UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 29, 2019

o 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 x No o

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 x No o

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 o		Accelerated filer o

Non-accelerated filer x		Smaller reporting company x
		Emerging growth company o

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. o

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

As of August 5, 2019, there were 18,926,704 shares outstanding of the registrant’s Common Stock, $0.0001 par value per share.

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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 June 29, 2019 (unaudited) and December 29, 2018	1

	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 29, 2019 and June 30, 2018 (unaudited)	2

	Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 29, 2019 and June 30, 2018 (unaudited)	3

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 29, 2019 and June 30, 2018 (unaudited)	4

	Condensed Consolidated Statements of Stockholder’s Equity for the Six Months Ended June 29, 2019 and June 30, 2018 (unaudited)	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19

Item 4.	Controls and Procedures	19

Part II.	Other Information	20

Item 1.	Legal Proceedings	20

Item 1A.	Risk Factors	20

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20

Item 3.	Defaults Upon Senior Securities	20

Item 4.	Mine Safety Disclosures	20

Item 5.	Other Information	20

Item 6.	Exhibits	20

Exhibit Index		21

Signatures		22

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PART I. FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements (unaudited)

Summer Infant, Inc.

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)
	June 29, 2019			December 29, 2018
ASSETS

CURRENT ASSETS

Cash and cash equivalents	$	580		$	721
Trade receivables, net of allowance for doubtful accounts	35,975			31,223
Inventory, net	32,599			36,066
Prepaid and other current assets	1,223			997
TOTAL CURRENT ASSETS	70,377			69,007
Property and equipment, net	9,621			9,685
Other intangible assets, net	13,044			13,300
Right to use assets, noncurrent	5,396			—
Deferred tax assets, net	2,138			2,127
Other assets	101			97
TOTAL ASSETS	$	100,677		$	94,216

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Accounts payable	$	24,679		$	28,120
Accrued expenses	7,745			8,939
Lease liabilities, current	2,316			—
Current portion of long term debt	875			875
TOTAL CURRENT LIABILITIES	35,615			37,934
Long-term debt, less current portion and unamortized debt issuance costs	51,249			44,641
Lease liabilities, noncurrent	3,634			—
Other liabilities	2,166			2,371
TOTAL LIABILITIES	92,664			84,946

STOCKHOLDERS’ EQUITY
Preferred Stock, $0.0001 par value, 1,000,000 authorized, none issued or outstanding at June 29, 2019 and December 29, 2018, respectively	—			—
Common Stock $0.0001 par value, authorized, issued and outstanding of 49,000,000, 19,198,353 and 18,926,704 at June 29, 2019 and 49,000,000, 19,092,251, and 18,820,602 at December 29, 2018, respectively	2			2
Treasury Stock at cost (271,649 shares at June 29, 2019 and December 29, 2018)	(1,283		)	(1,283		)
Additional paid-in capital	77,548			77,396
Accumulated deficit	(65,507		)	(63,885		)
Accumulated other comprehensive loss	(2,747		)	(2,960		)
TOTAL STOCKHOLDERS’ EQUITY	8,013			9,270
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	100,677		$	94,216

See notes to condensed consolidated financial statements

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Summer Infant, Inc.

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					Unaudited
	For the three months ended					For the six months ended
	June 29, 2019			June 30, 2018		June 29, 2019			June 30, 2018
Net sales	$	46,425		$	47,678	$	88,963		$	89,733
Cost of goods sold	31,583			32,284		60,671			60,747
Gross profit	14,842			15,394		28,292			28,986
General & administrative expenses	8,523			9,376		17,902			21,964
Selling expenses	4,031			3,091		7,384			5,769
Depreciation and amortization	952			1,074		1,889			2,075
Operating income (loss)	1,336			1,853		1,117			(822		)
Interest expense, net	1,293			1,409		2,542			2,182
Income (loss) before provision (benefit) for income taxes	43			444		(1,425		)	(3,004		)
Provision (benefit) for income taxes	267			146		197			(595		)
Net (loss) income	$	(224	)	$	298	$	(1,622	)	$	(2,409	)
Net (loss) income per share:
BASIC	$	(0.01	)	$	0.02	$	(0.09	)	$	(0.13	)
DILUTED	$	(0.01	)	$	0.02	$	(0.09	)	$	(0.13	)
Weighted average shares outstanding:
BASIC	18,899,340			18,731,553		18,866,100			18,690,711
DILUTED	18,899,340			18,735,858		18,866,100			18,690,711

See notes to condensed consolidated financial statements.

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Summer Infant, Inc.

Condensed Consolidated Statements of Comprehensive Loss

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

	Unaudited For the three months ended						Unaudited For the six months ended
	June 29, 2019			June 30, 2018			June 29, 2019			June 30, 2018
Net (loss) income	$	(224	)	$	298		$	(1,622	)	$	(2,409	)
Other comprehensive income (loss):
Changes in foreign currency translation adjustments	48			(348		)	213			(400		)

Comprehensive net loss	$	(176	)	$	(50	)	$	(1,409	)	$	(2,809	)

See notes to condensed consolidated financial statements.

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Summer Infant, Inc.

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 six months ended
	June 29, 2019			June 30, 2018
Cash flows from operating activities:
Net loss	$	(1,622	)	$	(2,409	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	1,855			2,068
Stock-based compensation expense	152			314
Write off of unamortized deferred financing costs	—			518
Provision for allowance for doubtful accounts	34			2,269
Changes in assets and liabilities:
Increase in trade receivables	(4,553		)	(1,972		)
Decrease in inventory	3,725			6,953
Increase in right of use assets	(5,381		)	—
Increase in lease liability	5,935			—
Increase in prepaids and other assets	(220		)	(317		)
Decrease in accounts payable and accrued expenses	(5,042		)	(273		)
Net cash (used in) provided by operating activities	(5,117		)	7,151
Cash flows from investing activities:
Acquisitions of property and equipment	(1,416		)	(1,751		)
Acquisitions of other intangible assets	(114		)	—
Net cash (used in) investing activities	(1,530		)	(1,751		)
Cash flows from financing activities:
Proceeds from issuance of common stock upon exercise of stock options	—			19
Repayment of Prior Term Loan Facility	—			(5,000		)
Repayment of Prior FILO	—			(1,250		)
Payment of financing fees and expenses	—			(1,958		)
Proceeds from New Term Loan Facility	—			17,500
Repayment of Term Loan Facility	(438		)	—
Net borrowings (repayment) on revolving facilities	7,046			(14,529		)
Net cash provided by (used in) financing activities	6,608			(5,218		)
Effect of exchange rate changes on cash and cash equivalents	(102		)	66
Net (decrease) increase in cash and cash equivalents	(141		)	248
Cash and cash equivalents, beginning of period	721			681
Cash and cash equivalents, end of period	$	580		$	929
Supplemental disclosure of cash flow information:
Cash paid for interest	$	2,034		$	1,411
Cash paid for income taxes	$	5		$	4

See notes to condensed consolidated financial statements.

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Summer Infant, Inc.

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.

	Common Stock			Additional Paid in		Treasury			Retained			Accumulated Comprehensive			Total
	Shares	Amount		Capital		Stock			Earnings			Loss			Equity
Balance at December 30, 2017	18,629,737	$	2	$	76,848	$	(1,283	)	$	(59,634	)	$	(2,291	)	$	13,642
Issuance of common stock upon vesting of restricted shares	55,500
Stock-based compensation				99											99
Net loss for the period									(2,707		)				(2,707		)
Foreign currency translation adjustment												(52		)	(52		)
Balance at March 31, 2018	18,685,237	$	2	$	76,947	$	(1,283	)	$	(62,341	)	$	(2,343	)	$	10,982
Issuance of common stock upon vesting of restricted shares	67,728
Issuance of common stock upon exercise of stock options	16,050			20											20
Stock-based compensation				215											215
Net loss for the period									298						298
Foreign currency translation adjustment												(348		)	(348		)
Balance at June 30, 2018	18,769,015	$	2	$	77,182	$	(1,283	)	$	(62,043	)	$	(2,691	)	$	11,167

	Common Stock			Additional Paid in		Treasury			Retained			Accumulated Comprehensive			Total
	Shares	Amount		Capital		Stock			Earnings			Loss			Equity
Balance at December 29, 2018	18,820,602	$	2	$	77,396	$	(1,283	)	$	(63,885	)	$	(2,960	)	$	9,270
Issuance of common stock upon vesting of restricted shares	33,125
Stock-based compensation				48											48
Net loss for the period									(1,398		)				(1,398		)
Foreign currency translation adjustment												165			165
Balance at March 30, 2019	18,853,727	$	2	$	77,444	$	(1,283	)	$	(65,283	)	$	(2,795	)	$	8,085
Issuance of common stock upon vesting of restricted shares	72,977
Stock-based compensation				104											104
Net loss for the period									(224		)				(224		)
Foreign currency translation adjustment												48			48
Balance at June 29, 2019	18,926,704	$	2	$	77,548	$	(1,283	)	$	(65,507	)	$	(2,747	)	$	8,013

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 health, safety and wellness 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 safety, nursery, monitoring, and baby gear. Most products are sold under our core brand names of Summer™, SwaddleMe®, and born freeTM. When used herein, the terms the “Company,” “we,” “us,” and “our” mean Summer Infant, Inc. and its consolidated subsidiaries.

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 December 29, 2018 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 December 29, 2018 included in its Annual Report on Form 10-K filed with the SEC on February 20, 2019, as amended on March 22, 2019.

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 have been eliminated in the consolidation.

All dollar amounts included in the Notes to Condensed Consolidated Financial Statements are in thousands of U.S. dollars, except share and per share amounts.

Revenue Recognition

The Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services.

The Company’s principal activities from which it generates its revenue is product sales. The Company has one reportable segment of business.

Revenue is measured based on consideration specified in a contract with a customer. The Company recognizes revenue when it satisfies a performance obligation in a contract by transferring control over a product to a customer when product delivery occurs. Consideration is typically paid approximately 60 days from the time control is transferred. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in selling costs.

A performance obligation is a promise in a contract to transfer a distinct product to the customer, which for the Company is transfer of juvenile products to its customers. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation.

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each customer, may include product price discounts, markdown allowances, return allowances, and/or volume rebates which reduce the consideration due from customers. Variable consideration is estimated using the most likely amount method, which is based on our historical experience as well as current information such as sales forecasts.

Contracts may also include cooperative advertising arrangements where the Company allows a discount from invoiced product amounts in exchange for customer purchased advertising that features the Company’s products. These allowances are generally based upon product purchases or specific advertising campaigns. Such allowances are accrued when the related revenue is recognized. These cooperative advertising arrangements provide a distinct benefit and fair value and are accounted for as direct selling expenses.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect certain reported amounts of revenues, expenses, assets, liabilities and related disclosures. These estimates are based on management’s best knowledge as of the date the financial statements are published of current events and actions the Company may undertake in the future. Accordingly, actual results could differ from those estimates.

Trade Receivables

Trade receivables are carried at their outstanding unpaid principal balances reduced by an allowance for doubtful accounts. The Company estimates doubtful accounts based on historical bad debts, factors related to specific customers’ ability to pay and current economic trends. The Company writes off accounts receivable against the allowance when a balance is determined to be uncollectible. Amounts are considered to be uncollectable based upon historical experience and management’s evaluation of outstanding accounts receivable.

Changes in the allowance for doubtful accounts are as follows:

	For the Six months ended
	June 29, 2019		June 30, 2018
Allowance for doubtful accounts, beginning of period	$	304	$	1,622
Charges to costs and expenses, net	34		2,269
Account write-offs	—		—
Allowance for doubtful accounts, end of period	$	338	$	3,891

Inventory Valuation

Inventory is comprised mostly of finished goods and some component parts and is stated at the lower of cost using the first-in, first-out (“FIFO”) method, or net realizable value. The Company regularly reviews slow-moving and excess inventories, and writes down inventories to net realizable value if the expected net proceeds from the disposals of excess inventory are less than the carrying cost of the merchandise.

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the Company’s condensed consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company’s uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

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together as a single component. The Company’s facilities operating leases have lease and non-lease components to which the Company has elected to apply the practical expedient and account for each lease component and related non-lease component as one single component. The lease component results in a right-of-use asset being recorded on the balance sheet. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Income Taxes

Income taxes are computed using the asset and liability method of accounting. Under the asset and liability method, a deferred income tax asset or liability is recognized for estimated future tax effects attributable to temporary differences and carry-forwards. The measurement of deferred income tax assets is adjusted by a valuation allowance, if necessary, to recognize future tax benefits only to the extent, based on available evidence, that it is more likely than not that such benefits will be realized. The net deferred tax assets and liabilities are presented as noncurrent.

The Company utilized the discrete method of accounting for income taxes in the U.S. for the three months ended March 30, 2019 and the three months ended June 29, 2019 as it believes the discrete method results in a more accurate representation of the income tax benefit for the quarter.

The Company follows the appropriate guidance relative to uncertain tax positions. This standard provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Uncertain tax positions must meet a recognition threshold of more-likely-than-not in order for those tax positions to be recognized in the financial statements.

Net Loss/Income Per Share

Basic loss per share for the Company is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted loss per share includes the dilutive impact of outstanding stock options and unvested restricted shares.

Translation of Foreign Currencies

All assets and liabilities of the Company’s foreign subsidiaries, each of whose functional currency is its local currency, are translated into U.S. dollars at the exchange rate in effect at the end of the quarter and the income and expense accounts of these affiliates have been translated at average rates prevailing during each respective quarter. Resulting translation adjustments are made to a separate component of stockholders’ equity within accumulated other comprehensive loss. Foreign exchange transaction gains and losses are included in the accompanying interim, condensed consolidated statement of operations.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize most leases on their balance sheet as a right-of-use asset and a lease liability. Leases are classified as either operating or finance, and classification is based on criteria similar to past lease accounting, but without explicit bright lines. In July 2018, the FASB issued ASU No. 2018-10, “Codification Improvements to Topic 842, Leases” (“ASU 2018-10”), which provides narrow amendments to clarify how to apply certain aspects of the new lease standard, and ASU No. 2018-11, “Leases (Topic 842) — Targeted Improvements” (ASU 2018-11), which addresses implementation issues related to the new lease standard. The guidance became effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years.

The Company adopted the standard on the effective date of December 31, 2018 by applying the new lease requirements at the effective date. The Company also elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allows the Company to carry forward the historical lease classification. The impact of the adoption of ASC 842 on the condensed consolidated balance sheet was an increase of $6,411 in assets and an increase of $7,037 of liabilities for the recognition of right-of-use assets and lease liabilities. The adoption of ASU 2016-02 was immaterial to the condensed consolidated results of operations and cash flows.

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

2. REVENUE

Disaggregation of Revenue

The Company’s revenue is primarily from distinct fixed-price product sales in the juvenile product market, to similar customers and channels utilizing similar types of contracts that are short term in nature (less than one year). The Company does not sell service agreements or goods over a period of time and does not sell or utilize customer financing arrangements or time-and-material contracts.

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The following is a table that presents net sales by geographical area:

	For the three months ended June 29, 2019		For the six months ended June 29, 2019
United States	$	39,064	$	75,300
All Other	7,361		13,663
Net Sales	$	46,425	$	88,963

All Other consists of Canada, Europe, South America, Mexico, Asia, and the Middle East.

Contract Balances

The Company does not have any contract assets such as work-in-process or contract liabilities such as customer advances. All trade receivables on the Company’s condensed consolidated balance sheet are from contracts with customers.

Contract Costs

Costs incurred to obtain a contract are capitalized unless short term in nature. As a practical expedient, costs to obtain a contract that are short term in nature are expensed as incurred. All contract costs incurred in the six months ended June 29, 2019 and six months ended June 30, 2018 fall under the provisions of the practical expedient and have therefore been expensed.

3. DEBT

Credit Facilities

Bank of America Credit Facility. On June 28, 2018, the Company and Summer Infant (USA), Inc., as borrowers, entered into a Second Amended and Restated Loan and Security Agreement with Bank of America, N.A., as agent, the financial institutions party to the agreement from time to time as lenders, and certain subsidiaries of the Company as guarantors (as amended, the “Restated BofA Agreement”). The Restated BofA Agreement replaced the Company’s prior credit facility with Bank of America, and provides for a $60,000, asset-based revolving credit facility, with a $5,000 letter of credit sub-line facility. The total borrowing capacity is based on a borrowing base, which is defined as 85% of eligible receivables plus the lesser of (i) 70% of the value of eligible inventory or (ii) 85% of the net orderly liquidation value of eligible inventory, less applicable reserves. The scheduled maturity date of loans under the Restated BofA Agreement is June 28, 2023 (subject to customary early termination provisions). On March 25, 2019, the Company and Summer Infant (USA), Inc., as borrowers, entered into Amendment No. 1 to the Second Amended and Restated Loan and Security Agreement that modified the definitions of Capital Lease, EBITDA, Eligible Account and Revolver Borrowing Base in the Restated BofA Agreement in order to account for FASB mandated changes to lease accounting standards and provide additional financing flexibility to the Company.

All obligations under the Restated BofA Agreement are secured by substantially all the assets of the Company, including a first priority lien on accounts receivable and inventory and a junior lien on certain assets subject to the term loan lender’s first priority lien described below. Summer Infant Canada Limited and Summer Infant Europe Limited, subsidiaries of the Company, are guarantors under the Restated BofA Agreement. Proceeds from the loans were used to satisfy existing debt, pay fees and transaction expenses associated with the closing of the Restated BofA Agreement and may be used to pay obligations under the Restated BofA Agreement, and for lawful corporate purposes, including working capital.

Loans under the Restated BofA Agreement bear interest, at the Company’s option, at a base rate or at LIBOR, plus applicable margins based on average quarterly availability under the Restated BofA Agreement. Interest payments are due monthly, payable in arrears. The Company is also required to pay an annual non-use fee on unused amounts, as well as other customary fees as are set forth in the Restated BofA Agreement. The Restated BofA Agreement contains customary affirmative and negative covenants. Among other restrictions, the Company is restricted in its ability to incur additional debt, make acquisitions or investments, dispose of assets, or make distributions unless in each case certain conditions are satisfied. In addition, if availability falls below a specified amount, a springing covenant would be in effect requiring the Company to maintain a fixed charge coverage ratio at the end of each fiscal month of at least 1.0 to 1.0 for the twelve-month period then ended.

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under the Restated BofA Agreement may be declared immediately due and payable. For certain events of default relating to insolvency and receivership, all outstanding obligations become due and payable.

As of June 29, 2019, under the Restated BofA Agreement, the rate on base-rate loans was 6.50% and the rate on LIBOR-rate loans was 4.50%. The amount outstanding on the Restated BofA Agreement at June 29, 2019 was $37,712. Total borrowing capacity at June 29, 2019 was $45,854 and borrowing availability was $8,142.

Prior to entering into the Restated BofA Agreement, the Company and Summer Infant (USA), Inc. were parties to an amended and restated loan and security agreement with Bank of America, N.A., as agent, which provided for an asset-based credit facility (the “Prior Credit Facility”). The Prior Credit Facility consisted of a $60,000 asset-based revolving credit facility, with a $10,000 letter of credit sub-line facility (the “Revolving Facility”), a $5,000 “first in last out” revolving credit facility (the “FILO Facility”) and a $10,000 term loan facility (the “Term Loan Facility”). The total borrowing capacity under the Revolving Facility was based on a borrowing base, generally defined as 85% of the value of eligible accounts plus the lesser of (i) 70% of the value of eligible inventory or (ii) 85% of the net orderly liquidation value of eligible inventory, less reserves. The total borrowing capacity under the FILO Facility was based on a borrowing base, generally defined as a specified percentage of the value of eligible accounts that steps down over time, plus a specified percentage of the value of eligible inventory that stepped down over time. As noted above, all obligations under the Revolving Facility and Term Loan Facility were repaid in connection with the Restated BofA Agreement and Term Loan Agreement described below. Loans under the FILO Facility were repaid April 21, 2018.

Term Loan Agreement. On June 28, 2018, the Company and Summer Infant (USA), Inc., as borrowers, entered into a Term Loan and Security Agreement (as amended, the “Term Loan Agreement”) with Pathlight Capital LLC, as agent, each lender from time to time a party to the Term Loan Agreement, and certain subsidiaries of the Company as guarantors, providing for a $17,500 term loan (the “Term Loan”). Proceeds from the Term Loan were used to satisfy existing debt, pay fees and transaction expenses associated with the closing of the Term Loan and may be used to pay obligations under the Term Loan Agreement, and for lawful corporate purposes, including working capital. The Term Loan is secured by a lien on certain assets of the Company, including a first priority lien on intellectual property, machinery and equipment, and a pledge of (i) 100% of the ownership interests of domestic subsidiaries and (ii) 65% of the ownership interests in certain foreign subsidiaries of the Company, and a junior lien on certain assets subject to the liens under the Restated BofA Agreement described above. The Term Loan matures on June 28, 2023. Summer Infant Canada Limited and Summer Infant Europe Limited, subsidiaries of the Company, are guarantors under the Term Loan Agreement. On March 25, 2019, the Company and Summer Infant (USA), Inc., as borrowers, entered into Amendment No. 1 to the Term Loan and Security Agreement that modified definitions consistent with the amendment of the Restated BofA Agreement and also modified the IP Advance Rate Reduction Amount definition in order to provide additional financing flexibility to the Company.

The principal of the Term Loan will be repaid, on a quarterly basis, in installments of $219, with the first installment having been paid on December 1, 2018, until paid in full on termination. The Term Loan bears interest at an annual rate equal to LIBOR, plus 9.0%. Interest payments are due monthly, in arrears. Obligations under the Term Loan Agreement are also subject to restrictions on prepayment and a prepayment penalty if the Term Loan is repaid prior to the third anniversary of the closing of the Term Loan.

The Term Loan Agreement contains customary affirmative and negative covenants that are substantially the same as the Restated BofA Agreement. In addition, if availability falls below a specified amount, then the Company must maintain a fixed charge coverage ratio at the end of each fiscal month of at least 1.0 to 1.0 for the twelve-month period then ended. The Term Loan Agreement also contains events of default, including a cross default with the Restated BofA Agreement or the occurrence of a change of control. In the event of a default, all of the obligations of the Company and its subsidiaries under the Term Loan Agreement may be declared immediately due and payable. For certain events of default relating to insolvency and receivership, all outstanding obligations become due and payable.

As of June 29, 2019, the interest rate on the Term Loan was 11.52%. The amount outstanding on the Term Loan at June 29, 2019 was $16,844.

Aggregate maturities of bank debt related to the Restated BofA Agreement and the Term Loan Agreement:

Fiscal Year ending:
2019	438
2020	875
2021	875
2022	875
2023 and thereafter	$	51,493
Total	$	54,556

Unamortized debt issuance costs were $2,432 at June 29, 2019 and $2,395 at December 29, 2018, and are presented as a direct deduction of long-term debt on the consolidated balance sheets.

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4. INTANGIBLE ASSETS

Intangible assets consisted of the following:

	June 29,			December 29,
	2019			2018

Brand names	$	11,819		$	11,819
Patents and licenses	3,880			3,766
Customer relationships	6,946			6,946
Other intangibles	1,882			1,882
	24,527			24,413
Less: Accumulated amortization	(11,483		)	(11,113		)
Intangible assets, net	$	13,044		$	13,300

The amortization period for the majority of the intangible assets ranges from 5 to 20 years for those assets that have an estimated life; certain of the assets have indefinite lives (brand names). Total of intangibles not subject to amortization amounted to $8,400 as of June 29, 2019 and December 29, 2018.

5. COMMITMENTS AND CONTINGENCIES

Leases

The Company leases office space and distribution centers primarily related to its Riverside California, Canada, United Kingdom, and Hong Kong operations. In connection with these leases, there were no cash incentives from the landlord to be used for the construction of leasehold improvements within the facility. Our headquarters in Woonsocket, Rhode Island continues to be accounted for as a sale-leaseback lease.

The Company identified and assessed the following significant assumptions in recognizing the right-of-use asset and corresponding liabilities:

· Expected lease term — The expected lease term includes both contractual lease periods and, when applicable, cancelable option periods when it is reasonably certain that the Company would exercise such options. These leases have remaining lease terms between 7 months and 4 years. The Canada lease has one 5-year extension option that has also not been included in the lease term.

· Incremental borrowing rate — The Company’s lease agreements do not provide an implicit rate. As the Company does not have any external borrowings for comparable terms of its leases, the Company estimated the incremental borrowing rate based on secured borrowings available to the Company for the next 5 years. This is the rate the Company would have to pay if borrowing on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment.

· Lease and non-lease components — In certain cases the Company is required to pay for certain additional charges for operating costs, including insurance, maintenance, taxes, and other costs incurred, which are billed based on both usage and as a percentage of the Company’s share of total square footage. The Company determined that these costs are non-lease components and they are not included in the calculation of the lease liabilities because they are variable. Payments for these variable, non-lease components are considered variable lease costs and are recognized in the period in which the costs are incurred.

The components of the Company’s lease expense for the three and six months ended June 29, 2019 were as follows:

	Three Months Ended June 29, 2019		Six Months Ended June 29, 2019
Operating lease cost	$	624	$	1,247
Variable lease cost	270		644
Total lease cost	$	894	$	1,891

Weighted-average remaining lease term

2.57 years

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Weighted Average discount rate:

5.00%

Cash paid for amounts included in the measurement of the Company’s lease liabilities were $1,298 for the six months ended June 29, 2019.

As of June 29, 2019, the present value of maturities of the Company’s operating lease liabilities were as follows:

Fiscal Year Ending:
2019	$	1,294
2020	2,550
2021	2,041
2022	319
2023	153
Less imputed interest	(407		)
Total	$	5,950

Prior to the adoption of ASU 2016-02 and for the six months ended June 29, 2018, the Company recognized rent expense on a straight-line basis over the lease period and recorded deferred rent expense for rent expense incurred but not yet paid. The Company also recorded deferred rent attributable to cash incentives received under its lease agreements which are amortized to rent expense over the lease term. During the three and six months ended June 29, 2018, the Company recognized rent expense of $613 and $1,225 respectively.

Disclosures related to periods prior to adoption of the new lease standard:

Under ASC 840, approximate future minimum rental payments due under these leases as of June 29, 2019 were as follows:

Fiscal Year Ending:
2019	$	2,627
2020	2,556
2021	2,048
2022	323
2023 and beyond	154
Total (a)	$	7,708

(a) Amounts exclude payments for sales-leaseback transaction of the Woonsocket headquarters.

Litigation

The Company is a party to various routine claims, litigation and administrative complaints incidental to its business, including claims involving product liability, employee matters and other general liability claims, most of which are covered by insurance. We are not aware of any such proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, results of operations or financial condition.

6. SHARE BASED COMPENSATION

The Company is currently authorized to issue up to 1,700,000 shares for equity awards under the Company’s 2012 Incentive Compensation Plan (as amended, “2012 Plan”). Periodically, the Company may also grant equity awards outside of its 2012 Plan as inducement grants for new hires.

Under the 2012 Plan, awards may be granted to participants in the form of non-qualified stock options, incentive stock options, restricted stock, deferred stock, restricted stock units and other stock-based awards. Subject to the provisions of the plans, awards may be granted to employees, officers, directors, advisors and consultants who are deemed to have rendered or are able to render significant services to the Company or its subsidiaries and who are deemed to have contributed or to have the potential to contribute to the Company’s success. The Company accounts for options under the fair value recognition standard. Share-based compensation expense for the six months ended June 29, 2019 and June 30, 2018 was $152 and $314, respectively. Share based compensation expense is included in general and administrative expenses.

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The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the table below. The Company uses the simplified method to estimate the expected term of the options, but used an estimate for grants of “plain vanilla” stock options based on a formula prescribed by the Securities and Exchange Commission. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Share-based compensation expense recognized in the consolidated financial statements is based on awards that are ultimately expected to vest.

As of June 29, 2019, there were 1,213,660 stock options outstanding and 292,275 unvested restricted shares outstanding.

During the six months ended June 29, 2019, the Company granted 237,000 stock options and 169,500 shares of restricted stock, respectively. The following table summarizes the weighted average assumptions used for stock options granted during the six months ended June 29, 2019 and June 30, 2018.

	For the Six Months Ended June 29, 2019		For the Six Months Ended June 30, 2018
Expected life (in years)	4.8		4.9
Risk-free interest rate	2.34	%	2.68	%
Volatility	64.2	%	64.0	%
Dividend yield	0	%	0	%
Forfeiture rate	24.2	%	23.1	%

As of June 29, 2019, there were 516,218 shares available to grant under the 2012 Plan.

7. WEIGHTED AVERAGE COMMON SHARES

Basic and diluted earnings or loss per share (“EPS”) is based upon the weighted average number of common shares outstanding during the period. Diluted weighted average number of common shares outstanding also included common stock equivalents such as stock options and restricted shares. The Company does not include the anti-dilutive effect of common stock equivalents in the calculation of dilutive common shares outstanding. The computation of diluted common shares for the three and six months ended June 29, 2019 excluded 1,213,660 stock options and 292,275 shares of restricted stock outstanding. The computation of diluted common shares for the three and six months ended June 30, 2018 excluded 1,188,010 stock options and 321,000 shares of restricted stock outstanding and 1,188,010 stock options and 356,766 shares of restricted stock outstanding, respectively.

8. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the filing date of this Quarterly Report on Form 10-Q and determined that no subsequent events occurred that would require recognition in the consolidated financial statements or disclosure in the notes thereto.

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

The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking information and statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All forward-looking statements included in this document are based on information available to us on the date hereof. It is important to note that our actual results could differ materially from those projected in such forward-looking statements contained in this Quarterly Report on Form 10-Q. These forward-looking statements include statements concerning our expectations regarding the impact of existing tariffs or new tariffs on the cost of our imported products and pricing of our products; the impact of our re-branding and marketing strategy; our business strategy and future growth and profitability; our ability to deliver high quality, innovative products to the marketplace; our ability to maintain and build upon our existing customer and supplier relationships; our expected cash flow and liquidity for the next 12 months; and our ability to build awareness of our core brands. These statements are based on current expectations that involve numerous risks and uncertainties. These risks and uncertainties include the concentration of our business with retail customers; our ability to comply with financial and other covenants in our debt agreements; our ability to introduce new products or improve existing products that satisfy consumer preferences; our ability to develop new or improved products in a timely and cost-efficient manner; our ability to meet the continued listing requirements for the listing of our common stock on the Nasdaq Capital Market; liquidity problems or bankruptcy of our customers and their ability to pay us in a timely manner; our ability to compete with larger and more financially stable companies in our markets; our dependence on key personnel; our reliance on foreign suppliers and potential disruption in foreign markets in which we operate; increases in the cost of raw materials used to manufacture our products; compliance with safety and testing regulations for our products; product liability claims arising from use of our products; unanticipated tax liabilities; an impairment of other intangible assets; and other risks as detailed in our Annual Report on Form 10-K for the year ended December 29, 2018, as amended, and subsequent filings with the Securities and Exchange Commission. All these matters are difficult or impossible to predict accurately, many of which may be beyond our control. Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Quarterly Report on Form 10-Q will prove to be accurate.

The following discussion is intended to assist in the assessment of significant changes and trends related to the results of operations and financial condition of our Company and our consolidated subsidiaries. This Management’s Discussion and Analysis should be read together with the unaudited interim condensed consolidated financial statements and related notes included elsewhere in this filing and with our consolidated financial statements for the year ended December 29, 2018 included in our Annual Report on Form 10-K for the year ended December 29, 2018, as amended (“2018 Form 10-K”).

Note that all dollar amounts in this section are in thousands of U.S. dollars, except share and per share data.

Overview

We are an infant and juvenile products company originally founded in 1985 and have publicly traded on the Nasdaq Stock Market since 2007 under the symbol “SUMR.” We are a recognized authority in the juvenile industry, providing parents and caregivers a full range of innovative, high-quality, and high-value products to care for babies and toddlers. We seek to improve the quality of life of parents, caregivers, and babies through our product offerings, while at the same time maximizing shareholder value over the long term.

We operate in one principal industry segment across geographically diverse marketplaces, selling our products globally to large, national retailers as well as independent retailers, and on our partner’s websites, and our own direct to consumer websites. In North America, our customers include Amazon.com, Wal-Mart, Target, Buy Buy Baby, Home Depot, and Lowe’s. Our largest European-based customers are Argos and Amazon. We also sell through international distributors, representatives, and to select international retail customers in geographic locations where we do not have a direct sales presence.

In the second quarter of 2019, sales declined 2.6% as compared to the prior year period. In the second quarter of 2019, we experienced growth across our major customers and certain product categories but experienced declines with our mid-tier and international customers. Selling expenses increased 30.4% in the second quarter compared to prior year period as a result of higher cooperative advertisement and consumer advertisement costs for new product launches and on-line marketing initiatives. General and administrative expenses declined 9.1% as compared to the prior period largely due to lower labor and other costs as a result of cost reduction actions take in the prior fiscal quarter and over the past year. Net loss per diluted share for the quarter was $0.01 per share as compared to a net income of $0.02 per share for the comparable prior period.

We continue to progress on a key part of our business strategy to develop a portfolio of brands positioned to appeal to multiple consumer demographics and offer channel differentiation. In early 2019, we began doing business under the name SUMR Brands and expanded our family of brands with the born freeTM relaunch in March of 2019. The repositioned born freeTM brand utilizes a

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‘digital-first’ approach and offers a product line with more sophisticated styling and higher price points than the SummerTM branded range of products.

We expect our results in 2019 and potentially thereafter will continue to be impacted by the 10% tariff enacted in September 2018 and the 15% tariff enacted in May 2019 on certain products, as well as the new 10% tariff expected for September 2019 on all remaining goods that are imported into the United States from China. The duration of these tariffs, and whether the tariffs may increase, is uncertain as the United States continues to engage in trade negotiations with China. We have initiated actions to mitigate the impact of the existing tariffs, including price increases and exploring alternative sources of supply outside of China. However, the increase in the cost of certain of our products as a result of the tariffs that is not offset by our mitigation efforts could have an adverse effect on our business, financial position, results of operations and cash flows.

Summary of Critical Accounting Policies and Estimates

There have been no significant changes in our critical accounting policies and estimates during the six months ended June 29, 2019 from our critical accounting policies and estimates disclosed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2018 Form 10-K except for the adoption of the new lease accounting rules in the first quarter of fiscal 2019 as noted in Note 1 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Results of Operations

	For the three months ended					For the six months ended
	(Unaudited)					(Unaudited)
	June 29, 2019			June 30, 2018		June 29, 2019			June 30, 2018
Net sales	$	46,425		$	47,678	$	88,963		$	89,733
Cost of goods sold	31,583			32,284		60,671			60,747
Gross profit	14,842			15,394		28,292			28,986
General & administrative expenses	8,523			9,376		17,902			21,964
Selling expenses	4,031			3,091		7,384			5,769
Depreciation and amortization	952			1,074		1,889			2,075
Operating income (loss)	1,336			1,853		1,117			(822		)
Interest expense, net	1,293			1,409		2,542			2,182
Income (loss) before provision (benefit) for income taxes	43			444		(1,425		)	(3,004		)
Provision (benefit) for income taxes	267			146		197			(595		)
Net income (loss)	$	(224	)	$	298	$	(1,622	)	$	(2,409	)

Three Months ended June 29, 2019 compared with Three Months ended June 30, 2018

Net sales decreased 2.6% from $47,678 for the three months ended June 30, 2018 to $46,425 for the three months ended June 29, 2019. Sales to our top three customers increased by 7.7% and we had increases in sales across most of our product categories, including gates, potty, strollers, monitors, bathers, and entertainers for the three months ended June 29, 2019 as compared to the three months ended June 30, 2018. However, these increases were offset by a decline in our international and mid-tier customer sales as well as a decline in value of foreign currency sales and the negative impact on sales of the 25% tariff on goods imported into the United States from China.

Cost of goods sold includes cost of the finished product from suppliers, duties on certain imported items, freight-in from suppliers, and miscellaneous charges. The components of cost of goods sold remained substantially the same for the quarter ended June 29, 2019 as compared to the quarter ended June 30, 2018.

Gross profit decreased 3.6% from $15,394 for the three months ended June 30, 2018 to $14,842 for the three months ended June 29, 2019. Gross margin as a percent of net sales declined slightly from 32.3% for the three months ended June 30, 2018 to 32.0% for the three months ended June 29, 2019. Gross margin dollars and percent declined primarily due to increased tariffs, shift in sales mix, and the decline in value of foreign currency sales.

General and administrative expenses decreased 9.1% from $9,376 for the three months ended June 30, 2018 to $8,523 for the three months ended June 29, 2019. General and administrative expenses decreased from 19.7% of net sales for the three months ended June 30, 2018 to 18.4% of net sales for the three months ended June 29, 2019. The decline in dollars and as a percent of sales

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was primarily attributable to the impact of lower labor and other costs as a result of cost reduction actions taken earlier in the fiscal year.

Selling expenses increased 30.4% from $3,091 for the three months ended June 30, 2018 to $4,031 for the three months ended June 29, 2019. Selling expenses also increased as a percent of net sales from 6.5% for the three months ended June 30, 2018 to 8.7% for the three months ended June 29, 2019. The increase in selling expense dollars and as a percent of sales was primarily attributable to increased cooperative advertisements and consumer advertisement costs this year due mainly to new product launches and on-line marketing initiatives as compared to the three months ended June 30, 2018, which also included a larger component of direct import sale.

Depreciation and amortization decreased 11.4% from $1,074 for the three months ended June 30, 2018 to $952 for the three months ended June 29, 2019. The decrease in depreciation and amortization was attributable to the timing of capital investment over the past year.

Interest expense decreased 8.2% from $1,409 for the three months ended June 30, 2018 to $1,293 for the three months ended June 29, 2019. Interest expense for the three months ended June 30, 2018 included a write off of $518 of previously unamortized prepaid finance fees associated with the repayment of existing debt from the proceeds of our June 2018 refinancing. This was partially offset by interest on higher debt levels, increased market interest rates and higher interest margins under our new credit facilities.

For the three months ended June 30, 2018, we recorded a $146 provison for income taxes on $444 of pretax income, reflecting an estimated 32.9% tax rate for the quarter. For the three months ended June 29, 2019, we recorded a $267 provision for income taxes on $43 of pretax income. The tax provision for the three months ended June 29, 2019 included a $181 discrete valuation allowance charge for nondeductible interest expense.

Six Months ended June 29, 2019 compared with Six Months ended June 30, 2018

Net sales decreased 0.9% from $89,733 for the six months ended June 30, 2018 to $88,963 for the six months ended June 29, 2019. The six months ended June 30, 2018 included $2,954 of sales to Babies R Us, a subsidiary of Toys R Us (“TRU”), that did not recur in the six months ended June 29, 2019 as a result of the liquidation of TRU in 2018. Excluding the 2018 TRU sales of $2,954, net sales for the six months ended June 29, 2019 increased by 2.5% compared to the same period last year. For the six month ended June 29, 2019, our top four customer sales increased by 11.5% and we experienced increases in sales across many of our product categories such as in gates, potty, strollers, bathers, and entertainer categories. However, these increases were offset by a decline in our international and mid-tier customer sales as well as a decline in value of foreign currency sales and the negative impact of the 25% tariff on goods imported into the United Stated from China.

Cost of goods sold includes cost of the finished product from suppliers, duties on certain imported items, freight-in from suppliers, and miscellaneous charges. The components of cost of goods sold remained substantially the same for the six months ended June 29, 2019 as compared to the six months ended June 30, 2018.

Gross profit decreased 2.4% from $28,986 for the six months ended June 30, 2018 to $28,292 for the six months ended June 29, 2019. Gross margin as a percent of net sales decreased from 32.3% for the six months ended June 30, 2018 to 31.8% for the six months ended June 29, 2019. Gross profit decreased primarily due to lower sales. Gross margin decreased primarily due tariffs, sales mix, and the decline in value of foreign currency sales.

General and administrative expenses decreased 18.5% from $21,964 for the six months ended June 30, 2018 to $17,902 for the six months ended June 29, 2019. General and administrative expenses decreased from 24.5% of net sales for the six months ended June 30, 2018 to 20.1% of net sales for the six months ended June 29, 2019. The decrease in dollars and as a percent of sales was primarily attributable to a $2,348 increase in our allowance for bad debts due to the liquidation of TRU’s U.S. assets in the three months ended March 30, 2018 that did not repeat as well as lower labor and other costs as a result of cost reduction actions taken in the three months ended March 30, 2019.

Selling expenses increased 28.0% from $5,769 for the six months ended June 30, 2018 to $7,384 for the six months ended June 29, 2019. Selling expenses also increased as a percent of net sales from 6.4% for the six months ended June 30, 2018 to 8.3% for the six months ended June 29, 2019. The increase in selling expense dollars and as a percent of sales was primarily attributable to increased cooperative advertisements and consumer advertisement costs this year due mainly to new product launches and on-line marketing initiatives as compared to the six months ended June 30, 2018, which also included a larger component of direct import sales.

Depreciation and amortization decreased 9.0% from $2,075 for the six months ended June 30, 2018 to $1,889 for the six months ended June 29, 2019. The decrease in depreciation was attributable to the timing of capital investment primarily over the past year.

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Interest expense increased 16.5% from $2,182 for the six months ended June 30, 2018 to $2,542 for the six months ended June 29, 2019. The increase in interest expense was primarily attributable to higher debt levels, increased market interest rates and higher interest margins under our new credit facilities. Interest expense for the three months ended June 30, 2018, included a write off of $518 of previously unamortized prepaid finance fees associated with the repayment of existing debt from the proceeds of our June 2018 refinancing.

For the six months ended June 30, 2018, we recorded a $595 benefit for income taxes on $3,004 of pretax loss, reflecting an estimated 19.8% tax rate. For the six months ended June 29, 2019, we recorded a $197 provision for income taxes on $1,425 of pretax loss. The tax provision for the six months ended June 29, 2019, included a $494 discrete valuation allowance charge for nondeductible interest expense.

Liquidity and Capital Resources

We fund our operations and working capital needs through cash generated from operations and borrowings under our credit facilities.

In our typical operational cash flow cycle, inventory is purchased in U.S. dollars to meet expected demand plus a safety stock. Because the majority of our suppliers are based in Asia, inventory takes from three to four weeks to arrive from Asia to the various distribution points we maintain in the United States, Canada and the United Kingdom. Payment terms for these vendors are approximately 60-75 days from the date the product ships from Asia and therefore we are generally paying for the product a short time after it is physically received in the United States. In turn, sales to customers generally have payment terms of 60-75 days, resulting in an accounts receivable and increasing the amount of cash required to fund working capital. To bridge the gap between paying our suppliers and receiving payment from our customers for goods sold, we rely on our credit facilities.

The majority of our capital expenditures are for tools and molds related primarily to new product introductions. We receive indications from retailers near the middle of each year as to what products they will be taking into their product lines for the upcoming year. Based on these indications, we will then acquire the tools and molds required to build and produce the products. In most cases, the payments for the tools are spread out over a three to four month period.

For the six months ended June 29, 2019, net cash used in operating activities totaled $5,117 primarily due to the paydown of accounts payable from higher inventory purchased at the end of the previous fiscal year in advance of a potential further increase in tariffs. We expect inventory to return to normal levels in the third fiscal quarter of 2019. Net cash provided by operating activities for the six months ended June 30, 2018 was $7,151 primarily due to reductions in inventory.

For the six months ended June 29, 2019, net cash used in investing activities was approximately $1,530. For the six months ended June 30, 2018, net cash used in investing activities was $1,751.

Net cash provided by financing activities was approximately $6,608 for the six months ended June 29, 2019 and reflected borrowings on our credit facilities primarily to reduce supplier payables and fund accounts receivable. We expect inventory to return to normal levels in the third fiscal quarter of 2019, resulting in lower borrowings and thus repayments on our credit facilities. Net cash used by financing activities was approximately $5,218 for the six months ended June 30, 2018, reflecting repayments on our credit facilities with funds generated from operating activities.

Based primarily on the above factors, net cash decreased for the six months ended June 29, 2019 by $141, resulting in a cash balance of approximately $580 at June 29, 2019.

Capital Resources

In addition to operating cash flow, we also rely on our asset-based revolving credit facility with Bank of America, N.A. and our term loan agreement with Pathlight Capital to meet our financing requirements, which are subject to changes in our inventory and account receivable levels. We regularly evaluate market conditions, our liquidity profile, and various financing alternatives for opportunities to enhance our capital structure.

If we are unable to meet our current financial forecast, do not adequately control expenses, or adjust our operations accordingly, we may not have access to all of our available lines of credit due to insufficient asset availability. If our availability drops below specified levels, we will be required to meet certain financial covenants under our revolving credit facility and term loan agreement. There is no assurance that we will meet all of our financial or other covenants in the future, or that our lenders will grant waivers if there are covenant violations. In addition, should we seek to raise additional funds through debt or equity financings, any sale of debt or equity securities may cause dilution to existing stockholders. If sufficient funds are not available or are not available on acceptable terms, our ability to address any unexpected changes in our operations could be limited.

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Based on past performance and current expectations, we believe that our anticipated cash flow from operations and availability under our existing credit facility are sufficient to fund our working capital, capital expenditures and debt service requirements for at least the next 12 months.

Credit Facilities

On June 28, 2018, the Company and Summer Infant (USA), Inc., as borrowers, entered into a Second Amended and Restated Loan and Security Agreement with Bank of America, N.A., as agent, the financial institutions party to the agreement from time to time as lenders, and certain subsidiaries of the Company as guarantors (as amended, the “Restated BofA Agreement”). The Restated BofA Agreement replaced the Company’s prior credit facility with Bank of America, and provides for a $60,000, asset-based revolving credit facility, with a $5,000 letter of credit sub-line facility. The total borrowing capacity is based on a borrowing base, which is defined as 85% of eligible receivables plus the lesser of (i) 70% of the value of eligible inventory or (ii) 85% of the net orderly liquidation value of eligible inventory, less applicable reserves. The scheduled maturity date of loans under the Restated BofA Agreement is June 28, 2023 (subject to customary early termination provisions). On March 25, 2019, the Company and Summer Infant (USA), Inc., as borrowers, entered into Amendment No. 1 to the Second Amended and Restated Loan and Security Agreement that modified the definitions of Capital Lease, EBITDA, Eligible Account and Revolver Borrowing Base in the Restated BofA Agreement in order to account for FASB mandated changes to lease accounting standards and provide additional financing flexibility to the Company.

The Restated BofA Agreement also contains customary events of default, including a cross default with the Term Loan Agreement or the occurrence of a change of control. In the event of a default, all of the obligations of the Company and its subsidiaries under the Restated BofA Agreement may be declared immediately due and payable. For certain events of default relating to insolvency and receivership, all outstanding obligations become due and payable.

Term Loan Agreement. On June 28, 2018, the Company and Summer Infant (USA), Inc., as borrowers, entered into a Term Loan and Security Agreement (the “Term Loan Agreement”) with Pathlight Capital LLC, as agent, each lender from time to time a party to the Term Loan Agreement, and certain subsidiaries of the Company as guarantors, providing for a $17,500 term loan (the “Term Loan”). Proceeds from the Term Loan were used to satisfy existing debt, pay fees and transaction expenses associated with the closing of the Term Loan and may be used to pay obligations under the Term Loan Agreement, and for lawful corporate purposes, including working capital. The Term Loan is secured by a lien on certain assets of the Company, including a first priority lien on intellectual property, machinery and equipment, and a pledge of (i) 100% of the ownership interests of domestic subsidiaries and (ii) 65% of the ownership interests in certain foreign subsidiaries of the Company, and a junior lien on certain assets subject to the liens under the Restated BofA Agreement described above. The Term Loan matures on June 28, 2023. Summer Infant Canada Limited and Summer Infant Europe Limited, subsidiaries of the Company, are guarantors under the Term Loan Agreement. On March 25, 2019, the Company and Summer Infant (USA), Inc., as borrowers, entered into Amendment No. 1 to the Term Loan and Security Agreement that modified definitions consistent with the amendment of the Restated BofA Agreement, and also modified the IP Advance Rate Reduction Amount definition in order to provide additional financing flexibility to the Company.

Table of Contents

As of June 29, 2019, the interest rate on the Term Loan was 11.52%. The amount outstanding on the Term Loan at June 29, 2019 was $16,844.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as of June 29, 2019. Our Chief Executive Officer and Chief Financial Officer have concluded, based on this evaluation, that our controls and procedures were effective as of June 29, 2019.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

ITEM 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A, “Risk Factors,” of our 2018 Form 10-K and Part II, Item 1A, “Risk Factors,” of our Quarterly Report on Form 10-Q for the quarter ended March 30, 2019.

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

None.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information.

None

ITEM 6. Exhibits

The exhibits listed in the Exhibit Index immediately preceding the signature page hereto are filed as part of this Quarterly Report on Form 10-Q.

Table of Contents

EXHIBIT INDEX

Exhibit No.		Description

31.1		Certification of Chief Executive Officer

31.2		Certification of Chief Financial Officer

32.1		Section 1350 Certification of Chief Executive Officer

32.2		Section 1350 Certification of Chief Financial Officer

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Labels Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

Table of Contents

Signatures

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

	Summer Infant, Inc.


Date: August 7, 2019	By:	/s/ Mark Messner
		Mark Messner
		Chief Executive Officer
		(Principal Executive Officer)

Date: August 7, 2019	By:	/s/ Paul Francese
		Paul Francese
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Mark Messner, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Summer Infant, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2019	/s/ Mark Messner
	Mark Messner
	Chief Executive Officer

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Paul Francese, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Summer Infant, Inc.;

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2019	/s/ Paul Francese
	Paul Francese
	Chief Financial Officer

Exhibit 32.1

SECTION 1350 CERTIFICATION

In connection with the Quarterly Report on Form 10-Q of Summer Infant, Inc. (the “Company”) for the quarter ended June 29, 2019 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Mark Messner, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 7, 2019	/s/ Mark Messner
	Mark Messner
	Chief Executive Officer

Exhibit 32.2

SECTION 1350 CERTIFICATION

In connection with the Quarterly Report on Form 10-Q of Summer Infant, Inc. (the “Company”) for the quarter ended June 29, 2019 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Paul Francese, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 7, 2019	/s/ Paul Francese
	Paul Francese
	Chief Financial Officer

Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jun. 29, 2019	Aug. 05, 2019
Document and Entity Information
Entity Registrant Name	Summer Infant, Inc.
Document Type	10-Q
Document Period End Date	Jun. 29, 2019
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		18,926,704
Entity Central Index Key	0001314772
Current Fiscal Year End Date	--12-28
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Amendment Flag	false

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 29, 2019	Dec. 29, 2018
CURRENT ASSETS
Cash and cash equivalents	$ 580	$ 721
Trade receivables, net of allowance for doubtful accounts	35,975	31,223
Inventory, net	32,599	36,066
Prepaid and other current assets	1,223	997
TOTAL CURRENT ASSETS	70,377	69,007
Property and equipment, net	9,621	9,685
Other intangible assets, net	13,044	13,300
Right to use assets, noncurrent	5,396
Deferred tax assets, net	2,138	2,127
Other assets	101	97
TOTAL ASSETS	100,677	94,216
CURRENT LIABILITIES
Accounts payable	24,679	28,120
Accrued expenses	7,745	8,939
Lease liabilities, current	2,316
Current portion of long-term debt	875	875
TOTAL CURRENT LIABILITIES	35,615	37,934
Long-term debt, less current portion and unamortized debt issuance costs	51,249	44,641
Lease liabilities, noncurrent	3,634
Other liabilities	2,166	2,371
TOTAL LIABILITIES	92,664	84,946
STOCKHOLDERS' EQUITY
Preferred Stock, $0.0001 par value, 1,000,000 authorized, none issued or outstanding at June 29, 2019 and December 29, 2018, respectively
Common Stock $0.0001 par value, authorized, issued and outstanding of 49,000,000, 19,198,353, and 18,926,704 at June 29, 2019 and 49,000,000, 19,092,251, and 18,820,602 at December 29, 2018, respectively	2	2
Treasury Stock at cost (271,649 shares at June 29, 2019 and December 29, 2018)	(1,283)	(1,283)
Additional paid-in capital	77,548	77,396
Accumulated deficit	(65,507)	(63,885)
Accumulated other comprehensive loss	(2,747)	(2,960)
TOTAL STOCKHOLDERS' EQUITY	8,013	9,270
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 100,677	$ 94,216

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 29, 2019	Dec. 29, 2018
Condensed Consolidated Balance Sheets
Preferred Stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred Stock, authorized	1,000,000	1,000,000
Preferred Stock, issued	0	0
Preferred Stock, outstanding	0	0
Common Stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common Stock, authorized	49,000,000	49,000,000
Common Stock, issued	19,198,353	19,092,251
Common Stock, outstanding	18,926,704	18,820,602
Treasury Stock at cost, shares	271,649	271,649

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Condensed Consolidated Statements of Operations
Net sales	$ 46,425	$ 47,678	$ 88,963	$ 89,733
Cost of goods sold	31,583	32,284	60,671	60,747
Gross profit	14,842	15,394	28,292	28,986
General & administrative expenses	8,523	9,376	17,902	21,964
Selling expense	4,031	3,091	7,384	5,769
Depreciation and amortization	952	1,074	1,889	2,075
Operating income (loss)	1,336	1,853	1,117	(822)
Interest expense, net	1,293	1,409	2,542	2,182
Income (loss) before provision (benefit) for income taxes	43	444	(1,425)	(3,004)
Provision (benefit) for income taxes	267	146	197	(595)
Net (loss) income	$ (224)	$ 298	$ (1,622)	$ (2,409)
Net (loss) income per share:
BASIC (in dollars per share)	$ (0.01)	$ 0.02	$ (0.09)	$ (0.13)
DILUTED (in dollars per share)	$ (0.01)	$ 0.02	$ (0.09)	$ (0.13)
Weighted average shares outstanding:
BASIC (in shares)	18,899,340	18,731,553	18,866,100	18,690,711
DILUTED (in shares)	18,899,340	18,735,858	18,866,100	18,690,711

Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Condensed Consolidated Statements of Comprehensive Loss
Net (loss) income	$ (224)	$ 298	$ (1,622)	$ (2,409)
Other comprehensive income (loss):
Changes in foreign currency translation adjustments	48	(348)	213	(400)
Comprehensive net loss	$ (176)	$ (50)	$ (1,409)	$ (2,809)

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 29, 2019	Jun. 30, 2018
Cash flows from operating activities:
Net loss	$ (1,622)	$ (2,409)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	1,855	2,068
Stock-based compensation expense	152	314
Write off of unamortized deferred financing costs		518
Provision for allowance for doubtful accounts	34	2,269
Changes in assets and liabilities:
Increase in trade receivables	(4,553)	(1,972)
Decrease in inventory	3,725	6,953
Increase in right of use assets	(5,381)
Increase in lease liability	5,935
Increase in prepaids and other assets	(220)	(317)
Decrease in accounts payable and accrued expenses	(5,042)	(273)
Net cash (used in) provided by operating activities	(5,117)	7,151
Cash flows from investing activities:
Acquisitions of property and equipment	(1,416)	(1,751)
Acquisitions of other intangible assets	(114)
Net cash (used) in investing activities	(1,530)	(1,751)
Cash flows from financing activities:
Proceeds from issuance of common stock upon exercise of stock options		19
Repayment of Prior Term Loan Facility		(5,000)
Repayment of Prior FILO		(1,250)
Payment of financing fees and expenses		(1,958)
Proceeds from New Term Loan Facility		17,500
Repayment of Term Loan Facility	(438)
Net borrowings (repayment) on revolving facilities	7,046	(14,529)
Net cash provided by (used in) financing activities	6,608	(5,218)
Effect of exchange rate changes on cash and cash equivalents	(102)	66
Net (decrease) increase in cash and cash equivalents	(141)	248
Cash and cash equivalents, beginning of period	721	681
Cash and cash equivalents, end of period	580	929
Supplemental disclosure of cash flow information:
Cash paid for interest	2,034	1,411
Cash paid for income taxes	$ 5	$ 4

Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Common Stock	Additional Paid in Capital	Treasury Stock	Retained Earnings	Accumulated Comprehensive Loss	Total
Balance, beginning of period at Dec. 30, 2017	$ 2	$ 76,848	$ (1,283)	$ (59,634)	$ (2,291)	$ 13,642
Balance, beginning of period (in shares) at Dec. 30, 2017	18,629,737
Increase (Decrease) in Shareholders' Equity
Issuance of common stock upon vesting of restricted shares (in shares)	55,500
Stock-based compensation		99				99
Net loss for the period				(2,707)		(2,707)
Foreign currency translation adjustment					(52)	(52)
Balance, end of period at Mar. 31, 2018	$ 2	76,947	(1,283)	(62,341)	(2,343)	10,982
Balance, end of period (in shares) at Mar. 31, 2018	18,685,237
Balance, beginning of period at Dec. 30, 2017	$ 2	76,848	(1,283)	(59,634)	(2,291)	13,642
Balance, beginning of period (in shares) at Dec. 30, 2017	18,629,737
Increase (Decrease) in Shareholders' Equity
Net loss for the period						(2,409)
Foreign currency translation adjustment						(400)
Balance, end of period at Jun. 30, 2018	$ 2	77,182	(1,283)	(62,043)	(2,691)	11,167
Balance, end of period (in shares) at Jun. 30, 2018	18,769,015
Balance, beginning of period at Mar. 31, 2018	$ 2	76,947	(1,283)	(62,341)	(2,343)	10,982
Balance, beginning of period (in shares) at Mar. 31, 2018	18,685,237
Increase (Decrease) in Shareholders' Equity
Issuance of common stock upon vesting of restricted shares (in shares)	67,728
Issuance of common stock upon exercise of stock options		20				20
Issuance of common stock upon exercise of stock options (in shares)	16,050
Stock-based compensation		215				215
Net loss for the period				298		298
Foreign currency translation adjustment					(348)	(348)
Balance, end of period at Jun. 30, 2018	$ 2	77,182	(1,283)	(62,043)	(2,691)	11,167
Balance, end of period (in shares) at Jun. 30, 2018	18,769,015
Balance, beginning of period at Dec. 29, 2018	$ 2	77,396	(1,283)	(63,885)	(2,960)	9,270
Balance, beginning of period (in shares) at Dec. 29, 2018	18,820,602
Increase (Decrease) in Shareholders' Equity
Issuance of common stock upon vesting of restricted shares (in shares)	33,125
Stock-based compensation		48				48
Net loss for the period				(1,398)		(1,398)
Foreign currency translation adjustment					165	165
Balance, end of period at Mar. 30, 2019	$ 2	77,444	(1,283)	(65,283)	(2,795)	8,085
Balance, end of period (in shares) at Mar. 30, 2019	18,853,727
Balance, beginning of period at Dec. 29, 2018	$ 2	77,396	(1,283)	(63,885)	(2,960)	9,270
Balance, beginning of period (in shares) at Dec. 29, 2018	18,820,602
Increase (Decrease) in Shareholders' Equity
Net loss for the period						(1,622)
Foreign currency translation adjustment						213
Balance, end of period at Jun. 29, 2019	$ 2	77,548	(1,283)	(65,507)	(2,747)	8,013
Balance, end of period (in shares) at Jun. 29, 2019	18,926,704
Balance, beginning of period at Mar. 30, 2019	$ 2	77,444	(1,283)	(65,283)	(2,795)	8,085
Balance, beginning of period (in shares) at Mar. 30, 2019	18,853,727
Increase (Decrease) in Shareholders' Equity
Issuance of common stock upon vesting of restricted shares (in shares)	72,977
Stock-based compensation		104				104
Net loss for the period				(224)		(224)
Foreign currency translation adjustment					48	48
Balance, end of period at Jun. 29, 2019	$ 2	$ 77,548	$ (1,283)	$ (65,507)	$ (2,747)	$ 8,013
Balance, end of period (in shares) at Jun. 29, 2019	18,926,704

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 29, 2019

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Basis of Presentation and Principles of Consolidation

All dollar amounts included in the Notes to Condensed Consolidated Financial Statements are in thousands of U.S. dollars, except share and per share amounts.

Revenue Recognition

The Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services.

The Company’s principal activities from which it generates its revenue is product sales. The Company has one reportable segment of business.

A transaction price is the amount of consideration the Company expects to receive under the arrangement. The Company is required to estimate variable consideration (if any) and to factor that estimation into the determination of the transaction price. The Company conducts its business with customers through valid purchase or sales orders each of which is considered a separate contract because individual orders are not interdependent on one another. Product transaction prices on a purchase or sale order are discrete and stand-alone. Purchase or sales orders may be issued under either a customer master service agreement or a reseller allowance agreement. Purchase or sales orders, master service agreements, and reseller allowance agreements which are specific and unique to each customer, may include product price discounts, markdown allowances, return allowances, and/or volume rebates which reduce the consideration due from customers. Variable consideration is estimated using the most likely amount method, which is based on our historical experience as well as current information such as sales forecasts.

Use of Estimates

Trade Receivables

Changes in the allowance for doubtful accounts are as follows:


	For the
	Six months ended
	June 29, 2019		June 30, 2018
Allowance for doubtful accounts, beginning of period	$	304	$	1,622
Charges to costs and expenses, net		34		2,269
Account write-offs		—		—
Allowance for doubtful accounts, end of period	$	338	$	3,891

Inventory Valuation

Leases

The components of a lease should be split into three categories: lease components (e.g., land, building, etc.), non-lease components (e.g., common area maintenance, maintenance, consumables, etc.), and non-components (e.g., property taxes, insurance, etc.). Then the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on fair values to the lease components and non-lease components. Although separation of lease and non-lease components is required, certain practical expedients are available to entities. Entities electing the practical expedient would not separate lease and non-lease components. Rather, they would account for each lease component and the related non-lease component together as a single component. The Company’s facilities operating leases have lease and non-lease components to which the Company has elected to apply the practical expedient and account for each lease component and related non-lease component as one single component. The lease component results in a right-of-use asset being recorded on the balance sheet. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Income Taxes

Net Loss/Income Per Share

Translation of Foreign Currencies

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize most leases on their balance sheet as a right-of-use asset and a lease liability. Leases are classified as either operating or finance, and classification is based on criteria similar to past lease accounting, but without explicit bright lines. In July 2018, the FASB issued ASU No. 2018-10, “Codification Improvements to Topic 842, Leases” (“ASU 2018-10”), which provides narrow amendments to clarify how to apply certain aspects of the new lease standard, and ASU No. 2018-11, “Leases (Topic 842) – Targeted Improvements” (ASU 2018-11), which addresses implementation issues related to the new lease standard. The guidance became effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years.

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

REVENUE

6 Months Ended

Jun. 29, 2019

REVENUE

REVENUE

2. REVENUE

Disaggregation of Revenue

The following is a table that presents net sales by geographical area:


	For the three		For the six months
	months ended		ended
	June 29, 2019		June 29, 2019
United States	$	39,064	$	75,300
All Other		7,361		13,663
Net Sales	$	46,425	$	88,963

All Other consists of Canada, Europe, South America, Mexico, Asia, and the Middle East.

Contract Balances

The Company does not have any contract assets such as work-in-process or contract liabilities such as customer advances. All trade receivables on the Company's condensed consolidated balance sheet are from contracts with customers.

Contract Costs

DEBT

6 Months Ended

Jun. 29, 2019

DEBT

DEBT

3. DEBT

Credit Facilities

Bank of America Credit Facility. On June 28, 2018, the Company and Summer Infant (USA), Inc., as borrowers, entered into a Second Amended and Restated Loan and Security Agreement with Bank of America, N.A., as agent, the financial institutions party to the agreement from time to time as lenders, and certain subsidiaries of the Company as guarantors (as amended, the “Restated BofA Agreement”). The Restated BofA Agreement replaced the Company’s prior credit facility with Bank of America, and provides for a $60,000, asset-based revolving credit facility, with a $5,000 letter of credit sub-line facility. The total borrowing capacity is based on a borrowing base, which is defined as 85% of eligible receivables plus the lesser of (i) 70% of the value of eligible inventory or (ii) 85% of the net orderly liquidation value of eligible inventory, less applicable reserves. The scheduled maturity date of loans under the Restated BofA Agreement is June 28, 2023 (subject to customary early termination provisions). On March 25, 2019, the Company and Summer Infant (USA), Inc., as borrowers, entered into Amendment No. 1 to the Second Amended and Restated Loan and Security Agreement that modified the definitions of Capital Lease, EBITDA, Eligible Account and Revolver Borrowing Base in the Restated BofA Agreement in order to account for FASB mandated changes to lease accounting standards and provide additional financing flexibility to the Company.

Term Loan Agreement. On June 28, 2018, the Company and Summer Infant (USA), Inc., as borrowers, entered into a Term Loan and Security Agreement (as amended, the "Term Loan Agreement") with Pathlight Capital LLC, as agent, each lender from time to time a party to the Term Loan Agreement, and certain subsidiaries of the Company as guarantors, providing for a $17,500 term loan (the "Term Loan"). Proceeds from the Term Loan were used to satisfy existing debt, pay fees and transaction expenses associated with the closing of the Term Loan and may be used to pay obligations under the Term Loan Agreement, and for lawful corporate purposes, including working capital. The Term Loan is secured by a lien on certain assets of the Company, including a first priority lien on intellectual property, machinery and equipment, and a pledge of (i) 100% of the ownership interests of domestic subsidiaries and (ii) 65% of the ownership interests in certain foreign subsidiaries of the Company, and a junior lien on certain assets subject to the liens under the Restated BofA Agreement described above. The Term Loan matures on June 28, 2023. Summer Infant Canada Limited and Summer Infant Europe Limited, subsidiaries of the Company, are guarantors under the Term Loan Agreement. On March 25, 2019, the Company and Summer Infant (USA), Inc., as borrowers, entered into Amendment No. 1 to the Term Loan and Security Agreement that modified definitions consistent with the amendment of the Restated BofA Agreement and also modified the IP Advance Rate Reduction Amount definition in order to provide additional financing flexibility to the Company.

As of June 29, 2019, the interest rate on the Term Loan was 11.52%. The amount outstanding on the Term Loan at June 29, 2019 was $16,844.

Aggregate maturities of bank debt related to the Restated BofA Agreement and the Term Loan Agreement:


Fiscal Year ending:
2019		438
2020		875
2021		875
2022		875
2023 and thereafter	$	51,493
Total	$	54,556

Unamortized debt issuance costs were $2,432 at June 29, 2019 and $2,395 at December 29, 2018, and are presented as a direct deduction of long-term debt on the consolidated balance sheets.

INTANGIBLE ASSETS

6 Months Ended

Jun. 29, 2019

INTANGIBLE ASSETS

INTANGIBLE ASSETS

4. INTANGIBLE ASSETS

Intangible assets consisted of the following:


	June 29,		December 29,
	2019		2018
Brand names	$	11,819	$	11,819
Patents and licenses		3,880		3,766
Customer relationships		6,946		6,946
Other intangibles		1,882		1,882
		24,527		24,413
Less: Accumulated amortization		(11,483)		(11,113)
Intangible assets, net	$	13,044	$	13,300

COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 29, 2019

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

5. COMMITMENTS AND CONTINGENCIES

Leases

The Company identified and assessed the following significant assumptions in recognizing the right-of-use asset and corresponding liabilities:

Expected lease term – The expected lease term includes both contractual lease periods and, when applicable, cancelable option periods when it is reasonably certain that the Company would exercise such options. These leases have remaining lease terms between 7 months and 4 years. The Canada lease has one 5-year extension option that has also not been included in the lease term.

Incremental borrowing rate – The Company’s lease agreements do not provide an implicit rate. As the Company does not have any external borrowings for comparable terms of its leases, the Company estimated the incremental borrowing rate based on secured borrowings available to the Company for the next 5 years. This is the rate the Company would have to pay if borrowing on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment.

Lease and non-lease components – In certain cases the Company is required to pay for certain additional charges for operating costs, including insurance, maintenance, taxes, and other costs incurred, which are billed based on both usage and as a percentage of the Company’s share of total square footage. The Company determined that these costs are non-lease components and they are not included in the calculation of the lease liabilities because they are variable. Payments for these variable, non-lease components are considered variable lease costs and are recognized in the period in which the costs are incurred.

The components of the Company’s lease expense for the three and six months ended June 29, 2019 were as follows:


			Three Months Ended		Six Months Ended
			June 29, 2019		June 29, 2019
Operating lease cost			$	624	$	1,247
Variable lease cost				270		644
Total lease cost			$	894	$	1,891
Weighted-average remaining lease term	2.57	years
Weighted Average discount rate:	5.00	%

Cash paid for amounts included in the measurement of the Company’s lease liabilities were $1,298 for the six months ended June 29, 2019.

As of June 29, 2019, the present value of maturities of the Company’s operating lease liabilities were as follows:


Fiscal Year Ending:
2019	$	1,294
2020		2,550
2021		2,041
2022		319
2023		153
Less imputed interest		(407)
Total	$	5,950

Disclosures related to periods prior to adoption of the new lease standard:

Under ASC 840, approximate future minimum rental payments due under these leases as of June 29, 2019 were as follows:


Fiscal Year Ending:
2019	$	2,627
2020		2,556
2021		2,048
2022		323
2023 and beyond		154
Total (a)	$	7,708

(a)

Amounts exclude payments for sales-leaseback transaction of the Woonsocket headquarters.

Litigation

SHARE BASED COMPENSATION

6 Months Ended

Jun. 29, 2019

SHARE BASED COMPENSATION

SHARE BASED COMPENSATION

6. SHARE BASED COMPENSATION

As of June 29, 2019, there were 1,213,660 stock options outstanding and 292,275 unvested restricted shares outstanding.


	For the Six		For the Six
	Months Ended		Months Ended
	June 29, 2019		June 30, 2018
Expected life (in years)	4.8		4.9
Risk-free interest rate	2.34	%	2.68	%
Volatility	64.2	%	64.0	%
Dividend yield	0	%	0	%
Forfeiture rate	24.2	%	23.1	%

As of June 29, 2019, there were 516,218 shares available to grant under the 2012 Plan.

WEIGHTED AVERAGE COMMON SHARES	6 Months Ended
WEIGHTED AVERAGE COMMON SHARES	Jun. 29, 2019
WEIGHTED AVERAGE COMMON SHARES
WEIGHTED AVERAGE COMMON SHARES	7. WEIGHTED AVERAGE COMMON SHARES Basic and diluted earnings or loss per share (“EPS”) is based upon the weighted average number of common shares outstanding during the period. Diluted weighted average number of common shares outstanding also included common stock equivalents such as stock options and restricted shares. The Company does not include the anti-dilutive effect of common stock equivalents in the calculation of dilutive common shares outstanding. The computation of diluted common shares for the three and six months ended June 29, 2019 excluded 1,213,660 stock options and 292,275 shares of restricted stock outstanding. The computation of diluted common shares for the three and six months ended June 30, 2018 excluded 1,188,010 stock options and 321,000 shares of restricted stock outstanding and 1,188,010 stock options and 356,766 shares of restricted stock outstanding, respectively.

SUBSEQUENT EVENTS	6 Months Ended
SUBSEQUENT EVENTS	Jun. 29, 2019
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS	8. SUBSEQUENT EVENTS The Company has evaluated subsequent events through the filing date of this Quarterly Report on Form 10-Q and determined that no subsequent events occurred that would require recognition in the consolidated financial statements or disclosure in the notes thereto.

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 29, 2019

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

The Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services.

The Company’s principal activities from which it generates its revenue is product sales. The Company has one reportable segment of business.

Use of Estimates

Trade Receivables

Changes in the allowance for doubtful accounts are as follows:


	For the
	Six months ended
	June 29, 2019		June 30, 2018
Allowance for doubtful accounts, beginning of period	$	304	$	1,622
Charges to costs and expenses, net		34		2,269
Account write-offs		—		—
Allowance for doubtful accounts, end of period	$	338	$	3,891

Inventory Valuation

Leases

Income Taxes

Net Loss/Income Per Share

Translation of Foreign Currencies

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize most leases on their balance sheet as a right-of-use asset and a lease liability. Leases are classified as either operating or finance, and classification is based on criteria similar to past lease accounting, but without explicit bright lines. In July 2018, the FASB issued ASU No. 2018-10, “Codification Improvements to Topic 842, Leases” (“ASU 2018-10”), which provides narrow amendments to clarify how to apply certain aspects of the new lease standard, and ASU No. 2018-11, “Leases (Topic 842) – Targeted Improvements” (ASU 2018-11), which addresses implementation issues related to the new lease standard. The guidance became effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years.

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Jun. 29, 2019

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Summary of changes in the allowance for doubtful accounts

Changes in the allowance for doubtful accounts are as follows:


	For the
	Six months ended
	June 29, 2019		June 30, 2018
Allowance for doubtful accounts, beginning of period	$	304	$	1,622
Charges to costs and expenses, net		34		2,269
Account write-offs		—		—
Allowance for doubtful accounts, end of period	$	338	$	3,891

REVENUE (Tables)

6 Months Ended

Jun. 29, 2019

REVENUE

Schedule of net sales by geographical area


	For the three		For the six months
	months ended		ended
	June 29, 2019		June 29, 2019
United States	$	39,064	$	75,300
All Other		7,361		13,663
Net Sales	$	46,425	$	88,963

DEBT (Tables)

6 Months Ended

Jun. 29, 2019

DEBT

Schedule of aggregate maturities of bank debt


Fiscal Year ending:
2019		438
2020		875
2021		875
2022		875
2023 and thereafter	$	51,493
Total	$	54,556

INTANGIBLE ASSETS (Tables)

6 Months Ended

Jun. 29, 2019

INTANGIBLE ASSETS

Schedule of intangible assets


	June 29,		December 29,
	2019		2018
Brand names	$	11,819	$	11,819
Patents and licenses		3,880		3,766
Customer relationships		6,946		6,946
Other intangibles		1,882		1,882
		24,527		24,413
Less: Accumulated amortization		(11,483)		(11,113)
Intangible assets, net	$	13,044	$	13,300

COMMITMENTS AND CONTINGENCIES (Tables)

6 Months Ended

Jun. 29, 2019

COMMITMENTS AND CONTINGENCIES

Schedule of lease expense

The components of the Company’s lease expense for the three and six months ended June 29, 2019 were as follows:


			Three Months Ended		Six Months Ended
			June 29, 2019		June 29, 2019
Operating lease cost			$	624	$	1,247
Variable lease cost				270		644
Total lease cost			$	894	$	1,891
Weighted-average remaining lease term	2.57	years
Weighted Average discount rate:	5.00	%

Schedule of maturities of the operating lease liabilities

As of June 29, 2019, the present value of maturities of the Company’s operating lease liabilities were as follows:


Fiscal Year Ending:
2019	$	1,294
2020		2,550
2021		2,041
2022		319
2023		153
Less imputed interest		(407)
Total	$	5,950

Schedule of approximate future minimum rental payments due under leases

Under ASC 840, approximate future minimum rental payments due under these leases as of June 29, 2019 were as follows:


Fiscal Year Ending:
2019	$	2,627
2020		2,556
2021		2,048
2022		323
2023 and beyond		154
Total (a)	$	7,708

(a)

Amounts exclude payments for sales-leaseback transaction of the Woonsocket headquarters.

SHARE BASED COMPENSATION (Tables)

6 Months Ended

Jun. 29, 2019

SHARE BASED COMPENSATION

Summary of weighted average assumptions used for stock options granted


	For the Six		For the Six
	Months Ended		Months Ended
	June 29, 2019		June 30, 2018
Expected life (in years)	4.8		4.9
Risk-free interest rate	2.34	%	2.68	%
Volatility	64.2	%	64.0	%
Dividend yield	0	%	0	%
Forfeiture rate	24.2	%	23.1	%

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue Recognition and Trade Receivables (Details) $ in Thousands	6 Months Ended
	Jun. 29, 2019 USD ($) segment	Jun. 30, 2018 USD ($)
Revenue Recognition
Number of reportable segment \| segment	1
Days in accounts receivable	P60D
Changes in the allowance for doubtful accounts
Allowance for doubtful accounts, beginning of period	$ 304	$ 1,622
Charges to costs and expenses	34	2,269
Allowance for doubtful accounts, end of period	$ 338	$ 3,891

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Recently Issued Accounting Pronouncements (Details) - USD ($) $ in Thousands	Jun. 29, 2019	Dec. 31, 2018
Leases
Operating lease, right-to-use asset	$ 5,396
Operating lease liability	$ 5,950
2016-02 \| Adjustment
Leases
Operating lease, right-to-use asset		$ 6,411
Operating lease liability		$ 7,037

REVENUE (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
REVENUE (Details) - USD ($) $ in Thousands	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Net sales by geographical area
Net sales	$ 46,425	$ 47,678	$ 88,963	$ 89,733
Election of practical expedient, incremental cost of obtaining contracts			true
United States
Net sales by geographical area
Net sales	39,064		$ 75,300
All Other
Net sales by geographical area
Net sales	$ 7,361		$ 13,663

DEBT - Bank of America Credit Facility (Details) $ in Thousands		6 Months Ended
	Jun. 28, 2018 USD ($)	Jun. 29, 2019 USD ($)	Jun. 27, 2018 USD ($)
Restated Bank of America Agreement \| Credit Facility
DEBT
Amount outstanding on credit facility		$ 37,712
Borrowing capacity		45,854
Borrowing availability		$ 8,142
Restated Bank of America Agreement \| Credit Facility \| Minimum
DEBT
Fixed charge coverage ratio	1.0
Restated Bank of America Agreement \| Credit Facility \| LIBOR
DEBT
Interest rate during the period		4.50%
Restated Bank of America Agreement \| Credit Facility \| Base rate
DEBT
Interest rate during the period		6.50%
Restated Bank of America Agreement \| Revolving Facility
DEBT
Maximum borrowing capacity	$ 60,000
Borrowing base as a percentage of eligible receivables	85.00%
Borrowing base as a percentage of eligible inventory	70.00%
Borrowing base as a percentage of net orderly liquidation value of eligible inventory and less reserves	85.00%
Restated Bank of America Agreement \| Letter of Credit
DEBT
Maximum borrowing capacity	$ 5,000
Prior Credit Facility \| Revolving Facility
DEBT
Maximum borrowing capacity			$ 60,000
Borrowing base as a percentage of eligible receivables			85.00%
Borrowing base as a percentage of eligible inventory			70.00%
Borrowing base as a percentage of net orderly liquidation value of eligible inventory and less reserves			85.00%
Prior Credit Facility \| Letter of Credit
DEBT
Maximum borrowing capacity			$ 10,000
Prior Credit Facility \| FILO Facility
DEBT
Maximum borrowing capacity			5,000
Prior Credit Facility \| Term Loan Facility
DEBT
Maximum borrowing capacity			$ 10,000

DEBT - Term Loan Agreement (Details) $ in Thousands	Jun. 28, 2018 USD ($)	Jun. 29, 2019 USD ($)	Dec. 29, 2018 USD ($)
DEBT
Unamortized debt issuance costs		$ 2,432	$ 2,395
Term Loan
DEBT
Face amount of loan	$ 17,500
Percentage of ownership interests of domestic subsidiaries pledged	100.00%
Percentage of ownership interests of foreign subsidiaries pledged	65.00%
Quarterly basis installment amount	$ 219
Interest rate on borrowings		11.52%
Amount outstanding		$ 16,844
Term Loan \| Minimum
DEBT
Fixed charge coverage ratio	1.0
Term Loan \| LIBOR
DEBT
Interest rate basis	LIBOR
Applicable margin (as a percent)	9.00%

DEBT - Aggregate maturities (Details) - USD ($) $ in Thousands	Jun. 29, 2019	Dec. 29, 2018
Aggregate maturities of bank debt
2019	$ 438
2020	875
2021	875
2022	875
2023 and thereafter	51,493
Total	54,556
Unamortized debt issuance costs	$ 2,432	$ 2,395

INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	6 Months Ended
INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	Jun. 29, 2019	Dec. 29, 2018
INTANGIBLE ASSETS
Intangible assets, gross	$ 24,527	$ 24,413
Less: Accumulated amortization	(11,483)	(11,113)
Intangible assets, net	13,044	13,300
Intangibles not subject to amortization	$ 8,400	8,400
Minimum
INTANGIBLE ASSETS
Amortization period of intangible assets	5 years
Maximum
INTANGIBLE ASSETS
Amortization period of intangible assets	20 years
Patents and licenses
INTANGIBLE ASSETS
Intangible assets, gross	$ 3,880	3,766
Customer relationships
INTANGIBLE ASSETS
Intangible assets, gross	6,946	6,946
Other intangibles
INTANGIBLE ASSETS
Intangible assets, gross	1,882	1,882
Brand names
INTANGIBLE ASSETS
Intangible assets, gross	$ 11,819	$ 11,819

COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands	3 Months Ended		6 Months Ended
COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands	Jun. 29, 2019 USD ($) item	Jun. 30, 2018 USD ($)	Jun. 29, 2019 USD ($) item	Jun. 30, 2018 USD ($)
Leases
Term of secured borrowings used to estimate incremental borrowing rate (in years)			5 years
Cash paid for amounts included in the measurement of the Company's lease liabilities			$ 1,298
Components of the lease expense (Topic 842)
Operating lease cost	$ 624		1,247
Variable lease cost	270		644
Total lease cost	$ 894		$ 1,891
Weighted-average remaining lease term (in years)	2 years 6 months 26 days		2 years 6 months 26 days
Weighted Average discount rate:	5.00%		5.00%
Maturities of the operating lease liabilities (Topic 842)
2019	$ 1,294		$ 1,294
2020	2,550		2,550
2021	2,041		2,041
2022	319		319
2023	153		153
Less imputed interest	(407)		(407)
Total	5,950		5,950
Leases recorded under Topic 840
Total rent expense		$ 613		$ 1,225
Future minimum rental payments (Topic 840)
2019	2,627		2,627
2020	2,556		2,556
2021	2,048		2,048
2022	323		323
2023 and beyond	154		154
Total	$ 7,708		$ 7,708
Minimum
Leases
Remaining lease term (in years)	7 months		7 months
Maximum
Leases
Remaining lease term (in years)	4 years		4 years
Canada
Leases
Operating lease, option to extend			True
Number of options to extend \| item	1		1
Extension term (in years)	5 years		5 years

SHARE BASED COMPENSATION - Summary of Plans and Stock Option Info (Details) - 2012 Plan - USD ($) $ in Thousands	6 Months Ended
	Jun. 29, 2019	Jun. 30, 2018
SHARE BASED COMPENSATION
Number of shares authorized under the plan	1,700,000
Shares available to grant	516,218
Weighted average assumptions
Expected life (in years)	4 years 9 months 18 days	4 years 10 months 24 days
Risk-free interest rate	2.34%	2.68%
Volatility	64.20%	64.00%
Dividend yield	0.00%	0.00%
Forfeiture rate	24.20%	23.10%
General and Administrative Expense
SHARE BASED COMPENSATION
Share-based compensation expense	$ 152	$ 314
Stock Options
SHARE BASED COMPENSATION
Stock options outstanding (in shares)	1,213,660
Stock options granted during the period (in shares)	237,000
Restricted Stock Awards
SHARE BASED COMPENSATION
Unvested restricted shares outstanding	292,275
Granted (in shares)	169,500

WEIGHTED AVERAGE COMMON SHARES (Details) - shares	3 Months Ended		6 Months Ended
WEIGHTED AVERAGE COMMON SHARES (Details) - shares	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Stock Options
WEIGHTED AVERAGE COMMON SHARES
Anti-dilutive securities excluded from the computation of diluted earnings per share (in shares)	1,213,660	1,188,010	1,213,660	1,188,010
Restricted Stock Awards
WEIGHTED AVERAGE COMMON SHARES
Anti-dilutive securities excluded from the computation of diluted earnings per share (in shares)	292,275	321,000	292,275	356,766