|
287
|
(56)
|
231
|
Bad
debt expense
|
164
|
—
|
164
|
Amortization
of debt discount
|
248
|
(233)
|
15
|
Inventory
provision
|
—
|
35
|
35
|
Stock-based
compensation
|
137
|
—
|
137
|
Changes
in operating assets and liabilities:
|
|
|
|
Accounts
receivable
|
(443)
|
(434)
|
(877)
|
Inventory
|
(1,255)
|
592
|
(663)
|
Prepaid
giveaways
|
(23)
|
—
|
(23)
|
Prepaid
expenses and other current assets
|
100
|
(170)
|
(70)
|
Other
assets
|
(14)
|
—
|
(14)
|
Accounts
payable and accrued liabilities
|
2,917
|
472
|
3,389
|
Accrued
restructuring charges
|
(45)
|
—
|
(45)
|
Net
cash used in operating activities
|
(232)
|
—
|
(232)
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
Purchase
of property and equipment
|
(14)
|
—
|
(14)
|
Net
cash used in investing activities
|
(14)
|
—
|
(14)
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
Payments
on line of credit
|
(1,000)
|
—
|
(1,000)
|
Proceeds
from secured borrowing arrangement, net of reserves
|
13,494
|
—
|
13,494
|
Payments
on secured borrowing arrangement, net of fees
|
(13,332)
|
—
|
(13,332)
|
Repayment
of capital lease obligations
|
(34)
|
—
|
(34)
|
Net
cash used in financing activities
|
(872)
|
—
|
(872)
|
Effect
of exchange rate changes on cash
|
4
|
—
|
4
|
NET
CHANGE IN CASH
|
(1,114)
|
—
|
(1,114)
|
CASH
— BEGINNING OF PERIOD
|
6,228
|
—
|
6,228
|
CASH
— END OF PERIOD
|
$5,114
|
$—
|
$5,114
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
Cash
paid for interest
|
$614
|
$—
|
$614
|
Cash
paid for taxes
|
$68
|
$—
|
$68
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH ACTIVITIES:
|
|
|
|
Property
and equipment acquired in conjunction with capital
leases
|
$—
|
$—
|
$—
|
Purchase
of property and equipment included in current
liabilities
|
$13
|
$—
|
$13
|
Interest
paid through issuance of shares of common stock
|
$53
|
$—
|
$53
|
|
June 30,
2018
|
||
|
As
Previously Reported
|
Restatement
Adjustments
|
Restated
(Unaudited)
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash
|
$2,442
|
$—
|
$2,442
|
Accounts
receivable, net of allowance for doubtful accounts of $1,556 as of
June 30, 2018
|
16,278
|
(7,666)
|
8,612
|
Inventory
|
7,651
|
3,942
|
11,593
|
Prepaid
expenses and other current assets
|
1,140
|
346
|
1,486
|
Total
current assets
|
27,511
|
(3,378)
|
24,133
|
Property
and equipment, net
|
1,491
|
(800)
|
691
|
Intangible
assets, net
|
1,157
|
—
|
1,157
|
Other
assets
|
238
|
—
|
238
|
TOTAL
ASSETS
|
$30,397
|
$(4,178)
|
$26,219
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
Current
liabilities:
|
|
|
|
Obligation
under secured borrowing arrangement
|
$2,787
|
$—
|
$2,787
|
Line
of credit
|
2,000
|
—
|
2,000
|
Accounts
payable
|
16,562
|
(5)
|
16,557
|
Accrued
liabilities
|
5,700
|
(231)
|
5,469
|
Accrued
restructuring charges, current
|
564
|
—
|
564
|
Total
current liabilities
|
27,613
|
(236)
|
27,377
|
Convertible
note with a related party, net of discount
|
17,071
|
839
|
17,910
|
Accrued
restructuring charges, long-term
|
80
|
—
|
80
|
Other
long-term liabilities
|
1,248
|
—
|
1,248
|
Total
liabilities
|
46,012
|
603
|
46,615
|
Commitments
and contingencies (Note 9)
|
|
|
|
Stockholders'
deficit:
|
|
|
|
Common
stock, par value of $0.001 per share; 100,000,000 shares authorized
15,940,288; shares issued as of June 30, 2018; 15,064,667 shares
outstanding as of June 30, 2018
|
15
|
—
|
15
|
Additional
paid-in capital
|
159,918
|
(1,212)
|
158,706
|
Treasury
stock, at cost; 875,621 shares
|
(10,039)
|
—
|
(10,039)
|
Accumulated
other comprehensive loss
|
(165)
|
—
|
(165)
|
Accumulated
deficit
|
(165,344)
|
(3,569)
|
(168,913)
|
TOTAL
STOCKHOLDERS’ DEFICIT
|
(15,615)
|
(4,781)
|
(20,396)
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
$30,397
|
$(4,178)
|
$26,219
|
|
Three Months Ended June 30, 2018
|
||
|
As Previously Reported
|
Restatement Adjustments
|
Restated (Unaudited)
|
Revenue,
net
|
$27,104
|
$(5,277)
|
$21,827
|
Cost
of revenue
|
18,952
|
(1,835)
|
17,117
|
Gross
profit
|
8,152
|
(3,442)
|
4,710
|
Operating
expenses:
|
|
|
|
Advertising
and promotion
|
4,991
|
(4,112)
|
879
|
Salaries
and benefits
|
2,295
|
—
|
2,295
|
Selling,
general and administrative
|
2,654
|
16
|
2,670
|
Research
and development
|
208
|
—
|
208
|
Professional
fees
|
626
|
—
|
626
|
Total
operating expenses
|
10,774
|
(4,096)
|
6,678
|
Loss
from operations
|
(2,622)
|
654
|
(1,968)
|
Other
(expense) income:
|
|
|
|
Gain
on settlement of obligation
|
2,747
|
—
|
2,747
|
Interest
and other expense, net
|
(1,165)
|
140
|
(1,025)
|
Loss
before income taxes
|
(1,040)
|
794
|
(246)
|
Income
taxes
|
34
|
—
|
34
|
Net
loss
|
$(1,074)
|
$794
|
$(280)
|
|
|
|
|
Net
loss per share, basic and diluted
|
$(0.07)
|
$0.05
|
$(0.02)
|
|
|
|
|
Weighted
average shares used to compute net loss per share, basic and
diluted
|
14,701,473
|
297,058
|
14,998,531
|
|
Six Months Ended June 30, 2018
|
||
|
As Previously Reported
|
Restatement Adjustments
|
Restated (Unaudited)
|
Revenue,
net
|
$53,651
|
$(7,637)
|
$46,014
|
Cost
of revenue
|
37,280
|
(998)
|
36,282
|
Gross
profit
|
16,371
|
(6,639)
|
9,732
|
Operating
expenses:
|
|
|
|
Advertising
and promotion
|
8,652
|
(6,959)
|
1,693
|
Salaries
and benefits
|
4,449
|
—
|
4,449
|
Selling,
general and administrative
|
5,200
|
(43)
|
5,157
|
Research
and development
|
420
|
—
|
420
|
Professional
fees
|
1,198
|
148
|
1,346
|
Total
operating expenses
|
19,919
|
(6,854)
|
13,065
|
Loss
from operations
|
(3,548)
|
215
|
(3,333)
|
Other
(expense) income:
|
|
|
|
Gain
on settlement of obligation
|
2,747
|
—
|
2,747
|
Interest
and other expense, net
|
(2,473)
|
371
|
(2,102)
|
Loss
before income taxes
|
(3,274)
|
586
|
(2,688)
|
Income
taxes
|
103
|
—
|
103
|
Net
loss
|
$(3,377)
|
$586
|
$(2,791)
|
|
|
|
|
Net
loss per share, basic and diluted
|
$(0.23)
|
$0.04
|
$(0.19)
|
|
|
|
|
Weighted
average shares used to compute net loss per share, basic and
diluted
|
14,658,812
|
319,176
|
14,977,988
|
|
Six Months Ended June 30, 2018
|
||
|
As Previously Reported
|
Restatement
Adjustments
|
Restated (Unaudited)
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
Net
loss
|
$(3,377)
|
$586
|
$(2,791)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
Depreciation
and amortization
|
558
|
(112)
|
446
|
Gain
on settlement of accounts payable
|
—
|
—
|
—
|
Settlement
of obligation
|
(2,747)
|
2,747
|
—
|
Bad
debt expense
|
414
|
—
|
414
|
Amortization
of debt discount
|
403
|
(373)
|
30
|
Inventory
provision
|
—
|
36
|
36
|
Stock-based
compensation
|
257
|
—
|
257
|
Changes
in operating assets and liabilities:
|
|
|
|
Accounts
receivable
|
(71)
|
1,050
|
979
|
Inventory
|
(1,169)
|
(987)
|
(2,156)
|
Prepaid
expenses and other current assets
|
(56)
|
(346)
|
(402)
|
Other
assets
|
(15)
|
—
|
(15)
|
Accounts
payable and accrued liabilities
|
5,835
|
(2,601)
|
3,234
|
Accrued
restructuring charges
|
(71)
|
—
|
(71)
|
Net
cash used in operating activities
|
(39)
|
—
|
(39)
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
Purchase
of property and equipment
|
(73)
|
—
|
(73)
|
Net
cash used in investing activities
|
(73)
|
—
|
(73)
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
Payments
on line of credit
|
(1,000)
|
—
|
(1,000)
|
Proceeds
from secured borrowing arrangement, net of reserves
|
23,785
|
—
|
23,785
|
Payments
on secured borrowing arrangement, net of fees
|
(26,383)
|
—
|
(26,383)
|
Repayment
of capital lease obligations
|
(69)
|
—
|
(69)
|
Net
cash (used) provided by financing activities
|
(3,667)
|
—
|
(3,667)
|
Effect
of exchange rate changes on cash
|
(7)
|
—
|
(7)
|
NET
CHANGE IN CASH
|
(3,786)
|
—
|
(3,786)
|
CASH
— BEGINNING OF PERIOD
|
6,228
|
—
|
6,228
|
CASH
— END OF PERIOD
|
$2,442
|
$—
|
$2,442
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
Cash
paid for interest
|
$1,936
|
$—
|
$1,936
|
Cash
paid for taxes
|
$69
|
$—
|
$69
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH ACTIVITIES:
|
|
|
|
Property
and equipment acquired in conjunction with capital
leases
|
$—
|
$—
|
$—
|
Purchase
of property and equipment included in current
liabilities
|
$4
|
$—
|
$4
|
Interest
paid through issuance of shares of common stock
|
$53
|
$—
|
$53
|
|
September 30, 2018
|
||
|
As Previously Reported
|
Restatement Adjustments
|
Restated (Unaudited)
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash
|
$1,749
|
$—
|
$1,749
|
Accounts
receivable, net of allowance for doubtful accounts of
$1,985
|
16,235
|
(10,245)
|
5,990
|
Inventory
|
7,324
|
3,054
|
10,378
|
Prepaid
expenses and other current assets
|
1,120
|
491
|
1,611
|
Total
current assets
|
26,428
|
(6,700)
|
19,728
|
Property
and equipment, net
|
576
|
—
|
576
|
Intangible
assets, net
|
1,077
|
—
|
1,077
|
Other
assets
|
267
|
—
|
267
|
TOTAL
ASSETS
|
$28,348
|
$(6,700)
|
$21,648
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
Current
liabilities:
|
|
|
|
Obligation
under secured borrowing arrangement
|
$594
|
$—
|
$594
|
Line
of credit
|
1,500
|
—
|
1,500
|
Accounts
payable
|
20,672
|
(3,066)
|
17,606
|
Accrued
liabilities
|
5,238
|
(260)
|
4,978
|
Accrued
restructuring charges, current
|
463
|
—
|
463
|
Total
current liabilities
|
28,467
|
(3,326)
|
25,141
|
Convertible
note with a related party, net of discount
|
17,226
|
699
|
17,925
|
Accrued
restructuring charges, long-term
|
58
|
—
|
58
|
Other
long-term liabilities
|
74
|
152
|
226
|
Total
liabilities
|
45,825
|
(2,475)
|
43,350
|
Commitments
and contingencies (Note 9)
|
|
|
|
Stockholders'
deficit:
|
|
|
|
Common
stock, par value of $0.001 per share; 100,000,000 shares authorized
16,190,288 shares issued as of September 30, 2018; 15,314,667
shares outstanding as of September 30, 2018
|
15
|
—
|
15
|
Additional
paid-in capital
|
160,038
|
(1,212)
|
158,826
|
Treasury
stock, at cost; 875,621 shares
|
(10,039)
|
—
|
(10,039)
|
Accumulated
other comprehensive loss
|
(169)
|
—
|
(169)
|
Accumulated
deficit
|
(167,322)
|
(3,013)
|
(170,335)
|
TOTAL
STOCKHOLDERS’ DEFICIT
|
(17,477)
|
(4,225)
|
(21,702)
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
$28,348
|
$(6,700)
|
$21,648
|
|
Three Months Ended September 30, 2018
|
||
|
As Previously Reported
|
Restatement Adjustments
|
Restated (Unaudited)
|
Revenue,
net
|
$27,388
|
$(5,453)
|
$21,935
|
Cost
of revenue
|
18,595
|
(2,211)
|
16,384
|
Gross
profit
|
8,793
|
(3,242)
|
5,551
|
Operating
expenses:
|
|
|
|
Advertising
and promotion
|
3,589
|
(3,072)
|
517
|
Salaries
and benefits
|
1,856
|
—
|
1,856
|
Selling,
general and administrative
|
2,974
|
158
|
3,132
|
Research
and development
|
185
|
—
|
185
|
Professional
fees
|
436
|
—
|
436
|
Impairment
of assets
|
743
|
(743)
|
—
|
Total
operating expenses
|
9,783
|
(3,657)
|
6,126
|
Loss
from operations
|
(990)
|
415
|
(575)
|
Other
(expense) income:
|
|
|
|
Interest
and other expense, net
|
(990)
|
140
|
(850)
|
Loss
before income taxes
|
(1,980)
|
555
|
(1,425)
|
Income
taxes (benefit)
|
(3)
|
—
|
(3
|
Net
loss
|
$(1,977)
|
$555
|
(1,422)
|
|
|
|
|
Net
loss per share, basic and diluted
|
$(0.13)
|
$0.04
|
(0.09)
|
|
|
|
|
Weighted
average shares used to compute net loss per share, basic and
diluted
|
15,029,312
|
8,354
|
15,037,666
|
|
Nine Months Ended September 30, 2018
|
||
|
As Previously Reported
|
Restatement Adjustments
|
Restated (Unaudited)
|
Revenue,
net
|
$81,039
|
$(13,091)
|
$67,948
|
Cost
of revenue
|
55,875
|
(3,210)
|
52,665
|
Gross
profit
|
25,164
|
(9,881)
|
15,283
|
Operating
expenses:
|
|
|
|
Advertising
and promotion
|
12,241
|
(10,031)
|
2,210
|
Salaries
and benefits
|
6,305
|
—
|
6,305
|
Selling,
general and administrative
|
8,175
|
114
|
8,289
|
Research
and development
|
605
|
—
|
605
|
Professional
fees
|
1,634
|
148
|
1,782
|
Impairment
of assets
|
743
|
(743)
|
—
|
Total
operating expenses
|
29,703
|
(10,512)
|
19,191
|
Loss
from operations
|
(4,539)
|
631
|
(3,908)
|
Other
(expense) income:
|
|
|
|
Gain
on settlement of obligation
|
2,747
|
—
|
2,747
|
Interest
and other expense, net
|
(3,463)
|
511
|
(2,952)
|
Loss
before income taxes
|
(5,255)
|
1,142
|
(4,113)
|
Income
taxes
|
100
|
—
|
100
|
Net
loss
|
$(5,355)
|
$1,142
|
(4,213)
|
|
|
|
|
Net
loss per share, basic and diluted
|
$(0.36)
|
$0.08
|
(0.28)
|
|
|
|
|
Weighted
average shares used to compute net loss per share, basic and
diluted
|
14,783,669
|
214,430
|
14,998,099
|
|
Nine
Months Ended September 30, 2018
|
||
|
As
Previously Reported
|
Restatement
Adjustments
|
Restated
(Unaudited)
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
Net
loss
|
$(5,355)
|
$1,142
|
$(4,213)
|
Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities:
|
|
|
|
Depreciation
and amortization
|
822
|
(169)
|
653
|
Settlement
of obligation
|
(2,747)
|
2,747
|
—
|
Bad
debt expense
|
822
|
—
|
822
|
Impairment
of assets
|
743
|
(743)
|
—
|
Amortization
of debt discount
|
557
|
(513)
|
44
|
Inventory
provision
|
—
|
130
|
130
|
Stock-based
compensation
|
377
|
—
|
377
|
Changes
in operating assets and liabilities:
|
|
|
|
Accounts
receivable
|
(454)
|
3,629
|
3,175
|
Inventory
|
(755)
|
(193)
|
(948)
|
Prepaid
expenses and other current assets
|
(114)
|
(491)
|
(605)
|
Other
assets
|
(44)
|
—
|
(44)
|
Accounts
payable and accrued liabilities
|
8,365
|
(5,539)
|
2,826
|
Accrued
restructuring charges
|
(194)
|
—
|
(194)
|
Net
cash provided by operating activities
|
2,023
|
—
|
2,023
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
Purchase
of property and equipment
|
(86)
|
—
|
(86)
|
Net
cash used in investing activities
|
(86)
|
—
|
(86)
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
Payments
on line of credit
|
(1,500)
|
—
|
(1,500)
|
Proceeds
from secured borrowing arrangement, net of reserves
|
31,677
|
—
|
31,677
|
Payments
on secured borrowing arrangement, net of fees
|
(36,469)
|
—
|
(36,469)
|
Repayment
of capital lease obligations
|
(101)
|
—
|
(101)
|
Net
cash (used in) provided by financing activities
|
(6,393)
|
—
|
(6,393)
|
Effect
of exchange rate changes on cash
|
(23)
|
—
|
(23)
|
NET
CHANGE IN CASH
|
(4,479)
|
—
|
(4,479)
|
CASH
— BEGINNING OF PERIOD
|
6,228
|
—
|
6,228
|
CASH
— END OF PERIOD
|
$1,749
|
$—
|
$1,749
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
Cash
paid for interest
|
$2,727
|
$—
|
$2,727
|
Cash
paid for taxes
|
$173
|
$—
|
$173
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH ACTIVITIES:
|
|
|
|
Purchase
of property and equipment included in current
liabilities
|
$12
|
$—
|
$12
|
Interest
paid through issuance of shares of common stock
|
$53
|
$—
|
$53
|
|
|
|
|
Incorporated by Reference
|
||||||
Exhibit No.
|
|
Description
|
|
Form
|
|
SEC File Number
|
|
Exhibit
|
|
Filing Date
|
|
|
|
|
|
|
|
|
|
|
|
|
Articles of
Incorporation of MusclePharm Corporation (successor to Tone in
Twenty).
|
|
SB-2
|
|
333-147111
|
|
3.1
|
|
November 2, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amendment
to the Articles of Incorporation.
|
|
SB-2
|
|
333-147111
|
|
3.3
|
|
November 2,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amendment
to the Articles of Incorporation.
|
|
8-K
|
|
000-53166
|
|
3.3
|
|
February 24,
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amendment
to the Articles of Incorporation.
|
|
10-Q
|
|
000-53166
|
|
3.1
|
|
May 23,
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amendment
to the Articles of Incorporation.
|
|
8-K
|
|
000-53166
|
|
3.1
|
|
November 23, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amendment
to the Articles of Incorporation.
|
|
8-K
|
|
000-53166
|
|
3.1
|
|
January 27,
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amendment
to the Articles of Incorporation.
|
|
8-K
|
|
000-53166
|
|
3.1
|
|
March 30,
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificate
of Change.
|
|
8-K
|
|
000-53166
|
|
3.1
|
|
November 28,
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificate of
Amendment to Articles of Incorporation.
|
|
8-K
|
|
000-53166
|
|
3.2
|
|
November 28,
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificate
of Correction.
|
|
S-1/A
|
|
333-184625
|
|
3.15
|
|
December 26,
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second
Amended and Restated Bylaws.
|
|
8-K
|
|
000-53166
|
|
3.1
|
|
September
27, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specimen of
certificate for MusclePharm Corporation Common Stock.
|
|
S-1/A
|
|
333-184625
|
|
4.4
|
|
December 28,
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant, dated
November 7, 2016 by and between MusclePharm Corporation and INI
Buyer, Inc.
|
|
10-Q
|
|
000-53166
|
|
4.1
|
|
November
9, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
Incentive Compensation Plan.
|
|
S-8
|
|
333-212576
|
|
4.14
|
|
July
18, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
4.4**
|
|
Description
of Registrant’s Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchasing
Agreement with General Nutrition Corporation dated
December 16, 2009.
|
|
8-K
|
|
000-53166
|
|
10.2
|
|
February 24,
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Registration Rights Agreement, dated July 13, 2012, between
MusclePharm Corporation and TCA Global Credit Master Fund
LP.
|
|
8-K
|
|
000-53166
|
|
10.1
|
|
July 20,
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Form of
Indemnification Agreement.
|
|
8-K
|
|
000-53166
|
|
10.1
|
|
August 27, 2012
|
|
|
|
|
Incorporated by Reference
|
||||||
Exhibit No.
|
|
Description
|
|
Form
|
|
SEC File Number
|
|
Exhibit
|
|
Filing Date
|
|
|
|
|
|
|
|
|
|
|
|
10.4*
|
|
MusclePharm
Corporation 2015 Incentive Compensation Plan.
|
|
S-8
|
|
000-53166
|
|
4.14
|
|
July
18, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Confidentiality and
Non-Disclosure Agreement, dated June 23, 2015, between
MusclePharm Corporation and Consac, LLC, an affiliate of
Ryan Drexler.
|
|
10-Q
|
|
000-53166
|
|
10.6
|
|
August 10,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
10.6*
|
|
Executive
Employment Agreement, dated February 11, 2016, between
MusclePharm Corporation and Ryan Drexler.
|
|
8-K
|
|
000-53166
|
|
10.1
|
|
February 16, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Agreement for
Purchase and Sale of Stock dated April 21, 2016, between
MusclePharm Corporation and BioZone Laboratories, Inc., BioZone
Holdings, Inc. and Flavor Producers, Inc.
|
|
8-K
|
|
000-53166
|
|
10.1
|
|
April
27, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible Secured
Promissory Note, dated November 8, 2016, by and between MusclePharm
Corporation and Ryan Drexler.
|
|
10-Q
|
|
000-53166
|
|
10.1
|
|
November
9, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amended
and Restated Security Agreement, dated November 8, 2016, by and
between MusclePharm Corporation and Ryan Drexler.
|
|
10-Q
|
|
000-53166
|
|
10.2
|
|
November
9, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement
Agreement, dated November 7, by and among MusclePharm Corporation
and F.H.G. Corporation d/b/a Capstone Nutrition, INI Parent, Inc.,
INI Buyer, Inc. and Medley Capital Corporation.
|
|
10-Q
|
|
000-53166
|
|
10.3
|
|
November
9, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amended
and Restated Executive Employment Agreement, between MusclePharm
Corporation and Ryan Drexler.
|
|
8-K
|
|
000-53166
|
|
10.1
|
|
March
1, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible Secured
Promissory Note, dated December 7, 2015, by and between MusclePharm
Corporation and Ryan Drexler.
|
|
10-K
|
|
000-53166
|
|
10.14
|
|
March
15, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Amendment to Convertible Secured Promissory Note, dated December 7,
2015, by and between MusclePharm Corporation and Ryan
Drexler.
|
|
10-K
|
|
000-53166
|
|
10.15
|
|
March
15, 2017
|
|
|
|
|
Incorporated by Reference
|
||||||
Exhibit No.
|
|
Description
|
|
Form
|
|
SEC File
Number
|
|
Exhibit
|
|
Filing Date
|
|
|
|
|
|
|
|
|
|
|
|
|
Amended
and Restated Executive Employment Agreement, between MusclePharm
Corporation and Ryan Drexler
|
|
8-K
|
|
000-53166
|
|
99.1
|
|
March
1, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
Agreement for the Corporate Headquarters located in Burbank, CA
effective October 1, 2017
|
|
10-K
|
|
000-53166
|
|
10.16
|
|
April
2, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
Employment Agreement, between MusclePharm Corporation and Brian
Casutto
|
|
10-K
|
|
000-53166
|
|
10.17
|
|
April
2, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Code of
Ethics.
|
|
8-K
|
|
000-53166
|
|
14
|
|
April 23, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
Governance Guidelines, adopted March 8, 2015.
|
|
10-Q
|
|
000-53166
|
|
99.1
|
|
May 11,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
21.1**
|
|
Subsidiaries of the
Registrant.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.1**
|
|
Consent
of Independent Public Accounting Firm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1**
|
|
Certification of
the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2**
|
|
Certification of
the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1***
|
|
Certification of
the Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.2***
|
|
Certification of
the Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101**
|
|
The
following materials from MusclePharm Corporation’s annual
report on Form 10-K for the year ended December 31, 2018 formatted
in XBRL (eXtensible Business Reporting Language): (i) the
Consolidated Balance Sheets; (ii) the Consolidated Statements of
Operations; (iii) the Consolidated Statements of Comprehensive
Income; (iv) the Consolidated Statements of Changes in
Stockholders’ Deficit; (v) the Consolidated Statements of
Cash Flows; and (vi) related notes to these financial
statements.
|
|
1.
|
I have
reviewed this Annual Report on Form 10-K of MusclePharm
Corporation;
|
||
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the
period covered by this report;
|
||
|
3.
|
Based
on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods present in this
report;
|
||
|
4.
|
The
registrant’s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
|
||
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
|
||
|
b)
|
Designed
such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
|
||
|
c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
|
||
|
d)
|
Disclosed
in this report any change in the registrant’s internal
control over financing reporting that occurred during the
registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over
financial reporting; and
|
||
|
5.
|
The
registrant’s other certifying officer and I have disclosed,
based on my most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the
audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
|
||
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial
information; and
|
||
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s
internal control over financial reporting.
|
|
|
|
|
Date:
August 24, 2020
|
|
By:
|
/s/ Ryan Drexler
|
|
|
|
Ryan
Drexler
|
|
|
|
Chief
Executive Officer
|
|
|
|
(Principal
Executive Officer)
|
|
1.
|
I have
reviewed this Annual Report on Form 10-K of MusclePharm
Corporation;
|
||
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the
period covered by this report;
|
||
|
3.
|
Based
on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods present in this
report;
|
||
|
4.
|
The
registrant’s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
|
||
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
|
||
|
b)
|
Designed
such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
|
||
|
c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
|
||
|
d)
|
Disclosed
in this report any change in the registrant’s internal
control over financing reporting that occurred during the
registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over
financial reporting; and
|
||
|
5.
|
The
registrant’s other certifying officer and I have disclosed,
based on my most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the
audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
|
||
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial
information; and
|
||
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s
internal control over financial reporting.
|
|
|
|
|
Date:
August 24, 2020
|
|
By:
|
/s/ Allen Sciarillo
|
|
|
|
Allen
Sciarillo
|
|
|
|
Chief
Financial Officer
|
|
|
|
(Principal
Financial Officer and Principal Accounting Officer)
|
|
(1)
|
The
Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended;
and
|
|
(2)
|
The
information contained in the Report, fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
|
|
|
|
|
Date:
August 24, 2020
|
|
By:
|
/s/
Ryan Drexler
|
|
|
|
Ryan
Drexler
Chief
Executive Officer
(Principal
Executive Officer)
|
|
(1)
|
The
Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended;
and
|
|
(2)
|
The
information contained in the Report, fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
|
|
|
|
|
Date:
August 24, 2020
|
|
By:
|
/s/
Allen Sciarillo
|
|
|
|
Allen
Sciarillo
|
|
|
|
Chief
Financial Officer
(Principal
Financial Officer and Principal Accounting Officer)
|
|
|
|
|
Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Aug. 18, 2020 |
Jun. 30, 2020 |
|
Cover [Abstract] | |||
Entity Registrant Name | MusclePharm Corp | ||
Entity Central Index Key | 0001415684 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2019 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | No | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Interactive Data Current | Yes | ||
Entity Incorporation, State or Country Code | NV | ||
Entity File Number | 000-53166 | ||
Entity Public Float | $ 1,900,000 | ||
Entity Common Stock, Shares Outstanding | 33,101,866 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2019 |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, par value | $ .001 | $ 0.001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 33,876,033 | 16,190,288 |
Common stock, shares outstanding | 33,000,412 | 15,314,667 |
Treasury stock, shares | 875,621 | 875,621 |
Consolidated Statements of Operations - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2018 |
Sep. 30, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Income Statement [Abstract] | ||||||||
Revenue, net | $ 21,935 | $ 21,827 | $ 24,187 | $ 46,014 | $ 67,948 | $ 79,667 | $ 88,113 | $ 93,586 |
Cost of revenue | 16,384 | 17,117 | 19,165 | 36,282 | 52,665 | 70,979 | 69,719 | 70,642 |
Gross profit | 5,551 | 4,710 | 5,022 | 9,732 | 15,283 | 8,688 | 18,394 | 22,944 |
Operating expenses: | ||||||||
Advertising and promotion | 517 | 879 | 814 | 1,693 | 2,210 | 2,487 | 2,939 | 2,435 |
Salaries and benefits | 1,856 | 2,295 | 2,154 | 4,449 | 6,305 | 7,910 | 8,328 | 10,134 |
Selling, general and administrative | 3,132 | 2,670 | 2,487 | 5,157 | 8,289 | 8,899 | 11,610 | 13,582 |
Research and development | 185 | 208 | 212 | 420 | 605 | 893 | 751 | 642 |
Professional fees | 436 | 626 | 720 | 1,346 | 1,782 | 3,606 | 2,598 | 3,230 |
Total operating expenses | 6,126 | 6,678 | 6,387 | 13,065 | 19,191 | 23,795 | 26,226 | 29,593 |
Loss from operations | (575) | (1,968) | (1,365) | (3,333) | (3,908) | (15,107) | (7,832) | (6,649) |
Other (expense) income: | ||||||||
(Loss) gain on settlement of obligations | 2,747 | 2,747 | 2,747 | (125) | 1,074 | (1,877) | ||
Interest and other expense, net | (850) | (1,025) | (1,077) | (2,102) | (2,952) | (3,609) | (3,897) | (3,841) |
Loss before provision for income taxes | (1,425) | (246) | (2,442) | (2,688) | (4,113) | (18,841) | (10,655) | (12,367) |
Provision for income taxes | (3) | 34 | 69 | 103 | 100 | 86 | 100 | 142 |
Net loss | $ (1,422) | $ (280) | $ (2,511) | $ (2,791) | $ (4,213) | $ (18,927) | $ (10,755) | $ (12,509) |
Net loss per share, basic and diluted | $ (0.09) | $ (0.02) | $ (0.17) | $ (0.19) | $ (0.28) | $ (0.92) | $ (0.72) | $ (0.88) |
Weighted average shares used to compute net loss per share, basic and diluted | 15,037,666 | 14,998,531 | 14,957,217 | 14,977,988 | 14,998,099 | 20,475,313 | 15,023,872 | 14,215,399 |
Consolidated Statement of Comprehensive Loss - USD ($) $ in Thousands |
12 Months Ended | |
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Dec. 31, 2019 |
Dec. 31, 2018 |
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Statement of Comprehensive Income [Abstract] | ||
Net loss | $ (18,927) | $ (10,755) |
Other comprehensive loss: | ||
Change in foreign currency translation adjustment | (184) | (88) |
Comprehensive loss | $ (19,111) | $ (10,843) |
Note 1 - Description of Business |
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Dec. 31, 2019 | |||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||
Description of Business | Description of Business
MusclePharm Corporation was incorporated in Nevada in 2006. Except as otherwise indicated herein, or the context requires otherwise, the terms “MusclePharm,” “the Company,” “we,” “our” and “us” refer to MusclePharm Corporation and its subsidiaries. The Company is a scientifically-driven, performance lifestyle company that develops, manufactures, markets and distributes branded sports nutrition products and nutritional supplements. Our portfolio of recognized brands, including MusclePharm® and FitMiss®, is marketed and sold in more than 100 countries globally. The Company is headquartered in Burbank, California and, as of December 31, 2019 had the following wholly-owned operating subsidiaries: MusclePharm Canada Enterprises Corp., MusclePharm Ireland Limited and MusclePharm Australia Pty Limited.
The Company has incurred significant losses and experienced negative cash flows since inception. As of December 31, 2019, the Company had cash of $1.5 million, a decline of $0.8 million from the December 31, 2018 balance of $2.3 million. This decline is due to a net loss of $18.9 million, offset by non-cash adjustments of $2.0 million, cash provided by a change in operating assets and liabilities of $10.4 million and cash provided by financing activities of $5.7 million. Our working capital was a deficit of $29.4 million as of December 31, 2019, and we had a stockholders’ deficit of $28.0 million and recurring losses from operations resulting in an accumulated deficit of $195.9 million. As a result of our history of losses and financial condition, there is substantial doubt about our ability to continue as a going concern. For financial information concerning more recent periods, see our reports for such periods filed with the SEC.
The ability to continue as a going concern is dependent upon us generating profits in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management is evaluating different strategies to obtain financing to fund our expenses and achieve a level of revenue adequate to support our current cost structure. Financing strategies may include, but are not limited to, private placements of capital stock, debt borrowings, partnerships and/or collaborations.
In response to the Company’s continued losses in 2018, management implemented the following plans to improve the Company’s operating costs:
Despite these measures, during 2019, the Company continued to incur substantial losses. In order to improve the Company’s operating results, management has continued to focus on its 2018 initiatives. In addition, during the fourth quarter of 2019, management implemented the following measures to improve gross margin:
As a result of these measures, as well as a reduction in protein prices, the Company realized increased gross margins in the fourth quarter of 2019, a trend which continued through the first and second quarters of 2020. Beginning in April 2020, the Company began to experience a slowdown in sales from its retail customers, including its largest customer. This decline has been offset by a growth in sales to our online customers, including our largest online customer, although there can be no assurances that such growth will continue, or that the Company will have the financial resources to produce the additional quantities required by this customer. Management believes reductions in operating costs, and continued focus on gross margin, primarily pricing controls and a reduction in product discounts and promotional activity with the Company’s customers, will allow us to ultimately achieve profitability, however, the Company can give no assurances that this will occur. To manage cash flow, the Company has entered into multiple financing arrangements. See additional information in “Note 8. Debt.”
Our results of operations are affected by economic conditions, including macroeconomic conditions and levels of business confidence. There continues to be significant volatility and economic uncertainty in many markets and the ongoing COVID-19 pandemic has increased that level of volatility and uncertainty and has created economic disruption. We are actively managing our business to respond to the impact.
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Note 2 - Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Basis of Presentation and Principles of Consolidation
The accompanying Consolidated Financial Statements are prepared using the accrual method of accounting in accordance with GAAP and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Consolidated Financial Statements include the accounts of MusclePharm Corporation and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes. Such estimates include, but are not limited to, allowance for doubtful accounts, revenue discounts and allowances, the valuation of inventory and deferred tax assets, the assessment of useful lives, recoverability and valuation of long-lived assets, likelihood and range of possible losses on contingencies, restructuring liabilities, valuations of equity securities and intangible assets, fair value of derivatives, warrants and options, present value of lease liabilities, among others. Actual results could differ from those estimates.
Cash
The Company considers all highly liquid investments purchased with an original maturity of three months or less at the date of purchase and money market accounts to be cash equivalents. As of December 31, 2019 and 2018, the Company had no cash equivalents and all cash amounts consisted of cash on deposit.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable represents trade obligations from customers that are subject to normal trade collection terms and are recorded at the invoiced amount, net of any sales discounts and allowance for doubtful accounts, and do not typically bear interest. The Company assesses the collectability of the accounts by taking into consideration the aging of accounts receivable, changes in customer credit worthiness, general market and economic conditions, and historical experience. Bad debt expenses are recorded as part of “Selling, general and administrative” expenses in the consolidated statements of operations. The Company writes off the receivable balance against the allowance when management determines a balance is uncollectible. The Company also reviews its customer discounts and an accrual is made for discounts earned but not yet utilized at each period end.
The Company performs ongoing evaluations of its customers’ financial condition and generally does not require collateral. Some international customers are required to pay for their orders in advance of shipment. Accounts receivable consisted of the following as of December 31, 2019 and 2018 (in thousands):
The allowance for discounts and returns consisted of the following activity for the years ended December 31, 2019 and 2018 (in thousands):
Revenue Recognition
The Company adopted ASC 606, “Revenue from Contracts with Customers,” effective January 1, 2018. With the adoption of the new standard, revenue is recognized when control of the promised goods or services is transferred to the Company’s customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
The Company sells a variety of protein products through a broad distribution platform that includes supermarkets, mass merchandisers, wholesale clubs, drugstores, convenience stores, home stores, specialty stores and websites and other e-commerce channels, all of which sell our products to consumers.
For performance obligations related to the shipping and invoicing of products, control transfers at the point in time upon which finished goods are delivered to the Company’s customers or when finished goods are picked up by a customer or a customer’s carrier, depending on shipping terms. Once a product has been delivered or picked up by the customer, the customer is able to direct the use of, and obtain substantially all of the remaining benefits from, the asset. The Company considers control to have transferred upon delivery or customer receipt because the Company has an enforceable right to payment at that time, the customer has legal title to the asset, the Company has transferred physical possession of the asset, and the customer has significant risk and rewards of ownership of the asset.
The Company conducts extensive promotional activities, primarily through the use of off-list discounts, slotting, coupons, cooperative advertising, periodic price reduction arrangements, and end-aisle and other in-store displays. The costs of such activities are netted against sales and are recorded when the related sale takes place. The reserves for sales returns and consumer and trade promotion liabilities are established based on the Company’s best estimate of the amounts necessary to settle future and existing obligations for products sold as of the balance sheet date. To determine the appropriate timing of recognition of consideration payable to a customer, all consideration payable to our customers is reflected in the transaction price at inception and reassessed routinely.
The Company expenses incremental direct costs of obtaining a contract (broker commissions) when the related sale takes place, since the amortization period of the commissions paid for the sale of products is less than a year. These costs are recorded in “Selling, general and administrative” expenses in the accompanying consolidated statements of operations. The Company accounts for shipping and handling costs as fulfillment activities which are therefore recognized upon shipment of the goods.
Shipping and handling costs related to inbound purchases of raw material and finished goods are included in cost of revenues in our consolidated statements of operations. For the years ended December 31, 2019 and 2018, the Company incurred $1.2 million and $1.8 million, respectively, of inbound shipping and handling costs. Shipping and handling costs related to shipments to our customers is included in “Selling, general and administrative” expense in our consolidated statements of operations. For the years ended December 31, 2019 and 2018, the Company incurred $3.8 million and $4.2 million, respectively, of shipping and handling costs related to shipments to our customers.
The Company excludes from its revenue any amounts collected from customers for sales (and similar) taxes. During the years ended December 31, 2019 and 2018, the Company recorded discounts, and to a lesser degree, sales returns, totaling $26.9 million and $33.5 million, respectively, which accounted for 25% and 28% of gross revenue in each period, respectively.
The Company adopted ASC 606 using the modified retrospective method and the cumulative effect of this change in accounting method for the expected value of customer credits related to certain contracts in place, as defined by ASC 606, is presented below:
Concentrations
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The cash balance at times may exceed federally insured limits. Management believes the financial risk associated with these balances is minimal and has not experienced any losses to date. Significant customers are those that represent more than 10% of the Company’s net revenue or accounts receivable for each period presented. For each significant customer, percentage of net revenue and accounts receivable are as follows:
* Represents less than 10% of net revenue or net accounts receivable.
The Company uses a limited number of non-affiliated suppliers for contract manufacturing its products. The Company has quality control and manufacturing agreements in place with its primary manufacturers to ensure consistency in production and quality. The agreements ensure products are manufactured to the Company’s specifications and the contract manufacturers will bear the costs of recalled product due to defective manufacturing.
The Company had the following concentration of purchases with contract manufacturers for years ended December 31, 2019 and 2018:
* Represents less than 10% of purchases.
Inventory
Inventory consisted solely of finished goods and raw materials, used to manufacture our products by one of our co-manufacturers as of December 31, 2019 and 2018. The Company records charges for obsolete and slow-moving inventory based on the age of the product as determined by the expiration date or otherwise determined to be obsolete. Products within one year of their expiration dates are considered for write-off purposes. Inventory write-downs, once established, are not reversed as they establish a new cost basis for the inventory. Historically, the Company has had minimal returns with established customers. The Company incurred insignificant inventory write-offs during the years ended December 31, 2019 and 2018.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of various payments the Company has made in advance for goods or services to be received in the future. These prepaid expenses include legal retainers, giveaways, print advertising, insurance and service contracts requiring up-front payments.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed on a straight-line basis over the estimated useful lives of the respective assets or, in the case of leasehold improvements, the remaining lease term, if shorter. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are removed, and the resulting gains or losses are recorded in the statements of operations. Repairs and maintenance costs are expensed as incurred.
The estimated useful lives of the property and equipment are as follows:
Intangible Assets
Acquired intangible assets are recorded at estimated fair value, net of accumulated amortization, and costs incurred in obtaining certain trademarks are capitalized, and are amortized over their related useful lives, using a straight-line basis consistent with the underlying expected future cash flows related to the specific intangible asset.
Costs to renew or extend the life of intangible assets are capitalized and amortized over the remaining useful life of the asset. Amortization expenses are included as a component of “Selling, general and administrative” expenses in the consolidated statements of operations. The estimated useful life of the intangible assets is 7 years.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances exist that indicate the carrying amount of an asset may not be recoverable. When indicators of impairment exist, an estimate of undiscounted future cash flows is used in measuring whether the carrying amount of the asset or related asset group is recoverable. Measurement of the amount of impairment, if any, is based upon the difference between the asset’s carrying value and estimated fair value. There were no impairments for the years ended December 31, 2019 and 2018.
Fair Value
GAAP defines fair value as the exchange price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company measures its financial assets and liabilities at fair value at each reporting period using an estimated fair value hierarchy which requires the Company to use observable inputs and minimize the use of unobservable inputs when measuring fair value.
A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Cost of Revenue
Cost of revenue for MusclePharm and its subsidiaries represents costs directly related to the production, manufacturing and freight-in of the Company’s products purchased from third-party manufacturers.
Advertising and Promotion
Our advertising and promotion expenses consist primarily of digital, print and media advertising, athletic endorsements and sponsorships, promotional giveaways, trade show events and various partnering activities with our retail partners, and are expensed as incurred.
Some of the contracts provide for contingent payments to endorsers or athletes based upon specific achievement in their sports, such as winning a championship. The Company records expense for these payments if and when the endorser achieves the specific achievement.
Share-Based Payments and Stock-Based Compensation
Share-based compensation awards, including stock options and restricted stock awards, are recorded at estimated fair value on the applicable awards’ grant date, based on the estimated number of awards that are expected to vest. The grant date fair value is amortized on a straight-line basis over the time in which the awards are expected to vest, or immediately if no vesting is required. Share-based compensation awards issued to non-employees for services are also recorded at fair value on the grant date. The fair value of restricted stock awards is based on the fair value of the stock underlying the awards on the grant date as there is no exercise price.
The fair value of stock options is estimated using the Black-Scholes option-pricing model. The determination of the fair value of each stock award using this option-pricing model is affected by the Company’s assumptions regarding a number of complex and subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the awards and the expected term of the awards based on an analysis of the actual and projected employee stock option exercise behaviors and the contractual term of the awards. Due to the Company’s limited experience with the expected term of options, the simplified method was utilized in determining the expected option term as prescribed in Staff Accounting Bulletin No. 110.
The Company recognizes stock-based compensation expense over the requisite service period, which is generally consistent with the vesting of the awards, based on the estimated fair value of all stock-based payments issued to employees and directors that are expected to vest.
Foreign Currency
The functional currency of the Company’s foreign subsidiaries, MusclePharm Canada, MusclePharm Australia, and MusclePharm Ireland, is the local currency. The assets and liabilities of the foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at each balance sheet date. Revenue and expenses are translated at average exchange rates in effect during the year. Equity transactions are translated using historical exchange rates. The resulting translation adjustments are recorded to a separate component of “Accumulated other comprehensive loss” in the consolidated balance sheets.
Foreign currency gains and losses resulting from transactions denominated in a currency other than the functional currency are included in “Interest and other expense, net” in the consolidated statements of operations.
Comprehensive Loss
Comprehensive loss is composed of two components: net loss and other comprehensive loss. Other comprehensive loss refers to revenue, expenses, gains and losses that under GAAP are recorded as an element of stockholders’ deficit, and are excluded from the Company’s net loss. The Company’s other comprehensive loss is made up of foreign currency translation adjustments for both periods presented.
Segments
Management has determined that it currently operates in one segment. The Company’s chief operating decision maker reviews financial information on a consolidated basis, together with certain operating and performance measures principally to make decisions about how to allocate resources and to measure the Company’s performance.
Income Taxes
Income taxes are accounted for using the asset and liability method. Income tax expense includes the current tax liability from operations and the change in deferred income taxes during the year. Interest income, interest expense and penalties associated with income taxes are reflected in "Income tax expense" on the consolidated statements of income. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases, operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
A valuation allowance is required to be established unless management determines that it is more likely than not that we will ultimately realize the tax benefit associated with a deferred tax asset. We recognize the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely to be realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes Topic 840, Leases (“ASU 2016-02”). The guidance in this new standard requires lessees to put most leases on their balance sheets but recognize expenses on their income statements in a manner similar to the current accounting. The new lease standards also provide practical expedients for an entity's ongoing accounting. In July 2018, the FASB issued ASU No. 2018-11, Leases (842), Targeted Improvements (“ASU 2018-11”), which provides an additional transition election to not restate comparative periods for the effects of applying the new standard. This transition election permits entities to apply ASU 2016-02 on the adoption date and recognize a cumulative-effect adjustment to the opening balance of accumulated deficit. These ASU's are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018.
The Company adopted the ASUs, as of January 1, 2019, using the modified retrospective transition method prescribed by ASU 2018-11. Under this transition method, financial results reported in periods prior to the first quarter of 2019 are unchanged. As a result of the adoption of the ASUs, the Company recorded a ROU asset and liability of $2.1 million. Also as a result of the adoption, the Company reclassified $0.2 million of liabilities on its consolidated balance sheets as of January 1, 2019 against the operating lease ROU asset. The adoption of these ASUs did not result in a cumulative-effect adjustment to the opening balance of accumulated deficit.
In addition, the Company elected the package of practical expedients permitted by the transition guidance. The adoption of these ASU’s did not have an impact on the Company’s consolidated statements of operations or cash flows.
In July 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which among other things, these amendments require the measurement of all expected credit losses of financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 is effective for periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company is in the process of evaluating the impact of the pronouncement.
On September 20, 2018, FASB issued Accounting Standards Update No. 2018-07, “Compensation - Stock Compensation” (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to non-employees. This ASU expands the scope of ASC Topic 718, “Compensation - Stock Compensation”, which currently only includes share-based payments issued to employees, to also include share-based payments issued to non-employees for goods and services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned. ASU 2018-07 supersedes ASC Subtopic 505-50, “Equity - Equity-Based Payments to Non-Employees”. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The new standard has been adopted by the Company. The Company has evaluated the impact of ASU 2018-07 on its consolidated financial statements and it did not have a material impact.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, expected to reduce cost and complexity related to the accounting for income taxes. The ASU removes specific exceptions to the general principles in Topic 740 in GAAP. It eliminates the need for an organization to analyze whether the following apply in a given period: exception to the incremental approach for intra-period tax allocation; exceptions to accounting for basis differences when there are ownership changes in foreign investments; and exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. The ASU also improves financial statement preparers’ application of income tax-related guidance and simplifies GAAP for: franchise taxes that are partially based on income; transactions with a government that result in a step up in the tax basis of goodwill; separate financial statements of legal entities that are not subject to tax; and enacted changes in tax laws in interim periods. The Company is evaluating the impact of the pronouncement.
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Note 3 - Fair Value of Financial Instruments |
12 Months Ended |
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Dec. 31, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Financial Instruments | Management believes the fair values of the Company’s debt obligations approximate carrying value because the debts carry market rates of interest available to the Company. As of December 31, 2019 and 2018, the Company held no assets or liabilities that required re-measurement at fair value on a recurring basis.
Purchase Commitment
Upon the completion of the sale of a former subsidiary, BioZone Laboratories, Inc. (“BioZone”), on May 9, 2016, the Company entered into a manufacturing and supply agreement whereby the Company agreed to minimum purchase requirements of products from BioZone over a three-year period. The Company fell below the requirements, and as a result, the Company reserved an amount to cover the estimated purchase commitment shortfall during the year ended December 31, 2018.
In July 2019, the Company settled this matter through the payment of $0.6 million and the issuance of 150,000 shares of the Company’s common stock, which was valued at $60,000 on the settlement date.
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Note 4 - Restructuring |
12 Months Ended |
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Dec. 31, 2019 | |
Restructuring and Related Activities [Abstract] | |
Restructuring | As part of an effort to better focus and align the Company’s resources toward profitable growth, on August 24, 2015, the Board authorized the Company to undertake steps to commence a restructuring of the business and operations, which concluded during the third quarter of 2016. As of December 31, 2018, the Company had a balance of $0.4 million, representing contract termination costs and $0.1 million representing abandoned lease facilities. As of December 31, 2019, the Company had made payments to settle all the outstanding contract termination costs.
As a result of the adoption of the new lease standards, the restructuring liability for the company’s abandoned lease facilities was used to reduce the ROU asset, in accordance with the new standards. See additional information in “Note 6. Leases.”
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Note 5 - Balance Sheet Components |
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Balance Sheet Components | Inventory
Inventory consisted solely of finished goods and raw materials, used to manufacture our products at one of our co-manufacturers as of December 31, 2019 and 2018. The Company records charges for obsolete and slow-moving inventory based on the age of the product as determined by the expiration date or otherwise determined to be obsolete. Products within one year of their expiration dates are considered for write-off purposes.
Historically, the Company has had minimal returns with established customers. Other than write-off of inventory during restructuring activities, the Company incurred insignificant inventory write-offs during the years ended December 31, 2019 and 2018. Inventory write-downs, once established, are not reversed as they establish a new cost basis for the inventory.
Property and Equipment
Property and equipment consisted of the following as of December 31, 2019 and 2018 (in thousands):
Depreciation and amortization expense related to property and equipment was $0.3 million and $0.5 million for the years ended December 31, 2019 and 2018, respectively, which is included in “Selling, general, and administrative” expense in the accompanying consolidated statements of operations.
Intangible Assets
Intangible assets consisted of the following (in thousands):
Intangible assets amortization expense was $0.3 million for each of the years ended December 31, 2019 and 2018, which is included in “Selling, general, and administrative” expense in the accompanying consolidated statements of operations. As of December 31, 2019, the estimated future amortization expense of intangible assets is as follows (in thousands):
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Note 6 - Leases |
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Leases | The Company has operating leases for warehouse facilities and office spaces across the U.S. The remaining lease terms for these leases range from 1 to 4 years. The Company also leases manufacturing and warehouse equipment under finance lease arrangements, which expire at various dates through July 2020. The Company does not intend to extend the lease terms expiring in 2020.
In adopting the new lease standards (“ASC 842”), the Company has elected the “package of practical expedients,” which permit it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements, as the latter is not applicable to the Company. In addition, the Company elected not to apply ASC 842 to arrangements with lease terms of 12 month or less.
The Company determines if a contract contains a lease when the contract conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Upon identification and commencement of a lease, we establish a ROU asset and a lease liability.
ROU assets and lease liabilities are measured and recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. At adoption, the Company reduced the ROU asset through a derecognition of the restructuring liability for its abandoned lease facilities. Subsequent to adoption, the Company no longer recognized lease expense on a straight-line basis, as the impact of the derecognition resulted in a front-loading of the lease expenses.
Supplemental balance sheet information related to leases was as follows (in thousands):
The Company has elected the practical expedient to combine lease and non-lease components into a single component for all of its leases. Fixed lease costs represent the explicitly quantified lease payments prescribed by the lease agreement and are included in the measurement of the ROU asset and corresponding lease liability.
Some leasing arrangements require variable payments that are dependent on usage, output, or may vary for other reasons, such as insurance and tax payments. The variable lease payments are not presented as part of the initial ROU asset or lease liability. The Company's lease agreements do not contain any material restrictive covenants.
The components of lease cost for operating and finance leases for the year ended December 31, 2019 were as follows (in thousands):
The Company had no short-term leases as of December 31, 2019. The Company's leases do not provide an implicit rate; therefore, the Company uses its incremental borrowing rate based on the information available at the effective date in determining the present value of future payments for those leases.
Supplemental cash flow information related to leases was as follows:
The maturities of lease liabilities at December 31, 2019 were as follows (in thousands):
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Note 7 - Interest and Other Expense, Net |
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Interest and Other Expense, Net | For the years ended December 31, 2019 and 2018, “Interest and other expense, net” consisted of the following (in thousands):
“Other” for 2019 includes sublease income and interest income.
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Note 8 - Debt |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | As of December 31, 2019 and 2018, the Company’s debt consisted of the following (in thousands):
Related-Party Refinanced Convertible Note
On November 3, 2017, the Company entered into the refinancing with Mr. Ryan Drexler, the Company’s Chairman of the Board of Directors, Chief Executive Officer and President (the “Refinancing”). As part of the Refinancing, the Company issued to Mr. Drexler an amended and restated convertible secured promissory note (the “Refinanced Convertible Note”) in the original principal amount of $18,000,000, which amended and restated (i) a convertible secured promissory note dated as of December 7, 2015, amended as of January 14, 2017, in the original principal amount of $6,000,000 with an interest rate of 8% prior to the amendment and 10% following the amendment (the “2015 Convertible Note”), (ii) a convertible secured promissory note dated as of November 8, 2016, in the original principal amount of $11,000,000 with an interest rate of 10% (the “2016 Convertible Note”) , and (iii) a secured demand promissory note dated as of July 27, 2017, in the original principal amount of $1,000,000 with an interest rate of 15% (the “2017 Note”, and together with the 2015 Convertible Note and the 2016 Convertible Note, collectively, the “Prior Notes”). The due date of the 2015 Convertible Note and the 2016 Convertible Note was November 8, 2017. The 2017 Note was due on demand.
The $18.0 million Refinanced Convertible Note bears interest at the rate of 12% per annum. Interest payments are due on the last day of each quarter. At the Company’s option (as determined by its independent directors), the Company may repay up to one-sixth of any interest payment by either adding such amount to the principal amount of the note or by converting such interest amount into an equivalent amount of the Company’s common stock. Any interest not paid when due shall be capitalized and added to the principal amount of the Refinanced Convertible Note and bear interest on the applicable interest payment date along with all other unpaid principal, capitalized interest, and other capitalized obligations. Both the principal and the interest under the Refinanced Convertible Note were due on December 31, 2019, unless converted earlier. Mr. Drexler may convert the outstanding principal and accrued interest into shares of the Company’s common stock at a conversion price of $1.11 per share at any time. The Company may prepay the Refinanced Convertible Note by giving Mr. Drexler between 15 and 60 days’ notice depending upon the specific circumstances, subject to Mr. Drexler’s conversion right.
The Refinanced Convertible Note contains customary events of default, including, among others, the failure by the Company to make a payment of principal or interest when due. Following an event of default, interest will accrue at the rate of 14% per annum. In addition, following an event of default, any conversion, redemption, payment or prepayment of the Refinanced Convertible Note will be at a premium of 105%. The Refinanced Convertible Note also contains customary restrictions on the ability of the Company to, among other things, grant liens or incur indebtedness other than certain obligations incurred in the ordinary course of business. The restrictions are also subject to certain additional qualifications and carveouts, as set forth in the Refinanced Convertible Note. The Refinanced Convertible Note is subordinated to certain other indebtedness of the Company.
As part of the Refinancing, the Company and Mr. Drexler entered into a restructuring agreement (the “Restructuring Agreement”) pursuant to which the parties agreed to amend and restate the security agreement, resulting in a Third Amended and Restated Security Agreement (the “Amended Security Agreement”) in which the Prior Notes were secured by all of the assets and properties of the Company and its subsidiaries whether tangible or intangible. Pursuant to the Restructuring Agreement, the Company agreed to pay, on the effective date of the Refinancing, all outstanding interest on the Prior Notes through November 8, 2017 and certain fees and expenses incurred by Mr. Drexler in connection with the Restructuring.
On September 16, 2019, Mr. Ryan Drexler, the Chief Executive Officer, President and Chairman of the Board of Directors of MusclePharm Corporation, a Nevada corporation (the “Company”), delivered a notice to the Company and its independent directors of his election to convert, effective as of September 16, 2019 (the “Notice Date”), $18,000,000 of the amount outstanding under that certain Amended and Restated Convertible Secured Promissory Note, dated as of November 8, 2017 (the “Note”), issued by the Company to Mr. Drexler, into shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a conversion price of $1.11 per share, pursuant to the terms and conditions of the Note (the “Partial Conversion”). As of the Notice Date, the total amount outstanding under the Note (including principal and accrued and unpaid interest) was equal to $19,262,910. Pursuant to the terms of the Note, the Company instructed the transfer agent for its shares to issue to Mr. Drexler 16,216,216 shares (the “Shares”) of its Common Stock in respect of the Partial Conversion.
The outstanding principal and the interest, due on December 31, 2019, were refinanced under a new agreement on July 1, 2020. See additional information in “Note 17. Subsequent Events.”
For the years ended December 31, 2019 and 2018, interest expense, including the amortization of debt discount, related to the related party convertible secured promissory notes was $1.7 million and $2.2 million, respectively. During the years ended December 31, 2019 and 2018, $0.8 million and $1.9 million, respectively, in interest was paid in cash to Mr. Drexler.
Related-Party Revolving Note
On October 4, 2019, the Company entered into a secured revolving promissory note (the “Revolving Note”) with Mr. Drexler. Under the terms of the Revolving Note, the Company can borrow up to $3.0 million. The Revolving Note bears interest at the rate of 12% annually. The use of funds will be solely for the purchase of whey protein to be used in the manufacturing of MusclePharm products. The Company may prepay the Revolving Note by giving Mr. Drexler one days’ written notice.
The Revolving Note contains customary events of default, including, among others, the failure by the Company to make a payment of principal or interest when due. Following an event of default, Mr. Drexler is entitled to accelerate the entire indebtedness under the Revolving Note. The Revolving Note also contains customary restrictions on the ability of the Company to, among other things, grant liens or incur indebtedness other than certain obligations incurred in the ordinary course of business. The restrictions are also subject to certain additional qualifications and carveouts. The Revolving Note is subordinated to certain other indebtedness of the Company held by Crossroads.
In connection with the Revolving Note, the Company and Mr. Drexler entered into a security agreement dated October 4, 2019 pursuant to which the Revolving Note is secured by all of the assets and properties of the Company and its subsidiaries whether tangible or intangible. As of December 31, 2019, the outstanding balance on the revolving note was $1.2 million. Both the outstanding principal and all accrued interest, which became due on March 31, 2020, were refinanced under a new agreement on July 1, 2020. The revolving note is included in “Line of credit” in the consolidated balance sheets. See additional information in “Note 17. Subsequent Events.”
Related-Party Note Payable
The Company entered into a collateral receipt and security agreement with Mr. Drexler, dated December 27, 2019 pursuant to which Mr. Drexler agreed to post bond relating to the judgment ruled on the ThermoLife case, pending the appeal. The amount paid by Mr. Drexler on behalf of the Company, including fees, was $0.25 million. The amount, which was outstanding as of December 31, 2019, was refinanced under a new agreement on July 1, 2020. The note payable is included in “Convertible note with a related party, net of discount” in the consolidated balance sheets. See additional information in “Note 17. Subsequent Events.”
Line of Credit - Inventory Financing
On October 6, 2017, the Company entered into a Loan and Security Agreement (“Security Agreement”) with Crossroads Financial Group, LLC (“Crossroads”). Pursuant to the Security Agreement, the Company may borrow up to 70% of its Inventory Cost or up to 75% of Net Orderly Liquidation Value (each as defined in the Security Agreement), up to a maximum amount of $3.0 million at an interest rate of 1.5% per month, subject to a minimum monthly fee of $22,500. Subsequent to the end of 2017 the maximum amount was increased to $4.0 million. The term of the Security Agreement automatically extends in one-year increments, unless earlier terminated pursuant to the terms of the Security Agreement. The Security Agreement contains customary events of default, including, among others, the failure to make payments on amounts owed when due, default under any other material agreement or the departure of Mr. Drexler. The Security Agreement also contains customary restrictions on the ability of the Company to, among other things, grant liens, incur debt, and transfer assets. Under the Security Agreement, the Company agreed to grant Crossroads a security interest in all of the Company’s present and future accounts, chattel paper, goods (including inventory and equipment), instruments, investment property, documents, general intangibles, intangibles, letter of credit rights, commercial tort claims, deposit accounts, supporting obligations, documents, records and the proceeds thereof.
As of December 31, 2019 and December 31, 2018, we owed Crossroads $3.0 million and $1.5 million, respectively, and the amount is included in “Line of credit” in the consolidated balance sheets.
On April 1, 2019, the Company and Crossroads amended the terms of the agreement. The agreement was extended until March 31, 2020, the rate was modified to 1.33% per month, and increased the amount the Company can borrow from $3.0 million to $4.0 million.
On February 26, 2020, the Company and Crossroads amended the terms of the agreement. The agreement was extended until April 1, 2021 and the amount the Company can borrow was decreased from $4.0 million to $3.0 million.
Secured Borrowing Arrangement
In January 2016, the Company entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with Prestige Capital Corporation (“Prestige”) pursuant to which the Company agreed to sell and assign and Prestige agreed to buy and accept, certain accounts receivable owed to the Company (“Accounts”). Under the terms of the Purchase and Sale Agreement, upon the receipt and acceptance of each assignment of Accounts, Prestige will pay the Company 80% of the net face amount of the assigned Accounts, up to a maximum total borrowing of $12.5 million subject to sufficient amounts of accounts receivable to secure the loan. The remaining 20% will be paid to the Company upon collection of the assigned Accounts, less any chargebacks (including chargebacks for any customer amounts that remain outstanding for over 90 days), disputes, or other amounts due to Prestige. Prestige’s purchase of the assigned Accounts from the Company will be at a discount fee which varies from 0.7% to 4%, based on the number of days outstanding from the assignment of Accounts to collection of the assigned Accounts. In addition, the Company granted Prestige a continuing security interest in and lien upon all accounts receivable, inventory, fixed assets, general intangibles and other assets. Prestige will have no recourse against the Company if payments are not made due to the insolvency of an account debtor within 90 days of invoice date, with the exception of international and certain domestic customers. The Purchase and Sale Agreement’s term was extended to April 1, 2020 at which point the term now renews automatically for successive one-year periods unless either party receives written notice of cancellation from the other, at minimum, thirty days prior to the expiration date. At December 31, 2019 and 2018, the Company had outstanding borrowings of approximately $4.4 million and $1.3 million, respectively.
On April 10, 2019, the Company and Prestige amended the terms of the agreement. The agreement was extended until April 1, 2020. Thereafter the agreement shall renew itself automatically for one (1) year periods unless either party receives written notice of cancellation from the other, at minimum, thirty (30 days prior to the expiration date. The new agreement also modified certain rates and allows for increased borrowing on foreign borrowings.
For the years ended December 31, 2019 and 2018, the Company assigned to Prestige, accounts with an aggregate face amount of approximately $55.1 million and $46.2 million, respectively, for which Prestige paid to the Company approximately $44.1 million and $36.9 million, respectively, in cash. During years ended December 31, 2019 and 2018, $40.9 million and $41.0 million, respectively, was repaid to Prestige, including fees and interest.
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Note 9 - Commitments and Contingencies |
12 Months Ended |
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Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Leases
The Company leases office and warehouse facilities under operating leases, which expire at various dates through 2022. The Company also leases manufacturing and warehouse equipment under finance leases, which expire at various dates through July 2020. The Company does not intend to extend the lease terms expiring in 2020. See additional information in “Note 6. Leases.”
Purchase Commitment
Upon the completion of the sale of a former subsidiary, BioZone Laboratories, Inc. (“BioZone”), on May 9, 2016, the Company entered into a manufacturing and supply agreement whereby the Company agreed to minimum purchase requirements of products from BioZone over a three-year period. The Company fell below the requirements, and as a result, the Company reserved an amount to cover the estimated purchase commitment shortfall during the year ended December 31, 2018. In July 2019, the Company settled this matter through the payment of $0.6 million and the issuance of 150,000 shares of the Company’s common stock, which was valued at $60,000 on the settlement date.
Settlements
Manchester City Football Group
The Company was engaged in a dispute with City Football Group Limited (“CFG”), the owner of Manchester City Football Group, concerning amounts allegedly owed by the Company under a sponsorship agreement with CFG (the “Sponsorship Agreement”). In August 2016, CFG commenced arbitration in the United Kingdom against the Company, seeking approximately $8.3 million for the Company’s purported breach of the Sponsorship Agreement.
On July 28, 2017, the Company approved a Settlement Agreement (the “CFG Settlement Agreement”) with CFG effective July 7, 2017. The CFG Settlement Agreement represents a full and final settlement of all litigation between the parties. Under the terms of the agreement, the Company agreed to pay CFG a sum of $3 million, which was recorded as accrued expenses in 2017. The settlement consists of a $1 million payment that was advanced by a related party on July 7, 2017, a $1 million installment paid on July 7, 2018 and a subsequent $1 million installment payment to be paid by July 7, 2019. Of this amount, the Company has remitted $0.3 million.
During the years ended December 31, 2019 and 2018, the Company recorded a charge of $38,000 and $0.2 million, respectively, included in “Interest and other expense, net” in the Company’s consolidated statements of operations, representing imputed interest.
Former Executive Lawsuit
The Company was engaged in a dispute with Mr. Richard Estalella (“Estalella”) concerning amounts allegedly owed by the Company under an employment agreement with Estalella. Estalella was seeking certain equitable relief and unspecified damages. On May 7, 2018, the Court vacated the trial in contemplation of the parties’ settlement of this matter.
On June 19, 2018, the Company approved a settlement agreement (the “Estalella Settlement Agreement”) with Estalella, concerning amounts allegedly owed by the Company under an employment agreement with Estalella (the “Employment Litigation”). The Estalella Settlement Agreement represents a full and final settlement of the Employment Litigation. Under the terms of the agreement, the Company agreed to pay Estalella a sum of $0.93 million consisting of a $0.33 million initial payment that was made in July 2018, and subsequent payments of $0.15 million installments to be paid within 90, 180, 270 and 360 days of the initial payment, respectively. As of December 31, 2019, all outstanding payments had been fully paid.
Manziel Matter
On July 15, 2014, JMAN2 General LP (“JMAN2”), Jonathan Manziel and MusclePharm entered into an endorsement agreement, pursuant to which the Endorser would provide certain endorsements of MusclePharm’s businesses, products and services in exchange for payments to JMAN2 by MusclePharm. On April 17, 2018, JMAN2 commenced an action against MusclePharm in the District Court, City and County of Denver, Colorado and on July 19, 2018 filed an amended complaint against MusclePharm, in which JMAN2 asserted various claims against MusclePharm concerning their rights and obligations under the Endorsement Agreement.
On April 10, 2019, a settlement agreement was reached for an amount of $0.1 million, which had been recorded as an accrued expense as of December 31, 2018. Of this amount, $70,000 was paid in 2019, while the balance was paid in the first quarter of 2020.
United World Wrestling Arbitration
In November 2017, United World Wrestling (“UWW”), an amateur wrestling governing body, initiated arbitration against the Company before the Court of Arbitration for Sport in Lausanne, Switzerland (“CAS”), alleging that the Company owed it $0.6 million, comprised of a $0.4 million sponsorship fee plus accrued interest, under the terms of a 2015 sponsorship agreement. In September 2018, the CAS issued an order and decision in UWW’s favor for $0.4 million, plus interest at 12% per annum, as well as attorney’s fees in the amount of 5,000 Swiss Francs. On January 25, 2019, the two parties reached a settlement agreement for $0.4 million, which had been recorded as an accrued expense as of December 31, 2018. As of June 30, 2019, all amounts owed to UWW had been paid.
Durnford Matter
On July 28, 2015, Plaintiff, Tucker Durnford, filed a First Amended Class Action Complaint which alleged that the Company’s (now discontinued) Arnold Iron Mass product violates consumer protection laws by misleading consumers about the amount and sources of protein in the product. On February 10, 2016, the court granted our motion to dismiss the complaint on federal preemption grounds. On October 12, 2018, the Ninth Circuit reversed the dismissal. On October 8, 2019, the parties successfully mediated the case to a settlement of $0.15 million, which had been recorded as an accrued expense as of December 31, 2018. Of the settlement amount, $0.1 million was paid during the fourth quarter of 2019 and the balance was paid during the first quarter of 2020.
Contingencies
In the normal course of business or otherwise, the Company may become involved in legal proceedings. The Company will accrue a liability for such matters when it is probable that a liability has been incurred and the amount can be reasonably estimated. When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. The accrual for a litigation loss contingency might include, for example, estimates of potential damages, outside legal fees and other directly related costs expected to be incurred. The Company provides disclosures for material contingencies when there is a reasonable possibility that a loss or an additional loss may be incurred. In assessing whether a loss is a reasonable possibility, the Company may consider the following factors, among others: the nature of the litigation, claim or assessment, available information, opinions or views of legal counsel and other advisors, and the experience gained from similar cases. As of December 31, 2019, the Company was involved in the following material legal proceedings described below.
ThermoLife International
In January 2016, ThermoLife International LLC (“ThermoLife”), a supplier of nitrates to MusclePharm, filed a complaint against the Company in Arizona state court. ThermoLife alleged that the Company failed to meet minimum purchase requirements contained in the parties’ supply agreement. In March 2016, the Company filed counterclaims alleging that ThermoLife’s products were defective. Through orders issued in September and November 2018, the court dismissed MusclePharm’s counterclaims and found that the Company was liable to ThermoLife for failing to meet its minimum purchase requirements.
The court held a bench trial on the issue of damages in October 2019, and on December 4, 2019, the court entered judgment in favor of ThermoLife and against the Company in the amount of $1.6 million, comprised of $0.9 million in damages, interest in the amount of $0.3 million and attorneys’ fees and costs in the amount of $0.4 million. The Company recorded $1.6 million in accrued expenses as of December 31, 2018. In the interim, the Company filed an appeal, which is in the process of being briefed, and has posted bonds in the total amount of $0.6 million in order to stay execution on the judgment pending appeal. Of the $0.6 million, $0.25 million (including fees) was paid by Mr. Drexler on behalf of the Company. See “Note 8. Debt” for additional information. The balance of $0.35 million was secured by a personal guaranty from Mr. Drexler, while the associated fees of $12,500 was paid by the Company.
The Company intends to vigorously pursuing its defenses, including on appeal.
White Winston Select Asset Fund Series MP-18, LLC et al., v MusclePharm Corp., et al., (Nev. Dist. Ct.; Cal. Superior Court; Colorado Dist. Ct.; Mass. Super. Ct.)
On August 21, 2018, White Winston Select Asset Fund Series MP-18, LLC and White Winston Select Asset Fund, LLC (together “White Winston”) initiated a derivative action against MusclePharm and its directors (collectively the “director defendants”). White Winston alleges that the director defendants breached their fiduciary duties by improperly approving the refinancing of three promissory notes issued by MusclePharm to Drexler (the “Amended Note”) in exchange for $18.0 million in loans. White Winston alleges that this refinancing improperly diluted their economic and voting power and constituted an improper distribution in violation of Nevada law. In its complaint, White Winston sought the appointment of a receiver over MusclePharm, a permanent injunction against the exercise of Drexler’s conversion right under the Amended Note, and other unspecified monetary damages. On September 13, 2018, White Winston filed an amended complaint, which added a former MusclePharm executive, as a plaintiff (together with White Winston, the “White Winston Plaintiffs”). On December 9, 2019, the White Winston Plaintiffs filed a Second Amended Complaint, in which they added allegations relating to the resignation of MusclePharm’s auditor, Plante & Moran PLLC (“Plante Moran”). MusclePharm has moved to dismiss the Second Amended Complaint. That motion has not yet been fully briefed.
Along with its complaint, the White Winston Plaintiffs also filed a motion for a temporary restraining order (“TRO”) and preliminary injunction enjoining the exercise of Drexler’s conversion right under the Amended Note. On August 23, 2018, the Nevada district court issued an ex parte TRO. On September 14, 2018, the court let the TRO expire and denied the White Winston Plaintiffs’ request for a preliminary injunction, finding, among other things, that the White Winston Plaintiffs did not show a likelihood of success on the merits of the underlying action and failed to establish irreparable harm. Following the court’s decision, MusclePharm filed a motion seeking to recoup the legal fees and costs it incurred in responding to the preliminary injunction motion. On October 31, 2019, the court awarded MusclePharm $56,000 in fees and costs. The White Winston Plaintiffs have appealed that award.
On June 17, 2019, the White Winston Plaintiffs moved for the appointment of a temporary receiver over MusclePharm, citing Plante Moran’s resignation. The court granted the White Winston Plaintiffs’ request to hold an evidentiary hearing on the motion, but the date for that hearing was not set as of the date hereof. On July 30, 2019, the White Winston Plaintiffs filed an action in the Superior Court of the State of California in and for the County of Los Angeles, seeking access to MusclePharm’s books and records. MusclePharm has answered the petition, asserting as a defense that the request does not have a proper purpose. A trial on the petition has been set for February 25, 2021.
The Company intends to vigorously defend these actions.
IRS Audit
On April 6, 2016, the Internal Revenue Service (“IRS”) selected our 2014 Federal Income Tax Return for audit. As a result of the audit, the IRS proposed certain adjustments with respect to the tax reporting of our former executives’ 2014 restricted stock grants. Due to the Company’s current and historical loss position, the proposed adjustments would have no material impact on the Company’s Federal income tax. On October 5, 2016, the IRS commenced an audit of our employment and withholding tax liability for 2014. The IRS contends that the Company inaccurately reported the value of the restricted stock grants and improperly failed to provide for employment taxes and Federal tax withholding on these grants. In addition, the IRS is proposing certain penalties associated with the Company’s filings. On April 4, 2017, the Company received a “30-day letter” from the IRS asserting back taxes and penalties of approximately $5.3 million, of which $4.4 million related to withholding taxes, specifically, income withholding and Social Security taxes, and $0.9 million related to penalties. Additionally, the IRS asserts that the Company owes information reporting penalties of approximately $2.0 million.
The Company’s counsel has submitted a formal protest to the IRS disputing on several grounds all of the proposed adjustments and penalties on the Company’s behalf, and the Company has been pursuing this matter vigorously through the IRS appeal process. An Appeals Conference was held with the IRS in Denver, Colorado on July 31, 2019. At the conference, the Company made substantial arguments challenging the IRS’s claims for employment taxes and penalties. On December 16, 2019, a further Appeals Conference was held with the IRS by telephone. At the telephone conference, the Appeals Officer confirmed that he agreed with the Company’s argument that the failure to deposit penalties should be conceded by the IRS. The failure to deposit penalties total about $2 million. Thus, with this concession, the IRS’s claims have been reduced from approximately $7.3 million to about $5.3 million.
The remaining issue in dispute in this matter involves the fair market value of restricted stock units in the Company granted to certain former officers (the “Former Officers”) of the Company under Internal Revenue Code § 83. The Company and the IRS disagree as to the value of the restricted stock on the date of the grants, i.e., October 1, 2014. The Company and the IRS have exchanged expert valuation reports on the fair market value of the stock and have had extensive negotiations on this issue. The parties, however, have not been able to reach an agreement with respect to the value of the stock. The IRS has also made parallel claims regarding the restricted stock units against the Former Officers of the Company. The IRS has asserted that the Former Officers received ordinary income from the stock grants, and that they owe additional personal income taxes based on the fair market value of the stock. The Former Officers’ cases, unlike the Company’s case, are pending before the United States Tax Court. In the Tax Court litigation, the Former Officers are challenging the IRS’s determinations regarding the fair market value of the restricted stock grants on October 1, 2014. The Former Officers have separate counsel from the Company. The same IRS Appeals Officer and Revenue Agents assigned to the Company’s case are also involved in the cases for the Former Officers. Throughout the proceedings, the Company has argued to the IRS that it is the Former Officers who are directly and principally liable for the amount of any tax due, and not the Company.
The Former Officers cases were scheduled for trial in Tax Court on March 9, 2020. The trial of the cases was continued by the Court on February 4, 2020. The basis for the continuance was that the IRS and the Former Officers had made progress toward a settlement of the valuation issue involving the grants of the restricted stock. The outcome of these settlement negotiations will be relevant to the Company’s case. The Company is closely monitoring the settlement discussions between the IRS and the Former Officers. The Tax Court has ordered the Former Officers to file status reports regarding progress of their settlement negotiations with the IRS on or before October 22, 2020.
Due to the uncertainty associated with determining our liability for the asserted taxes and penalties, if any, and to our inability to ascertain with any reasonable degree of likelihood, as of the date of this report, the outcome of the IRS appeals process, the Company has not recorded an estimate for its potential liability, if any, associated with these taxes.
On August 22, 2018, Richard Estalella filed an action against the Company and two other defendants in the Colorado District Court for the County of Denver, seeking damages arising out of the IRS’s assertion of tax liability and penalties relating to the 2014 restricted stock grants. The Company has answered Estalella’s complaint, asserted counterclaims against Estalella for his failure to ensure that all withholding taxes were paid in connection with the 2014 restricted stock grants, and filed cross-claims against a valuation firm named in the action for failing to properly value the 2014 restricted stock grants for tax purposes. The Company is waiting on the next steps from the court and will continue to vigorously litigate the matter.
4Excelsior Matter
On March 18, 2019, 4Excelsior, a manufacturer of MusclePharm products, filed an action against MusclePharm in the Superior Court of the State of California for the County of Los Angeles, claiming approximately $6.2 million in damages relating to allegedly unpaid invoices, as well as approximately $7.8 million in consequential damages. On January 27, 2020, MusclePharm filed a counterclaim against 4Excelsior seeking unidentified damages relating to, among other things, 4Excelsior’s failure to fulfill a purchase order. MusclePharm also moved to strike 4Excelsior’s consequential damages on the grounds that they are unrecoverable under the Uniform Commercial Code. The court denied that motion, and the action has proceeded to discovery. The Company recognized a liability of $5.3 million (past due invoices plus interest) as of December 31, 2019. Trial has not yet been set, although a Trial Setting Conference has been set for September 21, 2020.
The Company intends to vigorously defend this action.
Nutrablend Matter
On February 27, 2020, Nutrablend, a manufacturer of MusclePharm products, filed an action against MusclePharm in the United States District Court for the Eastern District of California, claiming approximately $3.1 million in allegedly unpaid invoices. The amount is currently recorded as a liability as of December 31, 2019. Trial has been set for November 17, 2020. The Company intends to vigorously defend this action.
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Note 10 - Stockholders' Deficit |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Deficit | Common Stock
The fair value of all stock issuances is based upon the quoted closing trading price on the date of issuance. Common stock outstanding as of December 31, 2019 and 2018 includes shares legally outstanding even if subject to future vesting. For the year ended December 31, 2019, the Company had the following transactions related to its common stock including restricted stock awards (in thousands, except share and per share data):
For the year ended December 31, 2018, the Company had the following transactions related to its common stock including restricted stock awards (in thousands, except share and per share data):
Warrants
For the years ended December 31, 2019 and 2018, the Company did not issue any warrants. Outstanding warrants as of December 31, 2019 and 2018, were 1,289,378 shares and 1,389,378 shares, respectively.
Treasury Stock
During the years ended December 31, 2019 and 2018, the Company did not repurchase any shares of its common stock and held 875,621 shares in treasury as of both December 31, 2019 and 2018.
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Note 11 - Stock-Based Compensation |
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Stock-Based Compensation | Stock Incentive Plans
In 2015, the Board adopted the MusclePharm Corporation 2015 Incentive Compensation Plan (the “2015 Plan”). The 2015 Plan provides for the issuance of incentive stock options, non-qualified stock options, restricted stock, stock appreciation rights, restricted stock units, dividend equivalent rights, and other cash- and stock-based awards to employees, consultants and directors of the Company or its subsidiaries.
The 2015 Plan is administered by the Board, unless the Board elects to delegate administration responsibilities to a committee (either of the foregoing, or their authorized delegates, the “plan administrator”), and will continue in effect until terminated. The 2015 Plan may be amended, modified or terminated, subject to stockholder approval to the extent necessary to comply with applicable law or to the extent an amendment increases the number of shares available under the 2015 Plan or permits the extension of the exercise period for an stock option or stock appreciation right beyond ten years from the date of grant, and, with respect to outstanding awards, subject to the consent of the holder thereof if the amendment, modification or termination materially and adversely affects such holder. The total number of shares that may be issued under the 2015 Plan cannot exceed 2,000,000, subject to adjustment in the event of certain changes in the capital structure of the Company. As of December 31, 2019, there were 576,494 remaining shares available for issuance under the 2015 Plan.
The plan administrator determines the individuals who are issued awards and the terms and conditions of the awards, including vesting terms and conditions. The plan administrator also determines the methods by which the exercise price of stock options may be paid, which may include a combination of cash or check, shares, a promissory note or other property, and the methods by which shares are delivered.
Under the 2015 Plan, in any calendar year, the maximum number of shares with respect to which awards may be granted to any one participant during the year is 350,000 shares, subject to adjustment in the event of specified changes in the capital structure of the Company, and the maximum amount that may be paid in cash during any calendar year with respect to any award is $1.5 million.
Restricted Stock
The Company’s stock-based compensation for the years ended December 31, 2019 and 2018 consisted primarily of restricted stock awards. The restricted stock awards granted to employees, executives and Board members during the years ended December 31, 2019 and 2018 were as follows:
The total fair value of restricted stock awards granted to employees, executives and Board members was $0.4 million and $0.3 million for the years ended December 31, 2019 and 2018, respectively. As of December 31, 2019, the total unrecognized expense for unvested restricted stock awards, net of expected forfeitures, was $0.2 million, which is expected to be amortized over a weighted average period of 0.5 years.
Stock Options
The Company may grant options to purchase shares of the Company’s common stock to certain employees and directors pursuant to the 2015 Plan. Under the 2015 Plan, all stock options are granted with an exercise price equal to or greater than the fair market value of a share of the Company’s common stock on the date of grant. Vesting is generally determined by the plan administrator under the 2015 Plan. No stock option may be exercisable more than ten years after the date it is granted.
In February 2016, the Company issued options to purchase 137,362 shares of its common stock to Mr. Drexler, the Company’s Chairman of the Board, Chief Executive Officer, and President. These stock options were granted with an exercise price of $1.89 per share, a contractual term of 10 years and a grant date fair value of $1.72 per share, or $0.3 million in the aggregate, which was amortized on a straight-line basis over the vesting period of two years. The Company determined the fair value of the stock options using the Black-Scholes model.
The table below sets forth the assumptions used in valuing such options.
For the year ended December 31, 2019, the Company recorded no stock compensation expense related to stock options. For the year ended December 31, 2018, the Company recorded stock compensation expense of $16,000 related to stock options.
Stock Options Summary Table
The following table describes the total options outstanding, granted, exercised, expired and forfeited as of and during the years ended December 31, 2019 and 2018, as well as the total options exercisable as of December 31, 2019. Shares obtained from the exercise of our options are subject to various trading restrictions.
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Note 12 - Defined Contribution Plan |
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Retirement Benefits [Abstract] | |
Defined Contribution Plan | The Company established a 401(k) Plan (the “401(k) Plan”) for eligible employees of the Company. Generally, all employees of the Company who are at least twenty-one years of age and who have completed six months of service are eligible to participate in the 401(k) Plan. The 401(k) Plan is a defined contribution plan that provides that participants may make voluntary salary deferral contributions, on a pretax basis, in the form of voluntary payroll deductions. The Company may make discretionary matching contributions.
For each of the years ended December 31, 2019 and 2018, the Company’s matching contribution were $80,000 and $0.1 million, respectively.
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Note 13 - Net Loss per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Loss per Share | Basic net loss per share is computed by dividing net loss for the period by the weighted average number of shares of common stock outstanding during each period. There was no dilutive effect for the outstanding potentially dilutive securities for either the years ended December 31, 2019 or 2018, as the Company reported a net loss for all periods.
The following table sets forth the computation of the Company’s basic and diluted net loss per share for the years presented (in thousands, except share and per share data):
Diluted net loss per share is computed by dividing net loss for the period by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. The Company uses the treasury stock method to determine whether there is a dilutive effect of outstanding potentially dilutive securities, and the if-converted method to assess the dilutive effect of the convertible notes.
There was no dilutive effect for the outstanding awards for the years ended December 31, 2019 and 2018 as the Company reported a net loss for both periods. However, if the Company had net income for the year ended December 31, 2019, the potentially dilutive securities included in the earnings per share computation would have been 3,083,187. If the Company had net income for the year ended December 31, 2018, the potentially dilutive securities included in the earnings per share computation would have been 17,956,797.
Total outstanding potentially dilutive securities were comprised of the following:
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Note 14 - Income Taxes |
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Income Taxes | The components of loss before provision for income taxes for the years ended December 31, 2019 and 2018 are as follows (in thousands):
Income taxes are provided for the tax effects of transactions reported in the consolidated financial statements and consist of taxes currently due. Deferred taxes relate to differences between the basis of assets and liabilities for financial and income tax reporting which will be either taxable or deductible when the assets or liabilities are recovered or settled.
As of December 31, 2019, the Company has a Federal net operating loss carry-forward of $114.2 million available to offset future taxable income. The Company has estimated state loss carry-forwards of $83.1 million. The Company also has federal and state research and development credit carryforwards of $0.5 million as of December 31, 2019.
Utilization of net operating losses and R&D credits may be limited due to potential ownership changes under Section 382 of the IRS Code. The Company is currently undergoing a review of its net operating losses in connection with the conversion of Mr. Drexler’s convertible note in September 2019. It is anticipated that the utilization of the net operating losses carry-forwards may be limited as a result of the conversion. These pre-2018 net operating loss carry-forwards of $91.2 million for federal and $73.4 million for states and federal R&D credits have expiration dates starting in 2025 through 2037.
The valuation allowance as of December 31, 2019 was $32.3 million. The net change in valuation allowance for the year ended December 31, 2019 was an increase of $5.4 million. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.
Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a full valuation allowance as of December 31, 2019.
The effects of temporary differences that gave rise to significant portions of deferred tax assets as of December 31, 2019 and 2018, are as follows (in thousands):
The Company incurred income tax expense of $0.1 million for both years ended December 31, 2019 and 2018. Of the total tax provision for the years ended December 31, 2019 and 2018, $32,000 and $39,000 was attributed to taxes for foreign operations, respectively.
The income tax provision for the years ended December 31, 2019 and 2018 included the following (in thousands):
The income tax provision differs from those computed using the statutory federal tax rate of 34% due to the following (in thousands):
A reconciliation of the beginning and ending amount of unrecognized tax benefits (“UTB’s”) is as follows (in thousands):
If recognized, none of the Company’s unrecognized tax benefits as of December 31, 2019 would reduce its annual effective tax rate but would result in a corresponding adjustment to its deferred tax valuation allowance. As of December 31, 2019, the Company has not recorded a liability for potential interest or penalties. The Company also does not expect its unrecognized tax benefits to change significantly over the next 12 months. By statute, all tax years are open to examination by the major taxing jurisdictions to which the Company is subject.
The Tax Cuts and Jobs Act of 2017 (Tax Act), as signed by the President of the United States on December 22, 2017, significantly revised U.S. tax law. The tax reform legislation reduced the corporate tax rate, limits or eliminated certain tax deductions and changed the taxation of foreign earnings of U.S. multinational companies. The Deemed Repatriation Transition Tax (Transition Tax) is a tax on previously untaxed accumulated and current earnings and profits (E&P) of our foreign subsidiary at reduced tax rates. To determine the amount of the Transition Tax, we must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. The Tax Act reduced the corporate tax rate to 21 percent, effective January 1, 2018. Consequently, we recorded a provisional decrease to deferred tax assets, which was fully offset by a corresponding change in the valuation allowance recorded against our deferred tax assets.
On March 27, 2020, President Trump signed into law the CARES Act. Among the changes to the U.S. federal income tax, the CARES Act restored net operating loss carryback rules that were eliminated by 2017 Tax Cuts and Jobs Act, modified the limit on the deduction for net interest expense and accelerated the timeframe for refunds of AMT credits. Based on an analysis of the impact of the CARES Act, the Company has not identified any overall material effect on the 2018 and 2019 tax liabilities.
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Note 15 - Segments, Geographical Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segments, Geographical Information | The Company’s chief operating decision maker reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. As such, the Company currently has a single reporting segment and operating unit structure. In addition, substantially all long-lived assets are attributable to operations in the U.S. for both periods presented.
Revenue, net by geography is based on the company addresses of the customers. The following table sets forth revenue, net by geographic area (in thousands):
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Note 16 - Changes and Correction of Errors in Previously Reported Consolidated Financial Statements |
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Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes and Correction of Errors in Previously Reported Consolidated Financial Statements | Background on the Restatement
In February 2019, the Company was made aware, as part of the year-end sales cut-off testing procedures performed during the Company’s 2018 annual audit, by its then independent auditors, Plante & Moran, PLLC, that sales transactions may have been recognized as revenue prematurely which could have a material impact on revenue recognition for the year ended December 31, 2018. Upon such notification, the Company reviewed its revenue recognition reporting system, practices and underlying documents supporting the appropriateness of revenue under the Company’s previously established accounting policies for each quarterly period in the year ended December 31, 2018. In addition to the 2018 year-end period, the Company initially concluded that a potential material misstatement in revenue recognition was isolated to the previously issued quarterly financial statements for the three and nine months ended September 30, 2018.
Audit Committee Investigation
In March 2019, following management’s presentation of their initial assessment of the revenue recognition issue, the Audit Committee of the Board of Directors engaged independent legal counsel and a forensic accountant to conduct an investigation and to work with the Company to determine the potential impact on accounting for revenues. The investigation included the review of the Company’s initial assessment, interviews with key personnel, correspondence and document review, among other procedures. In April 2019, as a result of the findings of the Audit Committee's investigation to date, the Company determined that certain of its employees had engaged in deliberate inappropriate conduct, which resulted in revenue being intentionally recorded in periods prior to the criteria for revenue recognition under GAAP being satisfied. Further, the investigation discovered that revenue had been prematurely recorded in prior periods as well as the periods initially identified by management.
The investigation revealed that certain customer orders had been invoiced, triggering revenue recognition, prior to the actual shipment leaving the Company’s control. Such orders from customers had been marked as fulfilled in the Company’s enterprise reporting platform (“ERP”), thereby triggering the generation of an invoice and the recognition of revenue, in advance of shipments from both the Company’s distribution center in Tennessee and for orders that were drop-shipped directly to key customers from certain contract manufacturers. In addition, it was discovered during the investigation that certain orders had been moved to third-party locations at the respective cut-off periods and not actually shipped to the end customer until after the cut-off period resulting in the premature issuance of invoices to customers and recognition of revenue.
As a result of the Audit Committee's investigation, certain employees were terminated, and others received written reprimands related to their conduct as it relates to their behavior. In connection with the improprieties identified during the investigation resulting in the restatement of previously reported financial statements, the Company identified control deficiencies in its internal control over financial reporting that constitute material weaknesses.
Other Adjustments Resulting from Reconsidering Previously Issued Financial Statements
As a result of issues identified during the Audit Committee investigation, management reconsidered the Company’s previously issued consolidated financial statements and as a result additional corrections to the Company’s previously issued consolidated financial statements for each of the quarterly reporting periods ended September 30, 2018 and for the year ended December 31, 2017 were identified. These errors, for each period presented below, were primarily due to the following:
Other adjustments include, but are not limited to the following; purchase price variances, accrual for legal fees, payroll tax adjustment on restricted stock, rebate receivable and recognizing revenue on a net versus gross basis.
Accumulated deficit has been adjusted to reflect changes to net loss, for each period restated.
Restatement Adjustments
Several restatement adjustments were made to the Company's previously filed consolidated financial statements in order to reflect revenue recognition in the appropriate periods as discussed above. Accordingly, for the subject sales transactions, revenue and accounts receivable balances were reduced by an equivalent amount in the period that the sale was originally recorded as revenue, and revenue was increased in the subsequent period in which the criteria for revenue recognition were met. Further, for the subject sales transactions, cost of revenue was reduced, and inventory was increased, in the period that the sale was originally recorded as revenue, and cost of revenue was increased, and inventory was reduced, in the period the sale was ultimately recorded as revenue.
In addition, (i) revenue and operating expenses were reduced by an equivalent amount relating to the reclassification of customer payments, which were originally recorded on a gross versus net basis; (ii) revenue was increased or decreased each period, as appropriate, relating to revised estimates of the expected value of credits issued to customers, (iii) untimely recording of the change in the estimated useful life of leasehold improvements and an asset retirement obligation related to a modification to the lease of the Company’s former headquarters and (iv) other adjustments as referred to above.
December 31, 2017 Restatements (Unaudited)
As of and for the year ended December 31, 2017, the Company recorded the following restatement adjustments and charges (in thousands):
Impact on consolidated statements of operations - increase (decrease):
Accrual for customer credits – ($1,281) Sales cutoff – ($4,111) Reclassification of payments to customers – ($6,177) Restatement adjustment applicable to prior year error - $3,000
Sales cutoff – ($2,831) Restatement adjustment applicable to prior year error - $1,435 Purchase Price Variance - ($154) Reclassification of advertising expenses directly related to product sales - $482
Accrual for customer credits – $90 Reclassification of payments to customers – ($6,111) Sales cutoff – ($3) Reclassification of advertising expenses directly related to product sales and commissions – ($893)
Accrual for customer credits – $72 Reclass of payments to customers – ($65) Depreciation adjustment for facility relocation – $1,093 Reclassification of advertising expenses representing commissions - $411
Impact on consolidated balance sheets - increase (decrease):
Accrual for customer credits – ($1,443) Sales cutoff – ($4,120)
Sales cutoff – $2,837 Purchase Price Variance - $154
Legal over accrual – ($148) Payroll tax adjustment on restricted stock – ($230)
The unaudited restated consolidated balance sheets as of December 31, 2017 is presented below (in thousands, except per share data):
The unaudited restated consolidated statements of operations for the year ended December 31, 2017 is presented below (in thousands, except per share data):
The unaudited restated consolidated statements of stockholders’ deficit for the year ended December 31, 2017 is presented below (in thousands):
March 31, 2018 Restatements (Unaudited)
Impact on consolidated statements of operations for the three months ended March 31, 2018 (in thousands) - increase (decrease):
Reversal of December 31, 2017 accrual for credits – $1,281 Sales cutoff – $545 Correction of estimate of expected value of customer credits – ($1,572) Reclassification of payments to customers – ($2,584) Recognizing revenue on a net versus gross basis– ($30)
Sales cutoff – $776 Reversal of December 31, 2017 purchase price variance - $154 Recognizing revenue on a net versus gross basis– ($30) Accrual for rebate receivable – ($170) Reclassification of advertising expenses directly related to product sales - $107
Reversal of December 31, 2017 accrual for credits - ($90) Reclassification of payments to customers – ($2,582) Sales cutoff - $3 Reclassification of advertising expenses directly related to product sales and commissions – ($178)
Depreciation adjustment for facility relocation – ($56) Reclassification of payments to customers – ($2) Reclassification of advertising expenses representing commissions - $71
Impact on consolidated balance sheets - increase (decrease):
Sales cutoff – ($3,556) Correction of estimate of expected value of customer credits – ($1,573) ASC 606 modified retrospective transition – ($1,053)
The unaudited restated consolidated balance sheets as of March 31, 2018 is presented below (in thousands, except per share data):
The unaudited restated quarterly consolidated statements of operations for the three months ended March 31, 2018 is presented below (in thousands, except per share data):
The unaudited restated consolidated statements of cash flows for the three months ended March 31, 2018 is presented below (in thousands):
June 30, 2018 Restatements (Unaudited)
Impact on consolidated statements of operations for the three months ended June 30, 2018 - increase (decrease):
Sales cutoff – ($2,283) Correction of estimate of expected value of customer credits – $818 Reclassification of payments to customers – ($3,799) Recognizing revenue on a net versus gross basis– ($13)
Sales cutoff – ($1,884) Accrual for rebate receivable – ($180) Recognizing revenue on a net versus gross basis– ($13) Reclassification of advertising expenses directly related to product sales - $242
Reclassification of payments to customers – ($3,794) Reclassification of advertising expenses directly related to product sales and commissions – ($318)
Depreciation expense for facility relocation – ($56) Reclassification of payments to customers – ($5) Reclassification of advertising expenses representing commissions - $77
Impact on consolidated statements of operations for the six months ended June 30, 2018 - increase (decrease):
Reversal of December 31, 2017 accrual for credits – $1,281 Sales cutoff – ($1,738) Correction of estimate of expected value of customer credits – ($754) Reclassification of payments to customers – ($6,383) Recognizing revenue on a net versus gross basis– ($43)
Reversal of December 31, 2017 purchase price variance - $154 Sales cutoff – ($1,108) Accrual for rebate receivable – ($350) Recognizing revenue on a net versus gross basis– ($43) Reclassification of advertising expenses directly related to product sales - $349
Reversal of December 31, 2017 accrual for credits - ($90) Reclassification of payments to customers – ($6,376) Sales cutoff – $3 Reclassification of advertising expenses directly related to product sales and commissions – ($496)
Reversal of December 31, 2017 accrual for credits – ($72) Depreciation adjustment for facility relocation – ($112) Reclassification of payments to customers – ($7) Reclassification of advertising expenses representing commissions - $148
Impact on consolidated balance sheets - increase (decrease):
Sales cutoff – ($5,853) Correction of estimate of expected value of customer credits – ($760) ASC 606 modified retrospective transition – ($1,053)
The unaudited restated consolidated balance sheets as of June 30, 2018 is presented below (in thousands, except per share data):
The unaudited restated quarterly consolidated statements of operations for the three months ended June 30, 2018 is presented below (in thousands, except per share data):
The unaudited restated consolidated statements of operations for the six months ended June 30, 2018 is presented below (in thousands, except per share data):
The unaudited restated consolidated statements of cash flows for the six months ended June 30, 2018 is presented below (in thousands):
September 30, 2018 Restatement (Unaudited)
Impact on consolidated statements of operations for the three months ended September 30, 2018 (in thousands) - increase (decrease):
Sales cutoff – ($3,445) Correction of estimate of expected value of customer credits – $897 Reclassification of payments to customers – ($2,905)
Sales cutoff – ($2,170) Accrual for rebate receivable – ($144) Reclassification of advertising expenses directly related to product sales - $103
Reclassification of payments to customers – ($2,871) Reclassification of advertising expenses directly related to product sales and commissions – ($201)
Depreciation adjustment for facility relocation – ($56) Retirement of asset obligation – $151 Reclassification of payments to customers – ($36) Reclassification of advertising expenses representing commissions - $99
Impact on consolidated statements of operations for the nine months ended September 30, 2018 - increase (decrease):
Reversal of December 31, 2017 accrual for credits – $1,281 Sales cutoff – ($5,183) Correction of estimate of expected value of customer credits – $142 Reclassification of payments to customers – ($9,288) Recognizing revenue on a net versus gross basis– ($43)
Reversal of December 31, 2017 purchase price variance - $154 Sales cutoff – ($3,279) Accrual for rebate receivable – ($494) Recognizing revenue on a net versus gross basis– ($43) Reclassification of advertising expenses directly related to product sales - $452
Reversal of December 31, 2017 accrual for credits - ($90) Reclassification of payments to customers – ($9,247) Sales cutoff – $3 Reclassification of advertising expenses directly related to product sales and commissions – ($697)
Reversal of December 31, 2017 accrual for credits – ($72) Depreciation adjustment for facility relocation – ($168) Asset retirement obligation - $151 Reclassification of payments to customers – ($43) Reclassification of advertising expenses representing commissions - $246
Impact on consolidated balance sheets - increase (decrease):
Sales cutoff – ($9,330) Correction of estimate of expected value of customer credits – ($138) ASC 606 modified retrospective transition – ($1,053)
Payroll tax adjustment on restricted stock – ($231) Sales cut off – ($29)
The unaudited restated consolidated balance sheets as of September 30, 2018 is presented below (in thousands, except per share data):
The unaudited restated quarterly consolidated statements of operations for the three months ended September 30, 2018 is presented below (in thousands, except per share data):
The unaudited restated consolidated statements of operations for the nine months ended September 30, 2018 is presented below (in thousands, except per share data):
The unaudited restated consolidated statements of cash flows for the nine months ended September 30, 2018 is presented below (in thousands):
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Note 17 - Subsequent Events |
12 Months Ended |
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Dec. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | GAAP requires an entity to disclose events that occur after the balance sheet date but before financial statements are issued or are available to be issued (“subsequent events”) as well as the date through which an entity has evaluated subsequent events. There are two types of subsequent events.
The first type consists of events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, (“recognized subsequent events”). The second type consists of events that provide evidence about conditions that did not exist at the date of the balance sheet but arose subsequent to that date (“non-recognized subsequent events”).
Recognized Subsequent Events
None
Unrecognized Subsequent Events
CARES Act
On March 27, 2020, President Trump signed into law the CARES Act. Among the changes to the U.S. federal income tax, the CARES Act restored net operating loss carryback rules that were eliminated by 2017 Tax Cuts and Jobs Act, modified the limit on the deduction for net interest expense and accelerated the timeframe for refunds of AMT credits. Based on an analysis of the impact of the CARES Act, the Company has not identified any overall material effect on the 2018 and 2019 tax liabilities.
HSBF Note
Due to economic uncertainty as a result of the ongoing pandemic (COVID-19), on May 14, 2020, the Company received an aggregate principal amount of $964,910 pursuant to the borrowing arrangement (“Note”) with Harvest Small Business Finance, LLC (“HSBF”) and agreed to pay the principal amount plus interest at a 1% fixed interest rate per year, on the unpaid principal balance. No payments are due on the Note until November 16, 2020 (the “Deferment Period”). However, interest will continue to accrue during the Deferment Period. The Note will mature on May 16, 2022.
The Note includes forgiveness provisions in accordance with the requirements of the Paycheck Protection Program, Section 1106 of the CARES Act. The Company has not determined the amount of forgiveness in connection with the loan, partly due to the ongoing routine changes in the method of calculating the amount.
Related-Party Refinanced Convertible Note
On July 1, 2020, the Company entered into the refinancing with Mr. Ryan Drexler, the Company’s Chairman of the Board of Directors, Chief Executive Officer and President (the “Refinancing”). As part of the Refinancing, the Company issued to Mr. Drexler an amended and restated convertible secured promissory note (the “Refinanced Convertible Note”) in the original principal amount of $2,735,199, which amended and restated (i) a convertible secured promissory note dated as of November 8, 2017, $1,134,483 of which was outstanding as of July 1, 2020 (ii) a collateral receipt and security agreement with Mr. Drexler dated as of December 27, 2019, $252,500 of which was outstanding as of July 1, 2020, and (iii) a secured revolving promissory note dated as of October 4, 2019, $1,348,216 of which was outstanding as of July 1, 2020.
The $2.7 million Refinanced Convertible Note bears interest at the rate of 12% per annum. Unless earlier converted or repaid, all outstanding principal and any accrued but unpaid interest under the Refinanced Convertible Note shall be due and payable on November 30, 2020.
Any interest not paid when due shall be capitalized and added to the principal amount of the Refinanced Convertible Note and bear interest on the applicable interest payment date along with all other unpaid principal, capitalized interest, and other capitalized obligations. Mr. Drexler may convert the outstanding principal and accrued interest into shares of the Company’s common stock at a conversion price equal to or greater than (i) the closing price per share of the common stock on the last business day immediately preceding November 30, 2020 or (ii) $0.17. The Company may prepay the Refinanced Convertible Note by giving Mr. Drexler between 15 and 60 days’ notice depending upon the specific circumstances, subject to Mr. Drexler’s conversion right. The Refinanced Convertible Note also contains customary restrictions on the ability of the Company to, among other things, grant liens or incur indebtedness other than certain obligations incurred in the ordinary course of business. The restrictions are also subject to certain additional qualifications and carveouts, as set forth in the Refinanced Convertible Note. The Refinanced Convertible Note is subordinated to certain other indebtedness of the Company.
There are no other events subsequent to December 31, 2019 that have not been described in the accompanying footnotes.
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Note 2 - Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation and Principles of Consolidation | The accompanying Consolidated Financial Statements are prepared using the accrual method of accounting in accordance with GAAP and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Consolidated Financial Statements include the accounts of MusclePharm Corporation and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
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Use of Estimates | The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes. Such estimates include, but are not limited to, allowance for doubtful accounts, revenue discounts and allowances, the valuation of inventory and deferred tax assets, the assessment of useful lives, recoverability and valuation of long-lived assets, likelihood and range of possible losses on contingencies, restructuring liabilities, valuations of equity securities and intangible assets, fair value of derivatives, warrants and options, present value of lease liabilities, among others. Actual results could differ from those estimates.
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Cash | The Company considers all highly liquid investments purchased with an original maturity of three months or less at the date of purchase and money market accounts to be cash equivalents. As of December 31, 2019 and 2018, the Company had no cash equivalents and all cash amounts consisted of cash on deposit.
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Accounts Receivable and Allowance for Doubtful Accounts | Accounts receivable represents trade obligations from customers that are subject to normal trade collection terms and are recorded at the invoiced amount, net of any sales discounts and allowance for doubtful accounts, and do not typically bear interest. The Company assesses the collectability of the accounts by taking into consideration the aging of accounts receivable, changes in customer credit worthiness, general market and economic conditions, and historical experience. Bad debt expenses are recorded as part of “Selling, general and administrative” expenses in the consolidated statements of operations. The Company writes off the receivable balance against the allowance when management determines a balance is uncollectible. The Company also reviews its customer discounts and an accrual is made for discounts earned but not yet utilized at each period end.
The Company performs ongoing evaluations of its customers’ financial condition and generally does not require collateral. Some international customers are required to pay for their orders in advance of shipment. Accounts receivable consisted of the following as of December 31, 2019 and 2018 (in thousands):
The allowance for discounts and returns consisted of the following activity for the years ended December 31, 2019 and 2018 (in thousands):
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Revenue Recognition | The Company adopted ASC 606, “Revenue from Contracts with Customers,” effective January 1, 2018. With the adoption of the new standard, revenue is recognized when control of the promised goods or services is transferred to the Company’s customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
The Company sells a variety of protein products through a broad distribution platform that includes supermarkets, mass merchandisers, wholesale clubs, drugstores, convenience stores, home stores, specialty stores and websites and other e-commerce channels, all of which sell our products to consumers.
For performance obligations related to the shipping and invoicing of products, control transfers at the point in time upon which finished goods are delivered to the Company’s customers or when finished goods are picked up by a customer or a customer’s carrier, depending on shipping terms. Once a product has been delivered or picked up by the customer, the customer is able to direct the use of, and obtain substantially all of the remaining benefits from, the asset. The Company considers control to have transferred upon delivery or customer receipt because the Company has an enforceable right to payment at that time, the customer has legal title to the asset, the Company has transferred physical possession of the asset, and the customer has significant risk and rewards of ownership of the asset.
The Company conducts extensive promotional activities, primarily through the use of off-list discounts, slotting, coupons, cooperative advertising, periodic price reduction arrangements, and end-aisle and other in-store displays. The costs of such activities are netted against sales and are recorded when the related sale takes place. The reserves for sales returns and consumer and trade promotion liabilities are established based on the Company’s best estimate of the amounts necessary to settle future and existing obligations for products sold as of the balance sheet date. To determine the appropriate timing of recognition of consideration payable to a customer, all consideration payable to our customers is reflected in the transaction price at inception and reassessed routinely.
The Company expenses incremental direct costs of obtaining a contract (broker commissions) when the related sale takes place, since the amortization period of the commissions paid for the sale of products is less than a year. These costs are recorded in “Selling, general and administrative” expenses in the accompanying consolidated statements of operations. The Company accounts for shipping and handling costs as fulfillment activities which are therefore recognized upon shipment of the goods.
Shipping and handling costs related to inbound purchases of raw material and finished goods are included in cost of revenues in our consolidated statements of operations. For the years ended December 31, 2019 and 2018, the Company incurred $1.2 million and $1.8 million, respectively, of inbound shipping and handling costs. Shipping and handling costs related to shipments to our customers is included in “Selling, general and administrative” expense in our consolidated statements of operations. For the years ended December 31, 2019 and 2018, the Company incurred $3.8 million and $4.2 million, respectively, of shipping and handling costs related to shipments to our customers.
The Company excludes from its revenue any amounts collected from customers for sales (and similar) taxes. During the years ended December 31, 2019 and 2018, the Company recorded discounts, and to a lesser degree, sales returns, totaling $26.9 million and $33.5 million, respectively, which accounted for 25% and 28% of gross revenue in each period, respectively.
The Company adopted ASC 606 using the modified retrospective method and the cumulative effect of this change in accounting method for the expected value of customer credits related to certain contracts in place, as defined by ASC 606, is presented below:
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Concentrations | Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The cash balance at times may exceed federally insured limits. Management believes the financial risk associated with these balances is minimal and has not experienced any losses to date. Significant customers are those that represent more than 10% of the Company’s net revenue or accounts receivable for each period presented. For each significant customer, percentage of net revenue and accounts receivable are as follows:
* Represents less than 10% of net revenue or net accounts receivable.
The Company uses a limited number of non-affiliated suppliers for contract manufacturing its products. The Company has quality control and manufacturing agreements in place with its primary manufacturers to ensure consistency in production and quality. The agreements ensure products are manufactured to the Company’s specifications and the contract manufacturers will bear the costs of recalled product due to defective manufacturing.
The Company had the following concentration of purchases with contract manufacturers for years ended December 31, 2019 and 2018:
* Represents less than 10% of purchases.
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Inventory | Inventory consisted solely of finished goods and raw materials, used to manufacture our products by one of our co-manufacturers as of December 31, 2019 and 2018. The Company records charges for obsolete and slow-moving inventory based on the age of the product as determined by the expiration date or otherwise determined to be obsolete. Products within one year of their expiration dates are considered for write-off purposes. Inventory write-downs, once established, are not reversed as they establish a new cost basis for the inventory. Historically, the Company has had minimal returns with established customers. The Company incurred insignificant inventory write-offs during the years ended December 31, 2019 and 2018.
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Prepaid Expenses and Other Current Assets | Prepaid expenses and other current assets consist of various payments the Company has made in advance for goods or services to be received in the future. These prepaid expenses include legal retainers, giveaways, print advertising, insurance and service contracts requiring up-front payments.
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Property and Equipment | Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed on a straight-line basis over the estimated useful lives of the respective assets or, in the case of leasehold improvements, the remaining lease term, if shorter. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are removed, and the resulting gains or losses are recorded in the statements of operations. Repairs and maintenance costs are expensed as incurred.
The estimated useful lives of the property and equipment are as follows:
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Intangible Assets | Acquired intangible assets are recorded at estimated fair value, net of accumulated amortization, and costs incurred in obtaining certain trademarks are capitalized, and are amortized over their related useful lives, using a straight-line basis consistent with the underlying expected future cash flows related to the specific intangible asset.
Costs to renew or extend the life of intangible assets are capitalized and amortized over the remaining useful life of the asset. Amortization expenses are included as a component of “Selling, general and administrative” expenses in the consolidated statements of operations. The estimated useful life of the intangible assets is 7 years.
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Impairment of Long-Lived Assets | Long-lived assets are reviewed for impairment whenever events or changes in circumstances exist that indicate the carrying amount of an asset may not be recoverable. When indicators of impairment exist, an estimate of undiscounted future cash flows is used in measuring whether the carrying amount of the asset or related asset group is recoverable. Measurement of the amount of impairment, if any, is based upon the difference between the asset’s carrying value and estimated fair value. There were no impairments for the years ended December 31, 2019 and 2018.
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Fair Value | GAAP defines fair value as the exchange price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company measures its financial assets and liabilities at fair value at each reporting period using an estimated fair value hierarchy which requires the Company to use observable inputs and minimize the use of unobservable inputs when measuring fair value.
A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
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Cost of Revenue | Cost of revenue for MusclePharm and its subsidiaries represents costs directly related to the production, manufacturing and freight-in of the Company’s products purchased from third-party manufacturers.
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Advertising and Promotion | Our advertising and promotion expenses consist primarily of digital, print and media advertising, athletic endorsements and sponsorships, promotional giveaways, trade show events and various partnering activities with our retail partners, and are expensed as incurred.
Some of the contracts provide for contingent payments to endorsers or athletes based upon specific achievement in their sports, such as winning a championship. The Company records expense for these payments if and when the endorser achieves the specific achievement.
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Share-Based Payments and Stock-Based Compensation | Share-based compensation awards, including stock options and restricted stock awards, are recorded at estimated fair value on the applicable awards’ grant date, based on the estimated number of awards that are expected to vest. The grant date fair value is amortized on a straight-line basis over the time in which the awards are expected to vest, or immediately if no vesting is required. Share-based compensation awards issued to non-employees for services are also recorded at fair value on the grant date. The fair value of restricted stock awards is based on the fair value of the stock underlying the awards on the grant date as there is no exercise price.
The fair value of stock options is estimated using the Black-Scholes option-pricing model. The determination of the fair value of each stock award using this option-pricing model is affected by the Company’s assumptions regarding a number of complex and subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the awards and the expected term of the awards based on an analysis of the actual and projected employee stock option exercise behaviors and the contractual term of the awards. Due to the Company’s limited experience with the expected term of options, the simplified method was utilized in determining the expected option term as prescribed in Staff Accounting Bulletin No. 110.
The Company recognizes stock-based compensation expense over the requisite service period, which is generally consistent with the vesting of the awards, based on the estimated fair value of all stock-based payments issued to employees and directors that are expected to vest.
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Foreign Currency | The functional currency of the Company’s foreign subsidiaries, MusclePharm Canada, MusclePharm Australia, and MusclePharm Ireland, is the local currency. The assets and liabilities of the foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at each balance sheet date. Revenue and expenses are translated at average exchange rates in effect during the year. Equity transactions are translated using historical exchange rates. The resulting translation adjustments are recorded to a separate component of “Accumulated other comprehensive loss” in the consolidated balance sheets.
Foreign currency gains and losses resulting from transactions denominated in a currency other than the functional currency are included in “Interest and other expense, net” in the consolidated statements of operations.
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Comprehensive Loss | Comprehensive loss is composed of two components: net loss and other comprehensive loss. Other comprehensive loss refers to revenue, expenses, gains and losses that under GAAP are recorded as an element of stockholders’ deficit, and are excluded from the Company’s net loss. The Company’s other comprehensive loss is made up of foreign currency translation adjustments for both periods presented.
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Segments | Management has determined that it currently operates in one segment. The Company’s chief operating decision maker reviews financial information on a consolidated basis, together with certain operating and performance measures principally to make decisions about how to allocate resources and to measure the Company’s performance.
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Income Taxes | Income taxes are accounted for using the asset and liability method. Income tax expense includes the current tax liability from operations and the change in deferred income taxes during the year. Interest income, interest expense and penalties associated with income taxes are reflected in "Income tax expense" on the consolidated statements of income. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases, operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
A valuation allowance is required to be established unless management determines that it is more likely than not that we will ultimately realize the tax benefit associated with a deferred tax asset. We recognize the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely to be realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
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Recent Accounting Pronouncements | In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes Topic 840, Leases (“ASU 2016-02”). The guidance in this new standard requires lessees to put most leases on their balance sheets but recognize expenses on their income statements in a manner similar to the current accounting. The new lease standards also provide practical expedients for an entity's ongoing accounting. In July 2018, the FASB issued ASU No. 2018-11, Leases (842), Targeted Improvements (“ASU 2018-11”), which provides an additional transition election to not restate comparative periods for the effects of applying the new standard. This transition election permits entities to apply ASU 2016-02 on the adoption date and recognize a cumulative-effect adjustment to the opening balance of accumulated deficit. These ASU's are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018.
The Company adopted the ASUs, as of January 1, 2019, using the modified retrospective transition method prescribed by ASU 2018-11. Under this transition method, financial results reported in periods prior to the first quarter of 2019 are unchanged. As a result of the adoption of the ASUs, the Company recorded a ROU asset and liability of $2.1 million. Also as a result of the adoption, the Company reclassified $0.2 million of liabilities on its consolidated balance sheets as of January 1, 2019 against the operating lease ROU asset. The adoption of these ASUs did not result in a cumulative-effect adjustment to the opening balance of accumulated deficit.
In addition, the Company elected the package of practical expedients permitted by the transition guidance. The adoption of these ASU’s did not have an impact on the Company’s consolidated statements of operations or cash flows.
In July 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which among other things, these amendments require the measurement of all expected credit losses of financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 is effective for periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company is in the process of evaluating the impact of the pronouncement.
On September 20, 2018, FASB issued Accounting Standards Update No. 2018-07, “Compensation - Stock Compensation” (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to non-employees. This ASU expands the scope of ASC Topic 718, “Compensation - Stock Compensation”, which currently only includes share-based payments issued to employees, to also include share-based payments issued to non-employees for goods and services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned. ASU 2018-07 supersedes ASC Subtopic 505-50, “Equity - Equity-Based Payments to Non-Employees”. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The new standard has been adopted by the Company. The Company has evaluated the impact of ASU 2018-07 on its consolidated financial statements and it did not have a material impact.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, expected to reduce cost and complexity related to the accounting for income taxes. The ASU removes specific exceptions to the general principles in Topic 740 in GAAP. It eliminates the need for an organization to analyze whether the following apply in a given period: exception to the incremental approach for intra-period tax allocation; exceptions to accounting for basis differences when there are ownership changes in foreign investments; and exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. The ASU also improves financial statement preparers’ application of income tax-related guidance and simplifies GAAP for: franchise taxes that are partially based on income; transactions with a government that result in a step up in the tax basis of goodwill; separate financial statements of legal entities that are not subject to tax; and enacted changes in tax laws in interim periods. The Company is evaluating the impact of the pronouncement.
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Note 2 - Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts receivable |
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Allowance for discounts and returns |
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Significant customers and suppliers |
* Represents less than 10% of net revenue or net accounts receivable.
The Company had the following concentration of purchases with contract manufacturers for years ended December 31, 2019 and 2018:
* Represents less than 10% of purchases.
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Estimated useful lives of property, plant, and equipment |
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Note 5 - Balance Sheet Components (Tables) |
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Balance Sheet Related Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, plant and equipment |
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Intangible assets |
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Note 6 - Leases (Tables) |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental balance sheet information related to leases |
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Supplemental cash flow information related to leases |
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Note 7 - Interest and Other Expense, Net (Tables) |
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Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest and other expense, net |
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Note 8 - Debt (Tables) |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt |
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Note 10 - Stockholders' Deficit (Tables) |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock issued | For the year ended December 31, 2019, the Company had the following transactions related to its common stock including restricted stock awards (in thousands, except share and per share data):
For the year ended December 31, 2018, the Company had the following transactions related to its common stock including restricted stock awards (in thousands, except share and per share data):
|
Note 11 - Stock-Based Compensation (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock unit activity |
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Black-Scholes assumptions |
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Stock option activity |
|
Note 13 - Net Loss per Share (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic and diluted net loss per share |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Antidilutive securities excluded from computation of diluted earnings per share |
|
Note 14 - Income Taxes (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of loss before provision for income taxes |
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Deferred tax assets |
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Income tax provision |
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Tax expense differences from expected tax expenses |
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Reconciliation of beginning and ending amount of unrecognized tax benefits ("UTB's") |
|
Note 15 - Segments, Geographical Information (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue, net by geographic area |
|
Note 16 - Changes and Correction of Errors in Previously Reported Consolidated Financial Statements (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Error corrections and prior period adjustments | The unaudited restated consolidated balance sheets as of December 31, 2017 is presented below (in thousands, except per share data):
The unaudited restated consolidated statements of operations for the year ended December 31, 2017 is presented below (in thousands, except per share data):
The unaudited restated consolidated statements of stockholders’ deficit for the year ended December 31, 2017 is presented below (in thousands):
The unaudited restated consolidated balance sheets as of March 31, 2018 is presented below (in thousands, except per share data):
The unaudited restated quarterly consolidated statements of operations for the three months ended March 31, 2018 is presented below (in thousands, except per share data):
The unaudited restated consolidated statements of cash flows for the three months ended March 31, 2018 is presented below (in thousands):
The unaudited restated consolidated balance sheets as of June 30, 2018 is presented below (in thousands, except per share data):
The unaudited restated quarterly consolidated statements of operations for the three months ended June 30, 2018 is presented below (in thousands, except per share data):
The unaudited restated consolidated statements of operations for the six months ended June 30, 2018 is presented below (in thousands, except per share data):
The unaudited restated consolidated statements of cash flows for the six months ended June 30, 2018 is presented below (in thousands):
The unaudited restated consolidated balance sheets as of September 30, 2018 is presented below (in thousands, except per share data):
The unaudited restated quarterly consolidated statements of operations for the three months ended September 30, 2018 is presented below (in thousands, except per share data):
The unaudited restated consolidated statements of operations for the nine months ended September 30, 2018 is presented below (in thousands, except per share data):
The unaudited restated consolidated statements of cash flows for the nine months ended September 30, 2018 is presented below (in thousands):
|
Note 1 - Description of Business (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | |||||
---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2018 |
Sep. 30, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||
Cash | $ 1,749 | $ 2,442 | $ 5,114 | $ 2,442 | $ 1,749 | $ 1,532 | $ 2,317 | $ 6,228 | $ 4,943 |
Net loss | (1,422) | (280) | (2,511) | (2,791) | (4,213) | (18,927) | (10,755) | (12,509) | |
Net cash provided by (used in) financing activities | (872) | (3,667) | (6,393) | 5,742 | (5,726) | 6,436 | |||
Working capital deficit | (29,400) | ||||||||
Stockholders' deficit | (21,702) | (20,396) | (20,214) | (20,396) | (21,702) | (27,952) | (28,195) | (16,848) | |
Accumulated deficit | $ (170,335) | $ (168,913) | $ (168,633) | $ (168,913) | $ (170,335) | $ (195,858) | $ (176,877) | $ (165,069) | $ (152,560) |
Note 2 - Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|---|---|
Accounting Policies [Abstract] | ||||||
Accounts receivable | $ 8,419 | $ 14,647 | ||||
Less: allowance for discounts and returns | (2,901) | (5,574) | $ (2,387) | |||
Less: allowance for doubtful accounts | (711) | (2,800) | ||||
Accounts receivable, net | $ 4,807 | $ 6,273 | $ 5,990 | $ 8,612 | $ 10,743 | $ 10,052 |
Note 2 - Summary of Significant Accounting Policies (Details 1) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Accounting Policies [Abstract] | ||
Allowance for discount, beginning | $ 5,574 | $ 2,387 |
Charges against revenues | 26,941 | 33,500 |
Utilization of reserve | (29,614) | (30,313) |
Allowance for discount, ending | $ 2,901 | $ 5,574 |
Note 2 - Summary of Significant Accounting Policies (Details 2) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|---|---|
Accounts receivable, net | $ 4,807 | $ 6,273 | $ 5,990 | $ 8,612 | $ 10,743 | $ 10,052 |
Accumulated deficit | (166,122) | |||||
As Previously Reported | ||||||
Accounts receivable, net | 16,235 | 16,278 | 16,925 | 11,105 | ||
Accumulated deficit | (165,069) | |||||
Restatement Adjustments | ||||||
Accounts receivable, net | $ (10,245) | $ (7,666) | $ (6,182) | (1,053) | ||
Accumulated deficit | $ (1,053) |
Note 2 - Summary of Significant Accounting Policies (Details 4) |
12 Months Ended |
---|---|
Dec. 31, 2019 | |
Furniture, Fixtures and Equipment | Minimum | |
Property, plant and equipment, estimated useful life | 3 years |
Furniture, Fixtures and Equipment | Maximum | |
Property, plant and equipment, estimated useful life | 7 years |
Leasehold Improvements | |
Property, plant and equipment, estimated useful life | Lesser of estimated useful life or remaining lease term |
Manufacturing and Lab Equipment | Minimum | |
Property, plant and equipment, estimated useful life | 3 years |
Manufacturing and Lab Equipment | Maximum | |
Property, plant and equipment, estimated useful life | 5 years |
Vehicles | Minimum | |
Property, plant and equipment, estimated useful life | 3 years |
Vehicles | Maximum | |
Property, plant and equipment, estimated useful life | 5 years |
Displays | |
Property, plant and equipment, estimated useful life | 5 years |
Website | |
Property, plant and equipment, estimated useful life | 3 years |
Note 2 - Summary of Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Accounting Policies [Abstract] | ||
Shipping and handling costs | $ 3,800 | $ 4,200 |
Sales returns and discounts | $ 26,900 | $ 33,500 |
Sales returns and discounts as a percentage of sales | 25.00% | 28.00% |
Estimated useful life of the intangible assets | 7 years |
Note 4 - Restructuring (Details Narrative) $ in Thousands |
Dec. 31, 2018
USD ($)
|
---|---|
Contract Termination Costs | |
Provision of restructuring and accrued restructuring charges | $ 400 |
Abandoned Leased Facilities | |
Provision of restructuring and accrued restructuring charges | $ 100 |
Note 5 - Balance Sheet Components (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|---|---|
Property and equipment, gross | $ 3,817 | $ 4,736 | ||||
Less: accumulated depreciation and amortization | (3,601) | (4,223) | ||||
Property and equipment, net | 216 | 513 | $ 576 | $ 691 | $ 776 | $ 910 |
Furniture, Fixtures and Equipment | ||||||
Property and equipment, gross | 2,592 | 3,511 | ||||
Leasehold Improvements | ||||||
Property and equipment, gross | 236 | 236 | ||||
Vehicles | ||||||
Property and equipment, gross | 39 | 39 | ||||
Displays | ||||||
Property and equipment, gross | 453 | 453 | ||||
Website | ||||||
Property and equipment, gross | $ 497 | $ 497 |
Note 5 - Balance Sheet Components (Details 1) - USD ($) $ in Thousands |
12 Months Ended | |||||
---|---|---|---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
|
Finite-lived intangible assets, gross | $ 2,244 | $ 2,244 | ||||
Finite-lived intangible assets, accumulated amortization | (1,568) | (1,247) | ||||
Finite-lived intangible assets, net | 676 | 997 | $ 1,077 | $ 1,157 | $ 1,237 | $ 1,317 |
Brand (Apparel Rights) | ||||||
Finite-lived intangible assets, gross | 2,244 | 2,244 | ||||
Finite-lived intangible assets, accumulated amortization | (1,568) | (1,247) | ||||
Finite-lived intangible assets, net | $ 676 | $ 997 | ||||
Finite-lived intangible assets, remaining useful life | 2 years 1 month 6 days | 3 years 1 month 6 days |
Note 5 - Balance Sheet Components (Details 2) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|---|---|
Balance Sheet Related Disclosures [Abstract] | ||||||
2020 | $ 320 | |||||
2021 | 320 | |||||
2022 | 36 | |||||
Total amortization expense | $ 676 | $ 997 | $ 1,077 | $ 1,157 | $ 1,237 | $ 1,317 |
Note 5 - Balance Sheet Components (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|---|
Mar. 31, 2018 |
Jun. 30, 2018 |
Sep. 30, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Balance Sheet Related Disclosures [Abstract] | ||||||
Depreciation and amortization expense | $ 231 | $ 446 | $ 653 | $ 339 | $ 529 | $ 2,232 |
Amortization of intangible assets | $ 320 | $ 320 | $ 320 |
Note 6 - Leases (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Leases [Abstract] | ||
Operating, ROU assets, net | $ 1,175 | $ 0 |
Finance, property and equipment, net | 57 | |
Total assets | 1,232 | |
Operating, operating lease liability - current | 624 | 0 |
Finance, current accrued liability | 54 | |
Total current liabilities | 678 | |
Operating, operating lease liability - long term | 723 | $ 0 |
Finance, other long term liabilities | 0 | |
Total non-current liabilities | 723 | |
Total lease liabilities | $ 1,401 |
Note 6 - Leases (Details 1) $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2019
USD ($)
| |
Leases [Abstract] | |
Operating lease cost, selling, general and administrative | $ 1,041 |
Finance lease cost, amortization of ROU asset, selling, general and administrative | 119 |
Finance lease cost, interest on lease liabilities, selling, general and administrative | 6 |
Total finance lease cost | 125 |
Variable lease payments, selling, general and administrative | 29 |
Sublease income, other income | (380) |
Total lease cost | $ 1,005 |
Note 6 - Leases (Details 2) $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2019
USD ($)
| |
Leases [Abstract] | |
Operating cash flows from operating lease | $ 770 |
Operating cash flows from finance leases | 6 |
Financing cash flows from finance leases | $ 120 |
Weighted average remaining lease term, operating leases | 2 years 3 months 18 days |
Weighted average remaining lease term, finance leases | 2 years 6 months |
Weighted average discount rate, operating leases | 18.00% |
Weighted average discount rate, finance leases | 5.00% |
Note 6 - Leases (Details 3) $ in Thousands |
Dec. 31, 2019
USD ($)
|
---|---|
Operating | |
2020 | $ 808 |
2021 | 481 |
2022 | 369 |
Thereafter | 0 |
Total future undiscounted lease payments | 1,658 |
Less amounts representing interest | (311) |
Present value of lease liabilities | 1,347 |
Finance | |
2020 | 55 |
2021 | 0 |
2022 | 0 |
Thereafter | 0 |
Total future undiscounted lease payments | 55 |
Less amounts representing interest | (1) |
Present value of lease liabilities | $ 54 |
Note 7 - Interest and Other Expense, Net (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2018 |
Sep. 30, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Other Income and Expenses [Abstract] | ||||||||
Interest expense, related party | $ (1,597) | $ (2,160) | ||||||
Interest expense, related party debt discount | (60) | (60) | ||||||
Interest expense, other | (894) | (486) | ||||||
Interest expense, secured borrowing arrangement | (1,205) | (1,094) | ||||||
Foreign currency transaction loss | (236) | (115) | ||||||
Other | 383 | 18 | ||||||
Total interest and other expense, net | $ (850) | $ (1,025) | $ (1,077) | $ (2,102) | $ (2,952) | $ (3,609) | $ (3,897) | $ (3,841) |
Note 8 - Debt (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|---|---|
Debt Disclosure [Abstract] | ||||||
Refinanced convertible note, related party | $ 1,287 | $ 18,000 | ||||
Revolving line of credit, related party | 1,239 | 0 | ||||
Obligations under secured borrowing arrangement | 4,443 | 1,285 | $ 594 | $ 2,787 | $ 5,547 | $ 5,385 |
Line of credit - inventory financing | 2,965 | 1,500 | ||||
Notes payable | 247 | 0 | ||||
Unamortized debt discount, related party | 0 | (60) | ||||
Total debt | 10,181 | 20,725 | ||||
Less: current portion | (10,130) | (20,725) | ||||
Long term debt | $ 51 | $ 0 |
Note 8 - Debt (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |||||
---|---|---|---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
|
Debt Disclosure [Abstract] | ||||||
Interest expense, related party | $ 1,597 | $ 2,160 | ||||
Interest paid to related party | 800 | 1,900 | ||||
Line of credit - inventory financing | 2,965 | 1,500 | ||||
Obligations under secured borrowing arrangement | 4,443 | 1,285 | $ 594 | $ 2,787 | $ 5,547 | $ 5,385 |
Cash received on account of sale of accounts | 44,100 | 36,900 | ||||
Repayments of account receivable sale | $ 40,900 | $ 41,000 |
Note 10 - Stockholders' Deficit (Details) - Common Stock - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Stock issued for note conversion, quantity | 16,216,216 | |
Stock issued for note conversion, valuation | $ 18,000 | |
Stock issued for note conversion, range of value per share | $ 1.11 | |
Stock issued for consulting services, quantity | 22,222 | |
Stock issued for consulting services, valuation | $ 10 | |
Stock issued for consulting services, range of value per share | $ .45 | |
Stock issued in relation to Biozone settlement, quantity | 150,000 | |
Stock issued in relation to Biozone settlement, valuation | $ 60 | |
Stock issued in relation to Biozone settlement, range of value per share | $ .40 | |
Restricted stock issued to directors, quantity | 595,238 | |
Restricted stock issued to directors, valuation | $ 250 | |
Restricted stock issued to directors, range of value per share | $ .42 | |
Stock issued for advertising services, quantity | 702,069 | |
Stock issued for advertising services, valuation | $ 632 | |
Stock issued for advertising services, range of value per share | $ .90 | |
Stock issued to related party for interest, quantity | 81,113 | |
Stock issued to related party for interest, valuation | $ 53 | |
Stock issued to related party for interest, range of value per share | $ .65 | |
Stock issued to directors, quantity | 250,000 | |
Stock issued to directors, valuation | $ 250 | |
Stock issued to directors, range of value per share | $ 1.00 | |
Total, quantity | 17,685,745 | 331,113 |
Total, valuation | $ 18,952 | $ 303 |
Minimum | ||
Total, range of value per share | $ .40 | $ .65 |
Maximum | ||
Total, range of value per share | $ 1.11 | $ 1.00 |
Note 10 - Stockholders' Deficit (Details Narrative) - shares |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Equity [Abstract] | ||
Warrants outstanding | 1,289,378 | 1,389,378 |
Treasury stock | 875,621 | 875,621 |
Note 11 - Stock-Based Compensation (Details) - $ / shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Share-based Payment Arrangement [Abstract] | ||
Number of shares, unvested, beginning | 197,500 | 487,267 |
Number of shares, granted | 838,942 | 250,000 |
Number of shares, vested | (346,310) | (539,767) |
Number of shares, unvested, ending | 690,132 | 197,500 |
Weighted-average grant date fair value, unvested, beginning | $ 1.05 | $ 2.32 |
Weighted-average grant date fair value, granted | .42 | 1.00 |
Weighted-average grant date fair value, vested | .78 | 2.18 |
Weighted-average grant date fair value, unvested, ending | $ .42 | $ 1.05 |
Note 11 - Stock-Based Compensation (Details 1) |
12 Months Ended |
---|---|
Dec. 31, 2016 | |
Expected term of options | 6 years 6 months |
Expected volatility | 125.70% |
Minimum | |
Expected volatility | 118.40% |
Risk-free interest rate | 1.27% |
Maximum | |
Expected volatility | 131.00% |
Risk-free interest rate | 1.71% |
Note 11 - Stock-Based Compensation (Details 2) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Share-based Payment Arrangement [Abstract] | ||
Options issued and outstanding, beginning | 171,703 | 171,703 |
Options granted | 0 | 0 |
Options exercised | 0 | 0 |
Options forfeited | 0 | 0 |
Options issued and outstanding, ending | 171,703 | 171,703 |
Options exercisable | 171,703 | |
Weighted average option price per share, issued and outstanding, beginning | $ 1.89 | $ 1.89 |
Weighted average option price per share, granted | 0.00 | .00 |
Weighted average option price per share, exercised | 0.00 | .00 |
Weighted average option price per share, forfeited | 0.00 | .00 |
Weighted average option price per share, issued and outstanding, ending | 1.89 | 1.89 |
Weighted average option price per share, exercisable | 1.89 | |
Weighted average fair value of options granted, issued and outstanding, beginning | 1.72 | 1.72 |
Weighted average fair value of options granted, granted | 0.00 | .00 |
Weighted average fair value of options granted, exercised | 0.00 | .00 |
Weighted average fair value of options granted, forfeited | 0.00 | .00 |
Weighted average fair value of options granted, issued and outstanding, ending | 1.72 | $ 1.72 |
Weighted average fair value of options granted, exercisable | $ 1.72 | |
Weighted average remaining contractual life, years, issued and outstanding | 6 years 2 months 1 day | 7 years 2 months 1 day |
Weighted average remaining contractual life, years, exercisable | 6 years 2 months 1 day | |
Aggregate intrinsic value, issued and outstanding | $ 0 | $ 0 |
Aggregate intrinsic value, exercisable | $ 0 | $ 0 |
Note 11 - Stock-Based Compensation (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Share-based Payment Arrangement [Abstract] | ||
Shares available for issuance under the 2015 Plan | 576,494 | |
Restricted stock awards grant date fair value | $ 400 | $ 300 |
Unrecognized expense for unvested restricted stock awards | $ 200 | |
Unrecognized expense for unvested restricted stock awards period of recognition | 6 months | |
Stock compensation expense related to options | $ 0 | $ 16 |
Note 12 - Defined Contribution Plan (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Retirement Benefits [Abstract] | ||
Company matching contributions | $ 80 | $ 100 |
Note 13 - Net Loss per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2018 |
Sep. 30, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Earnings Per Share [Abstract] | ||||||||
Net loss | $ (1,422) | $ (280) | $ (2,511) | $ (2,791) | $ (4,213) | $ (18,927) | $ (10,755) | $ (12,509) |
Weighted-average common shares used in computing net loss per share, basic and diluted | 15,037,666 | 14,998,531 | 14,957,217 | 14,977,988 | 14,998,099 | 20,475,313 | 15,023,872 | 14,215,399 |
Net loss per share, basic and diluted | $ (0.09) | $ (0.02) | $ (0.17) | $ (0.19) | $ (0.28) | $ (0.92) | $ (0.72) | $ (0.88) |
Note 13 - Net Loss per Share (Details 1) - shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Total potentially dilutive securities outstanding | 3,083,187 | 17,956,797 |
Unvested Restricted Stock | ||
Total potentially dilutive securities outstanding | 690,132 | 179,500 |
Stock Options | ||
Total potentially dilutive securities outstanding | 171,703 | 171,703 |
Warrants | ||
Total potentially dilutive securities outstanding | 1,289,378 | 1,389,378 |
Convertible Notes | ||
Total potentially dilutive securities outstanding | 931,974 | 16,216,216 |
Note 14 - Income Taxes (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Income Tax Disclosure [Abstract] | ||
Domestic | $ (18,831) | $ (10,396) |
Foreign | (10) | (259) |
Loss before provision for income taxes | $ (18,841) | $ (10,655) |
Note 14 - Income Taxes (Details 1) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Deferred tax assets: | ||
Net operating loss carryforwards | $ 28,505 | $ 23,625 |
Other | 3,784 | 3,235 |
Gross deferred tax assets | 32,289 | 26,860 |
Valuation allowance | (32,289) | (26,860) |
Net deferred tax assets | $ 0 | $ 0 |
Note 14 - Income Taxes (Details 2) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2018 |
Sep. 30, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Current income tax expense: | ||||||||
Federal | $ 0 | $ 0 | ||||||
State | 54 | 61 | ||||||
Foreign | 32 | 39 | ||||||
Current income tax expense | 86 | 100 | ||||||
Deferred income tax provision: | ||||||||
Federal | 0 | 0 | ||||||
State | 0 | 0 | ||||||
Foreign | 0 | 0 | ||||||
Deferred income tax provision | 0 | 0 | ||||||
Provision for income taxes, net | $ (3) | $ 34 | $ 69 | $ 103 | $ 100 | $ 86 | $ 100 | $ 142 |
Note 14 - Income Taxes (Details 3) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2018 |
Sep. 30, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Income Tax Disclosure [Abstract] | ||||||||
Expected provision at statutory federal rate | $ (3,957) | $ (2,249) | ||||||
State tax - net of federal benefit | 48 | 35 | ||||||
Foreign income/losses taxed at different rates | 34 | 94 | ||||||
Other | 11 | 38 | ||||||
Change in valuation allowance | 3,950 | 2,182 | ||||||
Income tax expense | $ (3) | $ 34 | $ 69 | $ 103 | $ 100 | $ 86 | $ 100 | $ 142 |
Note 14 - Income Taxes (Details 4) $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2019
USD ($)
| |
Income Tax Disclosure [Abstract] | |
Unrecognized tax benefits, beginning | $ 39 |
Additions for tax positions taken in the current year | 89 |
Deductions for tax positions taken in a prior year | 0 |
Unrecognized tax benefits, ending | $ 128 |
Note 14 - Income Taxes (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2018 |
Sep. 30, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Research and development credit carryforwards | $ 500 | |||||||
Valuation allowance | 32,289 | $ 26,860 | ||||||
Change in valuation allowance | 3,950 | 2,182 | ||||||
Income tax expense | $ (3) | $ 34 | $ 69 | $ 103 | $ 100 | 86 | 100 | $ 142 |
Current foreign income tax expense | 32 | $ 39 | ||||||
Federal | ||||||||
Net operating loss carry-forward | 114,200 | |||||||
State | ||||||||
Net operating loss carry-forward | $ 83,100 |
Note 15 - Segments, Geographical Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2018 |
Sep. 30, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Revenue, net | $ 21,935 | $ 21,827 | $ 24,187 | $ 46,014 | $ 67,948 | $ 79,667 | $ 88,113 | $ 93,586 |
United States | ||||||||
Revenue, net | 56,976 | 55,970 | ||||||
International | ||||||||
Revenue, net | $ 22,691 | $ 32,143 |
Note 16 - Changes and Correction of Errors in Previously Reported Consolidated Financial Statements (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|---|---|---|---|---|
Current assets: | |||||||
Cash | $ 1,532 | $ 2,317 | $ 1,749 | $ 2,442 | $ 5,114 | $ 6,228 | $ 4,943 |
Accounts receivable, net | 4,807 | 6,273 | 5,990 | 8,612 | 10,743 | 10,052 | |
Inventory | 4,720 | 13,661 | 10,378 | 11,593 | 10,102 | 9,563 | |
Prepaid giveaways | 111 | ||||||
Prepaid expenses and other current assets | 1,104 | 576 | 1,611 | 1,486 | 1,065 | 994 | |
Total current assets | 12,163 | 22,827 | 19,728 | 24,133 | 27,135 | 27,890 | |
Property and equipment, net | 216 | 513 | 576 | 691 | 776 | 910 | |
Intangible assets, net | 676 | 997 | 1,077 | 1,157 | 1,237 | 1,317 | |
Other assets | 310 | 264 | 267 | 238 | 239 | 225 | |
Total assets | 14,540 | 24,601 | 21,648 | 26,219 | 29,387 | 30,342 | |
Current liabilities: | |||||||
Obligation under secured borrowing arrangement | 4,443 | 1,285 | 594 | 2,787 | 5,547 | 5,385 | |
Line of credit | 4,204 | 1,500 | 1,500 | 2,000 | 2,000 | 3,000 | |
Accounts payable | 26,178 | 24,797 | 17,606 | 16,557 | 15,217 | 11,738 | |
Accrued liabilities | 4,805 | 6,543 | 4,978 | 5,469 | 7,211 | 7,383 | |
Accrued restructuring charges, current | 0 | 493 | 463 | 564 | 560 | 595 | |
Total current liabilities | 41,541 | 52,558 | 25,141 | 27,377 | 30,535 | 28,101 | |
Convertible note with a related party, net of discount | 17,925 | 17,910 | 17,896 | 17,881 | |||
Accrued restructuring charges, long-term | 0 | 30 | 58 | 80 | 110 | 120 | |
Other long-term liabilities | 228 | 208 | 226 | 1,248 | 1,060 | 1,088 | |
Total liabilities | 42,492 | 52,796 | 43,350 | 46,615 | 49,601 | 47,190 | |
Commitments and contingencies (Note 9) | |||||||
Stockholders' deficit: | |||||||
Common stock | 31 | 15 | 15 | 15 | 14 | 14 | |
Additional paid-in capital | 177,914 | 158,944 | 158,826 | 158,706 | 158,586 | 158,396 | |
Treasury stock, at cost | (10,039) | (10,039) | (10,039) | (10,039) | (10,039) | (10,039) | |
Accumulated other comprehensive loss | 0 | (238) | (169) | (165) | (142) | (150) | |
Accumulated deficit | (195,858) | (176,877) | (170,335) | (168,913) | (168,633) | (165,069) | (152,560) |
Total stockholders' deficit | (27,952) | (28,195) | (21,702) | (20,396) | (20,214) | (16,848) | |
Total liabilities and stockholders' deficit | $ 14,540 | $ 24,601 | 21,648 | 26,219 | 29,387 | 30,342 | |
As Previously Reported | |||||||
Current assets: | |||||||
Cash | 1,749 | 2,442 | 5,114 | 6,228 | 4,943 | ||
Accounts receivable, net | 16,235 | 16,278 | 16,925 | 11,105 | |||
Inventory | 7,324 | 7,651 | 7,738 | 6,572 | |||
Prepaid giveaways | 111 | ||||||
Prepaid expenses and other current assets | 1,120 | 1,140 | 895 | 994 | |||
Total current assets | 26,428 | 27,511 | 30,783 | 30,462 | |||
Property and equipment, net | 576 | 1,491 | 1,632 | 1,822 | |||
Intangible assets, net | 1,077 | 1,157 | 1,237 | 1,317 | |||
Other assets | 267 | 238 | 239 | 225 | |||
Total assets | 28,348 | 30,397 | 33,891 | 33,826 | |||
Current liabilities: | |||||||
Obligation under secured borrowing arrangement | 594 | 2,787 | 5,547 | 5,385 | |||
Line of credit | 1,500 | 2,000 | 2,000 | 3,000 | |||
Accounts payable | 20,672 | 16,562 | 14,897 | 11,742 | |||
Accrued liabilities | 5,238 | 5,700 | 7,441 | 7,761 | |||
Accrued restructuring charges, current | 463 | 564 | 560 | 595 | |||
Total current liabilities | 28,467 | 27,613 | 30,445 | 28,483 | |||
Convertible note with a related party, net of discount | 17,226 | 17,071 | 16,917 | 16,669 | |||
Accrued restructuring charges, long-term | 58 | 80 | 110 | 120 | |||
Other long-term liabilities | 74 | 1,248 | 1,060 | 1,088 | |||
Total liabilities | 45,825 | 46,012 | 48,532 | 46,360 | |||
Commitments and contingencies (Note 9) | |||||||
Stockholders' deficit: | |||||||
Common stock | 15 | 15 | 14 | 14 | |||
Additional paid-in capital | 160,038 | 159,918 | 159,798 | 159,608 | |||
Treasury stock, at cost | (10,039) | (10,039) | (10,039) | (10,039) | |||
Accumulated other comprehensive loss | (169) | (165) | (142) | (150) | |||
Accumulated deficit | (167,322) | (165,344) | (164,272) | (161,967) | (150,994) | ||
Total stockholders' deficit | (17,477) | (15,615) | (14,641) | (12,534) | |||
Total liabilities and stockholders' deficit | 28,348 | 30,397 | 33,891 | 33,826 | |||
Restatement Adjustments | |||||||
Current assets: | |||||||
Cash | 0 | 0 | 0 | 0 | 0 | ||
Accounts receivable, net | (10,245) | (7,666) | (6,182) | (1,053) | |||
Inventory | 3,054 | 3,942 | 2,364 | 2,991 | |||
Prepaid giveaways | 0 | ||||||
Prepaid expenses and other current assets | 491 | 346 | 170 | 0 | |||
Total current assets | (6,700) | (3,378) | (3,648) | (2,572) | |||
Property and equipment, net | 0 | (800) | (856) | (912) | |||
Intangible assets, net | 0 | 0 | 0 | 0 | |||
Other assets | 0 | 0 | 0 | 0 | |||
Total assets | (6,700) | (4,178) | (4,504) | (3,484) | |||
Current liabilities: | |||||||
Obligation under secured borrowing arrangement | 0 | 0 | 0 | 0 | |||
Line of credit | 0 | 0 | 0 | 0 | |||
Accounts payable | (3,066) | (5) | 320 | (4) | |||
Accrued liabilities | (260) | (231) | (230) | (378) | |||
Accrued restructuring charges, current | 0 | 0 | 0 | 0 | |||
Total current liabilities | (3,326) | (236) | 90 | (382) | |||
Convertible note with a related party, net of discount | 699 | 839 | 979 | 1,212 | |||
Accrued restructuring charges, long-term | 0 | 0 | 0 | 0 | |||
Other long-term liabilities | 152 | 0 | 0 | 0 | |||
Total liabilities | (2,475) | 603 | 1,069 | 830 | |||
Commitments and contingencies (Note 9) | |||||||
Stockholders' deficit: | |||||||
Common stock | 0 | 0 | 0 | 0 | |||
Additional paid-in capital | (1,212) | (1,212) | (1,212) | (1,212) | |||
Treasury stock, at cost | 0 | 0 | 0 | 0 | |||
Accumulated other comprehensive loss | 0 | 0 | 0 | 0 | |||
Accumulated deficit | (3,013) | (3,569) | (4,361) | (3,102) | $ (1,596) | ||
Total stockholders' deficit | (4,225) | (4,781) | (5,573) | (4,314) | |||
Total liabilities and stockholders' deficit | $ (6,700) | $ (4,178) | $ (4,504) | $ (3,484) |
Note 16 - Changes and Correction of Errors in Previously Reported Consolidated Financial Statements (Details 1) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2018 |
Sep. 30, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Revenue, net | $ 21,935 | $ 21,827 | $ 24,187 | $ 46,014 | $ 67,948 | $ 79,667 | $ 88,113 | $ 93,586 |
Cost of revenue | 16,384 | 17,117 | 19,165 | 36,282 | 52,665 | 70,979 | 69,719 | 70,642 |
Gross profit | 5,551 | 4,710 | 5,022 | 9,732 | 15,283 | 8,688 | 18,394 | 22,944 |
Operating expenses: | ||||||||
Advertising and promotion | 517 | 879 | 814 | 1,693 | 2,210 | 2,487 | 2,939 | 2,435 |
Salaries and benefits | 1,856 | 2,295 | 2,154 | 4,449 | 6,305 | 7,910 | 8,328 | 10,134 |
Selling, general and administrative | 3,132 | 2,670 | 2,487 | 5,157 | 8,289 | 8,899 | 11,610 | 13,582 |
Research and development | 185 | 208 | 212 | 420 | 605 | 893 | 751 | 642 |
Professional fees | 436 | 626 | 720 | 1,346 | 1,782 | 3,606 | 2,598 | 3,230 |
Gain on settlement of accounts payable | 0 | (430) | ||||||
Impairment of assets | 0 | 0 | 0 | |||||
Total operating expenses | 6,126 | 6,678 | 6,387 | 13,065 | 19,191 | 23,795 | 26,226 | 29,593 |
Loss from operations | (575) | (1,968) | (1,365) | (3,333) | (3,908) | (15,107) | (7,832) | (6,649) |
Other (expense) income: | ||||||||
(Loss) gain on settlement of obligations | 2,747 | 2,747 | 2,747 | (125) | 1,074 | (1,877) | ||
Interest and other expense, net | (850) | (1,025) | (1,077) | (2,102) | (2,952) | (3,609) | (3,897) | (3,841) |
Loss before provision for income taxes | (1,425) | (246) | (2,442) | (2,688) | (4,113) | (18,841) | (10,655) | (12,367) |
Provision for income taxes | (3) | 34 | 69 | 103 | 100 | 86 | 100 | 142 |
Net loss | $ (1,422) | $ (280) | $ (2,511) | $ (2,791) | $ (4,213) | $ (18,927) | $ (10,755) | $ (12,509) |
Net loss per share, basic and diluted | $ (0.09) | $ (0.02) | $ (0.17) | $ (0.19) | $ (0.28) | $ (0.92) | $ (0.72) | $ (0.88) |
Weighted average shares used to compute net loss per share, basic and diluted | 15,037,666 | 14,998,531 | 14,957,217 | 14,977,988 | 14,998,099 | 20,475,313 | 15,023,872 | 14,215,399 |
As Previously Reported | ||||||||
Revenue, net | $ 27,388 | $ 27,104 | $ 26,547 | $ 53,651 | $ 81,039 | $ 102,155 | ||
Cost of revenue | 18,595 | 18,952 | 18,328 | 37,280 | 55,875 | 71,710 | ||
Gross profit | 8,793 | 8,152 | 8,219 | 16,371 | 25,164 | 30,445 | ||
Operating expenses: | ||||||||
Advertising and promotion | 3,589 | 4,991 | 3,661 | 8,652 | 12,241 | 9,352 | ||
Salaries and benefits | 1,856 | 2,295 | 2,154 | 4,449 | 6,305 | 10,134 | ||
Selling, general and administrative | 2,974 | 2,654 | 2,546 | 5,200 | 8,175 | 12,071 | ||
Research and development | 185 | 208 | 212 | 420 | 605 | 642 | ||
Professional fees | 436 | 626 | 572 | 1,198 | 1,634 | 3,378 | ||
Gain on settlement of accounts payable | 0 | (430) | ||||||
Impairment of assets | 743 | 743 | 180 | |||||
Total operating expenses | 9,783 | 10,774 | 9,145 | 19,919 | 29,703 | 35,327 | ||
Loss from operations | (990) | (2,622) | (926) | (3,548) | (4,539) | (4,882) | ||
Other (expense) income: | ||||||||
(Loss) gain on settlement of obligations | 2,747 | 2,747 | 2,747 | (1,877) | ||||
Interest and other expense, net | (990) | (1,165) | (1,310) | (2,473) | (3,463) | (4,072) | ||
Loss before provision for income taxes | (1,980) | (1,040) | (2,236) | (3,274) | (5,255) | (10,831) | ||
Provision for income taxes | (3) | 34 | 69 | 103 | 100 | 142 | ||
Net loss | $ (1,977) | $ (1,074) | $ (2,305) | $ (3,377) | $ (5,355) | $ (10,973) | ||
Net loss per share, basic and diluted | $ (0.13) | $ (0.07) | $ (0.16) | $ (0.23) | $ (0.36) | $ (0.79) | ||
Weighted average shares used to compute net loss per share, basic and diluted | 15,029,312 | 14,701,473 | 14,615,677 | 14,658,812 | 14,783,669 | 13,877,686 | ||
Restatement Adjustments | ||||||||
Revenue, net | $ (5,453) | $ (5,277) | $ (2,360) | $ (7,637) | $ (13,091) | $ (8,569) | ||
Cost of revenue | (2,211) | (1,835) | 837 | (998) | (3,210) | (1,068) | ||
Gross profit | (3,242) | (3,442) | (3,197) | (6,639) | (9,881) | (7,501) | ||
Operating expenses: | ||||||||
Advertising and promotion | (3,072) | (4,112) | (2,847) | (6,959) | (10,031) | (6,917) | ||
Salaries and benefits | 0 | 0 | 0 | 0 | 0 | 0 | ||
Selling, general and administrative | 158 | 16 | (59) | (43) | 114 | 1,511 | ||
Research and development | 0 | 0 | 0 | 0 | 0 | 0 | ||
Professional fees | 0 | 0 | 148 | 148 | 148 | (148) | ||
Gain on settlement of accounts payable | 0 | 0 | ||||||
Impairment of assets | (743) | (743) | (180) | |||||
Total operating expenses | (3,657) | (4,096) | (2,758) | (6,854) | (10,512) | (5,734) | ||
Loss from operations | 415 | 654 | (439) | 215 | 631 | (1,767) | ||
Other (expense) income: | ||||||||
(Loss) gain on settlement of obligations | 0 | 0 | 0 | 0 | ||||
Interest and other expense, net | 140 | 140 | 233 | 371 | 511 | 231 | ||
Loss before provision for income taxes | 555 | 794 | (206) | 586 | 1,142 | (1,536) | ||
Provision for income taxes | 0 | 0 | 0 | 0 | 0 | 0 | ||
Net loss | $ 555 | $ 794 | $ (206) | $ 586 | $ 1,142 | $ (1,536) | ||
Net loss per share, basic and diluted | $ 0.04 | $ 0.05 | $ (0.01) | $ 0.04 | $ 0.08 | $ (0.09) | ||
Weighted average shares used to compute net loss per share, basic and diluted | 8,354 | 297,058 | 341,540 | 319,176 | 214,430 | 337,713 |
Note 16 - Changes and Correction of Errors in Previously Reported Consolidated Financial Statements (Details 2) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2018 |
Sep. 30, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Accumulated deficit, beginning | $ (168,913) | $ (168,633) | $ (165,069) | $ (165,069) | $ (165,069) | $ (176,877) | $ (165,069) | $ (152,560) |
Net loss | (1,422) | (280) | (2,511) | (2,791) | (4,213) | (18,927) | (10,755) | (12,509) |
Accumulated deficit, ending | (170,335) | (168,913) | (168,633) | (168,913) | (170,335) | $ (195,858) | (176,877) | (165,069) |
As Previously Reported | ||||||||
Accumulated deficit, beginning | (165,344) | (164,272) | (161,967) | (161,967) | (161,967) | (161,967) | (150,994) | |
Net loss | (1,977) | (1,074) | (2,305) | (3,377) | (5,355) | (10,973) | ||
Accumulated deficit, ending | (167,322) | (165,344) | (164,272) | (165,344) | (167,322) | (161,967) | ||
Restatement Adjustments | ||||||||
Accumulated deficit, beginning | (3,569) | (4,361) | (3,102) | (3,102) | (3,102) | $ (3,102) | (1,596) | |
Net loss | 555 | 794 | (206) | 586 | 1,142 | (1,536) | ||
Accumulated deficit, ending | $ (3,013) | $ (3,569) | $ (4,361) | $ (3,569) | $ (3,013) | $ (3,102) |
Note 16 - Changes and Correction of Errors in Previously Reported Consolidated Financial Statements (Details 3) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2018 |
Sep. 30, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ (1,422) | $ (280) | $ (2,511) | $ (2,791) | $ (4,213) | $ (18,927) | $ (10,755) | $ (12,509) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 231 | 446 | 653 | 339 | 529 | 2,232 | ||
Amortization of intangible assets | 320 | 320 | 320 | |||||
Bad debt expense | 164 | 414 | 822 | 21 | 1,848 | 1,524 | ||
Gain on settlement of accounts payable | 0 | (430) | ||||||
Settlement of obligation | 0 | 0 | ||||||
Loss on disposal of property and equipment | (5) | 0 | 31 | |||||
Impairment of assets | 0 | 0 | 0 | |||||
Amortization of debt discount and issuance costs | 15 | 30 | 44 | 60 | 59 | 545 | ||
Inventory provision | 35 | 36 | 130 | 82 | (161) | |||
Stock-based compensation | 137 | 257 | 377 | 284 | 496 | 2,096 | ||
Write off of prepaid financing costs | 175 | (54) | 275 | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (877) | 979 | 3,175 | 1,444 | 1,931 | (2,055) | ||
Inventory | (663) | (2,156) | (948) | 8,859 | (3,937) | 566 | ||
Prepaid giveaways | (23) | |||||||
Prepaid expenses and other current assets | (70) | (402) | (605) | (528) | 418 | 849 | ||
Other assets | (14) | (15) | (44) | 710 | (39) | (77) | ||
Accounts payable and accrued liabilities | 3,389 | 3,234 | 2,826 | (70) | 11,518 | 1,609 | ||
Accrued restructuring charges | (45) | (71) | (194) | 0 | (192) | (107) | ||
Net cash provided by (used in) operating activities | (232) | (39) | 2,023 | (6,524) | 1,981 | (5,131) | ||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of property and equipment | (14) | (73) | (86) | (13) | (132) | (37) | ||
Net cash used in investing activities | (14) | (73) | (86) | (13) | (132) | (37) | ||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from line of credit | 3,239 | 0 | 3,000 | |||||
Payments on line of credit | (1,000) | (1,000) | (1,500) | (535) | (1,500) | |||
Net proceeds from convertible notes with a related party | 31,677 | 871 | ||||||
Proceeds from secured borrowing arrangement, net of reserves | 13,494 | 23,785 | (36,469) | 44,091 | 36,939 | 33,692 | ||
Payments on secured borrowing arrangement, net of fees | (13,332) | (26,383) | (40,933) | (41,039) | (30,988) | |||
Repayment of capital lease obligations | (34) | (69) | (101) | (120) | (126) | (139) | ||
Net cash provided by (used in) financing activities | (872) | (3,667) | (6,393) | 5,742 | (5,726) | 6,436 | ||
Effect of exchange rate changes on cash | 4 | (7) | (23) | 10 | (34) | 17 | ||
Net change in cash | (1,114) | (3,786) | (4,479) | (785) | (3,911) | 1,285 | ||
Cash - beginning of period | 2,442 | 5,114 | 6,228 | 6,228 | 6,228 | 2,317 | 6,228 | 4,943 |
Cash - end of period | 1,749 | 2,442 | 5,114 | 2,442 | 1,749 | 1,532 | 2,317 | 6,228 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Cash paid for interest | 614 | 1,936 | 2,727 | 1,401 | 3,435 | 2,445 | ||
Cash paid for taxes | 68 | 69 | 173 | 77 | 172 | 106 | ||
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES: | ||||||||
Conversion feature related to refinanced convertible note | 0 | |||||||
Property and equipment acquired in conjunction with capital leases | 0 | 0 | 29 | 0 | ||||
Purchase of property and equipment included in current liabilities | 13 | 4 | 12 | |||||
Interest paid through issuance of shares of common stock | 53 | 53 | 53 | $ 0 | 53 | |||
As Previously Reported | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | (1,977) | (1,074) | (2,305) | (3,377) | (5,355) | (10,973) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 287 | 558 | 822 | 1,320 | ||||
Amortization of intangible assets | 320 | |||||||
Bad debt expense | 164 | 414 | 822 | 1,524 | ||||
Gain on settlement of accounts payable | 0 | (430) | ||||||
Settlement of obligation | (2,747) | (2,747) | ||||||
Loss on disposal of property and equipment | 31 | |||||||
Impairment of assets | 743 | 743 | 180 | |||||
Amortization of debt discount and issuance costs | 248 | 403 | 557 | 545 | ||||
Inventory provision | 0 | 0 | 0 | |||||
Stock-based compensation | 137 | 257 | 377 | 2,096 | ||||
Write off of prepaid financing costs | 275 | |||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (443) | (71) | (454) | (4,619) | ||||
Inventory | (1,255) | (1,169) | (755) | 2,124 | ||||
Prepaid giveaways | (23) | |||||||
Prepaid expenses and other current assets | 100 | (56) | (114) | 849 | ||||
Other assets | (14) | (15) | (44) | (77) | ||||
Accounts payable and accrued liabilities | 2,917 | 5,835 | 8,365 | 1,991 | ||||
Accrued restructuring charges | (45) | (71) | (194) | (107) | ||||
Net cash provided by (used in) operating activities | (232) | (39) | 2,023 | (5,131) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of property and equipment | (14) | (73) | (86) | (37) | ||||
Net cash used in investing activities | (14) | (73) | (86) | (37) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from line of credit | 3,000 | |||||||
Payments on line of credit | (1,000) | (1,000) | (1,500) | |||||
Net proceeds from convertible notes with a related party | 31,677 | 871 | ||||||
Proceeds from secured borrowing arrangement, net of reserves | 13,494 | 23,785 | (36,469) | 33,692 | ||||
Payments on secured borrowing arrangement, net of fees | (13,332) | (26,383) | (30,988) | |||||
Repayment of capital lease obligations | (34) | (69) | (101) | (139) | ||||
Net cash provided by (used in) financing activities | (872) | (3,667) | (6,393) | 6,436 | ||||
Effect of exchange rate changes on cash | 4 | (7) | (23) | 17 | ||||
Net change in cash | (1,114) | (3,786) | (4,479) | 1,285 | ||||
Cash - beginning of period | 2,442 | 5,114 | 6,228 | 6,228 | 6,228 | 6,228 | 4,943 | |
Cash - end of period | 1,749 | 2,442 | 5,114 | 2,442 | 1,749 | 6,228 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Cash paid for interest | 614 | 1,936 | 2,727 | 2,445 | ||||
Cash paid for taxes | 68 | 69 | 173 | 106 | ||||
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES: | ||||||||
Conversion feature related to refinanced convertible note | 1,212 | |||||||
Property and equipment acquired in conjunction with capital leases | 0 | 0 | ||||||
Purchase of property and equipment included in current liabilities | 13 | 4 | 12 | |||||
Interest paid through issuance of shares of common stock | 53 | 53 | 53 | |||||
Restatement Adjustments | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | 555 | 794 | (206) | 586 | 1,142 | (1,536) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | (56) | (112) | (169) | 912 | ||||
Amortization of intangible assets | 0 | |||||||
Bad debt expense | 0 | 0 | 0 | 0 | ||||
Gain on settlement of accounts payable | 0 | 0 | ||||||
Settlement of obligation | 2,747 | 2,747 | ||||||
Loss on disposal of property and equipment | 0 | |||||||
Impairment of assets | (743) | (743) | (180) | |||||
Amortization of debt discount and issuance costs | (233) | (373) | (513) | 0 | ||||
Inventory provision | 35 | 36 | 130 | |||||
Stock-based compensation | 0 | 0 | 0 | 0 | ||||
Write off of prepaid financing costs | 0 | |||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (434) | 1,050 | 3,629 | 2,564 | ||||
Inventory | 592 | (987) | (193) | (1,558) | ||||
Prepaid giveaways | 0 | |||||||
Prepaid expenses and other current assets | (170) | (346) | (491) | 0 | ||||
Other assets | 0 | 0 | 0 | 0 | ||||
Accounts payable and accrued liabilities | 472 | (2,601) | (5,539) | (382) | ||||
Accrued restructuring charges | 0 | 0 | 0 | 0 | ||||
Net cash provided by (used in) operating activities | 0 | 0 | 0 | 0 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of property and equipment | 0 | 0 | 0 | 0 | ||||
Net cash used in investing activities | 0 | 0 | 0 | 0 | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from line of credit | 0 | |||||||
Payments on line of credit | 0 | 0 | 0 | |||||
Net proceeds from convertible notes with a related party | 0 | 0 | ||||||
Proceeds from secured borrowing arrangement, net of reserves | 0 | 0 | 0 | 0 | ||||
Payments on secured borrowing arrangement, net of fees | 0 | 0 | 0 | |||||
Repayment of capital lease obligations | 0 | 0 | 0 | 0 | ||||
Net cash provided by (used in) financing activities | 0 | 0 | 0 | 0 | ||||
Effect of exchange rate changes on cash | 0 | 0 | 0 | 0 | ||||
Net change in cash | 0 | 0 | 0 | 0 | ||||
Cash - beginning of period | 0 | 0 | 0 | 0 | 0 | $ 0 | 0 | |
Cash - end of period | $ 0 | $ 0 | 0 | 0 | 0 | 0 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Cash paid for interest | 0 | 0 | 0 | 0 | ||||
Cash paid for taxes | 0 | 0 | 0 | 0 | ||||
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES: | ||||||||
Conversion feature related to refinanced convertible note | $ (1,212) | |||||||
Property and equipment acquired in conjunction with capital leases | 0 | 0 | ||||||
Purchase of property and equipment included in current liabilities | 0 | 0 | 0 | |||||
Interest paid through issuance of shares of common stock | $ 0 | $ 0 | $ 0 |
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