Quarterly report pursuant to Section 13 or 15(d)

Supplemental Financial Statement Information

v3.22.2.2
Supplemental Financial Statement Information
 6 Months Ended
Jun. 30, 2022
Property, Plant and Equipment [Abstract]  
Supplemental Financial Statement Information SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION
Assets Held for Sale

We generally consider assets to be held for sale when (i) we commit to a plan to sell the assets, (ii) the assets are available for immediate sale in their present condition, (iii) we have initiated an active program to locate a buyer and other actions required to complete the plan to sell the assets, (iv) consummation of the planned sale transaction is probable, (v) the assets are being actively marketed for sale at a price that is reasonable in relation to their current fair value, (vi) the transaction is expected to qualify for recognition as a completed sale, within one year, and (vii) significant changes to or withdrawal of the plan is unlikely. Following the classification of any depreciable assets within a disposal group as held for sale, we discontinue depreciating the asset and write down the asset to the lower of carrying value or fair market value less cost to sell, if needed.

Our assets held for sale recorded on our condensed consolidated balance sheet as of June 30, 2022 are comprised of our corporate headquarters building located in Boca Raton, Florida, along with the related land, land improvements and property and equipment. We are actively seeking a buyer for these assets and expect to complete the sale within one year from June 30, 2022. The current and long-term portion of the related Real Estate Note, with represents the mortgage on the corporate headquarters building, is classified within "current portion of liabilities held for sale" and "long-term portion of liabilities held for sale" on our condensed consolidated balance sheet as of June 30, 2022, as described further in Note 6.

We recognized no impairment charges during the three and six months ended June 30, 2022 or 2021.
Accrued Expenses and Other Current Liabilities
The following table summarizes the composition of accrued expenses and other current liabilities as of the dates indicated:
(in thousands) June 30, 2022 December 31, 2021
VAT payable (including amounts related to VAT matter described in Note 2) $ 3,129  $ 4,393 
Contingent consideration 2,319  5,641 
Accrued employee compensation 5,283  6,055 
Accrued professional fees 1,514  1,700 
Refund liability (including accounts receivable credit balances) 1,396  1,481 
Accrued construction in progress (ERP) 468  1,061 
Sales tax payable 820  1,034 
Other 7,511  3,932 
$ 22,440  $ 25,297 
Customer Deposits
For certain product offerings such as child-resistant packaging, closed-system vaporization solutions and custom-branded retail products, we may receive a deposit from the customer (generally 25% - 50% of the total order cost, but the amount can vary by customer contract), when an order is placed by a customer. We typically complete orders related to customer deposits within one to six months from the date of order, depending on the complexity of the customization and the size of the order, but the
order completion timeline can vary by product type and terms of sale with each customer. Changes in our customer deposits liability balance during the six months ended June 30, 2022 were as follows:
(in thousands) Customer Deposits
Balance as of December 31, 2021 $ 7,924 
Increases due to deposits received, net of other adjustments 8,024 
Revenue recognized (10,785)
Balance as of June 30, 2022 $ 5,163 

Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss) for the periods presented were as follows:
(in thousands) Foreign Currency Translation Unrealized Gain or (Loss) on Derivative Instrument Total
Balance at December 31, 2021 $ 282  $ 42  $ 324 
Other comprehensive income (loss) 26  358  384 
Less: Reclassification adjustment for (gain) loss included in net loss (Note 4) —  (332) (332)
Less: Other comprehensive (income) loss attributable to non-controlling interest (17) (68) (85)
Balance at June 30, 2022 $ 291  $ —  $ 291 
(in thousands) Foreign Currency Translation Unrealized Gain or (Loss) on Derivative Instrument Total
Balance at December 31, 2020 $ 183  $ (154) $ 29 
Other comprehensive income (loss) 88  204  292 
Less: Other comprehensive (income) loss attributable to non-controlling interest (48) (130) (178)
Balance at June 30, 2021 $ 223  $ (80) $ 143 
Supplier Concentration
Our four largest vendors accounted for an aggregate of approximately 64.1% and 53.6% of our total net sales and 83.3% and 74.0% of our total purchases for the three and six months ended June 30, 2022, respectively, and an aggregate of approximately 37.7% and 38.8% of our total net sales and 46.8% and 44.4%. of our total purchases for the three and six months ended June 30, 2021, respectively. We expect to maintain our relationships with these vendors.
Related Party Transactions
Nicholas Kovacevich, our Chief Executive Officer, and Dallas Imbimbo, who served on our Board prior to his resignation on April 8, 2022, own capital stock of Unrivaled Brands Inc. (“Unrivaled”) and serve on the Unrivaled board of directors. Net sales to Unrivaled totaled approximately $0 and $0.7 million for the three and six months ended June 30, 2022, respectively, and $0 both for the three and six months ended June 30, 2021. Total accounts receivable due from Unrivaled were approximately $0.5 million and $0.4 million as of June 30, 2022 and December 31, 2021, respectively.
Adam Schoenfeld, co-founder and a current director of the Company, has a significant ownership interest in one of our customers, Universal Growing. Net sales to Universal Growing totaled approximately $0.0 million and $0.2 million for the three and six months ended June 30, 2022, respectively, and $0.2 million and $0.3 million for the three and six months ended June 30, 2021, respectively. Total accounts receivable due from Universal Growing as of June 30, 2022 and December 31, 2021 were de minimis.
In December 2021, we entered into a Secured Promissory Note with Aaron LoCascio, our co-founder, former Chief Executive Officer and President, and a current director of the Company, with respect to the $8.0 million Bridge Loan described under Note 6 above. On June 30, 2022, we entered into the First Amendment to the Secured Promissory Note, which provided for the extension of the maturity date of the Secured Promissory Note from June 30, 2022 to July 14, 2022. On July 19, 2022, we fully repaid the Bridge Loan and as a result, all obligations under the Bridge Loan have been satisfied.
On July 19, 2022, Warehouse Goods entered into the Sale Agreement with Portofino to sell the Company’s 50% stake in VIBES Holdings LLC for total consideration of $5.3 million in cash. The transactions contemplated by the Sale Agreement were completed on July 19, 2022, immediately following the signing of the Sale Agreement. Portofino is an entity partially
controlled by Adam Schoenfeld. The Sale Agreement was approved by the affirmative vote of a majority of the disinterested members of the Board and the audit committee of the Board in accordance with the Company’s related party transactions policy.