Delaware
|
|
90-0890517
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(State
or other jurisdiction of incorporation or
organization)
|
|
(I.R.S.
Employer Identification No.)
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2400 Boswell Road,
|
|
91914
|
Chula Vista, CA
|
|
(Zip
Code)
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(Address
of principal executive offices)
|
|
|
|
|
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Securities registered pursuant
to Section 12(b) of the Act:
|
|
Name of each exchange on which registered
|
None
|
|
|
|
|
|
Securities registered pursuant to Section 12(g) of the
Act:
|
|
|
Common
stock $0.001 par value
|
|
|
Large
accelerated filer [ ]
|
Accelerated
filer [ ]
|
Non-accelerated
filer [ ]
|
Smaller
reporting company [X]
|
|
|
(Do
not check if a
smaller
reporting company)
|
Emerging
growth company [X]
|
PART I
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5
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||
15
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27
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28
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28
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28
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PART II
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29
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31
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32
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41
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||
41
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81
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||
81
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81
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||
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PART III
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82
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86
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88
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90
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91
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PART IV
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92
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FORM 10-K SUMMARY |
93
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94
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●
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Nutritional supplements
|
●
|
Gourmet coffee
|
●
|
Weight management
|
●
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Skincare and cosmetics
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●
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Health and wellness
|
●
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Packaged foods
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●
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Lifestyle products (spa, bath, home and garden)
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●
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Pet care
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●
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Digital products including scrap and memory books
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●
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Telecare health services
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●
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Apparel and fashion accessories
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●
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Business lending
|
●
|
100% Colombian Premium Blend;
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●
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Italian Espresso;
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●
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House Blend;
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●
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Decaffeinated Coffee;
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●
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Dark Roast;
|
●
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Half-caff 50/50 blend Espresso;
|
●
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Donut Shop;
|
●
|
Green Coffee Beans;
|
●
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Flavored Coffees;
|
●
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Organic Coffees; and
|
●
|
Espresso;
|
●
|
Select Water Decaffeinated.
|
● www.youngevity.com
|
● www.clrroasters.com
|
● www.ygyi.com
|
● www.cafelarica.com
|
● www.youngofficial.com
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● www.javalution.com
|
● www.heritagemakers.com
|
● www.mialisia.com
|
● www.mkcollab.com
|
● www.mybeyondorganic.com
|
●
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liability for information retrieved from or transmitted over the
Internet;
|
●
|
online content regulation;
|
●
|
commercial e-mail;
|
●
|
visitor privacy; and
|
●
|
taxation and quality of products and services.
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●
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intellectual property ownership and infringement;
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●
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consumer protection;
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●
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obscenity;
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●
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defamation;
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●
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employment and labor;
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●
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the protection of minors;
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●
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health information; and
|
●
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personal privacy and the use of personally identifiable
information.
|
●
|
difficulties
in assimilating acquired operations or products, including the loss
of key employees from acquired businesses
and
disruption to our direct selling channel;
|
●
|
diversion of management's attention from our core
business;
|
●
|
adverse effects on existing business relationships with suppliers
and customers; and
|
●
|
risks of entering markets in which we have limited or no prior
experience.
|
●
|
the possibility that local civil unrest, political instability or
changes in diplomatic or trade relationships might disrupt our
operations in an international market;
|
●
|
the lack of well-established or reliable legal systems in certain
areas;
|
●
|
the presence of high inflation in the economies of international
markets;
|
●
|
the possibility that a foreign government authority might impose
legal, tax or other financial burdens on us or our coffee
operations, or sales force, due, for example, to the structure of
our operations in various markets;
|
●
|
the possibility that a government authority might challenge the
status of our sales force as independent contractors or impose
employment or social taxes on our sales force; and
|
●
|
the possibility that governments may impose currency remittance
restrictions limiting our ability to repatriate cash.
|
●
|
General business and economic conditions;
|
●
|
Adverse publicity or negative misinformation about us or our
products;
|
●
|
Public perceptions about network marketing programs;
|
●
|
High-visibility investigations or legal proceedings against network
marketing companies by federal or state authorities or private
citizens;
|
●
|
Public perceptions about the value and efficacy of nutritional,
personal care, or weight management products
generally;
|
●
|
Other competing network marketing organizations entering into the
marketplace that may recruit our existing distributors or reduce
the potential pool of new distributors; and
|
●
|
Changes to our compensation plan required by law or implemented for
business reasons that make attracting and retaining distributors
more difficult.
|
●
|
variations in our quarterly operating results;
|
●
|
announcements that our revenue or income/loss levels are below
analysts’ expectations;
|
●
|
general economic slowdowns;
|
●
|
changes in market valuations of similar companies;
|
●
|
announcements by us or our competitors of significant contracts;
or
|
●
|
acquisitions, strategic partnerships, joint ventures or capital
commitments.
|
Entity
|
|
Location
|
|
Approximate Square
Footage of Facilities
|
Land in Acres |
|
Own/Lease
|
|
Approximate Rent
Expense $
|
|
Youngevity
|
|
Chula Vista, CA
|
|
59,000
|
|
-
|
|
Own (1)
|
|
-
|
Youngevity
|
|
Alisio Viejo, CA
|
|
3,288
|
|
-
|
|
Lease
|
|
89,000
|
CLR
|
|
Miami, FL
|
|
50,110
|
|
-
|
|
Lease (2)
|
|
414,000
|
Siles Family Group
|
|
Matagalpa, Nicaragua
|
|
200,000
|
|
500
|
|
Own (3)
|
|
-
|
Heritage Makers
|
|
Orem, UT
|
|
9,300
|
|
-
|
|
Lease
|
|
121,000
|
Youngevity
|
|
Auckland, New Zealand
|
|
3,570
|
|
-
|
|
Lease (4)
|
|
69,000
|
Youngevity
|
|
Moscow, Russia
|
|
1,550
|
|
-
|
|
Lease
|
|
125,000
|
Youngevity
|
|
Singapore
|
|
3,222
|
|
-
|
|
Lease
|
|
269,000
|
Youngevity
|
|
Guadalajara, Mexico
|
|
1,500
|
|
-
|
|
Lease
|
|
23,000
|
Youngevity
|
|
Manila, Philippines
|
|
4,473
|
|
-
|
|
Lease
|
|
6,000
|
Legacy for Life
|
|
Lai Chi Kok Kin, Hong Kong
|
|
1,296
|
|
-
|
|
Lease
|
|
17,000
|
Legacy for Life
|
|
Taipei, Taiwan
|
|
4,722
|
|
-
|
|
Lease
|
|
7,000
|
|
2016
|
2015
|
||
|
High
|
Low
|
High
|
Low
|
First
Quarter
|
$0.33
|
$0.22
|
$0.27
|
$0.22
|
Second
Quarter
|
$0.32
|
$0.24
|
$0.41
|
$0.24
|
Third
Quarter
|
$0.32
|
$0.23
|
$0.39
|
$0.23
|
Fourth
Quarter
|
$0.32
|
$0.26
|
$0.35
|
$0.26
|
ISSUER
PURCHASES OF EQUITY SECURITIES
|
||||
|
|
|
|
|
Period ending December 31, 2016
|
Total Number
of Shares Purchased (*)
|
Average Price Paid per Share
|
Total Number of Shares Purchased as Part of
Publicly
Announced Plans or Programs
|
Maximum Number of Shares that May Yet Be Purchased Under the Plans
or Programs
|
October
1 to October 31
|
-
|
-
|
-
|
11,068,120
|
November
1 to November 30
|
-
|
-
|
-
|
11,068,120
|
December
1 to December 31
|
-
|
-
|
-
|
11,068,120
|
Total
|
-
|
-
|
-
|
11,068,120
|
(*) On December 11, 2012, we authorized a share
repurchase program to repurchase up to 15 million of our issued and
outstanding common shares from time to time on the open market or
via private transactions through block trades. The initial
expiration date for the stock repurchase program was December 31,
2013. On October 7, 2013, the Board voted to extend the stock
repurchase program until a date is set to revoke the
program.
|
Plan category
|
Number of
securities
issued
under equity
compensation plan
|
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
|
-
|
$-
|
-
|
Equity
compensation plans not approved by security holders
|
33,230,000
|
0.24
|
6,300,825
|
total
|
33,230,000
|
$0.24
|
6,300,825
|
|
Year Ended December 31,
|
||||
|
2016
|
2015
|
2014
|
2013
|
2012
|
|
|
|
|
|
|
Statements of Operations Data:
|
|
|
|
||
Revenues
|
$162,667
|
$156,597
|
$134,043
|
$85,627
|
$75,004
|
Cost
of revenues
|
64,530
|
63,628
|
57,718
|
34,326
|
31,179
|
Gross
profit
|
98,137
|
92,969
|
76,325
|
51,301
|
43,825
|
Distributor
compensation
|
67,148
|
63,276
|
52,646
|
32,985
|
30,526
|
Selling
and marketing, general and administrative expense
|
28,474
|
24,287
|
20,310
|
13,964
|
13,580
|
Operating
income (loss)
|
2,515
|
5,406
|
3,369
|
4,352
|
(281)
|
Interest
expense, net
|
(4,474)
|
(4,491)
|
(2,356)
|
(1,249)
|
(90)
|
Extinguishment
loss on debt
|
-
|
(1,198)
|
-
|
-
|
-
|
Change
in fair value of warrant derivative liability
|
1,371
|
(39)
|
(15)
|
-
|
-
|
Income
(loss) before income taxes
|
(3,103)
|
(322)
|
998
|
3,103
|
(368)
|
Income
tax (benefit) provision
|
(190)
|
1,384
|
(4,371)
|
452
|
196
|
Net
income (loss)
|
$(398)
|
$(1,706)
|
$5,369
|
$2,651
|
$(564)
|
|
|
|
|
|
|
Other Financial Data
|
|
|
|
|
|
Depreciation
and amortization
|
$3,862
|
$3,354
|
$2,686
|
$2,079
|
$1,905
|
Stock
based compensation
|
395
|
455
|
534
|
848
|
629
|
Change
in fair value of warrant derivative liability
|
(1,371)
|
39
|
15
|
-
|
-
|
Extinguishment
loss on debt
|
-
|
1,198
|
-
|
-
|
-
|
Adjusted
EBITDA (1)
|
6,772
|
9,215
|
6,589
|
7,279
|
3,170
|
|
|
|
|
|
|
Balance Sheet Data
|
|
|
|
|
|
Cash
and cash equivalents
|
$869
|
$3,875
|
$2,997
|
$4,320
|
$3,025
|
Inventory
|
21,492
|
17,977
|
11,783
|
5,973
|
4,675
|
Total
assets
|
66,008
|
61,329
|
55,732
|
34,853
|
24,907
|
Stockholders’
Equity
|
18,998
|
18,881
|
18,589
|
11,499
|
9,879
|
|
|
|
|
|
|
Weighted
average shares outstanding, diluted
|
392,641,735
|
392,075,608
|
389,795,108
|
391,953,473
|
387,392,118
|
|
For the years ended
December 31,
|
Percentage
|
|
Segment
Revenues
|
2016
|
2015
|
change
|
Direct
selling
|
$145,418
|
$138,927
|
4.7%
|
Commercial
coffee
|
17,249
|
17,670
|
(2.4)%
|
Total
|
$162,667
|
$156,597
|
3.9%
|
|
For the years
ended December 31,
|
Percentage
|
|
Segment Gross Profit (Loss)
|
2016
|
2015
|
change
|
Direct
selling
|
$97,219
|
$93,613
|
3.9%
|
Gross Profit % of Revenues
|
66.9%
|
67.4%
|
(0.5)%
|
Commercial
coffee
|
918
|
(644)
|
243.5%
|
Gross Profit % of Revenues
|
5.3%
|
(3.6)%
|
9.0%
|
Total
|
$98,137
|
$92,969
|
5.6%
|
Gross Profit % of Revenues
|
60.3%
|
59.4%
|
0.9%
|
|
Years Ended
|
|
|
December 31,
|
|
|
2016
|
2015
|
Net
loss
|
$(398)
|
$(1,706)
|
Add
|
|
|
Interest,
net
|
4,474
|
4,491
|
Income
taxes
|
(190)
|
1,384
|
Depreciation
|
1,518
|
1,242
|
Amortization
|
2,344
|
2,112
|
EBITDA
|
7,748
|
7,523
|
Add
|
|
|
Stock
based compensation
|
395
|
455
|
Change
in the fair value of warrant derivative
|
(1,371)
|
39
|
Extinguishment
loss on debt
|
-
|
1,198
|
Adjusted
EBITDA
|
$6,772
|
$9,215
|
|
|
Current
|
Long-Term
|
||||
Contractual Obligations*
|
Total
|
2017
|
2018
|
2019
|
2020
|
2021
|
Thereafter
|
Operating
Leases
|
$4,578
|
$1,138
|
$930
|
$634
|
$557
|
$571
|
$748
|
Capital
Leases
|
2,678
|
984
|
972
|
604
|
90
|
28
|
-
|
Purchase
Obligations
|
1,164
|
1,164
|
-
|
-
|
-
|
-
|
-
|
Convertible
Notes Payable, “July 2014 Private
Placement”(*)
|
4,750
|
-
|
-
|
4,750
|
-
|
-
|
-
|
Convertible
Notes Payable, “November 2015 Private Placement”
(*)
|
7,188
|
-
|
7,188
|
-
|
-
|
-
|
-
|
Notes
Payable, Operating
|
4,650
|
220
|
162
|
141
|
143
|
108
|
3,876
|
Contingent
Acquisition Debt
|
8,001
|
628
|
719
|
694
|
814
|
382
|
4,764
|
Total
|
$33,009
|
$4,134
|
$9,971
|
$6,823
|
$1,604
|
$1,089
|
$9,388
|
42
|
|
Financial
Statements:
|
43
|
43
|
|
44
|
|
45
|
|
46
|
|
47
|
|
|
Youngevity International, Inc.
and Subsidiaries
|
||||||||
Consolidated Balance Sheets
|
||||||||
(In thousands, except share amounts)
|
||||||||
|
|
As of
|
|
|||||
|
|
December 31,
2016
|
|
|
December 31,
2015
|
|
||
ASSETS
|
|
|
|
|
|
|
||
Current Assets
|
|
|
|
|
|
|
||
Cash
and cash equivalents
|
|
$
|
869
|
|
|
$
|
3,875
|
|
Accounts
receivable, due from factoring company
|
|
|
1,078
|
|
|
|
556
|
|
Trade
accounts receivable, net
|
|
|
1,071
|
|
|
|
1,068
|
|
Income
tax receivable
|
|
|
311
|
|
|
|
173
|
|
Deferred
tax assets, net current
|
|
|
565
|
|
|
|
711
|
|
Inventory
|
|
|
21,492
|
|
|
|
17,977
|
|
Prepaid
expenses and other current assets
|
|
|
3,087
|
|
|
|
2,412
|
|
Total
current assets
|
|
|
28,473
|
|
|
|
26,772
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
14,006
|
|
|
|
12,699
|
|
Deferred tax assets, long-term
|
|
|
2,292
|
|
|
|
1,821
|
|
Intangible assets, net
|
|
|
14,914
|
|
|
|
13,714
|
|
Goodwill
|
|
|
6,323
|
|
|
|
6,323
|
|
Total
assets
|
|
$
|
66,008
|
|
|
$
|
61,329
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
8,174
|
|
|
$
|
7,015
|
|
Accrued
distributor compensation
|
|
|
4,163
|
|
|
|
4,223
|
|
Accrued
expenses
|
|
|
3,701
|
|
|
|
3,605
|
|
Deferred
revenues
|
|
|
1,870
|
|
|
|
2,580
|
|
Other
current liabilities
|
|
|
2,389
|
|
|
|
577
|
|
Capital
lease payable, current portion
|
|
|
821
|
|
|
|
111
|
|
Notes
payable, current portion
|
|
|
219
|
|
|
|
456
|
|
Warrant
derivative liability
|
|
|
3,345
|
|
|
|
4,716
|
|
Contingent
acquisition debt, current portion
|
|
|
628
|
|
|
|
264
|
|
Total
current liabilities
|
|
|
25,310
|
|
|
|
23,547
|
|
|
|
|
|
|
|
|
|
|
Capital lease payable, net of current portion
|
|
|
1,569
|
|
|
|
294
|
|
Notes payable, net of current portion
|
|
|
4,431
|
|
|
|
4,647
|
|
Convertible notes payable, net of debt discount
|
|
|
8,327
|
|
|
|
6,786
|
|
Contingent acquisition debt, net of current portion
|
|
|
7,373
|
|
|
|
7,174
|
|
Total
liabilities
|
|
|
47,010
|
|
|
|
42,448
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies, Note 9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Convertible
Preferred Stock, $0.001 par value: 100,000,000 shares authorized;
161,135 shares issued and outstanding at December 31, 2016 and
December 31, 2015
|
|
|
-
|
|
|
|
-
|
|
Common
Stock, $0.001 par value: 600,000,000 shares authorized; 392,698,557
and 392,583,015 shares issued and outstanding at December 31, 2016
and December 31, 2015, respectively
|
|
|
393
|
|
|
|
393
|
|
Additional
paid-in capital
|
|
|
169,839
|
|
|
|
169,432
|
|
Accumulated
deficit
|
|
|
(151,016
|
)
|
|
|
(150,618
|
)
|
Accumulated
other comprehensive loss
|
|
|
(218
|
)
|
|
|
(326
|
)
|
Total
stockholders’ equity
|
|
|
18,998
|
|
|
|
18,881
|
|
Total
Liabilities and Stockholders’ Equity
|
|
$
|
66,008
|
|
|
$
|
61,329
|
|
|
|
Years Ended
December 31,
|
|
|||||
|
|
2016
|
|
|
2015
|
|
||
|
|
|
|
|
|
|
||
Revenues
|
|
$
|
162,667
|
|
|
$
|
156,597
|
|
Cost of revenues
|
|
|
64,530
|
|
|
|
63,628
|
|
Gross
profit
|
|
|
98,137
|
|
|
|
92,969
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Distributor
compensation
|
|
|
67,148
|
|
|
|
63,276
|
|
Sales
and marketing
|
|
|
10,413
|
|
|
|
8,212
|
|
General
and administrative
|
|
|
18,061
|
|
|
|
16,075
|
|
Total
operating expenses
|
|
|
95,622
|
|
|
|
87,563
|
|
Operating income
|
|
|
2,515
|
|
|
|
5,406
|
|
Interest
expense, net
|
|
|
(4,474
|
)
|
|
|
(4,491
|
)
|
Extinguishment
loss on debt
|
|
|
-
|
|
|
|
(1,198
|
)
|
Change
in fair value of warrant derivative liability
|
|
|
1,371
|
|
|
|
(39
|
)
|
Total
other expense
|
|
|
(3,103
|
)
|
|
|
(5,728
|
)
|
Loss before income taxes
|
|
|
(588
|
)
|
|
|
(322
|
)
|
Income tax (benefit) provision
|
|
|
(190
|
)
|
|
|
1,384
|
|
Net loss
|
|
|
(398
|
)
|
|
|
(1,706
|
)
|
Preferred stock dividends
|
|
|
(12
|
)
|
|
|
(12
|
)
|
Net loss available to common stockholders
|
|
$
|
(410
|
)
|
|
$
|
(1,718
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per share, basic
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
Net loss per share, diluted
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic
|
|
|
392,641,735
|
|
|
|
392,075,608
|
|
Weighted average shares outstanding, diluted
|
|
|
392,641,735
|
|
|
|
392,075,608
|
|
|
|
Years Ended
December 31,
|
|
|||||
|
|
2016
|
|
|
2015
|
|
||
|
|
|
|
|
|
|
||
Net loss
|
|
$
|
(398
|
)
|
|
$
|
(1,706
|
)
|
Foreign
currency translation
|
|
|
108
|
|
|
|
(51
|
)
|
Total other comprehensive income (loss)
|
|
|
108
|
|
|
|
(51
|
)
|
Comprehensive loss
|
|
$
|
(290
|
)
|
|
$
|
(1,757
|
)
|
|
Preferred Stock
|
Common Stock
|
Additional Paid-in
|
Accumulated Other
Comprehensive
|
Accumulated
|
Total
|
||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Income
(loss)
|
Deficit
|
Equity
|
|
|
|
|
|
|
|
|
|
Beginning Balance at December 31, 2014
|
161,135
|
$-
|
390,301,312
|
$390
|
$167,386
|
$(275)
|
$(148,912)
|
$18,589
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,706)
|
(1,706)
|
Foreign currency
|
|
|
|
|
|
|
|
|
translation adjustment
|
-
|
-
|
-
|
-
|
-
|
(51)
|
-
|
(51)
|
Beneficial conversion feature of convertible notes payable, net of tax |
-
|
-
|
-
|
-
|
402
|
-
|
-
|
402
|
Issuance of common stock pursuant to Notes Payable
|
-
|
-
|
2,450,000
|
2
|
585
|
-
|
-
|
587
|
Issuance of warrants pursuant to Convertible Notes Payable debt
financing
|
-
|
-
|
-
|
-
|
384
|
-
|
-
|
384
|
Issuance of common stock pursuant to the exercise of
warrants
|
-
|
-
|
806,250
|
1
|
201
|
-
|
-
|
202
|
Issuance of common stock pursuant to the exercise of stock
options
|
-
|
-
|
369,675
|
-
|
70
|
-
|
-
|
70
|
Repurchase of common stock
|
-
|
-
|
(1,344,222)
|
-
|
(426)
|
-
|
-
|
(426)
|
Dividends on preferred stock
|
-
|
-
|
-
|
-
|
(12)
|
-
|
-
|
(12)
|
Warrant modification expense
|
-
|
-
|
-
|
-
|
779
|
-
|
-
|
779
|
Stock based compensation expense
|
-
|
-
|
-
|
-
|
455
|
-
|
-
|
455
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2015
|
161,135
|
$-
|
392,583,015
|
$393
|
$169,432
|
$(326)
|
$(150,618)
|
$18,881
|
|
|
|
|
|
|
|
|
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(398)
|
(398)
|
Foreign currency
translation adjustment
|
-
|
-
|
-
|
-
|
-
|
108
|
-
|
108
|
Issuance of common stock pursuant to the exercise of
warrants
|
-
|
-
|
39,250
|
-
|
10
|
-
|
-
|
10
|
Issuance of common stock pursuant to the exercise of stock
options
|
-
|
-
|
102,000
|
-
|
20
|
-
|
-
|
20
|
Issuance of common stock for services
|
-
|
-
|
100,000
|
-
|
30
|
-
|
-
|
30
|
Repurchase of common stock
|
-
|
-
|
(125,708)
|
-
|
(36)
|
-
|
-
|
(36)
|
Dividends on preferred stock
|
-
|
-
|
-
|
-
|
(12)
|
-
|
-
|
(12)
|
Stock based compensation expense
|
-
|
-
|
-
|
-
|
395
|
-
|
-
|
395
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
161,135
|
$-
|
392,698,557
|
$393
|
$169,839
|
$(218)
|
$(151,016)
|
$18,998
|
|
|
Years Ended
December 31,
|
|
|||||
|
|
2016
|
|
|
2015
|
|
||
Cash Flows from Operating Activities:
|
|
(As
Restated)*
|
|
|
|
|
||
Net loss
|
|
$
|
(398
|
)
|
|
$
|
(1,706
|
)
|
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
3,862
|
|
|
|
3,354
|
|
Stock
based compensation expense
|
|
|
395
|
|
|
|
455
|
|
Warrant
modification expense
|
|
|
-
|
|
|
|
253
|
|
Amortization
of deferred financing costs
|
|
|
360
|
|
|
|
899
|
|
Amortization
of prepaid advisory fees
|
|
|
58
|
|
|
|
20
|
|
Stock
issuance for services
|
|
|
30
|
|
|
|
-
|
|
Change
in fair value of warrant derivative liability
|
|
|
(1,371
|
)
|
|
|
39
|
|
Amortization
of debt discount
|
|
|
1,053
|
|
|
|
967
|
|
Amortization
of warrant issuance costs
|
|
|
128
|
|
|
|
21
|
|
Expenses
allocated in profit sharing agreement
|
|
|
(698
|
)
|
|
|
(528
|
)
|
Change
in fair value of contingent acquisition debt
|
|
|
(1,462
|
)
|
|
|
(446
|
)
|
Extinguishment
loss on debt
|
|
|
-
|
|
|
|
1,198
|
|
Deferred
income taxes
|
|
|
(325
|
)
|
|
|
1,409
|
|
Changes
in operating assets and liabilities, net of effect from business
combinations:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(525
|
)
|
|
|
168
|
|
Inventory
|
|
|
(3,515
|
)
|
|
|
(6,194
|
)
|
Prepaid
expenses and other current assets
|
|
|
(733
|
)
|
|
|
885
|
|
Accounts
payable
|
|
|
1,159
|
|
|
|
1,608
|
|
Accrued
distributor compensation
|
|
|
(60
|
)
|
|
|
46
|
|
Deferred
revenues
|
|
|
(710
|
)
|
|
|
(2,495
|
)
|
Accrued
expenses and other liabilities
|
|
|
1,063
|
|
|
|
1,278
|
|
Income
taxes receivable
|
|
|
(138
|
)
|
|
|
136
|
|
Net Cash (Used In) Provided by Operating Activities
|
|
|
(1,827
|
)
|
|
|
1,367
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Acquisitions,
net of cash acquired
|
|
|
(48
|
)
|
|
|
(32
|
)
|
Purchases
of property and equipment
|
|
|
(1,397
|
)
|
|
|
(3,198
|
)
|
Net Cash Used in Investing Activities
|
|
|
(1,445
|
)
|
|
|
(3,230
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of secured promissory notes and common stock, net of
offering costs
|
|
|
-
|
|
|
|
5,080
|
|
Proceeds
from issuance of convertible notes payable, net
|
|
|
-
|
|
|
|
2,383
|
|
Proceeds
from the exercise of stock options and warrants, net
|
|
|
30
|
|
|
|
272
|
|
Proceeds
from factoring company
|
|
|
833
|
|
|
|
82
|
|
Payments
of notes payable, net
|
|
|
(453
|
)
|
|
|
(1,214
|
)
|
Payments
of contingent acquisition debt
|
|
|
(773
|
)
|
|
|
(3,338
|
)
|
Proceeds
(payments) of capital leases
|
|
|
557
|
|
|
|
(47
|
)
|
Repurchase
of common stock
|
|
|
(36
|
)
|
|
|
(426
|
)
|
Net Cash Provided by Financing Activities
|
|
|
158
|
|
|
|
2,792
|
|
Foreign Currency Effect on Cash and Cash
Equivalents
|
|
|
108
|
|
|
|
(51
|
)
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(3,006
|
)
|
|
|
878
|
|
Cash and Cash Equivalents, Beginning of Period
|
|
|
3,875
|
|
|
|
2,997
|
|
Cash and Cash Equivalents, End of Period
|
|
$
|
869
|
|
|
$
|
3,875
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow Information
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
2,966
|
|
|
$
|
2,127
|
|
Income taxes
|
|
$
|
181
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Noncash Investing and Financing
Activities
|
|
|
|
|
|
|
|
|
Purchases of property and equipment funded by capital leases and
accounts payable agreements
|
|
$
|
1,582
|
|
|
$
|
429
|
|
Common stock issued in connection with financing
|
|
$
|
-
|
|
|
$
|
587
|
|
Acquisitions of net assets in exchange for contingent acquisition
debt (see Note 2 for non-cash activity)
|
|
$
|
3,604
|
|
|
$
|
1,136
|
|
|
December 31,
|
|
||||||
|
|
2016
|
|
|
2015
|
|
||
Finished goods
|
|
$
|
11,550
|
|
|
$
|
9,893
|
|
Raw materials
|
|
|
11,006
|
|
|
|
8,970
|
|
Total inventory
|
|
|
22,556
|
|
|
|
18,863
|
|
Reserve for excess and obsolete
|
|
|
(1,064
|
)
|
|
|
(886
|
)
|
Inventory, net
|
|
$
|
21,492
|
|
|
$
|
17,977
|
|
|
|
|
December 31,
|
|
||||
|
|
2016
|
|
|
2015
|
|
||
Balance as of December 31, 2015
|
|
$
|
(886
|
)
|
|
$
|
(478
|
)
|
Addition to provision
|
|
|
(1,564
|
)
|
|
|
(1,114
|
)
|
Write-off of inventory
|
|
|
1,386
|
|
|
|
706
|
|
Balance as of December 31, 2016
|
|
$
|
(1,064
|
)
|
|
$
|
(886
|
)
|
|
December 31,
|
|
|
2016
|
2015
|
Building
|
$3,873
|
$2,930
|
Leasehold
improvements
|
2,532
|
2,302
|
Land
|
2,544
|
2,544
|
Land
improvements
|
602
|
602
|
Producing
coffee trees
|
553
|
553
|
Manufacturing
equipment
|
4,570
|
4,344
|
Furniture
and other equipment
|
1,580
|
1,417
|
Computer
software
|
1,236
|
1,100
|
Computer
equipment
|
699
|
663
|
Vehicles
|
103
|
103
|
Construction
in process
|
1,859
|
799
|
|
20,151
|
17,357
|
Accumulated
depreciation
|
(6,145)
|
(4,658)
|
Total
property and equipment
|
$14,006
|
$12,699
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
||||||||||||||||||
|
|
Cost
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
|
Cost
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
||||||
Distributor organizations
|
|
$
|
12,930
|
|
|
$
|
7,162
|
|
|
$
|
5,768
|
|
|
$
|
11,173
|
|
|
$
|
6,086
|
|
|
$
|
5,087
|
|
Trademarks and tradenames
|
|
|
5,394
|
|
|
|
815
|
|
|
|
4,579
|
|
|
|
4,666
|
|
|
|
537
|
|
|
|
4,129
|
|
Customer relationships
|
|
|
7,846
|
|
|
|
3,642
|
|
|
|
4,204
|
|
|
|
6,787
|
|
|
|
2,751
|
|
|
|
4,036
|
|
Internally developed software
|
|
|
720
|
|
|
|
357
|
|
|
|
363
|
|
|
|
720
|
|
|
|
258
|
|
|
|
462
|
|
Intangible assets
|
|
$
|
26,890
|
|
|
$
|
11,976
|
|
|
$
|
14,914
|
|
|
$
|
23,346
|
|
|
$
|
9,632
|
|
|
$
|
13,714
|
|
Years ending December
31,
|
|
|||
2017
|
|
$
|
2,471
|
|
2018
|
|
|
2,096
|
|
2019
|
|
|
1,502
|
|
2020
|
|
|
1,413
|
|
2021
|
|
|
1,336
|
|
|
|
Direct selling
|
|
|
Commercial coffee
|
|
|
Total
|
|
|||
Balance at December 31, 2014
|
|
$
|
3,009
|
|
|
$
|
3,314
|
|
|
$
|
6,323
|
|
Goodwill recognized
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Goodwill impaired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance at December 31, 2015
|
|
$
|
3,009
|
|
|
$
|
3,314
|
|
|
$
|
6,323
|
|
Goodwill recognized
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Goodwill impaired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance at December 31, 2016
|
|
$
|
3,009
|
|
|
$
|
3,314
|
|
|
$
|
6,323
|
|
Cash
paid for the equity in Legacy for Life Taiwan and Legacy for Life
Limited (Hong Kong)
|
$26
|
Cash
paid for inventory
|
195
|
Total
cash consideration
|
221
|
Trademarks
and trade name
|
185
|
Customer-related
intangible
|
250
|
Distributor
organization
|
390
|
Total
intangible assets acquired, non-cash
|
825
|
Total
purchase price
|
$1,046
|
Distributor
organization
|
$825
|
Customer-related
intangible
|
400
|
Trademarks
and trade name
|
250
|
Total
purchase price
|
$1,475
|
Distributor
organization
|
$200
|
Customer-related
intangible
|
155
|
Trademarks
and trade name
|
110
|
Total
purchase price
|
$465
|
Distributor
organization
|
$396
|
Customer-related
intangible
|
285
|
Trademarks
and trade name
|
158
|
Total
purchase price
|
$839
|
Distributor
organization
|
$296
|
Customer-related
intangible
|
169
|
Trademarks
and trade name
|
127
|
Total
purchase price
|
$592
|
Distributor organization
|
|
$
|
68
|
|
Customer-related intangible
|
|
|
52
|
|
Total purchase price
|
|
$
|
120
|
|
Distributor organization
|
|
$
|
140
|
|
Customer-related intangible
|
|
|
110
|
|
Trademarks and trade name
|
|
|
60
|
|
Initial cash payment
|
|
|
(25
|
)
|
Total purchase price
|
|
$
|
285
|
|
Years
ending December 31,
|
|
2017
|
$220
|
2018
|
7,349
|
2019
|
4,891
|
2020
|
143
|
2021
|
108
|
Thereafter
|
3,877
|
Total
|
$16,588
|
Years ending
December 31,
|
|
2017
|
$984
|
2018
|
972
|
2019
|
604
|
2020
|
90
|
2021
|
28
|
Total
|
2,678
|
Amount representing
interest
|
(288)
|
Present value of
minimum lease payments
|
2,390
|
Less current
portion
|
(821)
|
Long term
portion
|
$1,569
|
|
December 31,
2016
|
December 31,
2015
|
8%
Convertible Notes due July and August 2019 (July 2014 Private
Placement) (1)
|
$2,296
|
$1,346
|
8%
Convertible Notes due October and November 2018 (November 2015
Private Placement) (2)
|
6,999
|
6,896
|
Net
debt issuance costs (3)
|
(968)
|
(1,456)
|
Total
convertible notes payable, net of debt discount (4)
|
$8,327
|
$6,786
|
(1)
|
Principal amount of $4,750,000 are net of unamortized debt
discounts of $2,454,000 as of December 31, 2016 and $3,404,000
as of December 31, 2015.
|
(2)
|
Principal amount of approximately $7,188,000 are net of unamortized
debt discounts of $189,000 as of December 31, 2016 and
$292,000 as of December 31, 2015.
|
(3)
|
As of January 1, 2016, we adopted ASU 2015-03 with retrospective
application. This resulted in a $1,456,000 reclassification from
prepaid expenses and other current assets to convertible notes
payable, net of debt discount, for unamortized debt issuance
costs.
|
(4)
|
Principal amounts are net of unamortized discounts and issuance
costs of $3,611,000 as of December 31, 2016 and $5,152,000 as of
December 31, 2015.
|
|
December 31,
2016
|
December 31,
2015
|
Stock price volatility
|
60%-65%
|
70%
|
Risk-free interest rates
|
1.34%-1.70%
|
1.76%
|
Annual dividend yield
|
0%
|
0%
|
Expected life
|
2.6-3.9 years
|
3.6-4.9 years
|
|
Fair Value at December 31, 2016
|
|||
|
Total
|
Level 1
|
Level 2
|
Level 3
|
Liabilities:
|
|
|
|
|
Contingent
acquisition debt, current portion
|
$628
|
$-
|
$-
|
$628
|
Contingent
acquisition debt, less current portion
|
7,373
|
-
|
-
|
7,373
|
Warrant
derivative liability
|
3,345
|
-
|
-
|
3,345
|
Total
liabilities
|
$11,346
|
$-
|
$-
|
$11,346
|
|
Fair Value at December 31, 2015
|
|||
|
Total
|
Level 1
|
Level 2
|
Level 3
|
Liabilities:
|
|
|
|
|
Contingent
acquisition debt, current portion
|
$264
|
$-
|
$-
|
$264
|
Contingent
acquisition debt, less current portion
|
7,174
|
-
|
-
|
7,174
|
Warrant
derivative liability
|
4,716
|
-
|
-
|
4,716
|
Total
liabilities
|
$12,154
|
$-
|
$-
|
$12,154
|
|
|
Warrant Derivative Liability
|
|
|
Balance at December 31, 2014
|
|
$
|
3,712
|
|
Issuance
|
|
|
1,491
|
|
Adjustments to estimated fair
value
|
|
|
39
|
|
Warrant liability reclassified to
equity
|
|
|
(526
|
)
|
Balance at December 31, 2015
|
|
|
4,716
|
|
Issuance
|
|
|
-
|
|
Adjustments to estimated fair
value
|
|
|
(1,371
|
)
|
Balance at December 31, 2016
|
|
$
|
3,345
|
|
|
|
Contingent Consideration
|
|
|
Balance at December 31, 2014
|
|
$
|
10,472
|
|
Level
3 liabilities acquired
|
|
|
1,353
|
|
Level
3 liabilities settled
|
|
|
(3,338
|
)
|
Adjustments
to liabilities included in earnings
|
|
|
(446
|
)
|
Expenses
allocated to profit sharing agreement
|
|
|
(528
|
)
|
Adjustment
to purchase price allocation
|
|
|
(75
|
)
|
Balance at December 31, 2015
|
|
|
7,438
|
|
Level
3 liabilities acquired
|
|
|
3,604
|
|
Level
3 liabilities settled
|
|
|
(773
|
)
|
Adjustments
to liabilities included in earnings
|
|
|
(1,462
|
)
|
Expenses
allocated to profit sharing agreement
|
|
|
(698
|
)
|
Adjustment to purchase price
allocation
|
|
|
(108
|
)
|
Balance at December 31, 2016
|
|
$
|
8,001
|
|
Balance
at December 31, 2014
|
35,221,630
|
Granted
|
12,595,237
|
Expired
/ cancelled
|
(5,335,821)
|
Exercised
|
(806,250)
|
Balance
at December 31, 2015
|
41,674,796
|
Granted
|
-
|
Expired
/ cancelled
|
(3,645,516)
|
Exercised
|
(41,250)
|
Balance
at December 31, 2016
|
37,988,030
|
|
Number of
Shares
|
Weighted
Average
Exercise Price
|
Aggregate
Intrinsic
Value
(in thousands)
|
Outstanding
December 31, 2014
|
28,918,500
|
$0.21
|
$786
|
Issued
|
1,124,250
|
0.31
|
|
Canceled/expired
|
(6,151,475)
|
0.22
|
|
Exercised
|
(369,675)
|
0.21
|
-
|
Outstanding
December 31, 2015
|
23,521,600
|
0.22
|
2,044
|
Issued
|
12,792,250
|
0.27
|
|
Canceled
/ expired
|
(2,981,350)
|
0.24
|
|
Exercised
|
(102,500)
|
0.21
|
-
|
Outstanding
December 31, 2016
|
33,230,000
|
$0.24
|
$1,346
|
Exercisable
December 31, 2016
|
18,830,000
|
$0.23
|
$993
|
Weighted
|
|
Weighted
|
Weighted
|
|
Average
|
|
Average
|
Average
|
|
Exercise Price
|
Options
|
Exercise Price
|
Remaining Life
|
|
Outstanding:
|
|
|
|
|
$
|
$0.16 - 0.21
|
6,852,500
|
$0.19
|
7.02
|
$
|
$0.21 - 0.23
|
11,245,000
|
$0.22
|
5.28
|
$
|
$0.23 - 0.35
|
14,917,750
|
$0.27
|
7.81
|
$
|
$0.35 - 0.40
|
214,750
|
$0.38
|
1.44
|
Exercisable:
|
|
|
|
|
$
|
$0.16 - 0.21
|
3,452,250
|
$0.19
|
6.48
|
$
|
$0.21 - 0.23
|
11,245,000
|
$0.22
|
5.28
|
$
|
$0.23 - 0.35
|
3,917,750
|
$0.27
|
1.68
|
$
|
$0.35 - 0.40
|
214,750
|
$0.38
|
1.44
|
|
Years ended December 31,
|
|
|
2016
|
2015
|
Cost
of revenues
|
$10
|
$17
|
Distributor
compensation
|
215
|
158
|
Sales
and marketing
|
10
|
28
|
General
and administrative
|
160
|
252
|
|
$395
|
$455
|
|
Years ended December 31,
|
|
|
2016
|
2015
|
Dividend
yield
|
-
|
-
|
Stock
price volatility
|
57%- 90%
|
66% - 77%
|
Risk-free
interest rate
|
0.71% - 2.25%
|
0.56%- 1.06%
|
Expected life of options |
2.6 - 6.5 years
|
1.5 - 5.0 years
|
2017
|
$1,138
|
2018
|
930
|
2019
|
634
|
2020
|
557
|
2021
|
571
|
Thereafter
|
748
|
Total
|
$4,578
|
|
December 31,
|
|
|
2016
|
2015
|
Current
|
|
|
Federal
|
$3
|
$66
|
State
|
(18)
|
(161)
|
Foreign
|
150
|
76
|
Total
current
|
135
|
(19)
|
Deferred
|
|
|
Federal
|
$(304)
|
$1,307
|
State
|
(21)
|
96
|
Foreign
|
-
|
-
|
Total
deferred
|
(325)
|
1,403
|
Net
income tax (benefit) expense
|
$(190)
|
$1,384
|
|
December 31,
|
|
|
2016
|
2015
|
Federal
statutory rate
|
$(206)
|
$(113)
|
|
|
|
Adjustments
for tax effects of:
|
|
|
Foreign
rate differential
|
(35)
|
26
|
State
taxes, net
|
(112)
|
(241)
|
Other
nondeductible items
|
(50)
|
1,162
|
Change
in foreign entity tax status
|
(77)
|
-
|
Rate
change
|
6
|
91
|
Deferred
tax asset adjustment
|
(201)
|
101
|
Change
in valuation allowance
|
183
|
161
|
Foreign
tax credit
|
275
|
-
|
Undistributed
foreign earnings
|
17
|
197
|
Other
|
10
|
-
|
|
$(190)
|
$1,384
|
|
December 31,
|
|
|
2016
|
2015
|
Deferred
tax assets:
|
|
|
Amortizable
assets
|
$1,117
|
$1,146
|
Inventory
|
726
|
608
|
Accruals
and reserves
|
222
|
174
|
Stock
options
|
285
|
217
|
Net
operating loss carry-forward
|
3,554
|
2,387
|
Credit
carry-forward
|
309
|
581
|
Total
deferred tax asset
|
6,213
|
5,113
|
|
|
|
Deferred
tax liabilities:
|
|
|
Prepaids
|
(383)
|
(71)
|
Other
|
(608)
|
(521)
|
Depreciable
assets
|
(464)
|
(270)
|
Total
deferred tax liability
|
(1,455)
|
(862)
|
Net
deferred tax asset
|
4,758
|
4,250
|
Less
valuation allowance
|
(1,901)
|
(1,718)
|
Net
deferred tax liabilities
|
$2,857
|
$2,532
|
|
Years ended
|
|
|
December 31,
|
|
|
2016
|
2015
|
Revenues
|
|
|
Direct
selling
|
$145,418
|
$138,927
|
Commercial
coffee
|
17,249
|
17,670
|
Total
revenues
|
$162,667
|
$156,597
|
Gross
profit
|
|
|
Direct
selling
|
$97,219
|
$93,613
|
Commercial
coffee
|
918
|
(644)
|
Total
gross profit
|
$98,137
|
$92,969
|
Operating
income (loss)
|
|
|
Direct
selling
|
$4,564
|
$8,594
|
Commercial
coffee
|
(2,049)
|
(3,188)
|
Total
operating income
|
$2,515
|
$5,406
|
Net
income (loss)
|
|
|
Direct
selling
|
$1,894
|
$3,144
|
Commercial
coffee
|
(2,292)
|
(4,850)
|
Total
net loss
|
$(398)
|
$(1,706)
|
Capital
expenditures
|
|
|
Direct
selling
|
$1,922
|
$1,396
|
Commercial
coffee
|
903
|
2,223
|
Total
capital expenditures
|
$2,825
|
$3,619
|
|
December 31,
|
|
|
2016
|
2015
|
Total
assets
|
|
|
Direct
selling
|
$40,127
|
$36,907
|
Commercial
coffee
|
25,881
|
24,422
|
Total
assets
|
$66,008
|
$61,329
|
|
Years ended
|
|
|
December 31,
|
|
|
2016
|
2015
|
Revenues
|
|
|
United
States
|
$147,548
|
$145,259
|
International
|
15,119
|
11,338
|
Total
revenues
|
$162,667
|
$156,597
|
Youngevity
International, Inc. and Subsidiaries
|
||||||
Consolidated
Statement of Cash Flows
|
||||||
(In
thousands)
|
|
Year Ended December
31, 2016
|
||
|
Previously
Reported
|
Adjustment
|
As
Restated
|
Cash Flows from
Operating Activities:
|
|
|
|
Net Loss
|
$ (398)
|
$ -
|
$ (398)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
||
Depreciation and
amortization
|
3,862
|
-
|
3,862
|
Stock based compensation
expense
|
395
|
-
|
395
|
Amortization of deferred
financing costs
|
360
|
-
|
360
|
Amortization of prepaid
advisory fees
|
58
|
-
|
58
|
Stock issuance for
services
|
30
|
-
|
30
|
Change in fair value of
warrant derivative liability
|
(1,371)
|
-
|
(1,371)
|
Amortization of debt
discount
|
1,053
|
-
|
1,053
|
Amortization of warrant
issuance costs
|
128
|
-
|
128
|
Expenses allocated in
profit sharing agreement
|
(698)
|
-
|
(698)
|
Change in fair value of
contingent acquisition debt
|
(1,462)
|
-
|
(1,462)
|
Deferred income
taxes
|
(325)
|
-
|
(325)
|
Changes in
operating assets and liabilities, net of effect from business
combinations:
|
|
||
Accounts
receivable
|
(525)
|
-
|
(525)
|
Inventory
|
(3,515)
|
-
|
(3,515)
|
Prepaid expenses and
other current assets
|
(733)
|
-
|
(733)
|
Accounts
payable
|
1,159
|
-
|
1,159
|
Accrued distributor
compensation
|
(60)
|
-
|
(60)
|
Deferred
revenues
|
(710)
|
-
|
(710)
|
Accrued expenses and
other liabilities
|
2,729
|
(1,666)
|
1,063
|
Income taxes
receivable
|
(138)
|
-
|
(138)
|
Net Cash Used in
Operating Activities
|
(161)
|
(1,666)
|
(1,827)
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
Acquisitions, net of
cash acquired
|
(48)
|
-
|
(48)
|
Purchases of property
and equipment
|
(1,397)
|
-
|
(1,397)
|
Net Cash Used in
Investing Activities
|
(1,445)
|
-
|
(1,445)
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
Proceeds from the
exercise of stock options and warrants,
net
|
30
|
-
|
30
|
Proceeds (Payments)
from/to factoring company, net
|
(833)
|
1,666
|
833
|
Payments of notes
payable, net
|
(453)
|
-
|
(453)
|
Payments of contingent
acquisition debt
|
(773)
|
-
|
(773)
|
Proceeds of capital
leases
|
557
|
-
|
557
|
Repurchase of common
stock
|
(36)
|
-
|
(36)
|
Net Cash (Used
in) Provided by Financing Activities
|
(1,508)
|
1,666
|
158
|
Foreign Currency
Effect on Cash
|
108
|
-
|
108
|
Net decrease in cash and cash
equivalents
|
(3,006)
|
-
|
(3,006)
|
Cash and Cash
Equivalents, Beginning of Period
|
3,875
|
-
|
3,875
|
Cash and Cash
Equivalents, End of Period
|
$ 869
|
$ -
|
$ 869
|
|
|
|
|
Youngevity International, Inc. and Subsidiaries
|
||||||
Condensed Consolidated Statement of Cash Flows
|
||||||
(In thousands)
|
||||||
(Unaudited)
|
|
Three Months Ended
March 31, 2016
|
||
|
Previously
Reported
|
Adjustment
|
As
Restated
|
Cash Flows from
Operating Activities:
|
|
|
|
Net
income
|
$ 151
|
$ -
|
$ 151
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
||
Depreciation and
amortization
|
1,003
|
-
|
1,003
|
Stock based compensation
expense
|
70
|
-
|
70
|
Amortization of deferred
financing costs
|
90
|
-
|
90
|
Amortization of prepaid
advisory fees
|
15
|
-
|
15
|
Change in fair value of
warrant derivative liability
|
(650)
|
-
|
(650)
|
Amortization of debt
discount
|
264
|
-
|
264
|
Amortization of warrant
issuance costs
|
32
|
-
|
32
|
Expenses allocated in
profit sharing agreement
|
(147)
|
-
|
(147)
|
Change in fair value of
contingent acquisition debt
|
(391)
|
-
|
(391)
|
Changes in
operating assets and liabilities, net of effect from business
combinations:
|
-
|
||
Accounts
receivable
|
281
|
-
|
281
|
Inventory
|
(1,997)
|
-
|
(1,997)
|
Prepaid expenses and
other current assets
|
(835)
|
-
|
(835)
|
Accounts
payable
|
1,183
|
-
|
1,183
|
Accrued distributor
compensation
|
704
|
-
|
704
|
Deferred
revenues
|
(155)
|
-
|
(155)
|
Accrued expenses and
other liabilities
|
250
|
420
|
670
|
Income taxes
receivable
|
173
|
-
|
173
|
Net Cash Provided
by Operating Activities
|
41
|
420
|
461
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
Purchases of property
and equipment
|
(611)
|
-
|
(611)
|
Net Cash Used in
Investing Activities
|
(611)
|
|
(611)
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
Proceeds (Payments)
from/to factoring company, net
|
210
|
(420)
|
(210)
|
Payments of notes
payable, net
|
(306)
|
-
|
(306)
|
Payments of contingent
acquisition debt
|
(328)
|
-
|
(328)
|
Payments of capital
leases
|
(41)
|
-
|
(41)
|
Repurchase of common
stock
|
(4)
|
-
|
(4)
|
Net Cash Used in
Financing Activities
|
(469)
|
(420)
|
(889)
|
Foreign Currency
Effect on Cash
|
(109)
|
-
|
(109)
|
Net
decrease in cash and cash equivalents
|
(1,148)
|
-
|
(1,148)
|
Cash and Cash
Equivalents, Beginning of Period
|
3,875
|
-
|
3,875
|
Cash and Cash
Equivalents, End of Period
|
$ 2,727
|
$-
|
$ 2,727
|
|
|
|
|
Youngevity
International,
Inc. and Subsidiaries
|
||||||
Condensed Consolidated Statement of Cash Flows
|
||||||
(In thousands)
|
||||||
(Unaudited)
|
|
Six Months Ended June 30, 2016
|
||
|
Previously Reported
|
Adjustment
|
As Restated
|
Cash Flows from Operating Activities:
|
|
|
|
Net
income
|
$ 42
|
$ -
|
$ 42
|
Adjustments
to reconcile net income to net cash provided by (used in) operating
activities:
|
|||
Depreciation
and amortization
|
1,987
|
-
|
1,987
|
Stock
based compensation expense
|
126
|
-
|
126
|
Amortization
of deferred financing costs
|
180
|
-
|
180
|
Amortization
of prepaid advisory fees
|
31
|
-
|
31
|
Stock
issuance for services
|
30
|
-
|
30
|
Change
in fair value of warrant derivative liability
|
(166)
|
-
|
(166)
|
Amortization
of debt discount
|
527
|
-
|
527
|
Amortization
of warrant issuance costs
|
64
|
-
|
64
|
Expenses
allocated in profit sharing agreement
|
(382)
|
-
|
(382)
|
Change
in fair value of contingent acquisition debt
|
(871)
|
-
|
(871)
|
Changes
in operating assets and liabilities, net of effect from business
combinations:
|
-
|
||
Accounts
receivable
|
(391)
|
|
(391)
|
Inventory
|
(2,301)
|
-
|
(2,301)
|
Prepaid
expenses and other current assets
|
(67)
|
-
|
(67)
|
Accounts
payable
|
458
|
-
|
458
|
Accrued
distributor compensation
|
738
|
-
|
738
|
Deferred
revenues
|
(465)
|
-
|
(465)
|
Accrued
expenses and other liabilities
|
635
|
(1,662)
|
(1,027)
|
Income
taxes receivable
|
173
|
-
|
173
|
Net Cash Provided by (Used in) Operating
Activities
|
348
|
(1,662
) |
(1,314)
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
Purchases
of property and equipment
|
(461)
|
-
|
(461)
|
Net Cash Used in Investing Activities
|
(461)
|
-
|
(461)
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
Proceeds
from the exercise of stock optionsand warrants,
net
|
12
|
-
|
12
|
Proceeds
(Payments) from/to factoring company, net
|
(831)
|
1,662
|
831
|
Payments
of notes payable, net
|
(358)
|
-
|
(358)
|
Payments
of contingent acquisition debt
|
(462)
|
-
|
(462)
|
Proceeds
of capital leases
|
(132)
|
-
|
(132)
|
Repurchase
of common stock
|
(20)
|
-
|
(20)
|
Net Cash Used in Financing Activities
|
(1,791)
|
1,662
|
(129)
|
Foreign Currency Effect on Cash
|
(146)
|
-
|
(146)
|
Net
decrease in cash and cash equivalents
|
(2,050)
|
-
|
(2,050)
|
Cash and Cash Equivalents, Beginning of Period
|
3,875
|
-
|
3,875
|
Cash and Cash Equivalents, End of Period
|
$ 1,825
|
$-
|
$ 1,825
|
|
|
|
|
Youngevity International, Inc. and Subsidiaries
|
||||||
Condensed Consolidated Statement
of Cash Flows
|
||||||
(In thousands)
|
||||||
(Unaudited)
|
|
Nine Months Ended September 30, 2016
|
||
|
Previously Reported
|
Adjustment
|
As Restated
|
Cash Flows from Operating Activities:
|
|
|
|
Net
income
|
$ 109
|
$ -
|
$ 109
|
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
|
|||
Depreciation
and amortization
|
2,865
|
-
|
2,865
|
Stock
based compensation expense
|
292
|
-
|
292
|
Amortization
of deferred financing costs
|
270
|
-
|
270
|
Amortization
of prepaid advisory fees
|
46
|
-
|
46
|
Stock
issuance for services
|
30
|
-
|
30
|
Change
in fair value of warrant derivative liability
|
(535)
|
-
|
(535)
|
Amortization
of debt discount
|
790
|
-
|
790
|
Amortization
of warrant issuance costs
|
96
|
-
|
96
|
Expenses
allocated in profit sharing agreement
|
(557)
|
-
|
(557)
|
Change
in fair value of contingent acquisition debt
|
(1,185)
|
-
|
(1,185)
|
Changes in operating assets and liabilities, net of effect from
business combinations:-
|
-
|
||
Accounts
receivable-
|
(1,411)
|
-
|
(1,411)
|
Inventory-
|
(1,925)
|
-
|
(1,925)
|
Prepaid
expenses and other current assets
|
(502)
|
-
|
(502)
|
Accounts
-payable
|
293
|
-
|
293
|
Accrued
distributor compensation
|
401
|
-
|
401
|
Deferred
revenues
|
(652)
|
-
|
(652)
|
Accrued
expenses and other liabilities
|
2,967
|
(2,262)
|
705
|
Income
taxes receivable
|
173
|
-
|
173
|
Net Cash Provided by (Used in) Operating
Activities
|
1,565
|
(2,262)
|
(697)
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
Acquisitions,
net of cash acquired
|
(88)
|
-
|
(88)
|
Purchases
of property and equipment
|
(938)
|
-
|
(938)
|
Net Cash Used in Investing Activities
|
(1,026)
|
-
|
(1,026)
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
Proceeds
from the exercise of stock optionsand warrants,
net
|
39
|
-
|
39
|
Proceeds
(Payments) from/to factoring company, net
|
(1,131)
|
2,262
|
1,131
|
Payments
of notes payable, net
|
(411)
|
-
|
(411)
|
Payments
of contingent acquisition debt
|
(708)
|
-
|
(708)
|
Payments
of capital leases
|
19
|
-
|
19
|
Repurchase
of common stock
|
(36)
|
-
|
(36)
|
Net Cash (Used in) Provided by Financing
Activities
|
(2,228)
|
2,262
|
34
|
Foreign Currency Effect on Cash
|
(174)
|
-
|
(174)
|
Net
decrease in cash and cash equivalents
|
(1,863)
|
-
|
(1,863)
|
Cash and Cash Equivalents, Beginning of Period
|
3,875
|
-
|
3,875
|
Cash and Cash Equivalents, End of Period
|
$ 2,012
|
$-
|
$ 2,012
|
Name
|
|
Age
|
|
Director Since
|
|
Position
|
|
Stephan Wallach
|
|
|
50
|
|
2011*
|
|
Chairman and Chief Executive Officer
|
David Briskie
|
|
|
56
|
|
2011
|
|
President, Chief Financial Officer and Director
|
Michelle Wallach
|
|
|
46
|
|
2011*
|
|
Chief Operating Officer and Director
|
Richard Renton
|
|
|
61
|
|
2012
|
|
Director
|
William Thompson
|
|
|
56
|
|
2013
|
|
Director
|
Board Members
|
|
Audit
Committee
|
|
|
Compensation
Committee
|
|
|
Investment
Committee
|
|
Stephan
Wallach
|
|
-
|
|
|
Chairman
|
|
|
Member
|
|
David
Briskie
|
|
-
|
|
|
Member
|
|
|
Chairman
|
|
Michelle
Wallach
|
|
-
|
|
|
-
|
|
|
-
|
|
Richard
Renton
|
|
-
|
|
|
-
|
|
|
-
|
|
William
Thompson
|
|
Member
|
|
|
-
|
|
|
-
|
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Option
Awards(2)
($)
|
|
|
Total
($)
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stephan Wallach (1)
|
2016
|
|
|
282,500
|
|
|
|
179,730
|
|
|
|
-
|
|
|
|
462,230
|
|
Chief Executive Officer
|
2015
|
|
|
271,519
|
|
|
|
89,000
|
|
|
|
-
|
|
|
|
360,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Briskie (1) (2)
|
2016
|
|
|
282,500
|
|
|
|
179,730
|
|
|
|
748,500
|
|
|
|
1,210,730
|
|
President and Chief Financial Officer
|
2015
|
|
|
271,519
|
|
|
|
89,000
|
|
|
|
-
|
|
|
|
360,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michelle Wallach (1)
|
2016
|
|
|
192,660
|
|
|
|
179,730
|
|
|
|
-
|
|
|
|
372,390
|
|
Chief Operating Officer
|
2015
|
|
|
200,070
|
|
|
|
57,500
|
|
|
|
-
|
|
|
|
257,570
|
|
(1)
|
Mr. Stephan Wallach, Mr. David Briskie, and Ms. Michelle Wallach
have direct and or indirect (beneficially) distributor positions in
our Company that pay income based on the performance of those
distributor positions in addition to their base salaries, and the
people and or companies supporting those positions based upon the
contractual agreements that each and every distributor enter into
upon engaging in the network marketing business. The contractual
terms of these positions are the same as those of all the other
individuals that become distributors in our Company. There are no
special circumstances for these officers/directors. Mr. Stephan
Wallach and Ms. Michelle Wallach received or beneficially received
$357,002 and $312,410 in 2016 and 2015, respectively related to
their distributor positions, which are not included above. Mr.
Briskie beneficially received $23,889 and $28,010 in 2016 and 2015,
respectively, related to his spouse’s distributor position,
which is not included above.
|
(2)
|
We use a Black-Scholes option-pricing model (Black-Scholes model)
to estimate the fair value of the stock option grant. The amounts
do not represent the actual amounts paid to or released by any of
the Named Executive Officers during the respective periods. For a
discussion of the assumptions used in computing this valuation, see
Note 8 of the Notes to Consolidated Financial Statements in our
Annual Report on Form 10-K for the fiscal year ended December 31,
2016.
|
Name
|
|
Grant Date
|
|
Number of Securities
Underlying
Unexercised Options
Exercisable
|
|
Number of Securities
Underlying
Unexercised Options
Unexercisable
|
|
Option
Exercise
Price ($)
|
|
Option
Expiration
Date
|
Stephan Wallach
|
|
5/31/2012
|
|
2,500,000
|
|
-
|
|
0.22
|
|
5/31/2022
|
David Briskie
|
|
5/31/2012
|
|
5,000,000
|
|
-
|
|
0.22
|
|
5/31/2022
|
|
|
10/31/2013
|
|
600,000
|
|
400,000
|
|
0.18
|
|
10/31/2023
|
|
|
10/30/2014
|
|
800,000
|
|
1,200,000
|
|
0.19
|
|
10/30/2024
|
|
|
12/27/2016
|
|
-
|
|
5,000,000
|
|
0.27
|
|
12/27/2026
|
Michelle Wallach
|
|
5/31/2012
|
|
2,500,000
|
|
-
|
|
0.22
|
|
5/31/2022
|
Name
|
Fees Earned or
Paid in Cash ($)
|
Option
Awards ($)(1)
|
Other
Compensation ($)
|
Total ($)
|
Richard
Renton
|
-
|
2,786
|
-
|
2,786
|
William
Thompson
|
-
|
2,786
|
-
|
2,786
|
Name
|
Aggregate
Number of
Option Awards
|
Richard
Renton
|
250,000
|
William
Thompson
|
250,000
|
Name of Beneficial Owner
|
Number of Shares Beneficially Owned
|
|
Percentage
Ownership
|
|
Executive Officers & Directors (1)
|
|
|
|
|
Stephan Wallach, Chairman and Chief Executive
Officer
|
282,556,250
|
(2)
|
71.5
|
%
|
David Briskie, President, Chief Financial Officer and
Director
|
16,809,155
|
(3)
|
4.2
|
%
|
Michelle Wallach, Chief Operating Officer and
Director
|
282,500,000
|
(2)
|
71.5
|
%
|
Richard Renton, Director
|
434,600
|
(4)
|
*
|
|
William Thompson, Director
|
100,000
|
(5)
|
*
|
|
All
Executive Officers & Directors, as a group (5
persons)
|
302,400,005
|
|
77.0
|
%
|
|
|
|
|
|
Stockholders owning 5% or more
|
|
|
|
|
Carl
Grover
|
44,866,952
|
(6)
|
9.99
|
%
|
(1)
|
Unless otherwise set forth below, the mailing address of Executive
Officers, Directors and 5% or greater holders is c/o the Company,
2400 Boswell Road, Chula Vista, California 91914.
|
(2)
|
Mr. Stephan Wallach, our Chief Executive Officer, owns 280,000,000
shares of common stock through joint ownership with his wife,
Michelle Wallach, with whom he shares voting and dispositive
control. Mr. Wallach also owns 56,250 shares and options to
purchase 2,500,000 shares of common stock which are exercisable
within 60 days of the Evaluation Date and are included in the
number of shares beneficially owned by him and Ms. Wallach also
owns options to purchase 2,500,000 shares of common stock which are
exercisable within 60 days of the Evaluation Date and are included
in the number of shares beneficially owned by her.
|
(3)
|
Mr. David Briskie, our President and Chief Financial Officer, owns
3,408,588 shares of common stock, and beneficially owns 2,000,567
shares of common stock owned by Brisk Investments, LP, 5,000,000
shares of common stock owned by Brisk Management,
LLC. Mr. Briskie also owns options to purchase 6,400,000
shares of common stocks that are exercisable within 60 days of the
Evaluation Date and are included in the number of shares
beneficially owned by him.
|
(4)
|
Mr. Renton is a director of the Company, owns 34,850 shares of
common stock and 187,500 shares of common stock through joint
ownership with his wife, Roxanna Renton, with whom he shares voting
and dispositive control. Mr. Renton also owns 149,750
options to purchase common stock which are exercisable within 60
days of the Evaluation Date, 62,500 shares purchasable upon the
excise of outstanding warrants and are included in the number of
shares beneficially owned by him.
|
(5)
|
Mr. Thompson is a director of the Company, owns 100,000 options to
purchase common stock which are exercisable within 60 days of the
Evaluation Date and are included in the number of shares
beneficially owned by him.
|
(6)
|
Mr. Grover is the sole beneficial owner of 44,866,952 shares of
common stock. Mr. Grover owns a September 2014 Note in the
principal amount of $4,000,000 convertible into 11,428,571 shares
of Common Stock and a September 2014 Warrant exercisable for
15,652,174 shares of Common Stock. Mr. Grover also owns a November
2015 Note in the principal amount of $7,000,000 convertible into
20,000,000 shares of Common Stock and a November 2015 Warrant
exercisable for 9,333,333 shares of Common Stock. He also owns
5,151,240 shares of common stock. Mr. Grover has a contractual
agreement with us that limits his exercise of warrants and
conversion of notes such that his beneficial ownership of our
equity securities to no more than 9.99% of the voting power of the
Company at any one time and therefore his beneficial ownership does
not include the shares of Common Stock issuable upon conversion of
notes or exercise or warrants owned by Mr. Grover if such
conversion or exercise would cause his beneficial ownership to
exceed 9.99% of our outstanding shares of Common Stock. Mr.
Grover’s address is 1010 S. Ocean Blvd., Apt 1017, Pompano
Beach, FL 33062.
|
|
December 31,
2016
|
December 31,
2015
|
Audit Fees and Expenses (1)
|
$264,000
|
$300,000
|
Audit Related Fees (2)
|
17,000
|
8,000
|
All
Other Fees
|
-
|
-
|
|
$281,000
|
$308,000
|
(1)
|
Audit
fees and expenses were for professional services rendered for the
audit and reviews of the consolidated financial statements of the
Company, professional services rendered for issuance of consents
and assistance with review of documents filed with the
SEC.
|
(2)
|
The
audit related fees were for professional services rendered for
additional filing for registration statements and forms with the
SEC.
|
(a)(1)
|
The Consolidated Financial Statements of Youngevity International,
Inc. and Report of Independent Registered Public Accounting Firm
are included in Item 8 of this Annual Report.
|
|||
(2)
|
Schedules
are omitted because they are not applicable or the required
information is shown in the financial statements or notes
thereto.
|
|
||
(3)
|
The
following exhibits are filed as part of this Annual Report pursuant
to Item 601 of Regulation S-K:
|
|
|
|
|
||
Exhibit No.
|
|
Title of Document
|
|
3.1
|
|
Certificate of Incorporation Dated July 15, 2011(1)
|
|
3.2
|
|
Bylaws(1)
|
|
4.1
|
|
Specimen Common Stock certificate (1)
|
|
4.2
|
|
Warrant for Common Stock issued to David Briskie(1)
|
|
4.3
|
|
Stock Option issued to Stephan Wallach(1)
|
|
4.4
|
|
Stock Option issued to Michelle Wallach(1)
|
|
4.5
|
|
Stock Option issued to David Briskie(1)
|
|
4.6
|
|
Stock Option issued to William Andreoli(1)
|
|
4.7
|
|
Stock Option issued to Richard Renton(1)
|
|
4.8
|
|
Stock Option issued to John Rochon(1)
|
|
4.9
|
|
Form of Purchase Note Agreement(3)
|
|
4.10
|
|
Form of Secured Convertible Notes(3)
|
|
4.11
|
|
Form of Series A Warrants(3)
|
|
4.12
|
|
Form of Registration Rights Agreement(3)
|
|
4.13
|
|
Form of Note Purchase Agreement(4)
|
|
4.14
|
|
Form of Secured Note(4)
|
|
4.15
|
|
Form of Purchase Note Agreement(6)
|
|
4.16
|
|
Form of Secured Note(6)
|
|
4.17
|
|
Form of Warrant(6)
|
|
10.1
|
|
Purchase Agreement with M2C Global, Inc. dated March 9,
2007(1)
|
|
10.2
|
|
First Amendment to Purchase Agreement with M2C Global, Inc. dated
September 7, 2008(1)
|
|
10.3
|
|
Asset Purchase Agreement with MLM Holdings, Inc.
dated June 10, 2010(1)
|
|
10.4
|
|
Agreement of Purchase and Sale with Price Plus, Inc. dated
September 21, 2010(1)
|
|
10.5
|
|
Amended and Restated Agreement and Plan of Reorganization
Javalution Coffee Company, YGY Merge, Inc. dated July 11,
2011(1)
|
|
10.6
|
|
Asset Purchase Agreement with R-Garden Inc. dated July 1,
2011(1)
|
|
10.7
|
|
Re-Purchase Agreement with R-Garden dated September 12,
2012(1)
|
|
10.8
|
|
Agreement and Plan of Reorganization with Javalution dated July 18,
2011(1)
|
|
10.9
|
|
Asset Purchase Agreement with Adaptogenix, LLC dated August 22,
2011(1)
|
|
10.10
|
|
Amended Asset Purchase Agreement with Adaptogenix, LLC dated
January 27, 2012(1)
|
|
10.11
|
|
Asset Purchase Agreement with Prosperity Group, Inc. dated October
10, 2011(1)
|
|
10.12
|
|
Amended and Restated Equity Purchase Agreement with Financial
Destination, Inc., FDI Management Co, Inc., FDI Realty, LLC, and
MoneyTRAX, LLC dated October 25, 2011(1)
|
|
10.13
|
|
Exclusive License/Marketing Agreement with GLIE, LLC dba True2Life
dated March 20, 2012(1)
|
|
10.14
|
|
Bill of Sale with Livinity, Inc. dated July 10,
2012(1)
|
|
10.15
|
|
Consulting Agreement with Livinity, Inc. dated July 10,
2012(1)
|
|
10.16
|
|
Employment Agreement with William Andreoli dated October 25,
2011(1)
|
|
10.17
|
|
Promissory Note with 2400 Boswell LLC dated July 15,
2012(1)
|
|
10.18
|
|
Promissory Note with William Andreoli dated July 1,
2012(1)
|
|
10.19
|
|
2012 Stock Option Plan(1)
|
10.20
|
|
Form of Stock Option(1)
|
10.21
|
|
Lease with 2400 Boswell LLC dated May 1, 2001(1)
|
10.22
|
|
Lease with FDI Realty LLC dated July 29, 2008(1)
|
10.23
|
|
First Amendment to Lease with FDI Realty LLC dated October 25,
2011(1)
|
10.24
|
|
Lease with Perc Enterprises dated February 6, 2008(1)
|
10.25
|
|
Lease with Perc Enterprises dated September 25,
2012(1)
|
10.26
|
|
Factoring Agreement with Crestmark Bank dated February 12,
2010(1)
|
10.27
|
|
First Amendment to Factoring Agreement with Crestmark Bank dated
April 6, 2011(1)
|
10.28
|
|
Second Amendment to Factoring Agreement with Crestmark Bank dated
February 1, 2013(1)
|
10.29
|
|
Lease with Perc Enterprises dated March 19, 2013(1)
|
10.30
|
|
Purchase Agreement with Ma Lan Wallach dated March 15,
2013(1)
|
10.31
|
|
Promissory Note with Plaza Bank dated March 14,
2013(1)
|
10.32
|
|
Form of Security Agreement(3)
|
10.33
|
|
Guaranty Agreement made by Stephan Wallach(3)
|
10.34
|
|
Form of Security Agreement(4)
|
10.35
|
|
Guaranty Agreement made by Stephan Wallach(4)
|
10.36
|
|
Credit Agreement with Wells Fargo Bank, National Association dated
October 10, 2014(5)
|
10.37 |
|
Amended and Restated 2012 Stock Incentive Plan (7) |
10.38 |
|
Form of Stock
Option* |
10.39 |
|
Third Amendment with
Crestmark Bank dated May 1, 2016* |
21.1
|
|
Subsidiaries of Youngevity International, Inc. *
|
23.1
|
|
Consent of Independent Registered Public Accounting Firm
*
|
31.1
|
|
Certification of Stephan Wallach, Chief Executive Officer, pursuant
to Rule 13a-14(a)/15d-14(a) *
|
31.2
|
|
Certification of David Briskie, Chief Financial Officer pursuant to
Rule 13a-14(a)/15d-14(a) *
|
32.1
|
|
Certification of Stephan Wallach, Chief Executive Officer pursuant
to Section 1350 of the Sarbanes-Oxley Act of 2002 *
|
32.2
|
|
Certification David Briskie, Chief Financial Officer pursuant to
Section 1350 of the Sarbanes-Oxley Act of 2002 *
|
101.INS
|
|
XBRL Instance Document **
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document **
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
**
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
**
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document **
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
**
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
32.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
101.INS
|
|
XBRL Instance Document
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
*
|
Filed herewith
|
(1)
|
Incorporated by reference to the Company’s Form 10-12G, File
No. 000-54900, filed with the Securities
and Exchange Commission on February 12,
2013
|
(2)
|
Incorporated by reference to the Company’s Form 10-K, File
No. 000-54900, filed with the Securities and Exchange Commission on
March 27, 2014
|
(3)
|
Incorporated by reference to the Company’s 8-K, File No.
000-54900, filed with the Securities and Exchange Commission on
August 5, 2014
|
(4)
|
Incorporated by reference to the Company’s 8-K, File No.
000-54900, filed with the Securities and Exchange Commission on
January 7, 2015
|
(5)
|
Incorporated by reference to the Company’s Form 10-K, File
No. 000-54900, filed with the Securities and Exchange Commission on
March 30, 2015
|
(6)
|
Incorporated by reference to the Company’s 8-K, File No.
000-54900, filed with the Securities and Exchange Commission on
October 16, 2015
|
(7)
|
Previously filed with the Company’s Current Report on
Schedule 14C File No. 000-54900, filed with the Securities and
Exchange Commission on March 21, 2017
|
|
|
YOUNGEVITY INTERNATIONAL, INC.
|
|
|
|
August 14, 2017
|
By:
|
/s/ Stephan Wallach
|
|
|
Stephan Wallach,
|
|
|
Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
|
|
|
August 14,
2017
|
|
/s/ David Briskie
|
|
|
David Briskie
|
|
|
Chief Financial Officer
|
|
|
(Principal Financial and Accounting
Officer)
|
|
|
|
I, Stephan Wallach, certify that:
|
1.
|
I have reviewed this Amendment No. 1 to the Annual Report on Form
10-K/A of Youngevity International, Inc.;
|
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 presented 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 financial 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 our 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.
|
Dated: August 14, 2017
|
/s/ Stephan Wallach
|
|
Stephan Wallach,
|
|
Chief Executive Officer
|
|
(Principal Executive Officer)
|
I, David Briskie, certify that:
|
1.
|
I have reviewed this Amendment No. 1 to the Annual Report on Form
10-K/A of Youngevity International, Inc.;
|
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 presented 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 financial 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 our 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.
|
Dated:
August 14, 2017
|
/s/ David Briskie
|
|
David Briskie,
|
|
Chief Financial Officer
|
|
(Principal Financial and Accounting Officer)
|
Dated:
August 14, 2017
|
/s/ Stephan Wallach
|
|
Stephan Wallach,
|
|
Chief Executive Officer
|
|
(Principal Executive Officer)
|
Dated:
August
14, 2017
|
/s/ David Briskie
|
|
David Briskie,
|
|
Chief Financial Officer
|
|
(Principal Financial and Accounting Officer)
|
Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Mar. 17, 2017 |
Jun. 30, 2016 |
|
Document And Entity Information | |||
Entity Registrant Name | Youngevity International, Inc. | ||
Entity Central Index Key | 0001569329 | ||
Document Type | 10-K/A | ||
Document Period End Date | Dec. 31, 2016 | ||
Amendment Flag | true | ||
Amendment Description | The Company has prepared this Amendment No. 1 (this Amendment) to its Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which was originally filed with the Securities and Exchange Commission on March 30, 2017 (the Original 10-K) to reflect the restatement of certain of the Companys previously issued Consolidated Statements of Cash Flows and the notes related thereto and certain other related matters. There were no changes to the Consolidated Balance Sheets or Consolidated Statements of Operations. | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Common Stock, Shares Outstanding | 392,704,557 | ||
Entity Public Float | $ 31,618,639 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2016 |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Equity: | ||
Convertible Preferred Stock, par value | $ 0.001 | $ 0.001 |
Convertible Preferred Stock, shares authorized | 100,000,000 | 100,000,000 |
Convertible Preferred Stock, shares issued | 161,135 | 161,135 |
Convertible Preferred Stock, shares outstanding | 161,135 | 161,135 |
Common Stock, par value | $ 0.001 | $ 0.001 |
Common Stock, shares authorized | 600,000,000 | 600,000,000 |
Common Stock, shares issued | 392,698,557 | 392,583,015 |
Common Stock, shares outstanding | 392,698,557 | 392,583,015 |
Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Consolidated Statements Of Comprehensive Income | ||
Net loss | $ (398) | $ (1,706) |
Foreign currency translation | 108 | (51) |
Total other comprehensive income (loss) | 108 | (51) |
Comprehensive loss | $ (290) | $ (1,757) |
Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands |
Preferred Stock |
Common Stock |
Additional Paid-In Capital |
Accumulated Other Comprehensive Loss |
Accumulated Deficit |
Total Stockholders' Equity |
Total |
---|---|---|---|---|---|---|---|
Beginning Balance, Shares at Dec. 31, 2014 | 161,135 | 390,301,312 | |||||
Beginning Balance, Amount at Dec. 31, 2014 | $ 0 | $ 390 | $ 167,386 | $ (275) | $ (148,912) | $ 18,589 | $ 18,589 |
Net income (loss) | (1,706) | (1,706) | (1,706) | ||||
Foreign currency translation adjustment | (51) | (51) | (51) | ||||
Beneficial conversion feature of convertible notes payable, net of tax | 402 | 402 | 402 | ||||
Issuance of common stock pursuant to Notes Payable, shares | 2,450,000 | ||||||
Issuance of common stock pursuant to Notes Payable, amount | $ 2 | 585 | 587 | 587 | |||
Issuance of warrants pursuant to Convertible Notes Payable debt financing | 384 | 384 | 384 | ||||
Issuance of common stock pursuant to the exercise of warrants, shares | 806,250 | ||||||
Issuance of common stock pursuant to the exercise of warrants, amount | $ 1 | 201 | 202 | 202 | |||
Issuance of common stock pursuant to the exercise of stock options, shares | 369,675 | ||||||
Issuance of common stock pursuant to the exercise of stock options, amount | $ 0 | 70 | 70 | 70 | |||
Repurchase of common stock, shares | (1,344,222) | ||||||
Repurchase of common stock, amount | $ 0 | (426) | (426) | (426) | |||
Dividends on preferred stock | (12) | (12) | (12) | ||||
Warrant modification expense | 779 | 779 | 779 | ||||
Stock based compensation expense | 455 | 455 | 455 | ||||
Ending Balance, Shares at Dec. 31, 2015 | 161,135 | 392,583,015 | |||||
Ending Balance, Amount at Dec. 31, 2015 | $ 0 | $ 393 | 169,432 | (326) | (150,618) | 18,881 | 18,881 |
Net income (loss) | (398) | (398) | (398) | ||||
Foreign currency translation adjustment | 108 | 108 | 108 | ||||
Issuance of common stock pursuant to the exercise of warrants, shares | 39,250 | ||||||
Issuance of common stock pursuant to the exercise of warrants, amount | $ 0 | 10 | 10 | 10 | |||
Issuance of common stock pursuant to the exercise of stock options, shares | 102,000 | ||||||
Issuance of common stock pursuant to the exercise of stock options, amount | $ 0 | 20 | 20 | 20 | |||
Issuance of common stock for services, shares | 100,000 | ||||||
Issuance of common stock for services, amount | $ 0 | 30 | 30 | 30 | |||
Repurchase of common stock, shares | (125,708) | ||||||
Repurchase of common stock, amount | $ 0 | (36) | (36) | (36) | |||
Dividends on preferred stock | (12) | (12) | (12) | ||||
Stock based compensation expense | 395 | 395 | 395 | ||||
Ending Balance, Shares at Dec. 31, 2016 | 161,135 | 392,698,557 | |||||
Ending Balance, Amount at Dec. 31, 2016 | $ 0 | $ 393 | $ 169,839 | $ (218) | $ (151,016) | $ 18,998 | $ 18,998 |
Consolidated Statements of Cash Flows - USD ($) $ in Thousands |
12 Months Ended | ||||
---|---|---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
||||
Cash Flows from Operating Activities: | |||||
Net loss | $ (398) | [1] | $ (1,706) | ||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | |||||
Depreciation and amortization | 3,862 | [1] | 3,354 | ||
Stock based compensation expense | 395 | [1] | 455 | ||
Warrant modification expense | 0 | [1] | 253 | ||
Amortization of deferred financing costs | 360 | [1] | 899 | ||
Amortization of prepaid advisory fees | 58 | [1] | 20 | ||
Stock issuance for services | 30 | [1] | 0 | ||
Change in fair value of warrant derivative liability | (1,371) | [1] | 39 | ||
Amortization of debt discount | 1,053 | [1] | 967 | ||
Amortization of warrant issuance costs | 128 | [1] | 21 | ||
Expenses allocated to profit sharing agreement | (698) | [1] | (528) | ||
Change in fair value of contingent acquisition debt | (1,462) | [1] | (446) | ||
Extinguishment loss on debt | 0 | [1] | 1,198 | ||
Deferred income taxes | (325) | [1] | 1,409 | ||
Changes in operating assets and liabilities, net of effect from business combinations: | |||||
Accounts receivable | (525) | [1] | 168 | ||
Inventory | (3,515) | [1] | (6,194) | ||
Prepaid expenses and other current assets | (733) | [1] | 885 | ||
Accounts payable | 1,159 | [1] | 1,608 | ||
Accrued distributor compensation | (60) | [1] | 46 | ||
Deferred revenues | (710) | [1] | (2,495) | ||
Accrued expenses and other liabilities | 1,063 | [1] | 1,278 | ||
Income taxes receivable | (138) | [1] | 136 | ||
Net Cash (Used In) Provided by Operating Activities | (1,827) | [1] | 1,367 | ||
Cash Flows from Investing Activities: | |||||
Acquisitions, net of cash acquired | (48) | [1] | (32) | ||
Purchases of property and equipment | (1,397) | [1] | (3,198) | ||
Net Cash Used in Investing Activities | (1,445) | [1] | (3,230) | ||
Cash Flows from Financing Activities: | |||||
Proceeds from issuance of secured promissory notes and common stock, net of offering costs | 0 | [1] | 5,080 | ||
Proceeds from issuance of convertible notes payable, net | 0 | [1] | 2,383 | ||
Proceeds from the exercise of stock options and warrants, net | 30 | [1] | 272 | ||
Proceeds from factoring company | 833 | [1] | 82 | ||
Payments of notes payable, net | (453) | [1] | (1,214) | ||
Payments of contingent acquisition debt | (773) | [1] | (3,338) | ||
Proceeds (payments) of capital leases | 557 | [1] | (47) | ||
Repurchase of common stock | (36) | [1] | (426) | ||
Net Cash Provided by Financing Activities | 158 | [1] | 2,792 | ||
Foreign Currency Effect on Cash and Cash Equivalents | 108 | [1] | (51) | ||
Net (decrease) increase in cash and cash equivalents | (3,006) | [1] | 878 | ||
Cash and Cash Equivalents, Beginning of year | 3,875 | [1] | 2,997 | ||
Cash and Cash Equivalents, End of year | [1] | 869 | 3,875 | ||
Supplemental Disclosures of Cash Flow Information | |||||
Interest | 2,966 | [1] | 2,127 | ||
Income taxes | 181 | [1] | 0 | ||
Supplemental Disclosures of Non-cash Investing and Financing Activities | |||||
Purchases of property and equipment funded by capital leases and accounts payable agreements | 1,582 | [1] | 429 | ||
Common stock issued in connection with financing | 0 | [1] | 587 | ||
Acquisitions of net assets in exchange for contingent acquisition debt (see Note 2 for non-cash activity) | $ 3,604 | [1] | $ 1,136 | ||
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Basis of Presentation and Description of Business |
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Basis of Presentation and Description of Business |
Nature of Business
Youngevity International, Inc. (the “Company”), founded in 1996, develops and distributes health and nutrition related products through its global independent direct selling network, also known as multi-level marketing, and sells coffee products to commercial customers. The Company operates in two business segments, its direct selling segment where products are offered through a global distribution network of preferred customers and distributors and its commercial coffee segment where products are sold directly to businesses. In the following text, the terms “we,” “our,” and “us” may refer, as the context requires, to the Company or collectively to the Company and its subsidiaries.
The Company operates through the following domestic wholly-owned subsidiaries: AL Global Corporation, which operates our direct selling networks, CLR Roasters, LLC (“CLR”), our commercial coffee business, 2400 Boswell LLC, MK Collaborative LLC, Youngevity Global LLC and the wholly-owned foreign subsidiaries Youngevity Australia Pty. Ltd., Youngevity NZ, Ltd., Siles Plantation Family Group S.A., located in Nicaragua, Youngevity Mexico S.A. de CV, Youngevity Israel, Ltd., Youngevity Russia, LLC, Youngevity Colombia S.A.S, Youngevity International Singapore Pte. Ltd., Mialisia Canada, Inc., and Legacy for Life Limited (Hong Kong).
The Company also operates subsidiary branches of Youngevity Global LLC in the Philippines and Taiwan.
Summary of Significant Accounting Policies
A summary of the Company’s significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows:
Basis of Presentation
The Company consolidates all majority owned subsidiaries, investments in entities in which we have controlling influence and variable interest entities where we have been determined to be the primary beneficiary. All significant intercompany accounts and transactions have been eliminated in consolidation.
Certain reclassifications have been made to conform to the current year presentations including the Company’s adoption of Accounting Standards Update (“ASU”) 2015-03 and ASU 2015-15, pertaining to the presentation of debt issuance costs with retrospective application effective January 1, 2016. This resulted in a reclassification from prepaid expenses and other assets to convertible notes payable, net of debt discount. Refer below to “Recently Issued Accounting Pronouncements” below and Note 5 to the consolidated financial statements for further details. These reclassifications did not affect revenue, total costs and expenses, income (loss) from operations, or net income (loss). The adoption of ASU No. 2015-03 resulted in a reclassification of unamortized debt issuance costs of $1,456,000 from an asset to a liability classification on the Company’s consolidated financial statements as of December 31, 2015.
Segment Information
The Company has two reporting segments: direct selling and commercial coffee. The direct selling segment develops and distributes health and wellness products through its global independent direct selling network also known as multi-level marketing. The commercial coffee segment is a coffee roasting and distribution company specializing in gourmet coffee. The determination that the Company has two reportable segments is based upon the guidance set forth in Accounting Standards Codification (“ASC”) Topic 280, “Segment Reporting.” During the twelve months ended December 31, 2016 and 2015, we derived approximately 89% of our revenue from our direct sales segment and approximately 11% of our revenue from our commercial coffee sales segment, respectively.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense for each reporting period. Estimates are used in accounting for, among other things, allowances for doubtful accounts, deferred taxes, and related valuation allowances, fair value of derivative liabilities, uncertain tax positions, loss contingencies, fair value of options granted under our stock based compensation plan, fair value of assets and liabilities acquired in business combinations, capital leases, asset impairments, estimates of future cash flows used to evaluate impairments, useful lives of property, equipment and intangible assets, value of contingent acquisition debt, inventory obsolescence, and sales returns.
Actual results may differ from previously estimated amounts and such differences may be material to the consolidated financial statements. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected prospectively in the period they occur.
Liquidity
We believe that current cash balances, future cash provided by operations, and available amounts under our accounts receivable factoring agreement will be sufficient to cover our operating and capital needs in the ordinary course of business for at least the next 12 months as of March 30, 2017.
Though our operations are currently meeting our working capital requirements, if we experience an adverse operating environment or unusual capital expenditure requirements, or if we continue our expansion internationally or through acquisitions, additional financing may be required. No assurance can be given, however, that additional financing, if required, would be available on favorable terms. We might also require or seek additional financing for the purpose of expanding into new markets, growing our existing markets, or for other reasons. Such financing may include the use of additional debt or the sale of additional equity securities. Any financing which involves the sale of equity securities or instruments that are convertible into equity securities could result in immediate and possibly significant dilution to our existing shareholders.
Cash and Cash Equivalents
The Company considers only its monetary liquid assets with original maturities of three months or less as cash and cash equivalents.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency.
The Company reviews the terms of convertible debt and equity instruments it issues to determine whether there are derivative instruments, including an embedded conversion option that is required to be bifurcated and accounted for separately as a derivative financial instrument. In circumstances where a host instrument contains more than one embedded derivative instrument, including a conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. Also, in connection with the sale of convertible debt and equity instruments, the Company may issue freestanding warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity.
Derivative instruments are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. When the convertible debt or equity instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds allocated to the convertible host instruments are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the convertible instruments themselves, usually resulting in those instruments being recorded at a discount from their face value.
The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to interest expense, using the effective interest method.
Accounts Receivable
Accounts receivable are recorded net of an allowance for doubtful accounts. Accounts receivable are considered delinquent when the due date on the invoice has passed. The Company records its allowance for doubtful accounts based upon its assessment of various factors including past experience, the age of the accounts receivable balances, the credit quality of its customers, current economic conditions and other factors that may affect customers’ ability to pay. Accounts receivable are written off against the allowance for doubtful accounts when all collection efforts by the Company have been unsuccessful. Certain accounts receivable are financed as part of a factoring agreement. During the fourth quarter of fiscal 2016, the Company recorded a $10,000 allowance towards outstanding receivables associated with CLR. There was no allowance for doubtful accounts recorded as of December 31, 2015.
Inventory and Cost of Revenues
Inventory is stated at the lower of cost or market value. Cost is determined using the first-in, first-out method. The Company records an inventory reserve for estimated excess and obsolete inventory based upon historical turnover, market conditions and assumptions about future demand for its products. When applicable, expiration dates of certain inventory items with a definite life are taken into consideration.
Inventories consist of the following (in thousands):
A summary of the reserve for obsolete and excess inventory is as follows (in thousands):
Cost of revenues includes the cost of inventory, shipping and handling costs, royalties associated with certain products, transaction banking costs, warehouse labor costs and depreciation on certain assets.
Deferred Issuance Costs
Deferred issuance costs and debt discounts of approximately $3,611,000 and $5,152,000, as of December 31, 2016 and 2015, respectively, associated with our 2015 and 2014 Private Placement transactions are included with convertible notes payable on the Company's consolidated balance sheets. Deferred issuance costs related to our offerings are amortized over the life of the notes and are amortized as issuance costs to interest expense. See Note 5, below.
Warrant Issuance Costs
As of December 31, 2016 and 2015, warrant issuance costs associated with our November 2015 Private Placement include the fair value of the warrants issues of approximately $235,000 and $384,000 respectively, and is included with convertible notes payable, net of debt discounts on the Company's consolidated balance sheets. The warrant issuance costs related to this offering are being amortized over the life of the convertible notes and are amortized as issuance costs to interest expense. See note 5, below.
Plantation Costs
The Company’s commercial coffee segment CLR includes the results of the Siles Plantation Family Group (“Siles”), which is a 500 acre coffee plantation and a dry-processing facility located on 26 acres both located in Matagalpa, Nicaragua. Siles is a wholly-owned subsidiary of CLR, and the results of CLR include the depreciation and amortization of capitalized costs, development and maintenance and harvesting costs of Siles. In accordance with US generally accepted accounting principles (“GAAP”), plantation maintenance and harvesting costs for commercially producing coffee farms are charged against earnings when sold. Deferred harvest costs accumulate throughout the year, and are expensed over the remainder of the year as the coffee is sold. The difference between actual harvest costs incurred and the amount of harvest costs recognized as expense is recorded as either an increase or decrease in deferred harvest costs, which is reported as an asset and included with prepaid expenses and other current assets in the consolidated balance sheets. Once the harvest is complete, the harvest cost is then recognized as the inventory value.
Costs associated with the 2017 and 2016 harvest as of December 31, 2016 and 2015 total approximately $452,000 and $350,000, respectively and are included in prepaid expenses and other current assets as deferred harvest costs on the Company’s consolidated balance sheet.
Inventory related to our previously harvested coffee in Nicaragua as of December 31, 2016 is $112,000 and as of December 31, 2015 was $192,000.
Property and Equipment
Property and equipment are recorded at historical cost. Depreciation is provided in amounts sufficient to relate the cost of depreciable assets to operations over the estimated useful lives of the related assets. The straight-line method of depreciation and amortization is followed for financial statement purposes. Leasehold improvements are amortized over the shorter of the life of the respective lease or the useful life of the improvements. Estimated service lives range from 3 to 39 years. When such assets are sold or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in operations in the period of disposal. The cost of normal maintenance and repairs is charged to expense as incurred. Significant expenditures that increase the useful life of an asset are capitalized and depreciated over the estimated useful life of the asset.
Coffee trees, land improvements and equipment specifically related to the plantations are stated at cost, net of accumulated depreciation. Depreciation of coffee trees and other equipment is reported on a straight-line basis over the estimated useful lives of the assets (25 years for coffee trees, between 5 and 15 years for equipment and land improvements, respectively).
Property and equipment are considered long-lived assets and are evaluated for impairment whenever events or changes in circumstances indicate their net book value may not be recoverable. Management has determined that no impairment of its property and equipment occurred as of December 31, 2016 or 2015.
Property and equipment consist of the following (in thousands):
Depreciation expense totaled approximately $1,518,000 and $1,242,000 for the years ended December 31, 2016 and 2015, respectively.
Business Combinations
The Company accounts for business combinations under the acquisition method and allocates the total purchase price for acquired businesses to the tangible and identified intangible assets acquired and liabilities assumed, based on their estimated fair values. When a business combination includes the exchange of the Company’s common stock, the value of the common stock is determined using the closing market price as of the date such shares were tendered to the selling parties. The fair values assigned to tangible and identified intangible assets acquired and liabilities assumed are based on management or third-party estimates and assumptions that utilize established valuation techniques appropriate for the Company’s industry and each acquired business. Goodwill is recorded as the excess, if any, of the aggregate fair value of consideration exchanged for an acquired business over the fair value (measured as of the acquisition date) of total net tangible and identified intangible assets acquired. A liability for contingent consideration, if applicable, is recorded at fair value as of the acquisition date. In determining the fair value of such contingent consideration, management estimates the amount to be paid based on probable outcomes and expectations on financial performance of the related acquired business. The fair value of contingent consideration is reassessed quarterly, with any change in the estimated value charged to operations in the period of the change. Increases or decreases in the fair value of the contingent consideration obligations can result from changes in actual or estimated revenue streams, discount periods, discount rates and probabilities that contingencies will be met.
Intangible Assets
Intangible assets are comprised of distributor organizations, trademarks and tradenames, customer relationships and internally developed software. The Company's acquired intangible assets, which are subject to amortization over their estimated useful lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. An impairment loss is recognized when the carrying amount of an intangible asset exceeds its fair value.
Intangible assets consist of the following (in thousands):
Amortization expense related to intangible assets was approximately $2,344,000 and $2,112,000 for the years ended December 31, 2016 and 2015, respectively.
As of December 31, 2016, future expected amortization expense related to definite lived intangible assets for the next five years is as follows (in thousands):
As of December 31, 2016, the weighted-average remaining amortization period for intangibles assets was approximately 5.18 years.
Trade names, which do not have legal, regulatory, contractual, competitive, economic, or other factors that limit the useful lives are considered indefinite lived assets and are not amortized but are tested for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Approximately $2,267,000 in trademarks from business combinations have been identified as having indefinite lives.
The Company has determined that no impairment occurred for its definite and indefinite lived intangible assets for the years ended December 31, 2016 and 2015.
Goodwill
Goodwill is recorded as the excess, if any, of the aggregate fair value of consideration exchanged for an acquired business over the fair value (measured as of the acquisition date) of total net tangible and identified intangible assets acquired. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, “Intangibles — Goodwill and Other”, goodwill and other intangible assets with indefinite lives are not amortized but are tested for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The Company conducts annual reviews for goodwill and indefinite-lived intangible assets in the fourth quarter or whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable.
The Company first assesses qualitative factors to determine whether it is more likely than not (a likelihood of more than 50%) that goodwill is impaired. After considering the totality of events and circumstances, the Company determines whether it is more likely than not that goodwill is not impaired. If impairment is indicated, then the Company conducts the two-step impairment testing process. The first step compares the Company’s fair value to its net book value. If the fair value is less than the net book value, the second step of the test compares the implied fair value of the Company’s goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, the Company would recognize an impairment loss equal to that excess amount. The testing is generally performed at the “reporting unit” level. A reporting unit is the operating segment, or a business one level below that operating segment (referred to as a component) if discrete financial information is prepared and regularly reviewed by management at the component level. The Company has determined that its reporting units for goodwill impairment testing are the Company’s reportable segments. As such, the Company analyzed its goodwill balances separately for the commercial coffee reporting unit and the direct selling reporting unit. The goodwill balance as of December 31, 2016 and December 31, 2015 was $6,323,000.
The Company has determined that no impairment of its goodwill occurred for the years ended December 31, 2016 and 2015.
Goodwill activity for the years ended December 31, 2016 and 2015 by reportable segment consists of the following (in thousands):
Revenue Recognition
The Company recognizes revenue from product sales when the following four criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable, and collectability is reasonably assured. The Company ships the majority of its direct selling segment products directly to the distributors via UPS or USPS and receives substantially all payments for these sales in the form of credit card transactions. The Company regularly monitors its use of credit card or merchant services to ensure that its financial risk related to credit quality and credit concentrations is actively managed. Revenue is recognized upon passage of title and risk of loss to customers when product is shipped from the fulfillment facility. The Company ships the majority of its coffee segment products via common carrier and invoices its customer for the products. Revenue is recognized when the title and risk of loss is passed to the customer under the terms of the shipping arrangement, typically, FOB shipping point.
The Company also charges fees to become a distributor, and earn a position in the network genealogy, which are recognized as revenue in the period received. Our distributors are required to pay a one-time enrollment fee and receive a welcome kit specific to that country region that consists of forms, policy and procedures, selling aids, and access to our distributor website and a genealogy position with no down line distributors.
Sales revenue and a reserve for estimated returns are recorded net of sales tax when product is shipped.
Deferred Revenues and Costs
Deferred revenues relate primarily to the Heritage Makers product line and represent the Company’s obligation for points purchased by customers that have not yet been redeemed for product. Cash received for points sold is recorded as deferred revenue. Revenue is recognized when customers redeem the points and the product is shipped. As of December 31, 2016 and December 31, 2015, the balance in deferred revenues was approximately $1,870,000 and $2,580,000 respectively, of which the portion attributable to Heritage Makers was approximately $1,662,000 and $2,485,000, respectively. The remaining balance of approximately $208,000 and $95,000 as of December 31, 2016 and 2015, related primarily to the Company’s 2017 and 2016 conventions whereby attendees pre-enroll in the events and the Company does not recognize this revenue until the conventions occur, respectively.
Deferred costs relate to Heritage Makers prepaid commissions that are recognized in expense at the time the related revenue is recognized. As of December 31, 2016 and 2015, the balance in deferred costs was approximately $415,000 and $967,000 respectively, and was included in prepaid expenses and current assets.
Product Return Policy
All products, except food products and commercial coffee products are subject to a full refund within the first 30 days of receipt by the customer, subject to an advance return authorization procedure. Returned product must be in unopened resalable condition. Product returns as a percentage of our net sales have been approximately 1% of our monthly net sales over the last two years. Commercial coffee products are returnable only if defective.
Shipping and Handling
Shipping and handling costs associated with inbound freight and freight to customers, including independent distributors, are included in cost of sales. Shipping and handling fees charged to customers are included in sales. Shipping expense was approximately $9,927,000 and $10,394,000 for the years ended December 31, 2016 and 2015, respectively.
Distributor Compensation
In the direct selling segment, the Company utilizes a network of independent distributors, each of whom has signed an agreement with the Company, enabling them to purchase products at wholesale prices, market products to customers, enroll new distributors for their down-line and earn compensation on product purchases made by those down-line distributors and customers.
The payments made and stock options issued under the compensation plans are the only form of compensation paid to the distributors. Each product has a point value, which may or may not correlate to the wholesale selling price of a product. A distributor must qualify each month to participate in the compensation plan by making a specified amount of product purchases, achieving specified point levels. Once qualified, the distributor will receive payments based on a percentage of the point value of products sold by the distributor’s down-line. The payment percentage varies depending on the qualification level of the distributor and the number of levels of down-line distributors. There are also additional incentives paid upon achieving predefined activity and or down-line point value levels. There can be multiple levels of independent distributors earning incentives from the sales efforts of a single distributor. Due to the multi-layer independent sales approach, distributor incentives are a significant component of the Company’s cost structure. The Company accrues all distributor compensation expense in the month earned and pays the compensation the following month.
Earnings Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to common stockholders by the sum of the weighted-average number of common shares outstanding during the period and the weighted-average number of dilutive common share equivalents outstanding during the period, using the treasury stock method. Dilutive common share equivalents are comprised of in-the-money stock options, warrants and convertible preferred stock, based on the average stock price for each period using the treasury stock method. Since the Company incurred a loss for the year ended December 31, 2016 and 2015, therefore 105,647,443 and 99,615,809 common share equivalents including potential convertible shares of common stock associated with the Company’s convertible notes, were not included in the weighted-average calculations for each respective year since their effect would have been anti-dilutive.
Foreign Currency Translation
The financial position and results of operations of the Company’s foreign subsidiaries are measured using each foreign subsidiary’s local currency as the functional currency. Revenues and expenses of such subsidiaries have been translated into U.S. dollars at average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of stockholders’ equity, unless there is a sale or complete liquidation of the underlying foreign investments. Translation gains or losses resulting from transactions in currencies other than the respective entities functional currency are included in the determination of income and are not considered significant to the Company for 2016 and 2015.
Comprehensive Income (Loss)
Comprehensive income (loss) consists of net gains and losses affecting stockholders’ equity that, under generally accepted accounting principles are excluded from net income (loss). For the Company, the only items are the foreign currency translation and net income (loss).
Income Taxes
The Company accounts for income taxes in accordance with ASC Topic 740, "Income Taxes," under the asset and liability method which includes the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this approach, deferred taxes are recorded for the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial statement and tax basis of assets and liabilities, and are adjusted for changes in tax rates and tax laws when changes are enacted. The effects of future changes in income tax laws or rates are not anticipated.
The Company is subject to income taxes in the United States and certain foreign jurisdictions. The calculation of the Company’s tax provision involves the application of complex tax laws and requires significant judgment and estimates. The Company evaluates the realizability of its deferred tax assets for each jurisdiction in which it operates at each reporting date and establishes a valuation allowance when it is more likely than not that all or a portion of its deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income of the same character and in the same jurisdiction. The Company considers all available positive and negative evidence in making this assessment, including, but not limited to, the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. In circumstances where there is sufficient negative evidence indicating that deferred tax assets are not more likely than not realizable, the Company will establish a valuation allowance.
The Company applies ASC Topic 740 “Accounting for Uncertainty in Income Taxes” recognized in its financial statements. ASC 740 requires that all tax positions be evaluated using a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Differences between tax positions taken in a tax return and amounts recognized in the financial statements are recorded as adjustments to income taxes payable or receivable, or adjustments to deferred taxes, or both. The Company believes that its accruals for uncertain tax positions are adequate for all open audit years based on its assessment of many factors including past experience and interpretation of tax law. To the extent that new information becomes available, which causes the Company to change its judgment about the adequacy of its accruals for uncertain tax positions, such changes will impact income tax expense in the period such determination is made. The Company’s policy is to include interest and penalties related to unrecognized income tax benefits as a component of income tax expense.
Stock Based Compensation
The Company accounts for stock based compensation in accordance with ASC Topic 718, “Compensation – Stock Compensation,” which establishes accounting for equity instruments exchanged for employee services. Under such provisions, stock based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense, under the straight-line method, over the vesting period of the equity grant.
The Company accounts for equity instruments issued to non-employees in accordance with authoritative guidance for equity based payments to non-employees. Stock options issued to non-employees are accounted for at their estimated fair value, determined using the Black-Scholes option-pricing model. The fair value of options granted to non-employees is re-measured as they vest, and the resulting increase in value, if any, is recognized as expense during the period the related services are rendered.
Other Income (Expense)
We record interest income, interest expense, and change in derivative liabilities, as well as other non-operating transactions, as other income (expense) on our consolidated statements of operations.
Recently Issued Accounting Pronouncements
In October 2016, the FASB issued Accounting Standard Update ("ASU") 2016-17, Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control. This standard amends the guidance issued with ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis in order to make it less likely that a single decision maker would individually meet the characteristics to be the primary beneficiary of a Variable Interest Entity ("VIE"). When a decision maker or service provider considers indirect interests held through related parties under common control, they perform two steps. The second step was amended with this ASU to say that the decision maker should consider interests held by these related parties on a proportionate basis when determining the primary beneficiary of the VIE rather than in their entirety as was called for in the previous guidance. This ASU will be effective for fiscal years beginning after December 15, 2016, and early adoption is not permitted. The Company is currently evaluating the impact of the adoption of this ASU on our financial position and results of operations.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The standard requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. We will adopt the standard no later than July 1, 2019. The Company is currently assessing the impact that the new standard will have on our Consolidated Financial Statements, which will consist primarily of a balance sheet gross up of our operating leases. The Company does not believe the adoption of the new standard will have a significant impact on our consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs. This ASU more closely aligns the treatment of debt issuance costs with debt discounts and premiums and requires debt issuance costs be presented as a direct deduction from the carrying amount of the related debt. The amendments in this ASU are effective for financial statements issued for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. This guidance has been applied on a retrospective basis on the Company’s consolidated financial statements as of December 31, 2015.
In August 2014, the FASB issued ASU No. 2014-15 Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue to meet its obligations as they become due within one year after the date that the financial statements are issued. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company evaluated the impact of this new standard and concluded as of December 31, 2016 that the adoption of this new standard did not have a significant impact on our consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, which deferred the effective date of the new revenue standard for periods beginning after December 15, 2016 to December 15, 2017, with early adoption permitted but not earlier than the original effective date. Accordingly, the updated standard is effective for us in the first quarter of fiscal 2018 and we do not plan to early adopt. We have not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures. |
Acquisitions and Business Combinations |
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Acquisitions and Business Combinations |
During 2016 and 2015, the Company entered into eight acquisitions, which are detailed below. The acquisitions were conducted in an effort to expand the Company’s distributor network, enhance and expand its product portfolio, and diversify its product mix. As such, the major purpose for all of the business combinations was to increase revenue and profitability. The acquisitions were structured as asset purchases which resulted in the recognition of certain intangible assets.
2016 Acquisitions
Legacy for Life, LLC
On August 18, 2016, with an effective date of September 1, 2016 the Company entered into an agreement to acquire certain assets of Legacy for Life, LLC, an Oklahoma based direct sales company and entered into an agreement to acquire the equity of two wholly owned subsidiaries of Legacy for Life, LLC; Legacy for Life Taiwan and Legacy for Life Limited (Hong Kong) collectively referred to as (“Legacy for Life”).
Legacy for Life is a science-based direct seller of i26, a product made from the IgY Max formula or hyperimmune whole dried egg, which is the key ingredient in Legacy for Life products. Additionally, the Company has entered into an Ingredient Supply Agreement to market i26 worldwide. IgY Max promotes healthy gut flora and healthy digestion and was created by exposing a specially selected flock of chickens to natural elements from the human world, whereby the chickens develop immunity to these elements. In a highly patented process, these special eggs are harvested as a whole food and are processed as a whole food into i26 egg powder, an all-natural product. Nothing is added to the egg nor does any chemical extraction take place.
As a result of this acquisition, the Company’s distributors and customers have access to the unique line of the Legacy for Life products and the Legacy for Life distributors and customers have gained access to products offered by the Company. The Company has agreed to purchase certain inventories and assume certain liabilities. The Company is obligated to make monthly payments based on a percentage of the Legacy for Life distributor revenue derived from sales of the Company’s products and a percentage of royalty revenue derived from sales of the Legacy for Life products until the earlier of the date that is fifteen (15) years from the closing date or such time as the Company has paid to Legacy for Life aggregate cash payments of Legacy for Life distributor revenue and royalty revenue equal to a predetermined maximum aggregate purchase price.
The acquisition of Legacy for Life was accounted for under the acquisition method of accounting. The assets acquired and liabilities assumed by the Company were recognized at their estimated fair values as of the acquisition date. The fair values of the acquired assets have not been finalized pending further information that may impact the valuation of certain assets or liabilities. The acquisition related costs, such as legal costs and other professional fees were minimal and expensed as incurred.
The contingent consideration’s estimated fair value at the date of acquisition was $825,000 as determined by management using a discounted cash flow methodology. In addition the Company paid $221,000 for the net assets of the Taiwan and Hong Kong entities and certain inventories from Legacy for Life.
The preliminary purchase price allocation for the acquisition of Legacy for Life (in thousands) is as follows:
The preliminary fair value of intangible assets acquired was determined through the use of a discounted cash flow methodology. The trademarks and trade name, customer-related intangible and distributor organization intangible are being amortized over their estimated useful life of ten (10) years using the straight-line method which is believed to approximate the time-line within which the economic benefit of the underlying intangible asset will be realized.
The Company expects to finalize the valuation within one (1) year from the acquisition date.
The revenue impact from the Legacy for Life acquisition, included in the consolidated statement of operations for the year ended December 31, 2016 was approximately $507,000.
The pro-forma effect assuming the business combination with Legacy for Life discussed above had occurred at the beginning of the current period is not presented as the information was not available.
Nature’s Pearl Corporation
On August 1, 2016, the Company entered into an agreement to acquire certain assets of Nature’s Pearl Corporation, (“Nature’s Pearl”) with an effective date of September 1, 2016. Nature’s Pearl is a direct sales company that produces nutritional supplements and skin and personal care products using the muscadine grape grown in the southeastern region of the United States that are deemed to be rich in antioxidants. As a result of this acquisition, the Company’s distributors and customers have access to the unique line of Nature’s Pearl products and Nature’s Pearl distributors and customers have gained access to products offered by the Company. The Company is obligated to make monthly payments based on a percentage of Nature’s Pearl distributor revenue derived from sales of the Company’s products and a percentage of royalty revenue derived from sales of Nature’s Pearl products until the earlier of the date that is ten (10) years from the closing date or such time as the Company has paid to Nature’s Pearl aggregate cash payments of Nature’s Pearl distributor revenue and royalty revenue equal to a predetermined maximum aggregate purchase price. The Company paid approximately $200,000 for certain inventories, which payment was applied against the maximum aggregate purchase price.
The contingent consideration’s estimated fair value of the acquisition was $1,475,000 and was determined by management using a discounted cash flow methodology. The acquisition related costs, such as legal costs and other professional fees were minimal and expensed as incurred.
The assets acquired were recorded at estimated fair values and have not been finalized pending further information that may impact the valuation of certain assets or liabilities. The preliminary purchase price allocation for Nature’s Pearl is as follows (in thousands):
The preliminary fair value of intangible assets acquired was determined through the use of a discounted cash flow methodology. The trademarks and trade name, customer-related intangible and distributor organization intangible are being amortized over their estimated useful life of ten (10) years using the straight-line method which is believed to approximate the time-line within which the economic benefit of the underlying intangible asset will be realized.
The Company expects to finalize the valuation within one (1) year from the acquisition date.
The revenue impact from the Nature’s Pearl acquisition, included in the consolidated statement of operations for the year ended December 31, 2016 was approximately $1,488,000.
The pro-forma effect assuming the business combination with Nature’s Pearl discussed above had occurred at the beginning of the current period is not presented as the information was not available.
Renew Interest, LLC (SOZO Global, Inc.)
On July 29, 2016, the Company acquired certain assets of Renew Interest, LLC (“Renew”) formerly owned by SOZO Global, Inc. (“SOZO”), a direct sales company that produces nutritional supplements, skin and personal care products, weight loss products and coffee products. The SOZO brand of products contains CoffeeBerry a fruit extract known for its high level of antioxidant properties. As a result of this business combination, the Company’s distributors and customers have access to the unique line of the Renew products and Renew distributors and customers have gained access to products offered by the Company. The Company is obligated to make monthly payments based on a percentage of Renew distributor revenue derived from sales of the Company’s products and royalty payments until the earlier of the date that is twelve (12) years from the closing date or such time as the Company agreed to pay to Renew, aggregate cash payments of Renew distributor revenue and royalty revenue equal to a predetermined maximum aggregate purchase price. The Company agreed to pay approximately $300,000 for certain inventories and assumed liabilities, which payment was applied to the maximum aggregate purchase price. The Company also received inventories on a consignment basis.
The contingent consideration’s estimated fair value of acquisition was $465,000 and was determined by management using a discounted cash flow methodology. The acquisition related costs, such as legal costs and other professional fees were minimal and expensed as incurred.
The assets acquired were recorded at estimated fair values and have not been finalized pending further information that may impact the valuation of certain assets or liabilities. The preliminary purchase price allocation for Renew is as follows (in thousands):
The preliminary fair value of intangible assets acquired was determined through the use of a discounted cash flow methodology. The trademarks and trade name, customer-related intangible and distributor organization intangible are being amortized over their estimated useful life of ten (10) years using the straight-line method which is believed to approximate the time-line within which the economic benefit of the underlying intangible asset will be realized.
The Company expects to finalize the valuation within one (1) year from the acquisition date.
The revenue impact from the Renew acquisition, included in the consolidated statement of operations for the year ended December 31, 2016 was approximately $432,000.
The pro-forma effect assuming the business combination with Renew discussed above had occurred at the beginning of the current period is not presented as the information was not available.
South Hill Designs Inc.
In January 2016, the Company acquired certain assets of South Hill Designs Inc., (“South Hill”) a direct sales and proprietary jewelry company that sells customized lockets and charms. As a result of this business combination the Company’s distributors have access to South Hill’s customized products and the South Hill distributors and customers have gained access to products offered by the Company.
The Company has agreed to pay South Hill a monthly royalty payment on all gross sales revenue generated by the South Hill distributor organization in accordance with this agreement, regardless of products being sold and a monthly royalty payment on South Hill product revenue for seven (7) years from the closing date.
The contingent consideration’s estimated fair value at the date of acquisition was $2,650,000 as determined by management using a discounted cash flow methodology. The acquisition related costs, such as legal costs and other professional fees were minimal and expensed as incurred.
During the fourth quarter ended December 31, 2016 the purchase accounting was finalized and the Company determined that the initial purchase price should be reduced by $1,811,000 from $2,650,000 to $839,000. The final purchase price allocation of the intangible assets acquired for South Hill (in thousands) is as follows:
The fair value of intangible assets acquired was determined through the use of a discounted cash flow methodology. The trademarks and trade name, customer-related intangible and distributor organization intangible are being amortized over their estimated useful life of ten (10) years using the straight-line method which is believed to approximate the time-line within which the economic benefit of the underlying intangible asset will be realized.
The revenue impact from the South Hill acquisition, included in the consolidated statement of operations for the year ended December 31, 2016 was approximately $4,283,000.
The pro-forma effect assuming the business combination with South Hill discussed above had occurred at the beginning of the current period is not presented as the information was not available.
2015 Acquisitions
Paws Group, LLC
On July 1, 2015, the Company acquired certain assets of Paws Group, LLC, (“PAWS”) a direct sales company for pet lovers that offers an exclusive pet boutique carrying treats for dogs and cats as well as grooming and bath products. The purchase price consisted of a maximum aggregate purchase price of $150,000. The Company paid approximately $61,000, for which the Company received certain inventories, which payment was applied against the maximum aggregate purchase price.
The Company recorded a fair value of a distributor network intangible asset of $125,000 as determined by management using a discounted cash flow methodology. The intangible is being amortized over its estimated useful life of ten (10) years using the straight-line method which is believed to approximate the time-line within which the economic benefit of the underlying intangible asset will be realized. The acquisition related costs, such as legal costs and other professional fees were minimal and expensed as incurred.
The revenue impact from the PAWS acquisition, included in the consolidated statement of operations for the years ended December 31, 2016 and 2015 was approximately $222,000 and $98,000, respectively.
The pro-forma effect assuming the business combination with PAWS discussed above had occurred at the beginning of the year ended 2015 is not presented as the information was not available.
Mialisia & Co., LLC
On June 1, 2015, the Company acquired certain assets of Mialisia & Co., LLC, (“Mialisia”) a direct sales jewelry company that specializes in interchangeable jewelry. As a result of this business combination, the Company’s distributors and customers have access to Mialisia’s patent-pending “VersaStyle” jewelry and Mialisia’s distributors and customers have gained access to products offered by the Company. The purchase price consisted of a maximum aggregate purchase price of $1,900,000. The Company paid $118,988 for certain inventories, which payment was applied against the maximum aggregate purchase price.
The Company has agreed to pay Mialisia a monthly payment equal to seven (7%) of all gross sales revenue generated by the Mialisia distributor organization in accordance with the asset purchase agreement, regardless of products being sold and pay five (5%) royalty on Mialisia product revenue until the earlier of the date that is fifteen (15) years from the closing date or such time as the Company has paid aggregate cash payment equal to $1,781,012 provided, however, that in no event will the maximum aggregate purchase price be reduced below $1,650,000.
The contingent consideration’s estimated fair value at the date of acquisition was $700,000 as determined by management using a discounted cash flow methodology. The acquisition related costs, such as legal costs and other professional fees were minimal and expensed as incurred.
During the second quarter ended June 30, 2016 the purchase accounting was finalized and the Company determined that the initial purchase price should be reduced by $108,000 from $700,000 to $592,000. The final purchase price allocation of the intangible assets acquired for Mialisia (in thousands) is as follows:
The fair value of intangible assets acquired was determined through the use of a discounted cash flow methodology. The trademarks and trade name, customer-related intangible and distributor organization intangible are being amortized over their estimated useful life of ten (10) years using the straight-line method which is believed to approximate the time-line within which the economic benefit of the underlying intangible asset will be realized.
The revenue impact from the Mialisia acquisition, included in the consolidated statement of operations for the years ended December 31, 2016 and 2015 was approximately $3,003,000 and $754,000, respectively.
The pro-forma effect assuming the business combination with Mialisia discussed above had occurred at the beginning of the year ended 2015 is not presented as the information was not available.
JD Premium LLC
On March 4, 2015, the Company acquired certain assets of JD Premium, LLC (“JD Premium”) a dietary supplement company. As a result of this business combination, the Company’s distributors and customers have access to JD Premium’s unique line of products and JD Premium’s distributors and clients gain access to products offered by the Company. The purchase price consisted of a maximum aggregate purchase price of $500,000. The Company paid $50,000 for the purchase of certain inventories, which payment was applied against the maximum aggregate purchase price.
The Company has agreed to pay JD Premium a monthly payment equal to seven (7%) of all gross sales revenue generated by the JD Premium distributor organization in accordance with the asset purchase agreement, regardless of products being sold and pay five (5%) royalty on JD Premium product revenue until the earlier of the date that is fifteen (15) years from the closing date or such time as the Company has paid aggregate cash payment equal to $450,000. All payments of JD Premium distributor revenue will be applied against and reduce the maximum aggregate purchase price; however if the aggregate gross sales revenue generated by the JD Premium distributor organization, effective April 4, 2015 for a twenty-four (24) months period does not equal or exceed $500,000 then the maximum aggregate purchase price will be reduced by the difference of the $500,000 and the average annual distributor revenue; provided, however, that in no event will the maximum aggregate purchase price be reduced below $300,000.
The contingent consideration’s estimated fair value at the date of acquisition was $195,000 as determined by management using a discounted cash flow methodology. The acquisition related costs, such as legal costs and other professional fees were minimal and expensed as incurred.
During the fourth quarter ended December 31, 2015 the purchase accounting was finalized and the Company determined that the initial purchase price should be reduced from $195,000 by approximately $75,000 to $120,000. The final purchase price allocation for JD Premium is as follows (in thousands):
The fair value of intangible assets acquired was determined through the use of a discounted cash flow methodology. The customer-related intangible and distributor organization intangible are being amortized over their estimated useful life of ten (10) years using the straight-line method which is believed to approximate the time-line within which the economic benefit of the underlying intangible asset will be realized.
The revenue impact from the JD Premium acquisition, included in the consolidated statement of operations for the years ended December 31, 2016 and 2015 were immaterial.
The pro-forma effect assuming the business combination with JD Premium discussed above had occurred at the beginning of the year ended 2015 is not presented as the information was not available.
Sta-Natural, LLC
On February 23, 2015, the Company acquired certain assets and assumed certain liabilities of Sta-Natural, LLC, (“Sta-Natural”) a dietary supplement company and provider of vitamins, minerals and supplements for families and their pets. As a result of this business combination, the Company’s distributors and customers have access to Sta-Natural’s unique line of products and Sta-Natural’s distributors and clients gain access to products offered by the Company. The purchase price consisted of a maximum aggregate purchase price of $500,000. The Company paid $25,000 for certain inventories, which payment was applied against the maximum aggregate purchase price.
The Company has agreed to pay Sta-Natural a monthly payment equal to eight (8%) of all gross sales revenue generated by the Sta-Natural distributor organization in accordance with the asset purchase agreement, regardless of products being sold and pay five (5%) royalty on Sta-Natural product revenue until the earlier of the date that is fifteen (15) years from the closing date or such time as the Company has paid aggregate cash payment equal to $450,000. All payments of Sta-Natural distributor revenue will be applied against and reduce the maximum aggregate purchase price; however if the aggregate gross sales revenue generated by the Sta-Natural distributor organization, for a twelve (12) months period following the closing date does not equal or exceed $500,000 then the maximum aggregate purchase price will be reduced by the difference of the $500,000 and the average distributor revenue for a twelve (12) month period: provided, however, that in no event will the maximum aggregate purchase price be reduced below $300,000.
The contingent consideration’s estimated fair value at the date of acquisition was $285,000 as determined by management using a discounted cash flow methodology. The acquisition related costs, such as legal costs and other professional fees were minimal and expensed as incurred.
The final purchase price allocation for Sta-Natural is as follows (in thousands):
The fair value of intangible assets acquired was determined through the use of a discounted cash flow methodology. The trademarks and trade name, customer-related intangible and distributor organization intangible are being amortized over their estimated useful life of ten (10) years using the straight-line method which is believed to approximate the time-line within which the economic benefit of the underlying intangible asset will be realized.
The revenue impact from the Sta-Natural acquisition, included in the consolidated statement of operations for the years ended December 31, 2016 and 2015 was approximately $1,168,000 and $691,000, respectively.
The pro-forma effect assuming the business combination with Sta-Natural discussed above had occurred at the beginning of the year ended 2015 is not presented as the information was not available. |
Arrangements with Variable Interest Entities and Related Party Transactions |
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Arrangements With Variable Interest Entities And Related Party Transactions | |
Arrangements with Variable Interest Entities and Related Party Transactions | The Company consolidates all variable interest entities in which it holds a variable interest and is the primary beneficiary of the entity. Generally, a variable interest entity (“VIE”) is a legal entity with one or more of the following characteristics: (a) the total at risk equity investment is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties; (b) as a group the holders of the equity investment at risk lack any one of the following characteristics: (i) the power, through voting or similar rights, to direct the activities of the entity that most significantly impact its economic performance, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) some equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity's activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is required to consolidate the VIE and is the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE's economic performance, and (b) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.
In determining whether it is the primary beneficiary of a VIE, the Company considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE's economic performance and which party has the power to direct such activities; the amount and characteristics of Company's interests and other involvements in the VIE; the obligation or likelihood for the Company or other investors to provide financial support to the VIE; and the similarity with and significance to the business activities of Company and the other investors. Significant judgments related to these determinations include estimates about the current and future fair values and performance of these VIEs and general market conditions.
FDI Realty, LLC
FDI Realty is the owner and lessor of the building previously occupied by the Company for its sales and marketing office in Windham, NH. In December 2015 the Company relocated its operations from the Windham office, to its corporate headquarters in Chula Vista, California. A former officer of the Company is the single member of FDI Realty. The Company is a co-guarantor of FDI Realty’s mortgages on the building. The Company determined that the fair value of the guarantees is not significant and therefore did not record a related liability. The first mortgage is due on August 13, 2018 and the second mortgage is due on August 13, 2028. The Company’s maximum exposure to loss as a result of its involvement with the unconsolidated VIE is approximately $1,806,000 and $1,900,000 as of December 31, 2016 and 2015, respectively. The Company may be subject to additional losses to the extent of any financial support that it voluntarily provides in the future.
At December 31, 2016 and 2015, the Company held a variable interest in FDI Realty, for which the Company is not deemed to be the primary beneficiary. The Company has concluded, based on its qualitative consideration of the terminated lease agreement, and the role of the single member of FDI Realty, that the single member is the primary beneficiary of FDI Realty. In making these determinations, the Company considered that the single member conducts and manages the business of FDI Realty, is authorized to borrow funds on behalf of FDI Realty, is the sole person authorized and responsible for conducting the business of FDI Realty, and is obligated to fund the obligations of FDI Realty. As a result of this determination, the financial position and results of operations of FDI Realty have not been included in the accompanying consolidated financial statements of the Company.
Related Party Transactions
Richard Renton
Richard Renton is a member of the Board of Directors and owns and operates with his wife Roxanna Renton Northwest Nutraceuticals, Inc., a supplier of certain inventory items sold by the Company. The Company made purchases of approximately $126,000 and $93,000 from Northwest Nutraceuticals Inc., for the years ended December 31, 2016 and 2015, respectively. In addition, Mr. Renton and his wife are also distributors of the Company and the Renton’s were paid distributor commissions for the years ended December 31, 2016 and 2015 approximately $457,000 and $422,000 respectively.
Hernandez, Hernandez, Export Y Company
The Company’s coffee segment CLR is associated with Hernandez, Hernandez, Export Y Company (“H&H”), a Nicaragua company, through sourcing arrangements to procure Nicaraguan green coffee and in March 2014 as part of the Siles Plantation Family Group “Siles” acquisition, CLR engaged the owners of H&H as employees to manage Siles.
As an inducement to managing the operations of Siles, CLR and H&H entered into an Operating and Profit Sharing Agreement (“Agreement”). In accordance with the Agreement, H&H shares equally (50%) in all profits and losses generated by Siles, and profits from any subsequent sale of the plantation, after profits are first distributed to CLR equal to the amount of CLR’s cash contributions for the acquisitions, then after profits are distributed to H&H in an amount equal to their cash contributions, and after certain other conditions are met. During the years ended December 31, 2016 and 2015 CLR recorded expenses allocated to the profit sharing Agreement of $698,000 and $528,000, respectively. As of December 31, 2016 and 2015 the balance of contingent acquisition debt payable to H&H after the reduction of $698,000 and $528,000 from the allocation of 50% losses recognized in 2016 and 2015 is $83,000 and $894,000, respectively.
CLR sources green coffee from H&H and made purchases of approximately $8,810,000 and $10,499,000 for the years ended December 31, 2016 and 2015, respectively. H&H Coffee Group Export, a Florida Company which is affiliated with H&H is a customer of CLR. During the year ended December 31, 2016 CLR sold $2,637,000 in green coffee to H&H Coffee Group Export. There were no related sales of green coffee to H&H Coffee Group Export during 2015.
Carl Grover
Mr. Carl Grover is the beneficial owner of in excess of five percent (5%) of our outstanding common shares, including his ownership as the sole beneficial owner of 44,866,952 shares of our common stock. Mr. Grover owns a September 2014 Note in the principal amount of $4,000,000 convertible into 11,428,571 shares of common stock convertible at a conversion price of $0.35 per share, and a September 2014 Warrant exercisable for 15,652,174 shares of common stock at an exercise price of $0.23 per share. Mr. Grover also owns a November 2015 Note in the principal amount of $7,000,000 convertible into 20,000,000 shares of common stock convertible at a conversion price of $0.35 per share, and a November 2015 Warrant exercisable for 9,333,333 shares of common stock at an exercise price of $0.45 per share. He also owns 5,151,240 shares of common stock.
2400 Boswell LLC
On March 15, 2013, the Company acquired 2400 Boswell LLC (“2400 Boswell”) for approximately $4.6 million. 2400 Boswell is the owner and lessor of the building occupied by the Company for its corporate office and warehouse in Chula Vista, California. The purchase was from an immediate family member of our Chief Executive Officer and consisted of approximately $248,000 in cash, $334,000 of debt forgiveness and accrued interest, and a promissory note of approximately $393,000, payable in equal payments over 5 years and bears interest at 5.0%. Additionally, the Company assumed a long-term mortgage of $3,625,000, payable over 25 years and has an initial interest rate of 5.75%. The interest rate is the prime rate plus 2.5%. The lender will adjust the interest rate on the first calendar day of each change period. As of December 31, 2016 the balance on the long-term mortgage is approximately $3,363,000 and the balance on the promissory note is approximately $108,000. The Company and its Chief Executive Officer are both co-guarantors of the mortgage.
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Notes Payable and Other Debt |
In November 2015, the Company completed a private placement and entered into Note Purchase Agreements with three (3) accredited investors pursuant to which it sold senior secured convertible notes in the aggregate principal amount of $7,187,500, that are convertible into shares of Common Stock. The Notes are due in October 2018 if the option to convert has not been exercised (see Note 5, below.)
In January 2015, the Company completed a private placement and entered into Note Purchase Agreements with three (3) accredited investors pursuant to which it sold units consisting of one (1) year senior secured notes in the aggregate principal amount of $5,250,000. One holder of a January 2015 Note in the principal amount of $5,000,000 was prepaid on October 26, 2015 through a cash payment from us to the investor of $1,000,000, and the remaining $4,000,000 owed was applied to the investor’s purchase of a $4,000,000 November 2015 Note in the November 2015 Offering and a November 2015 Warrant exercisable to purchase 5,333,333 shares of Common Stock. The remaining balance of the January 2015 Notes as of December 31, 2015 was $250,000 which amount was paid in January 2016 (see Note 5, below.)
During the third quarter of the year ended December 31, 2014, the Company completed a private placement and entered into Note Purchase Agreements with seven (7) accredited investors pursuant to which we sold units consisting of five (5) year senior secured convertible Notes in the aggregate principal amount of $4,750,000, that are convertible into shares of our common stock. The Notes are due in September 2019 if the option to convert has not been exercised (see Note 5, below.)
In March, 2013, the Company acquired 2400 Boswell for approximately $4.6 million. 2400 Boswell is the owner and lessor of the building occupied by the Company for its corporate office and warehouse in Chula Vista, California. The purchase was from an immediate family member of our Chief Executive Officer and consisted of approximately $248,000 in cash, $334,000 of debt forgiveness and accrued interest, and a promissory note of approximately $393,000, payable in equal payments over 5 years and bears interest at 5.0%. Additionally, the Company assumed a long-term mortgage of $3,625,000, payable over 25 years and has an initial interest rate of 5.75%. The interest rate is the prime rate plus 2.5%. The lender will adjust the interest rate on the first calendar day of each change period. As of December 31, 2016 the balance on the long-term mortgage is approximately $3,363,000 and the balance on the promissory note is approximately $108,000. The Company and its Chief Executive Officer are both co-guarantors of the mortgage.
In March 2007, the Company entered into an agreement to purchase certain assets of M2C Global, Inc., a Nevada corporation, for $4,500,000. The agreement required payments totaling $500,000 in three installments during 2007, followed by monthly payments in the amount of 10% of the sales related to the acquired assets until the entire note balance is paid. The Company has imputed interest at the rate of 7% per annum. As of December 31, 2016 and 2015, the carrying value of the liability was approximately $1,156,000 and $1,204,000, respectively. Imputed interest recorded on the note was approximately $29,000 for the year ended December 31, 2015. The interest associated with the note for the year ended December 31, 2016 was minimal.
The Company has two other notes payable in the total amount of $23,000 as of December 31, 2016 which expires in 2018 and 2020.
The following summarizes the maturities of notes payable (in thousands):
Capital Lease
The Company leases certain manufacturing and operating equipment under non-cancelable capital leases. The total outstanding balance under the capital leases as of December 31, 2016 excluding interest was approximately $2,390,000, of which $821,000 will be paid in 2017 and the remaining balance of $1,569,000 will be paid through 2021.
The following summarizes the maturities of capital leases (in thousands):
Depreciation expense related to the capitalized lease obligations was approximately $103,000 and $27,000 for the years ended December 31, 2016 and 2015, respectively.
Factoring Agreement
The Company has a factoring agreement (“Factoring Agreement”) with Crestmark Bank (“Crestmark”) related to the Company’s accounts receivable resulting from sales of certain products within its commercial coffee segment. Effective May 1, 2016, the Company entered into a third amendment to the factoring agreement (“Agreement”). Under the terms of the Agreement, all new receivables assigned to Crestmark shall be “Client Risk Receivables” and no further credit approvals will be provided by Crestmark and there will be no new credit-approved receivables. The changes to the Agreement include expanding the factoring facility to include borrowings to be advanced against acceptable eligible inventory up to 50% of landed cost of finished goods inventory and meeting certain criteria, not to exceed the lesser of $1,000,000 or 85% of the value of the receivables already advanced with a maximum overall borrowing of $3,000,000. Interest accrues on the outstanding balance and a factoring commission is charged for each invoice factored which is calculated as the greater of $5.00 or 0.75% to 0.875% of the gross invoice amount and is recorded as interest expense. In addition the Company and the Company’s CEO Mr. Wallach have entered into a Guaranty and Security Agreement with Crestmark Bank if in the event that CLR were to default. This Agreement continues in full force and is effective until February 1, 2019.
The Company accounts for the sale of receivables under the Factoring Agreement as secured borrowings with a pledge of the subject inventories and receivables as well as all bank deposits as collateral, in accordance with the authoritative guidance for accounting for transfers and servicing of financial assets and extinguishments of liabilities. The caption “Accounts receivable, due from factoring company” on the accompanying consolidated balance sheets in the amount of approximately $1,078,000 and $556,000 as of December 31, 2016 and December 31, 2015, respectively, reflects the related collateralized accounts.
The Company's outstanding liability related to the Factoring Agreement was approximately $1,290,000 and $457,000 as of December 31, 2016 and December 31, 2015, respectively, and is included in other current liabilities on the consolidated balance sheets. The minimum factoring commission payable to the bank is $90,000 during each consecutive 12-month period. Fees and interest paid pursuant to this agreement were approximately $170,000 and $155,000 for the years ended December 31, 2016 and 2015, respectively, which were recorded as interest expense.
Contingent Acquisition Debt
The Company has contingent acquisition debt associated with its business combinations. The Company accounts for business combinations under the acquisition method and allocates the total purchase price for acquired businesses to the tangible and identified intangible assets acquired and liabilities assumed, based on their estimated fair values as of the acquisition date. A liability for contingent consideration, if applicable, is recorded at fair value as of the acquisition date and, evaluated each period for changes in the fair value and adjusted as appropriate (see Note 7 below.) The Company’s contingent acquisition debt as of December 31, 2016 is $8,001,000 and is primarily attributable to debt associated with the Company’s direct selling segment which is $7,806,000 and $195,000 is debt associated with the Company’s coffee segment.
Line of Credit
On October 10, 2014, the Company entered into a revolving line of credit agreement (“Line of Credit”), with Wells Fargo Bank National Association (“Bank”), the Company’s principal banking partner. The Line of Credit provided the Company with a $2.5 million revolving credit line. The outstanding principal balance of the Line of Credit bear interest at a fluctuating rate per annum determined by the Bank to be two and three-quarter percent (2.75%) above Daily One Month LIBOR as in effect from time to time. The bank charged an unused commitment fee equal to five tenths percent (.5%) per annum on the daily unused amount of the Line of Credit and was payable quarterly. The Company did not draw against this credit facility. The agreement expired in October 2015 and was not renewed. |
Debt |
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Debt | January 2015 Private Placement
In January 2015, the Company entered into Note Purchase Agreements (the “Note” or “Notes”) related to its private placement offering (“January 2015 Private Placement”) with three (3) accredited investors pursuant to which the Company sold units consisting of one (1) year senior secured notes in the aggregate principal amount of $5,250,000. One holder of a January 2015 Note in the principal amount of $5,000,000 was prepaid on October 26, 2015 through a cash payment from us to the investor of $1,000,000 and the remaining $4,000,000 owed was applied to the investor’s purchase of a $4,000,000 November 2015 Note in the November 2015 Private Placement and a November 2015 Warrant exercisable to purchase 5,333,333 shares of Common Stock. The Notes bore interest at a rate of eight percent (8%) per annum and interest was paid quarterly in 2015. The remaining balance of the January 2015 Notes as of December 31, 2015 was $250,000 and was paid in January 2016.
The Company recorded a non-cash extinguishment loss on debt of $1,198,000 for the year ended December 31, 2015 as a result of the repayment of $5,000,000 in Notes Payable to one of the investors from the January 2015 Private Placement through issuance of a new November 2015 Note Payable. This loss represents the difference between the reacquisition value of the new debt to the holder of the note and the carrying amount of the holder’s extinguished debt. Issuance costs related to the Notes and the common stock were approximately $170,000 and $587,000 in cash and non-cash costs, respectively, which were recorded as deferred financing costs and were amortized over the term of the Notes. As of December 31, 2015 the deferred financing costs is fully amortized and was recorded as interest expense.
Convertible Notes Payable
Our total convertible notes payable, net of debt discount outstanding consisted of the amount set forth in the following table (in thousands):
July 2014 Private Placement
Between July 31, 2014 and September 10, 2014 the Company entered into Note Purchase Agreements (the “Note” or “Notes”) related to its private placement offering (“2014 Private Placement”) with seven accredited investors pursuant to which the Company raised aggregate gross proceeds of $4,750,000 and sold units consisting of five (5) year senior secured convertible Notes in the aggregate principal amount of $4,750,000, that are convertible into 13,571,429 shares of our common stock, at a conversion price of $0.35 per share, and warrants to purchase 18,586,956 shares of common stock at an exercise price of $0.23 per share. The Notes bear interest at a rate of eight percent (8%) per annum and interest is paid quarterly in arrears with all principal and unpaid interest due between July and September 2019. As of December 31, 2016 and December 31, 2015 the principal amount of $4,750,000 remains outstanding.
The Company has the right to prepay the Notes at any time after the one year anniversary date of the issuance of the Notes at a rate equal to 110% of the then outstanding principal balance and any unpaid accrued interest. The notes are secured by Company pledged assets and rank senior to all debt of the Company other than certain senior debt that has been previously identified as senior to the convertible notes debt. Additionally, Stephan Wallach, the Company’s Chief Executive Officer, has also personally guaranteed the repayment of the Notes, subject to the terms of a Guaranty Agreement executed by him with the investors. In addition, Mr. Wallach has agreed not to sell, transfer or pledge 30 million shares of the Common Stock that he owns so long as his personal guaranty is in effect.
Additionally, upon issuance of the Convertible Notes, the Company recorded the discount for the beneficial conversion feature of $1,053,000. The debt discount associated with the beneficial conversion feature is amortized to interest expense over the life of the Notes.
Paid in cash issuance costs related to the July 2014 Private Placement were approximately $490,000 and were recorded as deferred financing costs and are included with convertible notes payable, net of debt discounts on the consolidated balance sheets and are being amortized over the term of the Convertible Notes. As of December 31, 2016 and December 31, 2015 the remaining balance in deferred financing costs is approximately $253,000 and $351,000, respectively. The quarterly amortization of the deferred financing costs is approximately $25,000 and is recorded as interest expense.
November 2015 Private Placement
Between October 13, 2015 and November 25, 2015 the Company entered into Note Purchase Agreements (the “Note” or “Notes”) related to its private placement offering (“November 2015 Private Placement”) with three (3) accredited investors pursuant to which the Company raised cash proceeds of $3,187,500 in the offering and converted $4,000,000 of debt from the January 2015 Private Placement to this offering in consideration of the sale of aggregate units consisting of three (3) year senior secured convertible Notes in the aggregate principal amount of $7,187,500, convertible into 20,535,714 shares of common stock, par value $0.001 per share, at a conversion price of $0.35 per share, subject to adjustment as provided therein; and five (5) year Warrants exercisable to purchase 9,583,333 shares of the Company’s common stock at a price per share of $0.45. The Notes bear interest at a rate of eight percent (8%) per annum and interest is paid quarterly in arrears with all principal and unpaid interest due at maturity on October 12, 2018. As of December 31, 2016 and December 31, 2015 the principal amount of $7,187,500 remains outstanding.
The Company has the right to prepay the Notes at any time after the one year anniversary date of the issuance of the Notes at a rate equal to 110% of the then outstanding principal balance and any unpaid accrued interest. The notes are secured by Company pledged assets and rank senior to all debt of the Company other than certain senior debt that has been previously identified as senior to the convertible notes debt. The amounts owed under this Note are secured by a Deed of Trust as of October 13, 2015 executed by the Company’s affiliate 2400 Boswell LLC, a California limited liability company, and encumbering the Company’s headquarters at 2400 Boswell Rd., Chula Vista, CA 91914 (the “Deed of Trust.”) Additionally, Stephan Wallach, the Company’s Chief Executive Officer, has also personally guaranteed the repayment of the Notes, subject to the terms of a Guaranty Agreement executed by him with the investors. In addition, Mr. Wallach has agreed not to sell, transfer or pledge 30 million shares of the Common Stock that he owns so long as his personal guaranty is in effect.
The Company recorded the discount for the beneficial conversion feature of $15,000. The beneficial conversion feature was recorded to equity and the debt discount associated with the beneficial conversion feature will be amortized to interest expense over the life of the Notes.
Paid in cash issuance costs related to the November 2015 Private Placement were approximately $786,000 and were recorded as deferred financing costs and are included with convertible notes payable, net of debt discounts on the consolidated balance sheets and are being amortized over the term of the Convertible Notes. As of December 31, 2016 and December 31, 2015 the remaining balance in deferred financing costs is approximately $480,000 and $742,000, respectively. The quarterly amortization of the deferred financing costs is approximately $66,000 and is recorded as interest expense.
Registration Rights Agreements
The Company entered into a registration rights agreements (“Registration Rights Agreement”) with the investors in the November 2015 and July 2014 Private Placements. Under the terms of the Registration Rights Agreement, the Company agreed to file a registration statement covering the resale of the common stock underlying the units and the common stock that is issuable on exercise of the warrants within 90 days from the final closing date of the Private Placements (the “Filing Deadline”).
The Company has agreed to use reasonable efforts to maintain the effectiveness of the registration statement through the one year anniversary of the date the registration statement is declared effective by the Securities and Exchange Commission (the “SEC”), or until Rule 144 of the 1933 Act is available to investors in the Private Placements with respect to all of their shares, whichever is earlier. If the Company does not meet the Filing Deadline or Effectiveness Deadline, as defined in the Registration Rights Agreement, the Company will be liable for monetary penalties equal to one percent (1.0%) of each investor’s investment at the end of every 30 day period following such Filing Deadline or Effectiveness Deadline failure until such failure is cured.
The payment amount shall be prorated for partial 30 day periods. The maximum aggregate amount of payments to be made by the Company as the result of such shall be an amount equal to ten (10%) of each investor’s investment amount. Notwithstanding the foregoing, no payments shall be owed with respect to any period during which all of the investor’s registrable securities may be sold by such investor under Rule 144 or pursuant to another exemption from registration.
July 2014 Private Placement: The Company filed a registration statement on October 3, 2014 and an amended statement on October 17, 2014 and it was declared effective by the SEC on November 4, 2014.
November 2015 Private Placement: The Company filed a registration statement on December 29, 2015 and an amended registration statement on February 9, 2016 that was declared effective by the SEC on February 12, 2016.
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Derivative Liability |
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Derivative Liability | In October and November of 2015, the Company issued 9,583,333 five-year warrants in connection with Convertible Notes associated with our November 2015 Private Placement. The exercise price of the warrants is protected against down-round financing throughout the term of the warrant. Pursuant to ASC Topic 815, “Derivatives and Hedging” the fair value of the warrants of approximately $1,491,000 was recorded as a derivative liability on the issuance dates. The estimated fair values of the warrants were computed at issuance using a Monte Carlo option pricing models, with the following assumptions: stock price volatility 70%, risk-free rate 1.66%, annual dividend yield 0% and expected life 5.0 years.
In July and August of 2014, the Company issued 21,802,793 five-year warrants in connection with Convertible Notes associated with our July 2014 Private Placement. The exercise price of the warrants is protected against down-round financing throughout the term of the warrant. Pursuant to ASC Topic 815, the fair value of the warrants of approximately $3,697,000 was recorded as a derivative liability on the issuance dates. The estimated fair values of the warrants were computed at issuance using a Monte Carlo option pricing models, with the following assumptions: stock price volatility 90%, risk-free rates 1.58%-1.79%, annual dividend yield 0% and expected life 5.0 years.
In December 2015, the Company modified the terms of certain warrants that were issued to the placement agent as a result of warrants issued from the July Private Placement that were initially classified as derivative liabilities. The Company entered into an agreement with the placement agent to remove the down-round pricing protection provision contained within the placement agent issued warrants. As a result of this change in the warrants, the Company considered the guidance of Topic ASC 815, “Derivatives and Hedging” (formerly EITF 07-5 Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity's Own Stock)) to determine the appropriate accounting treatment of the warrants and the balance sheet classification of the warrants as either equity or liability. The Company determined that the warrants were indexed to the Company’s stock and the equity classification was appropriate and no longer qualified as derivative liabilities. This determination resulted in the reclassification of 3,215,837 warrants from a liability instrument to equity instruments by removing the derivative liability and a reclassification to additional paid in capital. The Company revalued the warrants as of December 31, 2015 and reduced the derivate liability by approximately $526,000. The warrants were revalued using the Black-Scholes valuation method using a risk-free rate of 1.5%, stock price of $0.30, exercise prices ranging from $0.23 to $0.35, expected life of 3.6 to 3.7 years and stock price volatility of 70.0%.
Warrants classified as derivative liabilities are recorded at their estimated fair value (see Note 7, below) at the issuance date and are revalued at each subsequent reporting date. We will continue to revalue the derivative liability on each subsequent balance sheet date until the securities to which the derivative liabilities relate are exercised or expire.
The Company revalued the warrants as of the end of each reporting period, and the estimated fair value of the outstanding warrant liabilities was approximately $3,345,000 and $4,716,000 as of December 31, 2016 and December 31, 2015, respectively.
Increases or decreases in fair value of the derivative liability are included as a component of total other expense in the accompanying consolidated statements of operations for the respective period. The changes to the derivative liability for warrants resulted in a decrease of $1,371,000 for the year ended December 31, 2016 and an increase of $39,000 for the year ended December 31, 2015.
Various factors are considered in the pricing models we use to value the warrants, including our current stock price, the remaining life of the warrants, the volatility of our stock price, and the risk free interest rate. Future changes in these factors may have a significant impact on the computed fair value of the warrant liability. As such, we expect future changes in the fair value of the warrants to continue and may vary significantly from year to year. The warrant liability and revaluations have not had a cash impact on our working capital, liquidity or business operations.
The estimated fair value of the warrants were computed as of December 31, 2016 and as of December 31, 2015 using Black-Scholes and Monte Carlo option pricing models, using the following assumptions:
In addition, Management assessed the probabilities of future financing assumptions in the valuation models.
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Fair Value of Financial Instruments |
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Fair Value of Financial Instruments | Fair value measurements are performed in accordance with the guidance provided by ASC Topic 820, “Fair Value Measurements and Disclosures.” ASC Topic 820 defines fair value as the price that would be received from selling an asset, or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or parameters are not available, valuation models are applied.
ASC Topic 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Assets and liabilities recorded at fair value in the financial statements are categorized based upon the hierarchy of levels of judgment associated with the inputs used to measure their fair value. Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities that an entity has the ability to access.
Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 – Unobservable inputs that are supportable by little or no market activity and that are significant to the fair value of the asset or liability.
The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, capital lease obligations and deferred revenue approximate their fair values based on their short-term nature. The carrying amount of the Company’s long term notes payable approximates its fair value based on interest rates available to the Company for similar debt instruments and similar remaining maturities.
The estimated fair value of the contingent consideration related to the Company's business combinations is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument.
In connection with the 2015 and 2014 Private Placements, we issued warrants to purchase shares of our common stock which are accounted for as derivative liabilities (see Note 6 above.) The estimated fair value of the warrants is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument.
The following table details the fair value measurement within the three levels of the value hierarchy of the Company’s financial instruments, which includes the Level 3 liabilities (in thousands):
The following table reflects the activity for the Company’s warrant derivative liability associated with our 2015 and 2014 Private Placements measured at fair value using Level 3 inputs (in thousands):
The following table reflects the activity for the Company’s contingent acquisition liabilities measured at fair value using Level 3 inputs (in thousands):
The fair value of the contingent acquisition liabilities are evaluated each reporting period using projected revenues, discount rates, and projected timing of revenues. Projected contingent payment amounts are discounted back to the current period using a discount rate. Projected revenues are based on the Company’s most recent internal operational budgets and long-range strategic plans. Increases in projected revenues will result in higher fair value measurements. Increases in discount rates and the time to payment will result in lower fair value measurements. Increases (decreases) in any of those inputs in isolation may result in a significantly lower (higher) fair value measurement. During the years ended December 31, 2016 and 2015, the net adjustment to the fair value of the contingent acquisition debt was a decrease of $1,462,000 and a decrease of $446,000, respectively.
The weighted-average of the discount rates used was 18.2% and 17.6% as of December 31, 2016 and 2015, respectively. The projected year of payment ranges from 2017 to 2031.
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Stockholders’ Equity |
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Stockholders' Equity | The Company’s Articles of Incorporation, as amended, authorize the issuance of two classes of stock to be designated “Common Stock” and “Preferred Stock”.
Convertible Preferred Stock
The Company had 161,135 shares of Series A Convertible Preferred Stock ("Series A Preferred") outstanding as of December 31, 2016 and December 31, 2015, and accrued dividends of approximately $112,000 and $98,000, respectively. The holders of the Series A Preferred Stock are entitled to receive a cumulative dividend at a rate of 8.0% per year, payable annually either in cash or shares of the Company's Common Stock at the Company's election. Shares of Common Stock paid as accrued dividends are valued at $0.50 per share. Each share of Series A Preferred is convertible into two shares of the Company's Common Stock. The holders of Series A Preferred are entitled to receive payments upon liquidation, dissolution or winding up of the Company before any amount is paid to the holders of Common Stock. The holders of Series A Preferred shall have no voting rights, except as required by law.
Common Stock
The Company had 392,698,557 common shares outstanding as of December 31, 2016. The holders of Common Stock are entitled to one vote per share on matters brought before the shareholders.
Warrant Modification Agreements
In December 2015, the Company modified the terms of certain warrants that were issued to the placement agent as a result of warrants issued from the July Private Placement that were initially classified as derivative liabilities. The Company entered into an agreement with the placement agent to remove the down-round pricing protection provision contained within the placement agent issued warrants. As a result of this change in the warrants, the Company considered the guidance of Topic ASC 815, “Derivatives and Hedging” (formerly EITF 07-5 Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity's Own Stock)) to determine the appropriate accounting treatment of the warrants and the balance sheet classification of the warrants as either equity or liability. The Company determined that the warrants were indexed to the Company’s stock and that the equity classification was appropriate and the warrants no longer qualified as derivative liabilities. This determination resulted in the reclassification of 3,215,837 warrants from a liability instrument to equity instruments by removing the derivative liability and a reclassification to additional paid in capital. The Company revalued the warrants as of December 31, 2015 and reduced the derivate liability by approximately $526,000. The warrants were revalued using the Black-Scholes valuation method using a risk-free rate of 1.5%, stock price of $0.30, exercise prices ranging from $0.23 to $0.35, expected life of 3.6 to 3.7 years and stock price volatility of 70.0%.
In July 2015, the Company entered into agreements which extended the life of 2,418,750 warrants classified as equity instruments by two years after certain conditions were met. The Company recorded a warrant modification expense, as a result of the extension of the expiration dates of approximately $253,000, which is included in general and administrative expense in the Company’s consolidated statements of operations. The expense was calculated using the Black-Scholes valuation method and using a risk-free rate of 0.67%, stock price of $0.31, exercise prices ranging from $0.30 to $0.40, expected life of 2.0 years and stock price volatility of 67.8%.
The warrants are exercisable into the Company’s common stock.
There were no warrant modifications during 2016.
Repurchase of Common Stock
On December 11, 2012, the Company authorized a share repurchase program to repurchase up to 15 million of the Company's issued and outstanding common shares from time to time on the open market or via private transactions through block trades. Under this program, for the year ended December 31, 2016, the Company repurchased a total of 125,708 shares at a weighted-average cost of $0.28. A total of 3,931,880 shares have been repurchased to-date at a weighted-average cost of $0.27. The remaining number of shares authorized for repurchase under the plan as of December 31, 2016 is 11,068,120.
Warrants to Purchase Preferred Stock and Common Stock
As of December 31, 2016, warrants to purchase 37,988,030 shares of the Company's common stock at prices ranging from $0.10 to $0.50 were outstanding. All warrants are exercisable as of December 31, 2016 and expire at various dates through November 2020 and have a weighted average remaining term of approximately 2.75 years and are included in the table below as of December 31, 2016.
During the fourth quarter of fiscal year ended December 31, 2015, the Company issued warrants through a Private Placement, to purchase 10,541,666 and 2,053,571 shares of its common stock, exercisable at $0.45 and $0.35 per share, respectively, and expire in October 2020 and October 2018, respectively. (See Note 5, above.)
During the third quarter of fiscal year ended December 31, 2014, the Company issued warrants through a Private Placement, to purchase 20,445,650 and 1,357,143 shares of its common stock, exercisable at $0.23 and $0.35 per share, respectively and expire in August 2019. (See Note 5, above.)
The following table summarizes warrant activity for the following periods:
Advisory agreements
PCG Advisory Group. On September 1, 2015, the Company entered into an agreement with PCG Advisory Group (“PCG”), pursuant to which PCG agreed to provide investor relations services for six (6) months in exchange for fees paid in cash of $6,000 per month and 100,000 shares of restricted common stock to be issued in accordance with the agreement upon successfully meeting certain criteria in accordance with the agreement. In connection with this agreement, the Company accrued for the estimated per share value on the agreement date at $0.32 per share, the price of Company’s common stock at September 1, 2015 for a total of $32,000 due to PCG. The fair values of the shares was recorded as prepaid advisory fees and were included in prepaid expenses and other current assets on the Company’s consolidated balance sheets and were amortized on a pro-rata basis over the term of the contract. On June 28, 2016 the Company issued PCG 100,000 restricted shares of our common stock in accordance with the performance of the agreement as previously accrued. These shares were valued at $0.30 per share, based on the price per share of the Company’s common stock on June 28, 2016. During the year ended December 31, 2016 and 2015 the Company recorded expense of approximately $9,000 and $21,000 respectively, in connection with amortization of the stock issuance.
On March 1, 2016, the Company signed a renewal contract with PCG, pursuant to which PCG agreed to provide investor relations services for six (6) months in exchange for fees paid in cash of $6,000 per month and 100,000 shares of restricted common stock to be issued in accordance with the agreement upon successfully meeting certain criteria in accordance with the agreement. In connection with this agreement, the Company has accrued for the estimated per share value on the agreement date at $0.30 per share, the price of Company’s common stock at March 1, 2016 for a total of $30,000 due to PCG. The fair values of the shares was recorded as prepaid advisory fees and are included in prepaid expenses and other current assets on the Company’s consolidated balance sheets and will be amortized on a pro-rata basis over the term of the contract. During the year ended December 31, 2016, the Company recorded expense of approximately $30,000 in connection with amortization of the stock issuance. There were no amortization expenses for the year ended December 31, 2015.
On September 1, 2016, the Company signed a renewal contract with PCG, pursuant to which PCG agreed to provide investor relations services for six (6) months in exchange for fees paid in cash of $6,000 per month and 100,000 shares of restricted common stock to be issued in accordance with the agreement upon successfully meeting certain criteria in accordance with the agreement. In connection with this agreement, the Company has accrued for the estimated per share value on the agreement date at $0.29 per share, the price of Company’s common stock at September 1, 2016 for a total of $29,000 due to PCG. The fair values of the shares was recorded as prepaid advisory fees and are included in prepaid expenses and other current assets on the Company’s consolidated balance sheets and will be amortized on a pro-rata basis over the term of the contract. During the year ended December 31, 2016, the Company recorded expense of approximately $19,000 in connection with amortization of the stock issuance. There were no amortization expenses for the year ended December 31, 2015. As of December 31, 2016, the total remaining balance of the prepaid investor relation services is approximately $10,000.
Shares Issued in Private Placement
On January 29, 2015, we completed our January 2015 Private Placement pursuant to which we entered into Notes Payable Agreements (see Note 5, above) and issued 2,450,000 shares of our common stock. The shares of common stock issued under the January 2015 Private Placement were offered and issued without registration under the Securities Act of 1933, as amended, (the “1933 Act”). The securities may not be sold, transferred or assigned in the absence of an effective registration statement for the securities under the 1933 Act, or an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transaction, that registration in required under the 1933 Act or unless sold pursuant to Rule 144 under the 1933 Act.
Stock Options
On May 16, 2012, the Company established the 2012 Stock Option Plan (“Plan”) authorizing the granting of options for up to 40,000,000 shares of Common Stock. The purpose of the Plan is to promote the long-term growth and profitability of the Company by (i) providing key people and consultants with incentives to improve stockholder value and to contribute to the growth and financial success of the Company and (ii) enabling the Company to attract, retain and reward the best available persons for positions of substantial responsibility. The Plan permits the granting of stock options, including non-qualified stock options and incentive stock options qualifying under Section 422 of the Code, in any combination (collectively, “Options”). At December 31, 2016, the Company had 6,300,825 shares of Common Stock available for issuance under the Plan.
A summary of the Plan Options for the year ended December 31, 2016 is presented in the following table:
The weighted-average fair value per share of the granted options for the years ended December 31, 2016 and 2015 was approximately $0.15.
The following table sets forth the exercise price range, number of shares, weighted-average exercise price and remaining contractual lives at December 31, 2016:
Total stock based compensation expense included in the consolidated statements of operations was charged as follows in thousands:
As of December 31, 2016, there was approximately $2,084,000 of total unrecognized compensation expense related to unvested share-based compensation arrangements granted under the Plan. The expense is expected to be recognized over a weighted-average period of 4.42 years.
The Company uses the Black-Scholes option-pricing model (“Black-Scholes model”) to estimate the fair value of stock option grants. The use of a valuation model requires the Company to make certain assumptions with respect to selected model inputs. Expected volatility is calculated based on the historical volatility of the Company’s stock price over the expected term of the option. The expected life is based on the contractual life of the option and expected employee exercise and post-vesting employment termination behavior. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of the grant. The following were the factors used in the Black Scholes model to calculate the compensation cost:
Approval of the Amendment of the Company’s 2012 Stock Option Plan
On February 23, 2017, the Company’s board of directors received the approval of our stockholders, to amend the 2012 Stock Option Plan (“Plan”) to increase the number of shares of common stock available for grant and to expand the types of awards available for grant under the Plan.
The amendment of the Plan increases the number of shares of the Company’s common stock that may be delivered pursuant to awards granted during the life of the plan from 40,000,000 to 80,000,000 shares authorized. The Plan currently provides only for the grant of options; however the Plan amendments will allow for the grant of: (i) incentive stock options; (ii) nonqualified stock options; (iii) stock appreciation rights; (iv) restricted stock; and (v) other stock-based and cash-based awards to eligible individuals. The terms of the awards will be set forth in an award agreement, consistent with the terms of the Plan. No stock option is exercisable later than ten years after the date it is granted.
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Commitments and Contingencies | Credit Risk
The Company maintains cash balances at various financial institutions primarily located in California. Accounts at the U.S. institutions are secured, up to certain limits, by the Federal Deposit Insurance Corporation. At times, balances may exceed federally insured limits. The Company has not experienced any losses in such accounts. Management believes that the Company is not exposed to any significant credit risk with respect to its cash and cash equivalent balances.
Litigation
We are, from time to time, the subject of claims and suits arising out of matters occurring during the operation of our business. We are not presently party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Leases
The Company leases its domestic and certain foreign facilities and other equipment under non-cancelable operating lease agreements, which expire at various dates through 2023. In addition to the minimum future lease commitments presented below, the leases generally require that the Company pay property taxes, insurance, maintenance and repair costs. Such expenses are not included in the operating lease amounts.
At December 31, 2016, future minimum lease commitments are as follows (in thousands):
Rent expense was $1,558,000 and $1,043,000 for the years ended December 31, 2016 and 2015, respectively.
In connection with the Company’s acquisition of FDI, it assumed mortgage guarantee obligations made by FDI on the building previously housing our New Hampshire office. The balance of the mortgages is approximately $1,806,000 as of December 31, 2016 (see Note 3, above).
The Company purchases its inventory from multiple third-party suppliers at competitive prices. The Company made purchases from three vendors, which individually comprised more than 10% of total purchases and in aggregate approximated 54% and 61% of total purchases for the years ended December 31, 2016 and 2015, respectively.
The Company has purchase obligations related to minimum future purchase commitments for green coffee to be used in the Company’s commercial coffee segment for roasting. Each individual contract requires the Company to purchase and take delivery of certain quantities at agreed upon prices and delivery dates. The contracts as of December 31, 2016, have minimum future purchase commitments of approximately $1,164,000, which are to be delivered in 2017. The contracts contain provisions whereby any delays in taking delivery of the purchased product will result in additional charges related to the extended warehousing of the coffee product. The fees can average approximately $0.01 per pound for every month of delay, to-date the Company has not incurred such fees. |
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Income Taxes | The income tax provision contains the following components (in thousands):
Income (loss) before income taxes relating to non-U.S. operations were $590,000 and $(62,000) in the years ended December 31, 2016 and 2015, respectively.
The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax income (loss) as a result of the following differences:
Significant components of the Company's deferred tax assets and liabilities are as follows (in thousands):
The Company has determined through consideration of all positive and negative evidence that the US federal deferred tax assets are more likely than not to be realized. The Company does not have a valuation allowance in the US Federal tax jurisdiction. A valuation allowance remains on certain state and foreign tax attributes that are likely to expire before realization. The valuation allowance increased approximately $183,000 for the year ended December 31, 2016 and increased approximately $161,000 for the year ended December 31, 2015.
At December 31, 2016, the Company had approximately $4,611,000 in federal net operating loss carryforwards, which begin to expire in 2028, and approximately $24,761,000 in net operating loss carryforwards from various states. The Company had approximately $1,697,000 in net operating losses in foreign jurisdictions.
Pursuant to Internal Revenue Code ("IRC") Section 382, use of net operating loss and credit carryforwards may be limited if the Company experienced a cumulative change in ownership of greater than 50% in a moving three-year period. Ownership changes could impact the Company's ability to utilize the net operating loss and credit carryforwards remaining at an ownership change date. The Company has not completed a Section 382 study.
The Company has analyzed the impact of repatriating earnings from its foreign subsidiaries and has determined that the impact is immaterial. The Company does not assert indefinite reinvestment of earnings from its foreign subsidiaries. Therefore, a deferred tax liability has been recorded. As of December 31, 2016 the deferred tax liability net of tax deemed paid is approximately $310,000.
The Company has accounted for uncertain tax position related to states. The Company accounts for interest expense and penalties related to income tax issues as income tax expense. Accordingly, interest expense and penalties associated with an uncertain tax position are included in the income tax provision. The total amount of accrued interest and penalties as of December 31, 2016 are approximately $1,000. Income tax expense as of December 31, 2016, included an increase in state income tax expense of approximately $4,000 related to uncertain tax positions.
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Segment and Geographical Information | The Company offers a wide variety of products to support a healthy lifestyle including; nutritional supplements, sports and energy drinks, health and wellness, weight loss, gourmet coffee, skincare and cosmetics, lifestyle services, digital products including scrap books and memory books, packaged foods, pharmacy discount cards, and clothing and jewelry lines. The Company’s business is classified by management into two reportable segments: direct selling and commercial coffee.
The Company’s segments reflect the manner in which the business is managed and how the Company allocates resources and assesses performance. The Company’s chief operating decision maker is the Chief Executive Officer. The Company’s chief operating decision maker evaluates segment performance primarily based on revenue and segment operating income. The principal measures and factors the Company considered in determining the number of reportable segments were revenue, gross margin percentage, sales channel, customer type and competitive risks. In addition, each reporting segment has similar products and customers, similar methods of marketing and distribution and a similar regulatory environment.
The accounting policies of the segments are consistent with those described in the summary of significant accounting policies. Segment revenue excludes intercompany revenue eliminated in the consolidation. The following tables present certain financial information for each segment (in thousands):
Total tangible assets, net located outside the United States are approximately $5.4 million as of December 31, 2016. For the year ended December 31, 2015, total assets, net located outside the United States were approximately $5.2 million.
The Company conducts its operations primarily in the United States. For the year ended December 31, 2016 approximately 9% of the Company’s sales were derived from sales outside the United States. As compared to approximately 7% for the year ended December 31, 2015. The following table displays revenues attributable to the geographic location of the customer (in thousands):
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Subsequent Events | None.
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Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restatement | Note 13. Restatement
The Company identified the following errors impacting the Company’s audited consolidated statement of cash flows as of December 31, 2016 and unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2016, six months ended June 30, 2016 and the nine months ended September 30, 2016. The restatement adjustments, correct an error in the presentation of cash flow activity under the Company’s factoring facility to properly reflect net borrowings and net payments. There was no impact to the net increase or decrease in cash or cash balances. The correction of the errors did not result in a change to net cash for the periods. There were no changes to Supplemental Disclosures of Noncash Investing and Financing Activities.
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Basis of Presentation and Description of Business (Policies) |
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Basis Of Presentation And Description Of Business Policies | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature of Business | Youngevity International, Inc. (the “Company”), founded in 1996, develops and distributes health and nutrition related products through its global independent direct selling network, also known as multi-level marketing, and sells coffee products to commercial customers. The Company operates in two business segments, its direct selling segment where products are offered through a global distribution network of preferred customers and distributors and its commercial coffee segment where products are sold directly to businesses. In the following text, the terms “we,” “our,” and “us” may refer, as the context requires, to the Company or collectively to the Company and its subsidiaries.
The Company operates through the following domestic wholly-owned subsidiaries: AL Global Corporation, which operates our direct selling networks, CLR Roasters, LLC (“CLR”), our commercial coffee business, 2400 Boswell LLC, MK Collaborative LLC, Youngevity Global LLC and the wholly-owned foreign subsidiaries Youngevity Australia Pty. Ltd., Youngevity NZ, Ltd., Siles Plantation Family Group S.A., located in Nicaragua, Youngevity Mexico S.A. de CV, Youngevity Israel, Ltd., Youngevity Russia, LLC, Youngevity Colombia S.A.S , Youngevity International Singapore Pte. Ltd., Mialisia Canada, Inc., and Legacy for Life Limited (Hong Kong).
The Company also operates subsidiary branches of Youngevity Global LLC in the Philippines and Taiwan. |
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Basis of Presentation | The Company consolidates all majority owned subsidiaries, investments in entities in which we have controlling influence and variable interest entities where we have been determined to be the primary beneficiary. All significant intercompany accounts and transactions have been eliminated in consolidation.
Certain reclassifications have been made to conform to the current year presentations including the Company’s adoption of Accounting Standards Update (“ASU”) 2015-03 and ASU 2015-15, pertaining to the presentation of debt issuance costs with retrospective application effective January 1, 2016. This resulted in a reclassification from prepaid expenses and other assets to convertible notes payable, net of debt discount. Refer below to “Recently Issued Accounting Pronouncements” below and Note 5 to the consolidated financial statements for further details. These reclassifications did not affect revenue, total costs and expenses, income (loss) from operations, or net income (loss). The adoption of ASU No. 2015-03 resulted in a reclassification of unamortized debt issuance costs of $1,456,000 from an asset to a liability classification on the Company’s consolidated financial statements as of December 31, 2015.
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Segment Information | The Company has two reporting segments: direct selling and commercial coffee. The direct selling segment develops and distributes health and wellness products through its global independent direct selling network also known as multi-level marketing. The commercial coffee segment is a coffee roasting and distribution company specializing in gourmet coffee. The determination that the Company has two reportable segments is based upon the guidance set forth in Accounting Standards Codification (“ASC”) Topic 280, “Segment Reporting.” During the twelve months ended December 31, 2016 and 2015, we derived approximately 89% of our revenue from our direct sales segment and approximately 11% of our revenue from our commercial coffee sales segment, respectively.
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Use of Estimates | The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense for each reporting period. Estimates are used in accounting for, among other things, allowances for doubtful accounts, deferred taxes, and related valuation allowances, fair value of derivative liabilities, uncertain tax positions, loss contingencies, fair value of options granted under our stock based compensation plan, fair value of assets and liabilities acquired in business combinations, capital leases, asset impairments, estimates of future cash flows used to evaluate impairments, useful lives of property, equipment and intangible assets, value of contingent acquisition debt, inventory obsolescence, and sales returns.
Actual results may differ from previously estimated amounts and such differences may be material to the consolidated financial statements. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected prospectively in the period they occur.
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Cash and Cash Equivalents | The Company considers only its monetary liquid assets with original maturities of three months or less as cash and cash equivalents.
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Liquidity |
We believe that current cash balances, future cash provided by operations, and available amounts under our accounts receivable factoring agreement will be sufficient to cover our operating and capital needs in the ordinary course of business for at least the next 12 months as of March 30, 2017.
Though our operations are currently meeting our working capital requirements, if we experience an adverse operating environment or unusual capital expenditure requirements, or if we continue our expansion internationally or through acquisitions, additional financing may be required. No assurance can be given, however, that additional financing, if required, would be available on favorable terms. We might also require or seek additional financing for the purpose of expanding into new markets, growing our existing markets, or for other reasons. Such financing may include the use of additional debt or the sale of additional equity securities. Any financing which involves the sale of equity securities or instruments that are convertible into equity securities could result in immediate and possibly significant dilution to our existing shareholders. |
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Derivative Financial Instruments | The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency.
The Company reviews the terms of convertible debt and equity instruments it issues to determine whether there are derivative instruments, including an embedded conversion option that is required to be bifurcated and accounted for separately as a derivative financial instrument. In circumstances where a host instrument contains more than one embedded derivative instrument, including a conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. Also, in connection with the sale of convertible debt and equity instruments, the Company may issue freestanding warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity.
Derivative instruments are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. When the convertible debt or equity instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds allocated to the convertible host instruments are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the convertible instruments themselves, usually resulting in those instruments being recorded at a discount from their face value.
The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to interest expense, using the effective interest method.
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Accounts Receivable | Accounts receivable are recorded net of an allowance for doubtful accounts. Accounts receivable are considered delinquent when the due date on the invoice has passed. The Company records its allowance for doubtful accounts based upon its assessment of various factors including past experience, the age of the accounts receivable balances, the credit quality of its customers, current economic conditions and other factors that may affect customers’ ability to pay. Accounts receivable are written off against the allowance for doubtful accounts when all collection efforts by the Company have been unsuccessful. Certain accounts receivable are financed as part of a factoring agreement. During the fourth quarter of fiscal 2016, the Company recorded a $10,000 allowance towards outstanding receivables associated with CLR. There was no allowance for doubtful accounts recorded as of December 31, 2015.
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Inventory and Cost of Sales | Inventory is stated at the lower of cost or market value. Cost is determined using the first-in, first-out method. The Company records an inventory reserve for estimated excess and obsolete inventory based upon historical turnover, market conditions and assumptions about future demand for its products. When applicable, expiration dates of certain inventory items with a definite life are taken into consideration.
Inventories consist of the following (in thousands):
A summary of the reserve for obsolete and excess inventory is as follows (in thousands):
Cost of revenues includes the cost of inventory, shipping and handling costs, royalties associated with certain products, transaction banking costs, warehouse labor costs and depreciation on certain assets.
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Deferred Issuance Costs | Deferred issuance costs and debt discounts of approximately $3,611,000 and $5,152,000, as of December 31, 2016 and 2015, respectively, associated with our 2015 and 2014 Private Placement transactions are included with convertible notes payable on the Company's consolidated balance sheets. Deferred issuance costs related to our offerings are amortized over the life of the notes and are amortized as issuance costs to interest expense. See Note 5, below. |
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Warrant Issuance Costs |
As of December 31, 2016 and 2015, warrant issuance costs associated with our November 2015 Private Placement include the fair value of the warrants issues of approximately $235,000 and $384,000 respectively, and is included with convertible notes payable, net of debt discounts on the Company's consolidated balance sheets. The warrant issuance costs related to this offering are being amortized over the life of the convertible notes and are amortized as issuance costs to interest expense. See note 5, below. |
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Plantation Costs | The Company’s commercial coffee segment CLR includes the results of the Siles Plantation Family Group (“Siles”), which is a 500 acre coffee plantation and a dry-processing facility located on 26 acres both located in Matagalpa, Nicaragua. Siles is a wholly-owned subsidiary of CLR, and the results of CLR include the depreciation and amortization of capitalized costs, development and maintenance and harvesting costs of Siles. In accordance with US generally accepted accounting principles (“GAAP”), plantation maintenance and harvesting costs for commercially producing coffee farms are charged against earnings when sold. Deferred harvest costs accumulate throughout the year, and are expensed over the remainder of the year as the coffee is sold. The difference between actual harvest costs incurred and the amount of harvest costs recognized as expense is recorded as either an increase or decrease in deferred harvest costs, which is reported as an asset and included with prepaid expenses and other current assets in the consolidated balance sheets. Once the harvest is complete, the harvest cost is then recognized as the inventory value.
Costs associated with the 2017 and 2016 harvest as of December 31, 2016 and 2015 total approximately $452,000 and $350,000, respectively and are included in prepaid expenses and other current assets as deferred harvest costs on the Company’s consolidated balance sheet.
Inventory related to our previously harvested coffee in Nicaragua as of December 31, 2016 is $112,000 and as of December 31, 2015 was $192,000. |
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Property and Equipment | Property and equipment are recorded at historical cost. Depreciation is provided in amounts sufficient to relate the cost of depreciable assets to operations over the estimated useful lives of the related assets. The straight-line method of depreciation and amortization is followed for financial statement purposes. Leasehold improvements are amortized over the shorter of the life of the respective lease or the useful life of the improvements. Estimated service lives range from 3 to 39 years. When such assets are sold or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in operations in the period of disposal. The cost of normal maintenance and repairs is charged to expense as incurred. Significant expenditures that increase the useful life of an asset are capitalized and depreciated over the estimated useful life of the asset.
Coffee trees, land improvements and equipment specifically related to the plantations are stated at cost, net of accumulated depreciation. Depreciation of coffee trees and other equipment is reported on a straight-line basis over the estimated useful lives of the assets (25 years for coffee trees, between 5 and 15 years for equipment and land improvements, respectively).
Property and equipment are considered long-lived assets and are evaluated for impairment whenever events or changes in circumstances indicate their net book value may not be recoverable. Management has determined that no impairment of its property and equipment occurred as of December 31, 2016 or 2015.
Property and equipment consist of the following (in thousands):
Depreciation expense totaled approximately $1,518,000 and $1,242,000 for the years ended December 31, 2016 and 2015, respectively.
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Business Combinations | The Company accounts for business combinations under the acquisition method and allocates the total purchase price for acquired businesses to the tangible and identified intangible assets acquired and liabilities assumed, based on their estimated fair values. When a business combination includes the exchange of the Company’s common stock, the value of the common stock is determined using the closing market price as of the date such shares were tendered to the selling parties. The fair values assigned to tangible and identified intangible assets acquired and liabilities assumed are based on management or third-party estimates and assumptions that utilize established valuation techniques appropriate for the Company’s industry and each acquired business. Goodwill is recorded as the excess, if any, of the aggregate fair value of consideration exchanged for an acquired business over the fair value (measured as of the acquisition date) of total net tangible and identified intangible assets acquired. A liability for contingent consideration, if applicable, is recorded at fair value as of the acquisition date. In determining the fair value of such contingent consideration, management estimates the amount to be paid based on probable outcomes and expectations on financial performance of the related acquired business. The fair value of contingent consideration is reassessed quarterly, with any change in the estimated value charged to operations in the period of the change. Increases or decreases in the fair value of the contingent consideration obligations can result from changes in actual or estimated revenue streams, discount periods, discount rates and probabilities that contingencies will be met.
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Intangible Assets | Intangible assets are comprised of distributor organizations, trademarks and tradenames, customer relationships and internally developed software. The Company's acquired intangible assets, which are subject to amortization over their estimated useful lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. An impairment loss is recognized when the carrying amount of an intangible asset exceeds its fair value.
Intangible assets consist of the following (in thousands):
Amortization expense related to intangible assets was approximately $2,344,000 and $2,112,000 for the years ended December 31, 2016 and 2015, respectively.
As of December 31, 2016, future expected amortization expense related to definite lived intangible assets for the next five years is as follows (in thousands):
As of December 31, 2016, the weighted-average remaining amortization period for intangibles assets was approximately 5.18 years.
Trade names, which do not have legal, regulatory, contractual, competitive, economic, or other factors that limit the useful lives are considered indefinite lived assets and are not amortized but are tested for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Approximately $2,267,000 in trademarks from business combinations have been identified as having indefinite lives.
The Company has determined that no impairment occurred for its definite and indefinite lived intangible assets for the years ended December 31, 2016 and 2015.
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Goodwill | Goodwill is recorded as the excess, if any, of the aggregate fair value of consideration exchanged for an acquired business over the fair value (measured as of the acquisition date) of total net tangible and identified intangible assets acquired. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, “Intangibles — Goodwill and Other”, goodwill and other intangible assets with indefinite lives are not amortized but are tested for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The Company conducts annual reviews for goodwill and indefinite-lived intangible assets in the fourth quarter or whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable.
The Company first assesses qualitative factors to determine whether it is more likely than not (a likelihood of more than 50%) that goodwill is impaired. After considering the totality of events and circumstances, the Company determines whether it is more likely than not that goodwill is not impaired. If impairment is indicated, then the Company conducts the two-step impairment testing process. The first step compares the Company’s fair value to its net book value. If the fair value is less than the net book value, the second step of the test compares the implied fair value of the Company’s goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, the Company would recognize an impairment loss equal to that excess amount. The testing is generally performed at the “reporting unit” level. A reporting unit is the operating segment, or a business one level below that operating segment (referred to as a component) if discrete financial information is prepared and regularly reviewed by management at the component level. The Company has determined that its reporting units for goodwill impairment testing are the Company’s reportable segments. As such, the Company analyzed its goodwill balances separately for the commercial coffee reporting unit and the direct selling reporting unit. The goodwill balance as of December 31, 2016 and December 31, 2015 was $6,323,000.
The Company has determined that no impairment of its goodwill occurred for the years ended December 31, 2016 and 2015.
Goodwill activity for the years ended December 31, 2016 and 2015 by reportable segment consists of the following (in thousands):
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Revenue Recognition | The Company recognizes revenue from product sales when the following four criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable, and collectability is reasonably assured. The Company ships the majority of its direct selling segment products directly to the distributors via UPS or USPS and receives substantially all payments for these sales in the form of credit card transactions. The Company regularly monitors its use of credit card or merchant services to ensure that its financial risk related to credit quality and credit concentrations is actively managed. Revenue is recognized upon passage of title and risk of loss to customers when product is shipped from the fulfillment facility. The Company ships the majority of its coffee segment products via common carrier and invoices its customer for the products. Revenue is recognized when the title and risk of loss is passed to the customer under the terms of the shipping arrangement, typically, FOB shipping point.
The Company also charges fees to become a distributor, and earn a position in the network genealogy, which are recognized as revenue in the period received. Our distributors are required to pay a one-time enrollment fee and receive a welcome kit specific to that country region that consists of forms, policy and procedures, selling aids, and access to our distributor website and a genealogy position with no down line distributors.
Sales revenue and a reserve for estimated returns are recorded net of sales tax when product is shipped.
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Deferred Revenues and Costs | Deferred revenues relate primarily to the Heritage Makers product line and represent the Company’s obligation for points purchased by customers that have not yet been redeemed for product. Cash received for points sold is recorded as deferred revenue. Revenue is recognized when customers redeem the points and the product is shipped. As of December 31, 2016 and December 31, 2015, the balance in deferred revenues was approximately $1,870,000 and $2,580,000 respectively, of which the portion attributable to Heritage Makers was approximately $1,662,000 and $2,485,000, respectively. The remaining balance of approximately $208,000 and $95,000 as of December 31, 2016 and 2015, related primarily to the Company’s 2017 and 2016 conventions whereby attendees pre-enroll in the events and the Company does not recognize this revenue until the conventions occur, respectively.
Deferred costs relate to Heritage Makers prepaid commissions that are recognized in expense at the time the related revenue is recognized. As of December 31, 2016 and 2015, the balance in deferred costs was approximately $415,000 and $967,000 respectively, and was included in prepaid expenses and current assets. |
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Product Return Policy | All products, except food products and commercial coffee products are subject to a full refund within the first 30 days of receipt by the customer, subject to an advance return authorization procedure. Returned product must be in unopened resalable condition. Product returns as a percentage of our net sales have been approximately 1% of our monthly net sales over the last two years. Commercial coffee products are returnable only if defective.
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Shipping and Handling | Shipping and handling costs associated with inbound freight and freight to customers, including independent distributors, are included in cost of sales. Shipping and handling fees charged to customers are included in sales. Shipping expense was approximately $9,927,000 and $10,394,000 for the years ended December 31, 2016 and 2015, respectively.
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Distributor Compensation | In the direct selling segment, the Company utilizes a network of independent distributors, each of whom has signed an agreement with the Company, enabling them to purchase products at wholesale prices, market products to customers, enroll new distributors for their down-line and earn compensation on product purchases made by those down-line distributors and customers.
The payments made and stock options issued under the compensation plans are the only form of compensation paid to the distributors. Each product has a point value, which may or may not correlate to the wholesale selling price of a product. A distributor must qualify each month to participate in the compensation plan by making a specified amount of product purchases, achieving specified point levels. Once qualified, the distributor will receive payments based on a percentage of the point value of products sold by the distributor’s down-line. The payment percentage varies depending on the qualification level of the distributor and the number of levels of down-line distributors. There are also additional incentives paid upon achieving predefined activity and or down-line point value levels. There can be multiple levels of independent distributors earning incentives from the sales efforts of a single distributor. Due to the multi-layer independent sales approach, distributor incentives are a significant component of the Company’s cost structure. The Company accrues all distributor compensation expense in the month earned and pays the compensation the following month.
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Earnings per share |
Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to common stockholders by the sum of the weighted-average number of common shares outstanding during the period and the weighted-average number of dilutive common share equivalents outstanding during the period, using the treasury stock method. Dilutive common share equivalents are comprised of in-the-money stock options, warrants and convertible preferred stock, based on the average stock price for each period using the treasury stock method. Since the Company incurred a loss for the year ended December 31, 2016 and 2015, therefore 105,647,443 and 99,615,809 common share equivalents including potential convertible shares of common stock associated with the Company’s convertible notes, were not included in the weighted-average calculations for each respective year since their effect would have been anti-dilutive.
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Foreign Currency Translation |
The financial position and results of operations of the Company’s foreign subsidiaries are measured using each foreign subsidiary’s local currency as the functional currency. Revenues and expenses of such subsidiaries have been translated into U.S. dollars at average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of stockholders’ equity, unless there is a sale or complete liquidation of the underlying foreign investments. Translation gains or losses resulting from transactions in currencies other than the respective entities functional currency are included in the determination of income and are not considered significant to the Company for 2016 and 2015. |
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Comprehensive Income (Loss) | Comprehensive income (loss) consists of net gains and losses affecting stockholders’ equity that, under generally accepted accounting principles are excluded from net income (loss). For the Company, the only items are the foreign currency translation and net income (loss). |
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Income Taxes | The Company accounts for income taxes in accordance with ASC Topic 740, "Income Taxes," under the asset and liability method which includes the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this approach, deferred taxes are recorded for the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial statement and tax basis of assets and liabilities, and are adjusted for changes in tax rates and tax laws when changes are enacted. The effects of future changes in income tax laws or rates are not anticipated.
The Company is subject to income taxes in the United States and certain foreign jurisdictions. The calculation of the Company’s tax provision involves the application of complex tax laws and requires significant judgment and estimates. The Company evaluates the realizability of its deferred tax assets for each jurisdiction in which it operates at each reporting date and establishes a valuation allowance when it is more likely than not that all or a portion of its deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income of the same character and in the same jurisdiction. The Company considers all available positive and negative evidence in making this assessment, including, but not limited to, the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. In circumstances where there is sufficient negative evidence indicating that deferred tax assets are not more likely than not realizable, the Company will establish a valuation allowance.
The Company applies ASC Topic 740 “Accounting for Uncertainty in Income Taxes” recognized in its financial statements. ASC 740 requires that all tax positions be evaluated using a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Differences between tax positions taken in a tax return and amounts recognized in the financial statements are recorded as adjustments to income taxes payable or receivable, or adjustments to deferred taxes, or both. The Company believes that its accruals for uncertain tax positions are adequate for all open audit years based on its assessment of many factors including past experience and interpretation of tax law. To the extent that new information becomes available, which causes the Company to change its judgment about the adequacy of its accruals for uncertain tax positions, such changes will impact income tax expense in the period such determination is made. The Company’s policy is to include interest and penalties related to unrecognized income tax benefits as a component of income tax expense.
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Stock Based Compensation | The Company accounts for stock based compensation in accordance with ASC Topic 718, “Compensation – Stock Compensation,” which establishes accounting for equity instruments exchanged for employee services. Under such provisions, stock based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense, under the straight-line method, over the vesting period of the equity grant.
The Company accounts for equity instruments issued to non-employees in accordance with authoritative guidance for equity based payments to non-employees. Stock options issued to non-employees are accounted for at their estimated fair value, determined using the Black-Scholes option-pricing model. The fair value of options granted to non-employees is re-measured as they vest, and the resulting increase in value, if any, is recognized as expense during the period the related services are rendered.
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Other Income (Expense) | We record interest income, interest expense, and change in derivative liabilities, as well as other non-operating transactions, as other income (expense) on our consolidated statements of operations.
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Recently Issued Accounting Pronouncements | In October 2016, the FASB issued Accounting Standard Update ("ASU") 2016-17, Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control. This standard amends the guidance issued with ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis in order to make it less likely that a single decision maker would individually meet the characteristics to be the primary beneficiary of a Variable Interest Entity ("VIE"). When a decision maker or service provider considers indirect interests held through related parties under common control, they perform two steps. The second step was amended with this ASU to say that the decision maker should consider interests held by these related parties on a proportionate basis when determining the primary beneficiary of the VIE rather than in their entirety as was called for in the previous guidance. This ASU will be effective for fiscal years beginning after December 15, 2016, and early adoption is not permitted. The Company is currently evaluating the impact of the adoption of this ASU on our financial position and results of operations.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The standard requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. We will adopt the standard no later than July 1, 2019. The Company is currently assessing the impact that the new standard will have on our Consolidated Financial Statements, which will consist primarily of a balance sheet gross up of our operating leases. The Company does not believe the adoption of the new standard will have a significant impact on our consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs. This ASU more closely aligns the treatment of debt issuance costs with debt discounts and premiums and requires debt issuance costs be presented as a direct deduction from the carrying amount of the related debt. The amendments in this ASU are effective for financial statements issued for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. This guidance has been applied on a retrospective basis on the Company’s consolidated financial statements as of December 31, 2015.
In August 2014, the FASB issued ASU No. 2014-15 Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue to meet its obligations as they become due within one year after the date that the financial statements are issued. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company evaluated the impact of this new standard and concluded as of December 31, 2016 that the adoption of this new standard will not have a significant impact on our consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, which deferred the effective date of the new revenue standard for periods beginning after December 15, 2016 to December 15, 2017, with early adoption permitted but not earlier than the original effective date. Accordingly, the updated standard is effective for us in the first quarter of fiscal 2018 and we do not plan to early adopt. We have not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures. |
Basis of Presentation and Description of Business (Tables) |
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Goodwill |
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Acquisitions and Business Combinations (Tables) |
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Notes Payable and Other Debt (Tables) |
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Maturities of capital leases |
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Debt (Tables) |
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Convertible notes |
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Derivative Liability (Tables) |
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Fair Value of Financial Instruments (Tables) |
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Fair value measurement within the three levels of value hierarchy |
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Fair value of warrant derivative liability |
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Contingent acquisition liabilities measured at fair value |
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Stockholders’ Equity (Tables) |
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Stockholders Equity Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock warrant activity |
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Summary of Plan Options |
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Exercise price range, number of shares, weighted-average exercise price and remaining contractual lives |
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Stock based compensation expense |
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Black Scholes compensation cost |
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Commitments and Contingencies (Tables) |
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Future minimum lease commitments |
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Income Taxes (Tables) |
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Income Taxes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income tax provision components |
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Statutory federal income tax rate difference |
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Deferred tax assets and liabilities |
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Segment and Geographical Information (Tables) |
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Segment And Geographical Information Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment information revenue |
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Segment information assets |
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Segment information geographical |
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Restatement (Tables) |
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Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restatement | Note 13. Restatement
The Company identified the following errors impacting the Company’s audited consolidated statement of cash flows as of December 31, 2016 and unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2016, six months ended June 30, 2016 and the nine months ended September 30, 2016. The restatement adjustments, correct an error in the presentation of cash flow activity under the Company’s factoring facility to properly reflect net borrowings and net payments. There was no impact to the net increase or decrease in cash or cash balances. The correction of the errors did not result in a change to net cash for the periods. There were no changes to Supplemental Disclosures of Noncash Investing and Financing Activities.
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Basis of Presentation and Description of Business (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|---|
Basis Of Presentation And Description Of Business Details | |||
Finished goods | $ 11,550 | $ 9,893 | |
Raw materials | 11,006 | 8,970 | |
Total inventory | 22,556 | 18,863 | |
Reserve for excess and obsolete | 1,064 | 886 | $ 478 |
Inventory, net | $ 21,492 | $ 17,977 |
Basis of Presentation and Description of Business (Details 1) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
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Basis Of Presentation And Description Of Business Details 1 | ||
Beginning balance | $ (886) | $ (478) |
Addition to provision | (1,564) | (1,114) |
Write-Off of obsolete inventory | 1,386 | 706 |
Ending balance | $ (1,064) | $ (886) |
Basis of Presentation and Description of Business (Details 2) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Basis Of Presentation And Description Of Business Details 2 | ||
Building | $ 3,873 | $ 2,930 |
Leasehold improvements | 2,532 | 2,302 |
Land | 2,544 | 2,544 |
Land improvements | 602 | 602 |
Producing coffee trees | 553 | 553 |
Manufacturing equipment | 4,570 | 4,344 |
Furniture and other equipment | 1,580 | 1,417 |
Computer software | 1,236 | 1,100 |
Computer equipment | 699 | 663 |
Vehicles | 103 | 103 |
Construction in progress | 1,859 | 799 |
Property and equipment before depreciation | 20,151 | 17,357 |
Accumulated depreciation | (6,145) | (4,658) |
Total property and equipment | $ 14,006 | $ 12,699 |
Basis of Presentation and Description of Business (Details 3) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Cost | $ 26,890 | $ 23,346 |
Accumulated Amortization | 11,976 | 9,632 |
Net | 14,914 | 13,714 |
Distributor Organizations [Member] | ||
Cost | 12,930 | 11,173 |
Accumulated Amortization | 7,162 | 6,086 |
Net | 5,768 | 5,087 |
Trademarks and Trade Names [Member] | ||
Cost | 5,394 | 4,666 |
Accumulated Amortization | 815 | 537 |
Net | 4,579 | 4,129 |
Customer Relationships [Member] | ||
Cost | 7,846 | 6,787 |
Accumulated Amortization | 3,642 | 2,751 |
Net | 4,204 | 4,036 |
Software Development [Member] | ||
Cost | 720 | 720 |
Accumulated Amortization | 357 | 258 |
Net | $ 363 | $ 462 |
Basis of Presentation and Description of Business (Details 4) $ in Thousands |
Dec. 31, 2016
USD ($)
|
---|---|
Finite Lived Intangible Assets Future Amortization Expense | |
2017 | $ 2,741 |
2018 | 2,096 |
2019 | 1,502 |
2020 | 1,413 |
2021 | $ 1,336 |
Basis of Presentation and Description of Business (Details 5) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Balance at Beginning of Period | $ 6,323 | $ 6,323 |
Goodwill recognized | 0 | 0 |
Goodwill impaired | 0 | 0 |
Balance at End of Period | 6,323 | 6,323 |
Direct Selling [Member] | ||
Balance at Beginning of Period | 3,009 | 3,009 |
Goodwill recognized | 0 | 0 |
Goodwill impaired | 0 | 0 |
Balance at End of Period | 3,009 | 3,009 |
Commercial Coffee [Member] | ||
Balance at Beginning of Period | 3,314 | 3,314 |
Goodwill recognized | 0 | 0 |
Goodwill impaired | 0 | 0 |
Balance at End of Period | $ 3,314 | $ 3,314 |
Basis of Presentation and Description of Business (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Deferred issuance cost and debt discounts | $ 3,611 | $ 5,152 | |
Depreciation expense | 1,518 | 1,242 | |
Amortization expense related to intangible assets | $ 2,344 | 2,112 | |
Weighted average remaining amortization period for intangible assets | 5 years 2 months 5 days | ||
Trademarks from business combinations that have indefinite lives | $ 2,267 | ||
Goodwill | 6,323 | 6,323 | $ 6,323 |
Deferred revenues | 1,870 | 2,580 | |
Deferred costs | 415 | 967 | |
Shipping expense | $ 9,927 | $ 10,394 | |
Common stock equivalents anti-dilutive | 105,647,443 | 99,625,809 | |
Heritage Makers [Member] | |||
Deferred revenues | $ 1,662 | $ 2,485 |
Acquisitions and Business Combinations (Details) - USD ($) $ in Thousands |
8 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Aug. 18, 2016 |
Aug. 01, 2016 |
Jul. 29, 2016 |
Jan. 31, 2016 |
Jun. 01, 2015 |
Mar. 04, 2015 |
Feb. 23, 2015 |
|
Legacy for Life [Member] | |||||||
Cash paid for the equity in Legacy for Life Taiwan and Legacy for Life Limited (Hong Kong) | $ 26 | ||||||
Cash paid for inventory | 195 | ||||||
Total cash consideration | 221 | ||||||
Distributor organization | 390 | ||||||
Customer-related intangible | 250 | ||||||
Trademarks and trade name | 185 | ||||||
Total intangible assets acquired, non-cash | 825 | ||||||
Total purchase price | $ 1,046 | ||||||
Nature's Pearl [Member] | |||||||
Distributor organization | $ 825 | ||||||
Customer-related intangible | 400 | ||||||
Trademarks and trade name | 250 | ||||||
Total purchase price | $ 1,475 | ||||||
Renew Interest [Member] | |||||||
Distributor organization | $ 200 | ||||||
Customer-related intangible | 155 | ||||||
Trademarks and trade name | 110 | ||||||
Total purchase price | $ 465 | ||||||
South Hill Designs Inc [Member] | |||||||
Distributor organization | $ 396 | ||||||
Customer-related intangible | 285 | ||||||
Trademarks and trade name | 158 | ||||||
Total purchase price | $ 839 | ||||||
Mialisia & Co., LLC [Member] | |||||||
Distributor organization | $ 296 | ||||||
Customer-related intangible | 169 | ||||||
Trademarks and trade name | 127 | ||||||
Total purchase price | $ 592 | ||||||
JD Premium [Member] | |||||||
Distributor organization | $ 68 | ||||||
Customer-related intangible | 52 | ||||||
Total purchase price | $ 120 | ||||||
Sta-Natural [Member] | |||||||
Distributor organization | $ 140 | ||||||
Customer-related intangible | 110 | ||||||
Trademarks and trade name | 60 | ||||||
Initial cash payment | (25) | ||||||
Total purchase price | $ 285 |
Acquisitions and Business Combinations (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Revenue | $ 162,667 | $ 156,597 |
Legacy for Life [Member] | ||
Revenue | 507 | |
Nature's Pearl [Member] | ||
Estimated fair value of acquisition | 1,475 | |
Revenue | 1,448 | |
Renew Interest [Member] | ||
Estimated fair value of acquisition | 465 | |
Revenue | 432 | |
South Hill Designs Inc [Member] | ||
Revenue | 4,283 | |
Paws Group [Member] | ||
Revenue | 222 | 98 |
Mialisia & Co., LLC [Member] | ||
Revenue | 3,003 | 754 |
Sta-Natural [Member] | ||
Revenue | $ 1,168 | $ 691 |
Arrangements with Variable Interest Entities and Related Party Transactions (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Purchases made from Northwest Nutraceuticals, Inc. | $ 126 | $ 93 |
Purchases made from H&H | 8,810 | 10,499 |
2400 Boswell LLC mortgage | 3,363 | 3,431 |
2400 Boswell LLC note | 108 | 189 |
FDI Realty LLC [Member] | ||
Maximum exposure to loss as a result of involvement with VIE | $ 1,806 | $ 1,900 |
Notes Payable and Other Debt (Details) $ in Thousands |
Dec. 31, 2016
USD ($)
|
---|---|
Maturities of Notes Payable | |
2017 | $ 220 |
2018 | 7,349 |
2019 | 4,891 |
2020 | 143 |
2021 | 108 |
Thereafter | 3,877 |
Total | $ 16,588 |
Notes Payable and Other Debt (Details 1) $ in Thousands |
Dec. 31, 2016
USD ($)
|
---|---|
Maturities of capital leases: | |
2017 | $ 984 |
2018 | 972 |
2019 | 604 |
2020 | 90 |
2021 | 28 |
Total | 2,678 |
Amount representing interest | (288) |
Present value of minimum lease payments | 2,390 |
Less current portion | (821) |
Long term portion | $ 1,569 |
Notes Payable and Other Debt (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|||
Mortgage balance | $ 3,363 | |||
Convertible notes | [1] | 8,327 | $ 6,786 | |
Depreciation expense | 1,518 | 1,242 | ||
Accounts receivable, due from factoring company | 1,078 | 556 | ||
Direct Selling [Member] | ||||
Contingent acquisition debt | 7,806 | |||
Commercial Coffee [Member] | ||||
Contingent acquisition debt | 195 | |||
Capital Lease Obligations [Member] | ||||
Outstanding balance under the capital leases | 2,390 | |||
Imputed interest | 821 | |||
Depreciation expense | 103 | 27 | ||
Factoring Agreement [Member] | ||||
Carrying value of liability | 1,290 | 457 | ||
Imputed interest | 170 | 155 | ||
M2C Global [Member] | ||||
Carrying value of liability | $ 1,156 | 1,204 | ||
Imputed interest | $ 29 | |||
|
Debt (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Net debt issuance costs | [1] | $ (968) | $ (1,456) | ||||||||
Total convertible notes payable, net of debt discount | [2] | 8,327 | 6,786 | ||||||||
Convertible Notes Payable 1 [Member] | |||||||||||
Convertible notes issued | [3] | 2,296 | 1,346 | ||||||||
Convertible Notes Payable 2 [Member] | |||||||||||
Convertible notes issued | [4] | $ 699 | $ 6,896 | ||||||||
|
Debt (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Convertible Notes Payable [Member] | ||
Aggregate principal amount of notes sold | $ 4,750 | $ 4,750 |
Convertible Notes Payable 2 [Member] | ||
Aggregate principal amount of notes sold | $ 7,187 | $ 7,187 |
Derivative Liability (Details) - $ / shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Warrant [Member] | ||
Stock Price Volatility | 70.00% | |
Risk-free interest rate | 1.76% | |
Dividend yield | $ 0.00 | $ 0.00 |
Maximum [Member] | ||
Stock Price Volatility | 90.00% | 77.00% |
Risk-free interest rate | 2.25% | 1.06% |
Expected term | 6 years 6 months | 5 years |
Maximum [Member] | Warrant [Member] | ||
Stock Price Volatility | 60.00% | |
Risk-free interest rate | 1.34% | |
Expected term | 2 years 7 months 6 days | 4 years 10 months 24 days |
Minimum [Member] | ||
Stock Price Volatility | 57.00% | 66.00% |
Risk-free interest rate | 0.71% | 0.56% |
Expected term | 2 years 7 months 6 days | 1 year 6 months |
Minimum [Member] | Warrant [Member] | ||
Stock Price Volatility | 65.00% | |
Risk-free interest rate | 1.70% | |
Expected term | 3 years 10 months 24 days | 3 years 7 months 6 days |
Derivative Liability (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|---|---|
Mar. 31, 2016 |
Jun. 30, 2016 |
Sep. 30, 2016 |
Dec. 31, 2016 |
Dec. 31, 2015 |
||||
Derivative Liability Details Narrative | ||||||||
Change in fair value of warrant derivative liability | $ (650) | $ (166) | $ (535) | $ (1,371) | [1] | $ 39 | ||
Fair Value of the Outstanding Warrant Liabilities | $ 3,345 | $ 4,716 | ||||||
|
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|---|
Liabilities: | |||
Contingent acquisition debt, current | $ 628 | $ 264 | |
Contingent acquisition debt, noncurrent | 7,373 | 7,174 | |
Warrant derivative liability | 3,345 | 4,716 | $ 3,712 |
Total liabilities | 11,346 | 12,154 | |
Level 1 [Member] | |||
Liabilities: | |||
Contingent acquisition debt, current | 0 | 0 | |
Contingent acquisition debt, noncurrent | 0 | 0 | |
Warrant derivative liability | 0 | 0 | |
Total liabilities | 0 | 0 | |
Level 2 [Member] | |||
Liabilities: | |||
Contingent acquisition debt, current | 0 | 0 | |
Contingent acquisition debt, noncurrent | 0 | 0 | |
Warrant derivative liability | 0 | 0 | |
Total liabilities | 0 | 0 | |
Level 3 [Member] | |||
Liabilities: | |||
Contingent acquisition debt, current | 628 | 264 | |
Contingent acquisition debt, noncurrent | 7,373 | 7,174 | |
Warrant derivative liability | 3,345 | 4,716 | |
Total liabilities | $ 11,346 | $ 12,154 |
Fair Value of Financial Instruments (Details 1) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Investments, All Other Investments [Abstract] | ||
Fair value, warrant liability, convertible notes payable | $ 4,716 | $ 3,712 |
Issuance | 0 | 1,491 |
Adjustments to estimated fair value | (1,371) | 39 |
Warrant liability reclassified to equity | (526) | |
Fair value, warrant liability, convertible notes payable | $ 3,345 | $ 4,716 |
Fair Value of Financial Instruments (Details 2) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Contingent acquisition liabilities | ||
Balance at Beginning of period | $ 7,438 | $ 10,472 |
Level 3 liabilities acquired | 7,105 | 1,353 |
Level 3 liabilities settled | (773) | (3,338) |
Adjustments to liabilities included in earnings | (1,462) | (446) |
Expenses allocated to profit sharing agreement | (698) | (528) |
Adjustment to purchase price allocation | (3,609) | (75) |
Balance at End of period | $ 8,001 | $ 7,438 |
Fair Value of Financial Instruments (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Fair Value Of Financial Instruments Details Narrative | ||
Increase in fair value of contingent acquisition debt | $ 1,462 | $ 446 |
Weighted-average of the discount rates used | 18.20% | 17.60% |
Stockholders’ Equity (Details) - shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Stockholders Equity Details | ||
Balance at beginning of period | 41,674,796 | 35,221,630 |
Granted | 0 | 12,595,237 |
Expired/cancelled | (3,645,516) | (5,335,821) |
Exercised | (41,250) | (806,250) |
Balance at end of period | 37,988,030 | 41,674,796 |
Stockholders’ Equity (Details 1) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Number of Shares | ||
Outstanding | 23,521,600 | 28,918,500 |
Granted | 12,792,250 | 1,124,250 |
Cancelled/expired | (2,981,350) | (6,151,475) |
Exercised | (102,500) | (369,675) |
Outstanding | 33,230,000 | 23,521,600 |
Exercisable | 18,830,000 | |
Weighted Average Exercise Price | ||
Outstanding | $ 0.22 | $ 0.21 |
Granted | .27 | 0.31 |
Cancelled/expired | .24 | 0.22 |
Exercised | .21 | 0.21 |
Outstanding | .24 | $ 0.22 |
Exercisable | $ .23 | |
Aggregate Intrinsic Value | ||
Outstanding | $ 2,044 | $ 786 |
Exercised | 0 | 0 |
Outstanding | 1,346 | $ 2,044 |
Exercisable | $ 993 |
Stockholders’ Equity (Details 2) - $ / shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Outstanding Options | 33,230,000 | 23,521,600 | 28,918,500 |
Weighted Average Price | $ .24 | $ 0.22 | $ 0.21 |
Exercisable Options | 18,830,000 | ||
Exercisable Weighted Average Price | $ .23 | ||
Exercise price 0.16 to 0.21 [Member] | |||
Outstanding Options | 6,852,500 | ||
Weighted Average Price | $ 0.19 | ||
Weighted Average Life | 7 years 7 days | ||
Exercisable Options | 3,452,250 | ||
Exercisable Weighted Average Price | $ .19 | ||
Exercisable Weighted Average Life | 6 years 5 months 22 days | ||
Exercise price 0.21 to 0.23 [Member] | |||
Outstanding Options | 11,245,000 | ||
Weighted Average Price | $ 0.22 | ||
Weighted Average Life | 5 years 3 months 11 days | ||
Exercisable Options | 11,245,000 | ||
Exercisable Weighted Average Price | $ 0.22 | ||
Exercisable Weighted Average Life | 5 years 3 months 12 days | ||
Exercise price 0.23 to 0.35 [Member] | |||
Weighted Average Life | 7 years 9 months 22 days | ||
Exercisable Weighted Average Life | 1 year 8 months 5 days | ||
Exercise price 0.35 to 0.40 [Member] | |||
Outstanding Options | 214,750 | ||
Weighted Average Price | $ 0.38 | ||
Weighted Average Life | 1 year 5 months 8 days | ||
Exercisable Options | 214,750 | ||
Exercisable Weighted Average Price | $ 0.38 | ||
Exercisable Weighted Average Life | 1 year 5 months 8 days | ||
Exercise price 0.23 to 0.33 [Member] | |||
Outstanding Options | 14,917,750 | ||
Weighted Average Price | $ 0.27 | ||
Exercisable Options | 3,917,750 | ||
Exercisable Weighted Average Price | $ .27 |
Stockholders’ Equity (Details 3) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Stock based compensation expense | $ 395 | $ 455 |
Cost of Revenues [Member] | ||
Stock based compensation expense | 10 | 17 |
Distributor Organizations [Member] | ||
Stock based compensation expense | 215 | 158 |
Selling And Marketing Expense [Member] | ||
Stock based compensation expense | 10 | 28 |
General and Administrative Expense [Member] | ||
Stock based compensation expense | $ 160 | $ 252 |
Stockholders’ Equity (Details 4) |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Dividend yield | 0.00% | 0.00% |
Minimum [Member] | ||
Stock price volatility | 57.00% | 66.00% |
Risk-free interest rate | 0.71% | 0.56% |
Expected life of options | 2 years 7 months 6 days | 1 year 6 months |
Maximum [Member] | ||
Stock price volatility | 90.00% | 77.00% |
Risk-free interest rate | 2.25% | 1.06% |
Expected life of options | 6 years 6 months | 5 years |
Stockholders’ Equity (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Preferred stock outstanding | 161,135 | 161,135 |
Accrued dividends | $ 112 | $ 98 |
Common shares outstanding | 392,698,557 | 392,583,015 |
Warrant modification expense | $ 779 | |
Stock repurchase program, shares repurchased | 125,708 | |
Stock repurchase program, shares repurchased price per share | $ .28 | |
Stock repurchase program, total shares repurchased to date | 3,931,880 | |
Remaining shares authorized for repurchase | 11,068,120 | |
Amortization of stock issuance | $ 9 | 21 |
Common stock available for issuance | 6,300,825 | |
Unrecognized compensation expense related to unvested share-based compensation arrangements | $ 2,084 | |
Warrant Modification Agreement [Member] | ||
Warrant modification expense | $ 526 |
Commitments and Contingencies (Details) $ in Thousands |
Dec. 31, 2016
USD ($)
|
---|---|
Operating leases | |
2017 | $ 1,138 |
2018 | 930 |
2019 | 634 |
2020 | 557 |
2021 | 571 |
Thereafter | 748 |
Total | $ 4,578 |
Commitments and Contingencies (Detail Narratives) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Commitments And Contingencies Detail Narratives | ||
Rent expense | $ 1,558 | $ 1,043 |
Balance on mortgage | $ 1,806 | |
Concentration risk, sales revenue | 54.00% | 61.00% |
Minimum future purchase commitments | $ 1,164 |
Income Taxes (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Income Taxes Details | ||
Current Federal | $ 3 | $ 66 |
Current State | (18) | (161) |
Current Foreign | 150 | 76 |
Total Current | 135 | (19) |
Deferred Federal | (304) | 1,307 |
Deferred State | (21) | 96 |
Deferred Foreign | 0 | 0 |
Total Deferred | (325) | 1,403 |
Total | $ (190) | $ 1,384 |
Income Taxes (Details 1) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Income Taxes Details 1 | ||
Federal statutory rate | $ (206) | $ (113) |
Foreign rate differential | (35) | 26 |
State taxes, net | (112) | (241) |
Other nondeductible items | (50) | 1,162 |
Change in foreign entity tax status | (77) | 0 |
Rate change | 6 | 91 |
Deferred tax asset adjustment | (201) | 101 |
Change in valuation allowance | 183 | 161 |
Foreign tax credit | 275 | 0 |
Undistributed foreign earnings | 17 | 197 |
Other | 10 | 0 |
Total | $ (190) | $ 1,384 |
Income Taxes (Details 2) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Deferred tax assets: | ||
Amortizable assets | $ 1,117 | $ 1,146 |
Inventory | 726 | 608 |
Accruals and reserves | 222 | 174 |
Stock options | 285 | 217 |
Net operating loss carry-forward | 3,554 | 2,387 |
Credit carry-forward | 309 | 581 |
Total Deferred Tax Asset | 6,213 | 5,113 |
Deferred tax liabilities: | ||
Prepaids | (383) | (71) |
Other | (608) | (521) |
Depreciable assets | (464) | (270) |
Total deferred tax liability | (1,455) | (862) |
Net deferred tax asset | 4,758 | 4,250 |
Less valuation allowance | (1,901) | (1,718) |
Net deferred tax liabilities | $ 2,857 | $ 2,532 |
Income Taxes (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Income Taxes Details Narrative | ||
Change in valuation allowance | $ 183 | $ 161 |
Federal net operating loss carryforwards | 4,611 | |
Net operating losses in foreign jurisdictions | 1,697 | |
Deferred tax liability | 310 | |
Increase to state income tax expense related to uncertain tax positions | $ 4 |
Segment and Geographical Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|---|---|
Mar. 31, 2016 |
Jun. 30, 2016 |
Sep. 30, 2016 |
Dec. 31, 2016 |
Dec. 31, 2015 |
||||
Revenues | $ 162,667 | $ 156,597 | ||||||
Gross profit | 98,137 | 92,969 | ||||||
Operating income (loss) | 2,515 | 5,406 | ||||||
Net income (loss) | $ 151 | $ 42 | $ 109 | (398) | [1] | (1,706) | ||
Capital expenditures | 2,825 | 3,619 | ||||||
Direct Selling [Member] | ||||||||
Revenues | 145,418 | 138,927 | ||||||
Gross profit | 97,219 | 93,613 | ||||||
Operating income (loss) | 4,564 | 8,594 | ||||||
Net income (loss) | 1,894 | 3,144 | ||||||
Capital expenditures | 1,922 | 1,396 | ||||||
Commercial Coffee [Member] | ||||||||
Revenues | 17,249 | 17,670 | ||||||
Gross profit | 918 | (644) | ||||||
Operating income (loss) | (2,049) | (3,188) | ||||||
Net income (loss) | (2,292) | (4,850) | ||||||
Capital expenditures | $ 903 | $ 2,223 | ||||||
|
Segment and Geographical Information (Details 1) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Total assets | $ 66,008 | $ 61,329 |
Direct Selling [Member] | ||
Total assets | 40,127 | 36,907 |
Commercial Coffee [Member] | ||
Total assets | $ 25,881 | $ 24,422 |
Segment and Geographical Information (Details 2) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Total revenues | $ 162,667 | $ 156,597 |
United States | ||
Total revenues | 147,548 | 145,259 |
International | ||
Total revenues | $ 15,119 | $ 11,338 |
Segment and Geographical Information (Details Narratives) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Segment And Geographical Information Details Narratives | ||
Tangible assets | $ 5,400 | $ 5,200 |
Restatement - Restatement (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2016 |
Jun. 30, 2016 |
Sep. 30, 2016 |
Dec. 31, 2016 |
Dec. 31, 2015 |
||||||||
Cash Flows from Operating Activities: | ||||||||||||
Net loss | $ 151 | $ 42 | $ 109 | $ (398) | [1] | $ (1,706) | ||||||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||||||
Depreciation and amortization | 1,003 | 1,987 | 2,865 | 3,862 | [1] | 3,354 | ||||||
Stock based compensation expense | 70 | 126 | 292 | 395 | [1] | 455 | ||||||
Warrant modification expense | 0 | [1] | 253 | |||||||||
Amortization of deferred financing costs | 90 | 180 | 270 | 360 | [1] | 899 | ||||||
Amortization of prepaid advisory fees | 15 | 31 | 46 | 58 | [1] | 20 | ||||||
Stock issuance for services | 30 | 30 | 30 | [1] | 0 | |||||||
Change in fair value of warrant derivative liability | (650) | (166) | (535) | (1,371) | [1] | 39 | ||||||
Amortization of debt discount | 264 | 527 | 790 | 1,053 | [1] | 967 | ||||||
Amortization of warrant issuance costs | 32 | 64 | 96 | 128 | [1] | 21 | ||||||
Expenses allocated to profit sharing agreement | (147) | (382) | (557) | (698) | [1] | (528) | ||||||
Change in fair value of contingent acquisition debt | (391) | (871) | (1,185) | (1,462) | [1] | (446) | ||||||
Extinguishment loss on debt | 0 | [1] | 1,198 | |||||||||
Deferred income taxes | (325) | [1] | 1,409 | |||||||||
Changes in operating assets and liabilities, net of effect from business combinations: | ||||||||||||
Accounts receivable | 281 | (391) | (1,411) | (525) | [1] | 168 | ||||||
Inventory | (1,997) | (2,301) | (1,925) | (3,515) | [1] | (6,194) | ||||||
Prepaid expenses and other current assets | (835) | (67) | (502) | (733) | [1] | 885 | ||||||
Accounts payable | 1,183 | 458 | 293 | 1,159 | [1] | 1,608 | ||||||
Accrued distributor compensation | 704 | 738 | 401 | (60) | [1] | 46 | ||||||
Deferred revenues | (155) | (465) | (652) | (710) | [1] | (2,495) | ||||||
Accrued expenses and other liabilities | 670 | (1,027) | 705 | 1,063 | [1] | 1,278 | ||||||
Income taxes receivable | 173 | 173 | 173 | (138) | [1] | 136 | ||||||
Net Cash (Used In) Provided by Operating Activities | 461 | (1,314) | (697) | (1,827) | [1] | 1,367 | ||||||
Cash Flows from Investing Activities: | ||||||||||||
Acquisitions, net of cash acquired | (88) | (48) | [1] | (32) | ||||||||
Purchases of property and equipment | (611) | (461) | (938) | (1,397) | [1] | (3,198) | ||||||
Net Cash Used in Investing Activities | (611) | (461) | (1,026) | (1,445) | [1] | (3,230) | ||||||
Cash Flows from Financing Activities: | ||||||||||||
Proceeds from issuance of secured promissory notes and common stock, net of offering costs | 0 | [1] | 5,080 | |||||||||
Proceeds from issuance of convertible notes payable, net | 0 | [1] | 2,383 | |||||||||
Proceeds from the exercise of stock options and warrants, net | 12 | 39 | 30 | [1] | 272 | |||||||
Proceeds from factoring company | (210) | 831 | (1,131) | 833 | [1] | 82 | ||||||
Payments of notes payable, net | (306) | (358) | (411) | (453) | [1] | (1,214) | ||||||
Payments of contingent acquisition debt | (328) | (462) | (708) | (773) | [1] | (3,338) | ||||||
Proceeds (payments) of capital leases | (41) | (132) | 19 | 557 | [1] | (47) | ||||||
Repurchase of common stock | (4) | (20) | (36) | (36) | [1] | (426) | ||||||
Net Cash Provided by Financing Activities | (889) | (129) | 34 | 158 | [1] | 2,792 | ||||||
Foreign Currency Effect on Cash and Cash Equivalents | (109) | (146) | (174) | 108 | [1] | (51) | ||||||
Net (decrease) increase in cash and cash equivalents | (1,148) | (2,050) | (1,863) | (3,006) | [1] | 878 | ||||||
Cash and Cash Equivalents, Beginning of year | 3,875 | [1] | 3,875 | [1] | 3,875 | [1] | 3,875 | [1] | 2,997 | |||
Cash and Cash Equivalents, End of year | 2,727 | 1,825 | 2,012 | 869 | [1] | 3,875 | [1] | |||||
Scenario, Previously Reported [Member] | ||||||||||||
Cash Flows from Operating Activities: | ||||||||||||
Net loss | 151 | 42 | 109 | (398) | ||||||||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||||||
Depreciation and amortization | 1,003 | 1,987 | 2,865 | 3,862 | ||||||||
Stock based compensation expense | 70 | 126 | 292 | 395 | ||||||||
Amortization of deferred financing costs | 90 | 180 | 270 | 360 | ||||||||
Amortization of prepaid advisory fees | 15 | 31 | 46 | 58 | ||||||||
Stock issuance for services | 30 | 30 | 30 | |||||||||
Change in fair value of warrant derivative liability | (650) | (166) | (535) | (1,371) | ||||||||
Amortization of debt discount | 264 | 527 | 790 | 1,053 | ||||||||
Amortization of warrant issuance costs | 32 | 64 | 96 | 128 | ||||||||
Expenses allocated to profit sharing agreement | (147) | (382) | (557) | (698) | ||||||||
Change in fair value of contingent acquisition debt | (391) | (871) | (1,185) | (1,462) | ||||||||
Deferred income taxes | (325) | |||||||||||
Changes in operating assets and liabilities, net of effect from business combinations: | ||||||||||||
Accounts receivable | 281 | (391) | (1,411) | (525) | ||||||||
Inventory | (1,997) | (2,301) | (1,925) | (3,515) | ||||||||
Prepaid expenses and other current assets | (835) | (67) | (502) | (733) | ||||||||
Accounts payable | 1,183 | 458 | 293 | 1,159 | ||||||||
Accrued distributor compensation | 704 | 738 | 401 | (60) | ||||||||
Deferred revenues | (155) | (465) | (652) | (710) | ||||||||
Accrued expenses and other liabilities | 250 | 635 | 2,967 | 2,729 | ||||||||
Income taxes receivable | 173 | 173 | 173 | (138) | ||||||||
Net Cash (Used In) Provided by Operating Activities | 41 | 348 | 1,565 | (161) | ||||||||
Cash Flows from Investing Activities: | ||||||||||||
Acquisitions, net of cash acquired | (88) | (48) | ||||||||||
Purchases of property and equipment | (611) | (461) | (938) | (1,397) | ||||||||
Net Cash Used in Investing Activities | (611) | (461) | (1,026) | (1,445) | ||||||||
Cash Flows from Financing Activities: | ||||||||||||
Proceeds from the exercise of stock options and warrants, net | 12 | 39 | 30 | |||||||||
Proceeds from factoring company | (210) | (831) | 1,131 | (833) | ||||||||
Payments of notes payable, net | (306) | (358) | (411) | (453) | ||||||||
Payments of contingent acquisition debt | (328) | (462) | (708) | (773) | ||||||||
Proceeds (payments) of capital leases | (41) | (132) | 19 | 557 | ||||||||
Repurchase of common stock | (4) | (20) | (36) | (36) | ||||||||
Net Cash Provided by Financing Activities | (469) | (1,791) | (2,228) | (1,508) | ||||||||
Foreign Currency Effect on Cash and Cash Equivalents | (109) | (146) | (174) | 108 | ||||||||
Net (decrease) increase in cash and cash equivalents | (1,148) | (2,050) | (1,863) | (3,006) | ||||||||
Cash and Cash Equivalents, Beginning of year | 3,875 | 3,875 | 3,875 | 3,875 | ||||||||
Cash and Cash Equivalents, End of year | 2,727 | 1,825 | 2,012 | 869 | $ 3,875 | |||||||
Restatement Adjustment [Member] | ||||||||||||
Cash Flows from Operating Activities: | ||||||||||||
Net loss | 0 | 0 | 0 | |||||||||
Changes in operating assets and liabilities, net of effect from business combinations: | ||||||||||||
Accrued expenses and other liabilities | 420 | (1,662) | (2,262) | (1,666) | ||||||||
Net Cash (Used In) Provided by Operating Activities | 420 | (1,662) | (2,262) | (1,666) | ||||||||
Cash Flows from Financing Activities: | ||||||||||||
Proceeds from factoring company | (420) | (1,662) | (2,262) | (1,666) | ||||||||
Net Cash Provided by Financing Activities | $ (420) | $ (1,662) | $ (2,262) | $ 1,666 | ||||||||
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