0001564590-21-026139.txt : 20210510 0001564590-21-026139.hdr.sgml : 20210510 20210510173014 ACCESSION NUMBER: 0001564590-21-026139 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 74 CONFORMED PERIOD OF REPORT: 20210331 FILED AS OF DATE: 20210510 DATE AS OF CHANGE: 20210510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ONESPAWORLD HOLDINGS Ltd CENTRAL INDEX KEY: 0001758488 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEMBERSHIP SPORTS & RECREATION CLUBS [7997] IRS NUMBER: 000000000 STATE OF INCORPORATION: C5 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-38843 FILM NUMBER: 21908693 BUSINESS ADDRESS: STREET 1: SHIRLEY HOUSE STREET 2: 253 SHIRLEY STREET CITY: NASSAU STATE: C5 ZIP: N-624 BUSINESS PHONE: 3053589002 MAIL ADDRESS: STREET 1: SHIRLEY HOUSE STREET 2: 253 SHIRLEY STREET CITY: NASSAU STATE: C5 ZIP: N-624 10-Q 1 osw-10q_20210331.htm 10-Q 2021 osw-10q_20210331.htm

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

For the three months ended March 31, 2021

OR

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

Commission File Number: 001-38843

 

OneSpaWorld Holdings Limited

(Exact name of Registrant as Specified in its Charter)

 

 

Commonwealth of The Bahamas

 

Not Applicable

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

Shirley House

253 Shirley Street

P.O. Box N-624

Nassau, The Bahamas

 

Not Applicable

(Address of principal executive offices)

 

(Zip Code)

(242) 356-0006

(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 Shares, par value (U.S.)

$0.0001 per share

 

OSW

 

The Nasdaq Capital Market

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

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

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

 

Large Accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-Accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

  

Emerging growth company

 

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

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

As of March 31, 2021, the registrant had 73,281,792 voting shares and 17,185,500 non-voting shares of common stock issued and outstanding.

 

 

 

 


Table of Contents

 

 

OneSpaWorld Holdings Limited

Table of Contents

 

 

 

Page

PART I - FINANCIAL INFORMATION

 

1

 

 

 

 

 

Item 1.

 

Unaudited Financial Statements

 

1

 

 

 

 

 

Item 2.

 

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

 

21

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

28

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

28

 

 

 

 

 

PART II - OTHER INFORMATION

 

30

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

30

 

 

 

 

 

Item 1A.

 

Risk Factors

 

30

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

32

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

33

 

 

 

 

 

Item 5.

 

Other Information

 

33

 

 

 

 

 

Item 6.

 

Exhibits

 

33

 

 

i


Table of Contents

 

 

PART I - FINANCIAL INFORMATION

Item 1.

Unaudited Financial Statements

ONESPAWORLD HOLDINGS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

 

March 31,

2021

 

 

December 31,

2020

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

  Cash and cash equivalents

 

$

50,823

 

 

$

41,552

 

  Restricted cash

 

 

1,896

 

 

 

1,896

 

  Accounts receivable, net

 

 

3,251

 

 

 

2,994

 

  Inventories

 

 

26,873

 

 

 

27,200

 

  Prepaid expenses

 

 

5,598

 

 

 

6,950

 

  Other current assets

 

 

1,863

 

 

 

1,590

 

  Total current assets

 

 

90,304

 

 

 

82,182

 

Property and equipment, net

 

 

15,557

 

 

 

17,056

 

Intangible assets, net

 

 

594,908

 

 

 

599,114

 

OTHER ASSETS:

 

 

 

 

 

 

 

 

  Deferred tax assets

 

 

98

 

 

 

98

 

  Other non-current assets

 

 

3,849

 

 

 

3,829

 

  Total other assets

 

 

3,947

 

 

 

3,927

 

  Total assets

 

$

704,716

 

 

$

702,279

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable

 

$

8,382

 

 

$

8,601

 

Accrued expenses

 

 

28,389

 

 

 

25,761

 

Other current liabilities

 

 

2,601

 

 

 

2,713

 

  Total current liabilities

 

 

39,372

 

 

 

37,075

 

Deferred rent

 

 

309

 

 

 

283

 

Income tax contingency

 

 

4,217

 

 

 

4,392

 

Warrant liabilities

 

 

128,000

 

 

 

104,700

 

Other long-term liabilities

 

 

4,258

 

 

 

5,568

 

Long-term debt, net

 

 

229,690

 

 

 

229,433

 

  Total liabilities

 

 

405,846

 

 

 

381,451

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

SHAREHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

Common stock:

 

 

 

 

 

 

 

 

Voting common stock, $0.0001 par value; 225,000,000 shares authorized, 73,281,792  issued and outstanding at March 31, 2021 and 69,292,596 shares issued and outstanding at December 31, 2020

 

 

7

 

 

 

7

 

Non-voting common stock, $0.0001 par value; 25,000,000 shares authorized, 17,185,500 shares issued and outstanding, at both March 31, 2021 and December 31, 2020

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

671,646

 

 

 

649,540

 

Accumulated deficit

 

 

(368,814

)

 

 

(323,246

)

Accumulated other comprehensive loss

 

 

(3,971

)

 

 

(5,475

)

Total shareholders' equity

 

 

298,870

 

 

 

320,828

 

Total liabilities and shareholders' equity

 

$

704,716

 

 

$

702,279

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

1


Table of Contents

 

ONESPAWORLD HOLDINGS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share data)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

 

 

2020 (as restated)

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

Service revenues

 

$

4,604

 

 

 

 

$

89,573

 

Product revenues

 

 

986

 

 

 

 

 

24,734

 

Total revenues

 

 

5,590

 

 

 

 

 

114,307

 

COST OF REVENUES AND OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

Cost of services

 

 

7,484

 

 

 

 

 

80,579

 

Cost of products

 

 

1,295

 

 

 

 

 

22,136

 

Administrative

 

 

3,844

 

 

 

 

 

4,583

 

Salary and payroll taxes

 

 

7,652

 

 

 

 

 

5,172

 

Amortization of intangible assets

 

 

4,206

 

 

 

 

 

4,206

 

Goodwill and tradename intangible assets impairment

 

 

 

 

 

 

 

190,777

 

Total cost of revenues and operating expenses

 

 

24,481

 

 

 

 

 

307,453

 

Loss from operations

 

 

(18,891

)

 

 

 

 

(193,146

)

OTHER EXPENSE, NET:

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(3,351

)

 

 

 

 

(3,743

)

Change in fair value of warrant liabilities

 

 

(23,300

)

 

 

 

 

50,300

 

Total other expense, net

 

 

(26,651

)

 

 

 

 

46,557

 

Loss before income tax expense

 

 

(45,542

)

 

 

 

 

(146,589

)

INCOME TAX EXPENSE

 

 

26

 

 

 

 

 

1,773

 

NET LOSS

 

$

(45,568

)

 

 

 

$

(148,362

)

NET LOSS PER VOTING AND NON-VOTING SHARE

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.52

)

 

 

 

$

(2.43

)

Diluted

 

$

(0.52

)

 

 

 

$

(3.23

)

WEIGHTED-AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

Basic

 

 

87,121

 

 

 

 

 

61,169

 

Diluted

 

 

87,121

 

 

 

 

 

61,522

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

2


Table of Contents

 

ONESPAWORLD HOLDINGS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(in thousands)

 

 

Three Months Ended March 31,

 

 

2021

 

 

2020 (as restated)

 

Net loss

$

(45,568

)

 

$

(148,362

)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

112

 

 

 

(493

)

Cash flows hedges:

 

 

 

 

 

 

 

Net unrealized gain (loss) on derivative

 

899

 

 

 

(5,955

)

Amount realized and reclassified into earnings

 

493

 

 

 

(38

)

Total other comprehensive gain (loss) net of tax

 

1,504

 

 

 

(6,486

)

Total comprehensive loss

$

(44,064

)

 

$

(154,848

)

The accompanying notes are an integral part of the condensed consolidated financial statements.

3


Table of Contents

 

ONESPAWORLD HOLDINGS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

Issued Common Voting Shares

 

 

Issued Common Non-Voting Shares

 

 

Voting and Non-Voting Common Stock

 

 

Additional Paid-in Capital

 

 

Accumulated Other Comprehensive Loss

 

 

Accumulated Deficit

 

 

Total Shareholders’ equity

 

 

 

 

 

BALANCE, December 31, 2020

 

 

69,292

 

 

 

17,186

 

 

$

9

 

 

$

649,540

 

 

$

(5,475

)

 

$

(323,246

)

 

$

320,828

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(45,568

)

 

 

(45,568

)

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

3,631

 

 

 

 

 

 

 

 

 

3,631

 

 

 

 

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

112

 

 

 

 

 

 

 

112

 

 

 

 

 

Unrecognized gain on derivatives

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,392

 

 

 

 

 

 

1,392

 

 

 

 

 

At-The Market Equity Offering, net of issuance cost

 

 

1,712

 

 

 

 

 

 

 

 

 

18,475

 

 

 

 

 

 

 

 

 

18,475

 

 

 

 

 

Common shares issued under equity incentive plan

 

 

673

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of deferred shares into common shares

 

 

1,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of public warrants into common shares

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE, March 31, 2021

 

 

73,282

 

 

 

17,186

 

 

$

9

 

 

$

671,646

 

 

$

(3,971

)

 

$

(368,814

)

 

$

298,870

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2020 (as restated)

 

 

 

Issued Common Voting Shares

 

 

Voting Common Stock

 

 

Additional Paid-in Capital

 

 

Accumulated Other Comprehensive Loss

 

 

Accumulated Deficit

 

 

Total OneSpaWorld Shareholders’ equity

 

 

Non-Controlling Interest

 

 

Total  Shareholders’ equity

 

BALANCE, December 31, 2019

 

 

61,119

 

 

$

6

 

 

$

616,888

 

 

$

719

 

 

$

(35,269

)

 

$

582,344

 

 

$

8,124

 

 

$

590,468

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(148,362

)

 

 

(148,362

)

 

 

0

 

 

 

(148,362

)

Stock-based compensation

 

 

 

 

 

 

 

 

426

 

 

 

 

 

 

 

 

 

426

 

 

 

 

 

 

426

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(493

)

 

 

 

 

 

(493

)

 

 

 

 

 

(493

)

Unrecognized loss on derivatives

 

 

 

 

 

 

 

 

 

 

 

(5,993

)

 

 

 

 

 

(5,993

)

 

 

 

 

 

(5,993

)

Dividends

 

 

 

 

 

 

 

 

(2,449

)

 

 

 

 

 

 

 

 

(2,449

)

 

 

 

 

 

(2,449

)

Distributions to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,011

)

 

 

(4,011

)

Purchase of noncontrolling interest

 

 

 

 

 

 

 

 

(6,697

)

 

 

 

 

 

 

 

 

(6,697

)

 

 

(4,113

)

 

 

(10,810

)

Purchase of public warrants

 

 

 

 

 

 

 

 

(879

)

 

 

 

 

 

 

 

 

(879

)

 

 

 

 

 

(879

)

BALANCE, March 31, 2020

 

 

61,119

 

 

$

6

 

 

$

607,289

 

 

$

(5,767

)

 

$

(183,631

)

 

$

417,897

 

 

$

 

 

$

417,897

 

 

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

4


Table of Contents

 

ONESPAWORLD HOLDINGS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

 

Three Months Ended March 31,

 

 

2021

 

 

2020 (as restated)

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net loss

$

(45,568

)

 

$

(148,362

)

Adjustments to reconcile net loss to net cash (used in) provided by

   operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

5,882

 

 

 

6,212

 

Goodwill and tradename intangible assets impairment

 

 

 

 

190,777

 

Amortization of deferred financing costs

 

257

 

 

 

256

 

Change in fair value of warrant liabilities

 

23,300

 

 

 

(50,300

)

Stock-based compensation

 

3,631

 

 

 

426

 

Provision for doubtful accounts

 

10

 

 

 

 

Loss from write-offs of property and equipment

 

156

 

 

 

 

Deferred income taxes

 

 

 

 

1,749

 

Changes in:

 

 

 

 

 

 

 

Accounts receivable, net

 

(267

)

 

 

14,385

 

Inventories

 

327

 

 

 

1,803

 

Prepaid expenses

 

1,352

 

 

 

(1,574

)

Other current assets

 

(273

)

 

 

68

 

Other noncurrent assets

 

(20

)

 

 

(218

)

Accounts payable

 

(294

)

 

 

(9,000

)

Accrued expenses

 

2,627

 

 

 

701

 

Other current liabilities

 

(29

)

 

 

(2,705

)

Income taxes payable

 

(175

)

 

 

52

 

Deferred rent

 

26

 

 

 

33

 

Net cash (used in) provided by operating activities

 

(9,058

)

 

 

4,303

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Capital expenditures

 

(367

)

 

 

(1,464

)

Net cash used in investing activities

 

(367

)

 

 

(1,464

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from At-the Market Equity Offering, net of issuance costs paid

 

18,550

 

 

 

 

Proceeds from the term loan facilities

 

 

 

 

20,000

 

Purchase of public warrants

 

 

 

 

(879

)

Cash paid to acquire noncontrolling interest

 

 

 

 

(10,810

)

Distributions to noncontrolling interest

 

 

 

 

(4,011

)

Net cash provided by financing activities

 

18,550

 

 

 

4,300

 

Effect of exchange rate changes on cash

 

146

 

 

 

(485

)

Net increase in cash and cash equivalents and restricted cash

 

9,271

 

 

 

6,654

 

Cash and cash equivalents and restricted cash, Beginning of period

 

43,448

 

 

 

13,863

 

Cash and cash equivalents and restricted cash, End of period

$

52,719

 

 

$

20,517

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

5


Table of Contents

 

ONESPAWORLD HOLDINGS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(CONTINUED)

(Unaudited)

(in thousands)

 

 

Three Months Ended March 31,

 

 

2021

 

 

2020

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

Income taxes

$

9

 

 

$

37

 

Interest

$

3,299

 

 

$

3,484

 

Non-cash transactions:

 

 

 

 

 

 

 

Unpaid declared dividends

$

 

 

$

2,449

 

Common stock issued to purchase noncontrolling interest

$

 

 

$

1,507

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

6


Table of Contents

 

ONESPAWORLD HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

(Unaudited)

1. ORGANIZATION

OneSpaWorld Holdings Limited (“OneSpaWorld”, the “Company”, “we”, “us”, “our”) is an international business company incorporated under the laws of the Commonwealth of The Bahamas. OneSpaWorld is a global provider and innovator in the fields of health and wellness, fitness and beauty. In facilities on cruise ships and in land-based resorts, the Company strives to create a relaxing and therapeutic environment where guests can receive health and wellness, fitness and beauty services and experiences of the highest quality. The Company’s services include traditional and alternative massage, body and skin treatments, fitness, acupuncture, and Medispa treatments. The Company also sells premium quality health and wellness, fitness and beauty products at its facilities and through its timetospa.com website. The predominant business, based on revenues, is sales of services and products on cruise ships and in land-based resorts, followed by sales of products through the timetospa.com website.

Impact of Coronavirus (COVID-19) – Liquidity and Management’s Plans

On January 30, 2020, the World Health Organization declared the coronavirus pandemic (“COVID-19”) a “Public Health Emergency of International Concern,” and on March 10, 2020, declared COVID-19 a pandemic. The regional and global outbreak of COVID-19 has negatively impacted and will continue to have a material negative impact on the Company’s operations. On March 14, 2020, the U.S. Centers for Disease Control and Prevention (“CDC”) issued a No Sail Order. The No Sail Order was extended on April 9, 2020, July 16, 2020 and September 30, 2020, to continue until the earliest of: (1) the expiration of the Secretary of Health and Human Services’ declaration that COVID-19 constitutes a public health emergency, (2) the CDC Director rescinds or modifies the order based on specific public health or other considerations, or (3) October 31, 2020. As a result of the No Sail Order, the majority of our cruise line partners voluntarily suspended operations.

On October 30, 2020, the CDC issued a Framework for Conditional Sailing Order, which will remain in effect until the earliest of (1) the expiration of the Secretary of Health and Human Services’ declaration that COVID-19 constitutes a public health emergency, (2) the CDC Director rescinds or modifies the order based on specific public health or other considerations, or (3) November 1, 2021. Pursuant to the Framework for Conditional Sailing Order, the No Sail Order has been lifted and the cruise industry will work with the CDC on a phased in return-to-service, which will consist of three phases: (i) testing and implementing additional safeguards for crew members; (ii) conducting simulated voyages to test cruise operators’ ability to mitigate COVID -19 risk; and (iii) providing a certification to ships that meet specified requirements, thereby allowing for a phased return to cruise ship passenger voyages. On April 2, 2021 the CDC announced a new phase of the Framework for Conditional Sailing Order for cruise ships operating or seeking to operate in U.S. waters with instructions for cruise ship operators to establish agreements at ports where they intend to operate, implement routine testing of crew and develop plans for vaccination to reduce the risk of COVID-19 spreading amongst crew and passengers. On May 5, 2021, the CDC announced the next two phases of the Framework for Conditional Sailing Order, which included instructions for cruise ships operating or seeking to operate in U.S. waters for preparing to conduct simulated voyages before resuming restricted passenger voyages once they have obtained conditional sailing certificates. We are continuing to review the CDC’s guidelines in connection with the Framework for Conditional Sailing Order as well as monitor the actions of our cruise line partners with respect to the status of the voluntary suspension of cruise sailings. We also believe that there have been positive developments around the availability and widespread distribution of effective COVID-19 vaccines, which we believe will be important to achieve historical occupancy levels of our cruise line and resorts partners.

In September 2020, we began the resumption of limited spa operations with one of our cruise line-partners. Likewise, during the third and fourth quarters of 2020, we began the resumption of spa operations in a limited number of destination resorts as part of our phased-in return to service. As of March 31, 2021, 47 destination resort spas were operating, some with capacity restrictions, and only two ships of our cruise line partners were operating with guests onboard at reduced capacity. Starting in the first quarter of 2020, and continuing through the first quarter of 2021, COVID-19-related shutdowns have had a significant negative impact on our business, results of operations and financial condition. We believe the ongoing effects of COVID-19 on our operations will continue to have a significant negative impact on our financial results and liquidity and such negative impact may continue well beyond the containment of the pandemic. It is not possible to predict the ultimate impact of the pandemic, which will depend on a number of factors, including the duration and scope of the pandemic, travel restrictions and advisories, the potential unavailability of ports and/or destinations of our cruise partners and the general impact on consumer sentiment regarding travel. The full effect of the pandemic on our financial performance cannot be quantified at this time and the full extent of the impact will be determined by our gradual return to service and the length of time COVID-19 influences travel decisions, but we expect to report a net loss for at least the second ending June 30, 2021 and likely for the year ending December 31, 2021.

On June 12, 2020, the Company closed its private placement (the “2020 Private Placement”) of $75 million in common equity and warrants to Steiner Leisure and its affiliates and other investors, including certain funds advised by Neuberger Berman Investment Advisers LLC and certain members of OSW management and its Board of Directors.

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On December 7, 2020, the Company entered into an At-The-Market Equity Offering (“ATM”) Sales Agreement with Stifel, Nicolaus & Company, Incorporated (the “Sales Agent”), pursuant to which the Company may offer and sell, from time to time, through the Sales Agent, its common shares, par value $0.0001 per share, having an aggregate offering price of up to $50.0 million. During December 2020 and March 2021, we sold 1,259,195 shares and 1,711,003, respectively, under the ATM Sales Agreement for total net proceeds of $29.6 million. As of March 31, 2021, there is approximately $20 million remaining available under the ATM Sales Agreement.

The Company has also undertaken steps to mitigate the adverse impact of the pandemic, which have included, without limitation, the following:

 

commencing in March 2020, closed all spas on ships where voyages have been cancelled (as of March 31, 2021, we were operating spas onboard two vessels);

 

closed all destination resort spas as of March 26, 2020 (as of March 31, 2021, 47 destination resort spas had reopened and were operating, some with capacity restrictions);

 

repatriated 3,220 of our staff due to COVID-related sailing suspensions, constituting all our cruise ship personnel, eliminating all ongoing expenses related to these employees during 2020, and re-embarked 18 cruise ship personnel to operate our spas on three vessels that sailed at any time during the fourth quarter of 2020 (only one of which was sailing as of December 31, 2020);

 

furloughed 96% and subsequently terminated the employment of 66% of U.S. and Caribbean-based destination resort spa personnel and 38% of corporate personnel and implemented salary reductions for all corporate personnel; as of March 31, 2021, 386 U.S. and Caribbean-based destination resort spa personnel had returned to work and 72 salary reductions remain in place for corporate personnel;

 

eliminated all non-essential operating and capital expenditures;

 

withdrew our dividend program until further notice and deferred payment of the dividend declared on February 26, 2020, in the amount of $2.4 million, until approved by the Board of Directors;

 

borrowed $7 million, net, on our revolving credit facility, leaving $13 million available and undrawn at March 31, 2021.

 

The estimation of our future liquidity requirements includes numerous assumptions that are subject to various risks and uncertainties. We cannot make assurances that our assumptions used to estimate our liquidity requirements may not change because of the unprecedented non-operational environment we are experiencing due to COVID-19. We have made reasonable estimates and judgments of the impact of COVID-19 within our financial statements and there may be material changes to those estimates in future periods.

In accordance with Accounting Standards Update (“ASU”) No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued. Based on the actions the Company has taken as described above and our resulting current resources, we have concluded that we will have sufficient liquidity to satisfy our obligations over the next twelve months and comply with all debt covenants as required by our debt agreements. Management cannot predict the magnitude and duration of the negative impact from the COVID-19 pandemic; new events beyond management’s control may have incrementally material adverse impact on the Company’s results of operations, financial position and liquidity.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation, Principles of Consolidation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in quarterly financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been omitted or condensed pursuant to the SEC’s rules and regulations. However, management believes that the disclosures contained herein are adequate to make the information presented not misleading. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments (which are of a normal recurring nature) necessary to present fairly our unaudited financial position, results of operations and cash flows. The unaudited results of operations and cash flows of our interim periods are not necessarily indicative of the results of operations or cash flows that may be expected for the entire fiscal year. As noted in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2020 (the “2020 10-K/A”), the Company restated its previously issued consolidated financial statements as of December 31, 2020 and 2019 and for the year ended December 31, 2020 and the period from March 20, 2019 to December 31, 2019 (Successor), as well each of the quarters within those periods, as a result of the Company’s reevaluation of the accounting treatment of its warrants in response to the SEC’s statement on April 12, 2021 entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”)” (the “Restatement”). For more information on the Restatement and a material weakness in internal control over financial reporting related thereto, see “Explanatory Note” in the 2020 10-K/A and Note 2 to the consolidated and combined financial statements included in the 2020 10-K/A. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated and combined financial statements and related notes thereto included in the 2020 10-K/A. We have restated herein our condensed consolidated financial statements as of and for the quarter ended March 31, 2020. We have also restated related amounts within the accompanying footnotes to the condensed consolidated financial statements. The impact to the quarter ended March 31, 2020 was a decrease to net loss of $50.3 million, an increase to Warrant liabilities of $5.6 million, and an increase to Accumulated Deficit of $5.6 million .

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The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. Actual results could differ from those estimates.

The accompanying unaudited condensed consolidated financial statements includes the condensed consolidated balance sheet and statement of operations, comprehensive loss, changes in equity, and cash flows of OneSpaWorld. All significant intercompany items and transactions have been eliminated in consolidation.

Restricted Cash

These balances include amounts held in escrow accounts, as a result of a legal proceeding related to a tax assessment. The following table reconciles cash, cash equivalents and restricted cash reported in our consolidated balance sheet as of March 31, 2021 to the total amount presented in our consolidated statements of cash flows for three months ended March 31, 2021 (in thousands):

 

Cash and cash equivalents

 

$

50,823

 

Restricted cash

 

 

1,896

 

Total cash and restricted cash in the consolidated statement of cash flows

 

$

52,719

 

 

Loss Per Share

Basic (loss) earnings per share is computed by dividing net (loss) income by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average number of diluted shares, as calculated under the treasury stock method, which includes the potential effect of dilutive common stock equivalents, such as options and warrants to purchase common shares, and contingently issuable shares. If the entity reports a net loss, rather than net income for the period, the computation of diluted loss per share excludes the effect of dilutive common stock equivalents, as their effect would be anti-dilutive.

As discussed in Note 5 – “Equity”, the Company has two classes of common stock, Voting and Non-Voting. Shares of Non-Voting common stock are in all respects identical to and treated equally with shares of Voting common stock except for the absence of voting rights. Basic (loss) income per share is computed by dividing net (loss) income by the weighted average number of Voting and Non-Voting common shares outstanding for the period. Diluted (loss) income per share is computed by dividing net income by the weighted average number of diluted Voting and Non-voting common shares, as calculated under the treasury stock method, which includes the potential effect of dilutive common stock equivalents, such as options and warrants to purchase Voting and Non-Voting common shares. If the entity reports a net loss, rather than net income for the period, the computation of diluted loss per share excludes the effect of dilutive common stock equivalents, as their effect would be anti-dilutive. The Company has not presented (loss) income per share under the two-class method, because the (loss) income per share are the same for both Voting and Non-Voting common stock since they are entitled to the same liquidation and dividend rights.

The following table provides details underlying OneSpaWorld’s loss per basic and diluted share calculation (in thousands, except per share data):

 

 

Three Months Ended March 31,

 

 

 

2021 (a)

 

 

2020 (as restated)

 

Net loss

 

$

(45,568

)

 

$

(148,362

)

Less change in fair value of warrants

 

 

 

 

 

(50,300

)

Net loss, adjusted for change in fair value of warrants for diluted earnings per share

 

$

(45,568

)

 

$

(198,662

)

Weighted average shares outstanding – Basic

 

 

87,121

 

 

 

61,169

 

Weighted average shares outstanding –  Diluted

 

 

87,121

 

 

 

61,522

 

Loss per share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.52

)

 

$

(2.43

)

Diluted

 

$

(0.52

)

 

$

(3.23

)

 

 

(a)  Potential common shares under the treasury stock method and the if-converted method were antidilutive because the Company reported a net loss in this period and the effect of the change in the fair value of warrants was antidilutive. Consequently, the Company did not have any adjustments in this period between basic and diluted loss per share related to stock options, restricted share units and warrants.

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The table below presents the weighted-average number of antidilutive potential common shares that are not considered in the calculation of diluted loss per share (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020 (as restated)

 

Sponsor Warrants

 

 

8,000

 

 

 

 

Public Warrants

 

 

16,149

 

 

 

16,408

 

2020 PIPE Warrants

 

 

5,000

 

 

 

 

Deferred shares

 

 

1,565

 

 

 

6,600

 

Employee stock options

 

 

4,376

 

 

 

4,376

 

Restricted stock units

 

 

1,851

 

 

 

201

 

Performance stock units

 

 

881

 

 

 

 

 

 

 

37,822

 

 

 

27,585

 

 

The table below presents the weighted-average number of antidilutive potential common shares that are not considered in the calculation of diluted loss (in thousands) (as restated):

 

Weighted average shares outstanding - basic

 

 

61,169

 

Sponsor warrants

 

 

353

 

Weighted average shares outstanding - diluted

 

 

61,522

 

 

Recent Accounting Pronouncements

With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements that are of significance, or potential significance, to the Company. The following summary of recent accounting pronouncements is not intended to be an exhaustive description of the respective pronouncement.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) to increase transparency and comparability among organizations by recognizing rights and obligations resulting from leases as lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The update requires lessees to recognize for all leases with a term of 12 months or more at the commencement date: (a) a lease liability or a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis and (b) a right-of-use asset or a lessee’s right to use or control the use of a specified asset for the lease term. Under the update, lessor accounting remains largely unchanged. The update requires a modified retrospective transition approach for leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements and do not require any transition accounting for leases that expire before the earliest comparative period presented. In June 2020, the FASB issued guidance (ASU 2020-05) that defers the effective dates of the lease standard (ASU 2016-02) for entities that have not yet issued financial statements adopting the standard. The update is effective retrospectively for annual periods beginning after December 15, 2021, and interim periods beginning after December 15, 2022, with early adoption permitted. We intend to elect the optional transition method, which allows entities to initially apply the standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company continues to evaluate the effect that the update will have on the Company’s consolidated financial statements. The Company is in the process of starting its initial scoping review to identify a complete population of leases to be recorded on the consolidated balance sheet as a lease obligation and right of use asset. The Company expects that the update will have a material effect on our consolidated balance sheets due to the recognition of operating lease assets and operating lease liabilities primarily related to the destination resort agreements and office space which will result in a balance sheet presentation that is not comparable to the prior period in the first year of adoption. The Company is currently assessing the impact of the adoption of this guidance.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326).” This ASU amends the FASB’s guidance on the impairment of financial instruments. The ASU adds to U.S. GAAP an impairment model (known as the current expected credit losses model) that is based on an expected losses model rather than an incurred losses model. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses. The ASU is also intended to reduce the complexity of U.S. GAAP by decreasing the number of impairment models that entities use to account for debt instruments. In November 2019, the FASB issued guidance (ASU 2019-10) that defers the effective dates of the Financial Instruments—Credit Losses standard for entities that have not yet issued financial statements adopting the standard. The update is effective for annual periods beginning after December 15, 2022, and interim periods beginning after December 15, 2022, with early adoption permitted. The Company is currently assessing the impact of the adoption of this guidance.

3. GOODWILL AND INTANGIBLE ASSETS

As a result of the effect of the COVID-19 on our expected future operating cash flows, we recognized impairment charges of approximately $190 million associated with the full impairment of the carrying value of the Maritime and Destination Resorts segment reporting units Goodwill and $0.7 million for the trade name, during three months ended March 31, 2020 and are included in Goodwill and tradename intangible assets

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impairment in the accompanying condensed consolidated statement of operations (See “Note 10”). There were no intangible impairment charges during the three months ended March 31, 2021.

Intangible assets consist of finite and indefinite life assets. The following is a summary of the Company’s intangible assets as of March 31, 2021 (in thousands, except amortization period):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost

 

 

Accumulated Amortization and Impairment

 

 

Net Balance

 

 

Weighted Average Amortization Period (in years)

Retail concession agreements

$

604,700

 

 

$

(31,557

)

 

$

573,143

 

 

39

Destination resort agreements

 

17,900

 

 

 

(2,393

)

 

 

15,507

 

 

15

Trade name

 

6,200

 

 

 

(700

)

 

 

5,500

 

 

Indefinite-life

Licensing agreement

 

1,000

 

 

 

(242

)

 

 

758

 

 

8

 

$

629,800

 

 

$

(34,892

)

 

$

594,908

 

 

 

The following is a summary of the Company’s intangible assets as of December 31, 2020 (in thousands, except amortization period):

 

 

Cost

 

 

Accumulated Amortization

 

 

Net Balance

 

 

Weighted Average Amortization Period (in years)

Retail concession agreements

$

604,700

 

 

$

(27,680

)

 

$

577,020

 

 

39

Destination resort agreements

 

17,900

 

 

 

(2,095

)

 

 

15,805

 

 

15

Trade name

 

6,200

 

 

 

(700

)

 

 

5,500

 

 

Indefinite-life

Licensing agreement

 

1,000

 

 

 

(211

)

 

 

789

 

 

8

 

$

629,800

 

 

$

(30,686

)

 

$

599,114