|
[X]
|
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
|
For the quarterly period ended March 31, 2017
|
|
[ ]
|
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
Delaware
|
|
90-0890517
|
(State or Other Jurisdiction of Incorporation or
Organization)
|
|
(I.R.S. Employer Identification No.)
|
|
|
|
2400 Boswell Road, Chula Vista, CA
|
|
91914
|
(Address of Principal Executive Offices)
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|
(Zip Code)
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Large accelerated filer
|
[ ]
|
Accelerated filer
|
[ ]
|
Non-accelerated filer
|
[ ]
|
Smaller reporting company
|
[X]
|
|
|
Emerging growth company
|
[X]
|
|
|
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|
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Page
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PART I. FINANCIAL INFORMATION
|
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1
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1
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2
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|
|
3
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4
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5
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21
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27
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27
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PART II. OTHER INFORMATION
|
|
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28
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28
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28
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28
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28
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28
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29
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30
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As of
|
|
|
March 31,
2017
|
December 31,
2016
|
ASSETS
|
(Unaudited)
|
|
Current Assets
|
|
|
Cash and cash equivalents
|
$1,019
|
$869
|
Accounts receivable, due from factoring company
|
2,614
|
1,078
|
Trade accounts receivable, net
|
798
|
1,071
|
Income tax receivable
|
1,239
|
311
|
Inventory
|
20,803
|
21,492
|
Prepaid expenses and other current assets
|
2,648
|
3,087
|
Total
current assets
|
29,121
|
27,908
|
|
|
|
Property
and equipment, net
|
13,923
|
14,006
|
Deferred
tax assets, net long-term
|
2,857
|
2,857
|
Intangible
assets, net
|
16,942
|
14,914
|
Goodwill
|
6,323
|
6,323
|
Total
assets
|
$69,166
|
$66,008
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current Liabilities
|
|
|
Accounts payable
|
$7,832
|
$8,174
|
Accrued distributor compensation
|
4,641
|
4,163
|
Accrued expenses
|
5,989
|
3,701
|
Deferred revenues
|
1,809
|
1,870
|
Other current liabilities
|
3,408
|
2,389
|
Capital lease payable, current portion
|
862
|
821
|
Notes payable, current portion
|
219
|
219
|
Warrant derivative liability
|
2,735
|
3,345
|
Contingent acquisition debt, current portion
|
411
|
628
|
Total
current liabilities
|
27,906
|
25,310
|
|
|
|
Capital
lease payable, net of current portion
|
1,398
|
1,569
|
Notes
payable, net of current portion
|
4,378
|
4,431
|
Convertible
notes payable, net of debt discount
|
8,712
|
8,327
|
Contingent
acquisition debt, net of current portion
|
9,759
|
7,373
|
Total
liabilities
|
52,153
|
47,010
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
Convertible
Preferred Stock, $0.001 par value: 100,000,000 shares authorized;
161,135 shares issued and outstanding at March 31, 2017 and
December 31, 2016
|
-
|
-
|
Common
Stock, $0.001 par value: 600,000,000 shares authorized; 392,740,557
and 392,698,557 shares issued and outstanding at March 31, 2017 and
December 31, 2016, respectively
|
393
|
393
|
Additional
paid-in capital
|
169,966
|
169,839
|
Accumulated
deficit
|
(153,075)
|
(151,016)
|
Accumulated
other comprehensive loss
|
(271)
|
(218)
|
Total
stockholders’ equity
|
17,013
|
18,998
|
Total Liabilities and
Stockholders’ Equity
|
$69,166
|
$66,008
|
|
Three Months Ended
March 31,
|
|
|
2017
|
2016
|
|
|
|
Revenues
|
$38,733
|
$38,202
|
Cost
of revenues
|
16,867
|
14,839
|
Gross profit
|
21,866
|
23,363
|
Operating
expenses
|
|
|
Distributor compensation
|
15,419
|
15,974
|
Sales and marketing
|
3,675
|
1,801
|
General and administrative
|
5,172
|
4,425
|
Total operating expenses
|
24,266
|
22,200
|
Operating
(loss) income
|
(2,400)
|
1,163
|
Interest expense, net
|
(1,197)
|
(1,104)
|
Change in fair value of warrant derivative liability
|
610
|
650
|
Total other expense
|
(587)
|
(454)
|
(Loss)
income before income taxes
|
(2,987)
|
709
|
Income
tax (benefit) provision
|
(928)
|
558
|
Net
(loss) income
|
(2,059)
|
151
|
Preferred
stock dividends
|
(3)
|
(3)
|
Net
(loss) income available to common stockholders
|
$(2,062)
|
$148
|
|
|
|
Net
(loss) income per share, basic
|
$(0.01)
|
$0.00
|
Net
(loss) income per share, diluted
|
$(0.01)
|
$0.00
|
|
|
|
Weighted
average shares outstanding, basic
|
392,715,207
|
392,595,949
|
Weighted
average shares outstanding, diluted
|
392,715,207
|
400,981,653
|
|
Three Months Ended
March 31,
|
|
|
2017
|
2016
|
|
|
|
Net
(loss) income
|
$(2,059)
|
$151
|
Foreign currency translation
|
53
|
(109)
|
Total
other comprehensive income (loss)
|
53
|
(109)
|
Comprehensive
(loss) income
|
$(2,006)
|
$42
|
|
Three Months Ended
March 31,
|
|
|
2017
|
2016
|
Cash Flows from Operating Activities:
|
(As
Restated)*
|
(As
Restated)
|
Net
(loss) income
|
$(2,059)
|
$151
|
Adjustments
to reconcile net (loss) income to net cash (used in)
provided by operating activities:
|
|
|
Depreciation and amortization
|
1,036
|
1,003
|
Stock based compensation expense
|
127
|
70
|
Amortization of deferred financing costs
|
90
|
90
|
Amortization of prepaid advisory fees
|
14
|
15
|
Change in fair value of warrant derivative liability
|
(610)
|
(650)
|
Amortization of debt discount
|
263
|
264
|
Amortization of warrant issuance costs
|
32
|
32
|
Expenses allocated in profit sharing agreement
|
(225)
|
(147)
|
Change in fair value of contingent acquisition debt
|
-
|
(391)
|
Changes in operating assets and liabilities, net of effect from
business combinations:
|
|
|
Accounts receivable
|
(1,263)
|
281
|
Inventory
|
689
|
(1,997)
|
Prepaid expenses and other current assets
|
425
|
(835)
|
Accounts payable
|
(342)
|
1,183
|
Accrued distributor compensation
|
478
|
704
|
Deferred revenues
|
(61)
|
(155)
|
Accrued expenses and other liabilities
|
1,827
|
670
|
Income taxes receivable
|
(928)
|
173
|
Net Cash (Used in) Provided by Operating
Activities
|
(507)
|
461
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
Acquisitions, net
|
(175)
|
-
|
Purchases of property and equipment
|
(142)
|
(611)
|
Net Cash Used in Investing Activities
|
(317)
|
(611)
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
Proceeds
from the exercise of stock options
|
3
|
-
|
Payments of notes payable, net
|
(53)
|
(306)
|
Proceeds (payments) from/to factoring
company
|
1,507
|
(210)
|
Payments of contingent acquisition debt
|
(134)
|
(328)
|
Payments of capital leases
|
(296)
|
(41)
|
Repurchase of common stock
|
-
|
(4)
|
Net Cash Provided by (Used in) Financing
Activities
|
1,027
|
(889)
|
Foreign Currency Effect on Cash
|
(53)
|
(109)
|
Net
increase (decrease) in cash and cash equivalents
|
150
|
(1,148)
|
Cash and Cash Equivalents, Beginning of Period
|
869
|
3,875
|
Cash and Cash Equivalents, End of Period
|
$1,019
|
$2,727
|
|
|
|
Supplemental Disclosures of Cash Flow Information
|
|
|
Cash paid during the period for:
|
|
|
Interest
|
$828
|
$719
|
Income
taxes
|
$-
|
$35
|
|
|
|
Supplemental Disclosures of Noncash Investing and Financing
Activities
|
|
|
Purchases
of property and equipment funded by capital leases
|
$166
|
86
|
Acquisitions
of net assets in exchange for contingent acquisition debt (see Note
4)
|
$2,670
|
$2,650
|
|
As of
|
|
|
March 31,
2017
|
December 31,
2016
|
Finished
goods
|
$11,135
|
$11,550
|
Raw
materials
|
10,732
|
11,006
|
|
21,867
|
22,556
|
Reserve
for excess and obsolete
|
(1,064)
|
(1,064)
|
Inventory,
net
|
$20,803
|
$21,492
|
Distributor
organization
|
$825
|
Customer-related
intangible
|
525
|
Trademarks
and trade name
|
400
|
Total
purchase price
|
$1,750
|
Distributor
organization
|
$440
|
Customer-related
intangible
|
280
|
Trademarks
and trade name
|
200
|
Total
purchase price
|
$920
|
|
March 31, 2017
|
December 31, 2016
|
||||
|
Cost
|
Accumulated
Amortization
|
Net
|
Cost
|
Accumulated
Amortization
|
Net
|
Distributor
organizations
|
$14,195
|
$7,460
|
$6,735
|
$12,930
|
$7,162
|
$5,768
|
Trademarks
and trade names
|
5,997
|
896
|
5,101
|
5,394
|
815
|
4,579
|
Customer
relationships
|
8,651
|
3,882
|
4,769
|
7,846
|
3,642
|
4,204
|
Internally
developed software
|
720
|
383
|
337
|
720
|
357
|
363
|
Intangible
assets
|
$29,563
|
$12,621
|
$16,942
|
$26,890
|
$11,976
|
$14,914
|
|
March 31,
2017
|
December 31,
2016
|
Goodwill,
commercial coffee
|
$3,314
|
$3,314
|
Goodwill,
direct selling
|
3,009
|
3,009
|
Total
goodwill
|
$6,323
|
$6,323
|
|
March 31,
2017
|
December 31,
2016
|
8%
Convertible Notes due July and August 2019 (July 2014 Private
Placement) (1)
|
$2,534
|
$2,296
|
8%
Convertible Notes due October and November 2018 (November 2015
Private Placement) (2)
|
7,025
|
6,999
|
Net
debt issuance costs
|
(847)
|
(968)
|
Total
convertible notes payable, net of debt discount (3)
|
$8,712
|
$8,327
|
|
March 31,
2017
|
December 31,
2016
|
Stock
price volatility
|
60% - 65%
|
60% - 65%
|
Risk-free
interest rates
|
1.50% - 1.27%
|
1.34% - 1.70%
|
Annual
dividend yield
|
0%
|
0%
|
Expected
life
|
2.3-3.6 years
|
2.6-3.9 years
|
|
Fair Value at March 31, 2017
|
|||
|
Total
|
Level 1
|
Level 2
|
Level 3
|
Liabilities:
|
|
|
|
|
Contingent
acquisition debt, current portion
|
$411
|
$-
|
$-
|
$411
|
Contingent
acquisition debt, less current portion
|
9,759
|
-
|
-
|
9,759
|
Warrant
derivative liability
|
2,735
|
-
|
-
|
2,735
|
Total
liabilities
|
$12,905
|
$-
|
$-
|
$12,905
|
|
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
|
Balance
at December 31, 2016
|
37,988,030
|
Issued
|
-
|
Expired
/ cancelled
|
(300,000)
|
Exercised
|
-
|
Balance
at March 31, 2017
|
37,688,030
|
|
Number of
Shares
|
Weighted
Average
Exercise Price
|
Aggregate
Intrinsic
Value
(in thousands)
|
Outstanding
December 31, 2016
|
33,230,000
|
$0.24
|
$1,346
|
Issued
|
20,000
|
0.31
|
|
Canceled
/ expired
|
(296,250)
|
0.19
|
|
Exercised
|
(42,000)
|
0.19
|
-
|
Outstanding
March 31, 2017
|
32,911,750
|
$0.24
|
$774
|
Exercisable
March 31, 2017
|
18,512,750
|
$0.22
|
$561
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2017
|
2016
|
Revenues
|
|
|
Direct selling
|
$33,242
|
$34,798
|
Commercial coffee
|
5,491
|
3,404
|
Total revenues
|
$38,733
|
$38,202
|
Gross
profit
|
|
|
Direct selling
|
$21,855
|
$23,490
|
Commercial coffee
|
11
|
(127)
|
Total gross profit
|
$21,866
|
$23,363
|
Operating
(loss) income
|
|
|
Direct selling
|
$(1,754)
|
$2,024
|
Commercial coffee
|
(646)
|
(861
|
Total operating (loss) income
|
$(2,400)
|
$1,163
|
Net
(loss) income
|
|
|
Direct selling
|
$(1,512)
|
$674
|
Commercial coffee
|
(547)
|
(523)
|
Total (loss) net income
|
$(2,059)
|
$151
|
Capital
expenditures
|
|
|
Direct selling
|
$128
|
$312
|
Commercial coffee
|
180
|
299
|
Total capital expenditures
|
$308
|
$611
|
|
As of
|
|
|
March 31,
2017
|
December 31,
2016
|
Total
assets
|
|
|
Direct selling
|
$42,689
|
$40,127
|
Commercial coffee
|
26,477
|
25,881
|
Total assets
|
$69,166
|
$66,008
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2017
|
2016
|
Revenues
|
|
|
United States
|
$34,835
|
$34,963
|
International
|
3,898
|
3,239
|
Total revenues
|
$38,733
|
$38,202
|
Youngevity International, Inc. and
Subsidiaries
|
|||
Condensed Consolidated Statement of Cash
Flows
|
|||
(In
thousands)
|
|||
(Unaudited)
|
|||
|
Three Months Ended March 31, 2017
|
||
|
Previously Reported
|
Adjustment
|
As Restated
|
Cash Flows from Operating Activities:
|
|
|
|
Net
Loss
|
$ (2,059)
|
$ -
|
$ (2,059)
|
Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities:
|
|
|
|
Depreciation
and amortization
|
1,036
|
-
|
1,036
|
Stock
based compensation expense
|
127
|
-
|
127
|
Amortization
of deferred financing costs
|
90
|
-
|
90
|
Amortization
of prepaid advisory fees
|
14
|
-
|
14
|
Change
in fair value of warrant derivative liability
|
(610)
|
-
|
(610)
|
Amortization
of debt discount
|
263
|
-
|
263
|
Amortization
of warrant issuance costs
|
32
|
-
|
32
|
Expenses
allocated in profit sharing agreement
|
(225)
|
-
|
(225)
|
Changes
in operating assets and liabilities, net of effect from business
combinations:
|
|
||
Accounts
receivable
|
(1,263)
|
-
|
(1,263)
|
Inventory
|
689
|
-
|
689
|
Prepaid
expenses and other current assets
|
425
|
-
|
425
|
Accounts
payable
|
(342)
|
-
|
(342)
|
Accrued
distributor compensation
|
478
|
-
|
478
|
Deferred
revenues
|
(61)
|
-
|
(61)
|
Accrued
expenses and other liabilities
|
4,841
|
(3,014)
|
1,827
|
Income
taxes receivable
|
(928)
|
-
|
(928)
|
Net Cash Provided by (Used in) Operating
Activities
|
2,507
|
(3,014)
|
(507)
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
Acquisitions,
net of cash acquired
|
(175)
|
-
|
(175)
|
Purchases
of property and equipment
|
(142)
|
-
|
(142)
|
Net Cash Used in Investing Activities
|
(317)
|
-
|
(317)
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
Proceeds
from the exercise of stock options
|
3
|
-
|
3
|
Payments
of notes payable, net
|
(53)
|
-
|
(53)
|
Proceeds
(Payments) from/to factoring company, net
|
(1,507)
|
3,014
|
1,507
|
Payments
of contingent acquisition debt
|
(134)
|
-
|
(134)
|
Payments
of capital leases
|
(296)
|
-
|
(296)
|
Net Cash (Used in) Provided by Financing
Activities
|
(1,987)
|
3,014
|
1,027
|
Foreign Currency Effect on Cash
|
(53)
|
-
|
(53)
|
Net
increase in cash and cash equivalents
|
150
|
-
|
150
|
Cash and Cash Equivalents, Beginning of Period
|
869
|
-
|
869
|
Cash and Cash Equivalents, End of Period
|
$ 1,019
|
$-
|
$ 1,019
|
|
For the three months
ended March 31,
|
Percentage
|
|
Segment
Revenues
|
2017
|
2016
|
change
|
Direct
selling
|
$33,242
|
$34,798
|
(4.5)%
|
Commercial
coffee
|
5,491
|
3,404
|
61.3%
|
Total
|
$38,733
|
$38,202
|
1.4%
|
|
For the three months
ended March 31,
|
Percentage
|
|
Segment
Gross Profit
|
2017
|
2016
|
change
|
Direct
selling
|
$21,855
|
$23,490
|
(7.0)%
|
Gross Profit % of Revenues
|
65.7%
|
67.5%
|
(1.8)%
|
Commercial
coffee
|
11
|
(127)
|
108.7%
|
Gross Profit % of Revenues
|
0.2%
|
(3.7)%
|
3.9%
|
Total
|
$21,866
|
$23,363
|
(6.4)%
|
Gross Profit % of Revenues
|
56.5%
|
61.2%
|
(4.7)%
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2017
|
2016
|
Net
(loss) income
|
$(2,059)
|
$151
|
Add/Subtract:
|
|
|
Interest,
net
|
1,197
|
1,104
|
Income
taxes (benefit) provision
|
(928)
|
558
|
Depreciation
|
391
|
399
|
Amortization
|
645
|
604
|
EBITDA
|
(754)
|
2,816
|
Add/Subtract:
|
|
|
Stock
based compensation
|
127
|
70
|
Change
in the fair value of warrant derivative
|
(610)
|
(650)
|
Adjusted EBITDA
|
$(1,237)
|
$2,236
|
Exhibit No.
|
|
Exhibit
|
|
|
|
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
|
|
YOUNGEVITY INTERNATIONAL INC.
|
|
(Registrant)
|
|
|
Date: August
14, 2017
|
/s/
Stephan Wallach
|
|
Stephan Wallach
|
|
Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
|
|
|
Date: August
14, 2017
|
/s/
David Briskie
|
|
David Briskie
|
|
Chief Financial Officer
|
|
(Principal Financial Officer)
|
|
|
1.
|
I
have reviewed this Amendment No. 1 to the Quarterly Report on
Form 10-Q/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.
|
|
/s/
Stephan Wallach
|
|
Stephan Wallach,
|
|
Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
August 14, 2017
|
1.
|
I
have reviewed this Amendment No. 1 to the Quarterly Report on
Form 10-Q/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.
|
|
/s/
David Briskie
|
|
David Briskie,
|
|
Chief Financial Officer
|
|
(Principal Financial Officer)
|
|
August 14, 2017
|
|
/s/
Stephan Wallach
|
|
Stephan Wallach,
|
|
Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
August 14, 2017
|
|
/s/
David Briskie
|
|
David Briskie,
|
|
Chief Financial Officer
|
|
(Principal Financial Officer)
|
|
August 14, 2017
|
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
May 08, 2017 |
|
Document And Entity Information | ||
Entity Registrant Name | Youngevity International, Inc. | |
Entity Central Index Key | 0001569329 | |
Document Type | 10-Q/A | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | true | |
Amendment Description | The Company has prepared this Amendment No. 1 (this Amendment) to its Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, which was originally filed with the Securities and Exchange Commission on May 12, 2017 (the Original 10-Q) to reflect the restatement of certain of the Companys previously issued Condensed Consolidated Statements of Cash Flows and the notes related thereto and certain other related matters. There were no changes to the Condensed Consolidated Balance Sheets or Condensed 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 | |
Trading Symbol | YGYI | |
Entity Common Stock, Shares Outstanding | 392,793,557 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2017 |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
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 | 392,740,557 | 392,698,557 |
Common Stock, shares outstanding | 392,740,557 | 392,698,557 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Condensed Consolidated Statements Of Operations | ||
Revenues | $ 38,733 | $ 38,202 |
Cost of revenues | 16,867 | 14,839 |
Gross profit | 21,866 | 23,363 |
Operating expenses | ||
Distributor compensation | 15,419 | 15,974 |
Sales and marketing | 3,675 | 1,801 |
General and administrative | 5,172 | 4,425 |
Total operating expenses | 24,266 | 22,200 |
Operating (loss) income | (2,400) | 1,163 |
Interest expense, net | (1,197) | (1,104) |
Change in fair value of warrant derivative liability | 610 | 650 |
Total other expense | (587) | (454) |
(Loss) income before income taxes | (2,987) | 709 |
Income tax (benefit) provision | (928) | 558 |
Net (loss) income | (2,059) | 151 |
Preferred stock dividends | (3) | (3) |
Net (loss) income available to common stockholders | $ (2,062) | $ 148 |
Net (loss) income per share, basic | $ (0.01) | $ 0 |
Net (loss) income per share, diluted | $ (0.01) | $ 0 |
Weighted average shares outstanding, basic | 392,715,207 | 392,595,949 |
Weighted average shares outstanding, diluted | 392,715,207 | 400,981,653 |
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Condensed Consolidated Statements Of Comprehensive Income Loss | ||
Net (loss) income | $ (2,059) | $ 151 |
Foreign currency translation | 53 | (109) |
Total other comprehensive income (loss) | 53 | (109) |
Comprehensive (loss) income | $ (2,006) | $ 42 |
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | ||||
---|---|---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
||||
Cash Flows from Operating Activities: | |||||
Net (loss) income | [1] | $ (2,059) | $ 151 | ||
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | |||||
Depreciation and amortization | [1] | 1,036 | 1,003 | ||
Stock based compensation expense | [1] | 127 | 70 | ||
Amortization of deferred financing costs | [1] | 90 | 90 | ||
Amortization of prepaid advisory fees | [1] | 14 | 15 | ||
Change in fair value of warrant derivative liability | [1] | (610) | (650) | ||
Amortization of debt discount | [1] | 263 | 264 | ||
Amortization of warrant issuance costs | [1] | 32 | 32 | ||
Expenses allocated in profit sharing agreement | [1] | (225) | (147) | ||
Change in fair value of contingent acquisition debt | [1] | (391) | |||
Changes in operating assets and liabilities, net of effect from business combinations: | |||||
Accounts receivable | [1] | (1,263) | 281 | ||
Inventory | [1] | 689 | (1,997) | ||
Prepaid expenses and other current assets | [1] | 425 | (835) | ||
Accounts payable | [1] | (342) | 1,183 | ||
Accrued distributor compensation | [1] | 478 | 704 | ||
Deferred revenues | [1] | (61) | (155) | ||
Accrued expenses and other liabilities | [1] | 1,827 | 670 | ||
Income taxes receivable | [1] | (928) | 173 | ||
Net Cash Provided by Operating Activities | [1] | (507) | 461 | ||
Cash Flows from Investing Activities: | |||||
Acquisitions, net | [1] | (175) | 0 | ||
Purchases of property and equipment | [1] | (142) | (611) | ||
Net Cash Used in Investing Activities | [1] | (317) | (611) | ||
Cash Flows from Financing Activities: | |||||
Proceeds from the exercise of stock options | [1] | 3 | 0 | ||
Payments of notes payable, net | [1] | (53) | (306) | ||
Proceeds (payments) from /to factoring company | [1] | 1,507 | (210) | ||
Payments of contingent acquisition debt | [1] | (134) | (328) | ||
Payments of capital leases | [1] | (296) | (41) | ||
Repurchase of common stock | [1] | (4) | |||
Net Cash Provided by (Used in) Financing Activities | [1] | 1,027 | (889) | ||
Foreign Currency Effect on Cash | [1] | (53) | (109) | ||
Net increase (decrease) in cash and cash equivalents | [1] | 150 | (1,148) | ||
Cash and Cash Equivalents, Beginning of Period | [1] | 869 | 3,875 | ||
Cash and Cash Equivalents, End of Period | [1] | 1,019 | 2,727 | ||
Supplemental Disclosures of Cash Flow Information Cash paid during the period for: | |||||
Interest | [1] | 828 | 719 | ||
Income taxes | [1] | 0 | 35 | ||
Supplemental Disclosures of Noncash Investing and Financing Activities | |||||
Purchases of property and equipment funded by capital leases | [1] | 166 | 86 | ||
Acquisitions of net assets in exchange for contingent acquisition debt (see Note 4) | [1] | $ 2,670 | $ 2,650 | ||
|
Basis of Presentation and Description of Business |
3 Months Ended |
---|---|
Mar. 31, 2017 | |
Notes to Financial Statements | |
Basis of Presentation and Description of Business | Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to such rules and regulations.
The statements presented as of March 31, 2017 and for the three months ended March 31, 2017 and 2016 are unaudited. In the opinion of management, these financial statements reflect all normal recurring and other adjustments necessary for a fair presentation, and to make the financial statements not misleading. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Form 10-K for the year ended December 31, 2016. The results for interim periods are not necessarily indicative of the results for the entire year.
The Company consolidates all wholly owned subsidiaries. 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”) 2015-17 pertaining to the presentation of deferred tax assets and liabilities as noncurrent with retrospective application effective January 1, 2017. This resulted in a reclassification from deferred tax assets, net current to deferred tax assets, net long-term. These reclassifications did not affect revenue, total costs and expenses, income (loss) from operations, or net income (loss). The adoption of ASU No. 2015-17 resulted in a reclassification of deferred tax assets, net current of $565,000 to deferred tax assets, net long-term on the Company’s consolidated financial statements as of December 31, 2016.
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.
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 condensed 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 twelve months as of May 12, 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.
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 three months ended March 31, 2017, 105,029,193 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 since their effect would have been anti-dilutive.
The incremental dilutive common share equivalents for the three months ended March 31, 2016 were 8,385,704.
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.
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. Under the terms of the Factoring Agreement, the Company effectively sold those identified accounts receivable to Crestmark with non-credit related recourse. The Company maintains the risk associated with the factored receivables and is responsible for the servicing and administration of the receivables.
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 condensed consolidated balance sheets in the amount of approximately $2,614,000 and $1,078,000 as of March 31, 2017 and December 31, 2016, respectively, reflects the related collateralized accounts.
The Company's outstanding liability related to the Factoring Agreement was approximately $2,796,000 and $1,290,000 as of March 31, 2017 and December 31, 2016, respectively, and is included in other current liabilities on the condensed consolidated balance sheets.
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 condensed consolidated balance sheets. Once the harvest is complete, the harvest cost is then recognized as the inventory value.
Costs associated with the 2017 harvest as of March 31, 2017 and December 31, 2016 total approximately $552,000 and $452,000, respectively and are included in prepaid expenses and other current assets as deferred harvest costs on the Company’s condensed consolidated balance sheets. As of December 31, 2016, the inventory related to the 2016 harvest was $112,000. As of March 31, 2017, the ending inventory related to the 2016 harvest has been sold. The Company plans to finalize the inventory valuation related to the 2017 harvest during the second quarter of 2017 once the harvest is complete.
Related Party Transactions
Hernandez, Hernandez, Export Y Company
The Company’s coffee segment CLR is associated with Hernandez, Hernandez, Export Y Company (“H&H”), a Nicaragua company, through sourcing arrangements to procure Nicaraguan green coffee and in March 2014 as part of the Siles acquisition, CLR engaged H&H as employees to manage Siles. The Company made purchases of approximately $415,000 and $1,800,000 from this supplier for the three months ended March 31, 2017 and 2016, respectively. In addition, for the three months ended March 31, 2017 and 2016, CLR sold $491,000 and $700,000 respectively, in green coffee to H&H Coffee Group Export, a Florida Company which is affiliated with H&H.
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 $21,000 and $34,000 from Northwest Nutraceuticals Inc., for the three months ended March 31, 2017 and 2016, respectively. In addition, Mr. Renton and his wife are distributors of the Company and can earn commissions on product sales.
Revenue Recognition
The Company recognizes revenue from product sales when the following four criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable, and collectability is reasonably assured. The Company ships the majority of its direct selling segment products directly to the distributors primarily via UPS, USPS or FedEx and receives substantially all payments for these sales in the form of credit card transactions. The Company regularly monitors its use of credit card or merchant services to ensure that its financial risk related to credit quality and credit concentrations is actively managed. Revenue is recognized upon passage of title and risk of loss to customers when product is shipped from the fulfillment facility. The Company ships the majority of its coffee segment products via common carrier and invoices its customer for the products. Revenue is recognized when the title and risk of loss is passed to the customer under the terms of the shipping arrangement, typically, FOB shipping point.
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 March 31, 2017 and December 31, 2016, the balance in deferred revenues was approximately $1,809,000 and $1,870,000 respectively, of which the portion attributable to Heritage Makers was approximately $1,622,000 and $1,662,000, respectively. The remaining balance of approximately $187,000 and $208,000 as of March 31, 2017 and December 31, 2016, related primarily to the Company’s 2017 conventions, respectively, whereby attendees pre-enroll in the events and the Company does not recognize this revenue until the conventions occur.
Deferred costs relate to Heritage Makers prepaid commissions that are recognized in expense at the time the related revenue is recognized. As of March 31, 2017 and December 31, 2016, the balance in deferred costs was approximately $390,000 and $415,000 respectively, and was included in prepaid expenses and current assets.
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 was effective for fiscal years beginning after December 15, 2016, and early adoption was not permitted. The Company adopted ASU 2016-17 effective the quarter ended March 31, 2017. The adoption of ASU 2016-17 did not have a significant impact on the Company’s consolidated financial statements.
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 January 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; however it is expected to gross-up the consolidated balance sheet as a result of recognizing a lease asset along with a similar lease liability.
In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. This guidance requires that entities with a classified statement of financial position present all deferred tax assets and liabilities as noncurrent. This update is effective for annual and interim periods for fiscal years beginning after December 15, 2016, which required the Company to adopt the new guidance in the first quarter of fiscal 2017. Early adoption was permitted for financial statements that have not been previously issued and may be applied on either a prospective or retrospective basis. The Company adopted ASU 2015-17 effective the quarter ended March 31, 2017. The adoption of ASU 2015-17 did not have a significant impact on the Company’s consolidated financial statements other than the netting of current and long-term deferred tax assets and liabilities in the non-current section of the balance sheet and footnote disclosures.
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 the Company 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.
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Income Taxes |
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Mar. 31, 2017 | |
Notes to Financial Statements | |
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 condensed consolidated financial statements. Under this approach, deferred taxes are recorded for the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial statement and tax basis of assets and liabilities, and are adjusted for changes in tax rates and tax laws when changes are enacted. The effects of future changes in income tax laws or rates are not anticipated.
Income taxes for the interim periods are computed using the effective tax rates estimated to be applicable for the full fiscal year, as adjusted for any discrete taxable events that occur during the period.
The Company files income tax returns in the United States (“U.S.”) on a federal basis and in many U.S. state and foreign jurisdictions. Certain tax years remain open to examination by the major taxing jurisdictions to which the Company is subject.
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Inventory and Costs of Revenues |
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Inventory and Costs 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):
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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Acquisitions and Business Combinations |
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Acquisitions and Business Combinations | The Company accounts for business combinations under the acquisition method and allocates the total purchase price for acquired businesses to the tangible and identified intangible assets acquired and liabilities assumed, based on their estimated fair values. When a business combination includes the exchange of the Company’s common stock, the value of the common stock is determined using the closing market price as of the date such shares were tendered to the selling parties. The fair values assigned to tangible and identified intangible assets acquired and liabilities assumed are based on management or third-party estimates and assumptions that utilize established valuation techniques appropriate for the Company’s industry and each acquired business. Goodwill is recorded as the excess, if any, of the aggregate fair value of consideration exchanged for an acquired business over the fair value (measured as of the acquisition date) of total net tangible and 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.
During the three months ended March 31, 2017, the Company entered into two acquisitions, which are detailed below. The acquisitions were conducted in an effort to expand the Company’s distributor network, enhance and expand its product portfolio, and diversify its product mix. As 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.
Bellavita Group, LLC
Effective March 1, 2017, the Company acquired certain assets of Bellavita Group, LLC “Bellavita” a direct sales company and producer of health and beauty products with locations and customers primarily in the Asian market.
The contingent consideration’s estimated fair value at the date of acquisition was $1,750,000 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. In addition, the Company has assumed certain liabilities in accordance with the agreement.
The Company is obligated to make monthly payments based on a percentage of the Bellavita distributor revenue derived from sales of the Company’s products and a percentage of royalty revenue derived from sales of Bellavita products until the earlier of the date that is twelve (12) years from the closing date or such time as the Company has paid to Bellavita aggregate cash payments of the Bellavita distributor revenue and royalty revenue equal to a predetermined maximum aggregate purchase price.
The assets acquired were recorded at estimated fair values as of the date of the acquisition. The fair values of the acquired assets have not been finalized pending further information that may impact the valuation of certain assets or liabilities. The preliminary purchase price allocation is as follows (in thousands):
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 valuations within one (1) year from the acquisition date.
The revenue impact from the Bellavita acquisition, included in the condensed consolidated statement of operations for the three months ended March 31, 2017 was approximately $252,000.
The pro-forma effect assuming the business combination with Bellavita discussed above had occurred at the beginning of the year is not presented as the information was not available.
Ricolife, LLC
Effective March 1, 2017, the Company acquired certain assets of Ricolife, LLC “Ricolife” a direct sales company and producer of teas with health benefits contained within its tea formulas.
The contingent consideration’s estimated fair value at the date of acquisition was $920,000 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. In addition, the Company has assumed certain liabilities in accordance with the agreement.
The Company is obligated to make monthly payments based on a percentage of the Ricolife distributor revenue derived from sales of the Company’s products and a percentage of royalty revenue derived from sales of Ricolife products until the earlier of the date that is twelve (12) years from the closing date or such time as the Company has paid to Ricolife aggregate cash payments of the Ricolife distributor revenue and royalty revenue equal to a predetermined maximum aggregate purchase price.
The assets acquired were recorded at estimated fair values as of the date of the acquisition. The fair values of the acquired assets have not been finalized pending further information that may impact the valuation of certain assets or liabilities. The preliminary purchase price allocation is as follows (in thousands):
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 valuations within one (1) year from the acquisition date.
The revenue impact from the Ricolife acquisition, included in the condensed consolidated statement of operations for the three months ended March 31, 2017 was approximately $64,000.
The pro-forma effect assuming the business combination with Ricolife discussed above had occurred at the beginning of the year is not presented as the information was not available.
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Intangible Assets and Goodwill |
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Intangible Assets and Goodwill | Intangible Assets
Intangible assets are comprised of distributor organizations, trademarks and tradenames, customer relationships and internally developed software. The Company's acquired intangible assets, which are subject to amortization over their estimated useful lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. An impairment loss is recognized when the carrying amount of an intangible asset exceeds its fair value.
Intangible assets consist of the following (in thousands):
Amortization expense related to intangible assets was approximately $645,000 and $604,000 for the three months ended March 31, 2017 and 2016, respectively.
Trade names, which do not have legal, regulatory, contractual, competitive, economic, or other factors that limit the useful lives are considered indefinite lived assets and are not amortized but are tested for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Approximately $2,267,000 in trademarks from business combinations have been identified as having indefinite lives.
Goodwill
Goodwill is recorded as the excess, if any, of the aggregate fair value of consideration exchanged for an acquired business over the fair value (measured as of the acquisition date) of total net tangible and identified intangible assets acquired. In accordance with Financial Accounting Standards Board (“FASB”) 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 March 31, 2017 and December 31, 2016 was $6,323,000. There were no triggering events indicating impairment of goodwill or intangible assets during the three months ended March 31, 2017 and 2016.
Goodwill intangible assets consist of the following (in thousands):
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Debt |
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Debt | 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 March 31, 2017 and December 31, 2016 the principal amount of $4,750,000 remains outstanding.
The Company recorded debt discounts of $4,750,000 related to the beneficial conversion feature of $1,053,000 and a debt discount of $3,697,000 related to the detachable warrants discount. The beneficial conversion feature discount and the detachable warrants discount are amortized to interest expense over the life of the Notes. As of March 31, 2017 and December 31, 2016 the remaining balances of the debt discounts is approximately $2,216,000 and $2,454,000, respectively. The quarterly amortization of the issuance costs is approximately $238,000 and is recorded as interest expense.
With respect to the aggregate offering, the Company paid $490,000 in expenses including placement agent fees. The issuance costs are amortized to interest expense over the term of the Notes. As of March 31, 2017 and December 31, 2016 the remaining balances of the issuance cost is approximately $229,000 and $253,000, respectively. The quarterly amortization of the issuance costs is approximately $25,000 and is recorded as interest expense.
Unamortized debt discounts and issuance costs are included with convertible notes payable, net of debt discount on the condensed consolidated balance sheets.
November 2015 Private Placement
Between October 13, 2015 and November 25, 2015 the Company entered into Note Purchase Agreements (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- 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-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 March 31, 2017 and December 31, 2016 the principal amount of $7,187,500 remains outstanding.
The Company recorded debt discounts of $309,000 related to the beneficial conversion feature of $15,000 and a debt discount of $294,000 related to the detachable warrants discount. The beneficial conversion feature discount and the detachable warrants discount are amortized to interest expense over the life of the Notes. As of March 31, 2017 and December 31, 2016 the remaining balances of the debt discounts is approximately $163,000 and $189,000 respectively. The quarterly amortization of the issuance costs is approximately $26,000 and is recorded as interest expense.
With respect to the aggregate offering, the Company paid $786,000 in expenses including placement agent fees. The issuance costs are amortized to interest expense over the term of the Notes. As of March 31, 2017 and December 31, 2016 the remaining balances of the issuance cost is approximately $415,000 and $480,000, respectively. The quarterly amortization of the issuance costs is approximately $65,000 and is recorded as interest expense.
Unamortized debt discounts and issuance costs are included with convertible notes payable, net of debt discount on the condensed consolidated balance sheets.
In addition the Company issued warrants to the placement agent in connection with the Notes which were valued at approximately $384,000. These warrants were not protected against down-round financing and accordingly, were classified as equity instruments and the corresponding deferred issuance costs are amortized over the term of the Notes. As of March 31, 2017 and December 31, 2016, the remaining balance of the warrant issuance costs is approximately $203,000 and $235,000, respectively. The quarterly amortization of the warrant issuance costs is approximately $32,000 and is recorded as interest expense.
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Derivative Liability |
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Derivative Liability | The Company accounted for the warrants issued in conjunction with our November 2015 and July 2014 Private Placements in accordance with the accounting guidance for derivatives ASC Topic 815. The accounting guidance sets forth a two-step model to be applied in determining whether a financial instrument is indexed to an entity’s own stock, which would qualify such financial instruments for a scope exception. This scope exception specifies that a contract that would otherwise meet the definition of a derivative financial instrument would not be considered as such if the contract is both (i) indexed to the entity’s own stock and (ii) classified in the stockholders’ equity section of the entity’s balance sheet. The Company determined the warrants issued to the investors that relate to Notes are ineligible for equity classification due to anti-dilution provisions set forth therein.
Warrants classified as derivative liabilities are recorded at their estimated fair value (see Note 8, below) at the issuance date and are revalued at each subsequent reporting date. The Company will continue to revalue the derivative liability on each subsequent balance sheet date until the securities to which the derivative liabilities relate are exercised or expire.
The estimated fair value of the outstanding warrant liabilities was $2,735,000 and $3,345,000 as of March 31, 2017 and December 31, 2016, respectively.
Increases or decreases in fair value of the derivative liability are included as a component of total other expense in the accompanying condensed consolidated statements of operations for the respective period. The changes to the derivative liability for warrants resulted in decreases of approximately $610,000 and approximately $650,000 for the three months ended March 31, 2017 and 2016, respectively.
Various factors are considered in the pricing models the Company uses to value the warrants, including its current stock price, the remaining life of the warrants, the volatility of its stock price, and the risk free interest rate. Future changes in these factors may have a significant impact on the computed fair value of the warrant liability. As such, the Company expects future changes in the fair value of the warrants to continue and may vary significantly from period to period. 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 March 31, 2017 and as of December 31, 2016 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 | 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, the Company issued warrants to purchase shares of its common stock which are accounted for as derivative liabilities (see Note 7 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 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 three months ended March 31, 2016, the net adjustment to the fair value of the contingent acquisition debt was a decrease of $391,000. There were no adjustments to the fair value of the contingent acquisition debt during the three months ended March 31, 2017. |
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 March 31, 2017 and December 31, 2016, and accrued dividends of approximately $115,000 and $112,000, 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 have no voting rights, except as required by law.
Common Stock
The Company had 392,740,557 common shares outstanding as of March 31, 2017. The holders of Common Stock are entitled to one vote per share on matters brought before the shareholders.
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. A total of 3,931,880 shares have been repurchased to-date as of March 31, 2017 at a weighted-average cost of $0.27. There were no repurchases during the three months ended March 31, 2017. The remaining number of shares authorized for repurchase under the plan as of March 31, 2017 is 11,068,120.
Warrants to Purchase Preferred Stock and Common Stock
As of March 31, 2017, warrants to purchase 37,688,030 shares of the Company's common stock at prices ranging from $0.10 to $0.50 were outstanding. All warrants are exercisable as of March 31, 2017 and expire at various dates through November 2020 and have a weighted average remaining term of approximately 2.52 years and are included in the table below as of March 31, 2017.
A summary of the warrant activity for the three months ended March 31, 2017 is presented in the following table:
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 upon successfully meeting certain criteria in accordance with the agreement. Subsequent to September 1, 2015 this agreement has been extended under the same terms with the monthly cash payment remaining at $6,000 per month and 100,000 shares of restricted common stock for every six (6) months of service performed.
As of March 31, 2017 the Company has issued 100,000 shares of restricted common stock in connection with this agreement and accrued for the estimated per share value on each subsequent six (6) month periods based on the price of Company’s common stock at each respective date. As of March 31, 2017 the Company has accrued for 200,000 shares of restricted stock that have been earned, but for which the shares have not been issued as of March 31, 2017. The fair value of the shares to be issued are recorded as prepaid advisory fees and are included in prepaid expenses and other current assets on the Company’s condensed consolidated balance sheets and is amortized on a pro-rata basis over the term of the respective periods. During the three months ended March 31, 2017 and 2016, the Company recorded expense of approximately $14,000 and $15,000, respectively, in connection with amortization of the stock issuance.
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. 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 increased 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 purpose of the Plan is to promote the long-term growth and profitability of the Company by (i) providing key people and consultants with incentives to improve stockholder value and to contribute to the growth and financial success of the Company and (ii) enabling the Company to attract, retain and reward the best available persons for positions of substantial responsibility. The Plan allows for the grant of: (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 qualifying under Section 422 of the Code, in any combination (collectively, “Options”). At March 31, 2017, the Company had 46,577,075 shares of Common Stock available for issuance under the Plan.
A summary of the Plan Options for the three months ended March 31, 2017 is presented in the following table:
The weighted-average fair value per share of the granted options for the three months ended March 31, 2017 and 2016 was approximately $0.09 and $0.14, respectively.
Stock based compensation expense included in the condensed consolidated statements of operations was $127,000 and $70,000 for the three months ended March 31, 2017 and 2016, respectively.
As of March 31, 2017, there was approximately $1,959,000 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 4.18 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.
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Segment and Geographical Information |
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Segment and Geographical Information | We are a leading omni-direct lifestyle company offering a hybrid of the direct selling business model that also offers e-commerce and the power of social selling. Assembling a virtual Main Street of products and services under one corporate entity, Youngevity offers products from top selling retail categories: health/nutrition, home/family, food/beverage (including coffee), spa/beauty, apparel/jewelry, as well as innovative services. We operate in two segments: the direct selling segment where products are offered through a global distribution network of preferred customers and distributors and the commercial coffee segment where roasted and green coffee bean products are sold directly to businesses.
The Company’s segments reflect the manner in which the business is managed and how the Company allocates resources and assesses performance. The Company’s chief operating decision maker is the Chief Executive Officer. The Company’s chief operating decision maker evaluates segment performance primarily based on revenue and segment operating income. The principal measures and factors the Company considered in determining the number of reportable segments were revenue, gross margin percentage, sales channel, customer type and competitive risks. In addition, each reporting segment has similar products and customers, similar methods of marketing and distribution and a similar regulatory environment.
The accounting policies of the segments are consistent with those described in the summary of significant accounting policies. Segment revenue excludes intercompany revenue eliminated in the consolidation. The following tables present certain financial information for each segment (in thousands):
Total tangible assets, net located outside the United States were approximately $5.4 million as of March 31, 2017 and December 31, 2016.
The Company conducts its operations primarily in the United States. For the three months ended March 31, 2017 and 2016 approximately 10% and 8%, respectively, of the Company’s sales were derived from sales outside the United States. The following table displays revenues attributable to the geographic location of the customer (in thousands):
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Restatement |
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Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restatement |
The Company identified the following errors impacting the Company’s condensed consolidated statement of cash flows as of March 31, 2017. 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 in cash or decrease in cash or cash balances. The correction of errors did not result in a change to the net cash for the period.
Youngevity International, Inc. and Subsidiaries Condensed Consolidated Statement of Cash Flows (In thousands) (Unaudited)
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Subsequent Events |
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Subsequent Events [Abstract] | |
Subsequent Events | None. |
Basis of Presentation and Description of Business (Policies) |
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Basis Of Presentation And Description Of Business Policies | |
Basis of Presentation |
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 condensed consolidated balance sheets. Once the harvest is complete, the harvest cost is then recognized as the inventory value.
Costs associated with the 2017 harvest as of March 31, 2017 and December 31, 2016 total approximately $552,000 and $452,000, respectively and are included in prepaid expenses and other current assets as deferred harvest costs on the Company’s condensed consolidated balance sheets. As of December 31, 2016, the inventory related to the 2016 harvest was $112,000. As of March 31, 2017, the ending inventory related to the 2016 harvest has been sold. The Company plans to finalize the inventory valuation related to the 2017 harvest during the second quarter of 2017 once the harvest is complete. |
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. |
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 condensed 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 twelve months as of May 12, 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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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. |
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 three months ended March 31, 2017, 105,029,193 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 since their effect would have been anti-dilutive.
The incremental dilutive common share equivalents for the three months ended March 31, 2016 were 8,385,704.
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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. |
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. Under the terms of the Factoring Agreement, the Company effectively sold those identified accounts receivable to Crestmark with non-credit related recourse. The Company maintains the risk associated with the factored receivables and is responsible for the servicing and administration of the receivables.
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 condensed consolidated balance sheets in the amount of approximately $2,614,000 and $1,078,000 as of March 31, 2017 and December 31, 2016, respectively, reflects the related collateralized accounts.
The Company's outstanding liability related to the Factoring Agreement was approximately $2,796,000 and $1,290,000 as of March 31, 2017 and December 31, 2016, respectively, and is included in other current liabilities on the condensed consolidated balance sheets. |
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 condensed consolidated balance sheets. Once the harvest is complete, the harvest cost is then recognized as the inventory value.
Costs associated with the 2017 harvest as of March 31, 2017 and December 31, 2016 total approximately $552,000 and $452,000, respectively and are included in prepaid expenses and other current assets as deferred harvest costs on the Company’s condensed consolidated balance sheets. As of December 31, 2016, the inventory related to the 2016 harvest was $112,000. As of March 31, 2017, the ending inventory related to the 2016 harvest has been sold. The Company plans to finalize the inventory valuation related to the 2017 harvest during the second quarter of 2017 once the harvest is complete. |
Related Party Transactions | Hernandez, Hernandez, Export Y Company
The Company’s coffee segment CLR is associated with Hernandez, Hernandez, Export Y Company (“H&H”), a Nicaragua company, through sourcing arrangements to procure Nicaraguan green coffee and in March 2014 as part of the Siles acquisition, CLR engaged H&H as employees to manage Siles. The Company made purchases of approximately $415,000 and $1,800,000 from this supplier for the three months ended March 31, 2017 and 2016, respectively. In addition, for the three months ended March 31, 2017 and 2016, CLR sold $491,000 and $700,000 respectively, in green coffee to H&H Coffee Group Export, a Florida Company which is affiliated with H&H.
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 $21,000 and $34,000 from Northwest Nutraceuticals Inc., for the three months ended March 31, 2017 and 2016, respectively. In addition, Mr. Renton and his wife are distributors of the Company and can earn commissions on sales products. |
Revenue Recognition | The Company recognizes revenue from product sales when the following four criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable, and collectability is reasonably assured. The Company ships the majority of its direct selling segment products directly to the distributors primarily via UPS, USPS or FedEx and receives substantially all payments for these sales in the form of credit card transactions. The Company regularly monitors its use of credit card or merchant services to ensure that its financial risk related to credit quality and credit concentrations is actively managed. Revenue is recognized upon passage of title and risk of loss to customers when product is shipped from the fulfillment facility. The Company ships the majority of its coffee segment products via common carrier and invoices its customer for the products. Revenue is recognized when the title and risk of loss is passed to the customer under the terms of the shipping arrangement, typically, FOB shipping point.
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 March 31, 2017 and December 31, 2016, the balance in deferred revenues was approximately $1,809,000 and $1,870,000 respectively, of which the portion attributable to Heritage Makers was approximately $1,622,000 and $1,662,000, respectively. The remaining balance of approximately $187,000 and $208,000 as of March 31, 2017 and December 31, 2016, related primarily to the Company’s 2017 conventions, respectively, whereby attendees pre-enroll in the events and the Company does not recognize this revenue until the conventions occur.
Deferred costs relate to Heritage Makers prepaid commissions that are recognized in expense at the time the related revenue is recognized. As of March 31, 2017 and December 31, 2016, the balance in deferred costs was approximately $390,000 and $415,000 respectively, and was included in prepaid expenses and current assets.
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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 was effective for fiscal years beginning after December 15, 2016, and early adoption was not permitted. The Company adopted ASU 2016-17 effective the quarter ended March 31, 2017. The adoption of ASU 2016-17 did not have a significant impact on the Company’s consolidated financial statements.
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 January 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; however it is expected to gross-up the consolidated balance sheet as a result of recognizing a lease asset along with a similar lease liability.
In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. This guidance requires that entities with a classified statement of financial position present all deferred tax assets and liabilities as noncurrent. This update is effective for annual and interim periods for fiscal years beginning after December 15, 2016, which required the Company to adopt the new guidance in the first quarter of fiscal 2017. Early adoption was permitted for financial statements that have not been previously issued and may be applied on either a prospective or retrospective basis. The Company adopted ASU 2015-17 effective the quarter ended March 31, 2017. The adoption of ASU 2015-17 did not have a significant impact on the Company’s consolidated financial statements other than the netting of current and long-term deferred tax assets and liabilities in the non-current section of the balance sheet and footnote disclosures.
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 the Company 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.
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Mar. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory And Cost Of Sales Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories |
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Acquisitions and Business Combinations (Tables) |
3 Months Ended | ||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||
Bellavita Group, LLC [Member] | |||||||||||||||||||||
Assets acquired and liabilities assumed |
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Ricolife, LLC [Member] | |||||||||||||||||||||
Assets acquired and liabilities assumed |
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Intangible Assets and Goodwill (Tables) |
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Intangible Assets And Goodwill Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets and Goodwill |
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Goodwill |
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Debt (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||
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Debt Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible note oustanding |
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Derivative Liability (Tables) |
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Derivative Liability Tables | ||||||||||||||||||||||||||||||||||||||||||||||
Monte Carlo fair value of warrants |
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Fair Value of Financial Instruments (Tables) |
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Fair Value Of Financial Instruments Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value measurement within the three levels of value hierarchy |
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Stockholders' Equity (Tables) |
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Stock Option Plan Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warrant Activity |
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Summary of Plan Options |
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Segment and Geographical Information (Tables) |
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Segment information geographical |
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Restatement (Tables) |
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Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restatement |
The Company identified the following errors impacting the Company’s condensed consolidated statement of cash flows as of March 31, 2017. 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 in cash or decrease in cash or cash balances. The correction of errors did not result in a change to the net cash for the period.
Youngevity International, Inc. and Subsidiaries Condensed Consolidated Statement of Cash Flows (In thousands) (Unaudited)
|
Basis of Presentation and Description of Business (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Dec. 31, 2016 |
|
Common stock equivalents anti-dilutive | 105,029,193 | 8,385,704 | |
Accounts receivable, due from factoring company | $ 2,614 | $ 1,078 | |
Deferred revenues | 1,809 | 1,870 | |
Deferred costs | 390 | 415 | |
2017 Harvest [Member] | |||
Prepaid costs | $ 552 | $ 452 |
Inventory and Costs of Revenues (Details) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Inventory And Cost Of Sales Details | ||
Finished goods | $ 11,135 | $ 11,550 |
Raw materials | 10,732 | 11,006 |
Total inventory | 21,867 | 22,556 |
Reserve for excess and obsolete inventory | (1,064) | (1,064) |
Total inventory, net | $ 20,803 | $ 21,492 |
Acquisitions and Business Combinations (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2017
USD ($)
| |
Bellavita Group, LLC [Member] | |
Total purchase price | $ 1,750 |
Bellavita Group, LLC [Member] | Distributor organizations [Member] | |
Total purchase price | 825 |
Bellavita Group, LLC [Member] | Customer-related intangible [Member] | |
Total purchase price | 525 |
Bellavita Group, LLC [Member] | Trademarks and trade name [Member] | |
Total purchase price | 400 |
Ricolife, LLC [Member] | |
Total purchase price | 920 |
Ricolife, LLC [Member] | Distributor organizations [Member] | |
Total purchase price | 440 |
Ricolife, LLC [Member] | Customer-related intangible [Member] | |
Total purchase price | 280 |
Ricolife, LLC [Member] | Trademarks and trade name [Member] | |
Total purchase price | $ 200 |
Acquisitions and Business Combinations (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Revenue | $ 38,733 | $ 38,202 |
Bellavita Group, LLC [Member] | ||
Fair value at date of acquisition | 1,750 | |
Revenue | 252 | |
Ricolife, LLC [Member] | ||
Fair value at date of acquisition | 920 | |
Revenue | $ 64 |
Intangible Assets and Goodwill (Details) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Distributor organizations [Member] | ||
Cost | $ 14,195 | $ 12,930 |
Accumulated Amortization | 7,460 | 7,162 |
Net | 6,735 | 5,768 |
Trademarks and trade names [Member] | ||
Cost | 5,997 | 5,394 |
Accumulated Amortization | 896 | 815 |
Net | 5,101 | 4,579 |
Customer relationships [Member] | ||
Cost | 8,651 | 7,846 |
Accumulated Amortization | 3,882 | 3,642 |
Net | 4,769 | 4,204 |
Internally developed software [Member] | ||
Cost | 720 | 720 |
Accumulated Amortization | 383 | 357 |
Net | 337 | 363 |
Intangible assets [Member] | ||
Cost | 29,563 | 26,890 |
Accumulated Amortization | 12,621 | 11,976 |
Net | $ 16,942 | $ 14,914 |
Intangible Assets and Goodwill (Details 1) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Goodwill | $ 6,323 | $ 6,323 |
Commercial Coffee [Member] | ||
Goodwill | 3,314 | 3,314 |
Direct Selling [Member] | ||
Goodwill | $ 3,009 | $ 3,009 |
Intangible Assets and Goodwill (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Dec. 31, 2016 |
|
Intangible Assets And Goodwill Details Narrative | |||
Amortization expense | $ 604 | $ 645 | |
Trademarks | 2,267 | ||
Goodwill balance | $ 6,323 | $ 6,323 |
Debt (Details) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
|||||||
---|---|---|---|---|---|---|---|---|---|
Net debt issuance costs | $ (847) | $ (968) | |||||||
Total convertible notes payable, net of debt discount | [1] | 8,712 | 8,327 | ||||||
Convertible Notes Payable 1 [Member] | |||||||||
Convertible notes issued | [2] | 2,534 | 2,296 | ||||||
Convertible Notes Payable 2 [Member] | |||||||||
Convertible notes issued | [3] | $ 7,025 | $ 6,999 | ||||||
|
Debt (Details Narrative) $ in Thousands |
Mar. 31, 2017
USD ($)
|
---|---|
July 2014 Private Placement [Member] | |
Principal outstanding amount remains | $ 4,750 |
November 2015 Private Placement [Member] | |
Principal outstanding amount remains | $ 7,187 |
Derivative Liability (Details) |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2017 |
Dec. 31, 2016 |
|
Annual dividend yield | 0.00% | 0.00% |
Minimum [Member] | ||
Stock price volatility | 60.00% | 60.00% |
Risk-free interest rate | 1.50% | 1.34% |
Expected life | 2 years 7 months 6 days | |
Maximum [Member] | ||
Stock price volatility | 65.00% | 65.00% |
Risk-free interest rate | 1.27% | 1.70% |
Expected life | 3 years 10 months 24 days |
Derivative Liability (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Dec. 31, 2016 |
|
Derivative Liability Details Narrative | |||
Warrant derivative liability | $ 2,735 | $ 3,345 | |
Decrease to derivative liability | $ (650) | $ (610) |
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Liabilities: | ||
Contingent acquisition debt, current portion | $ 411 | $ 628 |
Contingent acquisition debt, less current portion | 9,759 | 7,373 |
Warrant derivative liability | 2,735 | 3,345 |
Total liabilities | 12,905 | 11,346 |
Level 1 [Member] | ||
Liabilities: | ||
Contingent acquisition debt, current portion | 0 | 0 |
Contingent acquisition debt, less current portion | 0 | 0 |
Warrant derivative liability | 0 | 0 |
Total liabilities | 0 | 0 |
Level 2 [Member] | ||
Liabilities: | ||
Contingent acquisition debt, current portion | 0 | 0 |
Contingent acquisition debt, less current portion | 0 | 0 |
Warrant derivative liability | 0 | 0 |
Total liabilities | 0 | 0 |
Level 3 [Member] | ||
Liabilities: | ||
Contingent acquisition debt, current portion | 411 | 628 |
Contingent acquisition debt, less current portion | 9,759 | 7,373 |
Warrant derivative liability | 2,735 | 3,345 |
Total liabilities | $ 12,905 | $ 11,346 |
Fair Value of Financial Instruments (Details Narratives) $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2016
USD ($)
| ||||
Notes to Financial Statements | ||||
Change in fair value of contingent acquisition debt | $ (391) | [1] | ||
|
Stockholders' Equity (Details) - Warrant [Member] |
3 Months Ended |
---|---|
Mar. 31, 2017
shares
| |
Number of Shares | |
Outstanding, beginning of period | 37,988,030 |
Issued | 0 |
Expired / cancelled | (300,000) |
Exercised | 0 |
Outstanding, end of period | 37,688,030 |
Stockholders' Equity (Details 1) - Stock Option [Member] $ / shares in Units, $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2017
USD ($)
$ / shares
shares
| |
Number of Shares | |
Outstanding, beginning of period | shares | 33,230,000 |
Granted | shares | 20,000 |
Canceled / expired | shares | (296,250) |
Exercised | shares | (42,000) |
Outstanding, end of period | shares | 32,911,750 |
Exercisable, end of period | shares | 18,512,750 |
Outstanding, beginning of period | $ / shares | $ .24 |
Granted | $ / shares | .31 |
Canceled / expired | $ / shares | .19 |
Exercised | $ / shares | .19 |
Outstanding, end of period | $ / shares | .24 |
Exercisable, end of period | $ / shares | $ .22 |
Aggregate Intrinsic Value | |
Outstanding, beginning of period | $ | $ 1,346 |
Exercised | $ | 0 |
Outstanding, end of period | $ | 774 |
Exercisable, end of period | $ | $ 561 |
Stockholders' Equity (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Dec. 31, 2016 |
|
Convertible Preferred Stock, shares outstanding | 161,135 | 161,135 | |
Accrued dividends | $ 115 | $ 112 | |
Common Stock, shares outstanding | 392,740,557 | 392,698,557 | |
Shares repurchased | 0 | ||
Remaining shares authorized for repurchase | 11,068,120 | ||
Warrant outstanding | 37,688,030 | ||
Weighted average remaining term, warrant | 2 years 6 months 7 days | ||
Stock based compensation expense | $ 127 | $ 70 | |
Unrecognized compensation expense related to unvested share-based compensation arrangements | $ 1,959 | ||
Weighted-average period recognized | 4 years 2 months 5 days | ||
Series A Preferred Stock [Member] | |||
Convertible Preferred Stock, shares outstanding | 161,135 | 161,135 | |
Minimum [Member] | |||
Warrant outstanding, price range | $ .10 | ||
Maximum [Member] | |||
Warrant outstanding, price range | $ .50 |
Segment and Geographical Information (Details) - USD ($) $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|||
Revenues | $ 38,733 | $ 38,202 | ||
Gross profit | 21,866 | 23,363 | ||
Operating (loss) income | (2,400) | 1,163 | ||
Net income (loss) | [1] | (2,059) | 151 | |
Capital expenditures | 308 | 611 | ||
Direct Selling [Member] | ||||
Revenues | 33,242 | 34,798 | ||
Gross profit | 21,855 | 23,490 | ||
Operating (loss) income | (1,754) | 2,024 | ||
Net income (loss) | (1,512) | 674 | ||
Capital expenditures | 128 | 312 | ||
Commercial Coffee [Member] | ||||
Revenues | 5,491 | 3,404 | ||
Gross profit | 11 | (127) | ||
Operating (loss) income | (646) | (861) | ||
Net income (loss) | (547) | (523) | ||
Capital expenditures | $ 180 | $ 299 | ||
|
Segment and Geographical Information (Details 1) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Total assets | $ 69,166 | $ 66,008 |
Commercial Coffee [Member] | ||
Total assets | 42,689 | 25,881 |
Direct Selling [Member] | ||
Total assets | $ 26,477 | $ 40,127 |
Segment and Geographical Information (Details 2) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Total revenues | $ 38,733 | $ 38,202 |
United States [Member] | ||
Total revenues | 34,835 | 34,963 |
International [Member] | ||
Total revenues | $ 3,898 | $ 3,239 |
Segment and Geographical Information (Details Narrative) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Tangible assets | $ 5,400 | |
International [Member] | ||
Tangible assets | $ 5,400 |
Restatement (Details) - USD ($) $ in Thousands |
3 Months Ended | ||||
---|---|---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
||||
Cash Flows from Operating Activities: | |||||
Net (loss) income | [1] | $ (2,059) | $ 151 | ||
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | |||||
Depreciation and amortization | [1] | 1,036 | 1,003 | ||
Stock based compensation expense | [1] | 127 | 70 | ||
Amortization of deferred financing costs | [1] | 90 | 90 | ||
Amortization of prepaid advisory fees | [1] | 14 | 15 | ||
Change in fair value of warrant derivative liability | [1] | (610) | (650) | ||
Amortization of debt discount | [1] | 263 | 264 | ||
Amortization of warrant issuance costs | [1] | 32 | 32 | ||
Expenses allocated in profit sharing agreement | [1] | (225) | (147) | ||
Change in fair value of contingent acquisition debt | [1] | (391) | |||
Changes in operating assets and liabilities, net of effect from business combinations: | |||||
Accounts receivable | [1] | (1,263) | 281 | ||
Inventory | [1] | 689 | (1,997) | ||
Prepaid expenses and other current assets | [1] | 425 | (835) | ||
Accounts payable | [1] | (342) | 1,183 | ||
Accrued distributor compensation | [1] | 478 | 704 | ||
Deferred revenues | [1] | (61) | (155) | ||
Accrued expenses and other liabilities | [1] | 1,827 | 670 | ||
Income taxes receivable | [1] | (928) | 173 | ||
Net Cash Provided by Operating Activities | [1] | (507) | 461 | ||
Cash Flows from Investing Activities: | |||||
Acquisitions, net | [1] | (175) | 0 | ||
Purchases of property and equipment | [1] | (142) | (611) | ||
Net Cash Used in Investing Activities | [1] | (317) | (611) | ||
Cash Flows from Financing Activities: | |||||
Proceeds from the exercise of stock options | [1] | 3 | 0 | ||
Payments of notes payable, net | [1] | (53) | (306) | ||
Proceeds (payments) from /to factoring company | [1] | 1,507 | (210) | ||
Payments of contingent acquisition debt | [1] | (134) | (328) | ||
Payments of capital leases | [1] | (296) | (41) | ||
Repurchase of common stock | [1] | (4) | |||
Net Cash Provided by (Used in) Financing Activities | [1] | 1,027 | (889) | ||
Foreign Currency Effect on Cash | [1] | (53) | (109) | ||
Net increase (decrease) in cash and cash equivalents | [1] | 150 | (1,148) | ||
Cash and Cash Equivalents, Beginning of Period | [1] | 869 | 3,875 | ||
Cash and Cash Equivalents, End of Period | [1] | 1,019 | $ 2,727 | ||
Scenario, Previously Reported [Member] | |||||
Cash Flows from Operating Activities: | |||||
Net (loss) income | (2,059) | ||||
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | |||||
Depreciation and amortization | 1,036 | ||||
Stock based compensation expense | 127 | ||||
Amortization of deferred financing costs | 90 | ||||
Amortization of prepaid advisory fees | 14 | ||||
Change in fair value of warrant derivative liability | (610) | ||||
Amortization of debt discount | 263 | ||||
Amortization of warrant issuance costs | (32) | ||||
Expenses allocated in profit sharing agreement | (225) | ||||
Changes in operating assets and liabilities, net of effect from business combinations: | |||||
Accounts receivable | (1,263) | ||||
Inventory | 689 | ||||
Prepaid expenses and other current assets | 425 | ||||
Accounts payable | (342) | ||||
Accrued distributor compensation | 478 | ||||
Deferred revenues | (61) | ||||
Accrued expenses and other liabilities | 4,841 | ||||
Income taxes receivable | (928) | ||||
Net Cash Provided by Operating Activities | 2,507 | ||||
Cash Flows from Investing Activities: | |||||
Acquisitions, net | (175) | ||||
Purchases of property and equipment | (142) | ||||
Net Cash Used in Investing Activities | (317) | ||||
Cash Flows from Financing Activities: | |||||
Proceeds from the exercise of stock options | 3 | ||||
Payments of notes payable, net | (53) | ||||
Proceeds (payments) from /to factoring company | 1,507 | ||||
Payments of contingent acquisition debt | (134) | ||||
Payments of capital leases | (296) | ||||
Net Cash Provided by (Used in) Financing Activities | (1,987) | ||||
Foreign Currency Effect on Cash | (53) | ||||
Net increase (decrease) in cash and cash equivalents | 150 | ||||
Cash and Cash Equivalents, Beginning of Period | 869 | ||||
Cash and Cash Equivalents, End of Period | 1,019 | ||||
Restatement Adjustment [Member] | |||||
Cash Flows from Operating Activities: | |||||
Net (loss) income | 0 | ||||
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | |||||
Depreciation and amortization | 0 | ||||
Stock based compensation expense | 0 | ||||
Amortization of deferred financing costs | 0 | ||||
Amortization of prepaid advisory fees | 0 | ||||
Change in fair value of warrant derivative liability | 0 | ||||
Amortization of debt discount | 0 | ||||
Amortization of warrant issuance costs | 0 | ||||
Expenses allocated in profit sharing agreement | 0 | ||||
Changes in operating assets and liabilities, net of effect from business combinations: | |||||
Accounts receivable | 0 | ||||
Inventory | 0 | ||||
Prepaid expenses and other current assets | 0 | ||||
Accounts payable | 0 | ||||
Accrued distributor compensation | 0 | ||||
Deferred revenues | 0 | ||||
Accrued expenses and other liabilities | (3,014) | ||||
Income taxes receivable | 0 | ||||
Net Cash Provided by Operating Activities | (3,014) | ||||
Cash Flows from Investing Activities: | |||||
Acquisitions, net | 0 | ||||
Purchases of property and equipment | 0 | ||||
Net Cash Used in Investing Activities | 0 | ||||
Cash Flows from Financing Activities: | |||||
Proceeds from the exercise of stock options | 0 | ||||
Payments of notes payable, net | 0 | ||||
Proceeds (payments) from /to factoring company | (3,014) | ||||
Payments of contingent acquisition debt | 0 | ||||
Payments of capital leases | 0 | ||||
Net Cash Provided by (Used in) Financing Activities | (3,014) | ||||
Foreign Currency Effect on Cash | 0 | ||||
Net increase (decrease) in cash and cash equivalents | 3,014 | ||||
Cash and Cash Equivalents, Beginning of Period | 0 | ||||
Cash and Cash Equivalents, End of Period | $ 0 | ||||
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