Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2019 | May 16, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | Youngevity International, Inc. | |
Entity Central Index Key | 0001569329 | |
Document Type | 10-Q/A | |
Document Period End Date | Mar. 31, 2019 | |
Amendment Flag | true | |
Amendment Description | On October 13, 2020, the Audit Committee of the Board of Directors (the Board) of Youngevity International, Inc., (together with its subsidiaries, the Company, we, our or us), following discussion with management, determined that the unaudited condensed consolidated financial statements (the Previously Issued Financial Statements) presented in the Companys Quarterly Report for the quarterly periods ended March 31, 2019, June 30, 2019 and September 30, 2019 filed with the Securities and Exchange Commission (the SEC) should no longer be relied upon as a result of the following error: During the three months ended March 31, 2019 certain revenues related to green coffee sales, within the Companys commercial coffee segment, that were recognized at gross should have been recorded at net. During the Companys 2019 annual audit, it was determined that the Company had not fairly valued certain assets acquired in its acquisition of Khrysos Global, Inc., as of the closing date. As a result, the Company is restating its financial statements related to its commercial hemp segment detailed below for the following error: During the three months ended March 31, 2019, the fair value of certain fixed assets acquired in the acquisition of Khrysos Global, Inc., and the share price valuation for the common stock issued as consideration for the acquisition were not fairly valued as of the closing date. A description of the restatement is presented in Note 2 under the caption Restatement of previously reported unaudited condensed consolidated financial statements. Accordingly, the Company is filing this Amendment No. 1 (this Form 10Q/A) to amend our Quarterly Report on Form 10Q for the quarterly period ended March 31, 2019, originally filed with the Securities and Exchange Commission (the SEC) on May 20, 2019 (the Original Filing), to reflect the amendment and restatement of our Unaudited Condensed Consolidated Balance Sheet at March 31, 2019, Unaudited Condensed Consolidated Statement of Operations for the three months ended March 31, 2019, Unaudited Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2019 and the related notes thereto and related disclosures as of March 31, 2019. | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Interactive Data Current | Yes | |
Entity Incorporation State Country Code | DE | |
Entity File Number | 001-38116 | |
Entity Common Stock, Shares Outstanding | 28,890,671 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2019 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 | ||
Current Assets | ||||
Cash and cash equivalents | $ 2,540 | [1] | $ 2,879 | |
Accounts receivable, trade (Note 1) | 7,706 | [1] | 4,028 | |
Income tax receivable | 75 | [1] | 74 | |
Inventory | 24,164 | [1] | 21,776 | |
Advances (Note 1) | 0 | [1] | 5,000 | |
Notes receivable | 5,000 | [1] | 0 | |
Prepaid expenses and other current assets | 4,891 | [1] | 5,263 | |
Total current assets | 44,376 | [1] | 39,020 | |
Property and equipment, net | 19,729 | [1] | 15,105 | |
Operating lease right-of-use assets | 5,509 | [1] | 0 | |
Deferred tax assets | 148 | 148 | ||
Intangible assets, net | 23,919 | [1] | 15,377 | |
Goodwill | 13,154 | [1] | 6,323 | |
Other assets - notes receivable | 949 | [1] | 0 | |
Total assets | 107,784 | [1] | 75,973 | |
Current Liabilities | ||||
Accounts payable | 8,861 | [1] | 8,478 | |
Accrued distributor compensation | 4,143 | [1] | 3,289 | |
Accrued expenses | 6,462 | [1] | 6,582 | |
Deferred revenues | 2,268 | [1] | 2,312 | |
Line of credit | 2,432 | [1] | 2,256 | |
Other current liabilities | 535 | [1] | 1,912 | |
Operating lease liabilities, current portion | 745 | [1] | 0 | |
Finance lease liabilities, current portion | 978 | [1] | 1,168 | |
Notes payable, current portion | 158 | [1] | 141 | |
Convertible notes payable, current portion | 681 | [1] | 647 | |
Warrant derivative liability | 5,369 | [1] | 9,216 | |
Contingent acquisition debt, current portion | 792 | [1] | 795 | |
Total current liabilities | 33,424 | [1] | 36,796 | |
Operating lease liabilities, net of current portion | 4,764 | [1] | 0 | |
Finance lease liabilities, net of current portion | 927 | [1] | 1,107 | |
Notes payable, net of current portion | 10,378 | [1] | 7,629 | |
Convertible notes payable, net of debt discount | 1,981 | [1] | 0 | |
Contingent acquisition debt, net of current portion | 7,341 | [1] | 7,466 | |
Total liabilities | 58,815 | [1] | 52,998 | |
Commitments and contingencies (Note 1) | [1] | |||
Stockholders' Equity | ||||
Common Stock, $0.001 par value: 50,000,000 shares authorized; 28,890,671 and 25,760,708 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively | 29 | [1] | 26 | |
Additional paid-in capital | 244,906 | [1] | 206,757 | |
Accumulated deficit | (196,023) | [1] | (183,763) | |
Accumulated other comprehensive Income (loss) | 57 | [1] | (45) | |
Total stockholders' equity (deficit) | [2] | 48,969 | [1] | 22,975 |
Total Liabilities and Stockholders' Equity | 107,784 | [1] | 75,973 | |
Series A Preferred Stock [Member] | ||||
Stockholders' Equity | ||||
Preferred Stock, $0.001 par value: 5,000,000 shares authorized Convertible Preferred Stock, Series A - 161,135 shares issued and outstanding at March 31, 2019 and December 31, 2018 Convertible Preferred Stock, Series B – 129,437 shares issued and outstanding at March 31, 2019 and December 31, 2018 | 0 | 0 | ||
Total stockholders' equity (deficit) | 0 | 0 | ||
Series B Preferred Stock [Member] | ||||
Stockholders' Equity | ||||
Preferred Stock, $0.001 par value: 5,000,000 shares authorized Convertible Preferred Stock, Series A - 161,135 shares issued and outstanding at March 31, 2019 and December 31, 2018 Convertible Preferred Stock, Series B – 129,437 shares issued and outstanding at March 31, 2019 and December 31, 2018 | 0 | 0 | ||
Total stockholders' equity (deficit) | $ 0 | $ 0 | ||
[1] | The Unaudited Condensed Consolidated Balance Sheet as of March 31, 2019 has been restated. See Note 2. | |||
[2] | The Unaudited Condensed Consolidated Statement of Stockholders' Equity for the three months ended March 31, 2019 has been restated. See Note 2. |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2019 | Dec. 31, 2018 |
Equity: | ||
Convertible Preferred Stock, par value | $ 0.001 | $ 0.001 |
Convertible Preferred Stock, shares authorized | 5,000,000 | 5,000,000 |
Common Stock, par value | $ 0.001 | $ 0.001 |
Common Stock, shares authorized | 50,000,000 | 50,000,000 |
Common Stock, shares issued | 28,890,671 | 25,760,708 |
Common Stock, shares outstanding | 28,890,671 | 25,760,708 |
Series A Preferred Stock [Member] | ||
Equity: | ||
Convertible Preferred Stock, shares issued | 161,135 | 161,135 |
Convertible Preferred Stock, shares outstanding | 161,135 | 161,135 |
Series B Preferred Stock [Member] | ||
Equity: | ||
Convertible Preferred Stock, shares issued | 129,437 | 129,437 |
Convertible Preferred Stock, shares outstanding | 129,437 | 129,437 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019 | [1] | Mar. 31, 2018 | |
Condensed Consolidated Statements Of Operations | |||
Revenues | $ 41,192 | $ 42,994 | |
Cost of revenues | 14,343 | 17,982 | |
Gross profit | 26,849 | 25,012 | |
Operating expenses | |||
Distributor compensation | 14,890 | 15,578 | |
Sales and marketing | 4,019 | 3,499 | |
General and administrative | 19,881 | 5,911 | |
Total operating expenses | 38,790 | 24,988 | |
Income (loss) from Operations | (11,941) | 24 | |
Interest expense, net | (1,507) | (1,712) | |
Change in fair value of warrant derivative liability | 1,486 | 712 | |
Extinguishment loss on debt | 0 | [2] | (1,082) |
Total other income (expense) | (21) | (2,082) | |
Net loss before income taxes | (11,962) | (2,058) | |
Income tax provision | 298 | 250 | |
Net loss | (12,260) | (2,308) | |
Preferred stock dividends | (14) | [3] | (3) |
Net loss available to common stockholders | $ (12,274) | $ (2,311) | |
Net (loss) income per share, basic | $ (0.45) | $ (0.12) | |
Net (loss) income per share, diluted | $ (0.49) | $ (0.13) | |
Weighted average shares outstanding, basic | 27,577,576 | 19,744,144 | |
Weighted average shares outstanding, diluted | 28,025,172 | 19,758,402 | |
[1] | The Unaudited Condensed Consolidated Statement of Operations for the three months ended March 31, 2019 has been restated. See Note 2. | ||
[2] | The Unaudited Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2019 has been restated. See Note 2. | ||
[3] | The Unaudited Condensed Consolidated Statement of Stockholders' Equity for the three months ended March 31, 2019 has been restated. See Note 2. |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | ||
Condensed Consolidated Statements Of Comprehensive Income Loss | |||
Net loss | $ (12,260) | [1] | $ (2,308) |
Foreign currency translation | 102 | 201 | |
Total other comprehensive loss | 102 | 201 | |
Comprehensive loss | $ (12,158) | $ (2,107) | |
[1] | The Unaudited Condensed Consolidated Statement of Operations for the three months ended March 31, 2019 has been restated. See Note 2. |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands | Series A Preferred Stock [Member] | Series B Preferred Stock [Member] | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total | |||
Beginning Balance, Shares at Dec. 31, 2017 | 161,135 | 0 | 19,723,285 | |||||||
Beginning Balance, Amount at Dec. 31, 2017 | $ 0 | $ 0 | $ 20 | $ 171,405 | $ (281) | $ (163,693) | $ 7,451 | |||
Net loss | $ (2,308) | (2,308) | ||||||||
Foreign currency translation adjustment | $ 201 | 201 | ||||||||
Issuance of Series B preferred stock, net of issuance cost, shares | 381,173 | |||||||||
Issuance of Series B preferred stock, net of issuance cost, amount | 3,289 | 3,289 | ||||||||
Issuance of common stock pursuant to the exercise of stock options, shares | 437 | |||||||||
Issuance of common stock pursuant to the exercise of stock options, amount | 2 | 2 | ||||||||
Issuance of common stock for services, shares | 5,000 | |||||||||
Issuance of common stock for services, amount | 27 | 27 | ||||||||
Issuance of common stock for conversion of Notes - 2017 Notes, shares | 1,577,033 | |||||||||
Issuance of common stock for conversion of Notes - 2017 Notes, amount | $ 1 | 6,542 | 6,545 | |||||||
Dividends on preferred stock | (3) | (3) | ||||||||
Stock based compensation expense | $ 237 | $ 237 | ||||||||
Ending Balance, Shares at Mar. 31, 2018 | 161,135 | 381,173 | 25,305,755 | 181,501 | (80) | (166,001) | 15,441 | |||
Ending Balance, Amount at Mar. 31, 2018 | $ 0 | $ 0 | $ 21 | |||||||
Beginning Balance, Shares at Dec. 31, 2018 | 161,135 | 129,437 | 25,760,708 | |||||||
Beginning Balance, Amount at Dec. 31, 2018 | $ 0 | $ 0 | $ 26 | $ 206,757 | [1] | $ (45) | $ (183,763) | $ 22,975 | [1] | |
Net loss | (12,260) | (12,260) | [1] | |||||||
Foreign currency translation adjustment | 102 | 102 | [1] | |||||||
Issuance of common stock for ATM financing and exercise of stock options and warrants, net | 309,636 | |||||||||
Issuance of common stock for ATM financing and exercise of stock options and warrants, net, amount | $ 1 | 1,454 | [1] | 1,455 | [1] | |||||
Issuance of common stock for services, shares | 75,000 | |||||||||
Issuance of common stock for services, amount | [1] | 417 | 417 | [2] | ||||||
Issuance of common stock in private offering, net of issuance costs, shares | 255,000 | |||||||||
Issuance of common stock in private offering, net of issuance costs | [1] | 1,750 | 1,750 | |||||||
Issuance of common stock for acquisition of Khrysos, shares | 1,794,972 | |||||||||
Issuance of common stock for acquisition of Khrysos | $ 1 | 13,999 | [1] | 14,000 | [1] | |||||
Issuance of common stock for debt financing net of issuance costs, shares | 40,000 | |||||||||
Issuance of common stock for debt financing net of issuance costs | [1] | 350 | 350 | |||||||
Issuance of common stock for true up shares, shares | 44,599 | |||||||||
Issuance of common stock for true up shares | [1] | 281 | 281 | |||||||
Issuance of common stock for convertible note financing ($2.44 Mil), shares | 61,000 | |||||||||
Issuance of common stock for convertible note financing ($2.44 Mil) | [1] | 293 | 293 | |||||||
Issuance of common stock related to purchase of land H&H, shares | 153,846 | |||||||||
Issuance of common stock related to purchase of land H&H | [1] | 1,200 | 1,200 | |||||||
Issuance of common stock related to purchase of trademark H&H, shares | 100,000 | |||||||||
Issuance of common stock related to purchase of trademark H&H | [1] | 750 | 750 | |||||||
Issuance of common stock related to advance for working capital (note receivable) net of settlement of debt, shares | 295,910 | |||||||||
Issuance of common stock related to advance for working capital (note receivable) net of settlement of debt | $ 1 | 2,308 | [1] | 2,309 | [1] | |||||
Release of warrant liability upon exercise of warrants | [1] | 867 | 867 | |||||||
Release of warrant liability upon reclassification of liability to equity | [1] | 1,494 | 1,494 | |||||||
Warrant issued upon vesting for services | [1] | 1,656 | 1,656 | |||||||
Dividends on preferred stock | [1] | (14) | (14) | [3] | ||||||
Stock based compensation expense | [1] | 11,344 | 11,344 | |||||||
Ending Balance, Shares at Mar. 31, 2019 | 161,135 | 129,437 | 28,890,671 | |||||||
Ending Balance, Amount at Mar. 31, 2019 | $ 0 | $ 0 | $ 29 | $ 244,906 | [1] | $ 57 | $ (196,023) | $ 48,969 | [1],[4] | |
[1] | The Unaudited Condensed Consolidated Statement of Stockholders' Equity for the three months ended March 31, 2019 has been restated. See Note 2. | |||||||||
[2] | The Unaudited Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2019 has been restated. See Note 2. | |||||||||
[3] | The Unaudited Condensed Consolidated Statement of Operations for the three months ended March 31, 2019 has been restated. See Note 2. | |||||||||
[4] | The Unaudited Condensed Consolidated Balance Sheet as of March 31, 2019 has been restated. See Note 2. |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | ||
Cash Flows from Operating Activities: | |||
Net loss | $ (12,260) | [1] | $ (2,308) |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||
Depreciation and amortization | 1,145 | [1] | 1,259 |
Stock-based compensation expense | 11,344 | [1] | 237 |
Amortization of debt discounts and issuance costs | 199 | [1] | 543 |
Change in fair value of warrant derivative liability | (1,486) | [1] | (712) |
Change in fair value of contingent acquisition debt | 0 | [1] | (213) |
Changes in inventory reserve | 159 | [1] | 0 |
Extinguishment loss on debt | 0 | [1],[2] | 1,082 |
Equity issuance for services | 1,859 | [1] | 27 |
Stock issuance for true-up shares | 281 | [1] | 0 |
Deferred taxes | 0 | [1] | 137 |
Changes in operating assets and liabilities, net of effect from business combinations: | |||
Accounts receivable | (3,369) | [1] | (1,231) |
Inventory | (1,283) | [1] | (1,139) |
Prepaid expenses and other current assets | (111) | [1] | (484) |
Accounts payable | (54) | [1] | 794 |
Accrued distributor compensation | 854 | [1] | 259 |
Deferred revenues | (44) | [1] | 1,302 |
Accrued expenses and other liabilities | (2,173) | [1] | (1,075) |
Income taxes receivable | 0 | [1] | 95 |
Net Cash Used In Operating Activities | (4,831) | [1] | (1,427) |
Cash Flows from Investing Activities: | |||
Acquisitions, net of cash acquired | (425) | [1] | (50) |
Purchases of property and equipment | (2,291) | [1] | (106) |
Net Cash Used in Investing Activities | (2,716) | [1] | (156) |
Cash Flows from Financing Activities: | |||
Proceeds from issuance of promissory notes, net of offering costs | 3,750 | [1] | 0 |
Proceeds from private placement stock offering, net of offering costs | 2,267 | [1] | 3,289 |
Proceeds from the at-the-market-offering and exercise of stock options | 1,455 | [1] | 3 |
Proceeds net of repayment towards line of credit | 176 | [1] | 770 |
Payments of notes payable | (35) | [1] | (58) |
Payments of contingent acquisition debt | (128) | [1] | (10) |
Payments of finance leases | (368) | [1] | (232) |
Payments of dividends | (11) | [1] | 0 |
Net Cash Provided by Financing Activities | 7,106 | [1] | 3,762 |
Foreign Currency Effect on Cash | 102 | [1] | 201 |
Net (decrease) increase in cash and cash equivalents | (339) | [1] | 2,380 |
Cash and Cash Equivalents, Beginning of Period | 2,879 | [1] | 673 |
Cash and Cash Equivalents, End of Period | 2,540 | [1] | 3,053 |
Supplemental Disclosures of Cash Flow Information Cash paid during the period for: | |||
Interest | 1,034 | [1] | 1,191 |
Income taxes | 0 | [1] | 44 |
Supplemental Disclosures of Noncash Investing and Financing Activities | |||
Purchases of property and equipment funded by finance leases | 0 | [1] | 664 |
Purchases of property and equipment funded by mortgage agreements | 450 | [1] | 0 |
Fair value of stock issued for services | 417 | [1],[3] | 27 |
Fair value of stock issued for property and equipment (land) | 1,200 | [1] | 0 |
Fair value of stock issued for purchase of intangibles (tradename) | 750 | [1] | 0 |
Fair value of stock issued for note receivable, net of debt settlement | 2,309 | [1] | 0 |
Fair value of stock issued in connection with the acquisition of Khrysos Global, Inc. (Note 5) | 14,000 | [4] | 0 |
Dividends declared but not paid at the end of period | 14 | [1] | 0 |
Acquisitions of net assets in exchange for contingent acquisition debt, net of purchase price adjustments (see Note 4) | 0 | [1] | 1,877 |
Fair value of warrants issued in connection with the Series B Preferred Stock Offering | 0 | [1] | 75 |
Conversion of 2017 Notes to Common Stock | $ 0 | [1] | $ 7,254 |
[1] | The Unaudited Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2019 has been restated. See Note 2. | ||
[2] | The Unaudited Condensed Consolidated Statement of Operations for the three months ended March 31, 2019 has been restated. See Note 2. | ||
[3] | The Unaudited Condensed Consolidated Statement of Stockholders' Equity for the three months ended March 31, 2019 has been restated. See Note 2. | ||
[4] | The Fair value of stock issued in connection with the acquisition of Khrysos Global, Inc., was previously reported in Note 4 to the original filing of the Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 as filed with the SEC on May 20, 2019. |
Basis of Presentation and Descr
Basis of Presentation and Description of Business | 3 Months Ended |
Mar. 31, 2019 | |
Notes to Financial Statements | |
Basis of Presentation and Description of Business | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to such rules and regulations. Youngevity International, Inc. (the “Company”) consolidates all wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The statements presented as of March 31, 2019 and for the three months ended March 31, 2019 and 2018 are unaudited. In the opinion of management, these financial statements reflect all normal recurring and other adjustments necessary for a fair presentation, and to make the financial statements not misleading. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Form 10-K for the year ended December 31, 2018, filed with the SEC on April 15, 2019. The results for interim periods are not necessarily indicative of the results for the entire year. Nature of Business Youngevity International, Inc. (the “Company”), founded in 1996, develops and distributes health and nutrition related products through its global independent direct selling network, also known as multi-level marketing, and sells coffee products to commercial customers. During the year ended December 31, 2018 the Company operated in two business segments, its direct selling segment where products are offered through a global distribution network of preferred customers and distributors and its commercial coffee segment where products are sold directly to businesses. During the first quarter of 2019, the Company through the acquisition of the assets of Khrysos Global, Inc. added a third business segment to its operations, the commercial hemp segment. The Company's three segments are listed below: ● Commercial coffee business is operated through CLR and its wholly owned subsidiary, Siles Plantation Family Group S.A. (“Siles”). ● Domestic direct selling network is operated through the following (i) domestic subsidiaries: AL Global Corporation, 2400 Boswell LLC, MK Collaborative LLC, and Youngevity Global LLC and (ii) foreign subsidiaries: Youngevity Australia Pty. Ltd., Youngevity NZ, Ltd., Youngevity Mexico S.A. de CV, Youngevity Israel, Ltd., Youngevity Russia, LLC, Youngevity Colombia S.A.S, Youngevity International Singapore Pte. Ltd., Mialisia Canada, Inc. and Legacy for Life Limited (Hong Kong). The Company also operates through the BellaVita Group LLC, with operations in Taiwan, Hong Kong, Singapore, Indonesia, Malaysia and Japan. The Company also operates subsidiary branches of Youngevity Global LLC in the Philippines and Taiwan. ● Commercial hemp business is operated through the Company’s wholly owned subsidiary, Khrysos Industries, Inc., a Delaware corporation. Khrysos Industries, Inc. acquired the assets of Khrysos Global Inc. a Florida corporation in February 2019 and the wholly-owned subsidiaries of Khrysos Global Inc., INXL Laboratories, Inc., a Florida corporation and INX Holdings, Inc., a Florida corporation. Segment Information The Company has three reportable segments: direct selling, commercial coffee, and commercial hemp. The direct selling segment develops and distributes health and wellness products through its global independent direct selling network also known as multi-level marketing. The commercial coffee segment is engaged in coffee roasting and distribution (specializing in gourmet coffee), mill processing of green coffee, and sales of green coffee. The commercial hemp segment manufactures proprietary systems to provide end-to-end extraction and processing that allow for the conversion of hemp feed stock into hemp oil and hemp extracts. The determination that the Company has three reportable segments is based upon the guidance set forth in Accounting Standards Codification (“ASC”) Topic 280, “Segment Reporting.” During the three months ended March 31, 2019, the Company derived approximately 81.1% of its revenue from its direct selling segment and approximately 18.7% of its revenue from its commercial coffee segment. Commercial hemp segment revenues during the current quarter represented 0.2% of total revenues as it is newly acquired. During the three months ended March 31, 2018, the Company had two reportable segments and derived approximately 82% of its revenue from its direct selling segment and approximately 18% of its revenue from its commercial coffee segment. Liquidity and Going Concern The accompanying condensed consolidated financial statements have been prepared and presented on a basis assuming the Company will continue as a going concern. The Company has sustained significant losses during the three months ended March 31, 2019 and 2018 of approximately $12,260,000 and $2,308,000, respectively. Net cash used in operating activities was approximately $4,831,000 and $1,427,000 for the three months ended March 31, 2019 and 2018, respectively. The Company does not currently believe that its existing cash resources are sufficient to meet the Company’s anticipated needs over the next twelve months from the date hereof. Based on its current cash levels and its current rate of cash requirements, the Company will need to raise additional capital and/or will need to further reduce its expenses from current levels. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company anticipates that revenues will grow, and it intends to make necessary cost reductions related to international operations that are not performing well and reduce non-essential expenses. The Company is also considering multiple other fund-raising alternatives. On March 18, 2019, the Company entered into a two-year Secured Promissory Note (the “Note” or “Notes”) with two (2) accredited investors that had a substantial pre-existing relationship with the Company pursuant to which the Company raised cash proceeds of $2,000,000. In consideration of the Notes, the Company issued 20,000 shares of the Company’s common stock par value $0.001 for each $1,000,000 invested as well as for each $1,000,000 invested five-year warrants to purchase 20,000 shares of the Company’s common stock at a price per share of $6.00. The Notes pay interest at a rate of eight percent (8%) per annum and interest is paid quarterly in arrears with all principal and unpaid interest due at maturity on March 18, 2021. On February 15, 2019 and on March 10, 2019, the Company closed its first and second tranches of its 2019 January Private Placement debt offering, respectively, pursuant to which the Company offered for sale notes in the principal amount of a minimum of $100,000 and a maximum of notes in the principal amount $10,000,000 (the “2019 PIPE Notes”), with each investor receiving 2,000 shares of common stock for each $100,000 invested. The Company entered into subscription agreements with thirteen (13) accredited investors that had a substantial pre-existing relationship with the Company pursuant to which the Company received aggregate gross proceeds of $2,440,000 and issued the 2019 PIPE Notes in the aggregate principal amount of $2,440,000 and an aggregate of 48,800 shares of common stock. The placement agent received 12,200 shares of common stock in aggregate for the first and second tranches. The placement agent will receive up to 50,000 shares of common stock in the offering. Each 2019 PIPE Note matures 24 months after issuance, bears interest at a rate of six percent (6%) per annum, and the outstanding principal is convertible into shares of common stock at any time after the 180th day anniversary of the issuance of the 2019 PIPE Note, at a conversion price of $10 per share (subject to adjustment for stock splits, stock dividends and reclassification of the common stock). On February 6, 2019, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with one accredited investor that had a substantial pre-existing relationship with the Company pursuant to which the Company sold 250,000 shares of the Company’s common stock, par value $0.001 per share, at an offering price of $7.00 per share. Pursuant to the Purchase Agreement, the Company also issued to the investor a three-year warrant to purchase 250,000 shares of common stock at an exercise price of $7.00. The proceeds to the Company were $1,750,000. Consulting fees for arranging the Purchase Agreement include the issuance of 5,000 shares of restricted shares of the Company’s common stock, par value $0.001 per share, and 100,000 3-year warrants priced at $10.00. No cash commissions were paid. On January 7, 2019, the Company entered into an At-the-Market Offering Agreement (the “ATM Agreement”) with The Benchmark Company, LLC (“Benchmark”), as sales agent, pursuant to which the Company may sell from time to time, at its option, shares of its common stock, par value $0.001 per share, through Benchmark, as sales agent (the “Sales Agent”), for the sale of up to $60,000,000 of shares of the Company’s common stock. The Company is not obligated to make any sales of common stock under the ATM Agreement and the Company cannot provide any assurances that it will issue any shares pursuant to the ATM Agreement. The Company will pay the Sales Agent 3.0% commission of the gross sales proceeds. During the three months ended March 31, 2019, the Company sold a total of 1,000 shares of common stock under the ATM Agreement. Depending on market conditions, there can be no assurance that additional capital will be available when needed or that, if available, it will be obtained on terms favorable to the Company or to its stockholders. Failure to raise additional funds from the issuance of equity securities and failure to implement cost reductions could adversely affect the Company’s ability to operate as a going concern. The financial statements do not include any adjustments that might be necessary from the outcome of this uncertainty. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense for each reporting period. Estimates are used in accounting for, among other things, allowances for doubtful accounts, deferred taxes and related valuation allowances, fair value of derivative liabilities, uncertain tax positions, loss contingencies, fair value of options granted under the Company’s stock-based compensation plan, fair value of assets and liabilities acquired in business combinations, finance leases, asset impairments, estimates of future cash flows used to evaluate impairments, useful lives of property, equipment and intangible assets, value of contingent acquisition debt, inventory obsolescence, and sales returns. Actual results may differ from previously estimated amounts and such differences may be material to the consolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected prospectively in the period they occur. Cash and Cash Equivalents The Company considers only its monetary liquid assets with original maturities of three months or less as cash and cash equivalents. Related Party Transactions Richard Renton Richard Renton is a member of the Board of Directors and owns and operates WVNP, Inc., a supplier of certain inventory items sold by the Company. The Company made purchases of approximately $8,000 and $54,000 from WVNP Inc., for the three months ended March 31, 2019 and 2018, respectively. Carl Grover Mr. Grover is the sole beneficial owner of in excess of five percent (5%) of the Company’s outstanding common shares. On December 13, 2018, CLR, entered into a Credit Agreement with Mr. Grover (the “Credit Agreement”) pursuant to which CLR borrowed $5,000,000 from Mr. Grover and in exchange issued to him a $5,000,000 credit note (“Credit Note”) secured by its green coffee inventory under a Security Agreement, dated December 13, 2018 (the “Security Agreement”), with Mr. Grover and CLR’s subsidiary, Siles Family Plantation Group S.A. (“Siles”), as guarantor, and Siles executed a separate Guaranty Agreement (“Guaranty”). The Company issued to Mr. Grover a four-year warrant to purchase 250,000 shares of our common stock, exercisable at $6.82 per share, and a four-year warrant to purchase 250,000 shares of the Company’s common stock, exercisable at $7.82 per share, pursuant to a Warrant Purchase Agreement, dated December 13, 2018, with Mr. Grover. (See Note 7 below.) Paul Sallwasser Mr. Paul Sallwasser is a member of the board directors and prior to joining the Company’s Board of Directors he acquired a note (the “2014 Note”) issued in the Company’s private placement consummated in 2014 (the “2014 Private Placement”) in the principal amount of $75,000 convertible into 10,714 shares of common stock and a warrant (the “2014 Warrant”) issued, in the 2014 Private Placement, exercisable for 14,673 shares of common stock. Prior to joining the Company’s Board of Directors, Mr. Sallwasser acquired in the 2017 Private Placement a 2017 Note in the principal amount of approximately $38,000 convertible into 8,177 shares of common stock and a warrant (the “2017 Warrant”) issued, in the 2017 Private Placement, exercisable for 5,719 shares of common stock. Mr. Sallwasser also acquired in the 2017 Private Placement in exchange for the “2015 Note” that he acquired in the Company’s private placement consummated in 2015 (the “2015 Private Placement”), a 2017 Note in the principal amount of $5,000 convertible into 1,087 shares of common stock and a 2017 Warrant exercisable for 543 shares of common stock. On March 30, 2018, the Company completed its Series B Offering, and in accordance with the terms of the 2017 Notes, Mr. Sallwasser’s 2017 Notes converted to 9,264 shares of the Company’s common stock. 2400 Boswell LLC In March 2013, the Company acquired 2400 Boswell for approximately $4,600,000. 2400 Boswell is the owner and lessor of the building occupied by the Company for its corporate office and warehouse in Chula Vista, California. The purchase was from an immediate family member of the Company’s Chief Executive Officer and consisted of approximately $248,000 in cash, approximately $334,000 of debt forgiveness and accrued interest, and a promissory note of approximately $393,000, payable in equal payments over 5 years and bears interest at 5.0%. Additionally, the Company assumed a long-term mortgage of $3,625,000, payable over 25 years with an initial interest rate of 5.75%. The interest rate is the prime rate plus 2.5%. The current interest rate as of March 31, 2019 was 7.75%. The lender will adjust the interest rate on the first calendar day of each change period or calendar quarter. The Company and its Chief Executive Officer are both co-guarantors of the mortgage. As of March 31, 2019, the balance on the long-term mortgage is approximately $3,198,000 and the balance on the promissory note is zero. Other Relationship Transactions Hernandez, Hernandez, Export Y Company and H&H Coffee Group Export Corp. The Company’s commercial coffee segment, CLR, is associated with Hernandez, Hernandez, Export Y Company (“H&H”), a Nicaragua company, through sourcing arrangements to procure Nicaraguan grown green coffee beans. As part of the 2014 Siles acquisition, CLR engaged the owners of H&H, Alain Piedra Hernandez (“Mr. Hernandez”) and Marisol Del Carmen Siles Orozco (“Ms. Orozco”), as employees to manage Siles. H&H is a sourcing agent that purchases raw green coffee beans from the local producers in Nicaragua and supplies CLR’s mill with unprocessed green coffee for processing. CLR does not have a direct relationship with the local producers and is dependent on H&H to negotiate agreements with local producers for the supply and provide to CLR’s mill raw unprocessed green coffee to CLR in a timely and efficient manner. Substantially all the green coffee processed through the Siles mill was coffee assigned to CLR for processing. In addition, during 2018, CLR sold green coffee beans to H&H Coffee Group Export Corp., (“H&H Export”), a Florida based company which is affiliated with H&H. In consideration for H&H's sourcing of green coffee for processing within CLR’s mill, CLR and H&H share in the green coffee profit from milling operations. CLR made purchases from H&H of approximately $2,576,000 of green coffee for the three months ended March 31, 2019, for use in the Company’s Miami roasting facilities. There were no purchases of green coffee from H&H to be sold to other third parties during the three months ended March 31, 2019. CLR made purchases from H&H of approximately $3,734,000 of green coffee for the three months ended March 31, 2018, for use in the Company’s Miami roasting facilities and for use in selling processed green coffee to third parties. During the three months ended March 31, 2019, CLR recorded net revenues from processing services of approximately $4,826,000. There was no processing service revenue during the three months ended March 31, 2018. During the three months ended March 31, 2018, CLR recorded the sale of processed green coffee beans, to H&H Export as gross revenue of $2,443,000. There were no processed green coffee bean sales, to H&H Export during the three months ended March 31, 2019. In May 2017, the Company entered a settlement agreement with Alain Piedra Hernandez, one of the owners of H&H and the operating manager of Siles, who was issued a non-qualified stock option for the purchase of 75,000 shares of the Company’s common stock at a price of $2.00 with an expiration date of three years, in lieu of an obligation due from the Company to H&H as relates to a Sourcing and Supply Agreement with H&H. During the period ended September 30, 2017 the Company replaced the non-qualified stock option and issued a warrant agreement with the same terms. There was no financial impact related to the cancellation of the option and the issuance of the warrant. As of March 31, 2019, the warrant remains outstanding. In December 2018, CLR advanced $5,000,000 to H&H Export to provide services in support of a 5-year contract for the sale and processing of 41 million pounds of green coffee beans on an annual basis. The services include providing hedging and financing opportunities to producers and delivering harvested coffee to the Company’s mills. On March 31, 2019, this advance was converted to a $5,000,000 loan agreement and bears interest at 9% per annum and is due and payable by H&H Export at the end of each year’s harvest season, but no later than October 31 for any harvest year. The loan is secured by H&H Export’s hedging account with INTL FC Stone, trade receivables, green coffee inventory in the possession of H&H Export and all green coffee contracts. Mill Construction Agreement On January 15, 2019, CLR entered into the CLR Siles Mill Construction Agreement (the “Mill Construction Agreement”) with H&H and H&H Export, Alain Piedra Hernandez (“Hernandez”) and Marisol Del Carmen Siles Orozco (“Orozco”), together with H&H, H&H Export, Hernandez and Orozco, collectively referred to as the Nicaraguan Partner, pursuant to which the Nicaraguan Partner agreed to transfer a 45 acre tract of land in Matagalpa, Nicaragua (the “Property”) to be owned 50% by the Nicaraguan Partner and 50% by CLR. In consideration for the land acquisition the Company issued to H&H Export, 153,846 shares of common stock. In addition, the Nicaraguan Partner and CLR agreed to contribute $4,700,000 each toward the construction of a processing plant, office, and storage facilities (“Mill”) on the property for processing coffee in Nicaragua. As of March 31, 2019, the Company paid $1,350,000 towards construction of a mill, which is included in construction in process within property and equipment, net on the Company's condensed consolidated balance sheet. Amendment to Operating and Profit-Sharing Agreement On January 15, 2019, CLR entered into an amendment to the March 2014 operating and profit-sharing agreement with the owners of H&H. CLR previously engaged Hernandez and Orozco, the owners of H&H as employees to manage Siles. In addition, CLR and H&H, Hernandez and Orozco have agreed to restructure their profit-sharing agreement in regard to profits from green coffee sales and processing that increases the CLR’s profit participation by an additional 25%. Under the new terms of the agreement with respect to profit generated from green coffee sales and processing from La Pita, a leased mill, or the new mill, now will provide for a split of profits of 75% to CLR and 25% to the Nicaraguan Partner, after certain conditions are met. The Company issued 295,910 shares of the Company’s common stock to H&H Export to pay for certain working capital, construction and other payables. In addition, H&H Export has sold to CLR its espresso brand Café Cachita in consideration of the issuance of 100,000 shares of the Company’s common stock. Hernandez and Orozco are employees of CLR. The shares of common stock issued were valued at $7.50 per share. Revenue Recognition The Company recognizes revenue from product sales under the following five steps are completed: i) Identify the contract with the customer; ii) Identify the performance obligations in the contract; iii) Determine the transaction price; iv) Allocate the transaction price to the performance obligations in the contract; and v) Recognize revenue when (or as) each performance obligation is satisfied (see Note 4, below). Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities. The transaction price for all sales is based on the price reflected in the individual customer's contract or purchase order. Variable consideration has not been identified as a significant component of the transaction price for any of our transactions. Independent distributors receive compensation which is recognized as Distributor Compensation in the Company’s consolidated statements of operations. Due to the short-term nature of the contract with the customers, the Company accrues all distributor compensation expense in the month earned and pays the compensation the following month. The Company also charges fees to become a distributor, and earn a position in the network genealogy, which are recognized as revenue in the period received. The Company’s distributors are required to pay a one-time enrollment fee and receive a welcome kit specific to that country or region that consists of forms, policy and procedures, selling aids, access to the Company’s distributor website and a genealogy position with no down line distributors. The Company has determined that most contracts will be completed in less than one year. For those transactions where all performance obligations will be satisfied within one year or less, the Company is applying the practical expedient outlined in ASC 606-10-32-18. This practical expedient allows the Company not to adjust promised consideration for the effects of a significant financing component if the Company expects at contract inception the period between when the Company transfers the promised good or service to a customer and when the customer pays for that good or service will be one year or less. For those transactions that are expected to be completed after one year, the Company has assessed that there are no significant financing components because any difference between the promised consideration and the cash selling price of the good or service is for reasons other than the provision of financing. Deferred Revenues and Costs As of March 31, 2019 and December 31, 2018, the balance in deferred revenues was approximately $2,268,000 and $2,312,000, respectively. Deferred revenue related to the Company’s direct selling segment is attributable to the Heritage Makers product line and also for future Company convention and distributor events. Deferred revenues related to Heritage Makers were approximately $2,095,000 and $2,153,000, as of March 31, 2019, and December 31, 2018, respectively. The deferred revenue represents Heritage Maker’s obligation for points purchased by customers that have not yet been redeemed for product. Cash received for points sold is recorded as deferred revenue. Revenue is recognized when customers redeem the points and the product is shipped. Deferred costs relate to Heritage Makers prepaid commissions that are recognized in expense at the time the related revenue is recognized. As of March 31, 2019 and 2018, the balance in deferred costs was approximately $338,000 and $364,000, respectively, and is included in prepaid expenses and current assets. Deferred revenues related to pre-enrollment in upcoming conventions and distributor events of approximately $173,000 and $159,000 as of March 31, 2019 and December 31, 2018, respectively, relate primarily to the Company’s 2019 and 2018 events. The Company does not recognize this revenue until the conventions or distributor events occur. Plantation Costs The Company’s commercial coffee segment includes the results of Siles, which is a 500-acre coffee plantation and a dry-processing facility located on 26 acres located in Matagalpa, Nicaragua. Siles is a wholly-owned subsidiary of CLR, and the results of CLR include the depreciation and amortization of capitalized costs, development and maintenance and harvesting costs of Siles. In accordance with GAAP, plantation maintenance and harvesting costs for commercially producing coffee farms are charged against earnings when sold. Deferred harvest costs accumulate and are capitalized throughout the year and are expensed over the remainder of the year as the coffee is sold. The difference between actual harvest costs incurred and the amount of harvest costs recognized as expense is recorded as either an increase or decrease in deferred harvest costs, which is reported as an asset and included with prepaid expenses and other current assets in the condensed consolidated balance sheets. Once the harvest is complete, the harvest costs are then recognized as the inventory value. Deferred costs associated with the harvest as of March 31, 2019 and December 31, 2018 are approximately zero and $400,000, respectively, and are included in prepaid expenses and other current assets on the Company’s balance sheets. Stock-based Compensation The Company accounts for stock-based compensation in accordance with ASC Topic 718, “ Compensation – Stock Compensation,” The Company accounts for equity instruments issued to non-employees in accordance with authoritative guidance for equity-based payments to non-employees. Stock options issued to non-employees are accounted for at their estimated fair value, determined using the Black-Scholes option-pricing model. The fair value of options granted to non-employees is re-measured as they vest, and the resulting increase in value, if any, is recognized as expense during the period the related services are rendered. Income Taxes The Company accounts for income taxes in accordance with ASC Topic 740, "Income Taxes," Income taxes for the interim periods are computed using the effective tax rates estimated to be applicable for the full fiscal year, as adjusted for any discrete taxable events that occur during the period. The Company files income tax returns in the United States (“U.S.”) on a federal basis and in many U.S. state and foreign jurisdictions. Certain tax years remain open to examination by the major taxing jurisdictions to which the Company is subject. Commitments and Contingencies The Company is from time to time, the subject of claims and suits arising out of matters related to the Company’s business. The Company is party to litigation at the present time and may become party to litigation in the future. In general, litigation claims can be expensive, and time consuming to bring or defend against and could result in settlements or damages that could significantly affect financial results. It is not possible to predict the final resolution of the current litigation to which the Company is party to, and the impact of certain of these matters on the Company’s business, results of operations, and financial condition could be material. Regardless of the outcome, litigation has adversely impacted the Company’s business because of defense costs, diversion of management resources and other factors Recently Issued Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement In January 2017, the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment Recently Adopted Accounting Pronouncements In February 2018, the FASB issued Accounting Standards Update ASU No. 2018-02, Income Statement - Reporting Comprehensive Income In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception In February 2016, FASB established Topic 842, Leases, by issuing ASU No. 2016-02, Leases (Topic 842) Land Easement Practical Expedient for Transition to Topic Codification Improvements to Topic Leases Targeted Improvements Narrow-Scope Improvements for Lessors; and Codification Improvements Following the expiration of the Company’s Emerging Growth Company filing status (“EGC”) on December 31, 2018 the Company adopted the following accounting pronouncements effective January 1, 2018. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) |
Restatement of financial statem
Restatement of financial statements | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Changes and Error Corrections [Abstract] | |
Restatement of previously reported unaudited condensed consolidated financial statements | Background and Effects of the Restatement During the Company’s 2019 annual audit, the Company reviewed revenues related to CLR specifically the 2019 green coffee sales program, for sales made by the Company to its joint venture partner, H&H Coffee Group Export Corp. (“H&H Export”). These sales were originally recorded at gross, along with the respective cost of revenue. As part of the review, the Company assessed whether the 2019 green coffee sales to H&H Export depicted the transfer of promised goods or services to H&H Export in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The following five steps were applied to review if the core revenue recognition principles were met as such the Company concluded it had not met all the criteria when applying these steps: ● Step 1: Identify the contract with the customer ● Step 2: Identify the performance obligations in the contract ● Step 3: Determine the transaction price ● Step 4: Allocate the transaction price to the performance obligations in the contract ● Step 5: Recognize revenue when the company satisfies a performance obligation During this review process the Company focused on identifying the performance obligations in the contracts with H&H Export (the provider of the “wet” green coffee and the buyer of the processed coffee). The Company’s assessment indicated that according to the underlying terms and conditions of the contracts that CLR entered into with H&H Export, that CLR had been assigned the green coffee beans as coffee was delivered to its mill processing facility. Assignment of the coffee is defined as taking of physical possession of the green coffee for the purpose of processing the green coffee. Under the assignment CLR was responsible for insuring all reasonable and necessary actions to ensure the coffee beans are safeguarded during processing at the Company’s coffee mill. CLR, however, does not take ownership and does not incur financial risk associated with the coffee as it is delivered to its mill for the purpose of processing. Based on the above assessment, management has determined that when CLR provides the processed green coffee to H&H export, the goods or services provided to H&H Export is the performance obligation to provide milling services for the green coffee. As such, the Company is the agent for the milling services. Management has also determined that since the Company does not control the green coffee beans at the point of delivery to the mill, and that legal title to the green coffee beans is transferred momentarily, before the green coffee beans are sold back to H&H Export, that the Company is therefore an agent in sales transactions of green coffee beans to H&H Export. Therefore, management has determined that for green coffee sales made by the Company to its joint venture partner, H&H Export, the Company should have recorded these sales at net of costs to purchase inventory, which reflects the value of the performance obligation to provide milling services. For the quarter ended March 31, 2019, the Company is restating its revenue for coffee sold to H&H Export at net. On February 15, 2019, the Company and Khrysos Industries, Inc., closed its acquisition of Khrysos Global, Inc., detailed further in Note 5 to the unaudited condensed consolidated financial statements below. In conjunction with the Company’s 2019 annual audit the Company concluded that certain fixed assets acquired in the acquisition and the share price valuation for the common stock issued as consideration were not fairly valued as of the closing date including; i) $1,127,000 related to the certain fixed assets, and ii) $1,351,000 related to a change in the fair value of common stock issuance resulting in an increase to goodwill of $2,478,000 acquired and an adjusted aggregate purchase price if $15,894,000. The tables below summarize the effects of the restatement on our (i) unaudited condensed consolidated balance sheet at March 31, 2019; (ii) unaudited condensed consolidated statement of operations for the three months ended March 31, 2019; and (iii) unaudited condensed consolidated statement of cash flows for the three months ended March 31, 2019. A summary of the effect of the restatement on the unaudited condensed consolidated statement of changes to stockholders’ equity for the three months ended March 31, 2019 are not presented because the impact to additional paid-in-capital are reflected below in the unaudited condensed consolidated balance sheet summaries. Summary of Restatement – Unaudited Condensed Consolidated Balance Sheet The effects of the restatement on the Company’s unaudited condensed consolidated balance sheet are as follows: March 31, 2019 Previously Reported Adjustments Restated ASSETS Current Assets Cash and cash equivalents $ 2,540 $ $ 2,540 Accounts receivable, trade 21,629 (13,923 ) 7,706 Income tax receivable 75 75 Inventory 46,805 (22,641 ) 24,164 Notes receivable 5,000 5,000 Prepaid expenses and Other current assets 4,891 4,891 Total current assets 80,940 (36,564 ) 44,376 Property and equipment, net 20,856 (1,127 ) 19,729 Operating lease right-of-use assets 5,509 5,509 Deferred tax assets 148 148 Intangible assets, net 23,919 23,919 Goodwill 10,676 2,478 13,154 Other assets notes receivable 949 949 Total assets $ 142,997 $ (35,213 ) $ 107,784 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 22,784 $ (13,923 ) $ 8,861 Accrued distributor compensation 4,143 4,143 Accrued expenses 29,103 (22,641 ) 6,462 Deferred revenues 2,268 2,268 Line of credit 2,432 2,432 Other current liabilities 535 535 Operating lease liabilities, current portion 745 745 Finance lease liabilities, current portion 978 978 Notes payable, current portion 158 158 Convertible notes payable, current portion 681 681 Warrant derivative liability 5,369 5,369 Contingent acquisition debt, current portion 792 792 Total current liabilities 69,988 (36,564 ) 33,424 Operating lease liabilities, net of current portion 4,764 4,764 Finance lease liabilities, net of current portion 927 927 Notes payable, net of current portion 10,378 10,378 Convertible notes payable, net of current portion 1,981 1,981 Contingent acquisition debt, net of current portion 7,341 7,341 Total liabilities 95,379 (36,564 ) 58,815 Commitments and contingencies (Note 1) Stockholders Equity Preferred Stock, $0.001 par value: 5,000,000 shares authorized Convertible Preferred Stock, Series A - 161,135 shares issued and outstanding at March 31, 2019 and December 31, 2018 Convertible Preferred Stock, Series B 129,437 shares issued and outstanding at March 31, 2019 and December 31, 2018 Common Stock, $0.001 par value: 50,000,000 shares authorized; 28,890,671 and 25,760,708 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively 29 29 Additional paid-in capital 243,555 1,351 244,906 Accumulated deficit (196,023 ) (196,023 ) Accumulated other comprehensive loss 57 57 Total stockholders equity 47,618 1,351 48,969 Total Liabilities and Stockholders’ Equity $ 142,997 $ (35,213 ) $ 107,784 Summary of Restatement – Unaudited Condensed Consolidated Statement of Operations Three Months Ended March 31, 2019 Previously Reported Adjustments Restated Revenues $ 56,300 $ (15,108 ) $ 41,192 Cost of revenues 29,451 (15,108 ) 14,343 Gross profit 26,849 26,849 Operating expenses Distributor compensation 14,890 14,890 Sales and marketing 4,019 4,019 General and administrative 19,881 19,881 Total operating expenses 38,790 38,790 Loss from Operations (11,941 ) (11,941 ) Interest expense, net (1,507 ) (1,507 ) Change in fair value of warrant derivative liability 1,486 1,486 Total other expense, net (21 ) (21 ) Net loss before income taxes (11,962 ) (11,962 ) Income tax provision 298 298 Net loss (12,260 ) (12,260 ) Preferred stock dividends (14 ) (14 ) Net Loss Available to Common Stockholders $ (12,274 ) $ $ (12,274 ) Net loss per share, basic $ (0.45 ) $ $ (0.45 ) Net loss per share, diluted $ (0.49 ) $ $ (0.49 ) Weighted average shares outstanding, basic 27,577,576 27,577,576 Weighted average shares outstanding, diluted 28,025,172 28,025,172 Summary of Restatement – Unaudited Condensed Consolidated Statement of Cash Flows The effect of the restatement on our unaudited condensed consolidated statement of cash flows are as follows: Three Months Ended March 31, 2019 Previously Reported Adjustments Restated Cash Flows from Operating Activities: Net loss $ (12,260 ) $ $ (12,260 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,145 1,145 Stock-based compensation expense 11,344 11,344 Amortization of debt discounts and issuance costs 199 199 Change in fair value of warrant derivative liability (1,486 ) (1,486 ) Change in inventory reserve 159 159 Equity issuance for services 1,859 1,859 Stock issuance for true-up shares 281 281 Changes in operating assets and liabilities, net of effect from business combinations: Accounts receivable (17,292 ) 13,923 (3,369 ) Inventory (23,924 ) 22,641 (1,283 ) Prepaid expenses and other current assets (111 ) (111 ) Accounts payable 13,977 (13,923 ) 54 Accrued distributor compensation 854 854 Deferred revenues (44 ) (44 ) Accrued expenses and other liabilities 20,468 (22,641 ) (2,173 ) Net Cash Used in Operating Activities (4,831 ) (4,831 ) Cash Flows from Investing Activities: Acquisitions, net of cash acquired (425 ) (425 ) Purchases of property and equipment (2,291 ) (2,291 ) Net Cash Used in Investing Activities (2,716 ) (2,716 ) Cash Flows from Financing Activities: Proceeds from issuance of promissory notes, net of offering costs 3,750 3,750 Proceeds from private placement of common stock, net of offering costs 2,267 2,267 Proceeds from at-the-market-offering and exercise of stock options and warrants, net 1,455 1,455 Proceeds net of repayment on line of credit 176 176 Payments of notes payable (35 ) (35 ) Payments of contingent acquisition debt (128 ) (128 ) Payments of finance leases (368 ) (368 ) Payments of dividends (11 ) (11 ) Net Cash Provided by Financing Activities 7,106 7,106 Foreign Currency Effect on Cash 102 102 Net decrease in cash and cash equivalents (339 ) (339 ) Cash and Cash Equivalents, Beginning of Period 2,879 2,879 Cash and Cash Equivalents, End of Period $ 2,540 $ $ 2,540 Supplemental Disclosures of Cash Flow Information Cash paid during the period for: Interest $ 1,034 $ $ 1,034 Income taxes $ $ $ Supplemental Disclosures of Noncash Investing and Financing Activities Purchases of property and equipment funded by finance leases $ $ $ Purchases of property and equipment funded by mortgage agreements $ 450 $ $ 450 Fair value of stock issued for services (Note 11) $ 417 $ $ 417 Fair value of stock issued for property and equipment (land) $ 1,200 $ $ 1,200 Fair value of stock issued for purchase of intangibles (tradename) $ 750 $ $ 750 Fair value of stock issued for note receivable, net of debt settlement $ 2,309 $ $ 2,309 Fair value of stock issued in connection with the acquisition of Khrysos Global, Inc. (Note 5) (1) $ 12,649 $ 1,351 $ 14,000 Dividends declared but not paid at the end of period (Note 11) $ 14 $ $ 14 Acquisitions of net assets in exchange for contingent debt, net of purchase price adjustments $ $ $ Fair value of warrants issued in connection with the Series B Preferred Stock Offering $ $ $ Conversion of 2017 Notes to Common Stock $ $ $ (1) The Fair value of stock issued in connection with the acquisition of Khrysos Global, Inc., was previously reported in Note 4 to the original filing of the Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 as filed with the SEC on May 20, 2019. |
Basic and Diluted Net Loss Per
Basic and Diluted Net Loss Per Share | 3 Months Ended |
Mar. 31, 2019 | |
Notes to Financial Statements | |
Basic and Diluted Net Loss Per Share | Basic loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted loss per share is computed by dividing net loss attributable to common stockholders by the sum of the weighted-average number of common shares outstanding during the period and the weighted-average number of dilutive common share equivalents outstanding during the period, using the treasury stock method. Dilutive common share equivalents are comprised of stock options, restricted stock, warrants, convertible preferred stock and common stock associated with the Company's convertible notes based on the average stock price for each period using the treasury stock method. Potentially dilutive shares are excluded from the computation of diluted net loss per share when their effect is anti-dilutive. In periods where a net loss is presented, all potentially dilutive securities are anti-dilutive and are excluded from the computation of diluted net loss per share. Potentially dilutive securities for the three months ended March 31, 2019 were 12,882,194. Potentially dilutive securities were 7,321,334 for the three months ended March 31, 2018. The calculation of diluted loss per share requires that, to the extent the average market price of the underlying shares for the reporting period exceeds the exercise price of the warrants and the presumed exercise of such securities are dilutive to loss per share for the period, an adjustment to net loss used in the calculation is required to remove the change in fair value of the warrants, net of tax from the numerator for the period. Likewise, an adjustment to the denominator is required to reflect the related dilutive shares, if any, under the treasury stock method. During the three months ended March 31, 2019 and 2018, the Company recorded net of tax gain of $1,409,000 and $254,000, on the valuation of the Warrant Derivative Liability which has a dilutive impact on loss per share, respectively. Three months ended March 31, (unaudited) 2019 2018 Loss per Share Basic Numerator for basic loss per share $ (12,274,000 ) $ (2,311,000 ) Denominator for basic loss per share 27,577,576 19,744,144 Loss per common share basic $ (0.45 ) $ (0.12 ) Loss per Share Diluted Numerator for basic loss per share $ (12,274,000 ) $ (2,311,000 ) Adjust: Fair value of dilutive warrants outstanding (1,409,000 ) (254,000 ) Numerator for dilutive loss per share $ (13,683,000 ) $ (2,565,000 ) Denominator for basic loss per share 27,577,576 19,744,144 Plus: Incremental shares underlying in the money warrants outstanding 447,595 14,258 Denominator for diluted loss per share 28,025,172 19,758,402 Loss per common share diluted $ (0.49 ) $ (0.13 ) |
Balance Sheet Account Details
Balance Sheet Account Details | 3 Months Ended |
Mar. 31, 2019 | |
Notes to Financial Statements | |
Balance Sheet Account Details | Inventory and Cost of Revenues Inventory is stated at the lower of cost or net realizable value, net of a valuation allowance. Cost is determined using the first-in, first-out method. The Company records an inventory reserve for estimated excess and obsolete inventory based upon historical turnover, market conditions and assumptions about future demand for its products. When applicable, expiration dates of certain inventory items with a definite life are taken into consideration. Inventories consist of the following (in thousands): As of March 31, 2019 December 31, 2018 (Restated)* Finished goods $ 14,948 $ 11,300 Raw materials 11,643 12,744 Total inventory 26,591 24,044 Reserve for excess and obsolete (2,427 ) (2,268 ) Inventory, net $ 24,164 $ 21,776 Cost of revenues includes the cost of inventory, shipping and handling costs, royalties associated with certain products, transaction banking costs, warehouse labor costs and depreciation on certain assets. * Net inventory at March 31, 2019 has been restated. See Note 2. Leases Generally, the Company leases certain office space, warehouses, distribution centers, manufacturing centers, and equipment. A contract is or contains a lease if the contract conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration In general, the Company’s leases include one or more options to renew, with renewal terms that generally vary from one to ten years. The exercise of lease renewal options is generally at the Company’s sole discretion. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Leases with an initial term of twelve months or less are not recorded on the Company’s condensed consolidated balance sheets, and the Company does not separate nonlease components from lease components. The Company’s lease assets and liabilities recognized within its condensed consolidated balance sheets were as follows (in thousands): March 31, 2019 Balance Sheet Location ASSETS: Operating lease right-of-use assets $ 5,509 Operating lease right-of-use assets Finance lease right-of-use assets 1,330 Property, plant, and equipment, net at cost, net of accumulated amortization (1) Total lease assets $ 6,839 LIABILITIES: Current: Operating lease liabilities $ 745 Other current liabilities Finance lease liabilities 978 Current portion of long-term debt Non-current: Operating lease liabilities 4,764 Non-current operating lease liabilities Finance lease liabilities 927 Long-term debt, net of current portion Total lease liabilities $ 7,714 (1) Finance lease assets are recorded net of accumulated amortization of approximately $522,000 as of March 31, 2019. Lease cost is recognized on a straight-line basis over the lease term (in thousands): March 31, 2019 Operating lease costs $ 271 Finance lease cost Amortization of right-of-use assets 96 Interest on lease liabilities 37 Net lease costs $ 404 As of March 31, 2019, annual scheduled lease payments were as follows (in thousands): Operating Leases Finance Leases 2019 $ 788 $ 1,086 2020 753 742 2021 688 204 2022 648 9 2023 889 3 Thereafter 3,139 - Total lease payments 6,905 2,044 Less imputed interest 1,396 139 Present value of lease liabilities $ 5,509 $ 1,905 Finance lease right-of-use assets are amortized over their estimated useful life, as the Company does believe that it is reasonably certain that options which transfer ownership will be exercised. In general, for the majority of the Company’s material leases, the renewal options are not included in the calculation of its right-of-use assets and lease liabilities, as the Company does not believe that it is reasonably certain that these renewal options will be exercised. Periodically, the Company assesses its leases to determine whether it is reasonably certain that these options and any renewal options could be reasonably expected to be exercised. The majority of the Company’s leases are for real estate and equipment. In general, the individual lease contracts do not provide information about the rate implicit in the lease. Because the Company is not able to determine the rate implicit in its leases, it instead generally uses its incremental borrowing rate to determine the present value of lease liabilities. In determining its incremental borrowing rate, the Company reviewed the terms of its leases, its senior secured credit facility, swap rates, and other factors. The weighted-average remaining lease term and weighted-average discount rate used to calculate the present value of lease liabilities are as follows: March 31, 2019 Weighted-average remaining lease terms: Operating leases 5.8 Finance leases 2.1 Weighted-average remaining discount rate: Operating leases 5.5 % Finance leases 9.1 % Revenue Recognition Direct Selling Direct distribution sales are made through the Company’s network (direct selling segment), which is a web-based global network of customers and distributors. The Company’s independent sales force markets a variety of products to an array of customers, through friend-to-friend marketing and social networking. The Company considers itself to be an e-commerce company whereby personal interaction is provided to customers by its independent sales network. Sales generated from direct distribution includes health and wellness, beauty product and skin care, scrap booking and story booking items, packaged food products and other service-based products. Revenue is recognized when the Company satisfies its performance obligations under the contract. The Company recognizes revenue by transferring the promised products to the customer, with revenue recognized at shipping point, the point in time the customer obtains control of the products. The majority of the Company’s contracts have a single performance obligation and are short term in nature. Sales taxes in domestic and foreign jurisdictions are collected from customers and remitted to governmental authorities, all at the local level, and are accounted for on a net basis and therefore are excluded from revenues. Commercial Coffee - Coffee Roaster The Company engages in the commercial sale of roasted coffee through its subsidiary CLR, which is sold under a variety of private labels through major national sales outlets and to customers including cruise lines and office coffee service operators, and under its own Café La Rica brand, Josie’s Java House Brand and Javalution brands as well as through its distributor network within the direct selling segment. Revenue is recognized when the title and risk of loss is passed to the customer under the terms of the shipping arrangement, typically, FOB shipping point. At this point the customer has a present obligation to pay, takes physical possession of the product, takes legal title to the product, bears the risks and rewards of ownership, and as such, revenue will be recognized at this point in time. Sales taxes in domestic and foreign jurisdictions are collected from customers and remitted to governmental authorities, all at the local level, and are accounted for on a net basis and therefore are excluded from revenues. Commercial Coffee - Green Coffee The commercial coffee segment includes the sale of green coffee beans, which are sourced from the Nicaraguan rainforest and providing milling serves to H&H. Revenue is recognized when the title and risk of loss is passed to the customer under the terms of the shipping arrangement, typically, FOB shipping point. At this point the customer has a present obligation to pay, takes physical possession of the product, takes legal title to the product, bears the risks and rewards of ownership, and as such, revenue will be recognized at this point in time. Revenues derived from the sales of green coffee beans by the Company that it has milled, and it has determined it is the agent with regard to such green coffee beans is recorded at net of costs to purchase inventory or recorded to reflect only the revenue derived from the milling services provided. Sales taxes in domestic and foreign jurisdictions are collected from customers and remitted to governmental authorities, all at the local level, and are accounted for on a net basis and therefore are excluded from revenues. Commercial Hemp The commercial hemp segment provides end to end extraction and processing via the Company’s proprietary systems that allow for the conversion of hemp feed stock into hemp oil and hemp extracts. The primary focus of the segment will be to generate revenue through sales of extraction services and end to end processing services for the conversion of Hemp and Hemp oil into sellable ingredients. Additionally, the company offers various rental, sales, and service programs of the Company’s extraction and processing systems. Revenue is recognized when the title and risk of loss is passed to the customer under the terms of the shipping arrangement, typically, FOB shipping point. At this point the customer has a present obligation to pay, takes physical possession of the product, takes legal title to the product, bears the risks and rewards of ownership, and as such, revenue will be recognized at this point in time. Sales taxes in domestic and foreign jurisdictions are collected from customers and remitted to governmental authorities, all at the local level, and are accounted for on a net basis and therefore are excluded from revenues. The Company operates in three primary segments: the direct selling segment where products are offered through a global distribution network of preferred customers and distributors, the commercial coffee segment where products are sold directly to businesses and the Hemp segment. The following table summarizes revenue disaggregated by segment (in thousands): For the three months ended March 31, 2019 2018 (Restated)* Direct selling $ 33,420 $ 35,311 Commercial coffee: Processed green coffee 100 4,985 Milling and processing services 4,826 Roasted coffee and other 2,779 2,698 Total commercial coffee 7,705 7,683 Commercial hemp 67 Total $ 41,192 $ 42,994 * Revenue for the three months ended March 31, 2019 has been restated. See Note 2. Contract Balances Timing of revenue recognition may differ from the timing of invoicing to customers. The Company records contract assets when performance obligations are satisfied prior to invoicing. Contract liabilities are reflected as deferred revenues in current liabilities on the Company’s condensed consolidated balance sheets and includes deferred revenue and customer deposits. Contract liabilities relate to payments invoiced or received in advance of completion of performance obligations andare recognized as revenue upon the fulfillment of performance obligations. Contract Liabilities are classified as short-term as all performance obligations are expected to be satisfied within the next 12 months. As of March 31, 2019 and December 31, 2018, the balance in deferred revenues was approximately $2,268,000 and $2,312,000, respectively. The Company records deferred revenue related to its direct selling segment which is primarily attributable to the Heritage Makers product line and represents Heritage Maker’s obligation for points purchased by customers that have not yet been redeemed for product. In addition, deferred revenues include future Company convention and distributor events. Deferred revenue related to the commercial coffee segment represents deposits on customer orders that have not yet been completed and shipped. Revenue is recognized when the title and risk of loss is passed to the customer under the terms of the shipping arrangement FOB shipping point. (See Note 1, above.) Of the deferred revenue from the year ended December 31, 2018, the Company recognized revenue of approximately $2,095,000 from the Heritage Makers product line during the three months ended March 31. 2019. There were no deferred revenues associated with the commercial coffees segment and the commercial hemp as of March 31, 2019. |
Acquisitions and Business Combi
Acquisitions and Business Combinations | 3 Months Ended |
Mar. 31, 2019 | |
Notes to Financial Statements | |
Acquisitions and Business Combinations | The Company accounts for business combinations under the acquisition method and allocates the total purchase price for acquired businesses to the tangible and identified intangible assets acquired and liabilities assumed, based on their estimated fair values. When a business combination includes the exchange of the Company’s common stock, the value of the common stock is determined using the closing market price as of the date such shares were tendered to the selling parties. The fair values assigned to tangible and identified intangible assets acquired and liabilities assumed are based on management or third-party estimates and assumptions that utilize established valuation techniques appropriate for the Company’s industry and each acquired business. Goodwill is recorded as the excess, if any, of the aggregate fair value of consideration exchanged for an acquired business over the fair value (measured as of the acquisition date) of total net tangible and identified intangible assets acquired. A liability for contingent consideration, if applicable, is recorded at fair value as of the acquisition date. In determining the fair value of such contingent consideration, management estimates the amount to be paid based on probable outcomes and expectations on financial performance of the related acquired business. The fair value of contingent consideration is reassessed quarterly, with any change in the estimated value charged to operations in the period of the change. Increases or decreases in the fair value of the contingent consideration obligations can result from changes in actual or estimated revenue streams, discount periods, discount rates and probabilities that contingencies will be met. During the three months ended March 31, 2019, the Company entered into one acquisition, which is detailed below. The acquisition was conducted in an effort to expand the Company’s operations into the field of commercial hemp business. 2019 Acquisitions Khrysos Global, Inc. On February 12, 2019, the Company and Khrysos Industries, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“KII”) entered into an Asset and Equity Purchase Agreement (the “AEPA”) with, Khrysos Global, Inc., a Florida corporation (“Seller”), Leigh Dundore (“LD”), and Dwayne Dundore (the “Representing Party”) for KII to acquire substantially all the assets (the “Assets”) of KGI and all the outstanding equity of INXL Laboratories, Inc., a Florida corporation (“INXL”) and INX Holdings, Inc., a Florida corporation (“INXH”). Seller, INXL and INXH provides end to end extraction and processing via the company’s proprietary systems that allow for the conversion of hemp feed stock into hemp oil and hemp extracts. Additionally, KII offers various rental, sales, and service programs of KII’s extraction and processing systems. The consideration payable for the assets and the equity of KGI, INXL and INXH is an aggregate of $16,000,000, to be paid as set forth under the terms of the AEPA and allocated between the Sellers and LD in such manner as they determine at their discretion. At the closing on February 15, 2019, the Seller, LD and the Representing Party received an aggregate of 1,794,972 shares of the Company’s common stock which have a value of $14,000,000 for the purposes of the AEPA or $12,649,000 fair value for the acquisition valuation and $500,000 in cash. Thereafter, Seller, LD and the Representing Party are to receive an aggregate of: $500,000 in cash thirty (30) days following the date of closing; $250,000 in cash ninety (90) days following the date of closing; $250,000 in cash one hundred and eighty (180) days following the Date of closing; $250,000 in cash two hundred and seventy (270) days following the date of closing; and $250,000 in cash one (1) year following the date of closing. In addition, the Company agreed to issue to Representing Party, subject to the approval of the holders of at least a majority of the issued and outstanding shares of the Company’s common stock and the approval of The Nasdaq Stock Market (collectively, the “Contingent Consideration Warrants”) consisting of six (6) six-year warrants, to purchase 500,000 shares of common stock each, for an aggregate of 3,000,000 shares of common stock at an exercise price of $10 per share exercisable upon reaching certain levels of cumulative revenue or cumulative net income before taxes by the business during the any of the years ending December 31, 2019, 2020, 2021, 2022, 2023 or 2024. The AEPA contains customary representations, warranties and covenants of the Company, KII, the Seller, LD and the Representing Party. Subject to certain customary limitations, the Seller, LD and the Representing Party have agreed to indemnify the Company and KII against certain losses related to, among other things, breaches of the Seller’s, LD’s and the Representing Party’s representations and warranties, certain specified liabilities and the failure to perform covenants or obligations under the AEPA. On February 28, 2019, KII purchased a 45-acre tract of land in Groveland, Florida, in central Florida, which KII intends to build a R&D facility, greenhouse and allocate a portion for farming. Restatement Note - related to the Acquisition of Khrysos Global, Inc. In conjunction with the Company’s 2019 annual audit the Company concluded that certain fixed assets acquired in the acquisition and the share price valuation for the common stock issued as consideration were not fairly valued as of the closing date February 15, 2019 including; a) $1,127,000 related to the certain fixed assets, and b) $1,351,000 related to a change in the fair value of common stock issuance resulting in an increase to goodwill of $2,478,000 acquired and an adjusted aggregate purchase price if $15,894,000. As such, the Company here restates its Quarterly Report on Form 10-Q for the quarter ended March 31, 2019. The Company has estimated fair value at the date of acquisition of the acquired tangible and intangible assets and liabilities as follows including the resulting adjustments in changes to the aggregate purchase price (in thousands): Consideration as Originally Reported Adjustments Consideration as Currently Reported Present value of cash consideration $ 1,894 $ $ $ 1,894 Estimated fair value of common stock issued 12,649 1,351 14,000 Aggregate purchase price $ 14,543 $ 1,351 $ 15,894 The following table summarizes the estimated preliminary and as adjusted fair values of the assets acquired and liabilities assumed in February 2019 (in thousands): Fair Value as Originally Reported Adjustments Fair Value as Currently Reported Current assets $ 636 $ $ 636 Inventory 1,264 1,264 Property, plant and equipment 2,260 (1,127 ) 1,133 Trademarks and trade name 1,876 1,876 Customer-related intangible 5,629 5,629 Non-compete intangible 956 956 Goodwill 4,353 2,478 6,831 Current liabilities (1,904 ) (1,904 ) Notes payable (527 ) (527 ) Net assets acquired $ 14,543 $ 1,351 $ 15,894 The preliminary estimated fair value of intangible assets acquired in the amount of $8,461,000 was determined through the use of a third-party valuation firm using various income and cost approach methodologies. Specifically, the intangibles identified in the acquisition were trademarks and trade name, customer-related intangible and non-compete agreement. The trademarks and trade name, customer-related intangible and non-compete are being amortized over their estimated useful life of 8 years, 7 years and 6 years, respectively. The straight-line method is being used and is believed to approximate the time-line within which the economic benefit of the underlying intangible asset will be realized. Goodwill acquired as currently reported of $6,831,000 is recognized as the excess purchase price over the acquisition-date fair value of net assets acquired. Goodwill is estimated to represent the synergistic values expected to be realized from the combination of the two businesses. The goodwill is expected to be deductible for tax purposes. The Contingent Consideration Warrants discussed above are subject to vesting based upon the achievement of various sales milestones and only if the sellers do not terminate their services. As such, the warrants were considered equity-based compensation for future services and not considered contingent consideration in the calculation of the purchase price. The costs related to the acquisition are included in legal and accounting fees. Revenues included in the consolidated statement of operations for the three months ended March 31, 2019 were approximately $67,000. |
Intangible Assets and Goodwill
Intangible Assets and Goodwill | 3 Months Ended |
Mar. 31, 2019 | |
Notes to Financial Statements | |
Intangible Assets and Goodwill | Intangible Assets Intangible assets are comprised of distributor organizations, trademarks and tradenames, customer relationships and internally developed software. The Company's acquired intangible assets, which are subject to amortization over their estimated useful lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. An impairment loss is recognized when the carrying amount of an intangible asset exceeds its fair value. Intangible assets consist of the following (in thousands): March 31, 2019 December 31, 2018 Cost Accumulated Amortization Net Cost Accumulated Amortization Net Distributor organizations $ 14,559 $ 9,796 $ 4,763 $ 14,559 $ 9,575 $ 4,984 Trademarks and trade names 9,963 2,033 7,930 7,337 1,781 5,556 Customer relationships 16,028 5,895 10,133 10,398 5,723 4,675 Internally developed software 720 583 137 720 558 162 Non-compete agreement 956 956 Intangible assets $ 42,226 $ 18,307 $ 23,919 $ 33,014 $ 17,637 $ 15,377 Amortization expense related to intangible assets was approximately $670,000 and $827,000 for the three months ended March 31, 2019 and 2018, respectively. Trade names, which do not have legal, regulatory, contractual, competitive, economic, or other factors that limit the useful lives are considered indefinite lived assets and are not amortized but are tested for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. As of March 31, 2019 and December 31, 2018, approximately $1,649,000 in trademarks from business combinations have been identified as having indefinite lives. Goodwill Goodwill is recorded as the excess, if any, of the aggregate fair value of consideration exchanged for an acquired business over the fair value (measured as of the acquisition date) of total net tangible and identified intangible assets acquired. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, “Intangibles — Goodwill and Other”, The Company first assesses qualitative factors to determine whether it is more likely than not (a likelihood of more than 50%) that goodwill is impaired. After considering the totality of events and circumstances, the Company determines whether it is more likely than not that goodwill is not impaired. If impairment is indicated, then the Company conducts the two-step impairment testing process. The first step compares the Company’s fair value to its net book value. If the fair value is less than the net book value, the second step of the test compares the implied fair value of the Company’s goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, the Company would recognize an impairment loss equal to that excess amount. The testing is generally performed at the “reporting unit” level. A reporting unit is the operating segment, or a business one level below that operating segment (referred to as a component) if discrete financial information is prepared and regularly reviewed by management at the component level. The Company has determined that its reporting units for goodwill impairment testing are the Company’s reportable segments. As such, the Company analyzes its goodwill balances separately for the commercial coffee reporting unit, the direct selling reporting unit and the commercial hemp reporting unit. The goodwill balance as of March 31, 2019 and December 31, 2018 is approximately $13,154,000 and $6,323,000, respectively, which includes an adjustment to the KII acquisition goodwill during the three months ended March 31, 2019, discussed above in Note 5, which increased the goodwill for KII in the amount of $2,478,000. There were no triggering events indicating impairment of goodwill or intangible assets during the three months ended March 31, 2019 and 2018. Goodwill consists of the following (in thousands): March 31, 2019 December 31, 2018 Goodwill, commercial coffee $ 3,314 $ 3,314 Goodwill, direct selling 3,009 3,009 Goodwill, commercial hemp 6,831 Total goodwill $ 13,154 $ 6,323 |
Notes Payable and Other Debt
Notes Payable and Other Debt | 3 Months Ended |
Mar. 31, 2019 | |
Notes Payable And Other Debt | |
Notes Payable and Other Debt | Short-term Debt On July 18, 2018, the Company entered into lending agreements (the “Lending Agreements”) with three (3) separate entities and received loans in the total amount of $1,907,000, net of loan fees to be paid back over an eight-month period on a monthly basis. Payments are comprised of principal and accrued interest with an effective interest rate between 15% and 20%. The Company’s outstanding balance related to the Lending Agreements was approximately $504,000 as of December 31, 2018 and was included in other current liabilities on the Company’s balance sheet as of December 31, 2018. During the quarter ended March 31, 2019 the loans were paid in their entirety and the outstanding loan balance was zero. Notes Payable Promissory Notes On March 18, 2019, the Company entered into a two-year Secured Promissory Note (the “Note” or “Notes”) with two (2) accredited investors that had a substantial pre-existing relationship with the Company pursuant to which the Company raised cash proceeds of $2,000,000. In consideration of the Notes, the Company issued 20,000 shares of the Company’s common stock par value $0.001 for each $1,000,000 invested as well as for each $1,000,000 invested five-year warrants to purchase 20,000 shares of the Company’s common stock at a price per share of $6.00. The Notes pay interest at a rate of eight percent (8%) per annum and interest is paid quarterly in arrears with all principal and unpaid interest due at maturity on March 18, 2021. The Company recorded debt discounts of approximately $139,000 related to the fair value of warrants issued in the transaction and $212,000 of transaction issuance costs to be amortized to interest expense over the life of the Notes. As of March 31, 2019, the remaining balance of the debt discounts is approximately $345,000. The Company recorded approximately $5,000 amortization of the debt discounts during the three months ended March 31, 2019 and is recorded as interest expense. Credit Note On December 13, 2018, the Company’s wholly owned subsidiary, CLR, entered into a Credit Agreement with Mr. Carl Grover pursuant to which CLR borrowed $5,000,000 from Mr. Grover and in exchange issued to him a $5,000,000 Credit Note (the “Credit Note”) secured by its green coffee inventory under a Security Agreement, dated December 13, 2018, with Mr. Grover and CLR’s subsidiary, Siles. In connection with the Credit Agreement, the Company issued to Mr. Grover a four-year warrant to purchase 250,000 shares of its common stock, exercisable at $6.82 per share (“Warrant 1”), and a four-year warrant to purchase 250,000 shares of its common stock, exercisable at $7.82 per share (“Warrant 2”), pursuant to a Warrant Purchase Agreement, dated December 13, 2018, with Mr. Grover. The Company also entered into an Advisory Agreement with Ascendant Alternative Strategies, LLC (“Ascendant”), a third party not affiliated with Mr. Grover, in connection with the Credit Agreement, pursuant to which it agreed to pay to Ascendant a 3% fee on the transaction with Mr. Grover and issued to Ascendant (or it’s designees) a four-year warrant to purchase 50,000 shares of its common stock, exercisable at $6.33 per share. Upon the occurrence of an event of default, the unpaid balance of the principal amount of this Credit Note together with all accrued but unpaid interest, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The Company determined that the contingent call (put) option meets the definition of a derivative (i.e., has an underlying, a notional amount, requires no initial investment, and can be net settled). Therefore, it must be separately measured at fair value with changes in fair value impacting current earnings. Management has assessed the probability of a trigger event (i.e., the occurrence of an event of default, such amounts are declared due and payable or made automatically due and payable, in each case, in accordance with the terms of this Note) to be de minimis during the term of the Credit Note. As such, the fair value of the contingent put feature would have a de minimis value (i.e., there is no need to separately measure the contingent put feature, as assigning a probability of zero percent or near zero percent to the occurrence of an event of default would result in de minimis fair value for the feature). Management will reassess the probability of a trigger event at each reporting period during the term of the Credit Note. The Company recorded debt discounts of approximately $1,469,000 related to the fair value of warrants issued in the transaction and $175,000 of transaction issuance costs to be amortized to interest expense over the life of the Credit Agreement. As of March 31, 2019, the remaining balance of the debt discounts is approximately $1,460,000. The Company recorded approximately $154,000 amortization of the debt discounts during the three months ended March 31, 2019 and is recorded as interest expense. 2400 Boswell Mortgage In March 2013, the Company acquired 2400 Boswell for approximately $4,600,000. 2400 Boswell is the owner and lessor of the building occupied by the Company for its corporate office and warehouse in Chula Vista, California. The purchase was from an immediate family member of our Chief Executive Officer and consisted of approximately $248,000 in cash, $334,000 of debt forgiveness and accrued interest, and a promissory note of approximately $393,000, payable in equal payments over 5 years with interest at 5.0%. Additionally, the Company assumed a long-term mortgage of $3,625,000, payable over 25 years with an initial interest rate of 5.75%. The interest rate is the prime rate plus 2.5%. As of March 31, 2019, the interest rate was 7.75%. The lender will adjust the interest rate on the first calendar day of each change period. The Company and its Chief Executive Officer are both co-guarantors of the mortgage. As of March 31, 2019, the balance on the long-term mortgage is approximately $3,198,000 and the balance on the promissory note is zero. M2C Purchase Agreement In March 2007, the Company entered into an agreement to purchase certain assets of M2C Global, Inc., a Nevada corporation, for $4,500,000. The agreement required payments totaling $500,000 in three installments during 2007, followed by monthly payments in the amount of 10% of the sales related to the acquired assets until the entire note balance is paid. As of March 31,2019 and December 31, 2018, the carrying value of the liability was approximately $1,061,000 and $1,071,000, respectively. The interest associated with the note for the three months ended March 31, 2019 and 2018 was minimal. Khrysos Mortgage Notes In conjunction with the Company’s acquisition of Khrysos, the Company assumed one interest only mortgage in the amounts of $350,000 (due in September 2021) that bears an interest rate of 8% and a second mortgage of approximately $177,000 (due in June 2023) that bears an interest rate of 7% per annum. Both properties are located in Florida. As of March 31, 2019, the remaining mortgage balances are approximately $527,000. In February 2019, Khrysos purchased a 45-acre tract of land in Groveland, Florida, in central Florida for $750,000, which Khrysos intends to build a R&D facility, greenhouse and allocate a portion for farming. Khrysos paid approximately $303,000 down and assumed a mortgage of $450,000. The entire balance is due in February 2024 and bears interest at 6% per annum. As of March 31, 2019, the remaining mortgage balance is $450,000. Other Notes The Company’s other notes relate to loans for commercial vans at CLR in the amount of $90,000 as of March 31, 2019 which expire at various dates through 2023. Line of Credit - Loan and Security Agreement CLR had a factoring agreement (“Factoring Agreement”) with Crestmark Bank (“Crestmark”) related to accounts receivable resulting from sales of certain CLR products. On November 16, 2017, CLR entered into a new Loan and Security Agreement (“Agreement”) with Crestmark which amended and restated the original Factoring Agreement dated February 12, 2010 with Crestmark and subsequent agreement amendments thereto. CLR is provided with a line of credit related to accounts receivables resulting from sales of certain products that includes borrowings to be advanced against acceptable eligible inventory related to CLR. Effective December 29, 2017, CLR entered into a First Amendment to the Agreement, to include an increase in the maximum overall borrowing to $6,250,000. The loan amount may not exceed an amount which is the lesser of (a) $6,250,000 or (b) the sum of up (i) to 85% of the value of the eligible accounts; plus, (ii) the lesser of $1,000,000 or 50% of eligible inventory or 50% of (i) above, plus (iii) the lesser of $250,000 or eligible inventory or 75% of certain specific inventory identified within the Agreement. The Agreement contains certain financial and nonfinancial covenants with which the Company must comply to maintain its borrowing availability and avoid penalties. The outstanding principal balance of the Agreement will bear interest based upon a year of 360 days with interest being charged for each day the principal amount is outstanding including the date of actual payment. The interest rate is a rate equal to the prime rate plus 2.50% with a floor of 6.75%. As of March 31, 2019, the interest rate was 8.0%. In addition, other fees are incurred for the maintenance of the loan in accordance with the Agreement. Other fees may be incurred in the event the minimum loan balance of $2,000,000 is not maintained. The Agreement is effective until November 16, 2020. The Company and the Company’s CEO, Stephan Wallach, have entered into a Corporate Guaranty and Personal Guaranty, respectively, with Crestmark guaranteeing payments in the event that the Company’s commercial coffee segment CLR were to default. In addition, the Company’s President and Chief Financial Officer, David Briskie, personally entered into a Guaranty of Validity representing the Company’s financial statements so long as the indebtedness is owing to Crestmark, maintaining certain covenants and guarantees. The Company’s outstanding line of credit liability related to the Agreement was approximately $2,432,000 as of March 31, 2019 and $2,256,000 as of December 31, 2018. Contingent Acquisition Debt The Company has contingent acquisition debt associated with its business combinations. The Company accounts for business combinations under the acquisition method and allocates the total purchase price for acquired businesses to the tangible and identified intangible assets acquired and liabilities assumed, based on their estimated fair values as of the acquisition date. A liability for contingent consideration, if applicable, is recorded at fair value as of the acquisition date and evaluated each period for changes in the fair value and adjusted as appropriate. (See Note 10 below.) The Company’s contingent acquisition debt as of March 31, 2019 and December 31, 2018 is $8,133,000 and $8,261,000, respectively, and is attributable to debt associated with the Company’s direct selling segment. |
Convertible Notes Payable
Convertible Notes Payable | 3 Months Ended |
Mar. 31, 2019 | |
Notes to Financial Statements | |
Convertible Notes Payable | Total convertible notes payable as of March 31, 2019 and December 31, 2018, net of debt discount outstanding consisted of the amount set forth in the following table (in thousands): March 31, 2019 (unaudited) December 31, 2018 8% Convertible Notes due July and August 2019 (2014 Notes), principal $ 750 $ 750 Debt discounts (69 ) (103 ) Carrying value of 2014 Notes 681 647 6% Convertible Notes due February and March 2021 (2019 PIPE Notes), principal 2,400 - Debt discounts (459 ) - Carrying value of 2019 PIPE Notes 1,941 - Total carrying value of convertible notes payable $ 2,622 $ 647 July 2014 Private Placement Between July 31, 2014 and September 10, 2014 the Company entered into Note Purchase Agreements (the “Note” or “Notes”) related to its private placement offering (“2014 Private Placement”) with seven accredited investors pursuant to which the Company raised aggregate gross proceeds of $4,750,000 and sold units consisting of five (5) year senior secured convertible Notes in the aggregate principal amount of $4,750,000 that are convertible into 678,568 shares of our common stock, at a conversion price of $7.00 per share, and warrants to purchase 929,346 shares of common stock at an exercise price of $4.60 per share. The Notes bear interest at a rate of eight percent (8%) per annum and interest is paid quarterly in arrears with all principal and unpaid interest due between July and September 2019. The Company has the right to prepay the Notes at any time after the one-year anniversary date of the issuance of the Notes at a rate equal to 110% of the then outstanding principal balance and any unpaid accrued interest. The Notes are secured by Company pledged assets and rank senior to all debt of the Company other than certain senior debt that has been previously identified as senior to the convertible notes. Additionally, Stephan Wallach, the Company’s Chief Executive Officer, has also personally guaranteed the repayment of the Notes, subject to the terms of a Guaranty Agreement executed by him with the investors. In addition, Mr. Wallach has agreed not to sell, transfer or pledge 1.5 million shares of the common stock that he owns so long as his personal guaranty is in effect. On October 23, 2018, the Company entered into an agreement with Carl Grover to exchange (the “Debt Exchange”), subject to stockholder approval which was received on December 6, 2018, all amounts owed under the 2014 Note held by him in the principal amount of $4,000,000 which matures on July 30, 2019, for 747,664 shares of the Company’s common stock, at a conversion price of $5.35 per share and a four-year warrant to purchase 631,579 shares of common stock at an exercise price of $4.75 per share. Upon the closing the Company issued Ascendant Alternative Strategies, LLC, a FINRA broker dealer (or its designees), which acted as the Company’s advisor in connection with a Debt Exchange transaction, 30,000 shares of common stock in accordance with an advisory agreement and four-year warrants to purchase 80,000 shares of common stock at an exercise price of $5.35 per share and four-year warrants to purchase 70,000 shares of common stock at an exercise price of $4.75 per share. The Company considered the guidance of ASC 470-20, Debt: Debt with Conversion and Other Options Debt Troubled Debt Restructuring by Debtors In 2014, the Company initially recorded debt discounts of $4,750,000 related to the beneficial conversion feature and related detachable warrants. The beneficial conversion feature discount and the detachable warrants discount are amortized to interest expense over the life of the Notes. The unamortized debt discounts recognized with the Debt Exchange was approximately $679,000. As of March 31, 2019 and December 31, 2018 the remaining balance of the debt discounts is approximately $63,000 and $94,000, respectively. The Company recorded approximately $31,000 and $238,000 amortization of the debt discounts during the three months ended March 31, 2019 and 2018 and is recorded as interest expense. With respect to the 2014 Private Placement, the Company paid approximately $490,000 in expenses including placement agent fees. The issuance costs are amortized to interest expense over the term of the Notes. The unamortized issuance costs recognized with the Debt Exchange was approximately $63,000. As of March 31, 2019 and December 31, 2018 the remaining balance of the issuance costs is approximately $6,000 and $10,000, respectively. The Company recorded approximately $3,000 and $25,000 of the debt discounts amortization during the three months ended March 31, 2019 and 2018, respectively, and is recorded as interest expense. As of March 31, 2019 and December 31, 2018 the principal amount of $750,000 remains outstanding. Unamortized debt discounts and issuance costs are included with convertible notes payable, net of debt discount on the condensed consolidated balance sheets. January 2019 Private Placement On February 15, 2019 and on March 10, 2019, the Company closed its first and second tranches of its 2019 January Private Placement debt offering, respectively, pursuant to which the Company offered for sale a minimum of notes in the principal amount of a minimum of $100,000 and a maximum of notes in the principal amount $10,000,000 (the “2019 PIPE Notes”), with each investor receiving 2,000 shares of common stock for each $100,000 invested. The Company entered into subscription agreements with thirteen (13) accredited investors that had a substantial pre-existing relationship with the Company pursuant to which the Company received aggregate gross proceeds of $2,440,000 and issued 2019 PIPE Notes in the aggregate principal amount of $2,440,000 and an aggregate of 48,800 shares of common stock. The placement agent will receive up to 50,000 shares of common stock in the offering. Each 2019 PIPE Note matures 24 months after issuance, bears interest at a rate of six percent (6%) per annum, and the outstanding principal is convertible into shares of common stock at any time after the 180th day anniversary of the issuance of the 2019 PIPE Note, at a conversion price of $10 per share (subject to adjustment for stock splits, stock dividends and reclassification of the common stock). Upon issuance of the 2019 PIPE Notes, the Company recognized debt discounts of approximately $467,000, resulting from the allocated portion of offering proceeds to the separable common stock issuance. The debt discount is being amortized to interest expense over the term of the 2019 PIPE Notes. During the three months ended March 31, 2019 the Company recorded approximately $7,000 of amortization related to the debt discounts. |
Derivative Liability
Derivative Liability | 3 Months Ended |
Mar. 31, 2019 | |
Notes to Financial Statements | |
Derivative Liability | The Company recognizes and measures the warrants issued in conjunction with the Company’s August 2018, July 2017, November 2015 and July 2014 Private Placements in accordance with ASC Topic 815, Derivatives and Hedging Derivative liabilities are recorded at their estimated fair value (see Note 10, below) at the issuance date and are revalued at each subsequent reporting date. The Company will continue to revalue the derivative liability on each subsequent balance sheet date until the securities to which the derivative liabilities relate are exercised or expire. Various factors are considered in the pricing models the Company uses to value the derivative liabilities, including its current stock price, the remaining life, the volatility of its stock price, and the risk-free interest rate. Future changes in these factors may have a significant impact on the computed fair value of the liability. As such, the Company expects future changes in the fair values to continue and may vary significantly from period to period. The warrant and embedded liability and revaluations have not had a cash impact on working capital, liquidity or business operations. Warrants Effective January 1, 2019, the Company adopted ASU No. 2017-11 (see above, Recently Adopted Accounting Pronouncements The Company determined that the liability associated with the 2018 warrants should be remeasured and adjusted to fair value on the date of the change in classification with the offset to be recorded through earnings and then the fair value of the warrants should be reclassified to equity. The Company recorded the change in the fair value of the 2018 warrants as of the date of change in classification to earnings. The fair value of the 2018 warrants as of the date of change in classification, in the amount of $1,494,000 was reclassified from warrant derivative liability to additional paid in capital as a result of the change in classification of the warrants. Increases or decreases in the fair value of the derivative liability are included as a component of total other expense in the accompanying condensed consolidated statements of operations for the respective period. The changes to the derivative liability for warrants resulted in a decrease of $1,486,000 and a decrease of $712,000 for the three months ended March 31, 2019 and 2018, respectively. The estimated fair value of the outstanding warrant liabilities is $5,369,000 and $9,216,000 as of March 31, 2019 and December 31, 2018, respectively. The estimated fair value of the warrants was computed as of March 31, 2019 and December 31, 2018 using the Monte Carlo option pricing model with the following assumptions: March 31, 2019 (unaudited) December 31, 2018 Stock price volatility 97.2% - 111.5% 83.78% - 136.76% Risk-free interest rates 2.33% - 2.42% 2.465% - 2.577% Annual dividend yield 0% 0% Expected life 0.33 - 1.54 years 0.58 - 2.76 years In addition, management assessed the probabilities of future financing assumptions in the valuation models. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 3 Months Ended |
Mar. 31, 2019 | |
Notes to Financial Statements | |
Fair Value of Financial Instruments | Fair value measurements are performed in accordance with the guidance provided by ASC Topic 820, “Fair Value Measurements and Disclosures.” ASC Topic 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Assets and liabilities recorded at fair value in the financial statements are categorized based upon the hierarchy of levels of judgment associated with the inputs used to measure their fair value. Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows: Level 1 – Quoted prices in active markets for identical assets or liabilities that an entity has the ability to access. Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3 – Unobservable inputs that are supportable by little or no market activity and that are significant to the fair value of the asset or liability. The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, capital lease obligations and deferred revenue approximate their fair values based on their short-term nature. The carrying amount of the Company’s long-term notes payable approximates its fair value based on interest rates available to the Company for similar debt instruments and similar remaining maturities. The estimated fair value of the contingent consideration related to the Company's business combinations is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument. The following table details the fair value measurement within the fair value hierarchy of the Company’s financial instruments, which includes the Level 3 liabilities (in thousands): Fair Value at March 31, 2019 Total Level 1 Level 2 Level 3 Liabilities: Contingent acquisition debt, current portion $ 792 $ - $ - $ 792 Contingent acquisition debt, less current portion 7,341 - - 7,341 Warrant derivative liability 5,369 - - 5,369 Total liabilities $ 13,502 $ - $ - $ 13,502 Fair Value at December 31,2018 Total Level 1 Level 2 Level 3 Liabilities: Contingent acquisition debt, current portion $ 795 $ - $ - $ 795 Contingent acquisition debt, less current portion 7,466 - - 7,466 Warrant derivative liability 9,216 - - 9,216 Total liabilities $ 17,477 $ - $ - $ 17,477 The following table reflects the activity for the Company’s warrant derivative liability associated with the Company’s 2019, 2018, 2017, 2015 and 2014 Private Placements measured at fair value using Level 3 inputs (in thousands): Warrant Derivative Liability Balance at December 31, 2018 $ 9,216 Issuance - Adjustments to estimated fair value (1,486 ) Adjustments related to warrant exercises (867 ) Adjustments related to the reclassification of warrants to equity (1,494 ) Balance at March 31, 2019 $ 5,369 The following table reflects the activity for the Company’s contingent acquisition liabilities measured at fair value using Level 3 inputs (in thousands): Contingent Consideration Balance at December 31, 2018 $ 8,261 Liabilities acquired - Liabilities settled (128 ) Adjustments to liabilities included in earnings - Adjustment to purchase price - Balance at March 31, 2019 $ 8,133 The fair value of the contingent acquisition liabilities is evaluated each reporting period using projected revenues, discount rates, and projected timing of revenues. Projected contingent payment amounts are discounted back to the current period using a discount rate. Projected revenues are based on the Company’s most recent internal operational budgets and long-range strategic plans. Increases in projected revenues will result in higher fair value measurements. Increases in discount rates and the time to payment will result in lower fair value measurements. Increases (decreases) in any of those inputs in isolation may result in a significantly lower (higher) fair value measurement. During the three months ended March 31, 2018, the net adjustment to the fair value of the contingent acquisition debt was a decrease $213,000 and is included in the Company’s statements of operations in general and administrative expense. The Company did not have any adjustments to the fair value of the contingent acquisition debt during the three months ended March 31, 2019. |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Mar. 31, 2019 | |
Notes to Financial Statements | |
Stockholders' Equity | The Company’s Certificate of Incorporation, as amended, authorizes the issuance of two classes of stock to be designated: “Common Stock” and “Preferred Stock”. The total number of shares of stock which the Company has authority to issue is 50,000,000 shares of common stock, par value $0.001 per share and 5,000,000 shares of preferred stock, par value $0.001 per share, of which 161,135 shares have been designated as Series A convertible preferred stock, par value $0.001 per share (“Series A Convertible Preferred”), 1,052,631 has been designated as Series B convertible preferred stock (“Series B Convertible Preferred”), and 700,000 has been designated as Series C convertible preferred stock (“Series C Convertible Preferred”). Common Stock As of March 31, 2019 and December 31, 2018 there were 28,890,671 and 25,760,708 shares of common stock outstanding, respectively. The holders of the common stock are entitled to one vote for each share held at all meetings of stockholders (and written actions in lieu of meetings). Stock Offering On February 6, 2019, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with one accredited investor that had a substantial pre-existing relationship with the Company pursuant to which the Company sold 250,000 shares of common stock, par value $0.001 per share, at an offering price of $7.00 per share. Pursuant to the Purchase Agreement, the Company also issued to the investor a three-year warrant to purchase 250,000 shares of common stock at an exercise price of $7.00. The proceeds were $1,750,000. Consulting fees for arranging the Purchase Agreement include the issuance of 5,000 shares of restricted shares of the Company’s common stock, par value $0.001 per share, and 100,000 3-year warrants priced at $10.00. No cash commissions were paid. On February 15, 2019 and on March 10, 2019, the Company closed its first and second tranches of its 2019 January Private Placement debt offering, respectively, pursuant to which the Company offered for sale a minimum of notes in the principal amount of a minimum of $100,000 and a maximum of notes in the principal amount $10,000,000 (the “2019 PIPE Notes”), with each investor receiving 2,000 shares of common stock for each $100,000 invested. The Company entered into subscription agreements with thirteen (13) accredited investors that had a substantial pre-existing relationship with the Company pursuant to which the Company received aggregate gross proceeds of $2,440,000 and issued 2019 PIPE Notes in the aggregate principal amount of $2,440,000 and an aggregate of 48,800 shares of common stock. The placement agent will receive up to 50,000 shares of common stock in the offering. Each 2019 PIPE Note matures 24 months after issuance, bears interest at a rate of six percent (6%) per annum, and the outstanding principal is convertible into shares of common stock at any time after the 180th day anniversary of the issuance of the 2019 PIPE Note, at a conversion price of $10 per share (subject to adjustment for stock splits, stock dividends and reclassification of the common stock). On March 18, 2019, the Company entered into a two-year Secured Promissory Note (the “Note or Notes”) with two accredited investors that the Company had a substantial pre-existing relationship with and from whom the Company raised cash proceeds in the aggregate of $2,000,000. In consideration of the Notes, the Company issued 20,000 shares of common stock par value $0.001 for each $1,000,000 invested as well as for each $1,000,000 invested and five-year warrants to purchase 20,000 shares of common stock at a price per share of $6.00. The Notes pay interest at a rate of eight percent (8%) per annum and interest is paid quarterly in arrears with all principal and unpaid interest due at maturity on March 18, 2021. The Company issued 40,000 shares of common stock and 40,000 warrants with the Notes. Issuance of additional common shares and repricing of warrants related to 2018 Private Placement On March 13, 2019, the Company determined that three of the investors of the Company’s August 2018 Private Placement became eligible to receive additional shares of the Company’s common stock as it was referred to in their respective Purchase Agreement as True-up Shares. Total number of additional shares issued to those three investors is 44,599 shares of restricted shares of the Company’s common stock, par value $0.001. In addition, the exercise price of the warrants issued at their respective closings is reset pursuant to the terms of the warrants to exercise prices ranging from $4.06 to $4.44 from the exercise price at issuance of $4.75. Convertible Preferred Stock Series A Convertible Preferred Stock The Company has 161,135 shares of Series A Convertible Preferred Stock outstanding as of March 31, 2019, and December 31, 2018 and accrued dividends of approximately $140,000 and $137,000, respectively. The holders of the Series A Convertible Preferred Stock are entitled to receive a cumulative dividend at a rate of 8.0% per year, payable annually either in cash or shares of the Company's common stock at the Company's election. Each share of Series A Convertible Preferred is convertible into common stock at a conversion rate of 0.10. The holders of Series A Convertible Preferred are entitled to receive payments upon liquidation, dissolution or winding up of the Company before any amount is paid to the holders of common stock. The holders of Series A Convertible Preferred have no voting rights, except as required by law. Series B Convertible Preferred Stock On March 30, 2018, the Company completed the Series B Offering, pursuant to which the Company sold 381,173 shares of Series B Convertible Preferred Stock at an offering price of $9.50 per share and received gross proceeds in aggregate of approximately $3,621,000. The net proceeds to the Company from the Series B Offering were approximately $3,289,000 after deducting commissions, closing and issuance costs. Each share of Series B Convertible Preferred Stock is initially convertible at any time, in whole or in part, at the option of the holders, at an initial conversion price of $4.75 per share, into two (2) shares of common stock and automatically converts into two (2) shares of common stock on its two-year anniversary of issuance. The Company has 129,437 shares of Series B Convertible Preferred Stock outstanding as of March 31, 2019 and December 31, 2018. The holders of the Series B Convertible Preferred Stock are entitled to receive cumulative dividends on the Series B Convertible Preferred Stock from the date of original issue at a rate of 5.0% per annum payable quarterly in arrears on or about the last day of March, June, September and December of each year, beginning June 30, 2018. As of March 31, 2019 and December 31, 2018 accrued dividends were approximately $11,000 and $11,000, respectively. The shares of Series B Convertible Preferred Stock issued in the Series B Offering were sold pursuant to the Company’s Registration Statement, which was declared effective on February 13, 2018. Upon the receipt of the proceeds of the Series B Offering, the 2017 Notes in the principal amount of approximately $7,254,000 automatically converted into 1,577,033 shares of common stock. The holders of Series B Convertible Preferred are entitled to receive a distribution, to be paid in an amount equal to $9.50 for each and every share of Series B Preferred Stock held by the holders of Series B Preferred Stock, plus all accrued and unpaid dividends in preference to any distribution or payments made or any asset distributed to the holders of common stock, the Series A Preferred Stock, or any other class or series of stock ranking junior to the Series B Preferred Stock. Holders of the Series B Convertible Preferred Stock have no voting rights, except as required by law. Series C Preferred Stock Between August 17, 2018 and October 4, 2018, the Company closed three tranches of its Series C Offering, pursuant to which the Company sold 697,363 shares of Series C Convertible Preferred Stock at an offering price of $9.50 per share and agreed to issue two-year warrants (the “Preferred Warrants”) to purchase up to 1,394,726 shares of the Company’s common stock at an exercise price of $4.75 per share to Series C Preferred holders that voluntarily convert their shares of Series C Preferred to the Company’s common stock within two-years from the issuance date. Each share of Series C Convertible Preferred Stock is initially convertible at any time, in whole or in part, at the option of the holders, at an initial conversion price of $4.75 per share, into two (2) shares of common stock and automatically converts into two (2) shares of common stock on its two-year anniversary of issuance. The Company issued the placement agent in connection with the Series C Offering 116,867 warrants as compensation, exercisable at $4.75 per share and expire in December 2020. The Company determined that the warrants should be classified as equity instruments and used Black-Scholes to estimate the fair value of the warrants issued to the placement agent of $458,000 as of the issuance date December 19, 2018. As of December 31, 2018, the 116,867 warrants issued to the placement agent remain outstanding. The Company received aggregate gross proceeds totaling approximately $6,625,000. The net proceeds to the Company from the Series C Offering were approximately $6,236,000 after deducting commissions, closing and issuance costs. Upon liquidation, dissolution or winding up of the Company, each holder of Series C Preferred Stock was entitled to receive a distribution, to be paid in an amount equal to $9.50 for each and every share of Series C Preferred Stock held by the holders of Series C Preferred Stock, plus all accrued and unpaid dividends in preference to any distribution or payments made or any asset distributed to the holders of common stock, the Series A Preferred Stock, the Series B Preferred Stock or any other class or series of stock ranking junior to the Series C Preferred Stock. The shares of Series C Convertible Preferred Stock issued in the Series C Offering were sold pursuant to the Company’s Registration Statement, which was declared effective with the SEC on December 10, 2018. Pursuant to the Certificate of Designation, the Company agreed to pay cumulative dividends on the Series C Convertible Preferred Stock from the date of original issue at a rate of 6.0% per annum payable quarterly in arrears on or about the last day of March, June, September and December of each year, beginning September 30, 2018. In 2018 a total of approximately $51,000 of dividends was paid to the holders of the Series C Convertible Preferred Stock. The Series C Convertible Preferred Stock ranks senior to the Company’s outstanding Series A Convertible Preferred Stock, Series B Convertible Preferred Stock and the common stock with respect to dividend rights and rights upon liquidation, dissolution or winding up. Holders of the Series C Convertible Preferred Stock have no voting rights. The contingent obligation to issue warrants is considered an outstanding equity-linked financial instrument and was therefore recognized as equity classified warrants, initially measured at relative fair value of approximately $3,727,000, resulting in an initial discount to the carrying value of the Series C Preferred Stock. Due to the reduction of allocated proceeds to the contingently issuable common stock warrants and Series C Preferred Stock, the effective conversion price of the Series C Preferred Stock was less than the Company’s common stock price on each commitment date, resulting in an aggregate beneficial conversion feature of approximately $3,276,000, which reduced the carrying value of the Series C Preferred Stock. Since the conversion option of the Series C Preferred Stock was immediately exercisable, the beneficial conversion feature was immediately accreted as a deemed dividend, resulting in an increase in the carrying value of the C Preferred Stock of approximately $3,276,000. The Series C Preferred Stock was automatically redeemable at a price equal to its original purchase price plus all accrued but unpaid dividends in the event the average of the daily volume weighted average price of the Company’s common stock for the 30 days preceding the two-year anniversary date of issuance is less than $6.00 per share. As redemption was outside of the Company’s control, the Series C Preferred Stock was classified in temporary equity at issuance. All of the Series C Preferred shares were converted to common stock during 2018 and the Company has issued 1,394,726 warrants. As of March 31, 2019, no shares of Series C Convertible Preferred Stock remain outstanding. Repurchase of Common Stock On December 11, 2012, the Company authorized a share repurchase program to repurchase up to 750,000 of the Company's issued and outstanding shares of common stock from time to time on the open market or via private transactions through block trades. A total of 196,594 shares have been repurchased to-date as of March 31, 2019 at a weighted-average cost of $5.30 per share. There were no repurchases during the three months ended March 31, 2019 and 2018. The remaining number of shares authorized for repurchase under the plan as of March 31, 2019 is 553,406. Advisory Agreements The Company records the fair value of common stock issued in conjunction with advisory service agreements based on the closing stock price of the Company’s common stock on the measurement date. The fair value of the stock issued is recorded through equity and prepaid advisory fees and amortized over the life of the service agreement. ProActive Capital On September 1, 2015, the Company entered into an agreement with ProActive Capital The stock issuance expense associated with the amortization of advisory fees is recorded as stock issuance expense and is included in general and administrative expense on the Company’s condensed consolidated statements of operations for the three months ended March 31, 2018 is approximately $13,000. The Company did not further extend this agreement subsequent to August 2018. Ignition Capital, LLC On April 1, 2018, the Company entered into an agreement with Ignition Capital, LLC (“Ignition”), pursuant to which Ignition agreed to provide investor relations services for a period of twenty-one (21) months in exchange for 50,000 shares of restricted common stock which were issued in advance of the service period. The fair value of the shares issued is recorded as prepaid advisory fees and is included in prepaid expenses and other current assets on the Company’s condensed consolidated balance sheets and is amortized on a pro-rata basis over the term of the agreement. During the three months ended March 31, 2019, the Company recorded expense of approximately $30,000 in connection with amortization of the stock issuance. The stock issuance expense associated with the amortization of advisory fees is recorded as stock issuance expense and is included in general and administrative expense on the Company’s condensed consolidated statements of operations for the three months ended March 31, 2019. Greentree Financial Group, Inc. On March 27, 2018, the Company entered into an agreement with Greentree Financial Group, Inc. Capital Market Solutions, LLC. On July 1, 2018, the Company entered into an agreement with Capital Market Solutions, LLC. The fair value of the common stock shares issued is recorded as prepaid advisory fees and is included in prepaid expenses and other current assets on the Company’s condensed consolidated balance sheets and is amortized on a pro-rata basis over the term of the agreement. During the three months ended March 31, 2019 and 2018, the Company recorded expense of approximately $129,000, in connection with amortization of the stock issuance expense. During the three months ended March 31, 2019, the Company recorded expense of approximately $50,000, in connection with the base fee. The stock issuance expense associated with the amortization of advisory fees is recorded as stock issuance expense and is included in general and administrative expense on the Company’s condensed consolidated statements of operations for the three months ended March 31, 2019. Warrants As of March 31, 2019, warrants to purchase 6,943,874 shares of the Company's common stock at prices ranging from $2.00 to $10.00 were outstanding. As of March 31, 2019, 6,539,187 warrants are exercisable and expire at various dates through March 2024 and have a weighted average remaining term of approximately 2.23 years and are included in the table below as of March 31, 2019. The Company uses the Monte Carlo and Black-Scholes option-pricing model to estimate the fair value of the warrants. Warrants – Securities Purchase Agreement During the three months ended March 31, 2019, the Company issued the selling agent in connection with the Securities Purchase Agreement 100,000 warrants as compensation, exercisable at $10.00 per share and expire in February 2022. The Company used the Black-Scholes option-pricing model (“Black-Scholes”) to estimate the fair value of the warrants issued to the selling agent of $324,000 as of March 30, 2019. A summary of the warrant activity for the three months ended March 31, 2019 is presented in the following table: Number of Warrants Balance at December 31, 2018 5,876,980 Issued 1,315,000 Expired / cancelled Exercised (248,106 ) Balance at March 31, 2019, outstanding 6,943,874 Balance at March 31, 2019, exercisable 6,539,187 Stock Options On May 16, 2012, the Company established the 2012 Stock Option Plan (“Plan”) authorizing the granting of options for up to 9,000,000 shares of common stock. The purpose of the Plan is to promote the long-term growth and profitability of the Company by (i) providing key people and consultants with incentives to improve stockholder value and to contribute to the growth and financial success of the Company and (ii) enabling the Company to attract, retain and reward the best available persons for positions of substantial responsibility. The Plan allows for the grant of: (a) incentive stock options; (b) nonqualified stock options; (c) stock appreciation rights; (d) restricted stock; and (e) other stock-based and cash-based awards to eligible individuals qualifying under Section 422 of the Internal Revenue Code, in any combination (collectively, “Options”). At March 31, 2019, the Company had 3,587,072 shares of common stock available for issuance under the Plan. A summary of the Plan stock option activity for the three months ended March 31, 2019 is presented in the following table: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contract Life (years) Aggregate Intrinsic Value (in thousands) Outstanding December 31, 2018 2,394,379 $ 4.45 6.94 $ 3,049 Issued 2,540,000 6.66 Canceled / expired (37,275 ) 5.00 Exercised (60,530 ) 4.46 Outstanding March 31, 2019 4,836,574 $ 5.61 8.35 $ 3,045 Exercisable March 31, 2019 3,723,870 $ 5.96 8.23 $ 1,617 The weighted-average fair value per share of the granted options for the three months ended March 31, 2019 was approximately $4.26. There were no options granted during the three months ended March 31, 2018 Stock-based compensation expense included in the condensed consolidated statements of operations was $11,248,000 and $122,000 for the three months ended March 31, 2019 and 2018, respectively. As of March 31, 2019, there was approximately $2,132,000 of total unrecognized compensation expense related to unvested stock options granted under the Plan. The expense is expected to be recognized over a weighted-average period of 1.75 years. The Company uses the Black-Scholes to estimate the fair value of stock options. The use of a valuation model requires the Company to make certain assumptions with respect to selected model inputs. Expected volatility is calculated based on the historical volatility of the Company’s stock price over the expected term of the option. The expected life is based on the contractual life of the option and expected employee exercise and post-vesting employment termination behavior. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of the grant. Restricted Stock Units On August 9, 2017, the Company issued restricted stock units for an aggregate of 500,000 shares of common stock, to its employees and consultants. These shares of common stock will be issued upon vesting of the restricted stock units. Full vesting occurs on the sixth-year anniversary of the grant date, with 10% vesting on the third-year, 15% on the fourth-year, 50% on the fifth-year and 25% on the sixth-year anniversary of the vesting commencement date. As of March 31, 2019, none of the restricted stock units have vested. There were no grants during the three months ended March 31, 2019. The fair value of each restricted stock unit issued to employees is based on the closing stock price on the grant date of $4.53 and restricted stock units issued to consultants are revalued as they vest and is recognized as stock-based compensation expense over the vesting term of the award. Number of Shares Balance at December 31, 2018 475,000 Issued - Canceled - Balance at March 31, 2019 475,000 Stock-based compensation expense included in the condensed consolidated statements of operations was $96,000 and $115,000 for the three months ended March 31, 2019 and 2018, respectively. As of March 31, 2019, total unrecognized stock-based compensation expense related to restricted stock units to employees and consultants was approximately $1,629,000, which will be recognized over a weighted average period of 4.36 years. |
Segment and Geographical Inform
Segment and Geographical Information | 3 Months Ended |
Mar. 31, 2019 | |
Notes to Financial Statements | |
Segment and Geographical Information | The Company is a leading multi-channel lifestyle company offering a hybrid of the direct selling business model that also offers e-commerce and the power of social selling. Assembling a virtual main street of products and services under one corporate entity, Youngevity offers products from top selling retail categories: health/nutrition, home/family, food/beverage (including coffee), spa/beauty, apparel/jewelry, as well as innovative services. The Company operates in three segments: the direct selling segment where products are offered through a global distribution network of preferred customers and distributors, the commercial coffee segment where roasted and green coffee bean products are sold directly to businesses, and commercial hemp segment provides end to end extraction and processing via the Company's proprietary systems that allow for the conversion of hemp feed stock into hemp oil and hemp extracts. The primary focus of the segment will be to generate revenue through sales of extraction services and end to end processing services for the conversion of Hemp and Hemp oil into sellable ingredients. Additionally, the Company offers various rental, sales, and service programs of the company's extraction and processing systems. The Company’s segments reflect the manner in which the business is managed and how the Company allocates resources and assesses performance. The Company’s chief operating decision maker is the Chief Executive Officer. The Company’s chief operating decision maker evaluates segment performance primarily based on revenue and segment operating income. The principal measures and factors the Company considered in determining the number of reportable segments were revenue, gross margin percentage, sales channel, customer type and competitive risks. The accounting policies of the segments are consistent with those described in the summary of significant accounting policies. Segment revenue excludes intercompany revenue eliminated in the consolidation. The following tables present certain financial information for each segment (in thousands): Three Months Ended March 31, 2019 (unaudited) 2018 Revenues (Restated)* Direct selling $ 33,420 $ 35,311 Commercial coffee 7,705 7,683 Commercial hemp 67 Total revenues $ 41,192 $ 42,994 Gross profit Direct selling $ 22,755 $ 24,735 Commercial coffee 4,067 277 Commercial hemp 27 Total gross profit $ 26,849 $ 25,012 Operating income (loss) Direct selling $ (12,309 ) $ 781 Commercial coffee 884 (757 ) Commercial hemp (516 ) Total operating income (loss) $ (11,941 ) $ 24 Net income (loss) Direct selling $ (13,377 ) $ (591 ) Commercial coffee 1,633 (1,717 ) Commercial hemp (516 ) Total net loss $ (12,260 ) $ (2,308 ) Capital expenditures Direct selling $ 17 $ 87 Commercial coffee 2,572 679 Commercial hemp 1,384 Total capital expenditures $ 3,973 $ 766 Capital expenditures acquired through acquisition $- $- Direct selling - - Commercial coffee - - Commercial hemp 1,133 Total capital expenditures acquired through acquisition $ 1,133 $ As of March 31, 2019 (unaudited) December 31, 2018 Total assets (Restated)* Direct selling $ 45,011 $ 38,947 Commercial coffee 41,584 37,026 Commercial hemp 21,189 Total assets $ 107,784 $ 75,973 * Segment results and total assets as of and for the three months ended March 31, 2019 have been restated. See Note 2. Total tangible assets, net located outside the United States were approximately $7.3 million and $6.2 million as of March 31, 2019 and December 31, 2018, respectively. The Company conducts its operations primarily in the United States. For both the three months ended March 31, 2019 and 2018 approximately 13% of the Company’s sales were derived from sales outside the United States. The following table displays revenues attributable to the geographic location of the customer (in thousands): Three Months Ended March 31, 2019 (unaudited) 2018 Revenues (Restated)* United States $ 35,782 $ 37,393 International 5,410 5,601 Total revenues $ 41,192 $ 42,994 * Revenue for the three months ended March 31, 2019 has been restated. See Note 2. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2019 | |
Subsequent Events | |
Subsequent Events | None. |
Basis of Presentation and Des_2
Basis of Presentation and Description of Business (Policies) | 3 Months Ended |
Mar. 31, 2019 | |
Basis Of Presentation And Description Of Business Policies | |
Basis of Presentation | The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to such rules and regulations. Youngevity International, Inc. (the “Company”) consolidates all wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The statements presented as of March 31, 2019 and for the three months ended March 31, 2019 and 2018 are unaudited. In the opinion of management, these financial statements reflect all normal recurring and other adjustments necessary for a fair presentation, and to make the financial statements not misleading. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Form 10-K for the year ended December 31, 2018, filed with the SEC on April 15, 2019. The results for interim periods are not necessarily indicative of the results for the entire year. |
Nature of Business | Youngevity International, Inc. (the “Company”), founded in 1996, develops and distributes health and nutrition related products through its global independent direct selling network, also known as multi-level marketing, and sells coffee products to commercial customers. During the year ended December 31, 2018 the Company operated in two business segments, its direct selling segment where products are offered through a global distribution network of preferred customers and distributors and its commercial coffee segment where products are sold directly to businesses. During the first quarter of 2019, the Company through the acquisition of the assets of Khrysos Global, Inc. added a third business segment to its operations, the commercial hemp segment. The Company's three segments are listed below: ● Commercial coffee business is operated through CLR and its wholly owned subsidiary, Siles Plantation Family Group S.A. (“Siles”). ● Domestic direct selling network is operated through the following (i) domestic subsidiaries: AL Global Corporation, 2400 Boswell LLC, MK Collaborative LLC, and Youngevity Global LLC and (ii) foreign subsidiaries: Youngevity Australia Pty. Ltd., Youngevity NZ, Ltd., Youngevity Mexico S.A. de CV, Youngevity Israel, Ltd., Youngevity Russia, LLC, Youngevity Colombia S.A.S, Youngevity International Singapore Pte. Ltd., Mialisia Canada, Inc. and Legacy for Life Limited (Hong Kong). The Company also operates through the BellaVita Group LLC, with operations in Taiwan, Hong Kong, Singapore, Indonesia, Malaysia and Japan. The Company also operates subsidiary branches of Youngevity Global LLC in the Philippines and Taiwan. ● Commercial hemp business is operated through the Company’s wholly owned subsidiary, Khrysos Industries, Inc., a Delaware corporation. Khrysos Industries, Inc. acquired the assets of Khrysos Global Inc. a Florida corporation in February 2019 and the wholly-owned subsidiaries of Khrysos Global Inc., INXL Laboratories, Inc., a Florida corporation and INX Holdings, Inc., a Florida corporation. |
Segment Information | The Company has three reportable segments: direct selling, commercial coffee, and commercial hemp. The direct selling segment develops and distributes health and wellness products through its global independent direct selling network also known as multi-level marketing. The commercial coffee segment is engaged in coffee roasting and distribution (specializing in gourmet coffee), mill processing of green coffee, and sales of green coffee. The commercial hemp segment manufactures proprietary systems to provide end-to-end extraction and processing that allow for the conversion of hemp feed stock into hemp oil and hemp extracts. The determination that the Company has three reportable segments is based upon the guidance set forth in Accounting Standards Codification (“ASC”) Topic 280, “Segment Reporting.” |
Liquidity and Going Concern | The accompanying condensed consolidated financial statements have been prepared and presented on a basis assuming the Company will continue as a going concern. The Company has sustained significant losses during the three months ended March 31, 2019 and 2018 of approximately $12,260,000 and $2,308,000, respectively. Net cash used in operating activities was approximately $4,831,000 and $1,427,000 for the three months ended March 31, 2019 and 2018, respectively. The Company does not currently believe that its existing cash resources are sufficient to meet the Company’s anticipated needs over the next twelve months from the date hereof. Based on its current cash levels and its current rate of cash requirements, the Company will need to raise additional capital and/or will need to further reduce its expenses from current levels. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company anticipates that revenues will grow, and it intends to make necessary cost reductions related to international operations that are not performing well and reduce non-essential expenses. The Company is also considering multiple other fund-raising alternatives. On March 18, 2019, the Company entered into a two-year Secured Promissory Note (the “Note” or “Notes”) with two (2) accredited investors that had a substantial pre-existing relationship with the Company pursuant to which the Company raised cash proceeds of $2,000,000. In consideration of the Notes, the Company issued 20,000 shares of the Company’s common stock par value $0.001 for each $1,000,000 invested as well as for each $1,000,000 invested five-year warrants to purchase 20,000 shares of the Company’s common stock at a price per share of $6.00. The Notes pay interest at a rate of eight percent (8%) per annum and interest is paid quarterly in arrears with all principal and unpaid interest due at maturity on March 18, 2021. On February 15, 2019 and on March 10, 2019, the Company closed its first and second tranches of its 2019 January Private Placement debt offering, respectively, pursuant to which the Company offered for sale notes in the principal amount of a minimum of $100,000 and a maximum of notes in the principal amount $10,000,000 (the “2019 PIPE Notes”), with each investor receiving 2,000 shares of common stock for each $100,000 invested. The Company entered into subscription agreements with thirteen (13) accredited investors that had a substantial pre-existing relationship with the Company pursuant to which the Company received aggregate gross proceeds of $2,440,000 and issued the 2019 PIPE Notes in the aggregate principal amount of $2,440,000 and an aggregate of 48,800 shares of common stock. The placement agent received 12,200 shares of common stock in aggregate for the first and second tranches. The placement agent will receive up to 50,000 shares of common stock in the offering. Each 2019 PIPE Note matures 24 months after issuance, bears interest at a rate of six percent (6%) per annum, and the outstanding principal is convertible into shares of common stock at any time after the 180th day anniversary of the issuance of the 2019 PIPE Note, at a conversion price of $10 per share (subject to adjustment for stock splits, stock dividends and reclassification of the common stock). On February 6, 2019, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with one accredited investor that had a substantial pre-existing relationship with the Company pursuant to which the Company sold 250,000 shares of the Company’s common stock, par value $0.001 per share, at an offering price of $7.00 per share. Pursuant to the Purchase Agreement, the Company also issued to the investor a three-year warrant to purchase 250,000 shares of common stock at an exercise price of $7.00. The proceeds to the Company were $1,750,000. Consulting fees for arranging the Purchase Agreement include the issuance of 5,000 shares of restricted shares of the Company’s common stock, par value $0.001 per share, and 100,000 3-year warrants priced at $10.00. No cash commissions were paid. On January 7, 2019, the Company entered into an At-the-Market Offering Agreement (the “ATM Agreement”) with The Benchmark Company, LLC (“Benchmark”), as sales agent, pursuant to which the Company may sell from time to time, at its option, shares of its common stock, par value $0.001 per share, through Benchmark, as sales agent (the “Sales Agent”), for the sale of up to $60,000,000 of shares of the Company’s common stock. The Company is not obligated to make any sales of common stock under the ATM Agreement and the Company cannot provide any assurances that it will issue any shares pursuant to the ATM Agreement. The Company will pay the Sales Agent 3.0% commission of the gross sales proceeds. During the three months ended March 31, 2019, the Company sold a total of 1,000 shares of common stock under the ATM Agreement. Depending on market conditions, there can be no assurance that additional capital will be available when needed or that, if available, it will be obtained on terms favorable to the Company or to its stockholders. Failure to raise additional funds from the issuance of equity securities and failure to implement cost reductions could adversely affect the Company’s ability to operate as a going concern. The financial statements do not include any adjustments that might be necessary from the outcome of this uncertainty. |
Use of Estimates | The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense for each reporting period. Estimates are used in accounting for, among other things, allowances for doubtful accounts, deferred taxes and related valuation allowances, fair value of derivative liabilities, uncertain tax positions, loss contingencies, fair value of options granted under the Company’s stock-based compensation plan, fair value of assets and liabilities acquired in business combinations, finance leases, asset impairments, estimates of future cash flows used to evaluate impairments, useful lives of property, equipment and intangible assets, value of contingent acquisition debt, inventory obsolescence, and sales returns. Actual results may differ from previously estimated amounts and such differences may be material to the consolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected prospectively in the period they occur. |
Cash and Cash Equivalents | The Company considers only its monetary liquid assets with original maturities of three months or less as cash and cash equivalents. |
Related Party Transactions | Related Party Transactions Richard Renton Richard Renton is a member of the Board of Directors and owns and operates WVNP, Inc., a supplier of certain inventory items sold by the Company. The Company made purchases of approximately $8,000 and $54,000 from WVNP Inc., for the three months ended March 31, 2019 and 2018, respectively. Carl Grover Mr. Grover is the sole beneficial owner of in excess of five percent (5%) of the Company’s outstanding common shares. On December 13, 2018, CLR, entered into a Credit Agreement with Mr. Grover (the “Credit Agreement”) pursuant to which CLR borrowed $5,000,000 from Mr. Grover and in exchange issued to him a $5,000,000 credit note (“Credit Note”) secured by its green coffee inventory under a Security Agreement, dated December 13, 2018 (the “Security Agreement”), with Mr. Grover and CLR’s subsidiary, Siles Family Plantation Group S.A. (“Siles”), as guarantor, and Siles executed a separate Guaranty Agreement (“Guaranty”). The Company issued to Mr. Grover a four-year warrant to purchase 250,000 shares of our common stock, exercisable at $6.82 per share, and a four-year warrant to purchase 250,000 shares of the Company’s common stock, exercisable at $7.82 per share, pursuant to a Warrant Purchase Agreement, dated December 13, 2018, with Mr. Grover. (See Note 7 below.) Paul Sallwasser Mr. Paul Sallwasser is a member of the board directors and prior to joining the Company’s Board of Directors he acquired a note (the “2014 Note”) issued in the Company’s private placement consummated in 2014 (the “2014 Private Placement”) in the principal amount of $75,000 convertible into 10,714 shares of common stock and a warrant (the “2014 Warrant”) issued, in the 2014 Private Placement, exercisable for 14,673 shares of common stock. Prior to joining the Company’s Board of Directors, Mr. Sallwasser acquired in the 2017 Private Placement a 2017 Note in the principal amount of approximately $38,000 convertible into 8,177 shares of common stock and a warrant (the “2017 Warrant”) issued, in the 2017 Private Placement, exercisable for 5,719 shares of common stock. Mr. Sallwasser also acquired in the 2017 Private Placement in exchange for the “2015 Note” that he acquired in the Company’s private placement consummated in 2015 (the “2015 Private Placement”), a 2017 Note in the principal amount of $5,000 convertible into 1,087 shares of common stock and a 2017 Warrant exercisable for 543 shares of common stock. On March 30, 2018, the Company completed its Series B Offering, and in accordance with the terms of the 2017 Notes, Mr. Sallwasser’s 2017 Notes converted to 9,264 shares of the Company’s common stock. 2400 Boswell LLC In March 2013, the Company acquired 2400 Boswell for approximately $4,600,000. 2400 Boswell is the owner and lessor of the building occupied by the Company for its corporate office and warehouse in Chula Vista, California. The purchase was from an immediate family member of the Company’s Chief Executive Officer and consisted of approximately $248,000 in cash, approximately $334,000 of debt forgiveness and accrued interest, and a promissory note of approximately $393,000, payable in equal payments over 5 years and bears interest at 5.0%. Additionally, the Company assumed a long-term mortgage of $3,625,000, payable over 25 years with an initial interest rate of 5.75%. The interest rate is the prime rate plus 2.5%. The current interest rate as of March 31, 2019 was 7.75%. The lender will adjust the interest rate on the first calendar day of each change period or calendar quarter. The Company and its Chief Executive Officer are both co-guarantors of the mortgage. As of March 31, 2019, the balance on the long-term mortgage is approximately $3,198,000 and the balance on the promissory note is zero. Other Relationship Transactions Hernandez, Hernandez, Export Y Company and H&H Coffee Group Export Corp. The Company’s commercial coffee segment, CLR, is associated with Hernandez, Hernandez, Export Y Company (“H&H”), a Nicaragua company, through sourcing arrangements to procure Nicaraguan grown green coffee beans. As part of the 2014 Siles acquisition, CLR engaged the owners of H&H, Alain Piedra Hernandez (“Mr. Hernandez”) and Marisol Del Carmen Siles Orozco (“Ms. Orozco”), as employees to manage Siles. H&H is a sourcing agent that purchases raw green coffee beans from the local producers in Nicaragua and supplies CLR’s mill with unprocessed green coffee for processing. CLR does not have a direct relationship with the local producers and is dependent on H&H to negotiate agreements with local producers for the supply and provide to CLR’s mill raw unprocessed green coffee to CLR in a timely and efficient manner. Substantially all the green coffee processed through the Siles mill was coffee assigned to CLR for processing. In addition, during 2018, CLR sold green coffee beans to H&H Coffee Group Export Corp., (“H&H Export”), a Florida based company which is affiliated with H&H. In consideration for H&H's sourcing of green coffee for processing within CLR’s mill, CLR and H&H share in the green coffee profit from milling operations. CLR made purchases from H&H of approximately $2,576,000 of green coffee for the three months ended March 31, 2019, for use in the Company’s Miami roasting facilities. There were no purchases of green coffee from H&H to be sold to other third parties during the three months ended March 31, 2019. CLR made purchases from H&H of approximately $3,734,000 of green coffee for the three months ended March 31, 2018, for use in the Company’s Miami roasting facilities and for use in selling processed green coffee to third parties. During the three months ended March 31, 2019, CLR recorded net revenues from processing services of approximately $4,826,000. There was no processing service revenue during the three months ended March 31, 2018. During the three months ended March 31, 2018, CLR recorded the sale of processed green coffee beans, to H&H Export as gross revenue of $2,443,000. There were no processed green coffee bean sales, to H&H Export during the three months ended March 31, 2019. In May 2017, the Company entered a settlement agreement with Alain Piedra Hernandez, one of the owners of H&H and the operating manager of Siles, who was issued a non-qualified stock option for the purchase of 75,000 shares of the Company’s common stock at a price of $2.00 with an expiration date of three years, in lieu of an obligation due from the Company to H&H as relates to a Sourcing and Supply Agreement with H&H. During the period ended September 30, 2017 the Company replaced the non-qualified stock option and issued a warrant agreement with the same terms. There was no financial impact related to the cancellation of the option and the issuance of the warrant. As of March 31, 2019, the warrant remains outstanding. In December 2018, CLR advanced $5,000,000 to H&H Export to provide services in support of a 5-year contract for the sale and processing of 41 million pounds of green coffee beans on an annual basis. The services include providing hedging and financing opportunities to producers and delivering harvested coffee to the Company’s mills. On March 31, 2019, this advance was converted to a $5,000,000 loan agreement and bears interest at 9% per annum and is due and payable by H&H Export at the end of each year’s harvest season, but no later than October 31 for any harvest year. The loan is secured by H&H Export’s hedging account with INTL FC Stone, trade receivables, green coffee inventory in the possession of H&H Export and all green coffee contracts. Mill Construction Agreement On January 15, 2019, CLR entered into the CLR Siles Mill Construction Agreement (the “Mill Construction Agreement”) with H&H and H&H Export, Alain Piedra Hernandez (“Hernandez”) and Marisol Del Carmen Siles Orozco (“Orozco”), together with H&H, H&H Export, Hernandez and Orozco, collectively referred to as the Nicaraguan Partner, pursuant to which the Nicaraguan Partner agreed to transfer a 45 acre tract of land in Matagalpa, Nicaragua (the “Property”) to be owned 50% by the Nicaraguan Partner and 50% by CLR. In consideration for the land acquisition the Company issued to H&H Export, 153,846 shares of common stock. In addition, the Nicaraguan Partner and CLR agreed to contribute $4,700,000 each toward the construction of a processing plant, office, and storage facilities (“Mill”) on the property for processing coffee in Nicaragua. As of March 31, 2019, the Company paid $1,350,000 towards construction of a mill, which is included in construction in process within property and equipment, net on the Company's condensed consolidated balance sheet. Amendment to Operating and Profit-Sharing Agreement On January 15, 2019, CLR entered into an amendment to the March 2014 operating and profit-sharing agreement with the owners of H&H. CLR previously engaged Hernandez and Orozco, the owners of H&H as employees to manage Siles. In addition, CLR and H&H, Hernandez and Orozco have agreed to restructure their profit-sharing agreement in regard to profits from green coffee sales and processing that increases the CLR’s profit participation by an additional 25%. Under the new terms of the agreement with respect to profit generated from green coffee sales and processing from La Pita, a leased mill, or the new mill, now will provide for a split of profits of 75% to CLR and 25% to the Nicaraguan Partner, after certain conditions are met. The Company issued 295,910 shares of the Company’s common stock to H&H Export to pay for certain working capital, construction and other payables. In addition, H&H Export has sold to CLR its espresso brand Café Cachita in consideration of the issuance of 100,000 shares of the Company’s common stock. Hernandez and Orozco are employees of CLR. The shares of common stock issued were valued at $7.50 per share. |
Revenue Recognition | The Company recognizes revenue from product sales under the following five steps are completed: i) Identify the contract with the customer; ii) Identify the performance obligations in the contract; iii) Determine the transaction price; iv) Allocate the transaction price to the performance obligations in the contract; and v) Recognize revenue when (or as) each performance obligation is satisfied (see Note 4, below). Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities. The transaction price for all sales is based on the price reflected in the individual customer's contract or purchase order. Variable consideration has not been identified as a significant component of the transaction price for any of our transactions. Independent distributors receive compensation which is recognized as Distributor Compensation in the Company’s consolidated statements of operations. Due to the short-term nature of the contract with the customers, the Company accrues all distributor compensation expense in the month earned and pays the compensation the following month. The Company also charges fees to become a distributor, and earn a position in the network genealogy, which are recognized as revenue in the period received. The Company’s distributors are required to pay a one-time enrollment fee and receive a welcome kit specific to that country or region that consists of forms, policy and procedures, selling aids, access to the Company’s distributor website and a genealogy position with no down line distributors. The Company has determined that most contracts will be completed in less than one year. For those transactions where all performance obligations will be satisfied within one year or less, the Company is applying the practical expedient outlined in ASC 606-10-32-18. This practical expedient allows the Company not to adjust promised consideration for the effects of a significant financing component if the Company expects at contract inception the period between when the Company transfers the promised good or service to a customer and when the customer pays for that good or service will be one year or less. For those transactions that are expected to be completed after one year, the Company has assessed that there are no significant financing components because any difference between the promised consideration and the cash selling price of the good or service is for reasons other than the provision of financing. |
Deferred Revenues and Costs | As of March 31, 2019 and December 31, 2018, the balance in deferred revenues was approximately $2,268,000 and $2,312,000, respectively. Deferred revenue related to the Company’s direct selling segment is attributable to the Heritage Makers product line and also for future Company convention and distributor events. Deferred revenues related to Heritage Makers were approximately $2,095,000 and $2,153,000, as of March 31, 2019, and December 31, 2018, respectively. The deferred revenue represents Heritage Maker’s obligation for points purchased by customers that have not yet been redeemed for product. Cash received for points sold is recorded as deferred revenue. Revenue is recognized when customers redeem the points and the product is shipped. Deferred costs relate to Heritage Makers prepaid commissions that are recognized in expense at the time the related revenue is recognized. As of March 31, 2019 and 2018, the balance in deferred costs was approximately $338,000 and $364,000, respectively, and is included in prepaid expenses and current assets. Deferred revenues related to pre-enrollment in upcoming conventions and distributor events of approximately $173,000 and $159,000 as of March 31, 2019 and December 31, 2018, respectively, relate primarily to the Company’s 2019 and 2018 events. The Company does not recognize this revenue until the conventions or distributor events occur. |
Plantation Costs | The Company’s commercial coffee segment includes the results of Siles, which is a 500-acre coffee plantation and a dry-processing facility located on 26 acres located in Matagalpa, Nicaragua. Siles is a wholly-owned subsidiary of CLR, and the results of CLR include the depreciation and amortization of capitalized costs, development and maintenance and harvesting costs of Siles. In accordance with GAAP, plantation maintenance and harvesting costs for commercially producing coffee farms are charged against earnings when sold. Deferred harvest costs accumulate and are capitalized throughout the year and are expensed over the remainder of the year as the coffee is sold. The difference between actual harvest costs incurred and the amount of harvest costs recognized as expense is recorded as either an increase or decrease in deferred harvest costs, which is reported as an asset and included with prepaid expenses and other current assets in the condensed consolidated balance sheets. Once the harvest is complete, the harvest costs are then recognized as the inventory value. Deferred costs associated with the harvest as of March 31, 2019 and December 31, 2018 are approximately zero and $400,000, respectively, and are included in prepaid expenses and other current assets on the Company’s balance sheets. |
Stock-based Compensation | The Company accounts for stock-based compensation in accordance with ASC Topic 718, “ Compensation – Stock Compensation,” The Company accounts for equity instruments issued to non-employees in accordance with authoritative guidance for equity-based payments to non-employees. Stock options issued to non-employees are accounted for at their estimated fair value, determined using the Black-Scholes option-pricing model. The fair value of options granted to non-employees is re-measured as they vest, and the resulting increase in value, if any, is recognized as expense during the period the related services are rendered. |
Income Taxes | The Company accounts for income taxes in accordance with ASC Topic 740, "Income Taxes," Income taxes for the interim periods are computed using the effective tax rates estimated to be applicable for the full fiscal year, as adjusted for any discrete taxable events that occur during the period. The Company files income tax returns in the United States (“U.S.”) on a federal basis and in many U.S. state and foreign jurisdictions. Certain tax years remain open to examination by the major taxing jurisdictions to which the Company is subject. |
Commitments and Contingencies | The Company is from time to time, the subject of claims and suits arising out of matters related to the Company’s business. The Company is party to litigation at the present time and may become party to litigation in the future. In general, litigation claims can be expensive, and time consuming to bring or defend against and could result in settlements or damages that could significantly affect financial results. It is not possible to predict the final resolution of the current litigation to which the Company is party to, and the impact of certain of these matters on the Company’s business, results of operations, and financial condition could be material. Regardless of the outcome, litigation has adversely impacted the Company’s business because of defense costs, diversion of management resources and other factors |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In August 2018, issued o. 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement In January 2017, the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment Recently Adopted Accounting Pronouncements In February 2018, the FASB issued Accounting Standards Update ASU No. 2018-02, Income Statement - Reporting Comprehensive Income In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception In February 2016, FASB established Topic 842, Leases, by issuing ASU No. 2016-02, Leases (Topic 842) Land Easement Practical Expedient for Transition to Topic Codification Improvements to Topic Leases Targeted Improvements Narrow-Scope Improvements for Lessors; and Codification Improvements Following the expiration of the Company’s Emerging Growth Company filing status (“EGC”) on December 31, 2018 the Company adopted the following accounting pronouncements effective January 1, 2018. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) |
Restatement of financial stat_2
Restatement of financial statements (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Balance Sheet [Member] | |
Summary of restatement | March 31, 2019 Previously Reported Adjustments Restated ASSETS Current Assets Cash and cash equivalents $ 2,540 $ $ 2,540 Accounts receivable, trade 21,629 (13,923 ) 7,706 Income tax receivable 75 75 Inventory 46,805 (22,641 ) 24,164 Notes receivable 5,000 5,000 Prepaid expenses and Other current assets 4,891 4,891 Total current assets 80,940 (36,564 ) 44,376 Property and equipment, net 20,856 (1,127 ) 19,729 Operating lease right-of-use assets 5,509 5,509 Deferred tax assets 148 148 Intangible assets, net 23,919 23,919 Goodwill 10,676 2,478 13,154 Other assets notes receivable 949 949 Total assets $ 142,997 $ (35,213 ) $ 107,784 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 22,784 $ (13,923 ) $ 8,861 Accrued distributor compensation 4,143 4,143 Accrued expenses 29,103 (22,641 ) 6,462 Deferred revenues 2,268 2,268 Line of credit 2,432 2,432 Other current liabilities 535 535 Operating lease liabilities, current portion 745 745 Finance lease liabilities, current portion 978 978 Notes payable, current portion 158 158 Convertible notes payable, current portion 681 681 Warrant derivative liability 5,369 5,369 Contingent acquisition debt, current portion 792 792 Total current liabilities 69,988 (36,564 ) 33,424 Operating lease liabilities, net of current portion 4,764 4,764 Finance lease liabilities, net of current portion 927 927 Notes payable, net of current portion 10,378 10,378 Convertible notes payable, net of current portion 1,981 1,981 Contingent acquisition debt, net of current portion 7,341 7,341 Total liabilities 95,379 (36,564 ) 58,815 Commitments and contingencies (Note 1) Stockholders Equity Preferred Stock, $0.001 par value: 5,000,000 shares authorized Convertible Preferred Stock, Series A - 161,135 shares issued and outstanding at March 31, 2019 and December 31, 2018 Convertible Preferred Stock, Series B 129,437 shares issued and outstanding at March 31, 2019 and December 31, 2018 Common Stock, $0.001 par value: 50,000,000 shares authorized; 28,890,671 and 25,760,708 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively 29 29 Additional paid-in capital 243,555 1,351 244,906 Accumulated deficit (196,023 ) (196,023 ) Accumulated other comprehensive loss 57 57 Total stockholders equity 47,618 1,351 48,969 Total Liabilities and Stockholders’ Equity $ 142,997 $ (35,213 ) $ 107,784 |
Income Statement [Member] | |
Summary of restatement | Three Months Ended March 31, 2019 Previously Reported Adjustments Restated Revenues $ 56,300 $ (15,108 ) $ 41,192 Cost of revenues 29,451 (15,108 ) 14,343 Gross profit 26,849 — 26,849 Operating expenses Distributor compensation 14,890 — 14,890 Sales and marketing 4,019 — 4,019 General and administrative 19,881 — 19,881 Total operating expenses 38,790 — 38,790 Loss from Operations (11,941 ) — (11,941 ) Interest expense, net (1,507 ) — (1,507 ) Change in fair value of warrant derivative liability 1,486 — 1,486 Total other expense, net (21 ) — (21 ) Net loss before income taxes (11,962 ) — (11,962 ) Income tax provision 298 — 298 Net loss (12,260 ) — (12,260 ) Preferred stock dividends (14 ) — (14 ) Net Loss Available to Common Stockholders $ (12,274 ) $ — $ (12,274 ) Net loss per share, basic $ (0.45 ) $ — $ (0.45 ) Net loss per share, diluted $ (0.49 ) $ — $ (0.49 ) Weighted average shares outstanding, basic 27,577,576 — 27,577,576 Weighted average shares outstanding, diluted 28,025,172 — 28,025,172 |
Cash Flows [Member] | |
Summary of restatement | Three Months Ended March 31, 2019 Previously Reported Adjustments Restated Cash Flows from Operating Activities: Net loss $ (12,260 ) $ $ (12,260 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,145 1,145 Stock-based compensation expense 11,344 11,344 Amortization of debt discounts and issuance costs 199 199 Change in fair value of warrant derivative liability (1,486 ) (1,486 ) Change in inventory reserve 159 159 Equity issuance for services 1,859 1,859 Stock issuance for true-up shares 281 281 Changes in operating assets and liabilities, net of effect from business combinations: Accounts receivable (17,292 ) 13,923 (3,369 ) Inventory (23,924 ) 22,641 (1,283 ) Prepaid expenses and other current assets (111 ) (111 ) Accounts payable 13,977 (13,923 ) 54 Accrued distributor compensation 854 854 Deferred revenues (44 ) (44 ) Accrued expenses and other liabilities 20,468 (22,641 ) (2,173 ) Net Cash Used in Operating Activities (4,831 ) (4,831 ) Cash Flows from Investing Activities: Acquisitions, net of cash acquired (425 ) (425 ) Purchases of property and equipment (2,291 ) (2,291 ) Net Cash Used in Investing Activities (2,716 ) (2,716 ) Cash Flows from Financing Activities: Proceeds from issuance of promissory notes, net of offering costs 3,750 3,750 Proceeds from private placement of common stock, net of offering costs 2,267 2,267 Proceeds from at-the-market-offering and exercise of stock options and warrants, net 1,455 1,455 Proceeds net of repayment on line of credit 176 176 Payments of notes payable (35 ) (35 ) Payments of contingent acquisition debt (128 ) (128 ) Payments of finance leases (368 ) (368 ) Payments of dividends (11 ) (11 ) Net Cash Provided by Financing Activities 7,106 7,106 Foreign Currency Effect on Cash 102 102 Net decrease in cash and cash equivalents (339 ) (339 ) Cash and Cash Equivalents, Beginning of Period 2,879 2,879 Cash and Cash Equivalents, End of Period $ 2,540 $ $ 2,540 Supplemental Disclosures of Cash Flow Information Cash paid during the period for: Interest $ 1,034 $ $ 1,034 Income taxes $ $ $ Supplemental Disclosures of Noncash Investing and Financing Activities Purchases of property and equipment funded by finance leases $ $ $ Purchases of property and equipment funded by mortgage agreements $ 450 $ $ 450 Fair value of stock issued for services (Note 11) $ 417 $ $ 417 Fair value of stock issued for property and equipment (land) $ 1,200 $ $ 1,200 Fair value of stock issued for purchase of intangibles (tradename) $ 750 $ $ 750 Fair value of stock issued for note receivable, net of debt settlement $ 2,309 $ $ 2,309 Fair value of stock issued in connection with the acquisition of Khrysos Global, Inc. (Note 5) (1) $ 12,649 $ 1,351 $ 14,000 Dividends declared but not paid at the end of period (Note 11) $ 14 $ $ 14 Acquisitions of net assets in exchange for contingent debt, net of purchase price adjustments $ $ $ Fair value of warrants issued in connection with the Series B Preferred Stock Offering $ $ $ Conversion of 2017 Notes to Common Stock $ $ $ |
Basic and Diluted Net Loss Pe_2
Basic and Diluted Net Loss Per Share (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Loss per share | Three months ended March 31, 2019 2018 Loss per Share – Basic (unaudited) (unaudited) Numerator for basic loss per share $ (12,274,000 ) $ (2,311,000 ) Denominator for basic loss per share 27,577,576 19,744,144 Loss per common share – basic $ (0.45 ) $ (0.12 ) Loss per Share – Diluted Numerator for basic loss per share $ (12,274,000 ) $ (2,311,000 ) Adjust: Fair value of dilutive warrants outstanding (1,409,000 ) (254,000 ) Numerator for dilutive loss per share $ (13,683,000 ) $ (2,565,000 ) Denominator for basic loss per share 27,577,576 19,744,144 Plus: Incremental shares underlying “in the money” warrants outstanding 447,595 14,258 Denominator for diluted loss per share 28,025,172 19,758,402 Loss per common share – diluted $ (0.49 ) $ (0.13 ) |
Balance Sheet Account Details (
Balance Sheet Account Details (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Inventory And Cost Of Sales Tables | |
Inventories | As of March 31, 2019 December 31, 2018 (unaudited) Finished goods $ 14,948 $ 11,300 Raw materials 11,643 12,744 Total inventory 26,591 24,044 Reserve for excess and obsolete (2,427 ) (2,268 ) Inventory, net $ 24,164 $ 21,776 |
Leases | Leases with an initial term of twelve months or less are not recorded on the Company’s condensed consolidated balance sheets, and the Company does not separate nonlease components from lease components. The Company’s lease assets and liabilities recognized within its condensed consolidated balance sheets were as follows (in thousands): March 31, 2019 Balance Sheet Location ASSETS: Operating lease right-of-use assets $ 5,509 Operating lease right-of-use assets Finance lease right-of-use assets 1,330 Property, plant, and equipment, net at cost, net of accumulated amortization (1) Total lease assets $ 6,839 LIABILITIES: Current: Operating lease liabilities $ 745 Other current liabilities Finance lease liabilities 978 Current portion of long-term debt Non-current: Operating lease liabilities 4,764 Non-current operating lease liabilities Finance lease liabilities 927 Long-term debt, net of current portion Total lease liabilities $ 7,714 (1) Finance lease assets are recorded net of accumulated amortization of approximately $522,000 as of March 31, 2019. Lease cost is recognized on a straight-line basis over the lease term (in thousands): March 31, 2019 Operating lease costs $ 271 Finance lease cost Amortization of right-of-use assets 96 Interest on lease liabilities 37 Net lease costs $ 404 As of March 31, 2019, annual scheduled lease payments were as follows (in thousands): Operating Leases Finance Leases 2019 $ 788 $ 1,086 2020 753 742 2021 688 204 2022 648 9 2023 889 3 Thereafter 3,139 - Total lease payments 6,905 2,044 Less imputed interest 1,396 139 Present value of lease liabilities $ 5,509 $ 1,905 |
Segment Revenue | For the three months ended March 31, 2019 2018 (Restated)* Direct selling $ 33,420 $ 35,311 Commercial Coffee: Processed green coffee 100 4,985 Milling and processing services 4,826 Roasted coffee and other 2,779 2,698 Total commercial coffee 7,705 7,683 Commercial hemp 67 Total $ 41,192 $ 42,994 |
Acquisitions and Business Com_2
Acquisitions and Business Combinations (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Acquisitions And Business Combinations | |
Assets acquired and liabilities assumed | The Company has estimated fair value at the date of acquisition of the acquired tangible and intangible assets and liabilities as follows including the resulting adjustments in changes to the aggregate purchase price (in thousands): Consideration as Originally Reported Adjustments Consideration as Currently Reported Present value of cash consideration $ 1,894 $ $ - $ 1,894 Estimated fair value of common stock issued 12,649 1,351 14,000 Aggregate purchase price $ 14,543 $ 1,351 $ 15,894 The following table summarizes the estimated preliminary and as adjusted fair values of the assets acquired and liabilities assumed in February 2019 (in thousands): Fair Value as Originally Reported Adjustments Fair Value as Currently Reported Current assets $ 636 $ - $ 636 Inventory 1,264 - 1,264 Property, plant and equipment 2,260 (1,127 ) 1,133 Trademarks and trade name 1,876 - 1,876 Customer-related intangible 5,629 - 5,629 Non-compete intangible 956 - 956 Goodwill 4,353 2,478 6,831 Current liabilities (1,904 ) - (1,904 ) Notes payable (527 ) - (527 ) Net assets acquired $ 14,543 $ 1,351 $ 15,894 |
Intangible Assets and Goodwill
Intangible Assets and Goodwill (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Intangible Assets And Goodwill Tables | |
Intangible Assets and Goodwill | March 31, 2019 (unaudited) December 31, 2018 Cost Accumulated Amortization Net Cost Accumulated Amortization Net Distributor organizations $ 14,559 $ 9,796 $ 4,763 $ 14,559 $ 9,575 $ 4,984 Trademarks and trade names 9,963 2,033 7,930 7,337 1,781 5,556 Customer relationships 16,028 5,895 10,133 10,398 5,723 4,675 Internally developed software 720 583 137 720 558 162 Non-compete agreement 956 - 956 - - - Intangible assets $ 42,226 $ 18,307 $ 23,919 $ 33,014 $ 17,637 $ 15,377 |
Goodwill | March 31, 2019 (unaudited) December 31, 2018 Goodwill, commercial coffee $ 3,314 $ 3,314 Goodwill, direct selling 3,009 3,009 Goodwill, commercial hemp 6,831 - Total goodwill $ 13,154 $ 6,323 |
Convertible Notes Payable (Tabl
Convertible Notes Payable (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Debt Tables | |
Convertible note oustanding | March 31, 2019 (unaudited) December 31, 2018 8% Convertible Notes due July and August 2019 (2014 Notes), principal $ 750 $ 750 Debt discounts (69 ) (103 ) Carrying value of 2014 Notes 681 647 6% Convertible Notes due February and March 2021 (2019 PIPE Notes), principal 2,400 - Debt discounts (459 ) - Carrying value of 2019 PIPE Notes 1,941 - Total carrying value of convertible notes payable $ 2,622 $ 647 |
Derivative Liability (Tables)
Derivative Liability (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Derivative Liability Tables | |
Monte Carlo fair value of warrants | March 31, 2019 (unaudited) December 31, 2018 Stock price volatility 97.2% - 111.5% 83.78% - 136.76% Risk-free interest rates 2.33% - 2.42% 2.465% - 2.577% Annual dividend yield 0% 0% Expected life 0.33 - 1.54 years 0.58 - 2.76 years |
Fair Value of Financial Instr_2
Fair Value of Financial Instruments (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Fair Value Of Financial Instruments Tables | |
Fair value measurement within the three levels of value hierarchy | The following table details the fair value measurement within the fair value hierarchy of the Company’s financial instruments, which includes the Level 3 liabilities (in thousands): Fair Value at March 31, 2019 Total Level 1 Level 2 Level 3 Liabilities: Contingent acquisition debt, current portion $ 792 $ - $ - $ 792 Contingent acquisition debt, less current portion 7,341 - - 7,341 Warrant derivative liability 5,369 - - 5,369 Total liabilities $ 13,502 $ - $ - $ 13,502 Fair Value at December 31,2018 Total Level 1 Level 2 Level 3 Liabilities: Contingent acquisition debt, current portion $ 795 $ - $ - $ 795 Contingent acquisition debt, less current portion 7,466 - - 7,466 Warrant derivative liability 9,216 - - 9,216 Total liabilities $ 17,477 $ - $ - $ 17,477 |
Private Placements measured at fair value using Level 3 inputs | The following table reflects the activity for the Company’s warrant derivative liability associated with the Company’s 2019, 2018, 2017, 2015 and 2014 Private Placements measured at fair value using Level 3 inputs (in thousands): Warrant Derivative Liability Balance at December 31, 2018 $ 9,216 Issuance - Adjustments to estimated fair value (1,486 ) Adjustments related to warrant exercises (867 ) Adjustments related to the reclassification of warrants to equity (1,494 ) Balance at March 31, 2019 $ 5,369 The following table reflects the activity for the Company’s contingent acquisition liabilities measured at fair value using Level 3 inputs (in thousands): Contingent Consideration Balance at December 31, 2018 $ 8,261 Liabilities acquired - Liabilities settled (128 ) Adjustments to liabilities included in earnings - Adjustment to purchase price - Balance at March 31, 2019 $ 8,133 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Stock Option Plan Tables | |
Warrant Activity | Number of Warrants Balance at December 31, 2018 5,876,980 Issued 1,315,000 Expired / cancelled - Exercised (248,106 ) Balance at March 31, 2019, outstanding 6,943,874 Balance at March 31, 2019, exercisable 6,539,187 |
Summary of Plan Options | Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contract Life (years) Aggregate Intrinsic Value (in thousands) Outstanding December 31, 2018 2,394,379 $ 4.45 6.94 $ 3,049 Issued 2,540,000 6.66 Canceled / expired (37,275 ) 5.00 Exercised (60,530 ) 4.46 - Outstanding March 31, 2019 4,836,574 $ 5.61 8.35 $ 3,045 Exercisable March 31, 2019 3,723,870 $ 5.96 8.23 $ 1,617 |
RSU activity | Number of Shares Balance at December 31, 2018 475,000 Issued - Canceled - Balance at March 31, 2019 475,000 |
Segment and Geographical Info_2
Segment and Geographical Information (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Segment And Geographical Information Tables | |
Segment information revenue | Three Months Ended March 31, 2019 (unaudited) 2018 Revenues (Restated)* Direct selling $ 33,420 $ 35,311 Commercial coffee 7,705 7,683 Commercial hemp 67 Total revenues $ 41,192 $ 42,994 Gross profit Direct selling $ 22,755 $ 24,735 Commercial coffee 4,067 277 Commercial hemp 27 Total gross profit $ 26,849 $ 25,012 Operating income (loss) Direct selling $ (12,309 ) $ 781 Commercial coffee 884 (757 ) Commercial hemp (516 ) Total operating income (loss) $ (11,941 ) $ 24 Net income (loss) Direct selling $ (13,377 ) $ (591 ) Commercial coffee 1,633 (1,717 ) Commercial hemp (516 ) Total net loss $ (12,260 ) $ (2,308 ) Capital expenditures Direct selling $ 17 $ 87 Commercial coffee 2,572 679 Commercial hemp 1,384 Total capital expenditures $ 3,973 $ 766 Capital expenditures acquired through acquisition $- $- Direct selling - - Commercial coffee - - Commercial hemp 1,133 Total capital expenditures acquired through acquisition $ 1,133 $ |
Segment information assets | As of March 31, 2019 (unaudited) December 31, 2018 Total assets (Restated)* Direct selling $ 45,011 $ 38,947 Commercial coffee 41,584 37,026 Commercial hemp 21,189 Total assets $ 107,784 $ 75,973 |
Segment information geographical | Three Months Ended March 31, 2019 (unaudited) 2018 Revenues (Restated)* United States $ 35,782 $ 37,393 International 5,410 5,601 Total revenues $ 41,192 $ 42,994 * Revenue for the three months ended March 31, 2019 has been restated. See Note 2. |
Basis of Presentation and Des_3
Basis of Presentation and Description of Business (Details Narrative) - USD ($) $ in Thousands | Mar. 31, 2019 | [1] | Dec. 31, 2018 |
Basis Of Presentation And Description Of Business Details Narrative | |||
Accounts receivable, trade | $ 7,706 | $ 4,028 | |
Deferred revenues | $ 2,268 | $ 2,312 | |
[1] | The Unaudited Condensed Consolidated Balance Sheet as of March 31, 2019 has been restated. See Note 2. |
Restatement of financial stat_3
Restatement of financial statements (Details 1) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | ||
Current Assets | |||||
Cash and cash equivalents | $ 2,540 | [1] | $ 2,879 | ||
Accounts receivable, trade | 7,706 | [1] | 4,028 | ||
Income tax receivable | 75 | [1] | 74 | ||
Inventory | 24,164 | [1] | 21,776 | ||
Advances (Note 1) | 0 | [1] | 5,000 | ||
Notes receivable | 5,000 | [1] | 0 | ||
Prepaid expenses and other current assets | 4,891 | [1] | 5,263 | ||
Total current assets | 44,376 | [1] | 39,020 | ||
Property and equipment, net | 19,729 | [1] | 15,105 | ||
Operating lease right-of-use assets | 5,509 | [1] | 0 | ||
Deferred tax assets | 148 | ||||
Intangible assets, net | 23,919 | [1] | 15,377 | ||
Goodwill | 13,154 | [1] | 6,323 | ||
Other assets - notes receivable | 949 | [1] | 0 | ||
Total assets | 107,784 | [1] | 75,973 | ||
Current Liabilities | |||||
Accounts payable | 8,861 | [1] | 8,478 | ||
Accrued distributor compensation | 4,143 | [1] | 3,289 | ||
Accrued expenses | 6,462 | [1] | 6,582 | ||
Deferred revenues | 2,268 | [1] | 2,312 | ||
Line of credit | 2,432 | [1] | 2,256 | ||
Other current liabilities | 535 | [1] | 1,912 | ||
Operating lease liabilities, current portion | 745 | [1] | 0 | ||
Finance lease liabilities, current portion | 978 | [1] | 1,168 | ||
Notes payable, current portion | 158 | [1] | 141 | ||
Convertible notes payable, current portion | 681 | [1] | 647 | ||
Warrant derivative liability | 5,369 | [1] | 9,216 | ||
Contingent acquisition debt, current portion | 792 | [1] | 795 | ||
Total current liabilities | 33,424 | [1] | 36,796 | ||
Operating lease liabilities, net of current portion | 4,764 | [1] | 0 | ||
Finance lease liabilities, net of current portion | 927 | [1] | 1,107 | ||
Notes payable, net of current portion | 10,378 | [1] | 7,629 | ||
Convertible notes payable, net of debt discount | 1,981 | [1] | 0 | ||
Contingent acquisition debt, net of current portion | 7,341 | [1] | 7,466 | ||
Total liabilities | 58,815 | [1] | 52,998 | ||
Commitments and contingencies (Note 1) | [1] | ||||
Stockholders' Equity | |||||
Common Stock, $0.001 par value: 50,000,000 shares authorized; 28,890,671 and 25,760,708 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively | 29 | [1] | 26 | ||
Additional paid-in capital | 244,906 | [1] | 206,757 | ||
Accumulated deficit | (196,023) | [1] | (183,763) | ||
Accumulated other comprehensive loss | 57 | [1] | (45) | ||
Total stockholders' equity (deficit) | 48,969 | [1],[2] | 22,975 | [2] | $ 7,451 |
Total Liabilities and Stockholders' Equity | 107,784 | [1] | $ 75,973 | ||
Previously Reported [Member] | |||||
Current Assets | |||||
Cash and cash equivalents | 2,540 | ||||
Accounts receivable, trade | 21,629 | ||||
Income tax receivable | 75 | ||||
Inventory | 46,805 | ||||
Advances (Note 1) | 0 | ||||
Notes receivable | 5,000 | ||||
Prepaid expenses and other current assets | 4,891 | ||||
Total current assets | 80,940 | ||||
Property and equipment, net | 20,856 | ||||
Operating lease right-of-use assets | 5,509 | ||||
Deferred tax assets | 148 | ||||
Intangible assets, net | 23,919 | ||||
Goodwill | 10,676 | ||||
Other assets - notes receivable | 949 | ||||
Total assets | 142,997 | ||||
Current Liabilities | |||||
Accounts payable | 22,784 | ||||
Accrued distributor compensation | 4,143 | ||||
Accrued expenses | 29,103 | ||||
Deferred revenues | 2,268 | ||||
Line of credit | 2,432 | ||||
Other current liabilities | 535 | ||||
Operating lease liabilities, current portion | 745 | ||||
Finance lease liabilities, current portion | 978 | ||||
Notes payable, current portion | 158 | ||||
Convertible notes payable, current portion | 681 | ||||
Warrant derivative liability | 5,369 | ||||
Contingent acquisition debt, current portion | 792 | ||||
Total current liabilities | 69,988 | ||||
Operating lease liabilities, net of current portion | 4,764 | ||||
Finance lease liabilities, net of current portion | 927 | ||||
Notes payable, net of current portion | 10,378 | ||||
Convertible notes payable, net of debt discount | 1,981 | ||||
Contingent acquisition debt, net of current portion | 7,341 | ||||
Total liabilities | 95,379 | ||||
Commitments and contingencies (Note 1) | |||||
Stockholders' Equity | |||||
Common Stock, $0.001 par value: 50,000,000 shares authorized; 28,890,671 and 25,760,708 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively | 29 | ||||
Additional paid-in capital | 243,555 | ||||
Accumulated deficit | (196,023) | ||||
Accumulated other comprehensive loss | 57 | ||||
Total stockholders' equity (deficit) | 47,618 | ||||
Total Liabilities and Stockholders' Equity | 142,997 | ||||
Revision of Prior Period, Adjustment [Member] | |||||
Current Assets | |||||
Cash and cash equivalents | 0 | ||||
Accounts receivable, trade | (13,923) | ||||
Income tax receivable | 0 | ||||
Inventory | (22,641) | ||||
Advances (Note 1) | 0 | ||||
Notes receivable | 0 | ||||
Prepaid expenses and other current assets | 0 | ||||
Total current assets | (36,564) | ||||
Property and equipment, net | (1,127) | ||||
Operating lease right-of-use assets | 0 | ||||
Deferred tax assets | 0 | ||||
Intangible assets, net | 0 | ||||
Goodwill | 2,478 | ||||
Other assets - notes receivable | 0 | ||||
Total assets | (35,213) | ||||
Current Liabilities | |||||
Accounts payable | (13,923) | ||||
Accrued distributor compensation | 0 | ||||
Accrued expenses | (22,641) | ||||
Deferred revenues | 0 | ||||
Line of credit | 0 | ||||
Other current liabilities | 0 | ||||
Operating lease liabilities, current portion | 0 | ||||
Finance lease liabilities, current portion | 0 | ||||
Notes payable, current portion | 0 | ||||
Convertible notes payable, current portion | 0 | ||||
Warrant derivative liability | 0 | ||||
Contingent acquisition debt, current portion | 0 | ||||
Total current liabilities | (36,564) | ||||
Operating lease liabilities, net of current portion | 0 | ||||
Finance lease liabilities, net of current portion | 0 | ||||
Notes payable, net of current portion | 0 | ||||
Convertible notes payable, net of debt discount | 0 | ||||
Contingent acquisition debt, net of current portion | 0 | ||||
Total liabilities | (36,564) | ||||
Commitments and contingencies (Note 1) | |||||
Stockholders' Equity | |||||
Common Stock, $0.001 par value: 50,000,000 shares authorized; 28,890,671 and 25,760,708 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively | 0 | ||||
Additional paid-in capital | 1,351 | ||||
Accumulated deficit | 0 | ||||
Accumulated other comprehensive loss | 0 | ||||
Total stockholders' equity (deficit) | 1,351 | ||||
Total Liabilities and Stockholders' Equity | $ (35,213) | ||||
[1] | The Unaudited Condensed Consolidated Balance Sheet as of March 31, 2019 has been restated. See Note 2. | ||||
[2] | The Unaudited Condensed Consolidated Statement of Stockholders' Equity for the three months ended March 31, 2019 has been restated. See Note 2. |
Restatement of financial stat_4
Restatement of financial statements (Details 2) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | ||
Revenues | $ 41,192 | [1] | $ 42,994 |
Cost of revenues | 14,343 | [1] | 17,982 |
Gross profit | 26,849 | [1] | 25,012 |
Operating expenses | |||
Distributor compensation | 14,890 | [1] | 15,578 |
Sales and marketing | 4,019 | [1] | 3,499 |
General and administrative | 19,881 | [1] | 5,911 |
Total operating expenses | 38,790 | [1] | 24,988 |
Income (loss) from Operations | (11,941) | [1] | 24 |
Interest expense, net | (1,507) | [1] | (1,712) |
Change in fair value of warrant derivative liability | 1,486 | [1] | 712 |
Extinguishment loss on debt | 0 | [1],[2] | (1,082) |
Total other income (expense) | (21) | [1] | (2,082) |
Net loss before income taxes | (11,962) | [1] | (2,058) |
Income tax provision | 298 | [1] | 250 |
Net loss | (12,260) | [1] | (2,308) |
Preferred stock dividends | (14) | [1],[3] | (3) |
Net loss available to common stockholders | $ (12,274) | [1] | $ (2,311) |
Net (loss) income per share, basic | $ (0.45) | [1] | $ (0.12) |
Net (loss) income per share, diluted | $ (0.49) | [1] | $ (0.13) |
Weighted average shares outstanding, basic | 27,577,576 | [1] | 19,744,144 |
Weighted average shares outstanding, diluted | 28,025,172 | [1] | 19,758,402 |
Previously Reported [Member] | |||
Revenues | $ 56,300 | ||
Cost of revenues | 29,451 | ||
Gross profit | 26,849 | ||
Operating expenses | |||
Distributor compensation | 14,890 | ||
Sales and marketing | 4,019 | ||
General and administrative | 19,881 | ||
Total operating expenses | 38,790 | ||
Income (loss) from Operations | (11,941) | ||
Interest expense, net | (1,507) | ||
Change in fair value of warrant derivative liability | 1,486 | ||
Extinguishment loss on debt | 0 | ||
Total other income (expense) | (21) | ||
Net loss before income taxes | (11,962) | ||
Income tax provision | 298 | ||
Net loss | (12,260) | ||
Preferred stock dividends | (14) | ||
Net loss available to common stockholders | $ (12,274) | ||
Net (loss) income per share, basic | $ (0.45) | ||
Net (loss) income per share, diluted | $ (0.49) | ||
Weighted average shares outstanding, basic | 27,577,576 | ||
Weighted average shares outstanding, diluted | 28,025,172 | ||
Revision of Prior Period, Adjustment [Member] | |||
Revenues | $ (15,108) | ||
Cost of revenues | (15,108) | ||
Gross profit | 0 | ||
Operating expenses | |||
Distributor compensation | 0 | ||
Sales and marketing | 0 | ||
General and administrative | 0 | ||
Total operating expenses | 0 | ||
Income (loss) from Operations | 0 | ||
Interest expense, net | 0 | ||
Change in fair value of warrant derivative liability | 0 | ||
Extinguishment loss on debt | 0 | ||
Total other income (expense) | 0 | ||
Net loss before income taxes | 0 | ||
Income tax provision | 0 | ||
Net loss | 0 | ||
Preferred stock dividends | 0 | ||
Net loss available to common stockholders | $ 0 | ||
Net (loss) income per share, basic | $ 0 | ||
Net (loss) income per share, diluted | $ 0 | ||
Weighted average shares outstanding, basic | 0 | ||
Weighted average shares outstanding, diluted | 0 | ||
[1] | The Unaudited Condensed Consolidated Statement of Operations for the three months ended March 31, 2019 has been restated. See Note 2. | ||
[2] | The Unaudited Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2019 has been restated. See Note 2. | ||
[3] | The Unaudited Condensed Consolidated Statement of Stockholders' Equity for the three months ended March 31, 2019 has been restated. See Note 2. |
Restatement of financial stat_5
Restatement of financial statements (Details 3) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2019 | Mar. 31, 2018 | |||
Cash Flows from Operating Activities: | ||||
Net loss | $ (12,260) | [1] | $ (2,308) | |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||
Depreciation and amortization | 1,145 | [1] | 1,259 | |
Stock-based compensation expense | 11,344 | [1] | 237 | |
Amortization of debt discounts and issuance costs | 199 | [1] | 543 | |
Change in fair value of warrant derivative liability | (1,486) | [1] | (712) | |
Change in fair value of contingent acquisition debt | 0 | [1] | (213) | |
Changes in inventory reserve | 159 | [1] | 0 | |
Extinguishment loss on debt | 0 | [1],[2] | 1,082 | |
Equity issuance for services | 1,859 | [1] | 27 | |
Stock issuance for true-up shares | 281 | [1] | 0 | |
Deferred taxes | 0 | [1] | 137 | |
Changes in operating assets and liabilities, net of effect from business combinations: | ||||
Accounts receivable | (3,369) | [1] | (1,231) | |
Inventory | (1,283) | [1] | (1,139) | |
Prepaid expenses and other current assets | (111) | [1] | (484) | |
Accounts payable | (54) | [1] | 794 | |
Accrued distributor compensation | 854 | [1] | 259 | |
Deferred revenues | (44) | [1] | 1,302 | |
Accrued expenses and other liabilities | (2,173) | [1] | (1,075) | |
Income taxes receivable | 0 | [1] | 95 | |
Net Cash Used In Operating Activities | (4,831) | [1] | (1,427) | |
Cash Flows from Investing Activities: | ||||
Acquisitions, net of cash acquired | (425) | [1] | (50) | |
Purchases of property and equipment | (2,291) | [1] | (106) | |
Net Cash Used in Investing Activities | (2,716) | [1] | (156) | |
Cash Flows from Financing Activities: | ||||
Proceeds from issuance of promissory notes, net of offering costs | 3,750 | [1] | 0 | |
Proceeds from private placement stock offering, net of offering costs | 2,267 | [1] | 3,289 | |
Proceeds from the at-the-market-offering and exercise of stock options | 1,455 | [1] | 3 | |
Proceeds net of repayment towards line of credit | 176 | [1] | 770 | |
Payments of notes payable | (35) | [1] | (58) | |
Payments of contingent acquisition debt | (128) | [1] | (10) | |
Payments of finance leases | (368) | [1] | (232) | |
Payments of dividends | (11) | [1] | 0 | |
Net Cash Provided by Financing Activities | 7,106 | [1] | 3,762 | |
Foreign Currency Effect on Cash | 102 | [1] | 201 | |
Net (decrease) increase in cash and cash equivalents | (339) | [1] | 2,380 | |
Cash and Cash Equivalents, Beginning of Period | 2,879 | [1] | 673 | |
Cash and Cash Equivalents, End of Period | 2,540 | [1] | 3,053 | |
Supplemental Disclosures of Cash Flow Information Cash paid during the period for: | ||||
Interest | 1,034 | [1] | 1,191 | |
Income taxes | 0 | [1] | 44 | |
Supplemental Disclosures of Noncash Investing and Financing Activities | ||||
Purchases of property and equipment funded by finance leases | 0 | [1] | 664 | |
Purchases of property and equipment funded by mortgage agreements | 450 | [1] | 0 | |
Fair value of stock issued for services | 417 | [1],[3] | 27 | |
Fair value of stock issued for property and equipment (land) | 1,200 | [1] | 0 | |
Fair value of stock issued for purchase of intangibles (tradename) | 750 | [1] | 0 | |
Fair of stock issued for note receivable, net of debt settlement | 2,309 | [1] | 0 | |
Fair value of stock issued in connection with the acquisition of Khrysos Global, Inc. (Note 5) | 14,000 | [4] | 0 | |
Dividends declared but not paid at the end of period | 14 | [1] | 0 | |
Acquisitions of net assets in exchange for contingent acquisition debt, net of purchase price adjustments (see Note 4) | 0 | [1] | 1,877 | |
Fair value of warrants issued in connection with the Series B Preferred Stock Offering | 0 | [1] | 75 | |
Conversion of 2017 Notes to Common Stock | 0 | [1] | $ 7,254 | |
Previously Reported [Member] | ||||
Cash Flows from Operating Activities: | ||||
Net loss | (12,260) | |||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||
Depreciation and amortization | 1,145 | |||
Stock-based compensation expense | 11,344 | |||
Amortization of debt discounts and issuance costs | 199 | |||
Change in fair value of warrant derivative liability | (1,486) | |||
Change in fair value of contingent acquisition debt | 0 | |||
Changes in inventory reserve | 159 | |||
Extinguishment loss on debt | 0 | |||
Equity issuance for services | 1,859 | |||
Stock issuance for true-up shares | 281 | |||
Deferred taxes | 0 | |||
Changes in operating assets and liabilities, net of effect from business combinations: | ||||
Accounts receivable | (17,292) | |||
Inventory | (23,924) | |||
Prepaid expenses and other current assets | (111) | |||
Accounts payable | 13,977 | |||
Accrued distributor compensation | 854 | |||
Deferred revenues | (44) | |||
Accrued expenses and other liabilities | 20,468 | |||
Income taxes receivable | 0 | |||
Net Cash Used In Operating Activities | (4,831) | |||
Cash Flows from Investing Activities: | ||||
Acquisitions, net of cash acquired | (425) | |||
Purchases of property and equipment | (2,291) | |||
Net Cash Used in Investing Activities | (2,716) | |||
Cash Flows from Financing Activities: | ||||
Proceeds from issuance of promissory notes, net of offering costs | 3,750 | |||
Proceeds from private placement stock offering, net of offering costs | 2,267 | |||
Proceeds from the at-the-market-offering and exercise of stock options | 1,455 | |||
Proceeds net of repayment towards line of credit | 176 | |||
Payments of notes payable | (35) | |||
Payments of contingent acquisition debt | (128) | |||
Payments of finance leases | (368) | |||
Payments of dividends | (11) | |||
Net Cash Provided by Financing Activities | 7,106 | |||
Foreign Currency Effect on Cash | 102 | |||
Net (decrease) increase in cash and cash equivalents | (339) | |||
Cash and Cash Equivalents, Beginning of Period | 2,879 | |||
Cash and Cash Equivalents, End of Period | 2,540 | |||
Supplemental Disclosures of Cash Flow Information Cash paid during the period for: | ||||
Interest | 1,034 | |||
Income taxes | 0 | |||
Supplemental Disclosures of Noncash Investing and Financing Activities | ||||
Purchases of property and equipment funded by finance leases | 0 | |||
Purchases of property and equipment funded by mortgage agreements | 450 | |||
Fair value of stock issued for services | 417 | |||
Fair value of stock issued for property and equipment (land) | 1,200 | |||
Fair value of stock issued for purchase of intangibles (tradename) | 750 | |||
Fair of stock issued for note receivable, net of debt settlement | 2,309 | |||
Fair value of stock issued in connection with the acquisition of Khrysos Global, Inc. (Note 5) | [4] | 12,649 | ||
Dividends declared but not paid at the end of period | 14 | |||
Acquisitions of net assets in exchange for contingent acquisition debt, net of purchase price adjustments (see Note 4) | 0 | |||
Fair value of warrants issued in connection with the Series B Preferred Stock Offering | 0 | |||
Conversion of 2017 Notes to Common Stock | 0 | |||
Revision of Prior Period, Adjustment [Member] | ||||
Cash Flows from Operating Activities: | ||||
Net loss | 0 | |||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||
Depreciation and amortization | 0 | |||
Stock-based compensation expense | 0 | |||
Amortization of debt discounts and issuance costs | 0 | |||
Change in fair value of warrant derivative liability | 0 | |||
Change in fair value of contingent acquisition debt | 0 | |||
Changes in inventory reserve | 0 | |||
Extinguishment loss on debt | 0 | |||
Equity issuance for services | 0 | |||
Stock issuance for true-up shares | 0 | |||
Deferred taxes | 0 | |||
Changes in operating assets and liabilities, net of effect from business combinations: | ||||
Accounts receivable | 13,923 | |||
Inventory | 22,641 | |||
Prepaid expenses and other current assets | 0 | |||
Accounts payable | (13,923) | |||
Accrued distributor compensation | 0 | |||
Deferred revenues | 0 | |||
Accrued expenses and other liabilities | (22,641) | |||
Income taxes receivable | 0 | |||
Net Cash Used In Operating Activities | 0 | |||
Cash Flows from Investing Activities: | ||||
Acquisitions, net of cash acquired | 0 | |||
Purchases of property and equipment | 0 | |||
Net Cash Used in Investing Activities | 0 | |||
Cash Flows from Financing Activities: | ||||
Proceeds from issuance of promissory notes, net of offering costs | 0 | |||
Proceeds from private placement stock offering, net of offering costs | 0 | |||
Proceeds from the at-the-market-offering and exercise of stock options | 0 | |||
Proceeds net of repayment towards line of credit | 0 | |||
Payments of notes payable | 0 | |||
Payments of contingent acquisition debt | 0 | |||
Payments of finance leases | 0 | |||
Payments of dividends | 0 | |||
Net Cash Provided by Financing Activities | 0 | |||
Foreign Currency Effect on Cash | 0 | |||
Net (decrease) increase in cash and cash equivalents | 0 | |||
Cash and Cash Equivalents, Beginning of Period | 0 | |||
Cash and Cash Equivalents, End of Period | 0 | |||
Supplemental Disclosures of Cash Flow Information Cash paid during the period for: | ||||
Interest | 0 | |||
Income taxes | 0 | |||
Supplemental Disclosures of Noncash Investing and Financing Activities | ||||
Purchases of property and equipment funded by finance leases | 0 | |||
Purchases of property and equipment funded by mortgage agreements | 0 | |||
Fair value of stock issued for services | 0 | |||
Fair value of stock issued for property and equipment (land) | 0 | |||
Fair value of stock issued for purchase of intangibles (tradename) | 0 | |||
Fair of stock issued for note receivable, net of debt settlement | 0 | |||
Fair value of stock issued in connection with the acquisition of Khrysos Global, Inc. (Note 5) | [4] | 1,351 | ||
Dividends declared but not paid at the end of period | 0 | |||
Acquisitions of net assets in exchange for contingent acquisition debt, net of purchase price adjustments (see Note 4) | 0 | |||
Fair value of warrants issued in connection with the Series B Preferred Stock Offering | 0 | |||
Conversion of 2017 Notes to Common Stock | $ 0 | |||
[1] | The Unaudited Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2019 has been restated. See Note 2. | |||
[2] | The Unaudited Condensed Consolidated Statement of Operations for the three months ended March 31, 2019 has been restated. See Note 2. | |||
[3] | The Unaudited Condensed Consolidated Statement of Stockholders' Equity for the three months ended March 31, 2019 has been restated. See Note 2. | |||
[4] | The Fair value of stock issued in connection with the acquisition of Khrysos Global, Inc., was previously reported in Note 4 to the original filing of the Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 as filed with the SEC on May 20, 2019. |
Basic and Diluted Net Loss Pe_3
Basic and Diluted Net Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | ||
Loss per Share - Basic | |||
Numerator for basic loss per share | $ (12,274) | [1] | $ (2,311) |
Denominator for basic loss per share | 27,577,576 | [1] | 19,744,144 |
Loss per common share - basic | $ (0.45) | [1] | $ (0.12) |
Loss per Share - Diluted | |||
Numerator for basic loss per share | $ (12,274) | [1] | $ (2,311) |
Adjust: Fair value of dilutive warrants outstanding | (1,409) | (254) | |
Numerator for dilutive loss per share | $ (13,683) | $ (2,565) | |
Denominator for diluted loss per share | 27,577,576 | 19,744,144 | |
Plus: Incremental shares underlying "in the money" warrants outstanding | 447,595 | 14,258 | |
Denominator for diluted loss per share | 28,025,172 | [1] | 19,758,402 |
Loss per common share - diluted | $ (0.49) | [1] | $ (0.13) |
[1] | The Unaudited Condensed Consolidated Statement of Operations for the three months ended March 31, 2019 has been restated. See Note 2. |
Basic and Diluted Net Loss Pe_4
Basic and Diluted Net Loss Per Share (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Accounting Policies [Abstract] | ||
Potentially dilutive securities | 12,882,194 | 7,321,334 |
Gain on valuation of dilutive warrants outstanding | $ (1,409) | $ (254) |
Balance Sheet Account Details_2
Balance Sheet Account Details (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 | |
Inventory And Cost Of Sales Details | |||
Finished goods | $ 14,948 | [1] | $ 11,300 |
Raw materials | 11,643 | [1] | 12,744 |
Total inventory | 26,591 | [1] | 24,044 |
Reserve for excess and obsolete inventory | (2,427) | [1] | (2,268) |
Total inventory, net | $ 24,164 | [2] | $ 21,776 |
[1] | Restated. See Note 2. | ||
[2] | The Unaudited Condensed Consolidated Balance Sheet as of March 31, 2019 has been restated. See Note 2. |
Balance Sheet Account Details_3
Balance Sheet Account Details (Details 1) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019 | Dec. 31, 2018 | ||
ASSETS: | |||
Operating lease right-of-use assets | $ 5,509 | [1] | $ 0 |
Finance lease right-of-use assets | 1,330 | ||
Total lease assets | 6,839 | ||
LIABILITIES: | |||
Operating lease liabilities | 745 | [1] | 0 |
Finance lease liabilities | 978 | ||
Operating lease liabilities | 4,764 | [1] | 0 |
Finance lease liabilities | 927 | ||
Total lease liabilities | 7,714 | ||
Lease cost | |||
Operating Lease Costs | 271 | ||
Finance lease cost | 0 | ||
Amortization of right-of-use assets | 96 | ||
Interest on lease liabilities | 37 | ||
Net lease costs | 404 | ||
Operating lease future minimum payments | |||
2019 | 788 | ||
2020 | 753 | ||
2021 | 688 | ||
2022 | 648 | ||
2023 | 889 | ||
Thereafter | 3,139 | ||
Total lease payments | 6,905 | ||
Less imputed interest | 1,396 | ||
Present value of lease liabilities | 5,509 | [1] | $ 0 |
Finance lease future minimum payments | |||
2019 | 1,086 | ||
2020 | 742 | ||
2021 | 204 | ||
2022 | 9 | ||
2023 | 3 | ||
Thereafter | 0 | ||
Total lease payments | 2,044 | ||
Less imputed interest | 139 | ||
Present value of net minimum lease payments: | $ 1,905 | ||
[1] | The Unaudited Condensed Consolidated Balance Sheet as of March 31, 2019 has been restated. See Note 2. |
Balance Sheet Account Details_4
Balance Sheet Account Details (Details 2) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | ||
Revenues | $ 41,192 | [1] | $ 42,994 |
Direct Selling [Member] | |||
Revenues | 33,420 | 35,311 | |
Processed green coffee [Member] | |||
Revenues | 0 | 4,985 | |
Milling and processing services [Member] | |||
Revenues | 4,826 | 0 | |
Roasted coffee and other [Member] | |||
Revenues | 2,779 | 2,698 | |
Commerical Total [Member] | |||
Revenues | 7,705 | 7,683 | |
Commercial Hemp [Member] | |||
Revenues | $ 67 | $ 0 | |
[1] | The Unaudited Condensed Consolidated Statement of Operations for the three months ended March 31, 2019 has been restated. See Note 2. |
Acquisitions and Business Com_3
Acquisitions and Business Combinations (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Present value of cash consideration | $ 1,894 |
Estimated fair value of common stock issued and earn-out | 14,000 |
Total purchase price | 15,894 |
Current assets | 636 |
Inventory | 1,264 |
Property, plant and equipment | 1,133 |
Trademarks and trade name | 1,876 |
Customer-related intangible | 5,629 |
Non-compete intangible | 956 |
Goodwill | 6,831 |
Current liabilities | (1,904) |
Notes payable | (527) |
Net assets acquired | 15,894 |
Previously Reported [Member] | |
Present value of cash consideration | 1,897 |
Estimated fair value of common stock issued and earn-out | 12,649 |
Total purchase price | 14,543 |
Current assets | 636 |
Inventory | 1,264 |
Property, plant and equipment | 2,260 |
Trademarks and trade name | 1,876 |
Customer-related intangible | 5,629 |
Non-compete intangible | 956 |
Goodwill | 4,353 |
Current liabilities | (1,904) |
Notes payable | (527) |
Net assets acquired | 14,543 |
Revision of Prior Period, Adjustment [Member] | |
Present value of cash consideration | 0 |
Estimated fair value of common stock issued and earn-out | 1,351 |
Total purchase price | 1,351 |
Current assets | 0 |
Inventory | 0 |
Property, plant and equipment | (1,127) |
Trademarks and trade name | 0 |
Customer-related intangible | 0 |
Non-compete intangible | 0 |
Goodwill | 2,478 |
Current liabilities | 0 |
Notes payable | 0 |
Net assets acquired | $ 1,351 |
Acquisitions and Business Com_4
Acquisitions and Business Combinations (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | ||
Acquisitions And Business Combinations Details Abstract | |||
Revenue | $ 41,192 | [1] | $ 42,994 |
[1] | The Unaudited Condensed Consolidated Statement of Operations for the three months ended March 31, 2019 has been restated. See Note 2. |
Intangible Assets and Goodwil_2
Intangible Assets and Goodwill (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Distributor organizations [Member] | ||
Cost | $ 14,559 | $ 14,559 |
Accumulated Amortization | 9,796 | 9,575 |
Net | 4,763 | 4,984 |
Non-compete agreement [Member] | ||
Cost | 956 | 0 |
Accumulated Amortization | 0 | 0 |
Net | 956 | 0 |
Trademarks and trade names [Member] | ||
Cost | 9,963 | 720 |
Accumulated Amortization | 2,033 | 558 |
Net | 7,930 | 162 |
Intangible assets [Member] | ||
Cost | 42,226 | 33,014 |
Accumulated Amortization | 18,307 | 17,637 |
Net | 23,919 | 15,377 |
Customer relationships [Member] | ||
Cost | 16,028 | 10,398 |
Accumulated Amortization | 5,895 | 5,723 |
Net | 10,133 | 4,675 |
Internally developed software [Member] | ||
Cost | 720 | 7,337 |
Accumulated Amortization | 583 | 1,781 |
Net | $ 137 | $ 5,556 |
Intangible Assets and Goodwil_3
Intangible Assets and Goodwill (Details 1) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Goodwill | $ 13,154 | $ 6,323 |
Commercial Coffee [Member] | ||
Goodwill | 3,314 | 3,314 |
Direct Selling [Member] | ||
Goodwill | 3,009 | 3,009 |
Commercial Hemp [Member] | ||
Goodwill | $ 6,831 | $ 0 |
Intangible Assets and Goodwil_4
Intangible Assets and Goodwill (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | ||
Intangible Assets And Goodwill Details Narrative | ||||
Amortization expense | $ 670 | $ 827 | ||
Trademarks | 1,649 | $ 1,649 | ||
Goodwill balance | $ 13,154 | [1] | $ 6,323 | |
[1] | The Unaudited Condensed Consolidated Balance Sheet as of March 31, 2019 has been restated. See Note 2. |
Convertible Notes Payable (Deta
Convertible Notes Payable (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 | |
Total convertible notes payable, net of debt discount | $ 1,981 | [1] | $ 0 |
Convertible notes payable, current | 2,622 | 647 | |
Convertible Notes Payable 1 [Member] | |||
Convertible notes issued | 750 | 750 | |
Net debt issuance costs | (69) | (103) | |
Total convertible notes payable, net of debt discount | 681 | 647 | |
Convertible Notes Payable 2 [Member] | |||
Convertible notes issued | 2,400 | 0 | |
Net debt issuance costs | (459) | 0 | |
Total convertible notes payable, net of debt discount | $ 1,941 | $ 0 | |
[1] | The Unaudited Condensed Consolidated Balance Sheet as of March 31, 2019 has been restated. See Note 2. |
Derivative Liability (Details)
Derivative Liability (Details) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Annual dividend yield | 0.00% | 0.00% |
Maximum [Member] | ||
Stock price volatility | 111.15% | 136.76% |
Risk-free interest rate | 2.44% | 2.577% |
Expected life | 1 year 6 months 14 days | 2 years 9 months 4 days |
Minimum [Member] | ||
Stock price volatility | 97.20% | 83.78% |
Risk-free interest rate | 2.33% | 2.465% |
Expected life | 3 months 29 days | 6 months 29 days |
Fair Value of Financial Instr_3
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 | |
Liabilities: | |||
Contingent acquisition debt, current portion | $ 792 | [1] | $ 795 |
Contingent acquisition debt, less current portion | 7,341 | [1] | 7,466 |
Warrant derivative liability | 5,369 | 9,216 | |
Embedded conversion option derivative | 13,502 | 17,477 | |
Level 3 [Member] | |||
Liabilities: | |||
Contingent acquisition debt, current portion | 792 | 795 | |
Contingent acquisition debt, less current portion | 7,341 | 7,466 | |
Warrant derivative liability | 5,369 | 9,216 | |
Embedded conversion option derivative | 13,502 | 17,477 | |
Level 1 [Member] | |||
Liabilities: | |||
Contingent acquisition debt, current portion | 0 | 0 | |
Contingent acquisition debt, less current portion | 0 | 0 | |
Warrant derivative liability | 0 | 0 | |
Embedded conversion option derivative | 0 | 0 | |
Level 2 [Member] | |||
Liabilities: | |||
Contingent acquisition debt, current portion | 0 | 0 | |
Contingent acquisition debt, less current portion | 0 | 0 | |
Warrant derivative liability | 0 | 0 | |
Embedded conversion option derivative | $ 0 | $ 0 | |
[1] | The Unaudited Condensed Consolidated Balance Sheet as of March 31, 2019 has been restated. See Note 2. |
Fair Value of Financial Instr_4
Fair Value of Financial Instruments (Details 1) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019USD ($) | ||
Fair Value Of Financial Instruments | ||
Warant derivative liability, beginning | $ 9,216 | |
Issuance | 0 | |
Adjustments to estimated fair value | (1,486) | |
Adjustments related to warrant exercises | (867) | |
Adjustment related to the modification of warrants (Note 7) | (1,494) | |
Warant derivative liability, ending | 5,369 | [1] |
Contingent consideration, beginning | 8,261 | |
Level 3 liabilities acquired | 0 | |
Level 3 liabilities settled | (128) | |
Adjustments to liabilities included in earnings | 0 | |
Adjustment to purchase price allocation | 0 | |
Contingent consideration, ending | $ 8,133 | |
[1] | The Unaudited Condensed Consolidated Balance Sheet as of March 31, 2019 has been restated. See Note 2. |
Stockholders' Equity (Details 1
Stockholders' Equity (Details 1) - Warrant [Member] | 3 Months Ended |
Mar. 31, 2019shares | |
Number of Shares | |
Outstanding, beginning of period | 5,876,980 |
Issued | 1,315,000 |
Expired / cancelled | 0 |
Exercised | (248,106) |
Outstanding, end of period | 6,943,874 |
Exercisable, end of period | 6,539,187 |
Stockholders' Equity (Details 2
Stockholders' Equity (Details 2) - Stock Option [Member] $ / shares in Units, $ in Thousands | 3 Months Ended |
Mar. 31, 2019USD ($)$ / sharesshares | |
Number of Shares | |
Outstanding, beginning of period | shares | 2,394,379 |
Granted | shares | 2,540,000 |
Canceled / expired | shares | (37,275) |
Exercised | shares | (60,530) |
Outstanding, end of period | shares | 4,836,574 |
Exercisable, end of period | shares | 3,723,870 |
Outstanding, beginning of period | $ / shares | $ 4.45 |
Granted | $ / shares | 6.66 |
Canceled / expired | $ / shares | 5 |
Exercised | $ / shares | 4.46 |
Outstanding, end of period | $ / shares | 5.61 |
Exercisable, end of period | $ / shares | $ 5.96 |
Weighted Average Remaining Contract Life (years) Outstanding, Beginning | 6 years 11 months 8 days |
Weighted Average Remaining Contract Life (years) Outstanding, Ending | 8 years 4 months 6 days |
Weighted Average Remaining Contract Life (years) Exerciseable, Ending | 8 years 2 months 23 days |
Aggregate Intrinsic Value | |
Outstanding, beginning of period | $ | $ 3,049 |
Outstanding, end of period | $ | 3,045 |
Exercisable, end of period | $ | $ 1,617 |
Stockholders' Equity (Details 3
Stockholders' Equity (Details 3) - Restricted Stock Units (RSUs) [Member] | 3 Months Ended |
Mar. 31, 2019shares | |
Number of Shares | |
Outstanding, beginning of period | 475,000 |
Granted | 0 |
Canceled / expired | 0 |
Outstanding, end of period | 475,000 |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - shares | Mar. 31, 2019 | Dec. 31, 2018 |
Stockholders Equity Details Narrative Abstract | ||
Common Stock, shares outstanding | 28,890,671 | 25,760,708 |
Segment and Geographical Info_3
Segment and Geographical Information (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | ||
Revenues | $ 41,192 | [1] | $ 42,994 |
Gross profit | 26,849 | [1] | 25,012 |
Operating income (loss) | (11,941) | [1] | 24 |
Net income (loss) | (12,260) | [2] | (2,308) |
Capital expenditures | 3,973 | 766 | |
Capital expenditures acquired through acquisition | 1,133 | 0 | |
Direct Selling [Member] | |||
Revenues | 33,420 | 35,311 | |
Gross profit | 22,755 | 24,735 | |
Operating income (loss) | (12,309) | 781 | |
Net income (loss) | (13,377) | (591) | |
Capital expenditures | 17 | 87 | |
Capital expenditures acquired through acquisition | 0 | 0 | |
Commercial Coffee [Member] | |||
Revenues | 7,705 | [3] | 7,683 |
Gross profit | 4,067 | 277 | |
Operating income (loss) | 884 | (757) | |
Net income (loss) | 1,633 | (1,717) | |
Capital expenditures | 2,572 | 679 | |
Capital expenditures acquired through acquisition | 0 | 0 | |
Commercial Hemp [Member] | |||
Revenues | 67 | 0 | |
Gross profit | 27 | 0 | |
Operating income (loss) | (516) | 0 | |
Net income (loss) | (516) | 0 | |
Capital expenditures | 1,384 | 0 | |
Capital expenditures acquired through acquisition | $ 1,133 | $ 0 | |
[1] | The Unaudited Condensed Consolidated Statement of Operations for the three months ended March 31, 2019 has been restated. See Note 2. | ||
[2] | The Unaudited Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2019 has been restated. See Note 2. | ||
[3] | Restated. See Note 2. |
Segment and Geographical Info_4
Segment and Geographical Information (Details 1) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | |
Total assets | $ 107,784 | [1] | $ 75,973 | |
Direct Selling [Member] | ||||
Total assets | 45,011 | 38,947 | ||
Commercial Coffee [Member] | ||||
Total assets | 41,584 | [2] | $ 37,026 | |
Commercial Hemp [Member] | ||||
Total assets | $ 21,189 | $ 0 | ||
[1] | The Unaudited Condensed Consolidated Balance Sheet as of March 31, 2019 has been restated. See Note 2. | |||
[2] | Restated. See Note 2. |
Segment and Geographical Info_5
Segment and Geographical Information (Details 2) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | ||
Total revenues | $ 41,192 | [1] | $ 42,994 |
United States [Member] | |||
Total revenues | 35,782 | [2] | 37,393 |
International [Member] | |||
Total revenues | $ 5,410 | $ 5,601 | |
[1] | The Unaudited Condensed Consolidated Statement of Operations for the three months ended March 31, 2019 has been restated. See Note 2. | ||
[2] | Restated. See Note 2. |
Segment and Geographical Info_6
Segment and Geographical Information (Details Narrative) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
International [Member] | ||
Tangible assets | $ 7,300 | $ 6,200 |