UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018March 31, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____  to ____

Commission File Number: 001-38151

 

YogaWorks, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

47-1219105

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

5780 Uplander Way

Culver City, CA 90230

(Address of principal executive offices)

Registrant’s telephone number, including area code: (310) 664-6470

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  (Do not check if a small reporting company)

  

Small reporting company

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock $0.001 par value

YOGA

The Nasdaq Capital Market

As of July 31, 2018,May 13, 2019, the registrant had 16,466,52616,792,085 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

2

Item 1.

Financial Statements (Unaudited)

2

 

Condensed Consolidated Balance Sheets

2

 

Condensed Consolidated Statements of Operations

3

 

Condensed Consolidated Statements of Stockholders’ Equity

4

 

Condensed Consolidated Statements of Cash Flows

5

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

1617

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

PART II.

OTHER INFORMATION

25

Item 1.

Legal Proceedings

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

25

Item 3.

Defaults Upon Senior Securities

2526

Item 4.

Mine Safety Disclosures

2526

Item 5.

Other Information

2526

Item 6.

Exhibits

2627

Exhibit Index

2627

Signatures

2728

 

 

 

 


 

YogaWorPART I. FINANCIks,AL INFORMATION

Item 1. Financial Statements

YogaWorks, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

 

 

As of

June 30, 2018

 

 

As of

December 31, 2017

 

 

As of

March 31, 2019

 

 

As of

December 31, 2018

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

15,465,549

 

 

$

22,095,216

 

 

$

6,065,077

 

 

$

11,447,318

 

Inventories

 

 

1,222,960

 

 

 

1,212,608

 

 

 

1,089,976

 

 

 

1,148,449

 

Prepaid expenses and other current assets

 

 

2,075,346

 

 

 

1,145,067

 

 

 

1,951,951

 

 

 

936,757

 

Total current assets

 

 

18,763,855

 

 

 

24,452,891

 

 

 

9,107,004

 

 

 

13,532,524

 

Property and equipment, net

 

 

9,856,627

 

 

 

10,418,203

 

 

 

9,967,773

 

 

 

10,225,944

 

Intangible assets, net

 

 

19,442,521

 

 

 

22,142,275

 

 

 

12,560,321

 

 

 

13,291,502

 

Goodwill

 

 

10,782,063

 

 

 

12,768,773

 

 

 

663,954

 

 

 

663,954

 

Other non-current assets

 

 

1,314,362

 

 

 

1,224,179

 

 

 

1,232,685

 

 

 

1,327,775

 

Total assets

 

$

60,159,428

 

 

$

71,006,321

 

 

$

33,531,737

 

 

$

39,041,699

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

2,452,232

 

 

$

3,794,569

 

 

$

3,573,315

 

 

$

4,905,204

 

Accrued compensation

 

 

1,735,092

 

 

 

1,947,134

 

 

 

1,166,084

 

 

 

1,802,047

 

Deferred revenue

 

 

7,545,300

 

 

 

7,187,948

 

 

 

8,274,505

 

 

 

7,276,578

 

Current portion of deferred rent

 

 

106,802

 

 

 

122,607

 

 

 

138,702

 

 

 

124,319

 

Total current liabilities

 

 

11,839,426

 

 

 

13,052,258

 

 

 

13,152,606

 

 

 

14,108,148

 

Deferred rent, net of current portion

 

 

3,517,807

 

 

 

3,418,886

 

 

 

4,065,224

 

 

 

3,975,391

 

Deferred tax liability

 

 

12,641

 

 

 

 

Total liabilities

 

 

15,369,874

 

 

 

16,471,144

 

 

 

17,217,830

 

 

 

18,083,539

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 14)

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 12)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock $0.001 par value; 50,000,000 shares authorized,

16,595,513 issued and 16,460,501 outstanding at June 30, 2018

and 50,000,000 shares authorized, 16,435,505 issued and

16,332,510 outstanding at December 31, 2017

 

 

16,461

 

 

 

16,333

 

Common stock $0.001 par value; 50,000,000 shares authorized,

16,710,701 issued and 16,608,238 outstanding at March 31, 2019

and 50,000,000 shares authorized, 16,639,586 issued and

16,494,838 outstanding at December 31, 2018

 

 

16,609

 

 

 

16,496

 

Additional paid in capital

 

 

112,516,233

 

 

 

111,650,415

 

 

 

113,615,042

 

 

 

113,260,161

 

Accumulated deficit

 

 

(67,743,140

)

 

 

(57,131,571

)

 

 

(97,317,744

)

 

 

(92,318,497

)

Total stockholders’ equity

 

 

44,789,554

 

 

 

54,535,177

 

 

 

16,313,907

 

 

 

20,958,160

 

Total liabilities and stockholders’ equity

 

$

60,159,428

 

 

$

71,006,321

 

 

$

33,531,737

 

 

$

39,041,699

 

 

See accompanying notes to condensed consolidated financial statements.


YogaWorks, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net revenues

 

$

14,870,362

 

 

$

12,493,461

 

 

$

30,400,175

 

 

$

26,483,555

 

Cost of revenues and operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

5,755,974

 

 

 

4,805,637

 

 

 

11,679,823

 

 

 

9,934,389

 

Center operations

 

 

7,061,573

 

 

 

5,583,228

 

 

 

13,833,489

 

 

 

11,269,866

 

General and administrative expenses

 

 

4,054,012

 

 

 

4,094,443

 

 

 

8,458,945

 

 

 

7,104,829

 

Depreciation and amortization

 

 

2,218,271

 

 

 

2,167,877

 

 

 

4,597,028

 

 

 

4,369,462

 

Goodwill impairment

 

 

2,474,819

 

 

 

 

 

 

2,474,819

 

 

 

 

Total cost of revenues and operating

   expenses

 

 

21,564,649

 

 

 

16,651,185

 

 

 

41,044,104

 

 

 

32,678,546

 

Loss from operations

 

 

(6,694,287

)

 

 

(4,157,724

)

 

 

(10,643,929

)

 

 

(6,194,991

)

Interest (income) expense, net

 

 

(44,142

)

 

 

248,874

 

 

 

(50,272

)

 

 

810,506

 

Net loss before provision

   for income taxes

 

 

(6,650,145

)

 

 

(4,406,598

)

 

 

(10,593,657

)

 

 

(7,005,497

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

528

 

 

 

41,107

 

 

 

17,912

 

 

 

59,006

 

Net loss

 

 

(6,650,673

)

 

 

(4,447,705

)

 

 

(10,611,569

)

 

 

(7,064,503

)

Less preferred rights dividend on redeemable

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

(995,743

)

Net loss attributable to common

   stockholders

 

$

(6,650,673

)

 

$

(4,447,705

)

 

$

(10,611,569

)

 

$

(8,060,246

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per share

   attributable to common stockholders

 

$

(0.41

)

 

$

(0.50

)

 

$

(0.65

)

 

$

(1.66

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of shares used in

   calculating loss per share attributable to

   common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted common shares

 

 

16,382,505

 

 

 

8,908,188

 

 

 

16,367,796

 

 

 

4,857,160

 

See accompanying notes to condensed consolidated financial statements.


YogaWorks, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance, December 31, 2017

 

 

16,332,510

 

 

$

16,333

 

 

$

111,650,415

 

 

$

(57,131,571

)

 

$

54,535,177

 

Vesting of restricted stock units

 

 

160,533

 

 

 

161

 

 

 

(161

)

 

 

 

 

 

 

Repurchase of shares to satisfy tax withholding

 

 

(32,542

)

 

 

(33

)

 

 

(83,630

)

 

 

 

 

 

(83,663

)

Stock-based compensation

 

 

 

 

 

 

 

 

949,609

 

 

 

 

 

 

949,609

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(10,611,569

)

 

 

(10,611,569

)

Balance, June 30, 2018

 

 

16,460,501

 

 

$

16,461

 

 

$

112,516,233

 

 

$

(67,743,140

)

 

$

44,789,554

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Net revenues

 

$

15,691,274

 

 

$

15,529,813

 

Cost of revenues and operating expenses

 

 

 

 

 

 

 

 

Cost of revenues

 

 

6,144,819

 

 

 

5,923,849

 

Center operations

 

 

6,841,994

 

 

 

6,771,916

 

General and administrative expenses

 

 

4,375,716

 

 

 

4,404,933

 

Depreciation and amortization

 

 

1,499,668

 

 

 

2,378,757

 

Asset impairment

 

 

174,725

 

 

 

 

Total cost of revenues and operating expenses

 

 

19,036,922

 

 

 

19,479,455

 

Loss from operations

 

 

(3,345,648

)

 

 

(3,949,642

)

Interest income, net

 

 

(39,336

)

 

 

(6,130

)

Net loss before income taxes

 

 

(3,306,312

)

 

 

(3,943,512

)

Provision for income taxes

 

 

5,025

 

 

 

17,384

 

Net loss

 

$

(3,311,337

)

 

$

(3,960,896

)

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per share

   attributable to common stockholders

 

$

(0.20

)

 

$

(0.24

)

Weighted-average number of shares used in

   calculating loss per share attributable to

   common stockholders:

 

 

 

 

 

 

 

 

Basic and diluted common shares

 

 

16,533,349

 

 

 

16,350,026

 

 

See accompanying notes to condensed consolidated financial statements.

 


YogaWorks, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance as of January 1, 2018

 

 

16,332,510

 

 

$

16,333

 

 

$

111,650,415

 

 

$

(57,131,571

)

 

$

54,535,177

 

Vesting of restricted stock units

 

 

56,351

 

 

 

56

 

 

 

(56

)

 

 

 

 

 

 

Repurchase of shares to satisfy tax withholding

 

 

(25,906

)

 

 

(26

)

 

 

(73,610

)

 

 

 

 

 

(73,636

)

Stock-based compensation

 

 

 

 

 

 

 

 

452,176

 

 

 

 

 

 

452,176

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(3,960,896

)

 

 

(3,960,896

)

Balance as of March 31, 2018

 

 

16,362,955

 

 

$

16,363

 

 

$

112,028,925

 

 

$

(61,092,467

)

 

$

50,952,821

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 1, 2019

 

 

16,494,838

 

 

$

16,496

 

 

$

113,260,161

 

 

$

(92,318,497

)

 

$

20,958,160

 

Vesting of restricted stock units

 

 

139,287

 

 

 

139

 

 

 

(139

)

 

 

 

 

 

 

Repurchase of shares to satisfy tax withholding

 

 

(25,887

)

 

 

(26

)

 

 

(14,664

)

 

 

 

 

 

(14,690

)

Stock-based compensation

 

 

 

 

 

 

 

 

369,684

 

 

 

 

 

 

369,684

 

Impact of Adopting Topic 606

 

 

 

 

 

 

 

 

 

 

 

(1,687,910

)

 

 

(1,687,910

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(3,311,337

)

 

 

(3,311,337

)

Balance as of March 31, 2019

 

 

16,608,238

 

 

$

16,609

 

 

$

113,615,042

 

 

$

(97,317,744

)

 

$

16,313,907

 

See accompanying notes to condensed consolidated financial statements.


YogaWorks, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

 

Six Months Ended June 30,

 

 

Three Months Ended March 31,

 

 

2018

 

 

2017

 

 

2019

 

 

2018

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(10,611,569

)

 

$

(7,064,503

)

 

$

(3,311,337

)

 

$

(3,960,896

)

Adjustments to reconcile net loss to net cash used in

operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

4,597,028

 

 

 

4,369,462

 

 

 

1,499,668

 

 

 

2,378,757

 

Goodwill impairment

 

 

2,474,819

 

 

 

 

Asset impairment

 

 

174,725

 

 

 

 

Deferred tax

 

 

12,641

 

 

 

44,865

 

 

 

 

 

 

14,748

 

Paid-in-kind interest expense capitalized to convertible note

 

 

 

 

 

259,087

 

Beneficial conversion feature

 

 

 

 

 

147,877

 

Amortization of debt issuance cost

 

 

 

 

 

55,437

 

Stock-based compensation expense

 

 

949,609

 

 

 

825,145

 

 

 

369,684

 

 

 

452,176

 

Changes to operating assets and liabilities

 

 

 

 

 

 

 

 

Changes to operating assets and liabilities, net of effects from acquisitions:

 

 

 

 

 

 

 

 

Tenant improvement allowances received

 

 

47,530

 

 

 

 

 

 

289,260

 

 

 

 

Inventories

 

 

(6,386

)

 

 

69,605

 

 

 

58,473

 

 

 

(32,671

)

Prepaid expenses and other current assets

 

 

(930,279

)

 

 

(595,180

)

 

 

(1,304,454

)

 

 

(79,209

)

Other non-current assets

 

 

(52,751

)

 

 

(42,220

)

 

 

95,090

 

 

 

(63,963

)

Accounts payable and accrued expenses

 

 

(857,643

)

 

 

644,590

 

 

 

(1,331,889

)

 

 

(720,731

)

Accrued compensation

 

 

(212,042

)

 

 

(104,331

)

 

 

(635,963

)

 

 

(841,809

)

Deferred revenue

 

 

2,739

 

 

 

508,070

 

 

 

(689,983

)

 

 

194,940

 

Deferred rent and other non-current liabilities

 

 

35,586

 

 

 

60,446

 

 

 

104,216

 

 

 

(4,671

)

Net cash used in operating activities

 

 

(4,550,718

)

 

 

(821,650

)

 

 

(4,682,510

)

 

 

(2,663,329

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property, equipment, and intangible assets

 

 

(629,662

)

 

 

(470,046

)

 

 

(685,041

)

 

 

(425,901

)

Acquisition earnout and holdback payments

 

 

(643,694

)

 

 

 

Cash paid for acquisitions, net of earnouts

 

 

(721,930

)

 

 

 

Net cash used in investing activities

 

 

(1,995,286

)

 

 

(470,046

)

 

 

(685,041

)

 

 

(425,901

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Repurchase of shares to satisfy tax withholding

 

 

(83,663

)

 

 

 

 

 

(14,690

)

 

 

(73,636

)

Principal payment on term loans

 

 

 

 

 

(87,500

)

Principal payment on subordinated notes

 

 

 

 

 

(200,000

)

Proceeds from issuance of convertible note

 

 

 

 

 

3,200,000

 

Proceeds from issuance of common stock

 

 

 

 

 

13,800

 

Net cash (used in) provided by financing activities

 

 

(83,663

)

 

 

2,926,300

 

Increase (decrease) in cash and cash equivalents

 

 

(6,629,667

)

 

 

1,634,604

 

Acquisition earnout and holdback payments

 

 

 

 

 

(617,042

)

Net cash used in financing activities

 

 

(14,690

)

 

 

(690,678

)

Decrease in cash and cash equivalents

 

 

(5,382,241

)

 

 

(3,779,908

)

Cash and cash equivalents, beginning of period

 

 

22,095,216

 

 

 

1,912,421

 

 

 

11,447,318

 

 

 

22,095,216

 

Cash and cash equivalents, end of period

 

$

15,465,549

 

 

$

3,547,025

 

 

$

6,065,077

 

 

$

18,315,308

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

 

 

Interest paid

 

$

 

 

$

277,151

 

Supplemental disclosure of non-cash activities

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

 

Purchase consideration liabilities related to acquisitions

 

$

159,000

 

 

$

 

Financing activities

 

 

 

 

 

 

 

 

Dividends on preferred redeemable stock accrued

 

 

 

 

 

995,743

 

Paid-in-kind interest expense capitalized convertible note

 

 

 

 

 

259,087

 

Conversion of convertible notes to equity

 

 

 

 

 

11,825,774

 

Conversion of preferred redeemable stock to equity

 

 

 

 

 

62,388,567

 

 

See accompanying notes to condensed consolidated financial statements.


YogaWorks, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.Organization1.Organization and Basis of Presentation

General

YogaWorks, Inc., a Delaware corporation, and its wholly-owned subsidiary Yoga Works, Inc., a California corporation (togethersubsidiaries (collectively referred to as “we”, “us”, “our”, and the “Company”), are primarily engaged in operating yoga studios. YogaWorks, Inc.Our Company was formerly known as YWX Holdings, Inc. and we changed our name to YogaWorks, Inc. on April 10, 2017. We operate under the brand names YogaWorks, Yoga Tree and certain other local brands for a period of time following the acquisition of studios. We primarily offer yoga classes, workshops, teacher training programs, and yoga-related retail merchandise across our studios. In addition to our studio locations, we offer online yoga instruction and programming through our MyYogaWorks.com web platform, which provides subscribers with a highly curated library of over 1,1001,200 yoga classes.

Initial Public Offering

On August 16, 2017, we completed our initial public offering (“IPO”) whereby we sold 7,300,000 shares of our common stock (“Common Stock”) registered at a price of $5.50 per share. Our shares of our Common Stock arewere traded on the NASDAQNasdaq Global Market. We received proceeds from our IPO of $37.6 million after deducting underwriters'underwriters’ discounts and commissions of $2.5 million, but before deducting offering costs of $2.6 million. Certain IPO-related costs of $5.1 million were recorded as a reduction to additional paid-in capital in 2017.

On May 3, 2019, our Company’s securities were transferred from the Nasdaq Global Market to the Nasdaq Capital Market.

Markets

We operate in regional markets across the United States (“U.S.”). As a result of the clustering of our studios in key geographic markets, and the flexibility offered to students to use different studios in a regional market, we do not report net revenues on an individual studio basis or report same studio sales. We prefer to analyze financial results on a regional market basis. Given the focus on acquisitions, we may acquire studios in an existing regional market to capture more regional market share, which may take some market share from our existing studios.

As of June 30, 2018,March 31, 2019, we owned and operated 7168 yoga studios in nine regional markets. The following table illustrates the studio locations by regional market:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

Three Months Ended March 31,

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

2019

 

 

2018

 

Regional Market

 

Number of

Studios(1)

 

Percentage of

Net Revenues(2)

 

 

Number of

Studios(1)

 

 

Percentage of

Net Revenues(2)

 

 

Number of

Studios(1)

 

Percentage of

Net Revenues(2)

 

 

Number of

Studios(1)

 

 

Percentage of

Net Revenues(2)

 

 

Number of

Studios(1)

 

Percentage of

Net Revenues(2)

 

 

Number of

Studios(1)

 

Percentage of

Net Revenues(2)

 

Los Angeles

 

17

 

 

34

%

 

17

 

 

 

42

%

 

17

 

 

34

%

 

17

 

 

 

41

%

 

17

 

 

33

%

 

17

 

 

34

%

Orange County (California)

 

4

 

 

6

%

 

4

 

 

 

8

%

 

4

 

 

6

%

 

4

 

 

 

8

%

 

4

 

 

6

%

 

4

 

 

6

%

Northern California

 

13

 

 

21

%

 

13

 

 

 

25

%

 

13

 

 

22

%

 

13

 

 

 

25

%

 

13

 

 

23

%

 

13

 

 

23

%

Houston(3)

 

7

 

 

9

%

 

 

 

 

 

 

 

7

 

 

9

%

 

 

 

 

 

 

 

7

 

 

8

%

 

7

 

 

8

%

Atlanta(3)

 

4

 

 

5

%

 

 

 

 

 

 

 

4

 

 

4

%

 

 

 

 

 

 

 

4

 

 

3

%

 

4

 

 

4

%

Washington, D.C.(4)

 

6

 

 

4

%

 

1

 

 

 

1

%

 

6

 

 

4

%

 

1

 

 

 

1

%

 

6

 

 

5

%

 

6

 

 

5

%

Baltimore(4)

 

7

 

 

6

%

 

7

 

 

 

7

%

 

7

 

 

6

%

 

7

 

 

 

7

%

 

7

 

 

7

%

 

7

 

 

6

%

New York City(3)

 

5

 

 

10

%

 

5

 

 

 

14

%

 

5

 

 

11

%

 

5

 

 

 

14

%

 

4

 

 

9

%

 

5

 

 

11

%

Boston(5)(4)

 

8

 

 

5

%

 

3

 

 

 

3

%

 

8

 

 

4

%

 

3

 

 

 

4

%

 

6

 

 

6

%

 

3

 

 

3

%

Total Studios

 

71

 

 

 

 

 

50

 

 

 

 

 

 

71

 

 

 

 

 

50

 

 

 

 

 

 

68

 

 

 

 

 

66

 

 

 

 

 


 

(1)

Number of studios as of June 30, 2018March 31, 2019 and 2017.2018.

 

(2)

For the three and six months ended June 30, 2018March 31, 2019 and 2017.2018. Assumes that any net revenues for teacher training, workshops and MyYogaWorks.com for such period are allocated to the regional markets on a proportional basis based on the market’s share of total studio net revenues for such period.

 

(3)

Reflects seven Houston area studios acquiredOne New York City studio was closed in October 2017 and four Atlanta area studios acquired in November 2017.the fourth quarter of 2018.

 

(4)

Reflects five Washington, D.C./Baltimore-area studios acquired in the second half of 2017. The regions were then split into two separate areas as a result of the acquisitions.

(5)

Reflects five Boston area studios acquired in the second quarter of 2018.2018 and two Boston area studios that closed in the third quarter of 2018 and first quarter of 2019.


We operate in a number of regional operating segments; however, we meet the aggregation criteria of Accounting Standards Codification (“ASC”) 280, Segment Reporting, and therefore report as one reportable segment. Our chief executive officer, who is our chief operating decision maker, determines our strategy and makes operating decisions for our regional operating segments, and assesses performance and allocates resources based on performance of our regional operating segments. We derive revenue from the sale of yoga classes, workshops, teacher training programs and yoga-related retail merchandise.

Liquidity and Going Concern

We have a history of operating losses and an accumulated deficit of $97.3 million as of March 31, 2019. In addition, we had negative working capital of $4.0 and $0.6 million at March 31, 2019 and December 31, 2018, respectively. As disclosed in our most recent Annual Report on Form 10-K, the Company needs additional financing to fund its operations. These conditions raise substantial doubt about our ability to continue as a going concern. Historically, we have satisfied our liquidity needs primarily through cash generated from financing activities. Our principal liquidity needs include cash used for operations (such as rent and labor costs), acquisitions, capital expenditures for the development of new studios and other capital expenditures necessary to improve existing studios, primarily leasehold improvements and additional furniture and fixtures.

The accompanying interim unaudited financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that may result from the outcome of this uncertainty. At May 14, 2019, the Company is in the process of obtaining additional financing. The Company may sell additional equity, issue debt securities or obtain a credit facility. However, the Company may not be able to secure such financing in a timely manner or on favorable terms. Without additional funds, the Company may choose to delay or reduce its operating or investment expenditures which may have a material adverse effect on operations.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements included herein have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, normal recurring adjustments considered necessary for a fair presentation have been reflected in these condensed consolidated financial statements.

The consolidated balance sheet as of December 31, 20172018 has been derived from the audited financial statements for the fiscal year then ended included in our Annual Report on Form 10-K filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended, on April 3, 2018March 27, 2019 (the “10-K”), but does not include all of the information and notes required by GAAP for complete financial statements. The financial information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements as of and for the fiscal year ended December 31, 20172018 and the related notes thereto included in the 10-K.

Effective January 1, 2019, the Company adopted the requirements of Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, as discussed further in Note 2. All amounts and disclosures set forth in this Quarterly Report on Form 10-Q have been updated to comply with this new standard with results for reporting periods beginning after January 1, 2019 presented under ASU No. 2014-09, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period.

The Company has corrected an immaterial misstatement in the March 31, 2018 Statement of Cash Flows. The Company has reclassified $617,042 of cash paid related to acquisition holdback and earnouts from investing activities to financing activities. There was no impact on the cash flow from operating activities or net change in total cash flows.

2.Summary of Significant Accounting Policies

Except for changes to the Company’s revenue recognition policy, there have been no significant changes in ourto the Company’s significant accounting policies from those discloseddescribed in the 10-K.Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 27, 2019. See below for additional accounting policy and transition disclosures.

In June 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-07, Compensation – Stock Compensation (“Topic 718”): Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this ASU provide guidance on accounting for share-based payment transactions for acquiring goods and services from nonemployees. This ASU was effective for fiscal years beginning after December 15, 2018. We adopted this ASU as of January 1, 2019 noting no material impact to the consolidated financial statements.


In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (“Topic 230”): Classification of Certain Cash Receipts and Cash Payments. The update provides guidance on classification for cash receipts and payments related to eight specific issues. This ASU was effective for fiscal years beginning after December 15, 2018. We adopted this ASU as of January 1, 2019 noting no material impact to the consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”). This ASU supersedes the revenue recognition requirements in ASU Topic 605, Revenue Recognition, and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. Subsequently, the FASB issued several standards related to ASU 2014-09 (collectively, the “New Revenue Standard”), including the most recent ASU, ASU 2017-14, Income Statement - Reporting Comprehensive Income (“Topic 220”), Revenue Recognition (“Topic 605”), and Topic 606, which was issued in November 2017.

We adopted the requirements of Topic 606 utilizing the modified retrospective method of transition to contracts as of January 1, 2019. The accumulated deficit balance was increased; thus, stockholders’ equity was decreased by $1.7 million as of January 1, 2019 due to the cumulative impact of adopting Topic 606. The impact was primarily related to:

$1.7 million increase in deferred revenue related to the Company’s loyalty program. Topic 606 requires us to allocate and defer a portion of revenue attributable to loyalty points earned. The deferred revenue on the loyalty program is recognized as revenue upon redemption of the points or upon breakage. Previously, the Company was recognizing loyalty points under the incremental cost method.

$0.1 million reduction in deferred revenue related to class packages. Topic 606 requires us to recognize revenue upon redemption of the class packages for a class or upon breakage. The expected breakage amount is recognized as revenue in proportion to the pattern of rights exercised by the customer. Previously, class packages were recognized as revenue based on aggregate use pattern and breakage was recognized upon expiration of the class packages.

$0.1 million increase in deferred revenue related to paid in full memberships. Due to the Company’s general cancellation policy in its membership agreement, under Topic 606 the contract duration ends when the stand-ready obligation is revoked, regardless of the contract’s stated contractual term. As such, revenue is recognized on a daily basis over the membership period. Previously, revenue was recognized ratably over the contract duration.

The adoption had no impact to net cash provided by or used in operating, investing or financing activities in the Company’s Condensed Consolidated Statements of Cash Flows.

Impact of New Standard on Financial Statement Line Items

The following tables summarize the effect of the adoption of Topic 606 on the Company’s select line items, included in the unaudited condensed consolidated financial statements as of and for the quarter ended March 31, 2019, as if the previous accounting was in effect.

Condensed Consolidated Balance Sheets

 

 

As of March 31, 2019

 

 

 

As Reported

(ASC 606)

 

 

Impacts of

Adoption

 

 

Without

Adoption

(ASC 605)

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue

 

$

8,274,505

 

 

$

(1,388,904

)

 

$

6,885,601

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated deficit

 

 

(97,317,744

)

 

 

1,388,904

 

 

 

(95,928,840

)


 

2.Condensed Consolidated Statements of Operations

 

 

Three Months Ended March 31, 2019

 

 

 

As Reported

(ASC 606)

 

 

Impacts of

Adoption

 

 

Without Adoption

(ASC 605)

 

Net revenues

 

$

15,691,274

 

 

$

(299,006

)

 

$

15,392,268

 

Cost of revenues and operating expenses

 

 

19,036,922

 

 

 

 

 

 

19,036,922

 

Loss from Operations

 

 

(3,345,648

)

 

 

(299,006

)

 

 

(3,644,654

)

Interest income, net

 

 

(39,336

)

 

 

 

 

 

(39,336

)

Net loss before income taxes

 

 

(3,306,312

)

 

 

(299,006

)

 

 

(3,605,318

)

Provision for income taxes

 

 

5,025

 

 

 

 

 

 

5,025

 

Net Loss

 

$

(3,311,337

)

 

$

(299,006

)

 

$

(3,610,343

)

Summary of Significant Accounting Policies

Revenue Recognition after the adoption of Topic 606 beginning January 1, 2019

Our Company generates revenues primarily from the sale of yoga classes, workshops, teacher training programs and yoga-related retail merchandise, net of discounts, refunds and returns at the time they are granted. Membership, class package, workshop and teacher training revenues are generally paid in advance.

Classes and workshops

Classes are principally sold in two formats—class packages and memberships. Workshops are sold as a single class or as a class pack. Class packages are based on a fixed number of classes, while memberships provide unlimited classes over a certain time period. Class package revenue is recognized when the performance obligation is satisfied upon transfer of a promised service to a student or upon the redemption of a class pack for a class or upon breakage. The expected breakage amount is recognized as revenue in proportion to the pattern of rights exercised by the student. Memberships are offered to students in varying lengths. Membership revenue is recognized on a daily basis during the membership period.

Teacher Training and Workshops

Customers are offered teacher training and workshops in varying program formats and lengths. Revenue is recognized on a straight-line basis over the event period.

MyYogaworks.com Subscription

Subscription Revenue is recognized on a straight-line basis during the subscription period.

Loyalty Program

Revenue on its loyalty program is recognized when the performance obligation is satisfied upon the redemption of the loyalty points for retail products or classes, or upon breakage. Loyalty Points earned are valued at their relative standalone selling price that is calculated using the redemption value method adjusted to reflect the likelihood that some points will not be redeemed or breakage.

Retail

Revenue for retail merchandise is recognized at the time of sale when the customer receives and pays for the merchandise at the stores. Taxes collected from the customer are recorded on a net basis. Sales returns by customers for yoga-related retail merchandise sales have historically not been material. Our Company sells gift cards to our customers. The gift cards sold to customers have no stated expiration dates and are subject to actual and/or potential escheatment rights in several of the jurisdictions in which we operate. We recognize income from gift cards when redeemed by the customer or upon breakage.

Revenue Recognition prior to the adoption of Topic 606 on January 1, 2019

Our Company generates revenues primarily from the sale of yoga classes, workshops, teacher training programs and yoga-related retail merchandise, net of discounts, refunds and returns at the time they are granted. Yoga classes are principally sold in two formats—class packages and memberships. Class packages are based on a fixed number of classes, while memberships provide unlimited classes over a certain time period. Membership, class package, workshop and teacher training revenues are generally paid in


advance. There are primarily two types of memberships, monthly memberships and paid-in-full memberships (for six or twelve months), and revenue is recognized over the membership period. Class package revenue is recognized based on aggregate usage patterns. Workshop and teacher training revenue is deferred until the date of the event or is recognized over the period the event takes place. The deferred revenue balance is reduced by refunds in the reporting period which results in less revenue recognized over the service term than originally anticipated.

Revenue for retail merchandise is recognized at the time of sale when the customer receives and pays for the merchandise at the stores. Taxes collected from the customer are recorded on a net basis. Sales returns by customers for yoga-related retail merchandise sales have historically not been material. Our Company sells gift cards to our customers. The gift cards sold to customers have no stated expiration dates and are subject to actual and/or potential escheatment rights in several of the jurisdictions in which we operate. We recognize income from gift cards when redeemed by the customer or upon breakage. Gift cards that do not have activity for 2 years have a remote probability of being redeemed and are considered breakage.

Recent Accounting Pronouncements

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have availed ourselves of this exemption from new or revised accounting standards. The effective dates of the recent accounting pronouncements noted below reflect the private company transition date.

In JuneAugust 2018, the Financial Accounting Standards Board (“FASB”)FASB issued Accounting Standards Update (“ASU”) 2018-07, CompensationASU 2018-15 IntangiblesStock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.Goodwill and Other – Internal – Use Software (Subtopic 350-40). The amendments in this ASU provide guidance on accountingthe requirements for share-based payment transactionscapitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for acquiring goods and services from nonemployees.capitalizing implementation costs incurred to develop or obtain internal-use software. This ASU is effective for fiscal years beginning after December 15, 2018.2019. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606.permitted. We are evaluating the impact of implementing this update on our consolidated financial statements.

In May 2017,July 2018, the FASB issued ASU 2017-09, Compensation – Stock Compensation2018-10, Leases (Topic 718): Scope842), Codification Improvements and ASU 2018-11 Leases (Topic 842), Targeted Improvements, to provide additional guidance for the adoption of Modification Accounting. The amendments in thisTopic 842. ASU will provide2018-10 clarifies certain provisions and correct unintended applications of the guidance about which changes tosuch as the terms or conditionsapplication of a share-based payment award require an entity to apply modification accounting in Topic 718. This ASU was effective for fiscal years beginning after December 15, 2017. We adopted this ASU asimplicit rate, lessee reassessment of January 1, 2018 noting no material impact to the consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The amendments in this ASU provide a robust framework to use in determining when a set of assetslease classification, and activities is a business. This ASU is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted and the standardcertain transition adjustments that should be applied prospectively. We early adopted thisrecognized to earnings rather than to stockholders’ equity. ASU as2018-11 provides an alternative transition method and practical expedient for separating contract components for the adoption of January 9, 2018 and this standard was applied on all acquisitions during the second quarter of 2018 (See Note 3).

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update provides guidance on classification for cash receipts and payments related to eight specific issues. The update is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We are evaluating the impact of implementing this update on our consolidated financial statements.


In March 2016, the FASB issued ASU 2016-04, Liabilities – Extinguishments of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products. This update addresses the current and potential future diversity in practice related to the derecognition of a prepaid stored-value product liability. This ASU was effective for fiscal years beginning after December 15, 2017. We adopted this ASU as of January 1, 2018 noting no material impact to the consolidated financial statements.

Topic 842. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. TheASU 2018-11, ASU 2018-10, and ASU 2016-02 (collectively, “the new standardlease standards”) is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Although early adoption is permitted, we anticipate adopting these provisions in the first quarter of 2020. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We had $51.2$51.3 million of operating lease obligations as of DecemberMarch 31, 2017,2019, and upon adoption of this standard we will record a ROU asset and lease liability equal to the present value of these leases, which will have a material impact on the consolidated balance sheet. However, the recognition of lease expense in the consolidated statement of operations is not expected to change from the current methodology.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU supersedes the revenue recognition requirements in ASU Topic 605, Revenue Recognition, and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. Topic 606 is effective for our Company in fiscal years beginning after December 15, 2018, with early adoption permitted. The standard permits the use of either the retrospective or modified retrospective (cumulative effect) transition method. Our Company primarily generates revenues by selling yoga classes in the form of memberships or class packages. Our implementation efforts included the identification of revenue streams within the scope of the guidance, evaluation of the revenue contracts and existing revenue recognition policies. We anticipate that we will adopt the new standard on January 1, 2019 and our evaluation remains preliminary because we are still in the process of evaluating the impact.

3.Acquisitions

 

Our Company uses acquisitions as one of our primary strategy strategies to grow our market share, quickly gain students and build on the operating momentum of the acquired businesses. No acquisitions were made in the three months ended March 31, 2019. We completed two acquisitions during the quarter ended June 30, in 2018, paying total consideration of $721,930, excluding earnouts of $159,000. On April 30, 2018, we acquired Prana Power Yoga (three studios) and on May 24, 2018, we acquired Inner Strength Yoga Studios (two studios) all in the Boston area. The acquisitions were accounted for as a business acquisition in accordance with ASC 805, Business Combinations (“ASC 805”). Under the acquisition method of accounting, the total purchase price was allocated to the net tangible and intangible assets acquired and liabilities assumed, based on their estimated fair values. Any excess amount paid over identifiable assets is recorded as goodwill. The associated goodwill is deductible for tax purposes. The process for estimating the fair values of the acquired studios involves the use of significant estimates and assumptions, including estimating average industry purchase price multiple and estimating future cash flows.

 

The condensed consolidated statement of operations since the date of each acquisition through June 30, 2018March 31, 2019 and the condensed consolidated balance sheet as of June 30, 2018March 31, 2019 include the results of operations and the acquired assets and assumed liabilities related to all 2018 acquisitions. For the three months ended June 30, 2018,March 31, 2019, these acquisitions contributed $150,166$430,888 to our Company’s revenues. Net income contributed by these acquisitions was not separately identifiable due to our integration activities and


the impact of corporate-level expenses and is impracticable to provide. Acquisition-related costs, including legal fees and all related professional fees, were expensed. There were no acquisitions in six months ended June 30, 2017.

 

The total purchase price consideration was allocated to the acquired assets and liabilities as follows:

 

Amount

 

 

Amount

 

Inventories

 

$

3,966

 

 

$

3,966

 

Property and equipment

 

 

410,060

 

 

 

670,060

 

Intangible assets

 

 

295,976

 

 

 

52,976

 

Goodwill

 

 

488,109

 

 

 

549,000

 

Other non-current assets

 

 

37,432

 

 

 

37,432

 

Total assets acquired

 

 

1,235,543

 

 

 

1,313,434

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

159,000

 

Deferred revenue

 

 

354,613

 

 

 

354,613

 

Deferred rent

 

 

77,891

 

Total liabilities assumed

 

 

354,613

 

 

 

591,504

 

 

 

 

 

 

 

 

 

Net assets acquired

 

$

880,930

 

 

$

721,930

 

 

The purchase price allocations are preliminary and are based on information existing at the acquisition dates. Accordingly, the purchase price allocations are subject to change. These acquisitions are not material to our Company's results of operations, individually or in the aggregate. As a result, no pro forma financial information is provided.

 

4.Property and Equipment

The major classes of property and equipment are as follows:

 

 

As of

June 30, 2018

 

 

As of

December 31, 2017

 

 

As of

March 31, 2019

 

 

As of

December 31, 2018

 

Computer equipment and purchased software

 

$

1,232,305

 

 

$

1,130,653

 

 

$

678,778

 

 

$

670,022

 

Furniture and fixtures

 

 

3,755,408

 

 

 

3,633,677

 

 

 

2,886,475

 

 

 

2,744,580

 

Leasehold improvements

 

 

26,109,939

 

 

 

25,367,841

 

 

 

27,702,804

 

 

 

26,792,887

 

Other equipment

 

 

192,970

 

 

 

174,885

 

 

 

220,092

 

 

 

213,546

 

Construction-in-progress

 

 

30,863

 

 

 

 

 

 

511,561

 

 

 

1,075,634

 

Total property and equipment

 

 

31,321,485

 

 

 

30,307,056

 

 

 

31,999,710

 

 

 

31,496,669

 

Less accumulated depreciation and amortization

 

 

(21,464,858

)

 

 

(19,888,853

)

 

 

(22,031,937

)

 

 

(21,270,725

)

 

$

9,856,627

 

 

$

10,418,203

 

 

$

9,967,773

 

 

$

10,225,944

 

 

Depreciation and amortization expenses include property and equipment, leasehold improvements and purchased software. We incurred depreciation expense of $753,884$761,212 and $633,842$831,843 for the three months ended June 30,March 31, 2019 and 2018, respectively.

During the first quarter of 2019, we recorded an impairment charge of $174,725 to the property and 2017, respectively, and $1,576,005 and $1,294,644equipment for the six months ended June 30, 2018 and 2017, respectively, which is included in depreciation and amortization expenseone of our studios that was closed in the Statementfirst quarter of Operations.2019.

 

 

5. Goodwill

The changes in the carrying amount of goodwill are as follows:

 

 

As of

June 30, 2018

 

 

As of

December 31, 2017

 

 

As of

March 31, 2019

 

 

As of

December 31, 2018

 

Goodwill, beginning of period

 

$

12,768,773

 

 

$

17,746,570

 

 

$

663,954

 

 

$

12,768,773

 

Goodwill acquired during the year

 

 

488,109

 

 

 

2,510,602

 

Goodwill acquired in 2018 (See Note 3)

 

 

 

 

 

352,000

 

Goodwill acquired in 2017 (See Note 3)

 

 

 

 

 

197,000

 

Total goodwill

 

 

13,256,882

 

 

 

20,257,172

 

 

 

663,954

 

 

 

13,317,773

 

Less impairment

 

 

(2,474,819

)

 

 

(7,488,399

)

 

 

 

 

 

(12,653,819

)

Goodwill, end of period

 

$

10,782,063

 

 

$

12,768,773

 

 

$

663,954

 

 

$

663,954

 

In the second quarter of 2018, our Company


We performed a goodwill impairment test which found goodwill to be impaired primarily due toduring 2018 that was triggered by the continued decrease in the Company’s market capitalization. We recorded an impairment to goodwill of $2.5 million and $7.5$12.7 million in 2018. During the secondfirst quarter of 20182019, we performed an interim goodwill impairment test and fourth quarter of 2017, respectively.

During the quarter ended June 30, 2018, we completed two acquisitions which resulted in the addition of $0.5 million in goodwill (See Note 3).no impairment was noted.

 

6.Deferred Revenue

 

The following is a reconciliation of the changes in deferred revenue for the three months ended March 31, 2019 and six months ended June 30, 2018 and 2017:2018:

 

 

For the three months ended June 30,

 

 

For the six months ended June 30,

 

 

For the Three Months Ended March 31,

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

2019

 

 

2018

 

Deferred revenue at beginning of period

 

$

7,382,888

 

 

$

4,478,318

 

 

$

7,187,948

 

 

$

4,593,076

 

 

$

7,276,578

 

 

$

7,187,948

 

Cash receipts before deferred revenue

 

 

14,686,356

 

 

 

13,109,905

 

 

 

30,475,200

 

 

 

27,025,298

 

 

 

14,992,029

 

 

 

15,788,844

 

Net revenue for the period

 

 

(14,870,362

)

 

 

(12,493,461

)

 

 

(30,400,175

)

 

 

(26,483,555

)

 

 

(15,691,274

)

 

 

(15,529,813

)

Deferred revenue from acquisitions

 

 

354,613

 

 

 

-

 

 

 

354,613

 

 

 

-

 

Deferred revenue from loyalty program

 

 

1,687,910

 

 

 

 

Change in gift card liabilities

 

 

(8,195

)

 

 

6,384

 

 

 

(72,286

)

 

 

(33,673

)

 

 

9,262

 

 

 

(64,091

)

Deferred revenue at end of period

 

$

7,545,300

 

 

$

5,101,146

 

 

$

7,545,300

 

 

$

5,101,146

 

 

$

8,274,505

 

 

$

7,382,888

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7.Related Party

We paid expense reimbursement fees to an affiliate of Great Hill Equity Partners V, L.P. and Great Hill Investors, LLC (collectively, “Great Hill Partners” or “GHP”), the owners of a majority of our Common Stock, in the amount of $25,000 for the three months ended June 30, 2017 and $50,000 for the six months ended June 30, 2017. In connection with our IPO, the Expense Reimbursement Agreement that we entered into with Great Hill Partners was terminated.

On March 27, 2017, we issued new convertible notes (the “New Convertible Notes”) to Great Hill Partners, in the aggregate principal amount of $3.2 million, which were convertible, at the option of the holder, into shares of our Common Stock at a conversion price of $8.40 per share (see Note 8). In connection with the IPO, the New Convertible Notes were repaid in full.

8.Debt

 Long-term Debt

In July 2015, we obtained a 5-year $20 million senior secured term loan facility with Deerpath Funding LP (the “Deerpath Facility”). We borrowed $5 million in July 2015 (the “Initial Term Loan”), and had the ability, upon meeting certain conditions, to borrow up to an additional $15 million. Borrowings under the Deerpath Facility carried an annual interest rate of LIBOR + 7%. The proceeds from the Initial Term Loan were used to pay all of the outstanding indebtedness under our credit facility with a previous lender.

In December 2015, we borrowed an additional $2 million under the Deerpath Facility for general corporate purposes, thereby increasing the principal amount of the loans and reducing the incremental borrowing availability under the Deerpath Facility, in each case, by an equivalent amount. As of June 30, 2017, there remained $13.1 million of incremental borrowing capacity under the Deerpath Facility. Interest expense for the three months and six months ended June 30, 2017 related to the aggregate amount of outstanding indebtedness under the Deerpath Facility was $156,183 and $347,995, respectively. On August 16, 2017, in connection with the consummation of our IPO, the Deerpath Facility was repaid in full and immediately cancelled thereafter.

Convertible Note Due to Related Party

On March 27, 2017, we issued the Newnew convertible notes (the “New Convertible Notes Notes”) to Great Hill Partners, in the aggregate principal amount of $3.2 million, which were convertible, at the option of the holder, into shares of our Common Stock at a conversion rate of $8.40 per share. The New Convertible Notes consisted of a Subordinated Convertible Promissory Note, dated March 27, 2017, made by us in favor of Great Hill Equity Partners V, L.P., in the principal amount of $3,189,350, and a Subordinated Convertible Promissory Note, dated March 27, 2017, made by us in favor of Great Hill Investors, LLC, in the principal amount of $10,650. Each New Convertible Note had a maturity date of March 27, 2018 and bore interest at an annual rate of 8%. Interest expense for the three months and six months ended June 30, 2017 was $65,061 and $407,074, respectively. On August 16, 2017, in connection with the consummation of our IPO, the New Convertible Notes were repaid in full.

Redeemable Preferred Stock

9.On March 24, 2017, we engaged in a series of transactions to convert certain of our outstanding indebtedness and all of the outstanding redeemable preferred stock into shares of Common Stock. Because Great Hill Equity Partners V, L.P. and Great Hill Investors, LLC held all of the redeemable preferred stock and owned a substantial majority of the Common Stock both before and after the conversion of the redeemable preferred stock on March 24, 2017, there is no impact on earnings per share as a result of this conversion.

There were no other related party transactions during the three-month period ended March 31, 2019.

8.Common Stock

Initial Public Offering

On August 16, 2017, we completed our IPO whereby we sold 7,300,000 shares of our Common Stock registered at a price of $5.50 per share. We received proceeds from our IPO of $37.6 million after deducting underwriters'underwriters’ discounts and commissions of $2.5 million, but before deducting offering costs of $2.6 million.

 

Conversion of Amended and Restated 2015 GHP convertible promissory notes and redeemable preferred stock

On March 24, 2017, we engaged in a series of transactions to convert certain of our outstanding indebtedness and all of the Company’s outstanding redeemable preferred stock into shares of Common Stock.

The aggregate amount of principal and accrued interest under that certain Second Amended and Restated Subordinated Convertible Promissory Note made by us in favor of Great Hill Equity Partners V, L.P., dated March 24, 2017, and that certain Second Amended and Restated Subordinated Convertible Promissory Note made by us in favor of Great Hill Investors, LLC, dated March 24, 2017 (collectively, the “Amended and Restated 2015 GHP Convertible Promissory Notes”), was converted into 1,407,632 shares of Common Stock based on the conversion price per share of Common Stock as set forth in such notes of $8.40. Concurrently, all of the


outstanding shares of redeemable preferred stock were converted into shares of Common Stock, with the number of shares of Common Stock issuable upon such conversion computed by dividing the Preferred Share Liquidation Preference (as defined in the Amended and Restated 2015 GHP Convertible Promissory Notes) per share by a conversion price per share of Common Stock of $8.40, resulting in 7,426,169 newly issued shares of Common Stock. Immediately after the conversion of the Amended and Restated 2015 GHP Convertible Promissory Notes and the redeemable preferred stock into shares of Common Stock, we effected a 1-for-10 reverse stock split of the Common Stock. Accordingly, except as otherwise indicated, all share and per share amounts have been


adjusted to reflect the 1-for-10 reverse stock split as though it had occurred at the beginning of the initial period presented. In connection with the foregoing transactions, we also increased our total number of shares of authorized Common Stock to 14,131,017 shares.

Following the 1-for-10 reverse stock split, our Board of Directors (“Board”) amended our 2014 Stock Option and Grant Plan to increase the shares of Common Stock reserved for issuance thereunder to 1,695,484. In addition, our Board approved the grant of options to purchase 1,425,641 shares of Common Stock to certain employees and consultants.

On July 14, 2017, we effectuated a 1-for-1.333520 reverse stock split (the “1-for- 1.333520 Reverse Split”). Under the terms of the 1-for-1.333520 Reverse Split, each share of Common Stock, issued and outstanding as of such effective date, was automatically reclassified and split into 0.749895 shares of Common Stock, without any further action by the stockholders. Fractional shares were rounded down to the nearest whole share. Accordingly, except as otherwise indicated, all shshareare and per share amounts have been adjusted to reflect the 1-for-1.333520 Reverse Split for all periods presented in this quarterly report.

 

10.9.Preferred Stock

Redeemable Preferred Stock

On March 24, 2017, we engaged in a series of transactions to convert certain of our outstanding indebtedness and all of the outstanding redeemable preferred stock into shares of Common Stock. Because Great Hill Equity Partners V, L.P. and Great Hill Investors, LLC held all of the redeemable preferred stock and owned a substantial majority of the Common Stock both before and after the conversion of the redeemable preferred stock on March 24, 2017, there is no impact on earnings per share as a result of this conversion.

11.LossLoss per Share Attributable to Common Stockholders

The components of basic and diluted loss per share attributable to common stockholders are as follows (in thousands, except share and per share data):

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

Three Months Ended March 31,

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

2019

 

 

2018

 

Numerator for basic and diluted loss per share

attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(6,650,673

)

 

$

(4,447,705

)

 

$

(10,611,569

)

 

$

(7,064,503

)

 

$

(3,311,337

)

 

$

(3,960,896

)

Dividend attributable to participating securities

 

 

 

 

 

 

 

 

 

 

 

(995,743

)

 

 

 

 

 

 

Net loss attributable to YogaWorks, Inc. common stockholders

 

$

(6,650,673

)

 

$

(4,447,705

)

 

$

(10,611,569

)

 

$

(8,060,246

)

 

$

(3,311,337

)

 

$

(3,960,896

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average outstanding shares of common stock

 

 

16,382,505

 

 

 

8,908,188

 

 

 

16,367,796

 

 

 

4,857,160

 

 

 

16,533,349

 

 

 

16,350,026

 

Net loss per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.41

)

 

$

(0.50

)

 

$

(0.65

)

 

$

(1.66

)

 

$

(0.20

)

 

$

(0.24

)

For the period ended June 30,March 31, 2019, and 2018, and 2017, there were outstanding options to purchase 1,414,7203,083,753 and 1,289,0071,621,877 shares of Common Stock outstanding, respectively, which were excluded from the computation of diluted loss per share because it would be anti-dilutive.

 


12.10.Accounting for Stock-Based Compensation

2014 Plan

In July 2014, our Company adopted the 2014 Stock Option and Grant Plan (the “2014 Plan”). Upon adoption of the 2014 Plan, the maximum aggregate number of shares issuable thereunder was 7,499 shares post-reverse split. In March 12, 2017, our Board amended the 2014 Plan to increase the shares of Common Stock reserved for issuance thereunder to 1,695,484. As of June 30, 2018,March 31, 2019, no shares were issuable under the 2014 Plan.

2017 Plan

In connection with our IPO, we adopted the 2017 Incentive Award Plan (the “2017 Plan”), effective as of August 9, 2017. The aggregate number of shares of Common Stock reserved for issuance pursuant to awards granted under the 2017 Plan equals: (i) 2,263,213,3,904,580, plus (ii) any shares which, as of the effective date of the 2017 Plan, subject to awards under the 2014 Plan which forfeited or lapsed unexercised following the effective date of the 2017 Plan, plus (iii) an annual increase, which increases for 2018 and 2019 are reflected in the amount above, on the first day of each calendar year beginning on January 1, 2018 and ending on and including January 1, 2027 equal to the lesser of (a) 5% of the shares outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year, or (b) such smaller number of shares as determined by our Board.

The 2017 Plan permits the grant of incentive stock options, restricted stock, restricted stock units, stock appreciation rights, performance-based awards to our employees, directors and consultants. Shares issued pursuant to awards under the 2017 Plan that are settled for cash by our Company or that expire or are forfeited will become available for future grant or sale. Shares used to pay the exercise price of an award or to satisfy the minimum tax withholding obligations related to an award will not be available for future grants under the 2017 Plan. As of June 30, 2018, 2,107,421March 31, 2019, 1,111,094 shares remained available for issuance under the 2017 Plan.

With the exception of accelerated options, our typical options vest over four years from the grant date, with 25% of the award vesting on the first anniversary of the grant date and the remainder vesting over the next 36 months. Stock compensation expense related to these equity awards was recorded based upon the estimated fair value of the shares amortized over the vesting period.

 

 

Shares

 

 

Weighted-

Average

Exercise Price

 

 

Weighted-

Average

Remaining

Contractual

Life

(in Years)

 

 

Aggregate

Intrinsic

Value (1)

 

 

Shares

 

 

Weighted-

Average

Exercise Price

 

 

Weighted-

Average

Remaining

Contractual

Life

(in Years)

 

 

Aggregate

Intrinsic

Value (1)

 

Outstanding at December 31, 2017

 

 

1,527,768

 

 

$

7.74

 

 

 

9.29

 

 

$

 

Outstanding at December 31, 2018

 

 

1,382,152

 

 

$

7.28

 

 

 

8.37

 

 

$

 

Granted

 

 

125,500

 

 

 

2.78

 

 

 

9.92

 

 

 

 

 

 

1,807,572

 

 

 

0.58

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancelled

 

 

(238,548

)

 

 

8.13

 

 

 

 

 

 

 

 

 

(105,971

)

 

 

8.28

 

 

 

 

 

 

 

Outstanding at June 30, 2018

 

 

1,414,720

 

 

 

7.24

 

 

 

8.98

 

 

 

 

Outstanding at March 31, 2019

 

 

3,083,753

 

 

 

3.26

 

 

 

8.93

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable at June 30, 2018

 

 

794,125

 

 

 

7.82

 

 

 

8.79

 

 

 

 

Exercisable at March 31, 2019

 

 

1,259,913

 

 

 

6.13

 

 

 

7.85

 

 

 

 

 

 

(1)

Based on our Company’s closing stock price of $1.80$0.92 on JuneMarch 29, 2018.2019.

 

Unamortized stock-based compensation expense relating to stock options was $1.0$0.8 million at June 30, 2018,March 31, 2019, which is expected to be recognized over a weighted-average period of 2.82.3 years.

Valuation

 

We use the Black-Scholes option pricing model to calculate the fair value of each option grant. The expected volatility is based on historical volatility of the stock price of comparable public companies. We estimate the expected term based upon the historical exercise behavior of employees. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a term equal to the expected term of the option assumed at the date of grant. We estimated a zero-forfeiture rate for these stock option grants as the awards have short vesting terms and have a low probability of forfeiture based on the recipients of the stock options.


The fair values of stock options granted have been estimated utilizing the following assumptions:

 

 

Six Months Ended June 30,

 

 

Three Months Ended March 31,

 

 

2018

 

 

2017

 

 

2019

 

 

2018

 

Fair value of common stock

 

$

2.78

 

 

$

5.88

 

 

$

0.28

 

 

$

2.78

 

Exercise price of common stock option

 

 

2.78

 

 

 

8.40

 

 

 

0.28

 

 

$

2.78

 

Risk-free interest rate

 

 

2.38

%

 

 

2.10

%

 

 

2.50

%

 

 

2.38

%

Expected term (in years)

 

 

10.00

 

 

 

5.95

 

 

 

5.66

 

 

 

6.05

 

Dividend yield

 

 

0.00

%

 

 

0.00

%

 

 

0.00

%

 

 

0.00

%

Expected volatility

 

 

49

%

 

 

40

%

 

 

49

%

 

 

49

%

 

 

Restricted Stock Units

Our Company granted 300,00067,500 Restricted Stock Units (“RSU”) to our Company’s officers during the sixthree months ended June 30, 2018.March 31, 2019. All RSU grants vest on the satisfaction of only a service-based condition. As of June 30, 2018,March 31, 2019, there were 445,873424,560 shares of our Common Stock issuable upon the vesting of outstanding RSU. Unrecognized compensation expenses related to shares of our Common Stock subject to unvested RSU was $1.8$0.7 million at June 30, 2018,March 31, 2019, which is expected to be recognized as expense over the weighted-average period of 3.61.3 years. The service conditions are generally satisfied for the RSU granted to our officers and Board over four years starting from such person’s hiring or grant date and the earlier to occur of the first anniversary of the grant date or the annual meeting of stockholders, respectively.

For the sixthree months ended June 30, 2018,March 31, 2019, our Company withheld 32,54225,887 shares of Common Stock (“Net Settlement”) and remitted $83,630$14,690 in cash to meet the related tax withholding requirements on behalf of our officers. We will continue to evaluate the Net Settlement of RSU that vest in the future.

Stock-Based Compensation Expense

Our Company recognized stock-based compensation expense related to stock options and RSU, included in general and administrative expenses as follows:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Stock-based compensation

 

$

497,433

 

 

$

286,273

 

 

$

949,609

 

 

$

825,145

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Stock-based compensation

 

$

369,684

 

 

$

452,176

 

 

 

13.11.Income Taxes

Our effective income tax rate for the sixthree months ended June 30,March 31, 2019 and 2018 and 2017 was (0.22)(0.15)% and (0.84)(0.44)%, respectively. Our effective income tax rate is evaluated and adjusted at each interim period as facts and circumstances warrant. The difference between federal income taxes computed at the federal statutory rate and reported income taxes for the sixthree months ended June 30,March 31, 2019 and 2018 and 2017 was primarily related to the impact of the valuation allowance and state income taxes.

The FASB issued ASU 2018-05, Income Taxes (Topic 740): “Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (“SAB”) No. 118” to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act (the “Act”).    

The Act was enacted on December 22, 2017. Among other changes for tax years beginning January 1, 2018, the Act reduces the U.S. federal corporate tax rate from 34% to 21%, the deductibility of entertainment expenses and fringe benefits, and the limitations on excessive employee remuneration under Internal Revenue Code (“IRC”) Section 162(m). At June 30, 2018, the Company has not completed its accounting for all of the tax effects of the Act and has not made an adjustment to the provisional tax benefit recorded under SAB 118 at DecemberMarch 31, 2017.  We have estimated our provision for income taxes in accordance with the Act and guidance available as of the date of this filing. Our estimated annual effective tax rate may be adjusted in subsequent interim periods, due to, among other things, additional analysis, changes in interpretations and assumptions2019, we have made, and additional regulatory guidance that may be issued.

At June 30, 2018, we had no unrecognized tax benefits. We believe that there are no uncertain tax positions for which it is reasonably possible that will produce a material effect to the financial statements over the next 12 months. We recognize interest and penalties on taxes, if any, related to unrecognized tax benefits as income tax expense. As of June 30,March 31, 2019, and 2018, and 2017, we had no material uncertain tax positions to be accounted for in the financial statements; accordingly, no interest or penalties on taxes were recognized for the sixthree months ended June 30, 2018March 31, 2019 and for the same period in 2017.2018.


Pursuant to IRCInternal Revenue Code (“IRC”), Sections 382 and 383, annual use of our net operating loss carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurred within a three-year period. We have not completed an IRC Section 382 and 383 analysis regarding the limitation of net operating loss carryforwards. As there is a full valuation allowance applied to the deferred taxes, a Section 382 limitation will not have an effect on the deferred taxes or the income tax rate.

During the second quarter of 2018, the Company completed the examination of the federal income tax return filed for the 2015 tax year by the Internal Revenue Service, which resulted in no change. We are currently not under examination by federal, state and local tax authorities.

 

14.12.Commitments and ContContingenciesingencies

Legal Matters

On June 5, 2017, a letter was sent to the California Labor & Workforce Development Agency alleging our itemized wage statements did not comply with the California Labor Code, which we refer to herein as the Wage Statement Claim. On August 7,


2017, we agreed to a class wide settlement for a maximum amount of $865,000$865,000 with respect to the Wage Statement Claim, which would include settlement of all penalties under the Private Attorneys General Act of 2004 and California Labor Code section 226, attorneys’ fees and costs, class representative enhancements and claims administration fees. The entire amount was reserved under accrued expenses as of December 31, 2018. The class wide settlement including the maximum settlement amount of $865,000, remains subject to$865,000 was approved by the court approval. As of June 30, 2018, we have reserved forand paid by the entire amount under accrued expenses. 

In addition to the Wage Statement Claim, from time to time, we may become involved in legal proceedings arising in the ordinary course of business. There can be no assurance with respect to the outcome of any legal proceeding, and we could suffer monetary liability from the outcome of the Wage Statement Claim described above or other claims that may be made in the future that could be material to our results of operations.

Other than the Wage Statement Claim, we believe there are no pending lawsuits or claims that may have a material adverse effectCompany on our business, capital resources or results of operations.

15.Subsequent EventsJanuary 2, 2019.

Piece-Rate Employee Claims

On July 2, 2018, a former California employee (“Plaintiff”) filed a complaint against us in the Superior Court of the State of California for the County of Los Angeles (the “Complaint”). Plaintiff’s Complaint iswas filed pursuant to the California Labor Code purportedly on behalf of all Pilates instructors, yoga instructors and other employees who worked for us in California on a piece-rate basis within the four years preceding the date of the Complaint. The Complaint allegesalleged that certain of our payroll-related practices with respect to California-based employees paid on a piece-rate did not comply with the California Labor Code. The Complaint seeksOn March 21, 2019, we agreed to a class wide settlement for a maximum amount of $1.0 million, which would include settlement of all penalties under the Private Attorneys General Act of 2004 and relevant sections of the California Labor Code, on behalfattorneys’ fees and costs, class representative enhancements and claims administration fees. As of December 31, 2018, we have reserved for the entire amount under accrued expenses.

Four substantially similar putative class action complaints were filed in the Superior Court of the State of California, County of Los Angeles, captioned Salazar v. YogaWorks, Inc., et al. (filed November 26, 2018); Johnson v. YogaWorks, Inc., et al. (filed December 19, 2018); Lowinger v. YogaWorks, Inc. et al. (filed December 21, 2018); and allegedly aggrieved employees. NeitherMirza v. YogaWorks, Inc., et al. (filed January 17, 2019). These four state court actions were consolidated into the Salazar case by the Court on April 17, 2019 and assigned to Judge Maren Nelson for all purposes. Additionally, two putative class action complaints, substantially similar to the state court securities actions, captioned Cohen v. YogaWorks, Inc., et al. (filed December 27, 2018) and Dellinger v. YogaWorks, Inc., et al. (filed February 8, 2019) were filed in the United States District Court for the District of Central California. These lawsuits were brought by purported stockholders of YogaWorks alleging violations of the Securities Act of 1933 for alleged misstatements and omissions in offering documents related to YogaWorks’ IPO that took place on August 11, 2017. The lawsuits name as defendants YogaWorks, certain of its current and former officers and directors, YogaWorks’ majority shareholder, and certain underwriters of YogaWorks’ IPO. A status conference has been set for the consolidated Salazar matter for June 28, 2019. Pending further order of the court, no response is currently due. On March 21, 2019, the federal court actions were consolidated, and Inter-Local Pension Fund GCC/IBT’s were appointed as Lead Plaintiff. On April 3, 2019, the Court ordered that Lead Plaintiff’s amended complaint is due by May 21, 2019; Defendants’ motion(s) to dismiss is due by July 23, 2019; Plaintiffs’ opposition(s) to the motion(s) to dismiss is due by September 24, 2019; Defendants’ reply/replies in support of their motion(s) to dismiss are due by November 21, 2019; and the hearing on Defendants’ motion(s) to dismiss is set for December 9, 2019 at 1:30 p.m. The outcomes of the legal proceedings are inherently unpredictable, subject to significant uncertainties, and could be material to YogaWorks’ financial condition, results of operations, and cash flows for a particular period. YogaWorks intends to vigorously defend the claims asserted against it.

In addition to the aforementioned legal matters, from time to time, we are involved in legal proceedings arising in the ordinary course of business. There can be no assurance with respect to the outcome of any legal proceeding, and we could suffer monetary liability from the outcome of the allegedlegal matters described above or other claims nor the amount and range of potential damages or exposure associated with the allegations can be assessed with certainty, and any damage awardthat could be substantial.material to our results of operations.

Appointment of Sky Meltzer to the Board

On August 8, 2018, the Board appointed Sky Meltzer (“Mr. Meltzer”) as a director of the Company to fill a newly created seat on the Board. Pursuant to the Company’s Bylaws, Mr. Meltzer will serve as a Class III Director and shall hold office until the Company’s annual meeting of stockholders held in 2020. Mr. Meltzer was also appointed as a member of the Audit Committee and the Compensation Committee of the Board, serving as an independent Board member on each.

Mr. Meltzer has significant experience in the yoga industry. He most recently served as Chief Executive Officer of Manduka, a brand of premium yoga equipment and apparel, where he led the company’s global expansion from 2008 to 2016. From 2004 to 2007, he held the position of YogaWorks’ Vice President of Marketing and Business Development and was responsible for managing the creative direction of the brand, expanding the teacher training program and supporting studio operations. Prior to his time with YogaWorks and Manduka, Mr. Meltzer spent 10 years working in the finance, technology and media sectors where he held a variety of positions including investment banking analyst for Soundview Financial Group and brand manager for MGM Studios. Mr. Meltzer graduated from Stanford University with a B.A. in Economics. He currently serves on the Board of Directors of Manduka and Pear Sports and is an investor and advisor to several companies in the health and wellness sector.


Mr. Meltzer will be granted restricted stock units with a value of $86,537 (representing the pro-rated 2018 stock grant awarded to non-employee directors), in accordance with our non-employee director compensation program as described in our definitive proxy statement filed with the Securities and Exchange Commission on April 30, 2018.

There are no arrangements or understandings between Mr. Meltzer and any other person pursuant to which Mr. Meltzer was selected as a director of the Company. Mr. Meltzer is not a participant in, nor is he to be a participant in, any related-person transaction or proposed related-person transaction required to be disclosed by Item 404(a) of Regulation S-K under the Securities Exchange Act of 1934, as amended. Other than the Company’s formal plan for compensating its independent directors for their services approved by the Board,aforementioned legal matters, we believe there are no plans, contractspending lawsuits or arrangementsclaims that may have a material adverse effect on our business, capital resources or amendments to any plans, contracts or arrangements entered into with Mr. Meltzer, or any grants or awards made to Mr. Meltzer, in connection with his electionresults of operations.

13.Subsequent Events

On May 3, 2019, our Company’s securities were transferred from the Nasdaq Global Market to the Board.Nasdaq Capital Market.


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This quarterly report on Form 10-Q contains forward-looking statements, including statements based upon or relating to our expectations, estimates, and projections. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. These statements are not guarantees of future performance; they reflect our current views with respect to future events and are based on assumptions and are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from expectations or results projected or implied by forward-looking statements.

These forward-looking statements represent our estimates and assumptions only as of the date of this quarterly report on Form 10-Q. Unless required by federal securities laws, we assume no obligation to update any of these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated, to reflect circumstances or events that occur after the statements are made. Given these uncertainties, investors should not place undue reliance on these forward-looking statements.

Investors should read this quarterly report on Form 10-Q and the documents we reference in this report and have filed with the SEC, including our 10-K, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

The following discussion should be read in conjunction with our consolidated financial statements and the related notes, included elsewhere in this Form 10-Q. Unless otherwise indicated, all references in this Form 10-Q to YogaWorks, we, us, our, and ourthe Company refer to YogaWorks, Inc. and our consolidated subsidiary, Yoga Works, Inc.

Company Overview

YogaWorks is a healthy lifestyle brand focused on enriching and transforming lives through yoga. We strive to honor and empower our students’ journey toward personal growth and well-being, no matter their age or physical ability, in an inclusive and community-oriented environment. We offer a broad range of yoga disciplines and levels from fast-paced flow to soothing restorative and integrated fitness classes in order to meet the needs of our broad student base. We operate in a number of regional operating segments with similar economic characteristics and report as one reportable segment.

Key Metrics

Our financial results are primarily driven by the number of yoga studios we operate, the number of student visits to our studios and the number of classes that we conduct at our studios. The following table sets forth our key operating metrics for the periods indicated.

 

 

At or For Three Months Ended June 30,

 

 

At or For Six Months Ended June 30,

 

 

At or For Three Months Ended March 31,

 

Metric

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

2019

 

 

2018

 

Studios (period end)

 

 

71

 

 

 

50

 

 

 

71

 

 

 

50

 

 

 

68

 

 

 

66

 

Student visits(1)

 

 

868,857

 

 

 

705,979

 

 

 

1,787,243

 

 

 

1,466,686

 

 

 

897,867

 

 

 

918,386

 

Studio classes(2)

 

 

59,790

 

 

 

45,375

 

 

 

116,640

 

 

 

90,529

 

 

 

58,832

 

 

 

56,850

 

 

 

(1)

Student visits include each student’s attendance at a class in such period in which a teacher fee was paid for such class.

 

(2)

Studio classes include each completed class held at a studio in such period.


Components of Our Financial Performance

In assessing the financial performance of our business, we consider a variety of financial and operating metrics, including the following:

Net revenuesrevenues.. We derive revenues primarily from conducting yoga classes, both in our studios and through MyYogaWorks.com. We also derive additional revenues from teacher training programs, workshops and the sale of yoga-related retail merchandise. We expect net revenues from teacher training programs, workshops and the sale of yoga-related retail merchandise to generally be consistent as a percentage of our total net revenues year-to-year because net revenue from teacher trainings, workshops and retail sales are primarily driven by the same key metrics that drive our yoga class revenue, namely, the number of studios we operate, the number of student visits to our studios and the number of classes we conduct at our studios. Our students generally pay for their visits through membership fees (unlimited classes), multi-class packages (fixed number of classes)and drop-in (single class) purchases. Membership, class package, workshop and teacher training revenues are generally paid in advance. There are primarily two types of memberships, monthly memberships and paid-in-full memberships (for six or twelve months), and revenue is recognized over the membership period. Class package revenue is recognized based on aggregate usage patterns as required by GAAP. Workshop and teacher training revenue is deferred until the date of the event or is recognized over the period the event takes place. In addition, social commerce revenue is generated from class package sales through third party channels (i.e. ClassPass and Groupon).

Cost of revenuesrevenues. . Cost of revenues consists of direct costs associated with delivering our classes and services, which mainly includes teacher payroll and related expenses, and cost of physical goods sold, such as yoga clothing and accessories. We review our inventory levels of physical goods on an ongoing basis to identify slow-moving yoga merchandise and use retail product markdowns to efficiently sell those retail products. We expect that our newer studios will have higher cost of revenues as a percentage of net revenues as they ramp to maturity.

Center operationsoperations. . Center operations consistsconsist of costs for studio rent, utilities, compensation and benefits for studio staff, sales support staff and management, sales and marketing expenses and certain studio-level general and administrative expenses. We recognize these costs as an expense when incurred.

General and administrative expensesexpenses. . General and administrative expenses include corporate rent, marketing, office expenses and compensation and benefits costs for regional management and other regional support staff, executive, finance and accounting, human resources, information technology, administration, business development, legal and other support-function personnel.General and administrative expenses also include fees for professional services, insurance and licenses, as well as acquisition-related costs. As we grow our studio operations, we expect our aggregate general and administrative expenses to increase as we hire additional personnel in finance and accounting, human resources and administration to help manage our largeroperations.

In connection with studio acquisitions we incur transaction costs. These transaction costs include expenses incurred prior to owning a new studio and primarily consist of legal fees, due diligence expenses, travel and consulting fees. The transaction costs are included in general and administrative expenses, as noted above, and are expensed as incurred.

As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. Compliance with the rules and regulations of the SEC has increased our legal and financial compliance costs and has made some of our corporate and administrative activities more time consuming and costly. In addition, our management and other personnel devote substantial time to these public company requirements. In particular, we incur significant expenses and devote substantial management effort toward ensuring our compliance with the requirements of applicable laws and regulations. In addition, we have hired additional accounting and financial staff with appropriate public company experience and technical accounting knowledge.

Pre-Opening CostsCosts.. In connection with opening new yoga studios, we incur pre-opening costs. Pre-opening costs include expenses incurred prior to the opening of a new yoga studio and primarily consist of payroll, travel, marketing, teacher training, initial opening supplies and costs of transporting initial retail apparel inventory and fixtures for our studios, as well as occupancy costs incurred from the time of possession of a yoga studio site to the opening of that studio. These pre-opening costs are included in cost of revenues, center operations and general and administrative expenses and are expensed as incurred.

Depreciation and amortizationamortization.. Depreciation and amortization includes the depreciation of property and equipment, and the amortization expense of leasehold improvements and intangible assets.

Asset impairmentsimpairments.. Asset impairments includes an asset impairment of our long-lived assets, finite-lived intangible assets or goodwill recognized in the applicable year.period. We test for such impairments at least annually, or whenever events or changes in circumstances indicate that an impairment of the applicable asset has occurred.


RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the dollar variance and percentages of certain items included in our Condensed Consolidated Statements of Operations:

Quarter Ended June 30, 2018March 31, 2019 Compared to Quarter Ended June 30, 2017 (unaudited)March 31, 2018 (Unaudited)

 

 

Quarter Ended June 30,

 

 

Variance

 

 

Quarter Ended March 31,

 

 

Variance

 

(in thousands)

 

2018

 

 

2017

 

 

Dollar

 

 

Percent

 

 

2019

 

 

2018

 

 

Dollar

 

 

Percent

 

Net revenues

 

$

14,870

 

 

$

12,493

 

 

$

2,377

 

 

 

19

%

 

$

15,691

 

 

$

15,530

 

 

$

161

 

 

 

1

%

Cost of revenues and operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

5,756

 

 

 

4,806

 

 

 

950

 

 

 

20

%

 

 

6,145

 

 

 

5,924

 

 

 

221

 

 

 

4

%

Center operations

 

 

7,061

 

 

 

5,583

 

 

 

1,478

 

 

 

26

%

 

 

6,842

 

 

 

6,772

 

 

 

70

 

 

 

1

%

General and administrative expenses

 

 

4,054

 

 

 

4,094

 

 

 

(40

)

 

 

(1

%)

 

 

4,376

 

 

 

4,405

 

 

 

(29

)

 

 

(1

%)

Depreciation and amortization

 

 

2,218

 

 

 

2,168

 

 

 

50

 

 

 

2

%

 

 

1,499

 

 

 

2,379

 

 

 

(880

)

 

 

(37

%)

Goodwill impairment

 

 

2,475

 

 

 

 

 

 

2,475

 

 

 

100

%

Asset impairment

 

 

174

 

 

 

 

 

 

174

 

 

N/A

 

Total cost of revenues and operating

expenses

 

 

21,564

 

 

 

16,651

 

 

 

4,913

 

 

 

30

%

 

 

19,036

 

 

 

19,480

 

 

 

(444

)

 

 

(2

%)

Loss from operations

 

 

(6,694

)

 

 

(4,158

)

 

 

(2,536

)

 

 

61

%

 

 

(3,345

)

 

 

(3,950

)

 

 

605

 

 

 

(15

%)

Interest (income) expense, net

 

 

(44

)

 

 

249

 

 

 

(293

)

 

 

(118

%)

Interest income, net

 

 

(39

)

 

 

(6

)

 

 

(33

)

 

 

550

%

Net loss before income taxes

 

 

(6,650

)

 

 

(4,407

)

 

 

(2,243

)

 

 

51

%

 

 

(3,306

)

 

 

(3,944

)

 

 

638

 

 

 

(16

%)

Provision for income taxes

 

 

1

 

 

 

41

 

 

 

(40

)

 

 

(98

%)

 

 

5

 

 

 

17

 

 

 

(12

)

 

 

(71

%)

Net loss

 

$

(6,651

)

 

$

(4,448

)

 

$

(2,203

)

 

 

50

%

 

$

(3,311

)

 

$

(3,961

)

 

$

650

 

 

 

(16

%)

 

Net revenues

The $2.4 million or 19%slight increase in net revenues for the quarter ended June 30, 2018,March 31, 2019, as compared to the same period in 2017,2018, was primarily due to an increase in the number of studios. Sales from multi-class packagesMembership sales increased by $1.9 million and memberships increased by $0.3$1.7 million for the quarter ended June 30, 2018,March 31, 2019, compared to the same period in 2017,2018, due to revenue from acquired studios that have predominantly sold multi-class packages and our flexible pricing strategy. In addition, retail sales increased by $0.3 million due tomarketing initiatives towards monthly memberships at all studios. Other changes in net revenues between the comparable periods included an increase in the numbersocial commerce of studios.$0.3 million. These increases were offset by a $0.4$1.3 million decrease in net revenuessales from multi-class packages due to discontinued marketing initiatives towards the sale of class packs. In addition, sales from teacher trainings and workshopstraining decreased by $0.2 million due to a lower number of teacher trainings and workshop events held inbetween the quarter ended June 30, 2018, comparedcomparable periods and retail sales decreased by $0.1 million. Unearned revenue increased by $0.1 million due to the same period in 2017.adoption of Topic 606.

Cost of revenues

The $1.0$0.2 million or 20%4% increase in cost of revenues for the quarter ended June 30, 2018,March 31, 2019, as compared to the same period in 2017,2018, was primarily due to $0.8$0.2 million higher payroll related costs from the acquired studios and $0.1 million higher retail sales costs.studios.

Center operations

The $1.5 million or 26%slight increase in center operations for the quarter ended June 30, 2018,March 31, 2019, as compared to the same period in 2017, which included $0.6 million higher rent expense and $0.6 million higher payroll expenses, 2018, was primarily due to center operations costs from the impactacquired studios of acquired studios. In addition, other expenses increased by $0.2 million which included repairs and maintenance, utilitiesan increase in taxes and credit card fees.licenses of $0.1 million. These increases were offset by a decrease in rent expense of $0.2 million.

General and administrative

The slight decrease in general and administrative expenses for the quarter ended June 30, 2018,March 31, 2019, as compared to the same period in 2017,2018, was primarily due to a $0.9 million decrease in professional fees for audit, legal, and consulting services related to becoming a public companyof $0.2 million and decrease in 2017. This decrease wastravel expenses of $0.1 million. These decreases were offset due to (i) $0.5 million higher corporate payroll expense fromby an increase in stock-based compensation expense recognized on RSUstudio marketing of $0.1 million for the new studios as well as more promotional campaigns and Options issued to Employees and Directors during the rolling 12 months ended June 30, 2018web advertisements and an increase in headcount and new regional managers in the acquired studio regions, and (ii) $0.2maintenance of $0.1 million in other expenses which included insurance, acquisition related travel expenses and investor relations expenses.for all our studios.

Depreciation and amortization

The slight increase$0.9 million or 37% decrease in depreciation and amortization expense between the quarters ended June 30,March 31, 2019 and March 31, 2018 and June 30, 2017 was due to depreciation and amortization from the acquired studios offset by the lower depreciation and amortization from assets that were fully amortized during the period.period offset by the depreciation and amortization from the acquired studios.


GoodwillAsset impairment

We recognizedFor the quarter ended March 31, 2019, we recorded an impairment charge of $0.2 million to goodwillthe property and equipment for one of $2.5 millionour studios that was closed in the first quarter of 2019. No asset impairment was booked for the quarter ended June 30,March 31, 2018. The impairment was primarily due to the continued decrease in the Company’s market capitalization. We did not record any impairment losses related to goodwill for the quarter ended June 30, 2017.

Interest (income) expense,income, net

The $0.3 million or 118% decreaseslight increase in interest (income) expense,income, net for the quarter ended June 30, 2018,March 31, 2019, as compared to the same period in 2017,2018, was due to thean increase in interest income from depository accounts and lower interest expense related to the conversion of the convertible note due to GHP and pay-off of the New Convertible Notes and the Deerpath Facility.accounts.

Provision for (benefit from) income taxes

There was no material change in the provision for income taxes between the three months ended June 30, 2018March 31, 2019 and 2017.2018. Our effective income tax rate was (0.01)(0.15)% for the three months ended June 30, 2018March 31, 2019 and (0.93)(0.44)% for the three months ended June 30, 2017.

Six Months Ended June 30, 2018 Compared to Six Months Ended June 30, 2017

 

 

Six Months Ended June 30,

 

 

Variance

 

(in thousands)

 

2018

 

 

2017

 

 

Dollar

 

 

Percent

 

Net revenues

 

$

30,400

 

 

$

26,484

 

 

$

3,916

 

 

 

15

%

Cost of revenues and operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

11,680

 

 

 

9,934

 

 

 

1,746

 

 

 

18

%

Center operations

 

 

13,833

 

 

 

11,270

 

 

 

2,563

 

 

 

23

%

General and administrative expenses

 

 

8,459

 

 

 

7,105

 

 

 

1,354

 

 

 

19

%

Depreciation and amortization

 

 

4,597

 

 

 

4,369

 

 

 

228

 

 

 

5

%

Goodwill impairment

 

 

2,475

 

 

 

 

 

 

2,475

 

 

 

100

%

Total cost of revenues and operating expenses

 

 

41,044

 

 

 

32,678

 

 

 

8,366

 

 

 

26

%

Loss from operations

 

 

(10,644

)

 

 

(6,194

)

 

 

(4,450

)

 

 

72

%

Interest (income) expense, net

 

 

(50

)

 

 

811

 

 

 

(861

)

 

 

(106

%)

Net loss before income taxes

 

 

(10,594

)

 

 

(7,005

)

 

 

(3,589

)

 

 

51

%

Provision for income taxes

 

 

18

 

 

 

59

 

 

 

(41

)

 

 

(69

%)

Net loss

 

$

(10,612

)

 

$

(7,064

)

 

$

(3,548

)

 

 

50

%

Net revenues

The $3.9 million or 15% increase in net revenues for the six months ended June 30, 2018, as compared to the same period in 2017, was primarily due to an increase in the number of studios. Sales from multi-class packages increased by $3.3 million and memberships decreased by $0.4 million for the six months ended June 30, 2018, compared to the same period in 2017, due to revenue from acquired studios that have predominantly sold multi-class packages and our flexible pricing strategy. In addition, retail sales increased by $0.6 million, online class sales increased by $0.3 million and teacher trainings and workshop events increased by $0.3 million due to a higher number of events held during the six months ended June 30, 2018, as compared to the same period in 2017.

Cost of revenues

The cost of revenues for the six months ended June 30, 2018, as compared to the same period in 2017, increased $1.7 million or 18% primarily due to $1.4 million higher payroll costs related to the acquired studios and $0.3 million higher retail sales costs.

Center operations

The $2.6 million or 23% increase in center operations for the six months ended June 30, 2018, as compared to the same period in 2017, which included $1.1 million higher rent expense and $1.0 million higher payroll expenses, primarily due to the impact of acquired studios. In addition, other expenses increased by $0.5 million which included repairs and maintenance, utilities and credit card fees.

General and administrative

General and administrative expenses for the six months ended June 30, 2018, as compared to the same period in 2017, increased by $1.4 million or 19% primarily due to (i) $1.0 million higher corporate payroll expense from an increase in stock-based compensation expense recognized on RSU and Options issued to Employees and Directors during the rolling 12 months ended June


30, 2018 and higher headcount and new regional managers in the acquired studio regions, (ii) $0.3 million higher studio marketing expense for the new studios as well as more promotional campaigns and web advertisements, and (iii) $0.5 million in other expenses which included insurance, acquisition related travel expenses and investor relations expenses. These increases were offset by a decrease of $0.5 million in professional fees for audit, legal and consulting services.

Depreciation and amortization

The slight increase in depreciation and amortization expense for the six months ended June 30, 2018, as compared to the same period in 2017, was due to depreciation and amortization from the acquired studios offset by the lower depreciation and amortization from assets that were fully amortized during the period.

Goodwill impairment

We recognized an impairment to goodwill of $2.5 million for the six months ended June 30,March 31, 2018. The impairment was primarily due to the continued decrease in the Company’s market capitalization. We did not record any impairment losses related to goodwill for the six months ended June 30, 2017.

Interest (income) expense, net

The $0.9 million or 106% decrease in interest (income) expense, net for the six months ended June 30, 2018, as compared to the same period in 2017, was due to the income from depository accounts and lower interest expense related to the conversion of the convertible note due to GHP and pay-off of the New Convertible Notes and the Deerpath Facility.

Provision for income taxes

There was no material change in the provision for income taxes between the six months ended June 30, 2018 and 2017. Our effective income tax rate was (0.22)% for the six months ended June 30, 2018 and (0.84)% for the six months ended June 30, 2017.

Non-GAAP financial measures

In addition to our results determined in accordance with GAAP, we use Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”),EBITDA, Studio-Level EBITDA Adjusted free cash flow, Studio-Level free cash flow and Adjusted net loss which are not calculated in accordance with GAAP. We use these financial measures to understand and evaluate our business. Adjusted EBITDA is a supplemental measure of the operating performance of our core business operations. Studio-Level EBITDA is a supplemental measure of our operating performance of our studios. Adjusted free cash flow is a supplemental measure of the operating performance of our core business operations excluding deferred revenue. Studio-Level free cash flow is a supplemental measure of our operating performance of our studios excluding deferred revenue. Adjusted net loss is a supplemental measure of operating performance that is adjusted for certain non-recurring items that we do not believe directly reflect our core business operations. Accordingly, we believe Adjusted EBITDA, Studio-Level EBITDA Adjusted free cash flow, Studio-Level free cash flow and Adjusted net loss provide useful information to investors and others in understanding and evaluating our Company’s operating results in the same manner as management and theour Board. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

Our use of Adjusted EBITDA, Studio-Level EBITDA Adjusted free cash flow, Studio-Level free cash flow and Adjusted net loss has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these limitations are as follows:

although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA Studio-Level EBITDA, Adjusted free cash flow and Studio-Level free cash flowEBITDA, do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

Adjusted EBITDA Studio-Level EBITDA, Adjusted free cash flow and Studio-Level free cash flowEBITDA do not reflect: (i) changes in, or cash requirements for, our working capital needs,needs; (ii) debt service requirements,requirements; (iii) tax payments that may represent a reduction in cash available to us,us; and (iv) other cash costs that may recur in the future;

Studio-Level EBITDA and Studio-Level free cash flow areis not measuresa measure of our overall profitability but a supplemental measuresmeasure of the operating performance of our studios. While Studio-Level EBITDA and Studio-Level free cash flow excludeexcludes regional and corporate general and administrative expenses that are not necessary to operate our studios, these excluded expenses are essential to support the operation and development of our studios; and

other companies, including companies in our industry, may calculate Adjusted EBITDA, Studio-Level EBITDA Adjusted free cash flow, Studio-Level free cash flow and Adjusted net loss or similarly titled measures differently, which reduces their usefulness as a comparative measure.


Adjusted EBITDA Studio-Level EBITDA, Adjusted free cash flow and Studio-Level free cash flowEBITDA

The following table presents a reconciliation of Adjusted EBITDA and Studio-Level EBITDA to Net loss. In addition, Adjusted free cash flow and Studio-Level free cash flow are presented for each of the periods indicated:loss:

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

(in thousands)

 

(Unaudited)

 

Net loss

 

$

(6,651

)

 

$

(4,448

)

 

$

(10,612

)

 

$

(7,065

)

Interest (income) expense, net

 

 

(44

)

 

 

249

 

 

 

(50

)

 

 

810

 

Provision for income taxes

 

 

1

 

 

 

41

 

 

 

18

 

 

 

59

 

Depreciation and amortization

 

 

2,218

 

 

 

2,168

 

 

 

4,597

 

 

 

4,369

 

Goodwill impairment

 

 

2,475

 

 

 

 

 

 

2,475

 

 

 

 

Deferred rent(a)

 

 

40

 

 

 

69

 

 

 

36

 

 

 

100

 

Stock based compensation(b)

 

 

497

 

 

 

286

 

 

 

949

 

 

 

825

 

Legal settlement(c)

 

 

 

 

 

865

 

 

 

 

 

 

865

 

Severance(d)

 

 

68

 

 

 

3

 

 

 

68

 

 

 

85

 

Executive recruiting(e)

 

 

 

 

 

30

 

 

 

 

 

 

30

 

Professional fees(f)

 

 

16

 

 

 

161

 

 

 

71

 

 

 

161

 

Great Hill Partners expense reimbursement fees(g)

 

 

 

 

 

25

 

 

 

 

 

 

50

 

Adjusted EBITDA

 

 

(1,380

)

 

 

(551

)

 

 

(2,448

)

 

 

289

 

Change in deferred revenue(h)

 

 

(184

)

 

 

616

 

 

 

75

 

 

 

542

 

Adjusted free cash flow

 

 

(1,564

)

 

 

65

 

 

 

(2,373

)

 

 

831

 

Other general and administrative expenses(i)

 

 

3,590

 

 

 

2,723

 

 

 

7,378

 

 

 

5,088

 

Studio-Level free cash flow

 

 

2,026

 

 

 

2,788

 

 

 

5,005

 

 

 

5,919

 

Change in deferred revenue(h)

 

 

184

 

 

 

(616

)

 

 

(75

)

 

 

(542

)

Studio-Level EBITDA

 

$

2,210

 

 

$

2,172

 

 

$

4,930

 

 

$

5,377

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

(in thousands)

 

(Unaudited)

 

Net loss

 

$

(3,311

)

 

$

(3,961

)

Interest income, net

 

 

(39

)

 

 

(6

)

Provision for income taxes

 

 

5

 

 

 

17

 

Depreciation and amortization

 

 

1,499

 

 

 

2,379

 

Asset impairment

 

 

174

 

 

 

 

Deferred rent(a)

 

 

108

 

 

 

(5

)

Stock based compensation(b)

 

 

370

 

 

 

452

 

Legal settlement(c)

 

 

46

 

 

 

 

Professional fees(d)

 

 

5

 

 

 

55

 

Studio closure expenses(e)

 

 

6

 

 

 

 

Adjusted EBITDA

 

 

(1,137

)

 

 

(1,069

)

Other general and administrative expenses(f)

 

 

3,955

 

 

 

3,898

 

Studio-Level EBITDA

 

$

2,818

 

 

$

2,829

 

 

 

(a)

Reflects the extent to which our rent expense for the period has been above or below our cash rent payments.

 

(b)

Non-cash charges related to equity-based compensation programs, which vary from period to period depending on timing of awards and forfeitures.

 

(c)

Legal settlement expense relatedexpenses incurred in the period to the Wage Statement Claim with the state of California.settle claims.

 

(d)

Severance expenses incurred in the periodProfessional fees are related to the termination of studiocertain accounting, tax and non-studio employees.consulting services.

 

(e)

Executive recruitingRepresents closure expenses incurredof one Boston area studio that closed in connection with the recruitment and hiringfirst quarter of membersof our executive management team.2019.

 

(f)

Professional fees related to certain accounting, tax and consulting services that were expensed in connection with our acquisitions.

(g)

Represents expense reimbursement fees incurred in connection with our Expense Reimbursement Agreement with affiliates of Great Hill Partners, which was terminated upon completion of our IPO.

(h)

Represents change in deferred revenue that is reflected in the consolidated statements of operations, excluding the change in gift card liabilities and deferred revenue from acquisitions.

(i)

Represents general and administrative expenses that are corporate and regional expenses and not incurred by our studios, and which are primarily comprised of expenses related to (i) wages and benefits of corporate and regional employees, (ii) non-studio rent, utilities and maintenance, (iii) corporate and regional marketing and advertising, and (iv) corporate professional fees. Other general and administrative expenses exclude any general and administrative expenses related to deferred rent, stock-based compensation, legal settlement, severance, executive recruiting, professional fees the Great Hill Partners expense reimbursement fees or any other general and administrative expenses that are included in the reconciliation of net loss to Adjusted EBITDA.


Adjusted net loss

The following table presents a reconciliation of Adjusted net loss to Net loss for each of the periods indicated:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

Three Months Ended March 31,

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

2019

 

 

2018

 

(in thousands)

 

(Unaudited)

 

 

(Unaudited)

 

Net loss

 

$

(6,651

)

 

$

(4,448

)

 

$

(10,612

)

 

$

(7,065

)

 

$

(3,311

)

 

$

(3,961

)

Goodwill impairment

 

 

2,475

 

 

 

 

 

 

2,475

 

 

 

 

Asset impairment

 

 

174

 

 

 

 

Stock based compensation(a)

 

 

497

 

 

 

286

 

 

 

949

 

 

 

825

 

 

 

370

 

 

 

452

 

Legal settlement(b)

 

 

 

 

 

865

 

 

 

 

 

 

865

 

 

 

46

 

 

 

 

Severance(c)

 

 

68

 

 

 

3

 

 

 

68

 

 

 

85

 

Executive recruiting(d)

 

 

 

 

 

30

 

 

 

 

 

 

30

 

Professional fees(e)

 

 

16

 

 

 

161

 

 

 

71

 

 

 

161

 

Great Hill Partners expense reimbursement fees(f)

 

 

 

 

 

25

 

 

 

 

 

 

50

 

Professional fees(c)

 

 

5

 

 

 

55

 

Studio closure expenses (d)

 

 

6

 

 

 

 

Adjusted net loss

 

$

(3,595

)

 

$

(3,078

)

 

$

(7,049

)

 

$

(5,049

)

 

$

(2,710

)

 

$

(3,454

)

 

 

(a)

Non-cash charges related to equity-based compensation programs, which vary from period to period depending on timing of awards and forfeitures.

 

(b)

Legal settlement expense relatedexpenses incurred in the period to the Wage Statement Claim.settle claims.

 

(c)

Severance expenses incurred in the period related to the termination of studio and non-studio employees.

(d)

Executive recruiting expenses incurred in connection with the recruitment and hiring of membersof our executive management team.

(e)

Professional fees related to certain accounting, tax and consulting services that were expensed in connection with our acquisitions.services.

 

(f)(d)

Represents expense reimbursement fees incurredclosure expenses of one Boston area studio that closed in connection with our Expense Reimbursement Agreement with Great Hill Partners, which was terminated upon completionthe first quarter of our IPO.2019.


Liquidity and Capital Resources

We have a history of operating losses and an accumulated deficit of $65.3$97.3 million as of June 30, 2018.March 31, 2019. In addition, we had negative working capital of $6.9$4.0 and $11.4$0.6 million at June 30, 2018March 31, 2019 and December 31, 2017,2018, respectively. As disclosed in our most recent Annual Report on Form 10-K, the Company needs additional financing to fund its operations. These conditions raise substantial doubt about our ability to continue as a going concern. Historically, we have satisfied our liquidity needs primarily through cash generated from financing activities, including cash generated from Deerpath Funding, LP, or our Loan Agreement and convertible notes issued from time to time to Great Hill Partners.activities. Our principal liquidity needs include cash used for operations (such as rent and labor costs), acquisitions, capital expenditures for the development of new studios and other capital expenditures necessary to improve existing studios, primarily leasehold improvements and additional furniture and fixtures.

Based upon our current levelThe accompanying interim unaudited financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of operations, we believeassets and the satisfaction of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that our cash balance on hand, including the net proceeds received from our IPO, together with our cash flow from operations is adequate to meet our short- and long-term liquidity requirements for at least the next twelve monthsmay result from the dateoutcome of this report.

We utilize operating lease arrangements for alluncertainty. At May 14, 2019, the Company is in the process of our studios. We believe that our operating lease arrangements continueobtaining additional financing. The Company may sell additional equity, issue debt securities or obtain a credit facility. However, the Company may not be able to provide the appropriate leverage for our capital structuresecure such financing in a financially efficient manner. Because we lease all oftimely manner or on favorable terms. Without additional funds, the properties relatedCompany may choose to our studios, as well as our corporate office, we do notdelay or reduce its operating or investment expenditures which may have any debt that is secured by real property.a material adverse effect on operations.


Selected Cash Flow Data

The following table and discussion presents, for the periods indicated, a summary of net cash flow data from operating, investing and financing activities.

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

Three Months Ended March 31,

 

 

2018

 

 

2017

 

 

2019

 

 

2018

 

(in thousands)

 

(Unaudited)

 

 

(Unaudited)

 

Used in operating activities

 

$

(4,551

)

 

$

(821

)

 

$

(4,683

)

 

$

(2,663

)

Used in investing activities

 

 

(1,995

)

 

 

(470

)

 

 

(685

)

 

 

(1,043

)

(Used in) provided by financing activities

 

 

(83

)

 

 

2,926

 

Increase (decrease) in cash and cash equivalents

 

 

(6,629

)

 

 

1,635

 

Used in provided by financing activities

 

 

(14

)

 

 

(74

)

Decrease in cash and cash equivalents

 

 

(5,382

)

 

 

(3,780

)

Cash and cash equivalents, beginning of period

 

 

22,095

 

 

 

1,912

 

 

 

11,447

 

 

 

22,095

 

Cash and cash equivalents, end of period

 

 

15,466

 

 

 

3,547

 

 

 

6,065

 

 

 

18,315

 

Adjusted studio operating cash flows

 

$

2,105

 

 

$

3,069

 

Net cash used in operating activities

Net cash used in operating activities has been driven by marketing initiatives and the enhancement of classes and events we provide to our students as well as the impact of general and administrative expenses related to the infrastructure we added in 2017 to support our expected growth.

For the sixthree months ended June 30, 2018, $8.0March 31, 2019, $2.1 million or 75%63% of our net loss of $10.6$3.3 million consisted of non-cash items, including depreciation and amortization expense of $4.6$1.5 million, goodwill impairment of $2.5 million and stock-based compensation expense of $0.9$0.4 million and asset impairment of $0.2 million. Net cash used in operating activities in the sixthree months ended June 30, 2018March 31, 2019 also included a $0.9$1.3 million decrease in accounts payable and accrued expenses and $0.6 million decrease in accrued compensation primarily due to the timing of payments, a $1.3 million increase in prepaid and other current assets due to an increase in prepaid rent, and a $0.7 million decrease in deferred revenue due to the timing of when memberships and class packages had been sold and when the corresponding revenue recognized for such sales occurred.a

For the three months ended March 31, 2018, $3.1 million or 78% of our net loss of $4.0 million consisted of non-cash items, including depreciation and amortization expense of $2.4 million, stock-based compensation expense of $0.5 million, and change in deferred revenue of $0.2 million due to timing of when memberships and class packages had been sold and when the corresponding revenue recognized for such sales occurred. Net cash used in operating activities in the three months ended March 31, 2018 also included a $0.8 million decrease in accrued compensation and a $0.9$0.7 million decrease in accounts payable and accrued expenses as both decreases are primarily due to the timing of payments, and a $0.1 million increase in prepaid expenses and other current assets primarily due to the timing of rent payments.

For the six months ended June 30, 2017, our net cash used in operating activities primarily resulted from our net loss of $7.1 million, which included non-cash items of depreciation and amortization expense of $4.4 million and stock-based compensation expense of $0.8 million. In addition, prepaid expenses and other current assets increased by $0.6 million due to an increase in prepaid rent, accrued compensation decreased by $0.1 million and accounts payable and accrued expenses increased by $0.6 million due to timing of payments.assets.

Net cash used in investing activities

For the sixthree months ended June 30,March 31, 2019 and 2018, our net cash used in investing activities was primarily due to the acquisition of five studios amounting to $0.7 million, subsequent acquisition-related payments of $0.6 million and purchases of property and equipment for $0.6 million.$0.7 million and $0.4 million, respectively.


Net cash used in financing activities

For the sixthree months ended June 30, 2017,March 31, 2019, our net cash used in investingfinancing activities primarily resulted from $0.5 million of purchases of property and equipment.

Net cash provided by (used in) financing activitiesshare repurchases to satisfy tax withholding on vested RSU.

For the sixthree months ended June 30,March 31, 2018, our net cash used in financing activities resulted from $0.6 million for subsequent acquisition-related payments and $0.1 million for repurchase of sharesshare repurchases to satisfy tax withholding on vested RSU.

For the six months ended June 30, 2017, ourAdjusted studio operating cash flow

Adjusted studio operating cash flow is a non-GAAP measure reflecting net cash provided by financingstudio operating activities, primarily resulted fromexcluding other general and administrative expenses that are corporate and regional expenses and not incurred by our studios, interest and provision for income taxes that we considered as corporate expenses, and other changes in operating assets and liabilities. We use adjusted studio operating cash flow as a key liquidity measure for the issuancepurpose of evaluating our ability to generate cash at the studio level. We also believe adjusted studio operating cash flow provides our investors with useful information regarding our studio historical cash flow results. This non-GAAP measurement is not intended to replace the presentation of our financial results in accordance with GAAP, and adjusted studio operating cash flow does not represent residual cash flows available for discretionary expenditures. Use of the New Convertible Notes, in the aggregate principal amount of $3.2 million, less $0.2 million in payments to settle promissory notes related to acquisitions made in fiscal year 2015.term adjusted studio operating cash flow may differ from similar measures reported by other companies.

Adjusted studio operating cash flow is reconciled from net cash provided by operating activities determined under GAAP as follows:

 

 

Three Months Ended March 31,

 

(in thousands)

 

2019

 

 

2018

 

Net cash (used in) provided by operating activities

 

$

(4,683

)

 

$

(2,663

)

Changes to operating assets and liabilities(a)

 

 

2,829

 

 

 

1,738

 

Deferred Revenue from acquisitions(b)

 

 

(9

)

 

 

64

 

Other general and administrative expenses excluding SBC(c)

 

 

4,012

 

 

 

3,953

 

Interest and provision for income taxes(d)

 

 

(44

)

 

 

(23

)

Adjusted studio operating cash flow

 

$

2,105

 

 

$

3,069

 

(a)

Represents changes in operating assets and liabilities including (i) inventories, (ii) prepaid and other current assets, (iii) other noncurrent assets, (iv) accounts payable and accrued expenses, and (v) accrued compensation.

(b)

Represents change in deferred revenue of acquired studios.

(c)

Represents general and administrative expenses that are corporate and regional expenses and not incurred by our studios, and which are primarily comprised of expenses related to (i) wages and benefits of corporate and regional employees, (ii) non-studio rent, utilities and maintenance, (iii) corporate and regional marketing and advertising, and (iv) corporate professional fees. Other general and administrative expenses exclude any general and administrative expenses related to deferred rent, stock-based compensation, and other noncash expenses included in the cash flows from operating activities.

(d)

Represents interest income and expense excluding non-cash charges included in the cash flows from operating activities.

Off-Balance Sheet Arrangements

As of June 30, 2018,March 31, 2019, our Company did not have any off-balance sheet arrangements.

 

 


Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

Item 4. Controls and Procedures

 

Evaluation of disclosure controls and procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this quarterly report on Form 10-Q.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives.

As reported inBased on that evaluation, our 10-K,Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2019, our disclosure controls and procedures for the year ended December 31, 2017 were not effective due to a material weakness in internal controls over management review and financial reporting related to year end process level controls over certain reconciliations and effective review. As a result of the material weakness, management concluded that, at June 30, 2018, our internal control over financial reporting was also ineffective, as the remediation was in process. Management initiated additional procedures during the quarter ended June 30, 2018 to address the material weakness. We continue to review and develop additional controls and procedures to improve our control environment, including implementing procedures and enhancing controls to assure that management reviews are documented and performed timely and accurately. We believeprovide reasonable assurance that the foregoing steps have improvedinformation required to be disclosed by our controlsCompany in the reports it files or submits with the SEC is recorded, processed, summarized and we are workingreported within the time periods specified in SEC rules and forms and is accumulated and communicated to remediateour management, including the material weakness identified above. We will be assessing the effectiveness of the changes madeprincipal executive and make additional modificationsprincipal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required during the remainder of 2018.

Based upon the above procedures, notwithstanding the material weakness, management believes that the financial statements included in this report fairly represent in all material aspects our Company’s financial position, results of operations and cash flows for the periods presented.disclosure.

Changes in internal control over financial reporting

As noted above, changes have been made to controls and procedures to improve our control environment to address the material weakness identified in the fourth quarter of 2017 and we will continue to review and develop additional controls and procedures to improve our control environment. Other than the changes noted above, thereThere have been no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 


PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On June 5, 2017, a letter was sent to the California Labor & Workforce Development Agency alleging our itemized wage statements did not comply with the California Labor Code.Code, which we refer to herein as the Wage Statement Claim. On August 7, 2017, we agreed to a class-wideclass wide settlement for a maximum amount of $865,000 $865,000 with respect to the Wage Statement Claim, which would include settlement of all penalties under the Private Attorneys General Act of 2004 and California Labor Code section 226, attorneys’ fees and costs, class representative enhancements and claims administration fees. The class-wide settlement, including the maximumentire amount was reserved under accrued expenses as of December 31, 2018. The class wide settlement amount of $865,000, remains subject$865,000 was approved by the court and paid by the Company on January 2, 2019.

On July 2, 2018, a former California employee (“Plaintiff”) filed a complaint against us in the Superior Court of the State of California for the County of Los Angeles (the “Complaint”). Plaintiff’s Complaint was filed pursuant to court approval.the California Labor Code purportedly on behalf of all Pilates instructors, yoga instructors and other employees who worked for us in California on a piece-rate basis within the four years preceding the date of the Complaint. The Complaint alleged that certain of our payroll-related practices with respect to California-based employees paid on a piece-rate did not comply with the California Labor Code. On March 21, 2019, we agreed to a class wide settlement for a maximum amount of $1.0 million, which would include settlement of all penalties under the Private Attorneys General Act of 2004 and California Labor Code, attorneys’ fees and costs, class representative enhancements and claims administration fees. As of June 30,December 31, 2018, we have reserved for the entire amount under accrued expenses.

Four substantially similar putative class action complaints were filed in the Superior Court of the State of California, County of Los Angeles, captioned Salazar v. YogaWorks, Inc., et al. (filed November 26, 2018); Johnson v. YogaWorks, Inc., et al. (filed December 19, 2018); Lowinger v. YogaWorks, Inc. et al. (filed December 21, 2018); and Mirza v. YogaWorks, Inc., et al. (filed January 17, 2019). These four state court actions were consolidated into the Salazar case by the Court on April 17, 2019 and assigned to Judge Maren Nelson for all purposes. Additionally, two putative class action complaints, substantially similar to the state court securities actions, captioned Cohen v. YogaWorks, Inc., et al. (filed December 27, 2018) and Dellinger v. YogaWorks, Inc., et al. (filed February 8, 2019) were filed in the United States District Court for the District of Central California. These lawsuits were brought by purported stockholders of YogaWorks alleging violations of the Securities Act of 1933 for alleged misstatements and omissions in offering documents related to YogaWorks’ IPO that took place on August 11, 2017. The lawsuits name as defendants YogaWorks, certain of its current and former officers and directors, YogaWorks’ majority shareholder, and certain underwriters of YogaWorks’ IPO. A status conference has been set for the consolidated Salazar matter for June 28, 2019. Pending further order of the court, no response is currently due. On March 21, 2019, the federal court actions were consolidated, and Inter-Local Pension Fund GCC/IBT’s were appointed as Lead Plaintiff. On April 3, 2019, the Court ordered that Lead Plaintiff’s amended complaint is due by May 21, 2019; Defendants’ motion(s) to dismiss is due by July 23, 2019; Plaintiffs’ opposition(s) to the motion(s) to dismiss is due by September 24, 2019; Defendants’ reply/replies in support of their motion(s) to dismiss are due by November 21, 2019; and the hearing on Defendants’ motion(s) to dismiss is set for December 9, 2019 at 1:30 p.m. The outcomes of the legal proceedings are inherently unpredictable, subject to significant uncertainties, and could be material to YogaWorks’ financial condition, results of operations, and cash flows for a particular period. YogaWorks intends to vigorously defend the claims asserted against it.

In addition to the Wage Statement Claim,aforementioned legal matters, from time to time, we may becomeare involved in legal proceedings arising in the ordinary course of business. There can be no assurance with respect to the outcome of any legal proceeding, and we could suffer monetary liability from the outcome of the Wage Statement Claimlegal matters described above or other claims that may be made in the future that could be material to our results of operations.

Other than the Wage Statement Claim,aforementioned legal matters, we believe there are no pending lawsuits or claims that may have a material adverse effect on our business, capital resources or results of operations.

Item 1A. Risk Factors

Our business faces many risks. Any of the risks discussed in this quarterly report or our other SEC filings could have a material impact on our business, financial position or results of operations. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our business operations. For a detailed discussion of the risk factors that should be understood by any investor contemplating investment in our securities, please refer to Part I, Item 1A, Risk Factors, in our 20172018 Annual Report on Form 10-K. There have been no material changes to the risk factors set forth in our 20172018 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

None.


None.

Use of Proceeds

On August 10, 2017, our Registration Statement on Form S-1 (File No. 333-218950) was declared effective by the SEC for our IPO. There has been no material change in the use of proceeds as described in the final prospectus filed on August 11, 2017.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

 


Item 6. Exhibits

 

Exhibit

Number

 

Description

 

 

 

10.1

 

SeparationAmendment No. 1 to Employment Agreement, and Release,dated as of April 18, 2019, by and between Yoga Works,YogaWorks, Inc. and Suzanne Dawson, dated April 25, 2018Vance Chang (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 30, 2018)19, 2019).

10.2

Employment Agreement, by and between Yoga Works, Inc. and Kurt Donnell, dated June 20, 2018 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 25, 2018)

31.1*

 

Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*

 

Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*

 

Certification of the Principal Executive Officer and Principal Financial Officer pursuant to the 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

**101.INS

 

XBRL Instance Document

**101.SCH

 

XBRL Taxonomy Extension Schema Document

**101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

**101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

**101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

**101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

*

Filed herewith.

**

Submitted electronically with this Report.

 

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

YogaWorks, Inc.

 

 

 

 

Date: AugustMay 14, 20182019

 

By:

/s/ Rosanna McCollough

 

 

 

Rosanna McCollough

 

 

 

President and Chief Executive Officer

 

 

 

 

Date: AugustMay 14, 20182019

 

By:

/s/ Vance Chang

 

 

 

Vance Chang

 

 

 

Chief Financial Officer

 

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