10-Q

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 27, 2020

¨ 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 ¨

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 ¨

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

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer x	Smaller reporting company x
	Emerging growth company ¨

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

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

As of August 10, 2020, there were 2,114,103 shares outstanding of the registrant’s Common Stock, $0.0001 par value per share.

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 27, 2020 (unaudited) and December 28, 2019	1
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 27, 2020 and June 29, 2019 (unaudited)	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 27, 2020 and June 29, 2019 (unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 27, 2020 and June 29, 2019 (unaudited)	4
	Condensed Consolidated Statements of Stockholder’s Equity for the Six Months Ended June 27, 2020 and June 29, 2019 (unaudited)	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
Part II.	Other Information	22
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Mine Safety Disclosures	23
Item 5.	Other Information	23
Item 6.	Exhibits	24
Exhibit Index		25
Signatures		26

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 27, 2020			December 28, 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	848		$	395
Trade receivables, net of allowance for doubtful accounts		28,040			32,787
Inventory, net		18,833			28,056
Prepaid and other current assets		3,890			2,946
TOTAL CURRENT ASSETS		51,611			64,184
Property and equipment, net		5,684			8,788
Other intangible assets, net		12,714			12,896
Right to use assets, noncurrent		4,835			4,578
Deferred tax assets, net		1,248			996
Other assets		96			101
TOTAL ASSETS	$	76,188		$	91,543
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	24,252		$	25,396
Accrued expenses		8,269			7,289
Lease liabilities, current		2,816			2,495
Current portion of long term debt		438			875
TOTAL CURRENT LIABILITIES		35,775			36,055
Long-term debt, less current portion and unamortized debt issuance costs		32,380			45,359
Lease liabilities, noncurrent		2,349			2,546
Other liabilities		—			2,000
TOTAL LIABILITIES		70,504			85,960
STOCKHOLDERS’ EQUITY
Preferred Stock, $0.0001 par value, 1,000,000 authorized, none issued or outstanding at June 27, 2020 and December 28, 2019, respectively		—			—
Common Stock $0.0009 par value, authorized, issued and outstanding of 5,444,445, 2,144,288 and 2,114,103 at June 27, 2020 and 5,444,445, 2,138,928, and 2,108,743 at December 28, 2019, respectively		2			2
Treasury Stock at cost (30,185 shares at June 27, 2020 and December 28, 2019)		(1,283	)		(1,283	)
Additional paid-in capital		77,746			77,715
Accumulated deficit		(69,011	)		(69,088	)
Accumulated other comprehensive loss		(1,770	)		(1,763	)
TOTAL STOCKHOLDERS’ EQUITY		5,684			5,583
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	76,188		$	91,543

See notes to condensed consolidated financial statements

1

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 27, 2020		June 29, 2019			June 27, 2020		June 29, 2019
Net sales	$	38,214	$	46,425		$	78,552	$	88,963
Cost of goods sold		24,175		31,583			52,010		60,671
Gross profit		14,039		14,842			26,542		28,292
General & administrative expenses		6,729		8,523			14,876		17,902
Selling expenses		3,738		4,031			7,182		7,384
Depreciation and amortization		813		952			1,780		1,889
Operating income		2,759		1,336			2,704		1,117
Interest expense		1,121		1,293			2,531		2,542
Income (loss) before provision for income taxes		1,638		43			173		(1,425	)
Provision for income taxes		351		267			96		197
Net income (loss)	$	1,287	$	(224	)	$	77	$	(1,622	)
Net income (loss) per share:
BASIC	$	0.61	$	(0.11	)	$	0.04	$	(0.77	)
DILUTED	$	0.61	$	(0.11	)	$	0.04	$	(0.77	)
Weighted average shares outstanding:
BASIC		2,111,319		2,099,927			2,110,292		2,096,234
DILUTED		2,111,429		2,099,927			2,110,370		2,096,234

See notes to condensed consolidated financial statements.

2

Summer Infant, Inc.

Condensed Consolidated Statements of Comprehensive Income (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 27, 2020		June 29, 2019			June 27, 2020			June 29, 2019
Net income (loss)	$	1,287	$	(224	)	$	77		$	(1,622	)
Other comprehensive income (loss):
Changes in foreign currency translation adjustments		48		48			(7	)		213
Comprehensive income (loss)	$	1,335	$	(176	)	$	70		$	(1,409	)

See notes to condensed consolidated financial statements.

3

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 27, 2020			June 29, 2019
Cash flows from operating activities:
Net income (loss)	$	77		$	(1,622	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		1,780			1,855
Stock-based compensation expense		31			152
Write off of unamortized deferred financing costs		266			—
Provision for allowance for doubtful accounts		20			34
Amortization of right to use asset		1,201			1,030
Changes in assets and liabilities:
Decrease (increase) in trade receivables		4,638			(4,553	)
Decrease in inventory		9,138			3,725
Decrease in lease liability		(1,333	)		(1,102	)
Increase in prepaids and other assets		(910	)		(220	)
Decrease in accounts payable and accrued expenses		(362	)		(4,416	)
Net cash provided by (used in) operating activities		14,546			(5,117	)
Cash flows from investing activities:
Acquisitions of property and equipment		(864	)		(1,416	)
Acquisitions of other intangible assets		(57	)		(114	)
Net cash used in investing activities		(921	)		(1,530	)
Cash flows from financing activities:
Repayment of Term Loan Facility		—			(438	)
Net (repayment) borrowings on revolving facilities		(13,270	)		7,043
Net cash (used in) provided by financing activities		(13,270	)		6,608
Effect of exchange rate changes on cash and cash equivalents		98			(102	)
Net increase (decrease) in cash and cash equivalents		453			(141	)
Cash and cash equivalents, beginning of period		395			721
Cash and cash equivalents, end of period	$	848		$	580
Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,643		$	2,034
Cash paid for income taxes	$	2		$	5
Supplemental disclosure of non-cash investing and financing activities:
Derecognition of a building sale-leaseback fixed asset, net of depreciation	$	2,357		$	—
Derecognition of a building sale-leaseback financial obligation	$	(2,390	)	$	—
Right-of-use asset acquired through new operating lease	$	(1,457	)	$	—
Lease liability acquired through new operating lease	$	1,457		$	—

See notes to condensed consolidated financial statements.

4

Summer Infant, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

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			Accumulated			Accumulated Comprehensive			Total
	Shares		Amount		Capital			Stock			Deficit			Loss			Equity
Balance at December 29, 2018		2,091,178	$	2	$	77,396		$	(1,283	)	$	(64,924	)	$	(1,921	)	$	9,270
Issuance of common stock upon vesting of restricted shares		3,681
Stock-based compensation, net of forfeitures						48												48
Net loss for the period												(1,398	)					(1,398	)
Foreign currency translation adjustment															165			165
Balance at March 30, 2019		2,094,859	$	2	$	77,444		$	(1,283	)	$	(66,322	)	$	(1,756	)	$	8,085
Issuance of common stock upon vesting of restricted shares		8,109
Stock-based compensation, net of forfeitures						104												104
Net loss for the period												(224	)					(224	)
Foreign currency translation adjustment															48			48
Balance at June 29, 2019		2,102,968	$	2	$	77,548		$	(1,283	)	$	(65,507	)	$	(2,747	)	$	8,013
Balance at December 28, 2019		2,108,743	$	2	$	77,715		$	(1,283	)	$	(69,088	)	$	(1,763	)	$	5,583
Issuance of common stock upon vesting of restricted shares		1,064
Fractional share issuance upon reverse stock split		1,620
Stock-based compensation, net of forfeitures						(11	)											(11	)
Net loss for the period												(1,210	)					(1,210	)
Foreign currency translation adjustment															(55	)		(55	)
Balance at March 28, 2020		2,111,427	$	2	$	77,704		$	(1,283	)	$	(70,298	)	$	(1,818	)	$	4,307
Issuance of common stock upon vesting of restricted shares		2,676
Stock-based compensation, net of forfeitures						42												42
Net income for the period												1,287						1,287
Foreign currency translation adjustment															48			48
Balance at June 27, 2020		2,114,103		2		77,746			(1,283	)		(69,011	)		(1,770	)		5,684

5

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 free^TM. 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 28, 2019 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 28, 2019 included in its Annual Report on Form 10-K filed with the SEC on March 18, 2020, as amended on April 24, 2020.

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.

In March 2020, the Company completed a 1-for-9 reverse stock split of the Company's issued and outstanding shares of common stock in order to regain compliance with Nasdaq's minimum bid price requirement. Accordingly, all information in the financial statements and accompanying notes included within this Quarterly Report on Form 10-Q have been adjusted retrospectively to give effect to the reverse stock split as if it occurred at the beginning of the first period presented.

Reclassification

Previously reported amounts have been revised in the accompanying condensed consolidated statement of cash flows to properly state certain right to use assets and lease liabilities. These revisions had no impact on the company’s net cash provided by or used in operating activites.

Revenue Recognition

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

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.

6

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.

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 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 27, 2020		June 29, 2019
Allowance for doubtful accounts, beginning of period	$	542	$	304
Charges to costs and expenses, net		20		34
Account write-offs		—		—
Allowance for doubtful accounts, end of period	$	562	$	338

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.

7

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.

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 ROU 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 and six months ended June 27, 2020 and for the three and six months ended June 29, 2019 as it believes the discrete method results in a more accurate representation of the income tax provision for the periods.

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.

On March 27, 2020, the U.S. CARES Act was enacted, which provided a substantial tax-and-spending package intended to provide additional economic stimulus to address the impact of the COVID-19 pandemic. The U.S. CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain refundable employee retention credits. As a result of the U.S. CARES Act tax law changes, we recognized a $262 tax benefit related to the increase in interest deduction occurring during the fiscal year ended December 28, 2019 which was fully reserved for. The impact of the CARES Act in prospective periods may differ from our estimate as of June 27, 2020 due to changes in interpretations and assumptions, guidance that may be issued and actions the Company may take in response to the CARES Act. The CARES Act is highly detailed, and the Company will continue to assess the impact that various provisions will have on its business.

Net Loss/Income Per Share

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

8

Translation of Foreign Currencies

Assets and liabilities of the Company’s foreign subsidiaries 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. Assets and liabilities of the Company’s foreign subsidiaries whose functional currency is the U.S. dollar are remeasured into U.S. dollars at the their historical rates or the exchange rate in effect at the end of the quarter and the income and expense accounts of these affiliates have been remeasured at average rates prevailing during each respective quarter. Resulting remeasurement adjustments are made to the condensed consolidated statement of operations. Foreign exchange transaction gains and losses are included in the accompanying interim condensed consolidated statement of operations.

2020 Plan and COVID-19 Pandemic

In March 2020, the COVID-19 outbreak was declared a global pandemic and became widespread in the U.S. While our products are considered “essential” and our distribution center located in California continues to operate, some of our customers have been impacted and, to the extent they operated retail stores, have been required to close their stores and curtail operations. We began to see an impact on orders at the end of March and may continue to see lower demand in the near term as governmental restrictions on businesses remain in place. Due to the uncertainty with respect to when governmental restrictions may be lifted and the widespread nature of the pandemic, we cannot currently predict how it will impact our business in the long term.  The Company is not currently aware of any events or circumstances arising from the COVID-19 pandemic that would require us to update any estimates, judgments or materially revise the carrying value of our assets or liabilities. The Company’s estimates may change, however, as events evolve and additional information is obtained, and any such changes will be recognized in the condensed consolidated financial statements.

Beginning in the first quarter of 2020, the Company implemented various restructuring initiatives to streamline operations and support its liquidity needs, including headcount reductions, reductions in facility space, and other cost reductions, as well as working with its lenders to amend its credit facility and term loan agreement to undertake these restructuring initiatives and to provide availability.  In addition, the Company has begun taking actions to mitigate the impact of the expiration in August 2020 of tariff exclusions previously granted with respect to certain of its products, including seeking price increases from its customers and alternative manufacturing sources.  In light of the ongoing uncertainty surrounding the COVID-19 pandemic in the U.S. and other countries and unpredictable economic consequences in the coming months, the Company applied for and in August 2020, received a loan through the Paycheck Protection Program of the U.S. CARES Act in the amount of $1,955, which may be used  to fund certain qualified expenses, including payroll costs, rent and utility costs. The Company believes that its existing plan will generate sufficient cash which, along with its existing cash and availability under its facilities, will enable it to fund operations through at least the next 12 months. To the extent the Company experiences unexpected impacts from the COVID-19 pandemic or is unable to meet its current financial forecast, the Company would take further action to reduce costs, mitigate risks to its supply chain and, if necessary, seek to raise additional funds through debt or equity financings, restructure our existing debt, engage in strategic collaborations, and/or a strategic transaction.

2.REVENUE RECOGNITION

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.

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

	For the three months ended June 27, 2020		For the three months ended June 29, 2019
United States	$	35,800	$	39,064
All Other		2,414		7,361
Net Sales	$	38,214	$	46,425

	For the six months ended June 27, 2020		For the nine months ended June 29, 2019
United States	$	71,578	$	75,300
All Other		6,974		13,663
Net Sales	$	78,552	$	88,963

9

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 three and six months ended June 27, 2020 and three and six months ended June 29, 2019 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 through August 2020 (as amended, the “Restated BofA Agreement”). The Restated BofA Agreement replaced the Company’s prior credit facility with Bank of America, and provides for an asset-based revolving credit facility with a letter of credit sub-line facility. As of June 27, 2020, total revolver commitments under the credit facility were $48,000. 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). As a result of the amendments made to the Restated BofA Agreement in the first and second quarters of 2020, (i) the definition of Financial Covenant Trigger Amount was modified, (ii) the lenders' aggregate revolver commitments were reduced to $48,000, (iii) the definition of EBITDA was amended to exclude certain fees and expenses, (iv) the Company is required to meet certain minimum net sales amounts for each period of three consecutive fiscal months through the three-month period ending December 31, 2020, (v) the Company is required to meet a certain minimum EBITDA (as defined in the Restated BofA Agreement) as of the end of each fiscal month, calculated on a trailing 12-month basis, (vi) the applicable margin and applicable unused line fee rate were increased, (vii) a LIBOR floor of 0.75% was added, and (viii) certain reporting requirements were modified.

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. The Company is also required to meet certain financial covenants through the end of fiscal 2020, specifically (a) a minimum net sales amount for each period of three consecutive fiscal months, measured at the end of each month, and (b) a trailing, 12-month minimum adjusted EBITDA amount (as defined in the Restated BofA Agreement), measured at the end of each fiscal month. In addition, if availability falls below agreed minimum amounts, 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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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, the lenders may declare all of the obligations of the Company and its subsidiaries under the Restated BofA Agreement immediately due and payable. For events of default relating to insolvency and receivership, all outstanding obligations automatically become due and payable without any action on the part of the lenders.

As of June 27, 2020, under the Restated BofA Agreement, the rate on base-rate loans was 5.75% and the rate on LIBOR-rate loans was 4.25%. The amount outstanding on the Restated BofA Agreement at June 27, 2020, was $18,752 and borrowing availability was $7,493.

The amendments executed in the six months ended June 27, 2020 were evaluated to determine the proper accounting treatment for the transactions. Accordingly, debt extinguishment accounting was used to account for the reduction in the total revolver commitments under the credit facility, resulting in the write off of $266 in remaining unamortized deferred financing costs during the three months ended March 28, 2020.

On July 14, 2020, the Company entered into a letter agreement with Bank of America, N.A. as agent and lender and Pathlight Capital LLC, as agent for the Term Loan Lender that increased the maximum percentage of accounts owing from the Amazon Companies that may be included as eligible accounts under the Restated BofA Agreement for 120 days. In addition, on August 10, 2020, the Company entered into Amendment No. 6 to the Restated BofA Agreement with respect to the PPP Loan. See Note 9 for information regarding the letter agreement and Amendment No. 6.

Term Loan Agreement. On June 28, 2018, the Company and Summer Infant (USA), Inc., as borrowers, entered into a Term Loan and Security Agreement with Pathlight Capital LLC, as agent, each lender from time to time a party thereto, and certain subsidiaries of the Company as guarantors, as amended through August 2020 (as amended, the “Term Loan Agreement”) 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. As a result of the amendments made to the Term Loan Agreement in the first and second quarters of 2020, (i) the definition of IP Advance Rate Reduction was modified, (ii) the definition of Term Loan Borrowing Base was modified to deduct a specified equipment reserve amount from the calculation of the borrowing base, (iii) the definitions of Financial Covenant Trigger Amount and EBITDA were amended consistent with the Restated BofA Agreement, (iv) consistent with the Restated BofA Agreement, the Company is required to meet certain minimum net sales amounts for each period of three consecutive fiscal months through the three-month period ending December 31, 2020 and certain minimum EBITDA as of the end of each fiscal month, calculated on a trailing 12-month period, (v) principal payments on the term loan were suspended for 2020, such payments to resume in March 2021, (vi) a LIBOR floor of 0.75% was added, and (vii) certain reporting requirements were modified. In addition, as described below, beginning March 10, 2020, the Term Loan began to bear additional interest, to be paid in kind ("PIK interest") at an annual rate of 4.0%.

The principal of the Term Loan is being 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. In connection with the March 2020 amendment, principal payments on the Term Loan were suspended for 2020, to resume in March 2021. The Term Loan bears interest at an annual rate equal to LIBOR, plus 9.0%. Cash interest payments are due monthly, in arrears. In addition, the Term Loan began to accrue PIK (payment in kind) interest at an annual rate of 4.0% in March 2020, which interest will become payable upon the earlier to occur of (i) the repayment of the Term Loan in full, (ii) a sale or merger of the Company, (iii) the occurrence of default or event of default under the Term Loan Agreement, or (iv) the Company achieving adjusted EBITDA of $12 million (calculated on a trailing, 12-month basis). If, and only if, the PIK interest becomes due and payable as a result of the Company achieving the adjusted EBITDA event noted in clause (iv), then the Company will pay all PIK interest then due and thereafter, PIK interest will continue to accrue and be paid on each subsequent anniversary of such event. Obligations under the Term Loan Agreement are also subject to a prepayment penalty if the Term Loan is repaid prior to the third anniversary of the closing of the Term Loan.

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The Term Loan Agreement contains customary affirmative and negative covenants that are substantially the same as the Restated BofA Agreement. Consistent with the Restated BofA Agreement, the Company is also required to meet certain financial covenants through the end of fiscal 2020, specifically (a) a minimum net sales amount for each period of three consecutive fiscal months, measured at the end of each month, and (b) a trailing, 12-month minimum adjusted EBITDA amount (as defined in the Restated BofA Agreement), measured at the end of each fiscal month. In addition, consistent with the Restated BofA Agreement, if availability falls below a specified amount as described above, 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, the lenders may declare all of the obligations of the Company and its subsidiaries under the Term Loan Agreement immediately due and payable. For events of default relating to insolvency and receivership, all outstanding obligations automatically become due and payable without any action on the part of the lenders.

As of June 27, 2020, the interest rate on the Term Loan was 9.75% of cash interest and 4.0% of PIK interest. The amount outstanding on the Term Loan at June 27, 2020 was $16,406 and $201 of accrued PIK interest.

On August 10, 2020, the Company entered into Amendment No. 5 to the Term Loan Agreement with respect to the PPP Loan. See Note 9 for information regarding Amendment No. 5.

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

Fiscal Year ending:
2020		—
2021		875
2022		875
2023 and thereafter	$	33,408
Total	$	35,158

Unamortized debt issuance costs were $2,340 at June 27, 2020 and $2,398 at December 28, 2019, and are presented as a direct deduction of long-term debt on the condensed consolidated balance sheets.

4.        PROPERTY AND EQUIPMENT

Property and equipment, at cost, consisted of the following:

	For the
	fiscal year ended				Depreciation/
	June 27, 2020		December 28, 2019		Amortization Period
Computer-related		4,531	$	4,511		5 years
Tools, dies, prototypes, and molds		28,093		27,457		1 - 5 years
Building		0		4,156		30 years
Other		7,636		7,474		1 - 15 years
		40,260		43,598
Less: accumulated depreciation		34,576		34,810
Property and equipment, net	$	5,684	$	8,788

Property and equipment included amounts acquired under capital leases of approximately $589 and $589 at June 27, 2020 and June 29, 2019, respectively, with related accumulated depreciation of approximately $164 and $73, respectively. Total depreciation expense was $1,536 and $1,520 for the six months ended June 27, 2020 and June 29, 2019, respectively.

See Note 6 on the derecognition of the building asset in May 2020.

5.INTANGIBLE ASSETS

Intangible assets consisted of the following:

	June 27, 2020			December 28, 2019
Brand names	$	11,819		$	11,819
Patents and licenses		4,163			4,101
Customer relationships		6,946			6,946
Other intangibles		1,882			1,882
		24,810			24,748
Less: Accumulated amortization		(12,096	)		(11,852	)
Intangible assets, net	$	12,714		$	12,896

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 June 27, 2020.

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6. COMMITMENTS AND CONTINGENCIES

Leases

The Company leases office space and distribution centers primarily related to its United States, 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.

In May 2020, the Company entered into a lease agreement amendment related to our headquarters in Woonsocket, Rhode Island. The agreement decreased the leased premises square footage and extended the current term, which was set to end in March 2021 prior to the amendment to June 2025. It additionally granted two 5-year term extension options. The Company was accounting for the lease in Woonsocket as a sale-leaseback with the building on the balance sheet as property and equipment, net and a corresponding financing obligation in long-term liabilities. Upon the execution of the lease amendment, the Company re-assessed the classification of the lease and determined it to be an operating lease, as the criteria for a sale had been met. As part of this re-classification, the Company derecognized the financing obligation of $2,390 from long-term liabilities and the amount related to the property and equipment, net of $2,357 from the balance sheet and recorded a ROU asset and lease liability of $1,457 respectively. The Company did not include either of the term extension options in the calculation of the ROU asset and lease liability.

In April 2020, the company entered into a twelve month sublease agreement for a portion of the distribution warehouse located in Riverside, California. Fixed sublease payments received are recognized on a straight-line basis over the sublease term in general and administrative expenses.

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 1.25 and 5.00 years. The Woonsocket lease has two 5-year extension options and the Canada lease has one 5-year extension option that have 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 six months ended June 27, 2020 and June 29, 2019 were as follows:

	Six Months Ended June 27, 2020			Six Months Ended June 29, 2019
Operating lease cost	$	1,297		$	1,247
Variable lease cost	$	523		$	644
Less: sublease income		(250	)		—
Total lease expense	$	1,570		$	1,891

Weighted-average remaining lease term	2.5 years
Weighted-average discount rate:	5.00%

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Cash paid for amounts included in the measurement of the Company’s lease liabilities were $1,405 and $1,298 for the six months ended June 27, 2020 and June 29, 2019 respectively.

As of June 27, 2020, the present value of maturities of the Company’s operating lease liabilities were as follows:

Fiscal Year Ending:
2020		1,497
2021		2,448
2022		618
2023		465
2024		325
Thereafter		164
Less imputed interest		(352	)
Total	$	5,165

The future fixed sublease receipts under non-cancelable operating lease agreements as of June 27, 2020 are as follows:

Fiscal Year Ending:
2020		500
2021		250
Thereafter		—
Total	$	750

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.

7. SHARE BASED COMPENSATION

The Company is currently authorized to issue up to 188,889 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 27, 2020 and June 29, 2019 was $31 and $152, respectively. Share based compensation expense is included in general and administrative expenses.

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 condensed consolidated financial statements is based on awards that are ultimately expected to vest.

As of June 27, 2020, there were 71,562 stock options outstanding and 20,543 unvested restricted shares outstanding.

During the six months ended June 27, 2020, the Company granted 21,433 stock options and 9,550 shares of restricted stock, respectively. The following table summarizes the weighted average assumptions used for stock options granted during the six months ended June 27, 2020 and June 29, 2019.

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	For the Six Months Ended June 27, 2020			For the Six Months Ended June 29, 2019
Expected life (in years)		5.1			4.8
Risk-free interest rate		1.74	%		2.34	%
Volatility		67.3	%		64.2	%
Dividend yield		0	%		0	%
Forfeiture rate		14.2	%		24.2	%

As of June 27, 2020, there were 67,557 shares available to grant under the 2012 Plan.

8. 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 27, 2020 excluded 71,562 stock options and excluded 20,433 and 20,465 shares of restricted stock outstanding, respectively. The computation of diluted common shares for the three and six months ended June 29, 2019 excluded 134,852 stock options and 32,475 shares of restricted stock outstanding.

9. 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 condensed consolidated financial statements or disclosure in the notes thereto except as follows.

On July 14, 2020, the Company and Summer Infant (USA), Inc., as borrowers, and certain subsidiaries of the Company as guarantors, entered into a letter agreement with Bank of America, N.A. as agent (“Agent”) and lender, and Pathlight Capital LLC, as agent for the Term Loan Lender, with respect to the Restated BofA Agreement. Pursuant to the letter agreement, the maximum percentage of accounts owing from the Amazon Companies that may be included as “eligible accounts” under the Restated BofA Agreement shall be increased, provided that (i) such percentage shall be automatically reduced to the original percentage on November 16, 2020, and (ii) if at any time the corporate credit rating of Amazon.com, Inc. falls below a certain rating, as defined, the Agent shall have the right, in its sole discretion, to decrease the maximum percentage of such accounts owing from the Amazon Companies to an amount specified by the Agent.

Paycheck Protection Program.

On August 3, 2020, we received loan proceeds of $1,955 (the “PPP Loan”) pursuant to the Paycheck Protection Program (“PPP”) administered by the U.S. Small Business Administration under the CARES Act. The PPP Loan, which was in the form of a promissory note (the “PPP Note”), between the Company and Bank of America, N.A., as the lender, matures on July 27, 2025 and bears interest at a fixed rate of 1% per annum, payable monthly commencing six months from the date of the PPP Loan. The Company may voluntarily prepay the borrowings in full with no associated penalty or premium. Under the terms of the PPP, the principal may be forgiven if the PPP Loan proceeds are used for qualifying expenses, including payroll costs, rent and utility costs. No assurance can be provided that the Company will obtain forgiveness of the PPP Loan in whole or in part. In addition, details of the PPP continue to evolve regarding which companies are qualified to receive loans pursuant to the PPP and on what terms, and the Company may be required to repay some or all of the Loan due to these changes or different interpretations of the PPP requirements.

The PPP Note contains customary representations, warranties, and covenants for this type of transaction, including customary events of default relating to, among other things, payment defaults and breaches of representations and warranties or other provisions of the PPP Note. The occurrence of an event of default may result in, among other things, the Company becoming obligated to repay all amounts outstanding under the PPP Note.

On August 10, 2020, the Company and Summer Infant (USA), Inc., as borrowers entered into (i) Amendment No. 6 to Second Amended and Restated Loan and Security Agreement among the Company and Summer Infant (USA) Inc., as borrowers, the guarantors from time to time party thereto, the financial institutions from time to time party thereto as lenders, and Bank of America, N.A., as agent for the lenders (the “BofA Amendment”), and (ii) Amendment No. 5 to Term Loan and Security Agreement among the Company and Summer Infant (USA) Inc., as borrowers, the guarantors from time to time party thereto, the financial institutions from time to time party thereto as lenders, and Pathlight Capital LLC, as agent for the lenders (the “Term Loan Amendment”). The BofA Amendment amended the terms of the Restated BofA Agreement with respect to the PPP Loan, including to add the PPP Loan as “Permitted Debt,” and to exclude the interest expense or principal payments on the PPP Loan from “Fixed Charges” (unless such PPP Loan amount is not subsequently forgiven). Similarly, the Term Loan Amendment amended the terms of the Term Loan Agreement to modify certain provisions to take into account the PPP Loan in substantially the same form as the BofA Amendment.

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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 the COVID-19 pandemic on our financial condition and results of operations in the near and long term; anticipated savings from our ongoing restructuring efforts; the impact of tariffs on the cost of certain of our imported products and the expected effect of our mitigation efforts; and our expected cash flow and liquidity for the next 12 months. These statements are based on current expectations that involve numerous risks and uncertainties.  These risks and uncertainties include the impact of the COVID-19 outbreak on our business operations, and the U.S. and global economies; changes in international trade policy and the imposition of tariffs or other fees by the United States or other countries on our products; the concentration of our business with retail customers; potential liquidity problems or bankruptcy of our customers and their ability to pay us in a timely manner; our ability to comply with financial and other covenants in our debt agreements; our ability to work with our lenders to amend our existing debt agreements, if required; our ability to raise additional funds or engage in a strategic transaction, if necessary; whether we will be able to obtain forgiveness for all or part of our PPP loan; 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 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; potential increases in the cost of raw materials used to manufacture our products; compliance with safety and testing regulations for our products; potential product liability claims arising from use of our products; unanticipated tax liabilities; a potential impairment of other intangible assets; and other risks as detailed in our Annual Report on Form 10-K for the year ended December 28, 2019, as amended, our Quarterly Report on Form 10-Q for the quarter ended March 28, 2020, this Quarterly Report on Form 10-Q 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 28, 2019 included in our Annual Report on Form 10-K for the year ended December 28, 2019, as amended (“2019 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.

We operate in one principal industry segment across geographically diverse marketplaces, selling our products primarily in North America 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. 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 2020, sales declined 17.7% as compared to the prior year period, principally as a result of the restructuring of our international business in the second quarter and the negative effect of the COVID-19 pandemic on our supply chain and reduced demand from our customers and consumers with many brick-and-mortar stores being closed. While gross profit decreased due to lower sales, gross margin improved due primarily to a favorable mix of higher product margin categories and tariff exclusions on our products that resulted in $1,786 of the tariff refunds as a benefit to cost of goods sold in the second quarter of 2020. General and administrative expenses declined 21% as compared to the prior period as the Company began to benefit from the restructuring actions taken in the first and second quarters of 2020. Net income per diluted share for the quarter was $0.61 as compared to a net loss per diluted share of $0.11 in the comparable prior period.

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In early 2020 and prior to the COVID-19 outbreak in the U.S., we announced restructuring initiatives to further streamline operations and improve our financial outlook. We anticipate that these actions will result in annualized cost savings of approximately $7,500. As of the end of July 2020, we had taken many of these actions, including headcount reductions, reductions in facility space, and other cost reductions, and believe we are on track to realize the expected $7,500 in annualized cost savings. At the end of March 2020, we vacated our distribution center located in the U.K. To further reduce expenses, in April 2020, we entered into a sublease to lease a portion of our California distribution center and signed an amendment to our lease of our headquarters located in Rhode Island that reduced the size of premises occupied by us and correspondingly will reduce our base rent going forward. During the second quarter of 2020, we also worked with our lenders to amend our credit facility and term loan agreement to provide additional liquidity to address the potential short-term impact of the COVID-19 pandemic.

Impact of the COVID-19 Pandemic. As discussed in our 2019 Form 10-K, we experienced some delays in manufacturing and shipment of our products to the U.S., as the majority of our products are sourced from China. Sales in the first quarter were consistent with our forecast until March, when the COVID-19 pandemic spread to the U.S. Because our products are considered “essential” and our distribution center is located in California, we have continued to ship products without interruption.

In March 2020, we began to see customers that have retail stores reduce orders as they experienced or anticipated closures of those stores. While we did see an uptick in sales to those customers with significant e-commerce capabilities, it did not offset the reduced orders from our mid-size and smaller customers which continued through the second quarter of 2020.

We have seen manufacturing and shipments from China return to more normal levels, however, the potential exists that we might not be able to meet demand for certain products that are manufactured by suppliers that may be subject to closure due to the resurgence of COVID-19 outbreaks.

Sales in the second quarter of 2020 were impacted by the COVID-19 pandemic as some retail stores remained closed. We believe that customers with e-commerce capabilities will continue to have high demand and that, as stores begin to reopen across the U.S., we will see a corresponding increase in orders from customers with retail stores. However, given the unpredictability of the COVID-19 pandemic, it is possible that some stores will remain closed, or that outbreaks may continue to occur throught the remainder of the year. With our mid-size and smaller customers, we have seen some of these customers ask for extensions in payment terms. We expect these customers may experience financial difficulties, and we have taken steps to limit risk of non-payment from these customers.

The Company continues to assess the impact of the COVID-19 pandemic on its supply chain, consumer demand and overall business operations through the remainder of 2020 and have been working with our lenders to provide flexibility under our existing credit facilities during this uncertain time. Additionally, we believe the recent COVID-19 resurgence in the United States and in other countries has added greater uncertainty and unpredictable economic consequences in the coming months. After careful consideration and because of the lingering potential negative economic impact and increased uncertainty of the COVID-19 pandemic, in late July 2020 we applied for for a PPP loan under the CARES Act. Our application was approved on July 27, 2020, and we received approximately $1,955 in loan proceeds in August. We will use the loan proceeds to fund certain qualified expenses, including payroll costs, rent and utility costs. The term of the loan is for five-year period and bears interest at an annual rate of 1.00%, with no principal or interest payments due during the first six months. Under the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or part of the loan subject to limitations based on the use of the proceeds for eligible purposes. There can be no assurance that our application to the SBA will be approved, or if the loan is approved, that we will be able to obtain forgiveness of the loan in whole or in part.

Recent Developments. Tariff exclusions on certain of our imported products that were issued by the Office of the U.S. Trade Representative expired on August 7, 2020 and have not been renewed. As a result, we will again be required to pay tariffs on certain imported products effective August 2020 unless and until the tariff exclusion is extended, a new tariff exclusion is granted or the tariffs are terminated. While we are initiating actions to mitigate the impact of these tariffs, the tariffs will materially impact our cost of goods sold, and therefore our gross profit and gross margins, for the remainder of fiscal 2020 and beyond. To the extent our mitigation efforts are not successful, the impact not offset by our mitigation efforts could have an adverse effect on our business, financial position, results of operations and cash flows.

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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 27, 2020 from our critical accounting policies and estimates disclosed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2019 Form 10-K.

Results of Operations

	For the three months ended (Unaudited)					For the six months ended (Unaudited)
	June 27, 2020		June 29, 2019			June 27, 2020		June 29, 2019
Net sales	$	38,214	$	46,425		$	78,552	$	88,963
Cost of goods sold		24,175		31,583			52,010		60,671
Gross profit		14,039		14,842			26,542		28,292
General & administrative expenses		6,729		8,523			14,876		17,902
Selling expenses		3,738		4,031			7,182		7,384
Depreciation and amortization		813		952			1,780		1,889
Operating income		2,759		1,336			2,704		1,117
Interest expense, net		1,121		1,293			2,531		2,542
Income (loss) before provision for income taxes		1,638		43			173		(1,425	)
Provision for income taxes		351		267			96		197
Net income (loss)	$	1,287	$	(224	)	$	77	$	(1,622	)

Three Months ended June 27, 2020 compared with Three Months ended June 29, 2019

Net sales decreased 17.7% from $46,425 for the three months ended June 29, 2019 to $38,214 for the three months ended June 27, 2020 primarily as a result of the strategic restructuring of our international business that resulted in a decline of international sales and the negative effect of the COVID-19 pandemic on our supply chain and demand from our customers and consumers with many brick-and-mortar stores being closed. Sales to our top customers, especially through their ecommerce channels, remained strong and we increased sales in our specialty blanket and playard categories.

Cost of goods sold includes cost of the finished product from suppliers, tariffs/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 27, 2020 as compared to the quarter ended June 29, 2019.

Gross profit decreased 5.4% from $14,842 for the three months ended June 29, 2019 to $14,039 for the three months ended June 27, 2020. Gross profit as a percent of net sales increased from 32.0% for the three months ended June 29, 2019 to 36.7% for the three months ended June 27, 2020. Gross profit declined primarily due to lower sales. Gross profit as a percent of net sales increased primarily due to tariff exclusions on certain gate, bath, and bedrail products issued by the Office of the U.S. Trade Representative that became effective immediately and retroactive to September 2018 resulting in $1,819 of tariff refunds due to the Company. We recorded $1,786 of the tariff refunds as a benefit to cost of goods sold in the second quarter of 2020.

General and administrative expenses decreased 21.0% from $8,523 for the three months ended June 29, 2019 to $6,729 for the three months ended June 27, 2020. General and administrative expenses decreased from 18.4% of net sales for the three months ended June 29, 2019 to 17.6% of net sales for the three months ended June 27, 2020. The decline in dollars and as a percent of sales was primarily due to the Company’s restructuring activities begun in the first quarter of 2020 that included a reduction in work force and other cost reductions.

Selling expenses decreased 7.3% from $4,031 for the three months ended June 29, 2019 to $3,738 for the three months ended June 27, 2020. Selling expenses increased as a percent of net sales from 8.7% for the three months ended June 29, 2019 to 9.8% for the three months ended June 27, 2020. The decrease in selling expense dollars is primarily attributable to lower sales. The increase in selling expenses as a percent of net sales was primarily attributable to increased cooperative advertisement, freight out, and royalty costs this year as compared to the three months ended June 29, 2019.

Depreciation and amortization decreased 14.6% from $952 for the three months ended June 29, 2019 to $813 for the three months ended June 27, 2020. The decrease in depreciation and amortization was attributable to lower capital investment over the past year.

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Interest expense decreased 13.3% from $1,293 for the three months ended June 29, 2019 to $1,121 for the three months ended June 27, 2020. Interest expense decreased due to lower debt levels.

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. For the three months ended June 27, 2020, we recorded a $351 provision for income taxes on $1,638 of pretax income. The provision for income tax for the three months ended June 27, 2020 included a $120 discrete valuation allowance charge for nondeductible interest expense.

Six Months ended June 27, 2020 compared with Six Months ended June 29, 2019

Net sales decreased 11.7% from $88,963 for the six months ended June 29, 2019 to $78,552 for the six months ended June 27, 2020 primarily as a result of the strategic restructuring of our international business that resulted in a decline of international sales and the negative effect of the COVID-19 pandemic on our supply chain and demand from our customers and consumers with many brick-and-mortar stores being closed. Sales to our top customers, especially through their ecommerce channels, remained strong and we increased sales in our specialty blanket and playard categories.

Cost of goods sold includes cost of the finished product from suppliers, tariffs/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 27, 2020 as compared to the six months ended June 29, 2019.

Gross profit decreased 6.2% from $28,292 for the six months ended June 29, 2019 to $26,542 for the six months ended June 27, 2020. Gross profit as a percent of net sales increased from 31.8% for the six months ended June 29, 2019 to 33.8% for the six months ended June 27, 2020. Gross profit dollars decreased primarily due to lower sales. Gross profit as a percent of net sales improved primarily due to tariff exclusions on certain gate, bath, and bedrail products issued by the Office of the U.S. Trade Representative that became effective immediately and retroactive to September 2018 resulting in $2,020 of tariff refunds due to the Company in the six month period ending June 27, 2020. We also received tariff exclusions on metal gates in December 2019 of $1,848. As a result, we recorded $2,289 of the tariff refunds as a benefit to cost of sales in the six months ending June 27, 2020.

General and administrative expenses decreased 16.9% from $17,902 for the six months ended June 29, 2019 to $14,876 for the six months ended June 27, 2020. General and administrative expenses decreased from 20.1% of net sales for the six months ended June 29, 2019 to 18.9% of net sales for the six months ended June 27, 2020. The decline in dollars and as a percent of sales was primarily due to the Company’s restructuring activities begun in the first quarter of 2020 that included a reduction in work force and other cost reductions partially offset by severance and restructuring costs.

Selling expenses decreased 2.7% from $7,384 for the six months ended June 29, 2019 to $7,182 for the six months ended June 27, 2020. Selling expenses increased as a percent of net sales from 8.3% for the six months ended June 29, 2019 to 9.1% for the six months ended June 27, 2020. The decrease in selling expense dollars is primarily attributable to lower sales. The increase in selling expenses as a percent of net sales was primarily attributable to increased consumer advertising, freight out, and royalty costs this year as compared to the six months ended June 29, 2019.

Depreciation and amortization decreased 5.8% from $1,889 for the six months ended June 29, 2019 to $1,780 for the six months ended June 27, 2020. The decrease in depreciation was attributable to the decline in capital investment primarily over the past year.

Interest expense decreased 0.4% from $2,542 for the six months ended June 29, 2019 to $2,531 for the six months ended June 27, 2020. The decrease in interest expense was primarily attributable to lower debt levels. The decrease was partially offset by the write off of $266 of previously unamortized prepaid finance fees associated with the reduction in the total revolver commitments under the Company’s Bank of America credit facility in March 2020.

For the six months ended June 29, 2019, we recorded a $197 provision for income taxes on $1,425 of pretax loss. The provision for income taxes for the six months ended June 29, 2019, included a $494 discrete valuation allowance charge for nondeductible interest expense. For the six months ended June 27, 2020, we recorded a $96 provision for income taxes on $173 of pretax income. The provision for income taxes for the six months ended June 27, 2020, included a $171 discrete valuation allowance charge for nondeductible interest expense.

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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 China. 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 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 27, 2020, net cash provided by operating activities totaled $14,546 primarily due to increased profitability and improved working capital efficiency. Net cash used in operating activities for the six months ended June 29, 2019 was $5,117 primarily due to the paydown of accounts payable from higher inventory purchases at the end of the previous fiscal year in advance of a potential further increase in tariffs.

For the six months ended June 27, 2020, net cash used in investing activities was approximately $921. For the six months ended June 29, 2019, net cash used in investing activities was $1,530.

Net cash used in financing activities was approximately $13,270 for the six months ended June 27, 2020. Cash provided by operating activities were primarily used to reduce our bank borrowings on our credit facilities. 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 to reduce supplier payables and fund accounts receivable.

Primarily as a result of the above factors, net cash increased for the six months ended June 27, 2020 by $453, resulting in a cash balance of approximately $848 at June 27, 2020.

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. As noted above, we received a PPP loan in August 2020, the proceeds of which we will use to pay for certain qualifying expenses, including payroll costs, rent and utility costs.

As discussed above, we have worked with our lenders to address the potential impact of the COVID-19 pandemic on our cash flow and access to funding under our credit facility. However, if we are unable to meet our current financial forecast, experience a more severe impact from the COVID-19 pandemic on our business than expected, do not adequately control expenses, are unable to mitigate the impact of tariffs, or adjust our operations accordingly, we may experience constraints on our liquidity and may not meet the financial and other covenants under our revolving credit facility and term loan agreements which could impact our borrowing availability. 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 or agree to amend the terms of our agreements with them if there are covenant violations. In such case, we may be required to seek to raise additional funds through debt or equity financings, restructure our existing debt, engage in strategic collaborations, and/or a strategic transaction that is in the best interest of our stockholders. Any such financing or strategic transaction could result in significant dilution to our existing stockholders, depending on the terms of the transaction. If we are unable to identify a strategic transaction, raise additional funds, and/or restructure our existing debt, our operations could be limited and we may not be able to meet all of our obligations under our credit facility and term loan agreement.

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

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Credit Facilities

Restated BofA Agreement. We and our wholly owned subsidiary, Summer Infant (USA), Inc., as borrowers, and certain of our subsidiaries as guarantors, are parties to a Second Amended and Restated Loan and Security Agreement with Bank of America, N.A., as agent, that provides for a $48,000 asset-based revolving credit facility (as it may be amended from time to time, the "Restated BofA Agreement"). Total borrowing capacity under the Restated BofA Agreement 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. Loans under the Restated BofA Agreement are scheduled to mature on June 28, 2023 (subject to customary early termination provisions). 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, and certain of our subsidiaries are guarantors.

Loans under the Restated BofA Agreement bear interest, at the Company's option, at a base rate or at LIBOR with a LIBOR floor of 0.75%, plus applicable margins based on average quarterly availability under the Restated BofA Agreement. Interest payments are due monthly, payable in arrears. We are 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 and certain financial 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. Through the end of fiscal 2020, the Company is required to achieve (i) a minimum net sales amount for each three consecutive months, measured at the end of each month, and (ii) a trailing 12-month minimum adjusted EBITDA amount, measured at the end of each month. 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.

As of June 27, 2020, the interest rate for base-rate loans and LIBOR-rate loans under the Restated BofA Agreement were 5.75% and 4.25%, respectively. The amount outstanding on the Restated BofA Agreement at June 27, 2020 was $18,752, total borrowing capacity was $26,245, and borrowing availability was $7,493.

On July 14, 2020, the Company entered into a letter agreement with Bank of America, N.A. as agent and lender and Pathlight Capital LLC, as agent for the Term Loan Lender that increased the maximum percentage of accounts owing from the Amazon Companies that may be included as eligible accounts under the Restated BofA Agreement for 120 days. In addition, on August 10, 2020, the Company entered into Amendment No. 6 to the Restated BofA Agrement with respect to the PPP Loan. See Part II, Item. 5, “Other Information” below for information regarding the letter agreement and Amendment No. 6.

Term Loan Agreement. We and our wholly owned subsidiary, Summer Infant (USA), Inc., as borrowers, and certain of our subsidiaries as guarantors, are parties to a Term Loan and Security Agreement with Pathlight Capital LLC, as agent, pursuant to which we received a $17,500 term loan (as it may be amended from time to time, the "Term Loan Agreement"). In connection with the March 2020 amendment to the Term Loan Agreement, principal payments on the term loan were suspended for 2020, to resume in March 2021. In addition, the term loan began to accrue PIK (payment in kind) interest at an annual rate of 4.0% in March 2020, which interest will become payable upon repayment of the term loan or earlier upon the occurrence of certain events. The term loan matures on June 28, 2023. Obligations under the Term Loan Agreement are also subject to a prepayment penalty if the term loan is repaid prior to the third anniversary of the closing of the term loan. 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 asset-based revolving credit facility, and certain of our subsidiaries are guarantors.

The Term Loan Agreement contains customary affirmative and negative covenants and certain financial covenants that are substantially the same as the Restated BofA Agreement described above.

As of June 27, 2020, the interest rate on the Term Loan was 9.75% of cash interest and 4.0% of PIK interest. The amount outstanding on the Term Loan at June 27, 2020 was $16,406 and $201 of accrued PIK interest.

On August 10, 2020, the Company entered into Amendment No. 5 to the Term Loan Agrement with respect to the PPP Loan. See Part II, Item. 5, “Other Information” below for information regarding Amendment No. 5.

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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 27, 2020. Our Chief Executive Officer and Chief Financial Officer have concluded, based on this evaluation, that our controls and procedures were effective as of June 27, 2020.

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.

PART II.  OTHER INFORMATION

ITEM 1. Legal Proceedings

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.

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 2019 Form 10-K and Part II, Item 1A, “Risk Factors,” of our Quarterly Report on Form 10-Q for the quarter ended March 28, 2020, other than the following:

We may not be entitled to forgiveness of our recently received Paycheck Protection Program Loan, and our application for the Paycheck Protection Program Loan could in the future be determined to have been impermissible.

On August 3, 2020, we received loan proceeds of approximately $1,955 (the “PPP Loan”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S. Small Business Administration (the “SBA”). We intend to use the PPP Loan to retain current employees, maintain payroll and make lease and utility payments. Under the CARES Act, as amended in June 2020, loan forgiveness is generally available if proceeds were used for qualifying expenses in accordance with the CARES Act. The amount of the PPP Loan eligible to be forgiven may be reduced in certain circumstances, including as a result of certain headcount or salary reductions. We will be required to repay any portion of the outstanding principal that is not forgiven, along with accrued interest, and we cannot provide any assurance that we will be eligible for loan forgiveness, that we will apply for forgiveness, or that any amount of the PPP Loan will ultimately be forgiven by the SBA.

In order to apply for the PPP Loan, we were required to certify, among other things, that the current economic uncertainty made the PPP Loan request necessary to support our ongoing operations. If, despite our good-faith belief that given our circumstances we satisfied all eligible requirements for the PPP Loan, we are later determined to have violated any applicable laws or regulations that may apply to us in connection with the PPP Loan or it is otherwise determined that we were ineligible to receive the PPP Loan, we may be required to repay the PPP Loan in its entirety and/or be subject to additional penalties, which could also result in adverse publicity and damage to our reputation. Any of these events could have a material adverse effect on our business, results of operations and financial condition.

22

The suspension, revocation, expiration, non-renewal or other loss of temporary exemptions from certain tariffs could adversely affect our business, financial condition and results of operations.

As previously disclosed, the United States and other countries have levied tariffs and taxes on certain goods, including products imported into the United States from China. The majority of our products are manufactured outside the United States, mainly in China, and imported for sale in the United States. Tariffs enacted in 2018 and 2019 impacted our 2018 and 2019 results, and caused market disruption amongst our major customers.

In December 2019, a tariff exclusion for metal safety gates was granted by the Office of the U.S. Trade Representative (“USTR”), retroactive to the date of implementation (September 2018) through August 2020, and we have been receiving refunds for the amounts we paid in respect of such tariffs. Subsequently, tariff exclusions for certain other juvenile products were granted by the USTR for which we have also been receiving refunds. While we applied for a 12-month extension of the tariff exclusions, the applications have not been approved and the exclusions expired on August 7, 2020. As a result, we will again be required to pay tariffs on certain imported products effective August 2020 and until the tariff exclusions are extended, new tariff exclusions are granted, or the tariffs are terminated. There is no assurance that any actions we take to mitigate tariffs will be successful, and any increase in pricing to allow us to maintain reasonable margins could adversely affect the demand for those affected products and may result in decreased profitability and lower sales, thereby having an adverse effect on our business, results of operations and financial condition.

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.

Change in Control Plan

In May 2020, the Company’s Board of Directors approved an amendment to the Company’s existing Change in Control Plan to extend the term of the plan until February 7, 2022.

Letter Agreement with Bank of America

On July 14, 2020, the Company and Summer Infant (USA), Inc., as borrowers, and certain subsidiaries of the Company as guarantors, entered into a letter agreement with Bank of America, N.A. as agent (“Agent”) and lender, and Pathlight Capital LLC, as agent for the Term Loan Lender, with respect to the Restated BofA Agreement. Pursuant to the letter agreement, the maximum percentage of accounts owing from the Amazon Companies that may be included as “eligible accounts” under the Restated BofA Agreement shall be increased, provided that (i) such percentage shall be automatically reduced to the original percentage on November 16, 2020, and (ii) if at any time the corporate credit rating of Amazon.com, Inc. falls below a certain rating, as defined, the Agent shall have the right, in its sole discretion, to decrease the maximum percentage of such accounts owing from the Amazon Companies to an amount specified by the Agent. A copy of the letter agreement is filed herewith as Exhibit 10.4 and incorporated herein by reference.

Paycheck Protection Program and Related Bank Amendments.

On August 3, 2020, we received loan proceeds of $1,955 (the “PPP Loan”) pursuant to the Paycheck Protection Program (“PPP”) administered by the U.S. Small Business Administration under the CARES Act. The PPP Loan, which was in the form of a promissory note (the “PPP Note”), between the Company and Bank of America, N.A., as the lender, matures on July 27, 2025 and bears interest at a fixed rate of 1% per annum, payable monthly commencing six months from the date of the PPP Loan. The Company may voluntarily prepay the borrowings in full with no associated penalty or premium. Under the terms of the PPP, the principal may be forgiven if the PPP Loan proceeds are used for qualifying expenses, including payroll costs, rent and utility costs. No assurance can be provided that the Company will obtain forgiveness of the PPP Loan in whole or in part. In addition, details of the PPP continue to evolve regarding which companies are qualified to receive loans pursuant to the PPP and on what terms, and the Company may be required to repay some or all of the Loan due to these changes or different interpretations of the PPP requirements.

23

The PPP Note contains customary representations, warranties, and covenants for this type of transaction, including customary events of default relating to, among other things, payment defaults and breaches of representations and warranties or other provisions of the PPP Note. The occurrence of an event of default may result in, among other things, the Company becoming obligated to repay all amounts outstanding under the PPP Note.

On August 10, 2020, the Company and Summer Infant (USA), Inc., as borrowers entered into (i) Amendment No. 6 to Second Amended and Restated Loan and Security Agreement among the Company and Summer Infant (USA) Inc., as borrowers, the guarantors from time to time party thereto, the financial institutions from time to time party thereto as lenders, and Bank of America, N.A., as agent for the lenders (the “BofA Amendment”), and (ii) Amendment No. 5 to Term Loan and Security Agreement among the Company and Summer Infant (USA) Inc., as borrowers, the guarantors from time to time party thereto, the financial institutions from time to time party thereto as lenders, and Pathlight Capital LLC, as agent for the lenders (the “Term Loan Amendment”). The BofA Amendment amended the terms of the Restated BofA Agreement with respect to the PPP Loan, including to add the PPP Loan as “Permitted Debt,” and to exclude the interest expense or principal payments on the PPP Loan from “Fixed Charges” (unless such PPP Loan amount is not subsequently forgiven). Similarly, the Term Loan Amendment amended the terms of the Term Loan Agreement to modify certain provisions to take into account the PPP Loan in substantially the same form as the BofA Amendment.

The foregoing summary of the BofA Amendment and the Term Loan Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of such amendments, copies of which are filed herewith as Exhibit 10.5 and Exhibit 10.6, respectively, and incorporated herein by reference.

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.

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EXHIBIT INDEX

Exhibit No.	Description
10.1*	Amendment No. 5 to Second Amended and Restated Loan and Security Agreement, dated as of April 29, 2020, among Summer Infant, Inc. and Summer Infant (USA), Inc., as borrowers, the guarantors from time to time party thereto, the financial institutions from time to time party thereto as lenders, and Bank of America, N.A., as agent for the lenders (Incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q filed on May 12, 2020)
10.2*	Letter Agreement, dated April 29, 2020, among Summer Infant, Inc. and Summer Infant (USA), Inc., as borrowers, the guarantors from time to time party thereto, the financial institutions from time to time party thereto as lenders, and Pathlight Capital LLC, as agent for the lenders (Incorporated by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q filed on May 12, 2020)
10.3+	Change in Control Plan (as amended through May 11, 2020)
10.4+	Letter Agreement, dated as of July 14, 2020, among Bank of America, N.A., as ABL Agent and ABL Lender, Summer Infant, Inc. and Summer Infant (USA), Inc., as borrowers, the guarantors from time to time party thereto, and Pathlight Capital LLC, as agent for the Term Loan Lender
10.5+	Amendment No. 6 to Second Amended and Restated Loan and Security Agreement, dated as of August 10, 2020, among Summer Infant, Inc. and Summer Infant (USA), Inc., as borrowers, the guarantors from time to time party thereto, the financial institutions from time to time party thereto as lenders, and Bank of America, N.A., as agent for the lenders
10.6+	Amendment No. 5 to Term Loan and Security Agreement, dated as of August 10, 2020, among Summer Infant, Inc. and Summer Infant (USA) Inc., as borrowers, the guarantors from time to time party thereto, the financial institutions from time to time party thereto as lenders, and Pathlight Capital LLC, as agent for the lenders
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

*	Portions of this exhibit have been omitted for confidential treatment pursuant to Regulation S-K, Item 601(b)(10).
+	Filed herewith.

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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 11, 2020	By:	/s/ Stuart Noyes
		Stuart Noyes
		Interim Chief Executive Officer
		(Principal Executive Officer)
Date: August 11, 2020	By:	/s/ Edmund Schwartz
		Edmund Schwartz
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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EX-10.3

Exhibit 10.3

SUMMER INFANT, INC.

CHANGE IN CONTROL PLAN
(as amended through may 11, 2020)

The Company hereby adopts the Summer Infant, Inc. Change in Control Plan for the benefit of certain employees of the Company and its Affiliates, on the terms and conditions set forth in this plan. Capitalized terms are defined in Section 1.

Section 1. DEFINITIONS. As used herein:

1.1            “Affiliate” shall have the meaning set forth in Rule 12b-2 under the Exchange Act.

1.2            “Board” means the Board of Directors of the Company.

1.3            “Cause” means the occurrence of one or more of the following: (a) the Eligible Employee’s willful and continued failure to substantially perform his or her reasonably assigned duties with the Company (other than any such failure resulting from incapacity due to Disability or from the assignment to the Eligible Employee of duties that would constitute Good Reason), which failure continues for a period of at least thirty (30) days after written demand for substantial performance has been delivered by the Company to the Eligible Employee which specifically identifies the manner in which the Eligible Employee has failed to substantially perform his duties, (b) the Eligible Employee’s willful conduct which constitutes misconduct and is materially and demonstrably injurious to the Company, as determined in good faith by a vote of at least two-thirds of the non-employee directors of the Board at a meeting of the Board at which the Eligible Employee is provided an opportunity to be heard, (c) the Eligible Employee being convicted of, or pleading nolo contendere to a felony, (d) the Eligible Employee being convicted of, or pleading nolo contendere to a misdemeanor based in dishonesty or fraud, or (e) any breach or violation of any written agreement or written code of conduct relating to the Eligible Employee’s employment with the Employer that materially and adversely affects the Company or any of its Affiliates.

1.4            A “Change in Control” shall be deemed to have occurred if the event set forth in any one of the following subsections shall have occurred:

(a)            individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company, as such terms are used in Regulation 14A promulgated under the Exchange Act) shall be considered as though such individual was a member of the Incumbent Board;

(b)            the consummation of a reorganization, merger, consolidation or other form of corporate transaction or series of transactions (but not including an underwritten public offering of the Company’s common stock or other voting securities (or securities convertible into voting securities of the Company) for the Company’s own account registered under the Securities Act of 1933, as amended from time to time), in each case, with respect to which Persons who were stockholders of the Company immediately prior to such reorganization, merger, consolidation or other corporate transaction do not, immediately thereafter, own more than fifty percent (50%) of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated entity’s then outstanding voting securities;

(c)            a liquidation or dissolution of the Company or the sale of all or substantially all of the assets of the Company, in each case approved by the Company’s stockholders (unless such liquidation, dissolution or sale is subsequently abandoned or terminated prior to being consummated); or

(d)            the acquisition by any Person, entity or “group,” within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, of more than fifty percent (50%) of either the then outstanding shares of the Company’s common stock or the combined voting power of the Company’s then outstanding voting securities entitled to vote generally in the election of directors excluding any acquisitions by (A) the Company or any of its Affiliates or (B) any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Affiliates.

Notwithstanding anything to the contrary in this Section 1.4, no proceedings by or against the Company under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other similar relief undertaken under U.S. federal, state or foreign law, including the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. §101, et seq.), as amended, or any transactions that arise out of or occur in relation to such proceedings, shall constitute a “Change in Control” for purposes of this Plan.

1.5            “Code” means the Internal Revenue Code of 1986, as it may be amended from time to time.

1.6            “Company” means Summer Infant, Inc., a Delaware corporation, or any successor thereto.

1.7            “Disability” means that the Eligible Employee has been unable to perform his or her duties as the result of his or her incapacity due to physical or mental illness, and such inability, at least four (4) weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Eligible Employee or his or her legal representative (such agreement as to acceptability not to be unreasonably withheld). Termination resulting from Disability may only be affected after at least thirty (30) days’ written notice by the Company of its intention to terminate the Eligible Employee’s employment. In the event that the Eligible Employee resumes the performance of substantially all of his or her duties hereunder before the termination of his or her employment becomes effective, the notice of intent to terminate shall automatically be deemed to have been revoked.

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1.8            “Effective Date” means February 7, 2018, the date as of which the Plan has been adopted.

1.9            “Eligible Employee” means any employee who is designated a Tier 1 Employee, a Tier 2 Employee or a Tier 3 Employee.

1.10          “Employer” means the Company or any of its Affiliates that is an employer of an Eligible Employee.

1.11          “Equity Award” means stock options, restricted stock, restricted stock units, stock appreciation rights and other similar equity-based awards, in each case whether settled in stock, cash or otherwise, but excluding any performance-based equity awards, which are granted to an Eligible Employee under the Company’s equity-based incentive plans or awards adopted or assumed by the Company at any time prior to a Change in Control. For purposes of this Plan, Equity Awards shall also include any shares of common stock acquired upon the exercise of an option, warrant or other similar right that constitutes an Equity Award.

1.12          “ERISA” means the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.

1.13          “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.

1.14          “Good Reason” means, for all Eligible Employees, the occurrence without the affected Eligible Employee’s written consent, of any of the following on or after the date of a Change in Control:

(a)            the material diminution in the Eligible Employee’s authority, duties or responsibilities;

(b)            the relocation of the Eligible Employee to a location more than thirty (30) miles from his or her employment location at the Effective Date;

(c)            a material diminution in the Eligible Employee’s annual base salary as in effect immediately prior to such diminution, other than in connection with a general diminution in Company compensation levels and in amounts commensurate with the percentage diminutions of other Company employees of comparable seniority and responsibility; or

(d)            if applicable, any other action or inaction which constitutes a material breach by the Company or any of its Affiliates of an agreement between the Eligible Employee and the Employer pursuant to which the Eligible Employee provides services to the Company or any of its Affiliates.

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No violation described in clauses (a) through (d) above shall constitute Good Reason unless the Eligible Employee has given written notice to the Company pursuant to Section 6.10 of this Plan within ninety (90) days after the occurrence of such violation and the Company has not remedied such violation to the Eligible Employee’s reasonable satisfaction within thirty (30) days of its receipt of such notice.

1.15          “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (a) the Company or any of its Affiliates, (b) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries, (c) an underwriter temporarily holding securities pursuant to an offering of such securities or (d) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

1.16          “Plan” means the Summer Infant, Inc. Change in Control Plan, as set forth herein, as it may be amended from time to time.

1.17          “Plan Administrator” means the person or persons appointed from time to time by the Board, which appointment may be revoked at any time by the Board. If no Plan Administrator has been appointed by the Board (or if the Plan Administrator has been removed by the Board and no new Plan Administrator has been appointed by the Board), the Compensation Committee of the Board shall be the Plan Administrator.

1.18          “Severance” means during the 12-month period following the consummation of a Change in Control, a termination of such Eligible Employee’s employment with the Employer (A) by the Employer without Cause or (B) by the Eligible Employee for Good Reason, provided that, if and to the extent required by Code Section 409A, such employment termination meets the criteria for a “separation from service” as defined in Treas. Reg. § 1.409A-1(h). Termination of an Eligible Employee’s employment on account of death or Disability shall not be treated as a Severance.

1.19          “Severance Agreement and Release” means the written separation agreement and release substantially in the form attached hereto as Appendix I, as may be amended from time to time to accord for local or foreign laws or as determined by the Plan Administrator in accordance with Section 3.1.

1.20          “Severance Date” means, subject to the terms of Section 1.18, the effective date on which an Eligible Employee’s employment by the Employer terminates due to a Severance as specified in a prior written notice by the Company or the Eligible Employee, as the case may be, delivered to the other pursuant to Section 6.10.

1.21          “Severance Payment” means the payment determined pursuant to Section 2.1.

1.22          “Severed Employee” is an Eligible Employee once he or she incurs a Severance.

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1.23          “Tier 1 Employee” means the Chief Executive Officer of the Company as set forth on Schedule 1 attached hereto.

1.24          “Tier 2 Employee” means the Chief Financial Officer of the Company, specified members of senior management of the Company, and any other employee of the Company or any of its Affiliates designated as such by the Plan Administrator in writing, as set forth on Schedule 1 attached hereto.

1.25          “Tier 3 Employee” means an employee of the Company or any of its Affiliates designated as such by the Plan Administrator in writing as set forth on Schedule 1 attached hereto.

Section 2. SEVERANCE PAYMENTS; 280G PAYMENTS.

2.1            Each Eligible Employee who incurs a Severance shall be entitled, subject to the timely execution, return, and non-revocation of the Severance Agreement and Release, to receive from the Company, subject to the conditions set forth in Sections 2.2, 3.4 and 4:

(a)            Cash Payments.

(i)             A cash payment equal to the annual base salary as in effect immediately prior to the Severance Date, multiplied by (A) in the case of a Tier 1 Employee, 2.0, (B) in the case of a Tier 2 Employee, 1.0, and (C) in the case of a Tier 3 Employee, 0.5. For purposes of this Section 2.1(a)(i), annual base salary shall be the amount in effect immediately prior to the Severance Date without regard to any voluntary salary reductions that may be in effect immediately prior to the Severance Date.

(ii)            A cash payment equal to the pro-rated portion of the Eligible Employee’s annual cash bonus actually achieved for the fiscal year in which the Severance occurs, based on the number of months that the Eligible Employee was employed by the Employer during such fiscal year (rounded up to the nearest whole month).

(iii)           The payment made pursuant to Section 2.1(a)(i) shall be payable commencing on the 61st day following the Eligible Employee’s Severance Date in equal installments over the Restricted Period (as defined in the Severance Agreement and Release) in accordance with the Company’s regular payroll practices, provided that the Eligible Employee has executed and returned the Severance Agreement and Release that becomes irrevocable on or before the 60th day following the Severance Date. The payment made pursuant to Section 2.1(a)(ii) shall be paid when it would otherwise be paid after the end of the relevant performance period.

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(iv)           A taxable cash payment equal to one (1) times the sum of the monthly premiums for the Eligible Employee’s group medical, dental and vision coverage (including coverage for the Eligible Employee’s eligible dependents who were covered as of the Severance Date) under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) under the Company’s or its Affiliate’s group medical, dental and vision plans then in effect (the “Monthly COBRA Payment”). The Monthly COBRA Payment shall be payable in equal monthly installments over the Continuation Period (as defined below) in accordance with the Company’s regular payroll practices, provided that the Eligible Employee has executed and returned the Severance Agreement and Release that becomes irrevocable on or before the 60th day following the Severance Date. The “Continuation Period” shall be the period beginning on the Severance Date and ending on the earlier of (A) (1) in the case of a Tier 1 Employee, twenty-four (24) months, (2) in the case of a Tier 2 Employee, twelve (12) months, and (3) in the case of a Tier 3 Employee, six (6) months, or (B) the date on which the Eligible Employee becomes eligible to participate in group medical, dental and vision plans through a subsequent employer; provided that payment of any Monthly COBRA Payments shall be delayed until the first payroll date occurring on or after the 61^st day following the Eligible Employee’s Severance Date (the “Monthly COBRA Payment Commencement Date”) and any payments that are so delayed shall be paid on the Monthly COBRA Payment Commencement Date.

(b)            Equity Awards; Performance-Based Awards.

(i)             All outstanding, unvested Equity Awards granted prior to the Change in Control will accelerate and vest in full as of the Eligible Employee’s Severance Date.

(ii)            Unless the Eligible Employee’s applicable award agreement provides for different treatment on a Change in Control and/or a Severance following a Change in Control, all performance-based equity awards granted to such Eligible Employee prior to the Change in Control which remain unearned and unvested as of the Severance Date shall vest and be earned on the Eligible Employee’s Severance Date. The number of shares underlying the performance-based equity award that shall vest and be earned will be the number of shares assuming the Company’s achievement of the target performance level.

2.2            280G Payments. If Independent Tax Counsel (as herein defined) determines that the aggregate payments and benefits provided or to be provided to an Eligible Employee pursuant to this Plan, and any other payments and benefits provided or to be provided to the Eligible Employee from the Company or any of its Affiliates or any successors thereto constitute “parachute payments” as defined in Section 280G of the Code (or any successor provision thereto) (“Parachute Payments”) that would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then, except as otherwise provided in the next sentence, such Parachute Payments shall be reduced to the extent necessary so that no portion thereof shall be subject to the Excise Tax. If Independent Tax Counsel determines that the Eligible Employee would receive in the aggregate greater payments and benefits on an after tax basis if the Parachute Payments were not reduced pursuant to this Section 2.2, then no such reduction shall be made. The determination of the Independent Tax Counsel under this Section 2.2 shall be final and binding on all parties hereto. The Company shall reduce or eliminate the Parachute Payments as follows: (i) only from Parachute Payments that may be characterized as “parachute payments” under Section 280G of the Code; (ii) only from Parachute Payments that are required to be made in cash, (iii) only with respect to any amounts that are not payable pursuant to a “nonqualified deferred compensation plan” subject to Code Section 409A, until those payments have been reduced to zero, and (iv) in reverse chronological order, to the extent that any Parachute Payments subject to reduction are made over time (e.g., in installments). In no event, however, shall any Parachute Payments be reduced if and to the extent such reduction would cause a violation of Code Section 409A or other applicable law. For purposes of this Section 2.2, “Independent Tax Counsel” shall mean an attorney, a certified public accountant with a nationally recognized accounting firm, or a compensation consultant with a nationally recognized actuarial and benefits consulting firm with expertise in the area of employee compensation tax law, who shall be selected by the Company and shall be acceptable to the Eligible Employee (the Eligible Employee’s acceptance not to be unreasonably withheld), and whose fees and disbursements shall be paid by the Company.

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2.3            Recoupment and Forfeiture of Severance. Notwithstanding any other provision of the Plan to the contrary, if it is determined by the Company that an Eligible Employee has violated the Company’s code of conduct or code of ethics or violated any restrictive covenants contained in the Severance Agreement and Release or any other restrictive covenants contained in any other Company plan or program or agreement between the Company and the Eligible Employee, the Eligible Employee shall be required to repay to the Company an amount equal to the economic value of all amounts already paid or provided to the Eligible Employee under the Plan and the Eligible Employee shall forfeit all other entitlements under the Plan. Additional forfeiture provisions may apply under the Plan or other agreements between the Eligible Employee and the Company, and any such forfeiture provisions shall remain in full force and effect.

Section 3. PLAN ADMINISTRATION.

3.1            The Plan Administrator shall administer the Plan and shall have the full, discretionary authority to (a) construe and interpret the Plan, (b) adopt amendments to the Plan which are deemed necessary or desirable to bring the Plan in compliance with all applicable laws and regulations, including without limitation, Code Section 409A and the regulations thereunder, (c) prescribe, amend and rescind rules and regulations necessary or desirable for the proper and effective administration of the Plan, (d) prescribe, amend, modify and waive the various forms and documents to be used in connection with the operation of the Plan and also the times for giving any notice required by the Plan, and (e) make all other determinations necessary or advisable for the administration of the Plan.

3.2            The Plan Administrator may delegate any of its duties hereunder to such person or persons from time to time as it may designate, with the exception of duties relating to Eligible Employees whom are subject to Section 16 of the Exchange Act.

3.3            The Plan Administrator is empowered, on behalf of the Plan, to engage accountants, legal counsel and such other personnel as it deems necessary or advisable to assist it in the performance of its duties under the Plan. The functions of any such persons engaged by the Plan Administrator shall be limited to the specified services and duties for which they are engaged, and such persons shall have no other duties, obligations or responsibilities under the Plan. Such persons shall exercise no discretionary authority or discretionary control respecting the management of the Plan. All reasonable expenses thereof shall be borne by the Company.

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3.4            Unless such requirement is waived pursuant to Section 3.1, the Plan Administrator shall promptly provide the Severance Agreement and Release to an Eligible Employee who becomes eligible for a payment and benefits under Section 2.1 and shall require an executed Severance Agreement and Release to be returned to the Plan Administrator within no more than forty-five (45) days (or such shorter time period as the Plan Administrator may impose, subject to compliance with applicable law) from the Severance Date. Unless such requirement is waived under Section 3.1, if the Eligible Employee does not execute and return the Severance Agreement and Release to the Plan Administrator within the specified time period, he or she will not be entitled to any payments or benefits under the Plan.

Section 4. SUCCESSOR TO COMPANY. The Plan shall inure to the benefit of and be binding upon the Company and its successors. The Company shall require any corporation, entity, individual or other person who is the successor (whether direct or indirect by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all the business and/or assets of the Company to expressly assume and agree to perform, by a written agreement in form and in substance satisfactory to the Company, all of the obligations of the Company under the Plan.

Section 5. DURATION, AMENDMENT AND TERMINATION.

5.1            Duration. Subject to the provisions of Section 5.2, the Plan shall terminate four (4) years from the Effective Date (the “Expiration Date”) unless (a) the Plan is extended by the Board or (b) the Board terminates the Plan.

5.2            Amendment or Termination. Subject to the provisions of this Section 5.2, the Board shall have the discretionary authority to amend the Plan in any respect, including as to the removal or addition of Eligible Employees, at any time; provided that an amendment that is adverse to the interests of an Eligible Employee (except for an amendment to which the adversely affected Eligible Employee consents) shall not be effective until the date that is twelve (12) months following the date of such amendment, and if a Change in Control occurs during such twelve (12)-month period, such amendment shall not become effective. Notwithstanding the foregoing, the Board shall have the discretion and authority to amend the Plan at any time in accordance with Section 6. The Board shall have the discretionary authority to suspend or terminate the Plan at any time prior to the Expiration Date, provided that no such suspension or termination shall become effective until the date that is twelve (12) months following the date of such suspension or termination. If a Change in Control occurs while the Plan is in effect, the Plan (i) may not be amended, suspended or terminated on or following the date such Change in Control occurs, (ii) shall continue in full force and effect for at least two (2) years following the date such Change in Control occurs, and (iii) shall not terminate or expire until after all Eligible Employees who become entitled to any payments or benefits hereunder shall have received such payments and benefits in full.

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5.3            Procedure for Extension, Amendment or Termination. Any extension, amendment, suspension or termination of the Plan by the Board in accordance with this Section 5 shall be made by action of the Board in accordance with the Company’s charter and by-laws and applicable law.

Section 6. GENERAL PROVISIONS.

6.1            Code Section 409A.

(a)            If any provision of this Plan (or of any payment of compensation, including benefits) would cause an Eligible Employee to incur any additional tax or interest under Code Section 409A or any regulations or Treasury guidance promulgated thereunder, the Company shall, after consulting with the Eligible Employee, reform such provision to comply with Code Section 409A; provided that the Company agrees to make only such changes as are necessary to bring such provisions into compliance with Code Section 409A and to maintain, to the maximum extent practicable, the original intent and economic benefit to the Eligible Employee of the applicable provision without violating the provisions of Code Section 409A.

(b)            Notwithstanding any provision to the contrary in this Plan, if an Eligible Employee is deemed on the Severance Date to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment or the provision of any benefit that is required to be delayed in compliance with Section 409A(a)(2)(B) such payment or benefit shall not be made or provided (subject to the last sentence hereof) prior to the earlier of (i) the expiration of the six (6)-month period measured from the date of the Eligible Employee’s “separation from service” (as such term is defined in Treasury Regulations issued under Code Section 409A) or (ii) the date of his or her death (the “Deferral Period”). Upon the expiration of the Deferral Period, all payments and benefits deferred pursuant to this Section 6.1(b) (whether they would have otherwise been payable in a single sum or in installments in the absence of such deferral) shall be paid or reimbursed to the Eligible Employee in a lump sum, and any remaining payments and benefits due under this Plan shall be paid or provided in accordance with the normal payment dates specified for them herein.

(c)            If and to the extent required to comply with Code Section 409A, no payment or benefit required to be paid under this Plan on account of termination of an Eligible Employee’s employment shall be made unless and until the Eligible Employee incurs a “separation from service” within the meaning of Code Section 409A.

(d)            For purposes of applying the provisions of Code Section 409A to this Plan, each separately identified amount to which the Eligible Employee is entitled under this Plan shall be treated as a separate payment. In addition, to the extent permissible under Code Section 409A, any series of installment payments under this Plan shall be treated as a right to a series of separate payments.

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(e)            Notwithstanding the foregoing, the Company does not make any representation to any Eligible Employee that the payments or benefits provided under this Plan are exempt from, or satisfy, the requirements of Code Section 409A, and the Company shall have no liability or other obligation to indemnify or hold harmless any Eligible Employee or any beneficiary of any Eligible Employee for any tax, additional tax, interest or penalties that any Eligible Employee or any beneficiary of any Eligible Employee may incur in the event that any provision of this Plan, or any amendment or modification thereof, or any other action taken with respect thereto, is deemed to violate any of the requirements of Code Section 409A.

6.2            No Assignment of Benefits. Except as otherwise provided herein or by law, no right or interest of any Eligible Employee under the Plan shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including, without limitation, by execution, levy, garnishment, attachment, pledge or in any manner; no attempted assignment or transfer thereof shall be effective; and no right or interest of any Eligible Employee under the Plan shall be liable for, or subject to, any obligation or liability of such Eligible Employee. When a payment is due under this Plan to a Severed Employee who is unable to care for his or her affairs, payment may be made directly to his or her legal guardian or personal representative.

6.3            No Right to Continued Service. Neither the establishment of the Plan, nor any modification thereof, nor the creation of any fund, trust or account, nor the payment of any benefits shall be construed as giving any Eligible Employee, or any person whomsoever, the right to be retained in the service of the Employer, and all Eligible Employees shall remain subject to discharge to the same extent as if the Plan had never been adopted.

6.4            Notice Period. If an Employer is obligated by law, contract, policy or otherwise to pay severance, a termination indemnity, notice pay, or the like, or if an Employer is obligated by law to provide advance notice of separation (“Notice Period”), then any Severance Payment hereunder shall be reduced, if and to the extent permitted under Code Section 409A, by the amount of any such severance pay, termination indemnity, notice pay or the like, as applicable, and by the amount of any compensation received during any Notice Period.

6.5            No Duty to Mitigate. A Severed Employee shall not be required to mitigate the amount of any payment provided for in this Plan by seeking other employment or otherwise, nor, except as otherwise provided in Section 2.1(a)(iv), shall the amount of any payment or benefit provided for in this Plan be reduced by any compensation earned by such a Severed Employee as a result of employment by another employer after the Severance Date or otherwise.

6.6            Withholding. An Employer shall be entitled to withhold from amounts to be paid to the Severed Employee hereunder any U.S. or foreign federal, state, local or foreign withholding or other taxes or charges which it reasonably believes it is required to withhold.

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6.7            Successors. This Plan shall inure to the benefit of and be binding upon the heirs, executors, administrators, successors and assigns of the parties, including, without limitation, each Eligible Employee, present and future, and any successor to the Employer. If a Severed Employee shall die while any amount would still be payable to such Severed Employee under the Plan if the Severed Employee had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Plan to the executor, personal representative or administrators of the Severed Employee’s estate.

6.8            Severability. If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and this Plan shall be construed and enforced as if such provisions had not been included.

6.9            Plan is Unfunded. The Plan shall not be funded. No Eligible Employee shall have any right to, or interest in, any assets of any Employer which may be applied by the Employer to the payment of benefits or other rights under this Plan.

6.10          Notice. Any notice or other communication required or permitted pursuant to the terms hereof shall be in writing and shall be given when delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, addressed to the intended recipient at his, her or its last known address. A written notice of an Eligible Employee’s Severance Date by the Company or the Eligible Employee, as the case may be, to the other shall (a) indicate the specific termination provision of the Plan that is being relied upon; (b) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Eligible Employee’s employment under the provision so indicated and (c) specify the termination date (which date, in the case of a termination by the Eligible Employee for Good Reason, shall be not less than thirty (30), and in all other cases shall be not less than fifteen (15) days nor more than sixty (60) days after the giving of such notice). The failure by the Company or the Eligible Employee to provide such notice or to set forth in such notice any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Company or the Eligible Employee hereunder or preclude the Company or Eligible Employee from asserting such fact or circumstance in enforcing the Company’s or the Eligible Employee’s rights hereunder.

6.11          No Right to Other Benefits. Nothing in the Plan shall require the Employer to provide any payment that duplicates any payment, benefit, or grant that an Eligible Employee is entitled to receive under any Employer compensation or benefit plan, award agreement, or other arrangement. Any severance benefit provided under any Employer compensation or benefit plan, award agreement, or other arrangement shall offset, on a dollar for dollar basis, any benefits owed under the Plan. The amounts paid or provided under the Plan shall not be treated as compensation for purposes of determining any benefits payable under any Employer retirement, life insurance, or other employee benefit plan unless otherwise required by the terms of the plan or local law.

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6.12          Plan Conflicts/Integration. Except to the extent explicitly provided in this Plan, any awards made under any Employer compensation or benefit plan or program shall be governed by the terms of that plan or program and any applicable award agreement thereunder as in effect from time to time. The Plan, as amended from time to time, constitutes the entire agreement between the Company and any Eligible Employee concerning the subject matter hereof and supersedes in its entirety any and all plans, agreements and understandings related to the subject matter hereof except as otherwise stated in this Section 6.12 or the Plan.

6.13          Governing Law. This Plan shall be construed and enforced according to the laws of the State of Rhode Island (not including any Rhode Island law that would require the substantive law of another jurisdiction to apply), to the extent not preempted by federal law, which shall otherwise control.

6.14          ERISA. Because the Plan is not intended to provide retirement income or result in the systematic deferral of income to termination of employment, the Plan is intended to be an “employee welfare benefit plan” within the meaning of Section 3(1) of the ERISA, and not an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA. However, to the extent that the Plan (without regard to this Section 6.14) is determined to be an “employee pension benefit plan” because (a) with respect to certain participants the Plan provides for payments in excess of the amount specified in 29 C.F.R. Section 2510.3-2(b) (the “Severance Pay Regulation”) and (b) the facts and circumstances indicate the Plan (without regard to this Section 6.14) is not otherwise an “employee welfare benefit plan,” then the following provisions shall apply: The Plan shall be treated as two plans, one of which provides the benefits required by Section 2 not in excess of the safe harbor described in the Severance Pay Regulation and the other of which provides for all other payments and benefits required by Section 2 pursuant to a plan maintained “primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees” as described in Section 201(2) of ERISA.

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6.15          Claim Review Process. In the event of a claim for benefits hereunder by an Eligible Employee, such Eligible Employee shall present the reason for his or her claim in writing to the Plan Administrator as set forth in Section 6.10. The Plan Administrator shall, within ninety (90) days after receipt of such written claim (unless special circumstances require an extension of time, but in no event more than one hundred eighty (180) days after such receipt), send a written notification to the Eligible Employee as to the Plan Administrator’s determination of the claim. In the event the claim is wholly or partially denied, such written notification shall (a) state the specific reason or reasons for the denial, (b) make specific reference to pertinent Plan provisions on which the denial is based, (c) provide a description of any additional material or information necessary for the Eligible Employee to perfect the claim and an explanation of why such material or information is necessary, and (d) set forth the procedure by which the Eligible Employee may appeal the denial of his or her claim, including, without limitation, a statement of the claimant’s right to bring an action under Section 502(a) of ERISA, following an adverse determination on appeal. In the event an Eligible Employee wishes to perfect the claim and/or appeal the denial of his or her claim, he or she must request a review of such denial by making application in writing to the Plan Administrator within sixty (60) days after receipt of such denial. Such Eligible Employee (or his or her duly authorized legal representative), upon written request to the Plan Administrator, shall be permitted to review any documents pertinent to his or her claim, and submit in writing, issues and comments in support of his or her position. Within sixty (60) days after receipt of a written appeal (unless special circumstances, such as the need to hold a hearing, require an extension of time, but in no event more than one hundred twenty (120) days after such receipt), the Plan Administrator shall notify the Eligible Employee of the final decision. The final decision shall be in writing and shall include (i) specific reasons for the decision, written in a manner calculated to be understood by the claimant, (ii) specific references to the pertinent Plan provisions on which the decision is based, (iii) a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents relevant to the claim for benefits, and (iv) a statement describing the claimant’s right to bring an action under Section 502(a) of ERISA. No legal action for benefits under the Plan may be brought in any forum until the Eligible Employee has brought a claim for benefits under the Plan and exhausted the remedies set forth in this Section 6.15. Notwithstanding the foregoing, if the Plan Administrator does not respond to the Eligible Employees claim or appeal within the relevant time periods set forth above, the Eligible Employee’s claim is deemed to be denied and the Eligible Employee can proceed with a legal action for benefits.

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Appendix I to Summer Infant, Inc. Change in Control Plan

FORM OF SEVERANCE AGREEMENT AND RELEASE

This Sevarance Agreement and Release (the “Agreement”) is made by and between Summer Infant (USA), Inc., a Rhode Island corporation (the “Employer”), and [_______________] (“Employee”).

WHEREAS, Employee has agreed to enter this Agreement whereby Employee will release any and all claims he or she may have against the Employer and other released parties and agrees to certain restrictive covenants in consideration of the benefits to be received by the Employee under the Summer Infant, Inc. Change in Control Plan (the “Plan”).

NOW THEREFORE, in consideration of the mutual promises made herein, the parties hereby agree as follows:

1.              Termination. Executive’s employment from the Employer terminated on the [__________] (the “Termination Date”).

2.              Payment of Severance Benefits. Employee acknowledges and represents that, other than the payments and other benefits to be paid as set forth in the Plan, the Employer has paid or provided all salary, wages, bonuses, accrued vacation, premiums, leaves, relocation costs, interest, fees, reimbursable expenses, commissions, stock, stock options, vesting, and any and all other benefits and compensation due to Employee.

3.              Definitions. In addition to the capitalized terms used and defined elsewhere in this Agreement, for purposes of this Agreement the following capitalized terms shall have the meanings set forth below.

(a)            “Affiliate” means any Person that, directly or indirectly, controls, is controlled by or is under common control with such Person, and with respect to any natural person, includes the members of such person’s immediate family (spouse, children and parents, whether by blood, marriage or adoption, or anyone residing in such person’s home).

(b)            “Business Partner” means a supplier, manufacturer, vendor or licensor with whom the Company has a business relationship and with which Employee had business-related contact or dealings, or about which Employee received Confidential Information, during the two years prior to the termination of Employee’s employment or during Employee’s employment, whichever is the shorter period. A Business Partner does not include a supplier, manufacturer, vendor or licensor that has fully and finally decided to terminate its business relationship with the Company independent of any conduct or communications by the Employee or breach of this Agreement, and which has, in fact, ceased doing any business with the Company.

(c)            “Company” means Summer Infant, Inc. and its Affiliates, including the Employer, and their respective successors and assigns.

(d)            “Competition” means providing services to a Competitor of the Company (whether as an employee, independent contractor, consultant, principal, agent, partner, officer, director, investor, or shareholder, except as a shareholder of less than one percent of a publicly traded company) that: (i) are the same or similar in function or purpose to the services the Employee provided to the Company during his or her employment by the Company, and/or (ii) will likely result in the disclosure of Confidential Information to a Competitor or the use of Confidential Information on behalf of a Competitor.

(e)            “Competitor” means any person, corporation or other entity that designs, manufactures, sells or distributes infant, juvenile and/or children’s health, safety and wellness products in one or more product categories that are sold by the Company, including, without limitation, products in the monitoring, health and safety, nursery, baby gear, travel, feeding, play and furniture product categories.

(f)            “Consulting Services” means any activity that involves providing consulting or advisory services with respect to any relationship between the Company, on the one hand, and any third party, on the other hand, and that is likely to result in the use or disclosure of Confidential Information.

(g)            “Person” means any natural person or entity with legal status

(h)            “Restricted Area” refers to the United States, Canada, Mexico, United Kingdom, Australia and any other country where the Company sells its products.

(i)            “Restricted Period” means, for Tier 1 Employees the 24-month period, for Tier 2 Employees, the 12-month period, and for Tier 3 Employees the 6-month period, following the Termination Date.

4.              Restrictive Covenants. If Employee is party to an employment agreement or other agreement with the Company or any of its Affiliates (“Other Restrictive Agreement”), then the terms and provisions of this Section 4 shall apply rather than the terms and provisions of the Other Restrictive Agreement. Employee acknowledges that in order to assure the Company and its Affiliates that they will retain the value of their business relationships, it is reasonable that the Employee be limited in utilizing trade secrets and other confidential information of the Company and its Affiliates, Employee’s special knowledge of the business of the Company and its Affiliates, and Employee’s relationships with customers, suppliers and others having business relationships with the Company and its Affiliates in any manner or for any purpose other than the advancement of the interests of the Company and its Affiliates, as hereinafter provided. Employee acknowledges that the Company would not enter into this Agreement and provide the benefits provided for in the Plan without the covenants and agreements of the Employee set forth in this Section 4.

(a)            Confidentiality. Employee acknowledges that in the course of the Employee’s employment with the Employer, Employee has had extensive contact with Persons with which the Company has, had or anticipates having business relationships (including current and anticipated customers and suppliers), and to have knowledge of and access to trade secrets and other proprietary and confidential information of the Company, including, without limitation, the following non-public information: trade secrets, proprietary formulations generated, developed or licensed by the Company, manufacturing processes, procedures and techniques, material costing, operating margins, details of customer agreements, new product development, expansion strategies, sources of supply, employee compensation, and confidential information of third parties which is given to the Company pursuant to an obligation or agreement to keep such information confidential or any other information relating to the Company that could reasonably be regarded as confidential or proprietary or which is not in the public domain (other than by reason of Employee’s breach of the provisions of this section) (collectively, “Confidential Information”). Accordingly, Employee shall not at any time use or purport to authorize any Person to use, reveal, report, publish, transfer or otherwise disclose to any Person, any Confidential Information without the prior written consent of the Company, except for disclosures by the Employee pursuant to Section 9 or required by applicable law (but only to the extent the Company is given a reasonable opportunity to object to such disclosure and protect the Confidential Information) to responsible officers of the Company and other responsible Persons who are in a contractual or fiduciary relationship with the Company and who have a need for such information for purposes in the best interests of the Company. Without limiting the generality of the foregoing, subject to Section 9, Employee shall not, directly or indirectly, disclose or otherwise make known to any Person any information as to the Company’s employees and others providing services to the Company, including with respect to their abilities, compensation, benefits and other terms of employment or engagement. Employee shall keep secret all such matters entrusted to Employee, and Employee shall not use or attempt to use any Confidential Information on behalf of any person or entity other than Company, or in any manner which may injure or cause loss or may be calculated to injure or cause loss, whether directly or indirectly, to the Company.

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Further, Employee agrees that he or she shall not, after the termination of his or her employment, use or permit to be used any such notes, memoranda, reports, lists, records, specifications, software programs, data, documentation or other materials. All of the foregoing shall be and remain the sole and exclusive property of the Company, and immediately upon the termination of Employee’s employment, Employee shall deliver all of the foregoing, and all copies thereof, to the Company at its main office.

(b)            Restriction on Competition. During the Restricted Period, Employee shall not, directly or indirectly, whether alone or in association with others, engage in Competition or provide Consulting Services within the Restricted Area.

(c)            Non-Interference. During the Restricted Period, Employee shall not interfere with the Company’s relationship with its Business Partners by soliciting or communicating (regardless of who initiates the communication) with a Business Partner to induce or encourage the Business Partner to stop doing business or reduce its business with the Company, unless a duly authorized officer of the Company gives Employee written authorization to do so. Employee also agrees that during the Restricted Period, he or she will not work on a Company account on behalf of a Business Partner or serve as the representative of a Business Partner for the Company. During the Restricted Period, Employee also will not interfere with the Company’s relationship with any employee of the Company by: (i) soliciting or communicating with such employee to induce or encourage him or her to leave the Company’s employ (regardless of who first initiates the communication); (ii) helping another Person evaluate such employee as an employment candidate; or (iii) otherwise helping any person or entity hire an employee away from the Company unless a duly authorized officer of the Company gives Employee written authorization to do so. Where required by law, the foregoing restriction will only apply to employees with whom Employee had material contact or about whom Employee received Confidential Information within the shorter period of Employee’s employment with the Company or during the last two years prior to the termination of Employee’s employment with the Company.

(d)            Non-disparagement. Subject to Section 9, Employee shall not at any time, directly or indirectly, engage in any conduct or make any statement, whether in commercial or noncommercial speech, disparaging or criticizing in any way the Company (including its directors and employees and other providing services to the Company), or any of its products or services, nor shall the Employee engage in any other conduct or make any other statement that could reasonably be expected to impair the goodwill of any of them, the reputation of any products or services of the Company or the marketing of such products or services, in each case except as may be required by law, and then only after consultation with the Company to the extent possible.

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(e)            Assignment of Inventions. Employee agrees that he or she will promptly make full written disclosure to the Company, will hold in trust for the sole right and benefit of Company, and hereby assigns to the Company, or its designee, all of Employee’s right, title, and interest in and to any and all inventions, original works of authorship, developments, concepts, improvements, designs, discoveries, ideas, trademarks or trade secrets, whether or not patentable or registrable under copyright or similar laws, which Employee may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, while in the course of his or her employment for the Company during the period of time Employee is in the employ of the Company and relating to the business of the Company (collectively referred to as “Inventions”). Employee further acknowledges that all original works of authorship which are made by Employee (solely or jointly with others) within the scope of and during the period of Employee’s employment with the Company and which are protectable by copyright are “works made for hire,” and as such are the sole property of the Company. Employee understands and agrees that the decision whether or not to commercialize or market any Invention developed by Employee solely or jointly with others is within the Company’s sole discretion and for the Company’s sole benefit and that no royalty will be due to Employee as a result of the Company’s efforts to commercialize or market any such Invention.

5.              Release of Claims. Employee agrees that the consideration to be paid in accordance with the terms of the Plan represents settlement in full of all outstanding obligations owed to Employee by the Company. Employee, on behalf of himself or herself, and his or her respective heirs, family members, executors and assigns, hereby fully and forever releases the Company and its past, present and future officers, agents, directors, employees, investors, shareholders, administrators, affiliates, divisions, subsidiaries, parents, predecessor and successor corporations, and assigns, from, and agrees not to sue or otherwise institute or cause to be instituted any legal or administrative proceedings concerning any claim, duty, obligation or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that Employee may possess arising from any omissions, acts or facts that have occurred up until and including the Effective Date, including, without limitation:

(a)            any and all claims relating to or arising from Employee’s employment relationship with the Company and the termination of that relationship;

(b)            any and all claims relating to, or arising from, Employee’s right to purchase, or actual purchase of shares of stock of the Company, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable state corporate law, and securities fraud under any state or federal law;

(c)            any and all claims for wrongful discharge of employment, termination in violation of public policy, discrimination, breach of contract (both express and implied), breach of a covenant of good faith and fair dealing (both express and implied), promissory estoppel, negligent or intentional infliction of emotional distress, negligent or intentional misrepresentation, negligent or intentional interference with contract or prospective economic advantage, unfair business practices, defamation, libel, slander, negligence, personal injury, assault, battery, invasion of privacy, false imprisonment and conversion;

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(d)            any and all claims for violation of any federal, state or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Civil Rights Act of 1871, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, Family and Medical Leave Act, the Worker Adjustment and Retraining Notification Act, the Rhode Island Fair Employment Practices Act, the Rhode Island Civil Rights Act of 1990, the Rhode Island Civil Rights of People with Disabilities Act, the Rhode Island Parental and Family Medical Leave Act, and Rhode Island wage payment laws, and any executive orders (governing employment practices) which may affect the Company

(e)            any and all claims for violation of the federal, or any state, constitution;

(f)             any and all claims arising out of any other laws and regulations relating to employment or employment discrimination; and

(g)            any and all claims for attorneys’ fees and costs.

Employee agrees that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released. This release does not extend to any severance obligations due Employee under the Plan and does not release claims that cannot be released as a matter of law. Nothing in this Agreement waives Employee’s rights to indemnification or any payments under any insurance policy, if any, provided by any act or agreement of the Company, state or federal law or policy of insurance.

6.              Acknowledgment of Waiver of Claims under ADEA. Employee acknowledges that Employee is waiving and releasing any rights he or she may have under the Age Discrimination in Employment Act of 1967 (“ADEA”) and that this waiver and release is knowing and voluntary. Employee and the Company agree that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date. Employee acknowledges that the consideration given for this waiver and release is in addition to anything of value to which Employee was already entitled. Employee further acknowledges that he or she has been advised by this writing that (a) Employee should consult with an attorney prior to executing this Agreement; (b) Employee has at least twenty-one (21) days within which to consider this Agreement; (c) Employee has seven (7) days following the execution of this Agreement by the parties to revoke the Agreement; (d) this Agreement shall not be effective until the revocation period has expired; and (e) nothing in this Agreement prevents or precludes Employee from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs for doing so, unless specifically authorized by federal law. Any revocation should be in writing and delivered to the General Counsel at the Company by close of business on the seventh day from the date that Employee signs this Agreement. In the event Employee signs this Agreement and returns it to the Company in less than the 21-day period identified above, Employee hereby acknowledges that he or she has freely and voluntarily chosen to waive the time period allotted for considering this Agreement. The parties agree that changes, whether material or immaterial, do not restart the running of the 21-day period.

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7.              No Pending or Future Lawsuits. Employee represents that he or she has no lawsuits, claims, or actions pending in her name, or on behalf of any other person or entity, against the Company or any other person or entity referred to herein. Employee also represents that Employee does not intend to bring any claims on his or her own behalf or on behalf of any other person or entity against the Company or any other person or entity referred to herein.

8.              No Admission of Liability. Employee understands and acknowledges that this Agreement constitutes a compromise and settlement of disputed claims. No action taken by the Company, either previously or in connection with this Agreement shall be deemed or construed to be (a) an admission of the truth or falsity of any claims heretofore made or (b) an acknowledgment or admission by the Company of any fault or liability whatsoever to the Employee or to any third party.

9.              Protected Activity. Employee understands that nothing in this Agreement shall in any way limit or prohibit Employee from engaging for a lawful purpose in any Protected Activity. For purposes of this Agreement, “Protected Activity” shall mean filing a charge, complaint or report with, or otherwise communicating with, cooperating with or participating in any investigation or proceeding that may be conducted by any federal, state or local government agency or commission, including the Securities and Exchange Commission, the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, and the National Labor Relations Board (“Government Agencies”). Employee understands that in connection with such Protected Activity, Employee is permitted to disclose documents or other information as permitted by law, and without giving notice to, or receiving authorization from, the Company. Employee agrees to take all reasonable precautions to prevent any unauthorized use or disclosure of any information that may constitute Confidential Information under this Agreement to any parties other than the relevant Government Agencies. Employee further understands that Protected Activity does not include the disclosure of any Company attorney-client privileged communications.

10.            Miscellaneous.

(a)            Costs. The parties shall each bear their own costs, expert fees, attorneys’ fees and other fees incurred in connection with this Agreement.

(b)            Authority. Employee represents and warrants that Employee has the capacity to act on his or her own behalf and on behalf of all who might claim through Employee to bind them to the terms and conditions of this Agreement.

(c)            No Representations. Employee represents that he or she has had the opportunity to consult with an attorney, and has carefully read and understands the scope and effect of the provisions of this Agreement. Neither party has relied upon any representations or statements made by the other party hereto which are not specifically set forth in this Agreement.

(d)            Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision.

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(e)            Attorneys’ Fees. Except with regard to a legal action challenging or seeking a determination in good faith of the validity of the waiver herein under the ADEA, in the event that either party brings an action to enforce or effect its rights under this Agreement, the prevailing party shall be entitled to recover its costs and expenses, including the costs of mediation, arbitration, litigation, court fees, and reasonable attorneys’ fees incurred in connection with such an action.

(f)             Entire Agreement. This Agreement represents the entire agreement and understanding between the Company and Employee concerning Employee’s separation from the Company.

(g)            No Oral Modification. This Agreement may only be amended in writing signed by Employee and the Company.

(h)            Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Rhode Island applicable to agreements made and to be performed entirely in such state, without regard to the conflict of laws principles of such state.

(i)             Effective Date. This Agreement is effective eight (8) days after it has been signed by Employee, so long as it has been signed by the parties and has not been revoked by either party before that date (the “Effective Date”).

(j)             Counterparts. This Agreement may be executed in counterparts, and each counterpart shall have the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned.

(k)            Voluntary Execution of Agreement. Employee understands and agrees that Employee is executing this Agreement voluntarily and without any duress or undue influence on the part or behalf of the Company or any third party, with the full intent of releasing all of Employee’s claims against the Company and other persons referenced herein. Employee acknowledges that:

(i)            Employee has read this Agreement;

(ii)           Employee has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of his or her own choice or has voluntarily declined to seek such counsel;

(iii)          Employee understands the terms and consequences of this Agreement and of the releases it contains; and

(iv)          Employee is fully aware of the legal and binding effect of this Agreement.

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(l)             Specific Performance. Employee agrees that the restrictions set forth in Section 4, including the length of the Restricted Period, the geographic area covered and the scope of activities proscribed, are reasonable for the purposes of protecting the value of the business and goodwill of the Company. Employee acknowledges that compliance with the restrictions set forth in Section 4 will not prevent Employee from earning a livelihood, and that in the event of a breach by the Employee of any of the provisions of Section 4, monetary damages would not provide an adequate remedy to the Company. Accordingly, Employee agrees that, in addition to any other remedies available to the Company, the Company shall be entitled to seek injunctive and other equitable relief (without having to post bond or other security and without having to prove damages or the inadequacy of available remedies at law) to secure the enforcement of these provisions, and shall be entitled to receive reimbursement from the Employee for attorneys’ fees and expenses incurred by it in enforcing these provisions. In addition to its other rights and remedies hereunder, the Company shall have the right to require the Employee to account for and pay over to it all compensation, profits, money, accruals and other benefits derived or received, directly or indirectly, by the Employee from any breach of the covenants of Section 4, and may set off any such amounts due it from the Employee against any amounts otherwise due Employee from the Company. If the Employee breaches any covenant set forth in Section 4, the running of the Restricted Period as to such covenant only shall be tolled for so long as such breach continues. It is the desire and intent of the parties that the provisions of Sections 4 be enforced in full; however, if any court of competent jurisdiction shall at any time determine that, but for the provisions of this paragraph, any part of this Agreement relating to the time period, scope of activities or geographic area of restrictions is invalid or unenforceable, the maximum time period, scope of activities or geographic area, as the case may be, shall be reduced to the maximum which such court deems enforceable with respect only to the jurisdiction in which such adjudication is made. If any other part of this Agreement is determined by such a court to be invalid or unenforceable, the invalid or unenforceable provisions shall be deemed amended (with respect only to the jurisdiction in which such adjudication is made) in such manner as to render them enforceable and to effectuate as nearly as possible the original intentions and agreement of the parties.

 Signature Page Follows

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IN WITNESS WHEREOF, the parties have executed this Severance Agreement and Release on the respective dates set forth below.

COMPANY	EMPLOYEE
Summer Infant (USA), Inc.
By:
Name:	Name:
Title:
Date:	Date:

Signature Page to Severance Agreement and Release

EX-10.4

Exhibit 10.4

July 14, 2020

Summer Infant, Inc.

1275 Park East Drive

Woonsocket, RI 02895

Attn:	Ed Schwartz
	Chief Financial Officer
	Re:         ABL Credit Agreement and Term Loan Agreements

Gentlemen:

Reference is hereby made to the following agreements:

(a)            the Second Amended and Restated Loan and Security Agreement dated as of June 28, 2018 (as previously amended and as the same may be further amended, restated, supplemented or otherwise modified from time to time, the “ABL Credit Agreement”), by and among Summer Infant, Inc. and Summer Infant (USA), Inc., as “Borrowers” (the “Borrowers”), the guarantors from time to time party thereto (the “Guarantors”, and together with the Borrowers, the “Obligors”), Bank of America, N.A., as the sole lender (the “ABL Lender”), and Bank of America in its capacity as “Agent” for the ABL Lenders from time to time party to ABL Credit Agreement (in such capacity, the “ABL Agent”);

(b)            the Term Loan and Security Agreement, dated as of June 28, 2018 (as previously amended and as the same may be further amended, restated, supplemented or otherwise modified from time to time, the “Term Loan Agreement”), by and among the Borrowers, the other Obligors, certain financial institutions from time to time party thereto as “Lenders” (the “Term Lenders”), and Pathlight Capital LLC, in its capacity as “Agent” for the Term Lenders under the Term Loan Agreement (the “Term Loan Agent”); and

(c)            the Intercreditor Agreement, dated as of June 28, 2018 (as previously amended and as the same may be further amended, restated, supplemented or otherwise modified from time to time, the “Intercreditor Agreement”), by and among the ABL Agent, the Term Loan Agent, the Borrowers and the other Obligors.

Clause (d) of the definition of “Eligible Account” in the ABL Credit Agreement limits the maximum percentage of Accounts owing from the Amazon Companies to 45% of the aggregate Eligible Accounts. The Borrowers have requested that the ABL Agent and ABL Lender agree to increase the maximum percentage of Accounts owing from the Amazon Companies to 55% of the aggregate Eligible Accounts for a temporary period as more fully set forth herein.

Section 5.2(a)(4) of the Intercreditor Agreement requires the consent of the Term Loan Agent to changes to the “Revolving Borrowing Base” (as such term is defined in the ABL Credit Agreement) or the component definitions thereof if such change would result in an increase in the ABL Revolver Borrowing Base (as such term is defined in the Intercreditor Agreement), and, accordingly, the Borrowers have requested the consent of the Term Loan Agent to the proposed increase in the maximum percentage of Accounts owing the Amazon Companies that may be included as Eligible Accounts under the ABL Credit Agreement.

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Notwithstanding that none of the ABL Agent, the ABL Lender or the Term Loan Agent are under any obligation to agree (or to consent to) any increase in the maximum percentage of Accounts owing from the Amazon Companies that may be included as “Eligible Accounts” under the ABL Credit Agreement, the ABL Agent, the ABL Lender and the Term Loan Agent willing to agree (and to consent to) a temporary increase in the maximum percentage of Accounts owing from the Amazon Companies that may be included as “Eligible Accounts” under the ABL Credit Agreement, all on the terms and subject to satisfaction of the conditions set forth below.

In furtherance thereof:

1.            The ABL Agent and ABL Lender agree that during the period from the date of this letter agreement through November 15, 2020, the maximum percentage of Accounts owing from the Amazon Companies that may be included as “Eligible Accounts” under the ABL Credit Agreement shall be increased from 45% to 55%; provided that (a) on November 16, 2020, the maximum percentage of Accounts owing from the Amazon Companies that may be included as “Eligible Accounts” under the ABL Credit Agreement shall automatically be reduced back to 45%, and (b) if, at any time, the corporate credit rating of Amazon.com, Inc. falls below “BBB-” (by S&P or Fitch) or “Baa3” (by Moody’s), the ABL Agent shall have the right, in its sole discretion to decrease the maximum percentage of Accounts owing from the Amazon Companies that may be included as “Eligible Accounts” under the ABL Credit Agreement to such maximum percentage as the ABL Agent, in its sole discretion, shall specify.

2.            The Term Loan Agent consents to the increase in the maximum percentage of Accounts owing from the Amazon Companies that may be included as “Eligible Accounts” under the ABL Credit Agreement as provided in the foregoing paragraph 1.

3.            The Obligors hereby represent, warrant and confirm that: (a) all representations and warranties of the Obligors in the ABL Credit Agreement and the other ABL Documents (as such term is defined in the Intercreditor Agreement), and in the Term Loan Agreement and the other Term Documents (as such term is defined in the Intercreditor Agreement), are true and correct in all material respects (without duplication of any materiality qualifier contained therein) on and as of the date hereof as if made on such date (except to the extent that such representations and warranties expressly relate to or are stated to have been made as of an earlier date, in which case, such representations and warranties shall be true and correct in all material respects (without duplication of any materiality qualifier contained therein) as of such earlier date); (b) no Default or Event of Default (as such terms are defined in the ABL Credit Agreement) has occurred and is continuing; and (c) no Default or Event of Default (as such terms are defined in the Term Loan Agreement) has occurred and is continuing.

4.            Obligors hereby ratify and confirm all of the terms and provisions of the ABL Credit Agreement, the other ABL Documents, the Term Loan Agreement and the other Term Documents, and agree that all of such terms and provisions, as amended hereby, remain in full force and effect.

5.            The agreements provided in this letter agreement shall become effective as of the date when, and only when, the ABL Agent shall have received counterparts to this letter agreement, duly executed by the ABL Agent, the ABL Lender, the Term Loan Agent and the Obligors.

6.            The agreements provided by this letter agreement shall be limited precisely as written and, except as expressly set forth herein, neither the fact of the agreements of the ABL Agent, the ABL Lender and the Term Loan Agent to enter into this letter agreement nor any other term or provision herein shall, or shall be deemed or construed to, (i) be a consent to any forbearance, waiver, amendment or modification of any term, provision or condition of the ABL Credit Agreement, the other ABL Documents, the Term Loan Agreement or the other Term Documents, (ii) affect, impair, operate as a waiver of, or prejudice any right, power or remedy which the ABL Agent, the ABL Lender, the Term Loan Agent or the Term Lenders may now or hereafter have pursuant to the ABL Credit Agreement, the other ABL Documents, the Term Loan Agreement or the other Term Documents or any other document, agreement, security agreement or instrument executed in connection with or related to the ABL Credit Agreement, the other ABL Documents, the Term Loan Agreement or the other Term Documents, or at law or in equity or by statute including, without limitation, with regard to any existing or hereafter arising Default or Event of Default under the ABL Credit Agreement or under the Term Loan Agreement, (iii) impose upon the ABL Agent, the ABL Lender, the Term Loan Agent or any Term Lender any obligation, express or implied, to consent to any amendment or further modification of the the ABL Credit Agreement, the other ABL Documents, the Term Loan Agreement or the other Term Documents, or (iv) be a consent to any waiver of any existing Default or Event of Default under the ABL Credit Agreement or under the Term Loan Agreement. The ABL Agent, the ABL Lender, the Term Loan Agent and the Term Lenders hereby expressly reserve all rights, powers and remedies specifically given to it or them under the ABL Credit Agreement, the ABL Documents, the Term Loan Agreement or the Term Documents or now or hereafter existing at law, in equity or by statute.

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7.            The Obligors hereby confirm that prior to executing this letter agreement, the Obligors consulted with and had the benefit of advice of legal counsel of their own selection and have relied upon the advice of such counsel, and in no part upon the representations of the ABL Agent, the ABL Lender, the Term Loan Agent, any Term Lender or any counsel to the ABL Agent, the ABL Lender, the Term Loan Agent or any Term Lender, concerning the legal effects of this letter agreement or any provision hereof.

8.            The Borrowers agree to pay, on demand, all reasonable costs and expenses incurred by the ABL Agent, the ABL Lender and the Term Loan Agent in connection with the preparation, negotiation and execution of this letter agreement, including, without limitation, the reasonable fees of legal counsel to the ABL Agent, the ABL Lender and the Term Loan Agent and any taxes or expenses associated with or incurred in connection with any instrument or agreement referred to herein or contemplated hereby.

9.            This letter agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts taken together shall constitute but one and the same instrument. Delivery of an executed counterparty of a signature page of this letter agreement by electronic means shall be as effective as delivery of a manually executed counterpart of this letter agreement.

10.          This letter agreement shall be deemed to be an ABL Document and a Term Document for all purposes.

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Please confirm your agreement to the foregoing matters by counter-signing a copy of this Letter in the space provided therefor below and thereafter returning a fully executed copy hereof to the undersigned at your earliest opportunity.

Yours etc.,
BANK OF AMERICA, N.A.,
as ABL Agent and ABL Lender
By	/s/ Cynthia G. Stannard
	Name:	Cynthia G. Stannard
	Title:	Senior Vice President
PATHLIGHT CAPITAL LLC,
as Term Loan Agent
By	/s/ Katie Hendricks
	Name:	Katie Hendricks
	Title:	Managing Director

[Signatures continue on the following page]

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BORROWERS:

SUMMER INFANT, INC.
By:	/s/ Ed Schwartz
		Name:	Ed Schwartz
		Title:	Chief Financial Officer
SUMMER INFANT (USA), INC.
By:	/s/ Ed Schwartz
		Name:	Ed Schwartz
		Title:	Chief Financial Officer
GUARANTORS:
SUMMER INFANT CANADA, LIMITED
By:	/s/ Ed Schwartz
		Name:	Ed Schwartz
		Title:	Chief Financial Officer
SUMMER INFANT EUROPE LIMITED
By:	/s/ Ed Schwartz
		Name:	Ed Schwartz
		Title:	Chief Financial Officer

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EX-10.5

Exhibit 10.5

AMENDMENT NO. 6 TO

SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

This AMENDMENT NO. 6 TO SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Amendment”) is dated as of August 10, 2020 by and among SUMMER INFANT, INC. (the “Company”) and SUMMER INFANT (USA), INC. (together with the Company, “Borrowers”), the guarantors from time to time party to the Loan Agreement referenced below (“Guarantors”, and together with Borrowers, “Obligors”), BANK OF AMERICA, N.A., in its capacity as the sole existing “Lender” under the Loan Agreement referenced below (“Sole Lender”), and BANK OF AMERICA, N.A., in its capacity as “Agent” for the Lenders under the Loan Agreement referenced below (“Agent”).

R E C I T A L S:

WHEREAS, Obligors, Agent and Sole Lender have previously entered into that certain Second Amended and Restated Loan and Security Agreement dated as of June 28, 2018 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), pursuant to which Agent and Sole Lender have made certain loans and financial accommodations available to Borrowers;

WHEREAS, Borrowers have requested that Agent and Sole Lender amend certain provisions of the Loan Agreement and provide certain other accommodations to Borrowers;

WHEREAS, notwithstanding that Agent and Sole Lender are under no obligation to amend the Loan Agreement, Agent and Sole Lender are willing to make certain additional financial accommodations as requested by Borrowers, such that Borrowers, Agent and Sole Lender have agreed to amend the Loan Agreement and the other Loan Documents on the terms and subject to satisfaction of the conditions set forth in this Agreement; and

WHEREAS, each Obligor is entering into this Amendment with the understanding and agreement that, except as specifically provided herein, none of Agent’s or any Lender’s rights or remedies as set forth in the Loan Agreement and the other Loan Documents are being waived or modified by the terms of this Amendment.

NOW, THEREFORE, for and in consideration of the premises and mutual agreements and covenants herein contained and for the purposes of setting forth the terms and conditions of this Amendment, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be bound, hereby agree as follows:

AGREEMENT

1.       Capitalized Terms. Capitalized terms used herein which are defined in the Loan Agreement have the same meanings herein as therein, except to the extent such terms are amended hereby.

2.       Acknowledgements and Stipulations. In order to induce Agent and Sole Lender to enter into this Amendment, each Obligor acknowledges, stipulates and agrees that:

(a)Recitals True and Correct. Each of the Recitals contained at the beginning of this Amendment is true and correct;

(b)Obligations Outstanding. Obligors hereby acknowledge and agree that, in accordance with the terms and conditions of the Loan Documents, each Obligor is liable to Agent and Lenders for all of the Obligations, including, without limitation, (a) for all principal and accrued interest owed under the Loan Documents, whether now due or hereafter accruing; and (b) for all fees, and all Extraordinary Expenses (including reasonable attorneys’ fees and expenses) heretofore or hereafter incurred by Agent and/or any Lender in connection with the protection, preservation, and enforcement by Agent and Lenders of its/their rights and remedies under the Loan Documents and/or this Amendment, including, without limitation, the negotiation and preparation of this Amendment, and any of the other documents, instruments or agreements executed in connection therewith;

(c)No Defense or Counterclaim. All of the Loans and other Obligations are not subject to any defense, deduction, offset or counterclaim by Obligors to Lenders (and, to the extent any Obligor had any such defense, deduction, offset or counterclaim on the date hereof, the same is hereby waived by each such Obligor in accordance with Section 7 below);

(d)Loan Documents Binding and Enforceable. The Loan Documents executed by Obligors are legal, valid and binding obligations enforceable against each Obligor in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally;

(e)Liens Valid. The Liens granted by Obligors to Agent, for the benefit of itself and the Lenders, in the Collateral are valid and duly perfected, first-priority liens, subject only to any Permitted Encumbrances;

(f)Security Interest Ratification. Each Obligor hereby ratifies, confirms and reaffirms that all security interests and Liens granted pursuant to the Loan Documents secure and shall continue to secure the payment and performance of all of the Obligations and liabilities pursuant to the Loan Documents, whether now existing or hereafter arising; and

(g)Legal Counsel. Prior to executing this Amendment, Obligors consulted with and had the benefit of advice of legal counsel of its/their own selection and has relied upon the advice of such counsel, and in no part upon the representations of Agent or Sole Lender, or any counsel to Agent or Sole Lender, concerning the legal effects of this Amendment or any provision hereof.

3.       Amendments to the Loan Agreement.

(a)Section 1.1 of the Loan Agreement is hereby amended as follows:

1)The definition of “EBITDA” shall be amended by adding the following sentences to the end thereof:

“Anything to contrary contained in the foregoing notwithstanding, and without duplication of the any other provisions hereof, the incurrence of CARES Debt shall not result in any increase in EBITDA. Following the CARES Forgiveness Date, the amount of CARES Debt, if any, that is actually forgiven pursuant to the provisions of the CARES Act – Title 1 may be included in EBITDA for the period in which such CARES Debt is actually forgiven.”

2)The definition of “Excluded Deposit Accounts” shall be amended by adding the following sentence to the end thereof:

“Anything to the contrary contained in this Agreement notwithstanding, the CARES Account shall be deemed to be an Excluded Deposit Account.”

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3) The definition of “Fixed Charges” shall be amended by adding the following sentence at the end thereof:

“Anything to the contrary contained in the foregoing notwithstanding, “Fixed Charges” shall not include interest expense or principal payments on CARES Debt other than CARES Unforgiven Debt.”

4)The following new definitions shall be added to Section 1.1 of the Loan Agreement:

“CARES Account” has the meaning set forth in Section 10.1.17(e).

“CARES Act - Title I” means Title I of the Coronavirus Aid, Relief and Economic Security Act, (H.R. 6074, H.R. 6201, H.R. 748 and H.R. 266 (116), as amended (including any successor thereto), and all requests, rules, guidelines, requirements and directives thereunder or issued in connection therewith or in implementation thereof, regardless of the date enacted, adopted, issued or implemented.

“CARES Act Permitted Purposes” means, with respect to the use of proceeds of any CARES Debt, the purposes set forth in Section 1106(b) of the CARES Act – Title I and otherwise in compliance with all other provisions or requirements of the CARES Act – Title I applicable in order for the entire amount of the CARES Debt to be eligible for forgiveness.

“CARES Debt” has the meaning set forth in Section 10.1.17.

“CARES Forgiveness Date” means five (5) Business Days after the date that the Borrowers obtains a final determination by the lender of the CARES Debt (and, to the extent required, the Small Business Administration) (or such longer period as may be approved in writing by Agent) regarding the amount of CARES Debt, if any, that will be forgiven pursuant to the provisions of the CARES Act - Title I.

“CARES Unforgiven Debt” means that amount of the CARES Debt that (x) has been determined by the lender of the CARES Debt (or the Small Business Administration) to be ineligible for forgiveness pursuant to the provisions of the CARES Act - Title I; provided, that if such determination has not been made on or before the date that is twelve (12) months after the date of incurrence of the CARES Debt (or such longer period as may be approved in writing by Agent), all such CARES Debt shall be deemed “CARES Unforgiven Debt” until such time as a final determination is made by the lender of the CARES Debt (and, to the extent required, the Small Business Administration), (y) either (i) the CARES Debt (or the applicable portion thereof) is deemed CARES Unforgiven Debt if (1) Obligors do not timely file an application for forgiveness or do not include any portion of the CARES Debt in an application for forgiveness, (2) Borrowers give notice to the Agent that the CARES Debt will be CARES Unforgiven Debt, or (3) the Agent obtains actual knowledge that the CARES Debt will be CARES Unforgiven Debt.

“Small Business Administration” means the U.S. Small Business Administration.

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(b) Section 5.7 of the Loan Agreement is hereby amended by amending and replacing the third sentence of Section 5.7 to read as follows:

“If, at any time a Cash Dominion Period shall not be in effect, the aggregate balance of all cash held in all Deposit Accounts of Obligors (including all Dominion Accounts and all Excluded Deposit Accounts (other than (x) Deposit Accounts described in clause (a) of the definition of “Excluded Deposit Accounts” and (y) the CARES Account), shall exceed $2,000,000 for more than five Business Days, the Obligors shall remit to Agent to be applied to the Obligations an amount sufficient to cause such aggregate balance in all Deposit Accounts to be less than $2,000,000.”

(c)Section 7.1 of the Loan Agreement is hereby amended by adding the following sentence at the end thereof:

“Anything to the contrary contained in this Agreement notwithstanding, the CARES Account (and cash proceeds of the CARES Debt held in the CARES Account) shall constitute Excluded Property.”

(d)Section 7.2.1 of the Loan Agreement is hereby amended by adding the following sentence at the end thereof:

“Anything to the contrary contained in this Agreement notwithstanding, the Agent shall not have a Lien on the CARES Account (or any cash proceeds of the CARES Debt held in the CARES Account).”

(e)Section 9.1 of the Loan Agreement is hereby amended by adding the following new Section 9.1.28 thereto:

“9.1.28 CARES Debt. All applications, documents and other information submitted to any Governmental Authority with respect to the CARES Debt shall be true and correct. No Lender or any of its Affiliates is deemed an “affiliate” of any Obligor or any of its Subsidiaries for any purpose related to the CARES Debt, including the eligibility criteria with respect thereto. Each Obligor acknowledges and agrees that (a) it has consulted its own legal and financial advisors with respect to all matters related to CARES Debt (including eligibility criteria) and the CARES Act – Title I, (b) it is responsible for making its own independent judgment with respect to CARES Debt and the process leading thereto, and (c) it has not relied on Agent, any Lender or any of their respective Affiliates with respect to any of such matters.”

(f)Section 10.1 of the Loan Agreement is hereby amended by adding the following new Section 10.1.16 thereto:

“10.1.16 CARES Debt.

(a)       Obligors shall provide to Agent (i) a copy of their application for CARES Debt promptly upon submission thereof and (ii) copies of the definitive loan documentation for CARES Debt promptly following execution and delivery thereof by the parties, together with a reasonably detailed written estimate of the amount of CARES Debt that Obligors reasonably anticipate will be subject to forgiveness pursuant to the provisions of the CARES Act - Title I.

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(b)       Obligors shall timely (and, in any event, not later than thirty (30) days (or such longer period as may be agreed by Agent) after the seven-week anniversary of the initial incurrence thereof) submit all applications and required documentation necessary or desirable for the lender of the CARES Debt and/or the Small Business Administration to make a determination regarding the amount of the CARES Debt that is eligible to be forgiven.

(c)       Obligors shall provide to Agent copies of any amendments, modifications, waivers, supplements or consents executed and delivered with respect to CARES Debt promptly (and in any event within three (3) Business Days) upon execution and delivery thereof, and copies of any notices of default received by any Obligor with respect to the CARES Debt.

(d)       Obligors shall, to the extent not included in the foregoing clause (b) or (c), promptly (and in any event within three (3) Business Days) upon receipt or filing thereof, as applicable, provide to Agent copies of all material documents, applications and correspondence with the applicable lender or any Governmental Authority relating to CARES Debt, including with respect to loan forgiveness.

(e)       Obligors shall use the proceeds of the CARES Debt solely for CARES Act Permitted Purposes. Obligors agree to, and will cause each of their Subsidiaries to (i) deposit all proceeds from CARES Debt into a segregated Deposit Account (the “CARES Account”) that is specially and exclusively used to hold proceeds of CARES Debt, (ii) not commingle their funds that are not proceeds of CARES Debt with the proceeds of CARES Debt and (iii) use funds from the CARES Account solely for CARES Act Permitted Purposes and before using any other cash on hand to pay expenses that are CARES Act Permitted Purposes. Without limiting anything in the foregoing, Obligors shall cause the proceeds of the CARES Debt to be deposited in a Deposit Account that is not subject to the cash dominion of Agent or any other secured party, and shall ensure that the proceeds of the CARES Debt are not used to repay other Indebtedness.

(f)       On the CARES Forgiveness Date, Obligors shall deliver to Agent a certificate of an Authorized Officer of Obligors certifying as to the amount of the CARES Debt that will be forgiven pursuant to the provisions of the CARES Act - Title I, together with reasonably detailed description thereof, all in form satisfactory to Agent.

(g)       Each Obligor agrees that it will not make any claim that Agent, any Lender or any of their respective Affiliates have rendered advisory services of any nature or respect in connection with any CARES Debt, the CARES Act – Title I or the process leading thereto.”

(g)Section 10.2.1 of the Loan Agreement is hereby amended by (i) deleting the word “and” at the end of existing clause (l) thereof, (ii) re-designating clause (m) as clause (n) and (iii) adding the following new clause (m) immediately prior thereto: ‎

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‎“(m)‎             unsecured Indebtedness in an aggregate principal amount not to exceed $1,955,792 advanced by (i) any Governmental Authority (including the Small Business Administration) or any other Person acting as a financial agent of a Governmental Authority or (ii) any other Person to the extent such Indebtedness under this clause (ii) is guaranteed by a Governmental Authority (including the Small Business Administration), in each case under this Section 10.2.1(m), pursuant to the CARES Act - Title I (such unsecured Indebtedness, “CARES Debt”); provided, that unless otherwise approved by Agent, (A) no Event of Default shall have occurred and be continuing at the time of incurrence thereof and (B) CARES Debt shall (1) be used by Obligors and their Subsidiaries solely for purposes permitted under the CARES Act - Title I, (2) have a maturity date not less than two (2) years after the date of incurrence of the CARES Debt, (3) bear interest at a rate not greater than one percent (1%) per annum, (4) not require any payments of principal prior to maturity and (5) otherwise have terms customary for loans made pursuant to the CARES Act - Title I (taken as a whole); provided, further, that CARES Unforgiven Debt, if any, shall not be permitted under this Section 10.2.1(m) ‎; and”‎

(h)Section 10.2.8 of the Loan Agreement is hereby amended by adding the following sentence at the end thereof:

“Anything to the contrary contained in this Agreement notwithstanding, without the prior written consent of Agent, no portion of the CARES Debt may be optionally prepaid by Obligors or their Subsidiaries (whether by refinancing or otherwise).”

(i)Section 10.2 of the Loan Agreement is hereby amended by adding the following new Section 10.2.20 thereto:

“10.2.20 Amendments to CARES Debt. Anything to the contrary contained in this Agreement notwithstanding, agree to any amendment, restatement, supplement, waiver or other modification of the CARES Debt if the effect of such amendment, restatement, supplement, waiver or other modification would be materially adverse to Obligors or the Lenders.

(j)Section 11.1 of the Loan Agreement is hereby amended as follows:

(a) In clause (r), by deleting the word “or” following the semicolon therein.

(b) In clause (s), by deleting the period at the end and replacing same with the following “; or”.

(c) By adding the following new clause (t) thereto:

“(t) any event of default occurs with respect to the CARES Debt or any event or condition occurs that results in the CARES Debt becoming due prior to its scheduled maturity or that enables or permits the holder or holders thereof to declare the CARES Debt to be due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity.”

4.       Consent to Term Loan Agreement Amendment. Agent and Sole Lender hereby consent to the execution and delivery of that certain Amendment No. 5 to Term Loan and Security Agreement dated as of the date hereof by and among Obligors, the lenders party thereto, and the Term Loan Agent (the “Term Loan Agreement Amendment”), and the amendments to the Term Loan Agreement set forth therein. The consent of Agent and Sole Lender to the Term Loan Agreement Amendment shall also constitute requisite consent under Section 5.2(b) of the Intercreditor Agreement to the amendments to the Term Loan Agreement described in the Term Loan Agreement Amendment.

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5.       No Default; Representations and Warranties, Etc. Obligors hereby represent, warrant and confirm that: (a) after giving effect to this Amendment, all representations and warranties of Obligors in the Loan Agreement and the other Loan Documents are true and correct in all material respects (without duplication of any materiality qualifier contained therein) on and as of the date hereof as if made on such date (except to the extent that such representations and warranties expressly relate to or are stated to have been made as of an earlier date, in which case, such representations and warranties shall be true and correct in all material respects (without duplication of any materiality qualifier contained therein) as of such earlier date); (b) after giving effect to this Amendment, no Default or Event of Default has occurred and is continuing; and (c) the execution, delivery and performance by Obligors of this Amendment and all other documents, instruments and agreements executed and delivered in connection herewith or therewith (i) have been duly authorized by all necessary action on the part of Obligors (including any necessary shareholder consents or approvals), (ii) do not violate, conflict with or result in a default under and will not violate or conflict with or result in a default under any applicable law or regulation, any term or provision of the organizational documents of any Obligor or any term or provision of any material indenture, agreement or other instrument binding on any Obligor or any of its assets, and (iii) do not require the consent of any Person which has not been obtained.

6.       Ratification and Confirmation. Obligors hereby ratify and confirm all of the terms and provisions of the Loan Agreement and the other Loan Documents and agree that all of such terms and provisions, as amended hereby, remain in full force and effect. Without limiting the generality of the foregoing, Obligors hereby acknowledge and confirm that all of the “Obligations” under and as defined in the Loan Agreement are valid and enforceable and are secured by and entitled to the benefits of the Loan Agreement and the other Loan Documents, and Obligors hereby ratify and confirm the grant of the liens and security interests in the Collateral in favor of Agent, for the benefit of itself and Lenders, pursuant to the Loan Agreement and the other Loan Documents, as security for the Obligations.

7.       Waiver; Release. To induce Agent and Sole Lender to enter into this Amendment, including providing the waivers provided for herein, and for other good and valuable consideration, each Obligor hereby forever waives, relieves, releases, and forever discharges Agent and Sole Lender, together with its respective present or former employees, officers, directors, agents, representatives, attorneys, and each of them, from any and all claims, debts, liabilities, demands, obligations, promises, acts, agreements, costs and expenses, actions and causes of action, of every type, kind, nature, description or character whatsoever, whether known or unknown, suspected or unsuspected, absolute or contingent, arising out of or in any manner whatsoever connected with or related to facts, circumstances, issues, controversies or claims, or by reason of any matter, cause or anything whatsoever existing or arising from the beginning of time through and including the date of execution of this Amendment relating to or arising out of the Loan Agreement and any of the Loan Documents or otherwise, including, without limitation, any actual or alleged act or omission of or on behalf of Agent and/or Sole Lender with respect to the Loan Documents and any security interest, Liens or Collateral in connection therewith, or the enforcement of any of Agent and/or Sole Lender’s rights or remedies thereunder (collectively “Released Claims”). Without limiting the foregoing, the Released Claims shall include any and all liabilities or claims arising out of or in any manner whatsoever connected with or related to the Loan Agreement and the other Loan Documents, this Amendment, the Recitals hereto, any instruments, agreements or documents executed in connection with any of the foregoing, and/or the origination, negotiation, administration, servicing and/or enforcement of any of the foregoing.

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(a)By entering into this release, each Obligor recognizes that no facts or representations are ever absolutely certain and it may hereafter discover facts in addition to or different from those which it presently knows or believes to be true, but that it is the intention of each Obligor hereby to fully, finally and forever settle and release all matters, disputes and differences, known or unknown, suspected or unsuspected; accordingly, if any Obligor should subsequently discover that any fact that it relied upon in entering into this release was untrue, or that any understanding of the facts was incorrect, no Obligor shall be entitled to set aside this release by reason thereof, regardless of any claim of mistake of fact or law or any other circumstances whatsoever. Each Obligor acknowledges that it is not relying upon and has not relied upon any representation or statement made by Agent or Sole Lender with respect to the facts underlying this release or with regard to any of such party’s rights or asserted rights.

(b)This release may be pleaded as a full and complete defense and/or as a cross-complaint or counterclaim against any action, suit, or other proceeding that may be instituted, prosecuted or attempted in breach of this release. Each Obligor acknowledges that the release(s) contained herein constitute(s) a material inducement to Agent and Sole Lender to enter into this Amendment, and that Agent and Sole Lender would not have done so but for Agent’s and Sole Lender’s expectation that such release(s) is valid and enforceable in all events.

(c)Each Obligor hereby represents and warrants to Agent and Sole Lender, and Agent and Sole Lender are relying thereon, as follows:

i.Except as expressly stated in this Amendment, neither Agent nor Sole Lender nor any other agent, employee or representative of Agent and/or Sole Lender, has made any statement or representation to any Obligor regarding any fact relied upon by such Obligor in entering into this Amendment;

ii.Each Obligor has made such investigation of the facts pertaining to this Amendment and all of the matters appertaining thereto, as it deems necessary;

iii.The terms of this Amendment are contractual and not a mere recital; and

iv.This Amendment has been carefully read by each Obligor, the contents hereof are known and understood by each such Obligor, and this Amendment is signed freely, and without duress, by any Obligor.

(d)Each Obligor further represents and warrants that it is the sole and lawful owner of all right, title and interest in and to every claim and every other matter which it releases herein, and that it has not heretofore assigned or transferred, or purported to assign or transfer, to any person, firm or entity any claims or other matters herein released. Each Obligor shall indemnify Agent and Sole Lender, and defend and hold it/them harmless from and against all claims based upon or arising in connection with prior assignments or purported assignments or transfers of any claims or matters released herein.

8.       Expenses of Agent and Sole Lender. Borrowers agree to pay, on demand, all reasonable costs and expenses incurred by Agent and Sole Lender in connection with the preparation, negotiation and execution of this Amendment and any other Loan Documents executed pursuant hereto and any and all agreements, amendments, modifications, and supplements to the Loan Agreement, including, without limitation, the reasonable fees of Agent’s and Sole Lenders’ legal counsel and any taxes or expenses associated with or incurred in connection with any instrument or agreement referred to herein or contemplated hereby. Each Borrower acknowledges that Agent and Sole Lender may charge any and all such reasonable fees, costs and expenses to Borrowers’ Loan Account in accordance with the Loan Agreement, and Agent and Sole Lender agree to promptly provide all invoices to Borrowers related to such fees, costs and expenses after charging the Loan Account therefor.

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9.       Conditions to Effectiveness of Amendment. This Amendment shall become effective as of the date when, and only when, each of the following conditions precedent shall have been satisfied or waived in writing by Agent (such date being defined as the “Effective Date”):

(a)Agent shall have received counterparts to this Amendment, duly executed by Agent, Sole Lender, and Obligors; and

(b)Agent shall have received a true and complete copy of the fully executed Term Loan Agreement Amendment.

10.    Reservation of Rights. This Amendment shall be limited precisely as written and, except as expressly set forth herein, neither the fact of Agent and Sole Lender’s agreement to enter into this Amendment nor any other term or provisions herein shall, or shall be deemed or construed to, (i) be a consent to any forbearance, waiver, amendment or modification of any term, provision or condition of the Loan Documents, (ii) affect, impair, operate as a waiver of, or prejudice any right, power or remedy which Agent and Sole Lender may now or hereafter have pursuant to the Loan Documents or any other document, agreement, security agreement or instrument executed in connection with or related to the Loan Documents, or at law or in equity or by statute including, without limitation, with regard to any existing or hereafter arising Event of Default, (iii) impose upon Agent or Sole Lender any obligation, express or implied, to consent to any amendment or further modification of the Loan Documents, or (iv) be a consent to any waiver of any existing Event of Default. Agent and Sole Lender hereby expressly reserve all rights, powers and remedies specifically given to either of them under the Loan Documents or now or hereafter existing at law, in equity or by statute.

12.     Miscellaneous.

(a)Further Assurances. Obligors shall take such further actions, and execute and deliver to Agent and Lenders such additional assignments, agreements, supplements, powers and instruments, as Agent and/or Lenders may deem necessary or appropriate, wherever required by law, in order to perfect, preserve and protect the security interest in the Collateral and the rights and interests granted to Agent and Lenders under the Loan Agreement and the other Loan Documents, or to permit Agent and Lenders to exercise and enforce their rights, powers and remedies with respect to any Collateral. Without limiting the generality of the foregoing, but subject to applicable law, Obligors shall make, execute, endorse, acknowledge, file or refile and/or deliver to Agent from time to time upon request such lists, descriptions and designations of the Collateral, copies of warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, supplements, additional security agreements, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports, and other assurances or instruments.

(b)Full Force and Effect; Entire Agreement. Except to the extent expressly provided in this Amendment, the terms and conditions of the Loan Agreement and each other Loan Document shall remain in full force and effect. This Amendment, the Loan Agreement and the other Loan Documents constitute and contain the entire agreement of the parties hereto and supersede any and all prior agreements, negotiations, correspondence, understandings and communications between the parties, whether written or oral, respecting the subject matter hereof.

(c)Non-Waiver. Except as specifically provided herein, none of this Amendment or Agent’s and/or any Lender’s continued making of Loans or other extensions of credit at any time extended to Borrowers in accordance with this Amendment, the Loan Agreement, and the other Loan Documents shall be deemed a waiver of or consent to any Default or Event of Default. Obligors agree that any such Default and/or Event of Default, if any, shall not be deemed to have been waived, released or cured by virtue of Loans or other extensions of credit at any time extended to Borrowers, or by Agent’s and/or Sole Lender’s agreements provided for herein. Nothing in this Amendment shall restrict Agent’s or Sole Lender’s ability to take or refrain from taking or exercise any right that may exist under the Loan Documents.

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(d)Counterparts. This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts taken together shall constitute but one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment by telecopier, pdf or by other electronic means acceptable to Agent (including, without limitation, by electronic signature to the extent acceptable to Agent) shall be equally as effective as delivery of an original, manually executed, counterpart. Any party delivering an executed counterpart of a signature page to this Amendment by telecopier, pdf or other electronic means (including by electronic signature) shall also deliver an original executed counterpart of this Amendment but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Amendment.

(e)No Third Parties Benefited. This Amendment is made and entered into for the sole benefit of Obligors, Agent and the Lenders, and their permitted successors and assigns, and except as otherwise expressly provided in this Amendment, no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Amendment.

(f)Governing Law. THIS AMENDMENT AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS AMENDMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF (BUT INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

(g)Severability. In case any provision in or obligation under this Amendment shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

(h)Jury Trial Waiver. BORROWERS, GUARANTORS, AGENT AND SOLE LENDER EACH HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AMENDMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES TO THIS AMENDMENT IN RESPECT OF THIS AMENDMENT OR THE OTHER LOAN DOCUMENTS OR THE RELATED TRANSACTIONS, INCLUDING, WITHOUT LIMITATION, THE OBLIGATIONS OF BORROWERS, THE COLLATERAL, OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO THIS AMENDMENT, OR THE VALIDITY, PROTECTION, INTERPRETATION, ADMINISTRATION, COLLECTION OR ENFORCEMENT OF THIS AMENDMENT OR ANY OF THE OTHER LOAN DOCUMENTS, WHETHER NOW EXISTING OR HEREAFTER ARISING, WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWERS, GUARANTORS, AGENT AND SOLE LENDER EACH HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT SUCH OBLIGOR PARTY OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF THIS AMENDMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF THEIR RIGHT TO A TRIAL BY JURY.

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(i) Loan Document. This Amendment shall be deemed to be a Loan Document for all purposes.

[Remainder of page intentionally left blank]

[Signatures begin on the following page]

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IN WITNESS WHEREOF, the parties hereto have executed this Amendment which shall be deemed to be a sealed instrument as of the date first above written.

BORROWERS:
SUMMER INFANT, INC.
By:	/s/ Ed Schwartz
	Name:       Ed Schwartz
	Title:         Chief Financial Officer
SUMMER INFANT (USA), INC.
By:	/s/ Ed Schwartz
	Name:       Ed Schwartz
	Title:         Chief Financial Officer
GUARANTORS:
SUMMER INFANT CANADA, LIMITED
By:	/s/ Ed Schwartz
	Name:       Ed Schwartz
	Title:         Chief Financial Officer
SUMMER INFANT EUROPE LIMITED
By:	/s/ Ed Schwartz
	Name:       Ed Schwartz
	Title:          Chief Financial Officer

[Signature Page to Amendment No. 6 to Second Amended and Restated Loan and Security Agreement]

AGENT:
BANK OF AMERICA, N.A.,
as Agent
By	/s/ Cynthia Stannard
	Name:       Cynthia Stannard
	Title:         Senior Vice President
LENDER:
BANK OF AMERICA, N.A.,
as Sole Lender
By	/s/ Cynthia Stannard
	Name:       Cynthia Stannard
	Title:         Senior Vice President

[Signature Page to Amendment No. 6 to Second Amended and Restated Loan and Security Agreement]

EX-10.6

EXHIBIT 10.6

AMENDMENT NO. 5 TO

TERM LOAN AND SECURITY AGREEMENT

This AMENDMENT NO 5 TO TERM LOAN AND SECURITY AGREEMENT (this “Amendment”) is dated as of August 10, 2020 by and among SUMMER INFANT, INC. and SUMMER INFANT (USA), INC., as “Borrowers” (“Borrowers”), the guarantors from time to time party to the Loan Agreement referenced below (“Guarantors”, and together with Borrowers, “Obligors”), certain financial institutions from time to time party to the Loan Agreement referenced below (“Lenders”), and PATHLIGHT CAPITAL LLC, in its capacity as “Agent” for the Lenders under the Loan Agreement referenced below (“Agent”).

R E C I T A L S:

WHEREAS, the Obligors, the Agent, and the Lenders have previously entered into that certain Term Loan and Security Agreement, dated as of June 28, 2018 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), pursuant to which the Lenders have made certain loans and financial accommodations available to the Borrowers;

WHEREAS, Borrowers have requested that Agent and Lenders amend certain provisions of the Loan Agreement and provide certain other accommodations to Borrowers;

WHEREAS, notwithstanding that the Agent and Lenders are under no obligation to amend the Loan Agreement, the Agent and Lenders are willing to make certain additional financial accommodations as requested by the Borrowers, such that the Borrowers, the Agent and Lenders have agreed to amend the Loan Agreement and the other Loan Documents on the terms and subject to satisfaction of the conditions set forth in this Agreement; and

WHEREAS, each Obligor is entering into this Amendment with the understanding and agreement that, except as specifically provided herein, none of Agent’s or any Lender’s rights or remedies as set forth in the Loan Agreement and the other Loan Documents are being waived or modified by the terms of this Amendment.

NOW, THEREFORE, for and in consideration of the premises and mutual agreements and covenants herein contained and for the purposes of setting forth the terms and conditions of this Amendment, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be bound, hereby agree as follows:

AGREEMENT

1.             Capitalized Terms. Capitalized terms used herein which are defined in the Loan Agreement have the same meanings herein as therein, except to the extent such terms are amended hereby.

2.             Acknowledgements and Stipulations. In order to induce the Agent and Lenders to enter into this Amendment, each Obligor acknowledges, stipulates and agrees that:

a)Recitals True and Correct. Each of the Recitals contained at the beginning of this Amendment is true and correct;

b)Obligations Outstanding. Obligors hereby acknowledge and agree that, in accordance with the terms and conditions of the Loan Documents, each Obligor is liable to Agent and Lenders for all of the Obligations, including, without limitation, (a) for all principal and accrued interest owed under the Loan Documents, whether now due or hereafter accruing; and (b) for all fees, and all Extraordinary Expenses (including reasonable attorneys’ fees and expenses) heretofore or hereafter incurred by Agent and/or any Lender in connection with the protection, preservation, and enforcement by Agent and Lenders of its/their rights and remedies under the Loan Documents and/or this Amendment, including, without limitation, the negotiation and preparation of this Amendment, and any of the other documents, instruments or agreements executed in connection therewith;

c)No Defense or Counterclaim. All of the Loans and other Obligations are not subject to any defense, deduction, offset or counterclaim by Obligors to Lenders (and, to the extent any Obligor had any such defense, deduction, offset or counterclaim on the date hereof, the same is hereby waived by each such Obligor in accordance with Section 7 below);

d)Loan Documents Binding and Enforceable. The Loan Documents executed by Obligors are legal, valid and binding obligations enforceable against each Obligor in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally;

e)Liens Valid. The Liens granted by Obligors to the Agent, for the benefit of itself and the Lenders, in the Collateral are valid and duly perfected, first-priority liens, subject only to any Permitted Encumbrances;

f)Security Interest Ratification. Each Obligor hereby ratifies, confirms and reaffirms that all security interests and Liens granted pursuant to the Loan Documents secure and shall continue to secure the payment and performance of all of the Obligations and liabilities pursuant to the Loan Documents, whether now existing or hereafter arising; and

g)Legal Counsel. Prior to executing this Amendment, Obligors consulted with and had the benefit of advice of legal counsel of its/their own selection and has relied upon the advice of such counsel, and in no part upon the representations of the Agent, any Lender, or any counsel to the Agent or any Lender, concerning the legal effects of this Amendment or any provision hereof.

3.             Amendments to the Loan Agreement.

(a) Section 1.1 of the Loan Agreement is hereby amended as follows:

1) The definition of “Fixed Charges” shall be amended by adding the following sentence at the end thereof:

“Anything to the contrary contained in the foregoing notwithstanding, “Fixed Charges” shall not include interest expense or principal payments on CARES Debt other than CARES Unforgiven Debt.”

2) The definition of “Dominion Account” shall be amended by deleting the entirety thereof and substituting in its place the following:

“Dominion Account: a collection or similar account established by an Obligor at Bank of America over which Agent has control for withdrawal purposes; provided, that anything herein to the contrary notwithstanding, the CARES Account shall not be a Dominion Account .”

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3) The definition of “Excluded Deposit Account” shall be amended by deleting the entirety thereof and substituting in its place the following:

“Excluded Deposit Account: a Deposit Account maintained by any Obligor (a) which has been established and is used exclusively for the sole purpose of making payroll and withholding tax payments related thereto and other employee wage and benefit payments to or for the benefit of such Obligor's employees and accrued and unpaid employee compensation (including salaries, wages, benefits and expense reimbursements), (b) which is a zero balance operational disbursement or similar account, (c) has been established and is used exclusively for the sole purpose of making and remitting sales and use taxes, VAT and/or such Canadian sales and use tax equivalents, (d) which is used for petty cash or similar purposes so long as the amount on deposit (i) in each such individual Deposit Account described in this clause (d) does not exceed $10,000 during any period of seventy-two consecutive hours and (ii) in all Deposit Accounts referred to in this clause (d) does not exceed $50,000 in the aggregate during any period of seventy-two consecutive hours, or (e) that is the CARES Account or any CARES Act – Title I proceeds deposited therein.

4) The following new definitions shall be added to Section 1.1 of the Loan Agreement:

“CARES Account” has the meaning set forth in Section 10.1.17(e).

“CARES Act - Title I” means Title I of the Coronavirus Aid, Relief and Economic Security Act, (H.R. 6074, H.R. 6201, H.R. 748 and H.R. 266 (116), as amended (including any successor thereto), and all requests, rules, guidelines, requirements and directives thereunder or issued in connection therewith or in implementation thereof, regardless of the date enacted, adopted, issued or implemented.

“CARES Act Permitted Purposes” means, with respect to the use of proceeds of any CARES Debt, the purposes set forth in Section 1106(b) of the CARES Act – Title I and otherwise in compliance with all other provisions or requirements of the CARES Act – Title I applicable in order for the entire amount of the CARES Debt to be eligible for forgiveness.

“CARES Debt” has the meaning set forth in Section 10.1.17.

“CARES Forgiveness Date” means five (5) Business Days after the date that the Borrowers obtains a final determination by the lender of the CARES Debt (and, to the extent required, the Small Business Administration) (or such longer period as may be approved in writing by Agent) regarding the amount of CARES Debt, if any, that will be forgiven pursuant to the provisions of the CARES Act - Title I.

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“CARES Unforgiven Debt” means that amount of the CARES Debt that (x) has been determined by the lender of the CARES Debt (or the Small Business Administration) to be ineligible for forgiveness pursuant to the provisions of the CARES Act - Title I; provided, that if such determination has not been made on or before the date that is twelve (12) months after the date of incurrence of the CARES Debt (or such longer period as may be approved in writing by Agent), all such CARES Debt shall be deemed “CARES Unforgiven Debt” until such time as a final determination is made by the lender of the CARES Debt (and, to the extent required, the Small Business Administration), (y) either (i) the CARES Debt (or the applicable portion thereof) is deemed CARES Unforgiven Debt if (1) the Obligors do not timely file an application for forgiveness or do not include any portion of the CARES Debt in an application for forgiveness, (2) Borrowers give notice to the Agent that the CARES Debt will be CARES Unforgiven Debt, or (3) the Agent obtains actual knowledge that the CARES Debt will be CARES Unforgiven Debt.

“Fifth Amendment” means: that certain Amendment No. 5 to Term Loan and Security Agreement dated as of August 10, 2020 by and among Borrowers, Guarantors, and Agent.”

“Fifth Amendment Effective Date” means: August 10, 2020.”

“Small Business Administration” means the U.S. Small Business Administration.

(b) Section 7.1 of the Loan Agreement is hereby amended by adding the following clause at the end thereof:

“; provided, further, however, anything herein to the contrary notwithstanding, Excluded Property shall include the CARES Account or any CARES Act – Title I proceeds deposited therein.

(c) Section 9.1 of the Loan Agreement is hereby amended by adding the following new Section 9.1.28 thereto:

“9.1.28 CARES Debt. All applications, documents and other information submitted to any Governmental Authority with respect to the CARES Debt shall be true and correct. No Lender or any of its Affiliates is deemed an “affiliate” of any Obligor or any of its Subsidiaries for any purpose related to the CARES Debt, including the eligibility criteria with respect thereto. Each Obligor acknowledges and agrees that (a) it has consulted its own legal and financial advisors with respect to all matters related to CARES Debt (including eligibility criteria) and the CARES Act – Title I, (b) it is responsible for making its own independent judgment with respect to CARES Debt and the process leading thereto, and (c) it has not relied on Agent, any Lender or any of their respective Affiliates with respect to any of such matters.”

(d) Section 10.1 of the Loan Agreement is hereby amended by adding the following new Section 10.1.17 thereto:

“10.1.17 CARES Debt.

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(a)       The Obligors shall provide to Agent (i) a copy of their application for CARES Debt promptly upon submission thereof and (ii) copies of the definitive loan documentation for CARES Debt promptly upon execution and delivery thereof by the parties, together with a reasonably detailed written estimate of the amount of CARES Debt that the Obligors reasonably anticipate will be subject to forgiveness pursuant to the provisions of the CARES Act - Title I.

(b)       The Obligors shall timely (and, in any event, not later than thirty (30) days (or such longer period as may be agreed by Agent) after the seven-week anniversary of the initial incurrence thereof) submit all applications and required documentation necessary or desirable for the lender of the CARES Debt and/or the Small Business Administration to make a determination regarding the amount of the CARES Debt that is eligible to be forgiven.

(c)       The Obligors shall provide to Agent copies of any amendments, modifications, waivers, supplements or consents executed and delivered with respect to CARES Debt promptly (and in any event within three (3) Business Days) upon execution and delivery thereof, and copies of any notices of default received by any Obligor with respect to the CARES Debt.

(d)       The Obligors shall, to the extent not included in the foregoing clause (b) or (c), promptly (and in any event within three (3) Business Days) upon receipt or filing thereof, as applicable, provide to Administrative Agent copies of all material documents, applications and correspondence with the applicable lender or any Governmental Authority relating to CARES Debt, including with respect to loan forgiveness.

(e)       The Obligors shall use the proceeds of the CARES Debt solely for CARES Act Permitted Purposes. The Obligors agree to, and will cause each of their Subsidiaries to (i) deposit all proceeds from CARES Debt into a segregated Deposit Account (the “CARES Account”) that is specially and exclusively used to hold proceeds of CARES Debt, (ii) not commingle their funds that are not proceeds of CARES Debt with the proceeds of CARES Debt and (iii) use funds from the CARES Account solely for CARES Act Permitted Purposes and before using any other cash on hand to pay expenses that are CARES Act Permitted Purposes. Without limiting anything in the foregoing, the Obligors shall cause the proceeds of the CARES Debt to be deposited in a Deposit Account that is not subject to the cash dominion of Agent or any other secured party, and shall ensure that the proceeds of the CARES Debt are not used to repay other Indebtedness.

(f)       On the CARES Forgiveness Date, the Obligors shall deliver to Agent a certificate of an Authorized Officer of the Obligors certifying as to the amount of the CARES Debt that will be forgiven pursuant to the provisions of the CARES Act - Title I, together with reasonably detailed description thereof, all in form satisfactory to Agent.

(g)       Each Obligor agrees that it will not make any claim that Agent, any Lender or any of their respective Affiliates have rendered advisory services of any nature or respect in connection with any CARES Debt, the CARES Act – Title I or the process leading thereto.”

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(e)       Section 10.2.1 of the Loan Agreement is hereby amended as follows:

(a) In clause (l), by deleting the word “and” following the semicolon therein.

(b) By re-designating clause “(l)” as clause “(m)”.

(c) By adding a new clause “(l)” as follows:

“(l)       unsecured Indebtedness in an aggregate principal amount not to exceed $1,955,792 advanced by (i) any Governmental Authority (including the Small Business Administration) or any other Person acting as a financial agent of a Governmental Authority or (ii) any other Person to the extent such Indebtedness under this clause (ii) is guaranteed by a Governmental Authority (including the Small Business Administration), in each case under this Section 10.2.1(l), pursuant to the CARES Act - Title I (such unsecured Indebtedness, “CARES Debt”); provided, that unless otherwise approved by Agent, (A) no Event of Default shall have occurred and be continuing at the time of incurrence thereof and (B) CARES Debt shall (1) be used by the Obligors and their Subsidiaries solely for purposes permitted under the CARES Act - Title I, (2) have a maturity date not less than two (2) years after the date of incurrence of the CARES Debt, (3) bear interest at a rate not greater than one percent (1%) per annum, (4) not require any payments of principal prior to maturity and (5) otherwise have terms customary for loans made pursuant to the CARES Act - Title I (taken as a whole); provided, further, that CARES Unforgiven Debt, if any, shall not be permitted under this Section 10.2.1(l).”

(f) Section 10.2.8 of the Loan Agreement is hereby amended by adding the following sentence at the end thereof:

“Anything to the contrary contained in this Agreement notwithstanding, without the prior written consent of Agent, no portion of the CARES Debt may be optionally prepaid by the Obligors or their Subsidiaries (whether by refinancing or otherwise).”

(g) Section 10.2 of the Loan Agreement is hereby amended by adding the following new Section 10.2.20 thereto:

“10.2.20 Amendments to CARES Debt. Anything to the contrary contained in this Agreement notwithstanding, agree to any amendment, restatement, supplement, waiver or other modification of the CARES Debt if the effect of such amendment, restatement, supplement, waiver or other modification would be materially adverse to the Obligors or the Lenders.

(h) Section 11.1 of the Loan Agreement is hereby amended as follows:

(a) In clause (r), by deleting the word “or” following the semicolon therein.

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(b) In clause (s), by deleting the period at the end and replacing same with the following “; or”.

(c) By adding the following new clause (t) thereto:

“(t) any event of default occurs with respect to the CARES Debt or any event or condition occurs that results in the CARES Debt becoming due prior to its scheduled maturity or that enables or permits the holder or holders thereof to declare the CARES Debt to be due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity.”

4.             Consent to Revolver Loan Agreement Amendment. Agent and Lenders hereby consent to the execution and delivery of that certain Amendment No. 6 to Second Amended and Restated Loan and Security Agreement dated even date herewith by and among the Obligors and lenders party thereto, and the Revolver Agent (the “Revolver Loan Agreement Amendment”), and the amendments to the Revolver Loan Agreement set forth therein, which Revolver Loan Agreement Amendment shall be in the form annexed hereto as Exhibit B and incorporated herein. The consent of the Agent and Lenders to the Revolver Loan Agreement Amendment shall also constitute requisite consent under Section 5.2(b) of the Intercreditor Agreement, to the amendments to the Revolver Loan Agreement described in the Revolver Loan Agreement Amendment.

5.             No Default; Representations and Warranties, Etc. Obligors hereby represent, warrant and confirm that: (a) after giving effect to this Amendment, all representations and warranties of Obligors in the Loan Agreement and the other Loan Documents are true and correct in all material respects (without duplication of any materiality qualifier contained therein) on and as of the date hereof as if made on such date (except to the extent that such representations and warranties expressly relate to or are stated to have been made as of an earlier date, in which case, such representations and warranties shall be true and correct in all material respects (without duplication of any materiality qualifier contained therein) as of such earlier date); (b) after giving effect to this Amendment, no Default or Event of Default has occurred and is continuing; and (c) the execution, delivery and performance by Obligors of this Amendment and all other documents, instruments and agreements executed and delivered in connection herewith or therewith (i) have been duly authorized by all necessary action on the part of Obligors (including any necessary shareholder consents or approvals), (ii) do not violate, conflict with or result in a default under and will not violate or conflict with or result in a default under any applicable law or regulation, any term or provision of the organizational documents of any Obligor or any term or provision of any material indenture, agreement or other instrument binding on any Obligor or any of its assets, and (iii) do not require the consent of any Person which has not been obtained.

6.             Ratification and Confirmation. Obligors hereby ratify and confirm all of the terms and provisions of the Loan Agreement and the other Loan Documents and agree that all of such terms and provisions, as amended hereby, remain in full force and effect. Without limiting the generality of the foregoing, Obligors hereby acknowledge and confirm that all of the “Obligations” under and as defined in the Loan Agreement are valid and enforceable and are secured by and entitled to the benefits of the Loan Agreement and the other Loan Documents, and Obligors hereby ratify and confirm the grant of the liens and security interests in the Collateral in favor of Agent, for the benefit of itself and Lenders, pursuant to the Loan Agreement and the other Loan Documents, as security for the Obligations.

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7.             Waiver; Release. To induce Agent and Lenders to enter into this Amendment, including providing the waivers provided for herein, and for other good and valuable consideration, each Obligor hereby forever waives, relieves, releases, and forever discharges Agent and each Lender, together with its respective present or former employees, officers, directors, agents, representatives, attorneys, and each of them, from any and all claims, debts, liabilities, demands, obligations, promises, acts, agreements, costs and expenses, actions and causes of action, of every type, kind, nature, description or character whatsoever, whether known or unknown, suspected or unsuspected, absolute or contingent, arising out of or in any manner whatsoever connected with or related to facts, circumstances, issues, controversies or claims, or by reason of any matter, cause or anything whatsoever existing or arising from the beginning of time through and including the date of execution of this Amendment relating to or arising out of the Loan Agreement and any of the Loan Documents or otherwise, including, without limitation, any actual or alleged act or omission of or on behalf of Agent and/or any Lender with respect to the Loan Documents and any security interest, Liens or Collateral in connection therewith, or the enforcement of any of Agent and/or Lenders’ rights or remedies thereunder (collectively “Released Claims”). Without limiting the foregoing, the Released Claims shall include any and all liabilities or claims arising out of or in any manner whatsoever connected with or related to the Loan Agreement and the other Loan Documents, this Amendment, the Recitals hereto, any instruments, agreements or documents executed in connection with any of the foregoing, and/or the origination, negotiation, administration, servicing and/or enforcement of any of the foregoing.

a)By entering into this release, each Obligor recognizes that no facts or representations are ever absolutely certain and it may hereafter discover facts in addition to or different from those which it presently knows or believes to be true, but that it is the intention of each Obligor hereby to fully, finally and forever settle and release all matters, disputes and differences, known or unknown, suspected or unsuspected; accordingly, if any Obligor should subsequently discover that any fact that it relied upon in entering into this release was untrue, or that any understanding of the facts was incorrect, no Obligor shall be entitled to set aside this release by reason thereof, regardless of any claim of mistake of fact or law or any other circumstances whatsoever. Each Obligor acknowledges that it is not relying upon and has not relied upon any representation or statement made by Agent or any Lender with respect to the facts underlying this release or with regard to any of such party’s rights or asserted rights.

b)This release may be pleaded as a full and complete defense and/or as a cross-complaint or counterclaim against any action, suit, or other proceeding that may be instituted, prosecuted or attempted in breach of this release. Each Obligor acknowledges that the release(s) contained herein constitute(s) a material inducement to Agent and Lenders to enter into this Amendment, and that Agent and Lenders would not have done so but for Agent’s and Lenders’ expectation that such release(s) is valid and enforceable in all events.

c)Each Obligor hereby represents and warrants to Agent and Lenders, and Agent and Lenders are relying thereon, as follows:

i.Except as expressly stated in this Amendment, neither Agent nor any Lender nor any other agent, employee or representative of Agent and/or any Lender, has made any statement or representation to any Obligor regarding any fact relied upon by such Borrower in entering into this Amendment;

ii.Each Obligor has made such investigation of the facts pertaining to this Amendment and all of the matters appertaining thereto, as it deems necessary;

iii.The terms of this Amendment are contractual and not a mere recital; and

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iv. This Amendment has been carefully read by each Obligor, the contents hereof are known and understood by each such Obligor, and this Amendment is signed freely, and without duress, by any Obligor.

d)Each Obligor further represents and warrants that it is the sole and lawful owner of all right, title and interest in and to every claim and every other matter which it releases herein, and that it has not heretofore assigned or transferred, or purported to assign or transfer, to any person, firm or entity any claims or other matters herein released. Each Obligor shall indemnify Agent and each Lender, and defend and hold it/them harmless from and against all claims based upon or arising in connection with prior assignments or purported assignments or transfers of any claims or matters released herein.

8.             Expenses of Agent and Lenders. Borrowers agree to pay, on demand, all reasonable costs and expenses incurred by Agent and Lenders in connection with the preparation, negotiation and execution of this Amendment and any other Loan Documents executed pursuant hereto and any and all agreements, amendments, modifications, and supplements to the Loan Agreement, including, without limitation, the reasonable fees of Agent’s and Lenders’ legal counsel and any taxes or expenses associated with or incurred in connection with any instrument or agreement referred to herein or contemplated hereby. Each Borrower acknowledges that Agent and Lenders may charge any and all such reasonable fees, costs and expenses to Borrowers’ Loan Account in accordance with the Loan Agreement, and Agent and Lenders agree to promptly provide all invoices to Borrowers related to such fees, costs and expenses after charging the Loan Account therefor.

9.             Conditions to Effectiveness of Amendment. This Amendment shall become effective as of the date when, and only when, each of the following conditions precedent shall have been satisfied or waived in writing by Agent (such date being defined as the “Effective Date”):

(a)Agent shall have received counterparts to this Amendment, duly executed by Agent, Lenders constituting “Required Lenders”, and Obligors; and

(b)Agent shall have received a true and complete copy of the fully executed Revolver Loan Agreement Amendment.

10.           Reservation of Rights. This Amendment shall be limited precisely as written and, except as expressly set forth herein, neither the fact of Agent and Lenders’ agreement to enter into this Amendment nor any other term or provisions herein shall, or shall be deemed or construed to, (i) be a consent to any forbearance, waiver, amendment or modification of any term, provision or condition of the Loan Documents, (ii) affect, impair, operate as a waiver of, or prejudice any right, power or remedy which Agent and Lenders may now or hereafter have pursuant to the Loan Documents or any other document, agreement, security agreement or instrument executed in connection with or related to the Loan Documents, or at law or in equity or by statute including, without limitation, with regard to any existing or hereafter arising Event of Default, (iii) impose upon Agent or any Lender any obligation, express or implied, to consent to any amendment or further modification of the Loan Documents, or (iv) be a consent to any waiver of any existing Event of Default. Agent and Lenders hereby expressly reserve all rights, powers and remedies specifically given to it under the Loan Documents or now or hereafter existing at law, in equity or by statute.

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11.           Miscellaneous.

a)Further Assurances. The Obligors shall take such further actions, and execute and deliver to the Agent and Lenders such additional assignments, agreements, supplements, powers and instruments, as Agent and/or Lenders may deem necessary or appropriate, wherever required by law, in order to perfect, preserve and protect the security interest in the Collateral and the rights and interests granted to the Agent and Lenders under the Loan Agreement and the other Loan Documents, or to permit the Agent and Lenders to exercise and enforce their rights, powers and remedies with respect to any Collateral. Without limiting the generality of the foregoing, but subject to applicable law, the Obligors shall make, execute endorse, acknowledge, file or refile and/or deliver to Agent from time to time upon request such lists, descriptions and designations of the Collateral, copies of warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules confirmatory assignments, supplements, additional security agreements, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports, and other assurances or instruments.

b)Full Force and Effect; Entire Agreement. Except to the extent expressly provided in this Amendment, the terms and conditions of the Loan Agreement and each other Loan Document shall remain in full force and effect. This Amendment, the Loan Agreement and the other Loan Documents constitute and contain the entire agreement of the parties hereto and supersede any and all prior agreements, negotiations, correspondence, understandings and communications between the parties, whether written or oral, respecting the subject matter hereof.

c)Non-Waiver. Except as specifically provided herein, none of this Amendment or Agent’s and/or any Lender’s continued making of Term Loans or other extensions of credit at any time extended to Obligors in accordance with this Amendment, the Loan Agreement, and the other Loan Documents shall be deemed a waiver of or consent to any Default or Event of Default. Borrowers agree that any such Default and/or Event of Default, if any, shall not be deemed to have been waived, released or cured by virtue of Term Loans or other extensions of credit at any time extended to Borrowers, or by Agent’s and/or any Lender’s agreements provided for herein. Nothing in this Amendment shall restrict Agent’s or any Lender’s ability to take or refrain from taking or exercise any right that may exist under the Loan Documents.

d)Counterparts. This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts taken together shall constitute but one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment by telecopier, pdf or by other electronic means acceptable to Agent (including, without limitation, by electronic signature to the extent acceptable to Agent) shall be equally as effective as delivery of an original, manually executed, counterpart. Any party delivering an executed counterpart of a signature page to this Amendment by telecopier, pdf or other electronic means (including by electronic signature) shall also deliver an original executed counterpart of this Amendment but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Amendment.

e)No Third Parties Benefited. This Amendment is made and entered into for the sole benefit of the Obligors, Agent and the Lenders, and their permitted successors and assigns, and except as otherwise expressly provided in this Amendment, no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Amendment.

f)Governing Law. THIS AMENDMENT AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS AMENDMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF (BUT INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

10

g)Severability. In case any provision in or obligation under this Amendment shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

h)Jury Trial Waiver. BORROWERS, GUARANTORS, AGENT AND LENDERS EACH HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AMENDMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES TO THIS AMENDMENT IN RESPECT OF THIS AMENDMENT OR THE OTHER LOAN DOCUMENTS OR THE RELATED TRANSACTIONS, INCLUDING, WITHOUT LIMITATION, THE OBLIGATIONS OF BORROWERS, THE COLLATERAL, OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO THIS AMENDMENT, OR THE VALIDITY, PROTECTION, INTERPRETATION, ADMINISTRATION, COLLECTION OR ENFORCEMENT OF THIS AMENDMENT OR ANY OF THE OTHER LOAN DOCUMENTS, WHETHER NOW EXISTING OR HEREAFTER ARISING, WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWERS, GUARANTORS, AGENT AND LENDERS EACH HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT SUCH OBLIGOR PARTY OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF THIS AMENDMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF THEIR RIGHT TO A TRIAL BY JURY.

i)Loan Document. This Amendment shall be deemed to be a Loan Document for all purposes.

[Remainder of page intentionally left blank]

[Signatures begin on the following page]

11

IN WITNESS WHEREOF, the parties hereto have executed this Amendment which shall be deemed to be a sealed instrument as of the date first above written.

BORROWERS:
SUMMER INFANT, INC.
By:	/s/ Edmund Schwartz
	Name:	Edmund Schwartz
	Title:	Chief Financial Officer
SUMMER INFANT (USA), INC.
By:	/s/ Edmund Schwartz
	Name:	Edmund Schwartz
	Title:	Chief Financial Officer
GUARANTORS:
SUMMER INFANT CANADA, LIMITED
By:	/s/ Edmund Schwartz
	Name:	Edmund Schwartz
	Title:	Chief Financial Officer
SUMMER INFANT EUROPE LIMITED
By:	/s/ Edmund Schwartz
	Name:	Edmund Schwartz
	Title:	Chief Financial Officer

[Signature Page to Amendment No. 5 to Term Loan and Security Agreement]

AGENT:
PATHLIGHT CAPITAL LLC,
as Agent
By	/s/ Katie Hendricks
	Name:	Katie Hendricks
	Title:	Managing Director
LENDER:
PATHLIGHT CAPITAL LLC,
as a Lender
By	/s/ Katie Hendricks
	Name:	Katie Hendricks
	Title:	Managing Director

[Signature Page to Amendment No. 5 to Term Loan and Security Agreement]

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Stuart Noyes, 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 11, 2020	/s/ Stuart Noyes
	Stuart Noyes
	Interim Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Edmund Schwartz, 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 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

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 11, 2020	/s/ Edmund Schwartz
	Edmund Schwartz
	Chief Financial Officer

EX-32.1

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 27, 2020 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Stuart Noyes, Interim 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 11, 2020	/s/ Stuart Noyes
	Stuart Noyes
	Interim Chief Executive Officer

EX-32.2

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 27, 2020 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Edmund Schwartz, 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 11, 2020	/s/ Edmund Schwartz
	Edmund Schwartz
	Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 27, 2020	Aug. 10, 2020
Document and Entity Information
Entity Registrant Name	Summer Infant, Inc.
Document Type	10-Q
Document Period End Date	Jun. 27, 2020
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		2,114,103
Entity Central Index Key	0001314772
Current Fiscal Year End Date	--01-02
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 27, 2020	Dec. 28, 2019
CURRENT ASSETS
Cash and cash equivalents	$ 848	$ 395
Trade receivables, net of allowance for doubtful accounts of $542 and $304 at December 28, 2019 and December 29, 2018, respectively	28,040	32,787
Inventory, net	18,833	28,056
Prepaids and other current assets	3,890	2,946
TOTAL CURRENT ASSETS	51,611	64,184
Property and equipment, net	5,684	8,788
Intangible assets, net	12,714	12,896
Right of use assets, noncurrent	4,835	4,578
Deferred tax assets, net	1,248	996
Other assets	96	101
TOTAL ASSETS	76,188	91,543
CURRENT LIABILITIES
Accounts payable	24,252	25,396
Accrued expenses	8,269	7,289
Lease liabilities, current	2,816	2,495
Current portion of long-term debt	438	875
TOTAL CURRENT LIABILITIES	35,775	36,055
Long-term debt, less current portion and unamortized debt issuance costs	32,380	45,359
Lease liabilities, noncurrent	2,349	2,546
Other liabilities		2,000
TOTAL LIABILITIES	70,504	85,960
STOCKHOLDERS' EQUITY
Preferred Stock, $0.0001 par value, 1,000,000 authorized, none issued or outstanding at March 28, 2020 and December 28, 2019, respectively
Common Stock $0.0009 par value, authorized, issued and outstanding of 5,444,445, 2,144,288 and 2,114,103 at June 27, 2020 and 5,444,445, 2,138,928, and 2,108,743 at December 28, 2019, respectively	2	2
Treasury Stock at cost (30,185 shares at June 27, 2020 and December 28, 2019)	(1,283)	(1,283)
Additional paid-in capital	77,746	77,715
Accumulated deficit	(69,011)	(69,088)
Accumulated other comprehensive loss	(1,770)	(1,763)
TOTAL STOCKHOLDERS' EQUITY	5,684	5,583
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 76,188	$ 91,543

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 27, 2020	Dec. 28, 2019
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)	$ 0.0009	$ 0.0009
Common Stock, authorized	5,444,445	5,444,445
Common Stock, issued	2,144,288	2,138,928
Common Stock, outstanding	2,114,103	2,108,743
Treasury Stock at cost, shares	30,185	30,185

XML

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 27, 2020	Jun. 29, 2019	Jun. 27, 2020	Jun. 29, 2019
Condensed Consolidated Statements of Operations
Net sales	$ 38,214	$ 46,425	$ 78,552	$ 88,963
Cost of goods sold	24,175	31,583	52,010	60,671
Gross profit	14,039	14,842	26,542	28,292
General & administrative expenses	6,729	8,523	14,876	17,902
Selling expenses	3,738	4,031	7,182	7,384
Depreciation and amortization	813	952	1,780	1,889
Operating income	2,759	1,336	2,704	1,117
Interest expense	1,121	1,293	2,531	2,542
Income (loss) before provision for income taxes	1,638	43	173	(1,425)
Provision for income taxes	351	267	96	197
Net income (loss)	$ 1,287	$ (224)	$ 77	$ (1,622)
Net income (loss) per share:
BASIC (in dollars per share)	$ 0.61	$ (0.11)	$ 0.04	$ (0.77)
DILUTED (in dollars per share)	$ 0.61	$ (0.11)	$ 0.04	$ (0.77)
Weighted average shares outstanding:
BASIC (in shares)	2,111,319	2,099,927	2,110,292	2,096,234
DILUTED (in shares)	2,111,429	2,099,927	2,110,370	2,096,234

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 27, 2020	Jun. 29, 2019	Jun. 27, 2020	Jun. 29, 2019
Condensed Consolidated Statements of Comprehensive Income (Loss)
Net income (loss)	$ 1,287	$ (224)	$ 77	$ (1,622)
Other comprehensive income (loss):
Changes in foreign currency translation adjustments	48	48	(7)	213
Comprehensive income (loss)	$ 1,335	$ (176)	$ 70	$ (1,409)

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 27, 2020	Jun. 29, 2019
Cash flows from operating activities:
Net income (loss)	$ 77	$ (1,622)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	1,780	1,855
Stock-based compensation expense	31	152
Write off of unamortized deferred financing costs	266
Provision for allowance for doubtful accounts	20	34
Amortization of right of use assets	1,201	1,030
Changes in assets and liabilities:
Decrease (increase) in trade receivables	4,638	(4,553)
Decrease in inventory	9,138	3,725
Decrease in lease liability	(1,333)	(1,102)
Increase in prepaids and other assets	(910)	(220)
Decrease in accounts payable and accrued expenses	(362)	(4,416)
Net cash provided by (used in) operating activities	14,546	(5,117)
Cash flows from investing activities:
Acquisitions of property and equipment	(864)	(1,416)
Acquisitions of other intangible assets	(57)	(114)
Net cash used in investing activities	(921)	(1,530)
Cash flows from financing activities:
Repayment of Term Loan Facility		(438)
Net (repayment) borrowings on revolving facilities	(13,270)	7,043
Net cash (used in) provided by financing activities	(13,270)	6,608
Effect of exchange rate changes on cash and cash equivalents	98	(102)
Net increase (decrease) in cash and cash equivalents	453	(141)
Cash and cash equivalents, beginning of period	395	721
Cash and cash equivalents, end of period	848	580
Supplemental disclosure of cash flow information:
Cash paid for interest	1,643	2,034
Cash paid for income taxes	2	$ 5
Supplemental disclosure of non-cash investing and financing activities:
Derecognition of a building sale-leaseback fixed asset, net of depreciation	2,357
Derecognition of a building sale-leaseback financial obligation	(2,390)
Right-of-use asset acquired through new operating lease	(1,457)
Lease liability acquired through new operating lease	$ 1,457

XML

Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Common Stock	Additional Paid in Capital	Treasury Stock	Accumulated Deficit	Accumulated Comprehensive Loss	Total
Balance, beginning of period at Dec. 29, 2018	$ 2	$ 77,396	$ (1,283)	$ (64,924)	$ (1,921)	$ 9,270
Balance, beginning of period (in shares) at Dec. 29, 2018	2,091,178
Increase (Decrease) in Shareholders' Equity
Issuance of common stock upon vesting of restricted shares (in shares)	3,681
Stock-based compensation, net of forfeitures		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)	(66,322)	(1,756)	8,085
Balance, end of period (in shares) at Mar. 30, 2019	2,094,859
Balance, beginning of period at Dec. 29, 2018	$ 2	77,396	(1,283)	(64,924)	(1,921)	9,270
Balance, beginning of period (in shares) at Dec. 29, 2018	2,091,178
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	2,102,968
Balance, beginning of period at Mar. 30, 2019	$ 2	77,444	(1,283)	(66,322)	(1,756)	8,085
Balance, beginning of period (in shares) at Mar. 30, 2019	2,094,859
Increase (Decrease) in Shareholders' Equity
Issuance of common stock upon vesting of restricted shares (in shares)	8,109
Stock-based compensation, net of forfeitures		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	2,102,968
Balance, beginning of period at Dec. 28, 2019	$ 2	77,715	(1,283)	(69,088)	(1,763)	5,583
Balance, beginning of period (in shares) at Dec. 28, 2019	2,108,743
Increase (Decrease) in Shareholders' Equity
Issuance of common stock upon vesting of restricted shares (in shares)	1,064
Fractional share Issuance upon reverse stock split	1,620
Stock-based compensation, net of forfeitures		(11)				(11)
Net loss for the period				(1,210)		(1,210)
Foreign currency translation adjustment					(55)	(55)
Balance, end of period at Mar. 28, 2020	$ 2	77,704	(1,283)	(70,298)	(1,818)	4,307
Balance, end of period (in shares) at Mar. 28, 2020	2,111,427
Balance, beginning of period at Dec. 28, 2019	$ 2	77,715	(1,283)	(69,088)	(1,763)	5,583
Balance, beginning of period (in shares) at Dec. 28, 2019	2,108,743
Increase (Decrease) in Shareholders' Equity
Net loss for the period						77
Foreign currency translation adjustment						(7)
Balance, end of period at Jun. 27, 2020	$ 2	77,746	(1,283)	(69,011)	(1,770)	5,684
Balance, end of period (in shares) at Jun. 27, 2020	2,114,103
Balance, beginning of period at Mar. 28, 2020	$ 2	77,704	(1,283)	(70,298)	(1,818)	4,307
Balance, beginning of period (in shares) at Mar. 28, 2020	2,111,427
Increase (Decrease) in Shareholders' Equity
Issuance of common stock upon vesting of restricted shares (in shares)	2,676
Stock-based compensation, net of forfeitures		42				42
Net loss for the period				1,287		1,287
Foreign currency translation adjustment					48	48
Balance, end of period at Jun. 27, 2020	$ 2	$ 77,746	$ (1,283)	$ (69,011)	$ (1,770)	$ 5,684
Balance, end of period (in shares) at Jun. 27, 2020	2,114,103

XML

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 27, 2020

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

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 28, 2019 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 28, 2019 included in its Annual Report on Form 10-K filed with the SEC on March 18, 2020, as amended on April 24, 2020.

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.

In March 2020, the Company completed a 1-for-9 reverse stock split of the Company's issued and outstanding shares of common stock in order to regain compliance with Nasdaq's minimum bid price requirement. Accordingly, all information in the financial statements and accompanying notes included within this Quarterly Report on Form 10-Q have been adjusted retrospectively to give effect to the reverse stock split as if it occurred at the beginning of the first period presented.

Reclassification

Previously reported amounts have been revised in the accompanying condensed consolidated statement of cash flows to properly state certain right to use assets and lease liabilities. These revisions had no impact on the company’s net cash provided by or used in operating activites.

Revenue Recognition

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

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.

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 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 27, 2020		June 29, 2019
Allowance for doubtful accounts, beginning of period	$	542	$	304
Charges to costs and expenses, net		20		34
Account write-offs		—		—
Allowance for doubtful accounts, end of period	$	562	$	338

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.

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 ROU 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 and six months ended June 27, 2020 and for the three and six months ended June 29, 2019 as it believes the discrete method results in a more accurate representation of the income tax provision for the periods.

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.

On March 27, 2020, the U.S. CARES Act was enacted, which provided a substantial tax-and-spending package intended to provide additional economic stimulus to address the impact of the COVID-19 pandemic. The U.S. CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain refundable employee retention credits. As a result of the U.S. CARES Act tax law changes, we recognized a $262 tax benefit related to the increase in interest deduction occurring during the fiscal year ended December 28, 2019 which was fully reserved for. The impact of the CARES Act in prospective periods may differ from our estimate as of June 27, 2020 due to changes in interpretations and assumptions, guidance that may be issued and actions the Company may take in response to the CARES Act. The CARES Act is highly detailed, and the Company will continue to assess the impact that various provisions will have on its business.

Net Loss/Income Per Share

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

Translation of Foreign Currencies

Assets and liabilities of the Company’s foreign subsidiaries 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. Assets and liabilities of the Company’s foreign subsidiaries whose functional currency is the U.S. dollar are remeasured into U.S. dollars at the their historical rates or the exchange rate in effect at the end of the quarter and the income and expense accounts of these affiliates have been remeasured at average rates prevailing during each respective quarter. Resulting remeasurement adjustments are made to the condensed consolidated statement of operations. Foreign exchange transaction gains and losses are included in the accompanying interim condensed consolidated statement of operations.

2020 Plan and COVID-19 Pandemic

In March 2020, the COVID-19 outbreak was declared a global pandemic and became widespread in the U.S. While our products are considered “essential” and our distribution center located in California continues to operate, some of our customers have been impacted and, to the extent they operated retail stores, have been required to close their stores and curtail operations. We began to see an impact on orders at the end of March and may continue to see lower demand in the near term as governmental restrictions on businesses remain in place. Due to the uncertainty with respect to when governmental restrictions may be lifted and the widespread nature of the pandemic, we cannot currently predict how it will impact our business in the long term. The Company is not currently aware of any events or circumstances arising from the COVID-19 pandemic that would require us to update any estimates, judgments or materially revise the carrying value of our assets or liabilities. The Company’s estimates may change, however, as events evolve and additional information is obtained, and any such changes will be recognized in the condensed consolidated financial statements.

Beginning in the first quarter of 2020, the Company implemented various restructuring initiatives to streamline operations and support its liquidity needs, including headcount reductions, reductions in facility space, and other cost reductions, as well as working with its lenders to amend its credit facility and term loan agreement to undertake these restructuring initiatives and to provide availability. In addition, the Company has begun taking actions to mitigate the impact of the expiration in August 2020 of tariff exclusions previously granted with respect to certain of its products, including seeking price increases from its customers and alternative manufacturing sources. In light of the ongoing uncertainty surrounding the COVID-19 pandemic in the U.S. and other countries and unpredictable economic consequences in the coming months, the Company applied for and in August 2020, received a loan through the Paycheck Protection Program of the U.S. CARES Act in the amount of $1,955, which may be used to fund certain qualified expenses, including payroll costs, rent and utility costs. The Company believes that its existing plan will generate sufficient cash which, along with its existing cash and availability under its facilities, will enable it to fund operations through at least the next 12 months. To the extent the Company experiences unexpected impacts from the COVID-19 pandemic or is unable to meet its current financial forecast, the Company would take further action to reduce costs, mitigate risks to its supply chain and, if necessary, seek to raise additional funds through debt or equity financings, restructure our existing debt, engage in strategic collaborations, and/or a strategic transaction.

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REVENUE RECOGNITION

6 Months Ended

Jun. 27, 2020

REVENUE RECOGNITION

REVENUE RECOGNITION

2.          REVENUE RECOGNITION

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.

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

	For the three		For the three
	months ended		months ended
	June 27, 2020		June 29, 2019
United States	$	35,800	$	39,064
All Other		2,414		7,361
Net Sales	$	38,214	$	46,425

	For the six		For the nine
	months ended		months ended
	June 27, 2020		June 29, 2019
United States	$	71,578	$	75,300
All Other		6,974		13,663
Net Sales	$	78,552	$	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 three and six months ended June 27, 2020 and three and six months ended June 29, 2019 fall under the provisions of the practical expedient and have therefore been expensed.

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DEBT

6 Months Ended

Jun. 27, 2020

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 through August 2020 (as amended, the “Restated BofA Agreement”). The Restated BofA Agreement replaced the Company’s prior credit facility with Bank of America, and provides for an  asset-based revolving credit facility with a letter of credit sub-line facility. As of June 27, 2020, total revolver commitments under the credit facility were $48,000. 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). As a result of the amendments made to the Restated BofA Agreement in the first and second quarters of 2020, (i) the definition of Financial Covenant Trigger Amount was modified, (ii) the lenders' aggregate revolver commitments were reduced to $48,000, (iii) the definition of EBITDA was amended to exclude certain fees and expenses, (iv) the Company is required to meet certain minimum net sales amounts for each period of three consecutive fiscal months through the three-month period ending December 31, 2020, (v) the Company is required to meet a certain minimum EBITDA (as defined in the Restated BofA Agreement) as of the end of each fiscal month, calculated on a trailing 12-month basis, (vi) the applicable margin and applicable unused line fee rate were increased,  (vii) a LIBOR floor of 0.75% was added, and (viii) certain reporting requirements were modified.

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. The Company is also required to meet certain financial covenants through the end of fiscal 2020, specifically (a) a minimum net sales amount for each period of three consecutive fiscal months, measured at the end of each month, and (b) a trailing, 12-month minimum adjusted EBITDA amount (as defined in the Restated BofA Agreement), measured at the end of each fiscal month. In addition, if availability falls below agreed minimum amounts, 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.

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, the lenders may declare all of the obligations of the Company and its subsidiaries under the Restated BofA Agreement immediately due and payable. For events of default relating to insolvency and receivership, all outstanding obligations automatically become due and payable without any action on the part of the lenders.

As of June 27, 2020, under the Restated BofA Agreement, the rate on base-rate loans was 5.75% and the rate on LIBOR-rate loans was 4.25%. The amount outstanding on the Restated BofA Agreement at June  27, 2020, was $18,752 and borrowing availability was $7,493.

The amendments executed in the six months ended June  27, 2020 were evaluated to determine the proper accounting treatment for the transactions. Accordingly, debt extinguishment accounting was used to account for the reduction in the total revolver commitments under the credit facility, resulting in the write off of $266 in remaining unamortized deferred financing costs during the three months ended March 28, 2020.

On July 14, 2020, the Company entered into a letter agreement with Bank of America, N.A. as agent and lender and Pathlight Capital LLC, as agent for the Term Loan Lender that increased the maximum percentage of accounts owing from the Amazon Companies that may be included as eligible accounts under the Restated BofA Agreement for 120 days. In addition, on August 10, 2020, the Company entered into Amendment No. 6 to the Restated BofA Agreement with respect to the PPP Loan. See Note 9 for information regarding the letter agreement and Amendment No. 6.

Term Loan Agreement. On June 28, 2018, the Company and Summer Infant (USA), Inc., as borrowers, entered into a Term Loan and Security Agreement with Pathlight Capital LLC, as agent, each lender from time to time a party thereto, and certain subsidiaries of the Company as guarantors, as amended through August 2020 (as amended, the “Term Loan Agreement”) 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. As a result of the amendments made to the Term Loan Agreement in the first and second quarters of 2020, (i) the definition of IP Advance Rate Reduction was modified, (ii) the definition of Term Loan Borrowing Base was modified to deduct a specified equipment reserve amount from the calculation of the borrowing base, (iii) the definitions of Financial Covenant Trigger Amount and EBITDA were amended consistent with the Restated BofA Agreement, (iv) consistent with the Restated BofA Agreement, the Company is required to meet certain minimum net sales amounts for each period of three consecutive fiscal months through the three-month period ending December 31, 2020 and certain minimum EBITDA as of the end of each fiscal month, calculated on a trailing 12-month period, (v) principal payments on the term loan were suspended for 2020, such payments to resume in March 2021, (vi) a LIBOR floor of 0.75% was added, and (vii) certain reporting requirements were modified. In addition, as described below, beginning March 10, 2020, the Term Loan began to bear additional interest, to be paid in kind ("PIK interest") at an annual rate of 4.0%.

The principal of the Term Loan is being 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. In connection with the March 2020 amendment, principal payments on the Term Loan were suspended for 2020, to resume in March 2021. The Term Loan bears interest at an annual rate equal to LIBOR, plus 9.0%.  Cash interest payments are due monthly, in arrears. In addition, the Term Loan began to accrue PIK (payment in kind) interest at an annual rate of 4.0% in March 2020, which interest will become payable upon the earlier to occur of (i) the repayment of the Term Loan in full, (ii) a sale or merger of the Company, (iii) the occurrence of default or event of default under the Term Loan Agreement, or (iv) the Company achieving adjusted EBITDA of $12 million (calculated on a trailing, 12-month basis). If, and only if, the PIK interest becomes due and payable as a result of the Company achieving the adjusted EBITDA event noted in clause (iv), then the Company will pay all PIK interest then due and thereafter, PIK interest will continue to accrue and be paid on each subsequent anniversary of such event. Obligations under the Term Loan Agreement are also subject to 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. Consistent with the Restated BofA Agreement, the Company is also required to meet certain financial covenants through the end of fiscal 2020, specifically (a) a minimum net sales amount for each period of three consecutive fiscal months, measured at the end of each month, and (b) a trailing, 12-month minimum adjusted EBITDA amount (as defined in the Restated BofA Agreement), measured at the end of each fiscal month.  In addition, consistent with the Restated BofA Agreement, if availability falls below a specified amount as described above, 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, the lenders may declare all of the obligations of the Company and its subsidiaries under the Term Loan Agreement immediately due and payable. For events of default relating to insolvency and receivership, all outstanding obligations automatically become due and payable without any action on the part of the lenders.

As of June 27, 2020, the interest rate on the Term Loan was 9.75% of cash interest and 4.0% of PIK interest. The amount outstanding on the Term Loan at June 27, 2020 was $16,406 and $201 of accrued PIK interest.

On August 10, 2020, the Company entered into Amendment No. 5 to the Term Loan Agreement with respect to the PPP Loan. See Note 9 for information regarding Amendment No. 5.

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

Fiscal Year ending:
2020		—
2021		875
2022		875
2023 and thereafter	$	33,408
Total	$	35,158

Unamortized debt issuance costs were $2,340 at June 27, 2020 and $2,398 at December 28, 2019, and are presented as a direct deduction of long-term debt on the condensed consolidated balance sheets.

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PROPERTY AND EQUIPMENT

6 Months Ended

Jun. 27, 2020

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT

4.          PROPERTY AND EQUIPMENT

Property and equipment, at cost, consisted of the following:

		For the
		fiscal year ended
	June 27,		December 28,		Depreciation/
	2020		2019		Amortization Period
Computer-related		4,531	$	4,511	5 years
Tools, dies, prototypes, and molds		28,093		27,457	1 - 5 years
Building		0		4,156	30 years
Other		7,636		7,474	1 - 15 years
		40,260		43,598
Less: accumulated depreciation		34,576		34,810
Property and equipment, net	$	5,684	$	8,788

Property and equipment included amounts acquired under capital leases of approximately $589 and $589 at June 27, 2020 and June 29, 2019, respectively, with related accumulated depreciation of approximately $164 and $73, respectively. Total depreciation expense was $1,536 and $1,520 for the six months ended June 27, 2020 and June 29, 2019, respectively.

See Note 6 on the derecognition of the building asset in May 2020.

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INTANGIBLE ASSETS

6 Months Ended

Jun. 27, 2020

INTANGIBLE ASSETS

INTANGIBLE ASSETS

5.          INTANGIBLE ASSETS

Intangible assets consisted of the following:

	June 27, 2020		December 28, 2019
Brand names	$	11,819	$	11,819
Patents and licenses		4,163		4,101
Customer relationships		6,946		6,946
Other intangibles		1,882		1,882
		24,810		24,748
Less: Accumulated amortization		(12,096)		(11,852)
Intangible assets, net	$	12,714	$	12,896

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 June 27, 2020.

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 27, 2020

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

6.          COMMITMENTS AND CONTINGENCIES

Leases

The Company leases office space and distribution centers primarily related to its United States, 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.

In May 2020, the Company entered into a lease agreement amendment related to our headquarters in Woonsocket, Rhode Island. The agreement decreased the leased premises square footage and extended the current term, which was set to end in March 2021 prior to the amendment to June 2025. It additionally granted two 5-year term extension options. The Company was accounting for the lease in Woonsocket as a sale-leaseback with the building on the balance sheet as property and equipment, net and a corresponding financing obligation in long-term liabilities. Upon the execution of the lease amendment, the Company re-assessed the classification of the lease and determined it to be an operating lease, as the criteria for a sale had been met. As part of this re-classification, the Company derecognized the financing obligation of $2,390 from long-term liabilities and the amount related to the property and equipment, net of $2,357 from the balance sheet and recorded a ROU asset and lease liability of $1,457 respectively. The Company did not include either of the term extension options in the calculation of the ROU asset and lease liability.

In April 2020, the company entered into a twelve month sublease agreement for a portion of the  distribution warehouse located in Riverside, California. Fixed sublease payments received are recognized on a straight-line basis over the sublease term in general and administrative expenses.

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 1.25 and 5.00 years. The Woonsocket lease has two 5-year extension options and the Canada lease has one 5-year extension option that have 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 six months ended June 27, 2020 and June 29, 2019 were as follows:

			Six Months Ended		Six Months Ended
			June 27, 2020		June 29, 2019
Operating lease cost			$	1,297	$	1,247
Variable lease cost			$	523	$	644
Less: sublease income				(250)		—
Total lease expense			$	1,570	$	1,891
Weighted-average remaining lease term	2.5	years
Weighted-average discount rate:	5.00	%

Cash paid for amounts included in the measurement of the Company’s lease liabilities were $1,405 and $1,298 for the six months ended June 27, 2020 and June 29, 2019 respectively.

As of June 27, 2020, the present value of maturities of the Company’s operating lease liabilities were as follows:

Fiscal Year Ending:
2020		1,497
2021		2,448
2022		618
2023		465
2024		325
Thereafter		164
Less imputed interest		(352)
Total	$	5,165

The future fixed sublease receipts under non-cancelable operating lease agreements as of June 27, 2020 are as follows:

Fiscal Year Ending:
2020		500
2021		250
Thereafter		—
Total	$	750

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.

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SHARE BASED COMPENSATION

6 Months Ended

Jun. 27, 2020

SHARE BASED COMPENSATION

SHARE BASED COMPENSATION

7.          SHARE BASED COMPENSATION

The Company is currently authorized to issue up to 188,889 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 27, 2020 and June 29, 2019 was $31 and $152, respectively. Share based compensation expense is included in general and administrative expenses.

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 condensed consolidated financial statements is based on awards that are ultimately expected to vest.

As of June 27, 2020, there were 71,562 stock options outstanding and 20,543 unvested restricted shares outstanding.

During the six months ended June 27, 2020, the Company granted 21,433 stock options and 9,550 shares of restricted stock, respectively. The following table summarizes the weighted average assumptions used for stock options granted during the six months ended June 27, 2020 and June 29, 2019.

	For the Six		For the Six
	Months Ended		Months Ended
	June 27, 2020		June 29, 2019
Expected life (in years)	5.1		4.8
Risk-free interest rate	1.74	%	2.34	%
Volatility	67.3	%	64.2	%
Dividend yield	0	%	0	%
Forfeiture rate	14.2	%	24.2	%

As of June 27, 2020, there were 67,557 shares available to grant under the 2012 Plan.

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WEIGHTED AVERAGE COMMON SHARES

6 Months Ended

Jun. 27, 2020

WEIGHTED AVERAGE COMMON SHARES

WEIGHTED AVERAGE COMMON SHARES

8.          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 27, 2020 excluded 71,562 stock options and excluded 20,433 and 20,465 shares of restricted stock outstanding, respectively. The computation of diluted common shares for the three and six months ended June 29, 2019 excluded 134,852 stock options and 32,475 shares of restricted stock outstanding.  

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 27, 2020

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

9.          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 condensed consolidated financial statements or disclosure in the notes thereto except as follows.

On July 14, 2020, the Company and Summer Infant (USA), Inc., as borrowers, and certain subsidiaries of the Company as guarantors, entered into a letter agreement with Bank of America, N.A. as agent (“Agent”) and lender, and Pathlight Capital LLC, as agent for the Term Loan Lender, with respect to the Restated BofA Agreement.  Pursuant to the letter agreement, the maximum percentage of accounts owing from the Amazon Companies that may be included as “eligible accounts” under the Restated BofA Agreement shall be increased, provided that (i) such percentage shall be automatically reduced to the original percentage on November 16, 2020, and (ii) if at any time the corporate credit rating of Amazon.com, Inc. falls below a certain rating, as defined, the Agent shall have the right, in its sole discretion, to decrease the maximum percentage of such accounts owing from the Amazon Companies to an amount specified by the Agent.

Paycheck Protection Program. On August 3, 2020, we received loan proceeds of $1,955 (the “PPP Loan”) pursuant to the Paycheck Protection Program (“PPP”) administered by the U.S. Small Business Administration under the CARES Act. The PPP Loan, which was in the form of a promissory note (the “PPP Note”), between the Company and Bank of America, N.A., as the lender, matures on July 27, 2025 and bears interest at a fixed rate of 1% per annum, payable monthly commencing six months from the date of the PPP Loan. The Company may voluntarily prepay the borrowings in full with no associated penalty or premium.  Under the terms of the PPP, the principal may be forgiven if the PPP Loan proceeds are used for qualifying expenses, including payroll costs, rent and utility costs.  No assurance can be provided that the Company will obtain forgiveness of the PPP Loan in whole or in part. In addition, details of the PPP continue to evolve regarding which companies are qualified to receive loans pursuant to the PPP and on what terms, and the Company may be required to repay some or all of the Loan due to these changes or different interpretations of the PPP requirements.

The PPP Note contains customary representations, warranties, and covenants for this type of transaction, including customary events of default relating to, among other things, payment defaults and breaches of representations and warranties or other provisions of the PPP Note. The occurrence of an event of default may result in, among other things, the Company becoming obligated to repay all amounts outstanding under the PPP Note.

On August 10, 2020, the Company and Summer Infant (USA), Inc., as borrowers entered into (i) Amendment No. 6 to Second Amended and Restated Loan and Security Agreement among the Company and Summer Infant (USA) Inc., as borrowers, the guarantors from time to time party thereto, the financial institutions from time to time party thereto as lenders, and Bank of America, N.A., as agent for the lenders (the “BofA Amendment”), and (ii) Amendment No. 5 to Term Loan and Security Agreement among the Company and Summer Infant (USA) Inc., as borrowers, the guarantors from time to time party thereto, the financial institutions from time to time party thereto as lenders, and Pathlight Capital LLC, as agent for the lenders (the “Term Loan Amendment”). The BofA Amendment amended the terms of the Restated BofA Agreement with respect to the PPP Loan, including to add the PPP Loan as “Permitted Debt,” and to exclude the interest expense or principal payments on the PPP Loan from “Fixed Charges” (unless such PPP Loan amount is not subsequently forgiven). Similarly, the Term Loan Amendment amended the terms of the Term Loan Agreement to modify certain provisions to take into account the PPP Loan in substantially the same form as the BofA Amendment.

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

6 Months Ended

Jun. 27, 2020

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reclassification

Reclassification

Previously reported amounts have been revised in the accompanying condensed consolidated statement of cash flows to properly state certain right to use assets and lease liabilities. These revisions had no impact on the company’s net cash provided by or used in operating activites.

Revenue Recognition

Revenue Recognition

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

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.

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 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

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

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 27, 2020		June 29, 2019
Allowance for doubtful accounts, beginning of period	$	542	$	304
Charges to costs and expenses, net		20		34
Account write-offs		—		—
Allowance for doubtful accounts, end of period	$	562	$	338

Inventory Valuation

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

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.

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 ROU 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

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 and six months ended June 27, 2020 and for the three and six months ended June 29, 2019 as it believes the discrete method results in a more accurate representation of the income tax provision for the periods.

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.

On March 27, 2020, the U.S. CARES Act was enacted, which provided a substantial tax-and-spending package intended to provide additional economic stimulus to address the impact of the COVID-19 pandemic. The U.S. CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain refundable employee retention credits. As a result of the U.S. CARES Act tax law changes, we recognized a $262 tax benefit related to the increase in interest deduction occurring during the fiscal year ended December 28, 2019 which was fully reserved for. The impact of the CARES Act in prospective periods may differ from our estimate as of June 27, 2020 due to changes in interpretations and assumptions, guidance that may be issued and actions the Company may take in response to the CARES Act. The CARES Act is highly detailed, and the Company will continue to assess the impact that various provisions will have on its business.

Net Loss Per Share

Net Loss/Income Per Share

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

Translation of Foreign Currencies

Translation of Foreign Currencies

Assets and liabilities of the Company’s foreign subsidiaries 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. Assets and liabilities of the Company’s foreign subsidiaries whose functional currency is the U.S. dollar are remeasured into U.S. dollars at the their historical rates or the exchange rate in effect at the end of the quarter and the income and expense accounts of these affiliates have been remeasured at average rates prevailing during each respective quarter. Resulting remeasurement adjustments are made to the condensed consolidated statement of operations. Foreign exchange transaction gains and losses are included in the accompanying interim condensed consolidated statement of operations.

2020 Plan and COVID-19 Pandemic

2020 Plan and COVID-19 Pandemic

In March 2020, the COVID-19 outbreak was declared a global pandemic and became widespread in the U.S. While our products are considered “essential” and our distribution center located in California continues to operate, some of our customers have been impacted and, to the extent they operated retail stores, have been required to close their stores and curtail operations. We began to see an impact on orders at the end of March and may continue to see lower demand in the near term as governmental restrictions on businesses remain in place. Due to the uncertainty with respect to when governmental restrictions may be lifted and the widespread nature of the pandemic, we cannot currently predict how it will impact our business in the long term. The Company is not currently aware of any events or circumstances arising from the COVID-19 pandemic that would require us to update any estimates, judgments or materially revise the carrying value of our assets or liabilities. The Company’s estimates may change, however, as events evolve and additional information is obtained, and any such changes will be recognized in the condensed consolidated financial statements.

Beginning in the first quarter of 2020, the Company implemented various restructuring initiatives to streamline operations and support its liquidity needs, including headcount reductions, reductions in facility space, and other cost reductions, as well as working with its lenders to amend its credit facility and term loan agreement to undertake these restructuring initiatives and to provide availability. In addition, the Company has begun taking actions to mitigate the impact of the expiration in August 2020 of tariff exclusions previously granted with respect to certain of its products, including seeking price increases from its customers and alternative manufacturing sources. In light of the ongoing uncertainty surrounding the COVID-19 pandemic in the U.S. and other countries and unpredictable economic consequences in the coming months, the Company applied for and in August 2020, received a loan through the Paycheck Protection Program of the U.S. CARES Act in the amount of $1,955, which may be used to fund certain qualified expenses, including payroll costs, rent and utility costs. The Company believes that its existing plan will generate sufficient cash which, along with its existing cash and availability under its facilities, will enable it to fund operations through at least the next 12 months. To the extent the Company experiences unexpected impacts from the COVID-19 pandemic or is unable to meet its current financial forecast, the Company would take further action to reduce costs, mitigate risks to its supply chain and, if necessary, seek to raise additional funds through debt or equity financings, restructure our existing debt, engage in strategic collaborations, and/or a strategic transaction.

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

6 Months Ended

Jun. 27, 2020

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 27, 2020		June 29, 2019
Allowance for doubtful accounts, beginning of period	$	542	$	304
Charges to costs and expenses, net		20		34
Account write-offs		—		—
Allowance for doubtful accounts, end of period	$	562	$	338

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REVENUE RECOGNITION (Tables)

6 Months Ended

Jun. 27, 2020

REVENUE RECOGNITION

Schedule of net sales by geographical area

	For the three		For the three
	months ended		months ended
	June 27, 2020		June 29, 2019
United States	$	35,800	$	39,064
All Other		2,414		7,361
Net Sales	$	38,214	$	46,425

	For the six		For the nine
	months ended		months ended
	June 27, 2020		June 29, 2019
United States	$	71,578	$	75,300
All Other		6,974		13,663
Net Sales	$	78,552	$	88,963

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

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DEBT (Tables)

6 Months Ended

Jun. 27, 2020

DEBT

Schedule of aggregate maturities of the Restated BofA Agreement and the Term Loan Agreement

Fiscal Year ending:
2020		—
2021		875
2022		875
2023 and thereafter	$	33,408
Total	$	35,158

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PROPERTY AND EQUIPMENT (Tables)

6 Months Ended

Jun. 27, 2020

PROPERTY AND EQUIPMENT

Schedule of property and equipment, at cost

		For the
		fiscal year ended
	June 27,		December 28,		Depreciation/
	2020		2019		Amortization Period
Computer-related		4,531	$	4,511	5 years
Tools, dies, prototypes, and molds		28,093		27,457	1 - 5 years
Building		0		4,156	30 years
Other		7,636		7,474	1 - 15 years
		40,260		43,598
Less: accumulated depreciation		34,576		34,810
Property and equipment, net	$	5,684	$	8,788

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INTANGIBLE ASSETS (Tables)

6 Months Ended

Jun. 27, 2020

INTANGIBLE ASSETS

Schedule of intangible assets

	June 27, 2020		December 28, 2019
Brand names	$	11,819	$	11,819
Patents and licenses		4,163		4,101
Customer relationships		6,946		6,946
Other intangibles		1,882		1,882
		24,810		24,748
Less: Accumulated amortization		(12,096)		(11,852)
Intangible assets, net	$	12,714	$	12,896

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COMMITMENTS AND CONTINGENCIES (Tables)

6 Months Ended

Jun. 27, 2020

COMMITMENTS AND CONTINGENCIES

Schedule of lease expense

The components of the Company’s lease expense for the six months ended June 27, 2020 and June 29, 2019 were as follows:

			Six Months Ended		Six Months Ended
			June 27, 2020		June 29, 2019
Operating lease cost			$	1,297	$	1,247
Variable lease cost			$	523	$	644
Less: sublease income				(250)		—
Total lease expense			$	1,570	$	1,891
Weighted-average remaining lease term	2.5	years
Weighted-average discount rate:	5.00	%

Schedule of maturities of the operating lease liabilities

As of June 27, 2020, the present value of maturities of the Company’s operating lease liabilities were as follows:

Fiscal Year Ending:
2020		1,497
2021		2,448
2022		618
2023		465
2024		325
Thereafter		164
Less imputed interest		(352)
Total	$	5,165

Schedule of future fixed sublease receipts under non-cancelable operating lease agreements

The future fixed sublease receipts under non-cancelable operating lease agreements as of June 27, 2020 are as follows:

Fiscal Year Ending:
2020		500
2021		250
Thereafter		—
Total	$	750

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SHARE BASED COMPENSATION (Tables)

6 Months Ended

Jun. 27, 2020

SHARE BASED COMPENSATION

Summary of weighted average assumptions used for stock options granted

	For the Six		For the Six
	Months Ended		Months Ended
	June 27, 2020		June 29, 2019
Expected life (in years)	5.1		4.8
Risk-free interest rate	1.74	%	2.34	%
Volatility	67.3	%	64.2	%
Dividend yield	0	%	0	%
Forfeiture rate	14.2	%	24.2	%

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)	1 Months Ended		6 Months Ended		12 Months Ended
	Aug. 22, 2020 USD ($)	Mar. 31, 2020	Jun. 27, 2020 USD ($) segment	Jun. 29, 2019 USD ($)	Dec. 28, 2019 USD ($)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reverse stock split		0.1111
Tax benefit recognized related to increase in interest deduction from tax law changes					$ 262,000
Revenue Recognition
Number of reportable segments | segment			1
Days in accounts receivable			P60D
Changes in the allowance for doubtful accounts
Allowance for doubtful accounts, beginning of period			$ 542,000	$ 304,000	304,000
Charges to costs and expenses			20,000	34,000
Allowance for doubtful accounts, end of period			$ 562,000	$ 338,000	$ 542,000
PPP Loan
2020 Plan and COVID-19 Pandemic
Proceeds from loan	$ 1,955

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REVENUE RECOGNITION (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 27, 2020	Jun. 29, 2019	Jun. 27, 2020	Jun. 29, 2019
Net sales by geographical area
Net sales	$ 38,214	$ 46,425	$ 78,552	$ 88,963
United States
Net sales by geographical area
Net sales	35,800	39,064	71,578	75,300
All Other
Net sales by geographical area
Net sales	$ 2,414	$ 7,361	$ 6,974	$ 13,663

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DEBT - Credit Facilities and Term Loan Agreement (Details) - USD ($) $ in Thousands			3 Months Ended	6 Months Ended
	Jul. 14, 2020	Jun. 28, 2018	Mar. 28, 2020	Jun. 27, 2020	Mar. 10, 2020
DEBT
Write off of unamortized deferred financing costs				$ 266
Term Loan
DEBT
Quarterly basis installment amount				219
Adjusted EBITDA				$ 12,000
Cash interest rate				9.75%
PIK interest rate (as a percent)				4.00%	4.00%
Amount outstanding				$ 16,406
Accrued PIK interest amount				$ 201
Term Loan | Minimum
DEBT
Fixed charge coverage ratio at the end of each fiscal month				1.0
Term Loan | LIBOR
DEBT
Interest rate basis				LIBOR
Applicable margin (as a percent)				9.00%
Restated Bank of America Agreement | Credit Facility
DEBT
Amount outstanding on credit facility				$ 18,752
Borrowing availability				$ 7,493
Write off of unamortized deferred financing costs			$ 266
Period of increase of the maximum percentage of accounts owing from the Amazon Companies that may be included as eligible accounts	120 days
Restated Bank of America Agreement | Credit Facility | Base rate
DEBT
Interest rate during the period				5.75%
Restated Bank of America Agreement | Credit Facility | LIBOR
DEBT
Interest rate during the period				4.25%
Restated Bank of America Agreement | Credit Facility | Financial Covenant | Minimum
DEBT
Fixed charge coverage ratio at the end of each fiscal month				1.0
Restated Bank of America Agreement | Credit Facility | Financial Covenant | LIBOR
DEBT
Interest rate basis				LIBOR
Reference rate floor (as a percentage)				0.75%
Restated Bank of America Agreement | Revolving Facility
DEBT
Maximum borrowing capacity				$ 48,000
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%
Term Loan and Security Agreement | 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%
Term Loan and Security Agreement | Term Loan | Financial Covenant | LIBOR
DEBT
Interest rate basis				LIBOR
Reference rate floor (as a percentage)				0.75%

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DEBT - Aggregate maturities (Details) - USD ($) $ in Thousands	Jun. 27, 2020	Dec. 28, 2019
Aggregate maturities related to the Restated BofA Agreement and the Term Loan Agreement
2021	$ 875
2022	875
2023	33,408
Total	35,158
Unamortized debt issuance costs	$ 2,340	$ 2,398

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PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 27, 2020	Jun. 29, 2019	Dec. 28, 2019
PROPERTY AND EQUIPMENT
Property and equipment, gross	$ 40,260		$ 43,598
Less: accumulated depreciation	34,576		34,810
Property and equipment, net	5,684		8,788
Total depreciation expense	1,536	$ 1,520
Computer-related
PROPERTY AND EQUIPMENT
Property and equipment, gross	$ 4,531		4,511
Depreciation/Amortization Period	5 years
Tools, dies, prototypes, and molds
PROPERTY AND EQUIPMENT
Property and equipment, gross	$ 28,093		27,457
Tools, dies, prototypes, and molds | Minimum
PROPERTY AND EQUIPMENT
Depreciation/Amortization Period	1 year
Tools, dies, prototypes, and molds | Maximum
PROPERTY AND EQUIPMENT
Depreciation/Amortization Period	5 years
Building
PROPERTY AND EQUIPMENT
Property and equipment, gross	$ 0		4,156
Depreciation/Amortization Period	30 years
Other
PROPERTY AND EQUIPMENT
Property and equipment, gross	$ 7,636		$ 7,474
Other | Minimum
PROPERTY AND EQUIPMENT
Depreciation/Amortization Period	1 year
Other | Maximum
PROPERTY AND EQUIPMENT
Depreciation/Amortization Period	15 years
Property and equipment acquired under capital leases
PROPERTY AND EQUIPMENT
Less: accumulated depreciation	$ 164	73
Property and equipment, net	$ 589	$ 589

XML

INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 27, 2020	Dec. 28, 2019	Jun. 29, 2019
INTANGIBLE ASSETS
Intangible assets, gross	$ 24,810	$ 24,748
Less: Accumulated amortization	(12,096)	(11,852)
Intangible assets, net	12,714	12,896
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	$ 4,163	4,101
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

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COMMITMENTS AND CONTINGENCIES - Leases (Details) $ in Thousands	1 Months Ended		6 Months Ended
	May 31, 2020 USD ($) item	Apr. 30, 2020	Jun. 27, 2020 USD ($) item	Jun. 29, 2019 USD ($)	Dec. 28, 2019 USD ($)
Leases
Cash incentives from the landlord			$ 0
Derecognition of a building sale-leaseback financial obligation			2,390
Derecognition of a building sale-leaseback fixed asset, net of depreciation			2,357
ROU asset			4,835		$ 4,578
Lease liability			$ 5,165
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			$ 1,405	$ 1,298
Components of lease expense
Operating lease cost			1,297	1,247
Variable lease cost			523	644
Less: sublease income			(250)
Total lease expense			$ 1,570	$ 1,891
Weighted-average remaining lease term (in years)			2 years 6 months
Weighted-average discount rate			5.00%
Minimum
Leases
Remaining lease term (in years)			1 year 3 months
Maximum
Leases
Remaining lease term (in years)			5 years
Woonsocket, RI
Leases
Number of options to extend | item			2
Extension term (in years)			5 years
Derecognition of a building sale-leaseback financial obligation	$ 2,390
Derecognition of a building sale-leaseback fixed asset, net of depreciation	2,357
ROU asset	1,457
Lease liability	$ 1,457
Riverside, CA
Leases
Sublease term		12 months
Canada
Leases
Number of options to extend | item			1
Extension term (in years)			5 years
Lease Amendment | Woonsocket, RI
Leases
Number of options to extend | item	2
Extension term (in years)	5 years

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COMMITMENTS AND CONTINGENCIES - Maturities of the operating lease liabilities (Details) $ in Thousands	Jun. 27, 2020 USD ($)
Maturities of the operating lease liabilities
2020	$ 1,497
2021	2,448
2022	618
2023	465
2024	325
Thereafter	164
Less imputed interest	(352)
Total	$ 5,165

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COMMITMENTS AND CONTINGENCIES - Future fixed sublease receipts (Details) $ in Thousands	Jun. 27, 2020 USD ($)
Future fixed sublease receipts under non-cancelable operating lease agreements
2020	$ 500
2021	250
Total	$ 750

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SHARE BASED COMPENSATION (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 27, 2020	Jun. 29, 2019
SHARE BASED COMPENSATION
Stock options granted during the period (in shares)	21,433
Restricted stock granted during the period (in shares)	9,550
Stock Options
Weighted average assumptions
Expected life (in years)	5 years 1 month 6 days	4 years 9 months 18 days
Risk-free interest rate	1.74%	2.34%
Volatility	67.30%	64.20%
Dividend yield	0.00%	0.00%
Forfeiture rate	14.20%	24.20%
2012 Plan
SHARE BASED COMPENSATION
Number of shares authorized under the plan	188,889
Shares available to grant	67,557
2012 Plan | General and Administrative Expense
SHARE BASED COMPENSATION
Share-based compensation expense	$ 31	$ 152
2012 Plan | Stock Options
SHARE BASED COMPENSATION
Stock options outstanding (in shares)	71,562
2012 Plan | Restricted Stock Awards
SHARE BASED COMPENSATION
Unvested restricted shares outstanding	20,543

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WEIGHTED AVERAGE COMMON SHARES (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 27, 2020	Jun. 29, 2019	Jun. 27, 2020	Jun. 29, 2019
Stock Options
WEIGHTED AVERAGE COMMON SHARES
Anti-dilutive securities excluded from the computation of diluted earnings per share (in shares)	71,562	134,852	71,562	134,852
Restricted Stock Awards
WEIGHTED AVERAGE COMMON SHARES
Anti-dilutive securities excluded from the computation of diluted earnings per share (in shares)	20,433	32,475	20,465	32,475

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SUBSEQUENT EVENTS (Details) - PPP Loan - USD ($)		1 Months Ended
	Aug. 03, 2020	Aug. 22, 2020
Subsequent events
Proceeds from issuance of promissory note		$ 1,955
Subsequent events
Subsequent events
Proceeds from issuance of promissory note	$ 1,955