N
otes to Condensed Consolidated
Financial Statements
(Unaudited)
March 31, 2017
Note 1. 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.
Note
2.
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.
Note
3.
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):
|
|
|
|
|
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
|
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.
Note 4. 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):
Distributor
organization
|
$
825
|
Customer-related
intangible
|
525
|
Trademarks
and trade name
|
400
|
Total
purchase price
|
$
1,750
|
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):
Distributor
organization
|
$
440
|
Customer-related
intangible
|
280
|
Trademarks
and trade name
|
200
|
Total
purchase price
|
$
920
|
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.
Note 5. 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):
|
|
|
|
|
|
|
|
|
|
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
|
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):
|
|
|
Goodwill,
commercial coffee
|
$
3,314
|
$
3,314
|
Goodwill,
direct selling
|
3,009
|
3,009
|
Total
goodwill
|
$
6,323
|
$
6,323
|
Note 6. 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):
|
|
|
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
|
(1)
Principal
amount of $4,750,000 is net of unamortized debt discounts of
$2,216,000 as of March 31, 2017 and $2,454,000 as of December 31,
2016.
(2)
Principal
amount of approximately $7,188,000 is net of unamortized debt
discounts of $163,000 as of March 31, 2017 and $189,000 as of
December 31, 2016.
(3)
Principal
amounts are net of unamortized debt discounts and issuance costs of
$3,226,000 as of March 31, 2017 and $3,611,000 as of December 31,
2016.
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.
Note 7. 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:
|
|
|
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
|
In addition, Management assessed the probabilities of future
financing assumptions in the valuation models.
Note 8. 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):
|
Fair Value at March 31, 2017
|
|
|
|
|
|
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
|
|
|
|
|
|
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
|
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.
Note 9. 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:
Balance
at December 31, 2016
|
37,988,030
|
Issued
|
-
|
Expired
/ cancelled
|
(300,000
)
|
Exercised
|
-
|
Balance
at March 31, 2017
|
37,688,030
|
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 t
he Company has issued 100,000 shares
of restricted common stock i
n
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:
|
|
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
|
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.
Note 10. 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):
|
|
|
|
|
|
|
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
|
|
|
|
|
|
Total
assets
|
|
|
Direct selling
|
$
42,689
|
$
40,127
|
Commercial coffee
|
26,477
|
25,881
|
Total assets
|
$
69,166
|
$
66,008
|
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):
|
|
|
|
|
|
|
Revenues
|
|
|
United States
|
$
34,835
|
$
34,963
|
International
|
3,898
|
3,239
|
Total revenues
|
$
38,733
|
$
38,202
|
Note 11. Subsequent Events
None.
Note
12. 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
|
|
|
|
Three Months Ended March 31, 2017
|
|
|
|
|
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
|