UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended April 2, 2022

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number: 001-33346

Summer Infant, Inc.

(Exact name of registrant as specified in its charter)


Delaware		20-1994619
(State or other jurisdiction		(IRS Employer Identification No.)
of incorporation or organization)

1275 Park East Drive
Woonsocket, RI 02895		(401) 671-6550
(Address of principal executive offices) (Zip Code)		(Registrant’s telephone number, including area code)

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.0001		SUMR		Nasdaq Capital Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☒
		Emerging growth company ☐

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

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

As of May 13, 2022, there were 2,167,168 shares outstanding of the registrant’s Common Stock, $0.0001 par value per share. (number of shares include vested but unissued shares pursuant to stock awards).

Table of Contents

Summer Infant, Inc.

Form 10-Q

Table of Contents


		Page Number
Part I.	Financial Information	1

Item 1.	Condensed Consolidated Financial Statements (unaudited)	1

	Condensed Consolidated Balance Sheets as of April 2, 2022 (unaudited) and January 1, 2022	1

	Condensed Consolidated Statements of Operations for the Three Months Ended April 2, 2022 and April 3, 2021 (unaudited)	2

	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended April 2, 2022 and April 3, 2021 (unaudited)	3

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 2, 2022 and April 3, 2021 (unaudited)	4

	Condensed Consolidated Statements of Stockholder’ Equity for the Three Months Ended April 2, 2022 and April 3, 2021 (unaudited)	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24

Item 4.	Controls and Procedures	24

Part II.	Other Information	25

Item 1.	Legal Proceedings	25

Item 1A.	Risk Factors	26

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 3.	Defaults Upon Senior Securities	26

Item 4.	Mine Safety Disclosures	27

Item 5.	Other Information	27

Item 6.	Exhibits	28

Exhibit Index		28

Signatures		29

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PART I. FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements (unaudited)

Summer Infant, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

Note that all amounts presented in the table below are in thousands of U.S. dollars, except share and par value amounts.


	(Unaudited)
	April 2,		January 1,
	2022		2022
ASSETS

CURRENT ASSETS

Cash and cash equivalents	$	598	$	535
Trade receivables, net of allowance for doubtful accounts		28,804		30,934
Inventory, net		21,973		28,621
Prepaid and other current assets		2,013		1,143
TOTAL CURRENT ASSETS		53,388		61,233
Property and equipment, net		3,709		4,128
Other intangible assets, net		11,284		11,382
Right of use assets, noncurrent		13,601		14,383
Other assets		105		104
TOTAL ASSETS	$	82,087	$	91,230

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Accounts payable	$	22,547	$	27,985
Accrued expenses		8,555		5,698
Lease liabilities, current		3,171		3,133
Current portion of long term debt		2,125		2,125
Current portion of long term debt - Related parties		188		—
TOTAL CURRENT LIABILITIES		36,586		38,941
Long-term debt, less current portion and unamortized debt issuance costs		33,541		37,420
Long-term debt, less current portion - Related parties		1,762		—
Deferred tax liabilities		152		152
Lease liabilities, noncurrent		11,219		12,034
Other liabilities		108		108
TOTAL LIABILITIES		83,368		88,655

STOCKHOLDERS’ EQUITY
Preferred Stock, $0.0001 par value, 1,000,000 authorized, none issued or outstanding at April 2, 2022 and January 1, 2022, respectively		—		—
Common Stock $0.0001 par value, authorized, issued and outstanding of 49,000,000, 2,194,975 and 2,164,791 at April 2, 2022 and 49,000,000, 2,194,892 and 2,164,708 at January 1, 2022, respectively		2		2
Treasury Stock at cost (30,184 shares at April 2, 2022 and January 1, 2022)		(1,283)		(1,283)
Additional paid-in capital		78,402		78,370
Accumulated deficit		(77,003)		(73,088)
Accumulated other comprehensive loss		(1,399)		(1,426)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		(1,281)		2,575
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	82,087	$	91,230

See notes to condensed consolidated financial statements

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Summer Infant, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

Note that all amounts presented in the table below are in thousands of U.S. dollars, except share and per share amounts.


	(Unaudited)
	For the Three Months Ended
	April 2,		April 3,
	2022		2021
Net sales	$	34,383	$	36,201
Cost of goods sold		27,114		25,544
Gross profit		7,269		10,657
General and administrative expenses		7,949		7,027
Selling expense		2,262		2,407
Depreciation and amortization		561		560
Operating (loss) income		(3,503)		663
Interest expense, net		412		336
(Loss) income before income taxes		(3,915)		327
Provision for income taxes		—		67
NET (LOSS) INCOME	$	(3,915)	$	260
Net (loss) income per share:
BASIC	$	(1.81)	$	0.12
DILUTED	$	(1.81)	$	0.12
Weighted average shares outstanding:
BASIC		2,164,746		2,133,061
DILUTED		2,164,746		2,161,789

See notes to condensed consolidated financial statements.

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Summer Infant, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss and Income

Note that all amounts presented in the table below are in thousands of U.S. dollars.


	(Unaudited)
	For The Three Months Ended
	April 2,		April 3,
	2022		2021
Net (loss) income	$	(3,915)	$	260
Other comprehensive loss:
Changes in foreign currency translation adjustments		27		(39)

Comprehensive (loss) income	$	(3,888)	$	221

See notes to condensed consolidated financial statements.

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Summer Infant, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

Note that all amounts presented in the table below are in thousands of U.S. dollars.


	(Unaudited)
	For the three months ended
	April 2,		April 3,
	2022		2021
Cash flows from operating activities:
Net (loss) income	$	(3,915)	$	260
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		561		560
Stock-based compensation expense, net of forfeitures		32		(7)
Amortization of deferred financing costs		84		58
Amortization of right of use assets		791		649
Changes in assets and liabilities:
Decrease (increase) in trade receivables		2,143		(2,657)
Decrease in inventory		6,662		8,516
Decrease of lease liability		(785)		(639)
(Increase) decrease in prepaids and other assets		(903)		386
Decrease in accounts payable and accrued expenses		(2,591)		(5,805)
Net cash provided by operating activities		2,079		1,321
Cash flows from investing activities:
Acquisitions of property and equipment		(32)		(191)
Acquisitions of intangible assets		(12)		—
Net cash used in investing activities		(44)		(191)
Cash flows from financing activities:
Issuance of common stock upon exercise of options		—		9
Payment of financing fees and expenses		(272)		—
Proceeds from New Term Loan Facility		2,000		—
Repayments of BofA Term Loan		(375)		(375)
Repayments of BofA FILO Loan		(156)		(156)
Repayments of New Term Loan		(50)		—
Net repayment on BofA Asset Based Revolving Credit Facility		(3,160)		(662)
Net cash used in financing activities		(2,013)		(1,184)
Effect of exchange rate changes on cash and cash equivalents		41		(9)
Net increase (decrease) in cash and cash equivalents		63		(63)
Cash and cash equivalents, beginning of period		535		510
Cash and cash equivalents, end of period	$	598	$	447
Supplemental disclosure of cash flow information:
Cash paid for interest	$	327	$	302
Cash paid for income taxes	$	—	$	1
Right of use asset acquired through operating lease	$	—	$	13,583
Lease liability acquired through operating lease	$	—	$	(13,583)

See notes to condensed consolidated financial statements.

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Summer Infant, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

Note that all amounts presented in the table below are in thousands of U.S. dollars, except share and per share data.


				Additional							Accumulated
	Common Stock			Paid in		Treasury			Accumulated		Comprehensive		Total
	Shares	Amount		Capital		Stock			Deficit		Loss		Equity (Deficit)
Balance at January 2, 2021	2,132,275	$	2	$	77,979	$	(1,283)		$	(70,190)	$	(1,388)	$	5,120
Issuance of common stock upon vesting of restricted shares	349		—		—		—			—		—		—
Issuance of common stock upon exercise of stock options	985		—		9		—			—		—		9
Stock-based compensation, net of forfeitures	—		—		(7)		—			—		—		(7)
Net income for the period	—		—		—		—			260		—		260
Foreign currency translation adjustment	—		—		—		—			—		(39)		(39)
Balance at March 28, 2020	2,133,609	$	2	$	77,981	$	(1,283)		$	(69,930)	$	(1,427)	$	5,343
Balance at January 1, 2022	2,164,708	$	2	$	78,370	$	(1,283	)	$	(73,088)	$	(1,426)	$	2,575
Issuance of common stock upon vesting of restricted shares	83		—		—		—			—		—		—
Stock-based compensation, net of forfeitures	—		—		32		—			—		—		32
Net loss for the period	—		—		—		—			(3,915)		—		(3,915)
Foreign currency translation adjustment	—		—		—		—			—		27		27
Balance at April 2, 2022	2,164,791	$	2	$	78,402	$	(1,283)		$	(77,003)	$	(1,399)	$	(1,281)

See notes to condensed consolidated financial statements.

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SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

The Company designs, markets and distributes branded juvenile safety and convenience products that are sold globally to large national retailers as well as independent retailers, primarily in North America. The Company currently markets its products in several product categories including gates, potty, bath, entertainers, specialty blankets, strollers, car seats and travel systems. Most products are sold under our core brand names of Summer™ and SwaddleMe^®. When used herein, the terms the “Company,” “we,” “us,” and “our” mean Summer Infant, Inc. and its consolidated subsidiaries.

Proposed Merger with Kids2, Inc.

On March 16, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Kids2, Inc., a Georgia corporation (“Parent”), and Project Abacus Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”). The Merger Agreement provides, subject to its terms and conditions, for the acquisition of the Company by Parent through the merger of Merger Sub with and into the Company, with the Company surviving the Merger as a wholly owned subsidiary of Parent (the “Proposed Merger”). Under the terms of the Proposed Merger, each share of common stock of the Company issued and outstanding immediately prior to the effective time of the Merger (the “Effective Time”) (other than shares of common stock (i) owned by Parent, Merger Sub, the Company or any subsidiary of Parent, Merger Sub or Company, or (ii) held by a stockholder who is entitled to, and who has perfected, appraisal rights for such shares under Delaware law) automatically will be converted into the right to receive cash in an amount of $12.00 per share (the “Merger Consideration”), without interest, subject to any required withholding of taxes. The completion of the Proposed Merger is subject to closing conditions, including: (i) the approval of the Merger Agreement by the Company’s stockholders; (ii) the absence of any laws or court orders making the Proposed Merger illegal or otherwise prohibiting the Proposed Merger; (iii) other customary closing conditions, including the accuracy of the representations and warranties of each party (subject to certain materiality exceptions) and material compliance by each party with its covenants under the Merger Agreement; and (iv) the closing of a debt financing by Parent to fund the Merger Consideration.

2022 Plan and Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will continue to operate as a going concern and contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. For the quarter ended April 2, 2022, the Company incurred a net loss of $3,915. Cash provided by operating activities was $2,079, primarily a result of a decline in inventory and accounts receivable. As of April 2, 2022, the Company had $598 of cash, $38,831 of outstanding indebtedness and borrowing availability of $8,859 under its asset-based lending agreement.

Due to continuing losses, the Company’s financial position and the challenging supply chain environment, there is no assurance that Company will be able to maintain compliance with the financial covenants under its loan agreements, which would impair its ability to meet its financial obligations as they become due without future amendments to its loan agreements. In addition, the COVID-19 pandemic has significantly increased economic and demand uncertainty across the globe and while sales of many of the Company’s core categories have remained strong, including year over year growth in strollers, specialty blankets, bath, entertainers and boosters, if these challenges continue, the Company may not be able to meet demands of its customers which could result in lost, reduced or cancelled orders from its customers and could materially and adversely affect its business, financial condition, and results of operations.

Based on its known cash needs as of May 16, 2022, and the anticipated availability under its loan agreements, the Company has developed plans to extend its liquidity to support its working capital requirements and its ability to meet its financial obligations. The Company’s plans with regard to these matters include the following: (1) continuing to explore price increases where possible, (2) enhancing certain supply chain processes to obtain lower cost containers for its products and reduce demurrage and detention charges through additional new procedures, (3) shifting containers from COVID-19 impacted ports to alternative functioning ports to mitigate potential lost sales, (4) reducing warehouse costs through new processes as it relates to pallets, (5) reducing product costs through re-engineering of certain products, (6) reducing discretionary marketing to the extent that it does not impact revenue performance, and (7) considering additional financing and/or strategic alternatives.

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However, there can be no assurance the Company’s plans will be achieved and that the Company will be able to meet its financial obligations as they become due without obtaining additional financing or sources of capital. Therefore, in accordance with applicable accounting guidance, and based on the Company’s current financial condition and availability of funds, there is substantial doubt about the Company’s ability to continue as a going concern through twelve months from the date these financial statements were issued.

Basis of Presentation and Principles of Consolidation

The accompanying interim condensed consolidated financial statements of the Company are unaudited, but in the opinion of management, reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results for the interim periods. Accordingly, they do not include all information and notes required by generally accepted accounting principles in the United States of America (“GAAP”) for complete financial statements. The results of operations for interim periods are not necessarily indicative of results to be expected for the entire fiscal year or any other period. The balance sheet at January 1, 2022 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. These interim condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes for the year ended January 1, 2022 included in its Annual Report on Form 10-K filed with the SEC on March 17, 2022.

It is the Company’s policy to prepare its financial statements on the accrual basis of accounting in conformity with GAAP. The interim condensed consolidated financial statements include the accounts of its wholly-owned subsidiaries. All significant intercompany accounts and transactions hav

SEC Form 10-Q filed by Summer Infant Inc.