BowFlex (BFX) - 2024 Q4 - Annual Report

Part I Business The company filed for Chapter 11 bankruptcy, sold its assets for $37.5 million, and is now winding down operations - On March 4, 2024, the Company filed for Chapter 11 bankruptcy to facilitate the sale of substantially all of its assets[6] - The company completed an asset sale to Johnson Health Tech for $37.5 million on April 22, 2024; proceeds were insufficient to provide any value to common stockholders[7] - Following the asset sale, the company is no longer operating and is in the process of winding down, liquidating, and dissolving all operations[8] - The company's common stock is quoted on the OTC market under "BFXXQ," but there are insufficient funds for any future distributions to stockholders[9] Significant Customer Concentration | Customer | 2024 | 2023 | | :--- | :--- | :--- | | Amazon.com | 12.0% | 19.3% | Risk Factors Key risks include the bankruptcy proceedings, the resulting lack of value for common stock, and the departure of key personnel - The company has sold substantially all assets, and there were insufficient proceeds for common stockholders to receive any value for their shares[16][17] - The company's common stock, quoted on OTC as "BFXXQ," has no value, and no future distributions will be made to stockholders[18] - The departure of the CEO, CFO, COO, CMO, and four board members, along with significant employee departures, impacts the ability to manage the wind-down process[19] Cybersecurity Due to the company's wind-down and limited resources, formal cybersecurity programs are no longer maintained - The company does not anticipate having formal cybersecurity risk management programs on a going-forward basis due to limited resources and personnel[23] - Oversight of cybersecurity risks has been assumed by the remaining Board members following the reduction of the Audit Committee[23] Properties All domestic and international property leases have been rejected or terminated as part of the bankruptcy and wind-down process - All U.S. property leases were rejected as part of the bankruptcy cases on May 31, 2024[25] - Leases in China and Switzerland were also terminated or addressed through local bankruptcy proceedings following the asset sale[25] Legal Proceedings The company's primary legal proceedings are its Chapter 11 bankruptcy cases - The company's primary legal proceedings are its Chapter 11 bankruptcy cases, as described under the 'Business – Bankruptcy' section[26] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the OTC market, but it holds no value and will receive no future dividends - The common stock is quoted on the OTC market under the symbol "BFXXQ"[27] - The company confirms that proceeds from the asset sale were insufficient for common stockholders and no future dividends will be paid[27] Management's Discussion and Analysis of Financial Condition and Results of Operations Fiscal 2024 saw a 28.2% sales decline, an improved gross margin, and a net loss of $90.4 million amid bankruptcy proceedings Company Results Net sales fell 28.2% to $206.0 million in fiscal 2024, though the net loss narrowed to $90.4 million from $105.4 million Fiscal 2024 vs. Fiscal 2023 Performance | Metric | Fiscal 2024 | Fiscal 2023 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $206.0M | $286.8M | ($80.8M) | (28.2)% | | Gross Profit | $49.9M | $52.0M | ($2.1M) | (3.9)% | | Gross Margin | 24.2% | 18.1% | +6.1 ppts | N/A | | Operating Loss | ($89.7M) | ($93.4M) | $3.7M | (4.0)% | | Net Loss | ($90.4M) | ($105.4M) | $15.0M | (14.2)% | | Diluted EPS | ($2.56) | ($3.34) | $0.78 | (23.4)% | Results of Operations Net sales declined across all segments, while gross margins improved due to lower product costs and operating expenses decreased Net Sales by Segment (in thousands) | Segment | FY 2024 | FY 2023 | % Change | | :--- | :--- | :--- | :--- | | Direct | $111,717 | $139,289 | (19.8)% | | Retail | $93,131 | $144,113 | (35.4)% | | Royalty | $1,116 | $3,371 | (66.9)% | | Total | $205,964 | $286,773 | (28.2)% | Gross Margin by Segment | Segment | FY 2024 | FY 2023 | Change | | :--- | :--- | :--- | :--- | | Direct | 24.4% | 20.6% | +380 bps | | Retail | 23.1% | 13.8% | +930 bps | - Operating expenses decreased by $5.7 million, largely due to reduced media spending, partially offset by higher impairment and contractor fees[48] - The company recorded a goodwill and asset impairment charge of $39.6 million in fiscal 2024, compared to $27.0 million in fiscal 2023[57] Liquidity and Capital Resources The Chapter 11 filing raises substantial doubt about the company's ability to continue as a going concern, and all major credit facilities were terminated - The company's financial statements were prepared on a "going concern" basis, but the Chapter 11 filing raises substantial doubt about its ability to continue[67] - The DIP Credit Facility and the WF ABL Revolving Facility were terminated in April 2024 and February 2024, respectively[74][76][208] Key Balance Sheet and Cash Flow Items (as of March 31) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Cash and Restricted Cash | $21.9M | $18.3M | | Inventory | $33.1M | $46.6M | | Trade Payables | $5.7M | $29.4M | | Cash from Operations (FY) | $6.1M | $18.8M | Financial Statements and Supplementary Data The auditor's report expresses substantial doubt about the company's ability to continue as a going concern due to its bankruptcy - The independent auditor's report includes a paragraph expressing substantial doubt about the company's ability to continue as a going concern[82] - Subsequent to year-end, the asset sale to Johnson Health Tech closed, involving assets with a carrying value of approximately $41.7 million[273][274] Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $82,444 | $96,222 | | Total Assets | $86,307 | $163,532 | | Liabilities subject to compromise | $53,846 | $0 | | Total Liabilities | $110,120 | $102,232 | | Total Shareholders' Equity (Deficit) | ($23,813) | $61,300 | Consolidated Statement of Operations Highlights (in thousands) | Account | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Net Sales | $205,964 | $286,773 | | Gross Profit | $49,917 | $51,954 | | Operating Loss | ($89,653) | ($93,361) | | Reorganization items, net | ($1,897) | $0 | | Net Loss | ($90,370) | ($105,399) | Controls and Procedures Disclosure controls were deemed effective, but a material weakness rendered internal control over financial reporting ineffective - Disclosure controls and procedures were concluded to be effective as of March 31, 2024[278] - Management concluded that internal control over financial reporting was not effective as of March 31, 2024, due to a material weakness[281] - The material weakness was related to the failure to maintain effective controls for identifying asset impairment triggering events under ASC 360[281] Part III Directors, Executive Officers and Corporate Governance The Board has been reduced to two members, and the sole executive officer is the Chief Wind-Down Officer - As of the filing date, the Board of Directors consists of two independent directors: Anne G. Saunders and Ruby Sharma[285] - The sole executive officer is Robert D. Hoge, serving as General Counsel and Chief Wind-Down Officer since April 2024[291] - As of April 22, 2024, the Compensation Committee has no remaining members due to Board resignations and has not been replaced[296] Executive Compensation This section details compensation for Named Executive Officers, including a total of $1.44 million for the former CEO in FY2024 - The company has adopted an executive compensation clawback policy to recover erroneously received incentive-based compensation[304] Summary Compensation Table - Fiscal 2024 | Name | Position | Salary | Bonus | Stock Awards | Option Awards | Total Comp. | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | James Barr, IV | CEO | $625,000 | $300,000 | $29,750 | $482,102 | $1,442,259 | | Aina E. Konold | CFO | $410,000 | $300,000 | $99,166 | $74,244 | $886,649 | | Alan L. Chan | CLO | $350,000 | $50,000 | $81,024 | $54,839 | $538,876 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Namdar Family Holding LLC was the largest beneficial owner with 8.73% of common stock as of May 30, 2024 Principal Shareholders (as of May 30, 2024) | Name of Beneficial Owner | Percentage Beneficially Owned | | :--- | :--- | | Namdar Family Holding LLC | 8.73% | | Safe Asset Management, LP | 4.83% | | All Directors & Executive Officers as a Group | 2.04% | Principal Accounting Fees and Services Total fees paid to the independent auditor, Grant Thornton LLP, increased to $916,189 in fiscal year 2024 Auditor Fees (Grant Thornton LLP) | Type of Fees | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Audit Fees | $752,937 | $668,071 | | Audit-Related Fees | $92,125 | $26,500 | | Tax Fees | $71,127 | $64,811 | | Total | $916,189 | $759,382 | Part IV Exhibits and Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed with the Form 10-K - Lists all financial statements and exhibits filed with the report, including the Asset Purchase Agreement (Exhibit 10.14) and officer certifications[330][331][332]