Summer Infant Annual Report 2019

FY2019 Annual Report · Summer Infant

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

(Mark One)

FORM 10-K

(cid:31) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the fiscal year ended December 28, 2019
Or
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

(cid:30)

For the transition period from

Commission File No. 001-33346

SUMMER INFANT, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation)
1275 Park East Drive, Woonsocket, Rhode Island
(Address of principal executive offices)

20-1994619
(I.R.S. Employer
Identification No.)
02895
(Zip Code)

(401) 671-6550
(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

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act. Yes (cid:30) No (cid:31)

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the

Act. Yes (cid:30) No (cid:31)

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 (cid:31) No (cid:30)

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 (cid:31) No (cid:30)

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 (cid:30)

Accelerated filer (cid:30)

Non-accelerated filer (cid:31)

Smaller reporting company (cid:31)
Emerging growth company (cid:30)

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. (cid:30)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:30) No (cid:31)

The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates as of June 29,
2019, was $4.2 million (and has not been adjusted to reflect the reverse stock split effective March 13, 2020). For purposes of
this computation, all officers, directors, and 10% beneficial owners of the registrant are deemed to be affiliates. Such
determination should not be deemed to be an admission that such officers, directors, or 10% beneficial owners are, in fact,
affiliates of the registrant.

The number of shares issued and outstanding of the registrant’s common stock as of March 16, 2020 was 2,108,743
(excluding unvested restricted shares that have been issued to employees) reflecting the reverse stock split effective March 13,
2020.

Portions of the registrant’s Proxy Statement for its 2020 Annual Meeting of Stockholders are incorporated by reference

into Part III of this Annual Report on Form 10-K.

DOCUMENTS INCORPORATED BY REFERENCE

INDEX TO FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 28, 2019

PART I
ITEM 1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 2.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 3.
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 4.
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

ITEM 5.

ITEM 6.
ITEM 7.

Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of

Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 8.
Changes in and Disagreements with Accountants on Accounting and Financial
ITEM 9.

Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

ITEM 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 11.
Security Ownership of Certain Beneficial Owners and Management and Related
ITEM 12.

ITEM 13.
ITEM 14.

Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 15.
ITEM 16.
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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When used in this report, the terms ‘‘Summer,’’ the ‘‘Company,’’ ‘‘we,’’ ‘‘us,’’ and ‘‘our’’ mean
Summer Infant, Inc. and its subsidiaries. Note that all dollar amounts in Part I are in thousands of U.S.
dollars unless otherwise noted.

PART I

Item 1. Business

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 product industry, providing parents and caregivers a full range of innovative,
high-quality, and high-value products to care for babies and toddlers. We seek to improve the quality of
life of parents, caregivers, and babies through our product offerings, while at the same time maximizing
shareholder value over the long term.

We operate in one principal industry segment across geographically diverse marketplaces, selling

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

In 2019, we announced our new brand and product strategy, and are doing business under the

name SUMR Brands. We believe this ‘‘family of brands’’ approach better reflects our strategic vision
and evolving consumer expectations. As described below in ‘‘Sales and Marketing,’’ we seek to leverage
our brands, Summer�, SwaddleMe� and born free�, to cover multiple consumer demographics,
retailers, and channels.

Strategic Priorities

Our goal is to become a globally recognized leader in the juvenile product industry by creating

products that families everywhere need, want, love and depend on. We will continue to support a
roadmap for sustainable growth in 2020 and beyond by developing and launching new products based
on consumer demand, while also strengthening our core product offerings. Additionally, we will
continue to expand our reach through a portfolio of brands, strategically positioned to appeal to
multiple consumer demographics, and further develop our key customer relationships. We believe the
following key strategic priorities position us to capitalize on market trends and fuel our future growth:

• Growth through product. We continuously seek to create differentiated products that appeal to
consumers who increasingly demand high-quality, long-lasting products that make family life
easier, safer, and more fun. We pride ourselves as leaders of innovation within the juvenile
products industry. We strive to deliver innovation in various ways based upon product category,
including design innovation in potties and gates, new convenience features in bath and strollers,
inventive technology in our baby video monitors, and an expanded range of safe-sleep solutions
within our SwaddleMe� branded product line. In 2020, we are launching a new infant car seat
and travel system that offers many high-end features at a competitive price point. We believe
that this expansion will allow us to reach the first-time expectant parent market in a meaningful
way and bring them through our entire product line as their babies grow.

• Growth through brand. By developing a strategic approach to our consumer brands, we believe

we are positioned to expand our appeal to a wide variety of consumer demographics while
providing retailer differentiation. We continue to take a digital-first approach to marketing

communications and brand development. By implementing online marketing, marketing
automation, social publishing/listening, and digital analytics tools, we believe we will be able to
communicate more effectively with consumers of our products and understand what is important
to them. In addition, we expect to continue to focus on online merchandising to drive conversion
rates both in-store and online, as a majority of consumers research products online before
buying either at retail or through e-commerce.

• Growth through distribution. We have strong partnerships with our suppliers in the

U.S., Mexico, and Asia. We believe that our ability to develop products that are preferred by
consumers and cost-efficient gives us a competitive advantage in meeting our customer demands.
We have long-standing relationships with our brick and mortar and e-commerce retail customers
in the U.S., and will continue to focus on strengthening them to increase our presence in stores
and online.

• Continuous infrastructure improvement. A large percentage of our 2019 efforts and planned

2020 activities are focused on operational cost reductions, product sourcing and tariff mitigation,
and streamlining improvements. Active programs include ongoing SKU reductions and
rationalization, consolidation of UK distribution operations into our China facility, warehouse
labor reductions, leasehold rationalization and the subletting of excess space where applicable.
Additionally, we plan on increasing our direct import business, relocating product manufacturing
in Asia to realize reduced tariffs and lower costs, and overall supply chain/order management
staff consolidation.

Products

We currently market our products in several product categories including gates, potty, bath,
entertainers, baby monitors, specialty blankets, strollers, car seats and travel systems. We are a North
American market leader in the gate, bath, and the potty categories as well as a North American market
leader in the convenience stroller segment. We market our core products, under our Summer�,
SwaddleMe�, and born free� brand names.

Within gates, we offer a product range of more than 30 products. Our line of gates offer versatility

that covers use in home, ease of installation, and aesthetically pleasing designs. We appeal to
consumers with our combination of high quality and various designs matching home d´ecor. We
continue to receive positive feedback from retailers as we expand our portfolio.

We first entered the infant bathing category in 2002, and we have continued to create useful and

safe solutions for bathing. Our innovative bath product, My Bath Seat� continues to be extremely
popular with consumers. We have an established roadmap for developing products in the four phases of
bathing (sponges, bathers, bath tubs, and bath seats) to address consumer needs as baby grows, and to
create loyalty to our brands, with new products available in 2020.

Our My Size� Potty and the My Size� Potty Train & Transition have been well-received by
retailers and consumers alike. In 2020, we expect to continue to offer consumers more options in this
product line and to obtain incremental placements with our retail customers. We are a market share
leader in potties, with additional offerings that support different consumer needs and various price
points in regards to potty training.

We are a North American market leader in the convenience segment of strollers. Our 3Dlite�
Convenience Stroller continues to be a favorite among parents. We have continued to expand our 3D
line of lightweight, affordable, feature rich strollers with the 3Dlite� +, a new lightweight convenience
stroller with refined fashion and new features as well as the 3Dgo and 3D Pac. In 2020, we will also be
launching the modular travel system with an infant car seat.

Our monitors were first introduced in 2001 and are distinguished by ease of use, innovative
features, and their high quality. Currently, we offer audio and video monitors under the Summer�
brand. Our monitors feature high quality components, intended to fulfill the desire for consumers to
connect with baby at any time or place. 2019 saw the successful launch of our Baby Pixel monitor, and
we have continued to expand the product line with offerings including Baby Pixel Zoom HD and Baby
Pixel Cadet.

Our specialty blankets include SwaddleMe� specialty blankets as well as our expanded line of
Slumber Buddy soothers. Acquired in 2008, SwaddleMe� continues to be a trusted brand synonymous
with infant safe sleep. A new brand refresh, SwaddleMe branded website, and an expanded range of
products are expected to launch in early 2020.

Product Development and Design

A thorough understanding of our consumer, the competition, and our customer retail partners
drives our product development. Developing and marketing innovative solutions are a critical element
of our strategy. We strive to produce proprietary products that offer distinctive benefits, are visually
appealing, and provide safe, thoughtful solutions.

We conduct market analysis in our geographic regions of priority, evaluate identified opportunities,

and design products accordingly. The majority of our products are currently designed at our Rhode
Island headquarters. When appropriate, we also partner with manufacturers in Asia on product
development. In addition to new product development, we continuously look for ways to improve upon
existing products based on consumer insights with a strong focus on the end-user experience.

Suppliers and Manufacturing

The majority of our products are manufactured in Asia (primarily China). We also use

manufacturers in the United States and Mexico for certain injection-molded products, including bath
tubs, potty seats and booster seats.

We are not dependent on any one supplier as we use many different manufacturers and presently

own the tooling and molds used for our products. Our Hong Kong subsidiary provides us with an Asian
sourcing presence and the ability to oversee quality, electronic engineering and other issues that may
arise during production. Generally, we buy finished goods from manufacturers, and thus do not directly
procure raw materials for product manufacturing. Historically, we have not experienced any significant
disruption of supply as a result of raw material shortages or other manufacturing factors, but there is
the possibility that shortages could occur in the future based on a variety of factors beyond our control.

Asian-made goods are shipped on the water to our warehouses, which typically takes up to four
weeks. We also utilize a direct import program, to reduce costs and shipping time to certain customers.
We maintain inventory in warehouses located in the United States and Canada as well as a third-party
logistics warehouse in China. Most of our customers pick up their goods at our warehouses. We also
deliver shipments direct to customers for sales from our own website and our consumer replacements
program as well as for other smaller retail partners that request such arrangements.

Sales and Marketing

Our products are largely marketed and sold through our own direct sales force. We have also
established a strong network of independent manufacturers’ representatives and distributors to provide
sales and customer service support for retail customers in North America and internationally. We seek
to expand our direct-to-consumer sales, which we believe will also increase overall brand awareness.
Sales are recognized upon transfer of title to our customers and are made utilizing standard credit
terms of approximately 60 days. We generally accept returns only for defective merchandise.

Marketing, promotion and consumer engagement are key elements in the juvenile industry.
Historically, a significant percentage of our promotional spending has been structured in coordination
with large retail partners. We continue to focus our marketing efforts on growing brand awareness
among our target consumer demographic, optimizing marketing investments, and executing an
integrated marketing strategy. We believe an important component of our future growth is based on
speaking to the right customer, with the right content, in the right channel, at the right time. We have
implemented online marketing, social media, and digital analytics tools, which allow us to better
measure the performance of our marketing activities, learn from our consumers, and receive valuable
insights into industry and competitor activities.

Customer service is a critical component of our marketing strategy. We maintain a U.S.-based
internal customer service department that responds to customer inquiries, investigates and resolves
issues, and is available to assist customers and consumers during business hours. In 2019, we launched
live chat on our direct-to-consumer websites to allow consumers to connect with the consumer service
team as they research products or shop on our branded websites.

Competition

The juvenile product industry has many participants, none of which has dominant market share,

though certain companies may have disproportionate strength in specific product categories. We
compete with a number of different companies in a variety of categories, although there is no single
company that competes with us across all of our product categories. Our largest direct competitors are
Tomy Company, Ltd., Dorel Industries, Inc., Regalo Baby�, Munchkin�, GB� (Goodbaby International
Holdings, Ltd.), Graco� (a subsidiary of Newell Rubbermaid), Chicco�, Fisher-Price� (a subsidiary of
Mattel, Inc.), Aden & Anais�, and Motorola� (a licensed brand of Binatone Communications Group).

The primary method of competition in the industry consists of brand positioning, product
innovation, quality, price, and timely distribution. Our competitive strengths include our ability to
develop innovative new products, speed to market, our relationships with major retailers, and the
quality and pricing of our products.

Intellectual Property

We rely on a combination of trademarks, patents, and trade secrets to protect our intellectual

property. Our current U.S. patents include various design features related to safety gates, bouncers,
bathers, and monitors with several other patents under review by the United States Patent and
Trademark Office (USPTO). The issued patents expire at various times depending on the date of
issuance during the next 15 years. In certain circumstances, we will partner with third parties to develop
proprietary products, and, where appropriate, we have license agreements related to the use of third-
party innovation in our products. The duration of our trademark registrations varies from country to
country. However, trademarks are generally valid and may be renewed indefinitely as long as they are
in use and/or their registrations are properly maintained.

Customers

Sales to the Company’s top seven customers together comprised approximately 81% of our sales in
fiscal 2019 and 77% of our sales in fiscal 2018. Of these customers, three generated more than 10% of
sales for fiscal 2019: Amazon.com (26%), Walmart (25%), and Target (17%). In fiscal 2018, three
customers generated more than 10% of sales: Amazon.com (23%), Walmart (23%), and Target (16%)

We have no long-term contracts with these customers, and as a result, our success depends heavily

on our customers’ willingness to purchase and provide shelf space for our products.

Seasonality

We do experience some variations in seasonal demand for our products in our second and third

quarters of each year. However, we expect to generate higher than average volumes for the initial
shipment of new products which typically includes enough inventory to fill each store plus additional
amounts to be kept at the customer’s distribution center. The timing of these initial shipments varies by
customer depending on when they finalize store layouts for the upcoming year and whether there are
any mid-year product introductions.

Regulatory Matters

Each of our products is designed to comply with all applicable mandatory and voluntary safety

standards. In the United States, these safety standards are promulgated by federal, state and
independent agencies such as the US Consumer Product Safety Commission, ASTM, the Federal
Communications Commission, the Food and Drug Administration, the Federal Trade Commission, and
various states Attorney Generals and state regulatory agencies. All of our products are independently
tested by third party laboratories accepted by the Consumer Product Safety Commission to verify
compliance to applicable safety standards. A similar approach is used to design and test products sold
internationally.

Insurance

We carry product liability insurance that provides us with $15 million coverage with a minimal
deductible. We consult with our insurers to ascertain appropriate liability coverage for our product mix.
We believe our current coverage is adequate for our existing business and will continue to evaluate our
coverage in the future in line with our expanding sales and product breadth.

Employees

As of December 28, 2019, we had 159 employees, 156 of whom were full time employees and 74 of

whom worked in our Rhode Island headquarters.

Available Information

The Company is incorporated under the laws of the State of Delaware. Our principal executive

offices are located at 1275 Park East Drive, Woonsocket, Rhode Island 02895, and our telephone
number is (401) 671 6550. We maintain our corporate website at www.summerinfant.com.

We file reports with the Securities and Exchange Commission (‘‘SEC’’), including an annual report

on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to
those reports that we file with, or furnish to, the SEC. The SEC maintains an Internet website,
www.sec.gov, that contains reports, proxy and information statements and other information that we file
electronically with the SEC. Our website also includes corporate governance information, including our
Code of Ethics and our Board committee charters. The information contained on our website does not
constitute a part of this report.

Item 1A. Risk Factors

An investment in our securities involves a high degree of risk. You should carefully consider the

risks described below before making an investment decision. If any of the events or circumstances
described in the following risks actually occur, our business, financial condition or results of operations
could be materially adversely affected and the trading price of our common stock could decline. The
risk factors listed below are not exhaustive. We operate in a very competitive and rapidly changing
environment in which new factors may emerge from time to time, and it is not possible for
management to predict the impact of all of these factors on our business, financial condition or results
of operations.

Our business may be materially adversely impacted due to the recent coronavirus outbreak in the U.S.

Our business may be materially adversely impacted by the effects of the recent coronavirus
outbreak in the U.S. In addition to other risks related to the outbreak noted below, such as to our
supply chain or a temporary closure of our distribution facility, as of the date of this filing, multiple
retail stores in the U.S. have temporarily closed their stores in response to the outbreak, and state
governments are taking action to curtail public activities. A significant portion of our sales in 2019 were
made to large and small retail stores. We cannot at this time accurately predict what effects the closure
of our customers’ stores and the coronavirus outbreak in the U.S. will have on our sales in 2020,
including due to uncertainties relating to the ultimate geographic spread of the virus, the severity of the
disease, the duration of the outbreak, the length of voluntary business closures and governmental
actions taken in response to the outbreak. More generally, a widespread health crisis could adversely
affect the U.S. economy, resulting in an economic downturn that could affect demand for our products
and therefore impact our results.

The concentration of our business with certain retail customers means that changes in the purchasing policies
of these customers could have a significant impact on our business and operating results.

In fiscal 2019, sales to our top seven customers, including Amazon.com, Wal-Mart, and Target,

accounted for approximately 81% of our total sales. We do not have long-term commitments or
contracts with any of our retail customers, and retailers make purchases by delivering one-time
purchase orders. As such, any customer could potentially renegotiate the terms of our business
relationship at any time, which might include reducing overall purchases of our products, altering
pricing, reducing the number and variety of our products carried and the shelf space allotted for our
products, and reducing cooperative advertising or marketing support. Because of the current
concentration of our business with these retail customers, a change in our relationship with any of these
customers could adversely affect our results of operations and financial condition.

Increased tariffs, additional tariffs or other import or export taxes on our products could have an adverse
impact on the cost of our product, the demand for our products and our business, financial condition and
results of operations. Further, any suspension, revocation, expiration, non-renewal or other loss of our
temporary exemption from certain tariffs could adversely affect our business, financial condition and results of
operations.

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. While we took actions to mitigate the impact of these tariffs and are exploring alternative
sources of supply outside of China, if existing tariffs are increased or if additional tariffs or trade
restrictions are implemented by the United States, China or other countries, the cost of our products

manufactured in China or other countries and imported into the United States would increase
substantially, which would force us to increase the prices of the affected products.

In December 2019, an exclusion for metal safety gates was granted by the USTR, retroactive to
the date of implementation (September 2018). Any amounts we paid in respect of such tariffs between
the time of their implementation and the date the exclusion was granted will be refunded. However,
the exclusion is temporary and expires in August 2020. While the USTR is expected to publish a
process to seek extension of the exclusion, there can be no guarantee that the exclusion will be
extended past August 2020. Any suspension, revocation, expiration, non-renewal or other loss of the
granted exclusion could adversely affect our business, financial condition and results of operations. We
would be required to negotiate for increased prices to mitigate the impact of the tariffs, which in turn
could impact demand for our products.

There is no assurance that we would be successful in mitigating the impact of increased or
additional tariffs, and any increase in pricing to allow us to maintain reasonable margins could
adversely affect the demand for those products and may result in decreased profitability and lower
sales, thereby having an adverse effect on our business, results of operations and financial condition.

We may not achieve some or all of the expected benefits of or savings from our restructuring initiatives, and
our restructuring initiatives may adversely impact our business, financial condition and results of operations.

In 2020, we announced restructuring initiatives to further streamline our operations and improve

our financial outlook. We may not be able to obtain the cost savings and benefits that are initially
anticipated in connection with these restructuring initiatives. Reorganization and restructuring can
require a significant amount of management and other employees’ time and focus, which may divert
attention from operating and growing our business. If these initiatives are not implemented in a timely
manner, anticipated cost savings and benefits are not realized, business disruption occurs during the
pendency of or following such actions, or unanticipated charges are incurred, particularly if material,
there may be a negative effect on our business, financial condition and results of operations.

The intense competition in our market could reduce our net sales and profitability.

We operate in a highly competitive market and compete with several large domestic and foreign
companies and with smaller producers of infant and juvenile products. Many of our competitors have
longer operating histories, greater brand recognition, and greater financial, technical, marketing and
other resources than us, or have greater e-commerce and social media presence than us. We experience
price competition for our products and competition for shelf space at retailers, all of which may
increase in the future. If we cannot adjust to changes in our market and compete successfully in the
future, our net sales and profitability will likely decline.

Our ability to grow and compete will be harmed if we do not successfully satisfy consumer preferences,
enhance existing products, develop and introduce new products, and successfully market and achieve
acceptance of our products.

Our business and operating results depend largely upon providing our customers with products
that appeal to the end user. Consumer preferences are constantly changing, particularly among parents
whom are often the end purchasers of our products. Our success largely depends on our ability to
identify emerging trends in the infant and juvenile health, safety and wellness marketplace, and to
design quality products that address consumer preferences and prove safe and cost effective.

Our ability to maintain and increase our current market share will depend upon our ability to

anticipate changes in consumer preferences and satisfy these preferences, enhance existing products,
develop and introduce new products, grow existing distribution channels and seek additional
distribution channels for these products, successfully market the products and, ultimately, achieve

consumer acceptance of these products. A failure to achieve market acceptance of our products could
harm our ability to grow our business.

An inability to develop and introduce planned new products or product lines in a timely and cost-effective
manner may damage our business.

In developing new products and product lines, we have anticipated dates for associated product

introductions. When we state that we will introduce, or anticipate introducing, a particular product or
product line at a certain time in the future, those expectations are based on completing the associated
development, implementation, marketing work, and manufacturing in accordance with our currently
anticipated development schedule. Unforeseen delays or difficulties in the development process,
significant increases in the planned cost of development, changes in anticipated consumer demand for
our products, and delays in the manufacturing process may cause the introduction date for products to
be later than anticipated or, in some situations, may cause a product introduction to be discontinued.
The risk is also heightened by the sophistication of certain products we are designing, in terms of
combining digital and analog technologies, and providing greater innovation and product
differentiation. If we are unable to manufacture, source and ship new products in a timely manner and
on a cost effective basis, it could have an adverse effect on our business and operating results.

If we do not maintain sufficient inventory levels or if we are unable to deliver our products to our customers
in sufficient quantities, or on a timely basis, or if our inventory levels are too high, our operating results will
be adversely affected.

Our business places stringent demands on our inventory forecasting and production planning
processes. This inventory management approach may be particularly challenging when combined with
‘‘just-in-time’’ inventory management systems commonly used by customers to minimize their inventory
levels. If we fail to meet tight shipping schedules, we could damage our relationships with customers,
increase our shipping costs or cause sales opportunities to be delayed or lost. To deliver our
merchandise on a timely basis, we need to maintain adequate inventory levels of the desired products.
This approach requires us to begin to place orders for components for certain products up to a year in
advance, and we procure a significant amount of product months in advance of certain time periods. At
the time we place factory orders, we may not have firm orders from customers or a complete
understanding of what consumer demand for those products will be. If our inventory forecasting
processes are not accurate, it may result in inventory levels in excess of the levels forecasted and we
may not have sufficient space at our main distribution center to accommodate excess inventory. As a
result, we could be required to record inventory write-downs for excess and obsolete inventory, and/or
incur additional expense for storage of excess inventory, which would adversely affect our operating
results. In addition, if our processes result in our inventory levels being too low to meet customer
demand, we may lose sales, which could adversely affect our operating results.

Covenants in our credit facility and term loan agreement may affect our liquidity or limit our ability to
complete acquisitions, incur debt, make investments, sell assets, merge or complete other significant
transactions. Deviations from expected results of operations and expected cash requirements could result in a
failure to meet financial covenants, which would adversely affect our financial condition and results of
operations.

We rely on our credit facility and cash generated from our operations to meet our working capital
needs. Our credit facility and term loan agreement include certain covenants that place limitations on
or restrict a number of our activities, including our ability to incur additional debt, create liens on our
assets or make guarantees, make certain investments or loans, pay dividends or make distributions,
dispose of or sell assets, or enter into a merger or similar transaction.

These restrictive covenants may limit our ability to engage in acts that may be in our best

long-term interests. In addition, if we do not maintain a specified level of availability under our credit
facility and term loan agreement, we will be required to comply with a fixed charge coverage ratio
financial covenant. Any significant deviation in actual results from our expected results of operations,
or in the timing of material expenditures from current estimates, any significant business or product
acquisitions, or other significant unanticipated expenses could result in us not meeting applicable
financial covenants.

Non-compliance with the covenants in our credit facility and term loan agreement could result in
us being unable to utilize borrowings under our credit facility, a circumstance which potentially could
occur when operating shortfalls would most require supplementary borrowings to enable us to continue
to fund our operations. If access to our credit facility is limited or terminated, our liquidity would be
constrained, affecting our operations and growth prospects, and we would need to seek amendments to
our credit facility or obtain additional equity or debt financing or face default. There is no assurance
that such financing would be available on acceptable terms or at all. Furthermore, any equity financing
may result in dilution to existing stockholders and any debt financing may include restrictive covenants
that could impede our ability to effectively operate and grow our business in the future.

Liquidity problems or bankruptcy of our key retail customers could have a significant adverse effect on our
business, financial condition, and results of operations.

A significant portion of our revenue is with key retail customers. Due to the current pressure on

traditional brick-and-mortar retailers, there is increased risk that retailers may suffer material losses or
file for a petition for bankruptcy. Sales to retail customers are typically made on credit without
collateral. If a customer files for bankruptcy, our pre-petition accounts receivable may not be realized
and post-petition orders reduced or cancelled. The bankruptcy laws may severely limit our ability to
collect pre-petition accounts receivable. If key customers, cease doing business as a result of
bankruptcy, or significantly reduce the number of stores operated and therefore the amount of products
ordered from us, it could have an adverse effect on our business, financial condition, and results of
operations, including our ability to access availability under our credit facility.

Because we rely on foreign suppliers and we sell our products in foreign markets, we are subject to numerous
risks associated with international business that could increase our costs or disrupt the supply of our
products, resulting in a negative impact on our business and financial condition.

While most of our sales continue to be in North America, we operate facilities and sell products in

countries outside the United States. Additionally, as we discuss below, we utilize third-party suppliers
and manufacturers located in Asia to produce a majority of our products. These sales and
manufacturing operations, including operations in emerging markets that we have entered, may enter,
or may increase our presence in, are subject to the risks associated with international operations,
including:

• economic and political instability;

• restrictive actions by foreign governments;

• greater difficulty enforcing intellectual property rights and weaker laws protecting intellectual

property rights;

• trade restrictions;

• work stoppages or other changes in labor conditions;

• disease epidemics and health-related concerns, such as the H1N1 virus, coronavirus, or SARS

outbreaks in recent years, which could result in closed factories, reduced workforces, scarcity of

raw materials, scrutiny or embargo of goods produced in infected areas, or delays in
manufacturing or shipment of products to the U.S.;

• reduction in business activity in some parts of the world;

• currency fluctuations and devaluations;

• changes in import duties or import or export restrictions;

• compliance with anti-bribery and anti-corruption regulations;

• untimely shipping of product and unloading of product through West Coast ports, as well as

untimely truck delivery to our warehouses;

• complications in complying with the laws and policies of the United States affecting the

importation of goods, including duties, quotas, and taxes;

• limitations on repatriation of foreign earnings; and

• complications in complying with foreign tax laws.

Future changes to the U.S. tariff and import/export regulations could have a negative effect on our

results of operations. Due to our reliance of manufacturers located in China, from which we import a
majority of our products, the occurrence of such trade reforms or restrictions could impact our business
in an adverse manner.

As a result of our international operations, we are subject to the U.S. Foreign Corrupt Practices

Act and similar foreign anti-corruption and anti-bribery laws. Recent years have seen a substantial
increase in the global enforcement of anti-corruption laws, with more frequent voluntary self-disclosures
by companies, aggressive investigations and enforcement proceedings by both the U.S. Department of
Justice and the SEC resulting in record fines and penalties, increased enforcement activity by non-U.S.
regulators, and increases in criminal and civil proceedings brought against companies and individuals.
Our failure to successfully comply with any such legal requirements could subject us to monetary
liabilities and other sanctions that could harm our business and financial condition.

Also, because we generate some of our revenue outside the United States but report our financial

results in U.S. dollars, our financial results are impacted by fluctuations in foreign currency exchange
rates. If the U.S. dollar is strong against foreign currencies, our translation of foreign currency
denominated revenue or expense could result in lower U.S. dollar denominated net revenue and
expense.

Earthquakes, floods, fire, epidemics or other catastrophic events out of our control may damage or impact the
operations of our primary distribution facility and harm our results of operations.

Our primary distribution facility is located in Riverside, California, near major earthquake faults. A

catastrophic event, such as an earthquake, flood, fire, or other natural or manmade disaster, could
impact operations at this facility. In addition, the state of California has declared a state of emergency
related to the recent coronavirus outbreak, and operations at our distribution facility could be disrupted
or required to close if there are any employees who are diagnosed with the coronavirus or there is a
governmentally-imposed quarantine or other geographic limitations imposed on companies doing
business in California. Any of these events could impair distribution of our products, damage inventory,
interrupt critical functions, or otherwise affect our business negatively, harming our results of
operations.

Any adverse change in our relationship with our suppliers could harm our business.

We rely on numerous third-party suppliers located in Asia for the manufacture of most of our
products. While we believe that alternative suppliers could be located if required, our product sourcing
could be affected if any of these suppliers do not continue to manufacture our products in required
quantities or at all, or with the required levels of quality. We do not have any long-term supply
contracts with our foreign suppliers; rather, we enter into purchase orders with these suppliers. In
addition, difficulties encountered by these suppliers in the countries where they operate, such as fire,
accident, natural disasters, outbreaks of contagious diseases, or political unrest, could halt or disrupt
production at the affected locations, resulting in delay or cancellation of orders. For instance, the
recent coronavirus outbreak in China may result in delays in manufacturing of our products due to
closure of factories and delays in shipping products to the U.S., which could impact our sale forecasts
and inventory levels. Any of these events could result in delayed deliveries by us of our products,
causing reduced sales and harm to our reputation and brand name.

Increases in the cost of materials or labor used to manufacture our products could decrease our profitability
and therefore negatively impact our business and financial condition.

Because our products are manufactured by third-party suppliers, we do not directly purchase the
materials used in the manufacture of our products. However, the prices paid by us to these suppliers
could increase if raw materials, labor, or other costs increase. If we cannot pass these increases along
to our customers, our profitability will be adversely affected.

Intellectual property claims relating to our products could increase our costs and adversely affect our business.

We receive, from time to time, claims of alleged infringement of patents relating to certain of our
products, and we may face similar claims in the future. The defense of intellectual property claims can
be costly and time consuming, even in circumstances where the claim is without merit. We may be
required to pay substantial damages or settlement costs in order to resolve these types of claims. In
addition, these claims could materially harm our brand name, reputation and operations.

As a manufacturer of consumer products, we are subject to various government regulations and may be
subject to additional regulations in the future, violation of which could subject us to sanctions or otherwise
harm our business. In addition, we could be the subject of future product liability suits, product recalls, and
other claims relating to the use of our products, which could harm our business.

Because we produce infant and juvenile health, safety and wellness consumer products, we are
subject to significant government regulation and face product liability risks relating to consumer use of
our products. We must comply with a variety of state and federal product safety and product testing
regulations. In particular, our products are subject to the Consumer Product Safety Act, the Federal
Hazardous Substances Act (‘‘FHSA’’) and the Consumer Product Safety Improvement Act (‘‘CPSIA’’),
which empower the Consumer Product Safety Commission (the ‘‘CPSC’’), to take action against
hazards presented by consumer products. With expanded authority under the CPSIA, the CPSC has
and continues to adopt new regulations for safety and products testing that apply to our products.
These regulations have or likely will significantly increase the regulatory requirements governing the
manufacture and sale of children’s products and increase the potential penalties for noncompliance
with applicable regulations. The CPSC has the authority to exclude from the market and recall certain
consumer products that are found to be potentially hazardous. Consumer product safety laws also exist
in some states and cities within the United States and in Canada and Europe, as well as certain other
countries. If we fail to comply with these laws and regulations, or if we face product liability claims, we
may be subject to damage awards or settlement costs that exceed any available insurance coverage and
we may incur significant costs in complying with recall requirements.

We maintain a quality control program to help ensure compliance with applicable product safety
requirements. Nonetheless, we have experienced, and may in the future experience, issues in products
that may lead to product liability, personal injury or property damage claims, recalls, withdrawals,
replacements of products, or regulatory actions by governmental authorities. A product recall could
have an adverse effect on our results of operations and financial condition, depending on the product
affected by the recall and the extent of the recall efforts required. A product recall could also
negatively affect our reputation and the sales of other products. Furthermore, concerns about potential
liability may lead us to voluntarily recall selected products. Complying with existing or new regulations
or requirements could impose increased costs on our business operations, decrease sales, increase legal
fees and other costs, and put us at a competitive disadvantage compared to other manufacturers not
affected by similar issues with products, any of which could have an adverse effect on our financial
condition. Similarly, increased penalties for non-compliance could subject us to greater expense if our
products were found to not comply with such regulations.

In addition to product liability risks relating to the use by consumers of our products, we also must
comply with a variety of state and federal laws and regulations which prohibit unfair or deceptive trade
practices, including dissemination of false or misleading advertising. While we take steps that we
believe are necessary to comply with these laws and regulations, there can be no assurance that we will
always be in compliance. Compliance with these various laws and regulations could impose significant
costs on our business if we fail to comply, and could result in monetary liabilities and other penalties
and lead to significant negative media attention and consumer dissatisfaction, which could have an
adverse effect on our business, financial condition and results of operations.

Our success is dependent in part on our executive officers, and management turnover can create uncertainties
and could disrupt and impact our business.

Our success depends in part on the efforts of our senior management team and other key
personnel. Changes in our company as a result of management transition, including the fact that our
current Chief Executive Officer is serving on an interim basis, can be inherently difficult to manage and
may cause disruption to our business due to, among other things, diverting management’s attention
away from the Company’s day-to-day business, negatively impacting relationships with our key retail
customers, suppliers and employees, or causing a deterioration in workplace morale. If our interim
CEO were to resign, we would be forced to expend significant time and money in the pursuit of a
replacement.

We may have exposure to greater than anticipated tax liabilities that, if not identified, could negatively affect
our consolidated operating results and net worth.

Our provision for income taxes is subject to volatility and could be adversely affected by

nondeductible equity-based compensation, earnings being lower than anticipated in jurisdictions where
we have lower statutory rates and being higher than anticipated in jurisdictions where we have higher
statutory rates, transfer pricing adjustments, not meeting the terms and conditions of tax holidays or
incentives, changes in the valuation of our deferred tax assets and liabilities, changes in actual results
versus our estimates, or changes in tax laws, regulations, accounting principles or interpretations
thereof, and taxes relating to deemed dividends resulting from foreign guarantees made by certain of
our foreign subsidiaries. In addition, like other companies, we may be subject to examination of our
income tax returns by the U.S. Internal Revenue Service and other tax authorities. While we regularly
assess the likelihood of adverse outcomes from such examinations and the adequacy of our provision
for income taxes, there can be no assurance that such provision is sufficient and that a determination
by a tax authority will not have an adverse effect on our results of operations.

A material impairment in the carrying value of other intangible assets could negatively affect our consolidated
results of operations and net worth.

A portion of our assets are intangible, which are reviewed on an annual basis and/or whenever

events and changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. If the carrying value of these assets exceeds the current fair value, the asset is considered
impaired and is reduced to fair value, resulting in a non-cash charge to earnings during the period in
which any impairment is determined. If we make changes in our business strategy, our future operating
performance was to fall significantly below forecast levels or if external conditions adversely affect our
business operations, we may be required to record an impairment charge for intangibles, which would
lead to decreased assets and reduced net operating results and net worth.

We may be unable to adequately protect our information systems from cyberattacks, which could result in the
disclosure of confidential or proprietary information, including personal data, damage our reputation, disrupt
our operations and subject us to significant financial and legal exposure.

We rely on information technology systems, including systems managed by third parties, across our

operations, including for management of our supply chain, sale and delivery of our products, and
various other processes and transactions, including credit card processing for online sales. In the course
of our operations, we may collect and use confidential customer data and a variety of personal data. A
successful cyberattack could result in the theft or destruction of intellectual property, data, or other
misappropriation of assets, or otherwise compromise our confidential or proprietary information and
disrupt our operations. Cyberattacks are increasing in their frequency, sophistication and intensity,
including wrongful conduct by hostile foreign governments, industrial espionage, wire fraud and other
forms of cyber fraud, the deployment of harmful malware, denial-of-service and social engineering
fraud. Cyberattacks have become increasingly difficult to detect, and a successful cyberattack could
cause serious negative consequences for us, including the disruption of operations and the
misappropriation of confidential business information or personal data. Although we devote resources
to protect our information systems, we realize that cyberattacks are a threat, and there can be no
assurance that our efforts will prevent information security breaches that would result in business, legal,
financial or reputational harm to us, or would have a material adverse effect on our results of
operations and financial condition. Any failure to prevent or mitigate security breaches or improper
access to, use of, or disclosure of personal data could result in significant liability under state, federal
and international laws regarding data privacy, and may cause a material adverse impact to our
reputation and potentially disrupt our business.

Our stock price has been and may continue to be volatile.

The market price of our common stock has been, and is likely to continue to be, volatile. When we

or our competitors announce new products, experience quarterly fluctuations in operating results,
announce strategic relationships, acquisitions or dispositions, change earnings estimates, publish
financial results or other material news, our stock price is often affected. The volatility of our stock
price may be accentuated during periods of low volume trading, which may require a stockholder
wishing to sell a large number of shares to do so in increments over time to mitigate any adverse
impact of the sales on the market price of our stock.

We may not be able to maintain our listing on Nasdaq.

Our common stock currently trades on The Nasdaq Capital Market. This market has continued
listing requirements that we must continue to maintain to avoid delisting, including, among others, a
minimum bid price requirement of $1.00 per share and any of: (i) a minimum stockholders’ equity of
$2.5 million; (ii) a market value of listed securities of $35 million; or (iii) net income from continuing
operations of $500,000 in the most recently completed fiscal year or in two of the last three fiscal years.

Our results of operations and our fluctuating stock price directly impact our ability to satisfy these
listing standards. If we are unable to maintain these listing standards, we may be subject to delisting. In
2019, we received a letter from the Nasdaq Stock Market notifying us that we are not in compliance
with the minimum bid price requirement. In order to regain compliance with this requirement, on
March 13, 2020 we implemented a 1-for-9 reverse stock split. As of March 16, 2020, the closing bid
price of our common stock was $2.55 per share. However, there is no guarantee that our stock price
will remain above $1.00, and the history of similar reverse stock splits for companies in like
circumstances is varied. A delisting from The Nasdaq Capital Market would result in our common
stock being eligible for quotation on ‘‘over-the-counter’’ markets, which is generally considered to be a
less efficient system than listing on markets such as Nasdaq or other national exchanges because of
lower trading volumes, transaction delays and reduced security analyst and news media coverage. These
factors could contribute to lower prices and larger spreads in the bid and ask prices for our common
stock. Additionally, trading of our common stock on over-the-counter markets may make us less
desirable to institutional investors and may, therefore, limit our future equity financing options and
could negatively affect the liquidity of our stock.

Anti-takeover provisions in our organizational documents and Delaware law may limit the ability of our
stockholders to control our policies and effect a change of control of our Company and may prevent attempts
by our stockholders to replace or remove our current management, which may not be in your best interests.

There are provisions in our certificate of incorporation and bylaws that may discourage a third

party from making a proposal to acquire us, even if some of our stockholders might consider the
proposal to be in their best interests, and may prevent attempts by our stockholders to replace or
remove our current management. These provisions in our certificate of incorporation include
authorization for our Board of Directors to issue shares of preferred stock without stockholder
approval and to establish the preferences and rights of any preferred stock issued, and to issue one or
more classes or series of preferred stock that could discourage or delay a tender offer or change in
control. Our bylaws require advance written notice of stockholder proposals and director nominations.

Additionally, we are subject to Section 203 of the Delaware General Corporation Law, which, in

general, imposes restrictions upon acquirers of 15% or more of our stock. Finally, the Board of
Directors may in the future adopt other protective measures, such as a stockholder rights plan, which
could delay, deter or prevent a change of control.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We are headquartered in a 62,500 square foot facility in Woonsocket, Rhode Island. We have a
lease on this facility, which will expire in 2021. We also lease small offices in Arkansas, Canada, the
United Kingdom and Hong Kong.

We maintain inventory at leased warehouses in California (approximately 460,000 square feet) and

Canada (approximately 61,000 square feet). These leases expire at various times through 2023.

Item 3. Legal Proceedings

The Company is a party to routine litigation and administrative complaints incidental to its
business. The Company does not believe that the resolution of any or all of such current routine
litigation and administrative complaints is likely to have a material adverse effect on the Company’s
financial condition or results of operations.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases

PART II

of Equity Securities

Market Information

Our common stock is traded on the Nasdaq Capital Market under the symbol ‘‘SUMR’’.

Holders of Common Stock

As of March 16, 2020, there were 35 holders of record of our common stock. Because shares of

our common stock are held by depositaries, brokers and other nominees, the number of beneficial
holders of our shares is substantially larger than the number of record holders.

Issuer Repurchases of Equity Securities

None.

Recent Sales of Unregistered Securities

Not applicable.

Item 6. Selected Consolidated Financial Data

Not required.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is intended to assist in the assessment of significant changes and trends
related to our results of operations and financial condition. The information contained in this section
has been derived from our consolidated financial statements and should be read together with our
consolidated financial statements and related notes included elsewhere in this report. Readers should
also review and consider our disclosures under the heading ‘‘Special Note Regarding Forward-Looking
Statements’’ describing various factors that could affect our business and the disclosures under the
heading ‘‘Risk Factors’’ in this report.

Note that all dollar amounts in this Item 7 are in thousands of U.S. dollars, except share and per

share data.

Overview

We operate in one principal industry segment across geographically diverse marketplaces, selling

While sales in the fourth quarter of 2019 increased 6.6% from the previous year quarter, sales for
the full year 2019 remained relatively flat, declining by 0.3%. The year over year decrease reflected the
loss of $2,954 of sales to Babies R Us, a subsidiary of Toys R Us (‘‘TRU’’), that did not recur in fiscal
2019 as a result of the liquidation of TRU in 2018. We also experienced softened demand in the latter
half of 2019, that we believe was as a result of price increases instituted to mitigate trade tariffs. In
addition, sales in 2019 to our mid-tier customers and international sales declined, affected by fewer
channels and a stronger dollar. We were encouraged to see increased business with other customers
and we also achieved sales growth in our gate, potty, stroller, changing pad, soother, and booster
categories.

Our results in 2019 were impacted by trade tariffs on imported Chinese goods that were first

instituted in September 2018. We believe that we have mitigated most of the effect of tariffs during
fiscal 2019 through increased wholesale price increases, cost concessions, and moving certain production
to other countries. In addition, in December 2019, the Office of the U.S. Trade Representative
announced the exclusion of tariffs on metal baby gates effective immediately and retroactive to
September 2018. As a result of previously paid metal baby gate tariffs, we recognized a $1,848 tariff
refund receivable and reduced the value of our metal baby gate inventory by $378 on our balance sheet
as of December 28, 2019 and recorded a $1,470 benefit to cost of sales in the fourth quarter of 2019.
While certain of our products are still subject to ongoing tariffs, in light of the recent trade agreement
between the U.S. and China, we expect an improved tariff outlook for 2020, but there is no assurance
that our mitigation efforts will be successful, or that U.S. and China trade relations will improve in the
future.

Gross margins were flat in fiscal 2019 with the prior year at 31.7%. Selling expenses increased in
fiscal 2019 by $2,110 due to an increase in customer program terms and higher digital marketing costs
primarily for new product launches and on-line marketing initiatives. General and administrative
expenses declined in fiscal 2019 by $4,057 due to lower labor and other costs as a result of cost
reduction actions taken in the three months ended March 30, 2019 and fiscal 2018 included a
non-recurring $1,813 increase in our allowance for bad debts due to the liquidation of TRU’s U.S.
assets. We also recorded a $911 non-cash, deferred tax charge relating to the valuation of
non-deductible interest expense in 2019.

Primarily as a result of higher selling costs and the $911 deferred tax valuation charge, we ended
fiscal 2019 with a net loss of $1.98 per share as compared to a net loss of $2.07 per share in fiscal 2018.

In early 2020, we announced restructuring initiatives to further streamline operations and improve

our financial outlook. If all the anticipated initiatives are implemented, we expect that these actions will
result in annualized cost savings of approximately $7.5 million when complete. In addition to headcount
savings and supplier cost concessions already implemented, we expect to sublease a portion of our
warehousing facility in Riverside, California, and to vacate our distribution center located in the U.K.
by the end of the first quarter of fiscal 2020.

As discussed below in Liquidity and Capital Resources, we recently amended our loan agreements,

and as noted above, we began implementing restructuring initiatives to streamline operations and
reduce costs. We are currently assessing the potential impact of the coronavirus outbreak on our
business, including on our suppliers outside of the U.S. and on our distribution center located in
California. Based on the information currently available to us, we expect that we may experience delays
in shipment of our products to the U.S. and some delays in manufacturing of products. These potential
delays may adversely affect our financial condition and results of operations in the near term, however,
at this point, the extent of such impact is uncertain. To the extent we do not meet our financial
projections, are unable to mitigate the impact of ongoing tariffs, are impacted by the coronavirus
outbreak, or are not successful in implementing or realizing the savings anticipated from our

restructuring initiatives, our business, financial position, results of operations and cash flows would be
adversely affected.

Reverse Stock Split

In March 2020, we successfully completed a 1-for-9 reverse stock split of our Company’s issued
and outstanding shares of common stock in order to regain compliance with Nasdaq’s minimum bid
price requirement. Unless otherwise indicated, the financial statements and accompanying notes
included in this Annual Report on Form 10-K give effect to the reverse stock split as if it occurred at
the first period presented.

Summary of Critical Accounting Policies and Estimates

The following summary of our critical accounting policies is presented to assist in understanding

our consolidated financial statements. The consolidated financial statements and notes are
representations of our management, who are responsible for their integrity and objectivity. These
accounting policies conform to accounting principles generally accepted in the United States of
America and have been consistently applied in the preparation of the consolidated financial statements.
Additional information about our accounting policies and estimates may be found in Note 1 to our
consolidated financial statements included in this report.

We make certain estimates and assumptions that affect the reported amounts of assets and

liabilities and the reported amounts of revenues and expenses. The accounting policies described below
are those we consider critical in preparing our financial statements. Some of these policies include
significant estimates made by management using information available at the time the estimates were
made. However, these estimates could change materially if different information or assumptions were
used.

Revenue Recognition

We recognize revenue to depict the transfer of promised goods or services to customers in an
amount that reflects what we expect to receive in exchange for the goods or services. Our principal
activity from which we generate revenue is product sales. 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. 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 our historical experience as well as current
information such as sales forecasts.

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

Trade Receivables

Trade receivables are carried at their outstanding unpaid principal balances reduced by an
allowance for doubtful accounts. The allowance for doubtful accounts represents adjustments to
customer trade accounts receivable for amounts deemed uncollectible. The allowance for doubtful
accounts reduces gross trade receivables to their estimated net realizable value. 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.

Inventory Valuation

Inventory is comprised of finished goods and is stated at the lower of cost, inclusive of freight and
duty, or market (net realizable value) using the first-in, first-out (FIFO) method or net realizable value.
Our warehousing costs are charged to expense as incurred. We regularly review slow-moving and excess
inventory and write-down inventories as appropriate. Management uses estimates to record write-downs
based on its review of inventory by product category including length of time on hand and estimates of
future orders for each product. Changes in consumer preferences, as well as demand for products,
customer buying patterns and inventory management could impact the inventory valuation.

Long-Lived Assets with Finite Lives

We review long-lived assets with finite lives for impairment whenever events or changes in

circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. An asset
is considered to be impaired when its carrying amount exceeds both the sum of the undiscounted
future net cash flows expected to result from the use of the asset and its eventual disposition and the
asset’s fair value. Long-lived assets include property and equipment and finite-lived intangible assets.
The amount of impairment loss, if any, is charged by us to current operations.

Indefinite-Lived Intangible Assets

We account for indefinite-lived intangible assets in accordance with accounting guidance that
requires indefinite-lived intangible assets be tested annually for impairment and more frequently if
events or changes in circumstances indicate that the asset might be impaired. Our annual impairment
testing is conducted in the fourth quarter of every year.

We test indefinite-lived intangible assets for impairment by comparing the asset’s fair value to its
carrying amount. If the fair value is less than the carrying amount, the excess of the carrying amount
over fair value is recognized as an impairment charge and the adjusted carrying amount becomes the
asset’s new accounting basis.

Management also evaluates the remaining useful life of an intangible asset that is not being

amortized each reporting period to determine whether events and circumstances continue to support an
indefinite useful life. If an intangible asset that is not being amortized is subsequently determined to
have a finite useful life, it is amortized prospectively over its estimated remaining useful life.

Income Taxes

Income taxes are computed using the asset and liability method of accounting. Under the asset and

liability method, a deferred 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, it is more likely than not that such benefit will be realized.

We recognize interest and penalties, if any, related to uncertain tax positions in interest expense.
On a global basis, the open tax years subject to examination by major taxing jurisdictions in which we
operate is between 2013 and 2019.

Results of Operations

The following table presents selected consolidated financial information for our Company for the

fiscal years ended December 28, 2019 (‘‘fiscal 2019’’) and December 29, 2018 (‘‘fiscal 2018’’).

Year ended
December 28, 2019

Year Ended
December 29, 2018

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . .

173,181
118,296

100.0% $173,619
118,500
68.3%

100.0%
68.3%

Gross profit . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . .
Selling expenses . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . .

Income (loss) from operations . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Interest expense, net

Loss before provision (benefit) for income

taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . .

54,885
34,823
14,540
3,720

1,802
4,871

31.7%
20.1%
8.4%
2.2%

1.0%
2.8%

55,119
38,880
12,430
4,182

31.7%
22.4%
7.1%
2.4%

(373)
4,442

(0.2)%
2.5%

(3,069)
1,095

(1.8)%
(0.6)%

(4,815)
(564)

(2.7)%
0.3%

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (4,164)

(2.4)% $ (4,251)

(2.4)%

Fiscal 2019 Compared with Fiscal 2018

Net sales decreased 0.3% to $173,181 for fiscal 2019 from $173,619 for fiscal 2018 due mainly to
the fact that fiscal 2018 included $2,954 of sales to Babies R Us, a subsidiary of Toys R Us (‘‘TRU’’),
which did not recur in fiscal 2019 as a result of the liquidation of TRU in 2018. For fiscal 2019, sales to
our top three customers increased by approximately 7.1% over the prior fiscal year and sales increased
across several of our product categories such as in gates, potty, strollers, changing pads, soothers, and
boosters. However, these increases were offset by (a) the negative impact of increased tariffs imposed
on goods imported into the United States from China that led to higher retail price points that resulted
in softened demand and by (b) a decline in our mid-tier and international sales that were affected by
fewer distribution channels and a stronger dollar.

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

Gross profit decreased 0.4% to $54,885 for fiscal 2019 from $55,119 for fiscal 2018, and gross
margin was the same for fiscal 2019 and fiscal 2018 at 31.7%. The additional tariffs imposed in fiscal
2019 depressed our gross margins throughout the fiscal year as compared to fiscal 2018. By the fourth
quarter, however, we were able to offset much of the existing tariffs through increased customer prices,

supplier cost concessions, and moving certain production to other lower or non-tariff countries. In
addition, in December 2019, the Office of the U.S. Trade Representative announced the exclusion of
tariffs on metal baby gates effective immediately and retroactive to September 2018 resulting in a
$1,848 tariff refund due to the Company. We recorded $1,470 of the tariff refund as a benefit to cost of
sales in the fourth quarter of 2019 to reflect the portion attributable to fiscal 2019. The remaining $378
of the tariff refund will be taken as a benefit when the remaining tariffed metal baby gate inventory
held as of December 28, 2019 is sold off in fiscal 2020.

General and administrative expenses declined 10.4% to $34,823 for fiscal 2019 compared to
$38,880 for fiscal 2018 and decreased as a percent of sales to 20.1% for fiscal 2019 from 22.4% for
fiscal 2018. The decrease in dollars and as a percent of sales was primarily attributable to lower labor
and other costs as a result of cost reduction actions taken in the three months ended March 30, 2019
and a non-recurring $1,813 increase in our allowance for bad debts due to the liquidation of TRU’s
U.S. assets in fiscal 2018.

Selling expenses increased by 17.0% to $14,540 for fiscal 2019 from $12,430 for fiscal 2018 and as

a percent of sales to 8.4% for fiscal 2019 from 7.1% for fiscal 2018. The increase in selling expense
dollars and as a percent of net sales for the fiscal 2019 was primarily attributable to increased
cooperative advertisement and consumer advertisement costs primarily for new product launches and
on-line marketing initiatives as compared to fiscal 2018, which also included a larger component of
direct import sales.

Depreciation and amortization decreased to $3,720 for fiscal 2019 from $4,182 in fiscal 2018.

Capital expenditures decreased in fiscal 2019 to $1,991 from $3,472 in fiscal 2018.

Net interest expense increased 9.7% to $4,871 for fiscal 2019 from $4,442 in fiscal 2018. Interest

expense increased primarily as a result of higher debt levels during fiscal 2019 compared to fiscal 2018.
In addition, average interest rates under our current credit facilities signed in June 2018 are higher
than our previous credit facilities on a full year basis.

For fiscal 2019, we recorded a $1,095 tax provision on $3,069 of pretax loss for the period. The tax
provision for fiscal 2019 included a $911 valuation allowance for nondeductible interest expense, a $191
adjustment for the forfeiture of unexercised stock options, and a $333 valuation allowance against our
United Kingdom subsidiary’s net operating loss deferred tax asset until such time as we can
demonstrate it is more likely than not that these assets will be used in the near future. For fiscal 2018,
we recorded a $564 tax benefit on $4,815 of pretax loss for the period. The tax provision for fiscal 2018
included a $933 charge due to the new Tax Act. The Tax Act allows for interest expense to be
deductible for tax purposes up to 30% of adjusted taxable income. Any interest not deductible can be
carried forward indefinitely. We recorded an interest deduction limitation deferred tax asset of $933
and recorded an offsetting full valuation allowance on this asset until such time as we can demonstrate
it is more likely than not that the asset will be used in the near future.

Liquidity and Capital Resources

We fund our operations and working capital needs through cash generated from operations and

borrowings under our credit facility.

Cash Flows

The majority of our inventory is sourced from Asia which takes approximately three to four weeks

to arrive at the various distribution points we maintain in the United States, Canada and the United
Kingdom and payment terms for these vendors are approximately 60-75 days from the date the product
ships from Asia. In turn, sales to customers generally have payment terms of approximately 60 days,
resulting in an account 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 facility.

The majority of our capital expenditures are for tools and molds related to new product

introductions. We receive indications from retailers generally 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 acquire tools and molds required to build and produce the products. In most cases, the
payments for the tools and molds are spread over a three to four month period.

For fiscal 2019, net cash provided by operating activities was approximately $1,535 generated
primarily from operating performance. For fiscal 2018, net cash provided by operating activities was
approximately $5,546 generated primarily from operating performance and a reduction in net working
capital.

For fiscal 2019, net cash used in investing activities was approximately $2,326. For fiscal 2018, net

cash used in investing activities was approximately $3,472. The decline in the use of cash in investing
activities was primarily attributable to a reduction in capital expenditures in fiscal 2019.

For fiscal 2019, net cash provided by financing activities was approximately $719 to fund our

capital expenditures. For fiscal 2018, net cash used in financing activities was approximately $1,999,
reflecting repayments on our credit facility and the proceeds from our new Term Loan.

Based primarily on the above factors, net cash decreased for fiscal 2019 by $326, resulting in a

cash balance of approximately $395 at fiscal year end.

The following table summarizes our significant contractual commitments at fiscal 2019 year end:

Payment Due by Fiscal Period

Contractual Obligations

Total

2020

2021

2022

2023

Revolving Facility . . . . . . . . . . . . . . . . . . . . .
Term Loan Facility . . . . . . . . . . . . . . . . . . . .
Estimated future interest payments on

$32,226
16,406

—
875

— 32,226
13,781
875

Revolving Facility . . . . . . . . . . . . . . . . . . .

4,880

1,440

1,347

1,255

838

Estimated future interest payments on Term

Loan Facility . . . . . . . . . . . . . . . . . . . . . . .
Operating leases . . . . . . . . . . . . . . . . . . . . . .
Capital leases and other liabilities . . . . . . . . .

6,398
5,356
786

1,743
2,709
669

1,647
2,170
117

1,552
323

1,456
154

2024 and
beyond

Total contractual cash obligations . . . . . . . . . .

$66,052

$7,436

$6,156

$4,005

$48,455

Estimated future interest payments on our Revolving Facility and Term Loan Facility are based

upon the interest rates in effect at December 28, 2019.

Capital Resources

In addition to operating cash flow, we also rely on our asset-based revolving credit facility with

Bank of America, N.A. and our term loan agreement with Pathlight Capital to meet our financing
requirements, which is subject to changes in our inventory and account receivable levels. We regularly
evaluate market conditions, our liquidity profile, and various financing alternatives for opportunities to
enhance our capital structure.

If we are unable to meet our current financial projections, do not adequately control expenses, or

adjust our operations accordingly, we may experience constraints on our liquidity and may not meet the
financial and other covenants under our credit facility and term loan agreement, which could impact
our 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 our existing credit facility are sufficient to fund our working
capital, capital expenditures and debt service requirements for at least the next 12 months.

Credit Facilities

We and our wholly owned subsidiary, Summer Infant (USA), Inc., 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, 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 December 28, 2019, the interest rates for base-rate loans and LIBOR-rate loans under the
Restated BofA Agreement were 6.50% and 4.625%, respectively. At December 28, 2019, the amount
outstanding under the asset-based revolving credit facilty was $32,226, total borrowing capacity was
$39,109, and borrowing availability was $6,883.

Following the end of fiscal 2019, we amended the Restated BofA Agreement on January 17, 2020

and March 10, 2020. For additional information on the Restated BofA Agreement and the recent
amendments, please see Note 5 and Note 12 to our consolidated financial statements included in this
Annual Report on Form 10-K.

Term Loan

We and our wholly owned subsidiary, Summer Infant (USA), Inc., 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’’). Principal on the
term loan is repaid on a quarterly basis in installments of $219, and interest payments are due monthly,
in arrears, provided that, in connection with the recent amendments to our Term Loan Agreement,
principal payments for March, June and September 2020 have been suspended. In addition, in
connection with the recent amendments to our Term Loan Agreement, 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
facilty, 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.

The interest rate for the Term Loan Agreement was 10.91% as of December 28, 2019. The amount

outstanding under the Term Loan Agreement at December, 28, 2019 was $16,406.

Following the end of fiscal 2019, we amended the Term Loan Agreement on January 17, 2020 and

March 10, 2020. For additional information on the Term Loan Agreement and recent amendments,
please see Note 5 and Note 12 to our consolidated financial statements included in this Annual Report
on Form 10-K.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements during the year ended December 28, 2019 or

the year ended December 29, 2018.

Recently Issued Accounting Pronouncements

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

The Company adopted the standard on the effective date of December 30, 2018 by applying the

new lease requirements at the effective date. The Company also elected the package of practical
expedients permitted under the transition guidance within the new standard, which, among other things,
allows the Company to carry forward the historical lease classification. The impact of the adoption of
ASC 842-Leases (‘‘ASC 842’’) on the consolidated balance sheet on the date of adoption was an
increase of $6,411 in assets and an increase of $7,037 of liabilities for the recognition of right-of-use

assets and lease liabilities. The adoption of ASC 842 was immaterial to the consolidated results of
operations and cash flows.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments and a subsequent amendment to the initial
guidance, ASU 2018-19 Codification Improvements to Topic 325, Financial Instruments-Credit Losses
(collectively, Topic 326). Topic 326 requires measurement and recognition of expected credit losses for
financial assets held, which include, but are not limited to, trade and other receivables. The new
standard is effective for fiscal years beginning after December, 15, 2022. The Company is currently
evaluating the impact of this guidance on its consolidated financial statements.

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

Special Note Regarding Forward Looking Statements

This report contains ‘‘forward-looking statements’’ within the meaning of Section 27A of the

Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These statements concern management’s current assumptions, estimates, beliefs, plans,
strategies and expectations and anticipated events or trends and similar expressions concerning matters
that are not historical facts. Such forward-looking information may be identified by terms such as
‘‘expect,’’ ‘‘anticipate,’’ ‘‘believe,’’ ‘‘outlook,’’ ‘‘may,’’ ‘‘estimate,’’ ‘‘should,’’ ‘‘predict’’ and similar terms
or variations thereof, and includes statements regarding our expectations with respect to the benefits of
and savings from our restructuring initiatives, including an expected $7.5 million of annualized cost
savings, the potential impact of the coronavirus outbreak in China on our results of operations, our
liquidity for the next 12 months, and expected trends and product offerings in 2020. These statements
are based on a series of expectations, assumptions, estimates and projections about our Company, are
not guarantees of future results or performance, and involve significant risks, uncertainties and other
factors, including assumptions and projections, for all forward periods. Our actual results may differ
materially from any future results expressed or implied by such forward-looking statements. Such
factors include, among others, the following:

• the impact of increased tariffs, additional tariffs or import or export taxes on the cost of our

products and therefore demand for our products, or the suspension, non-renewal or revocation
of any exclusion from tariffs on our products;

• the concentration of our business with certain retail customers who may change their purchasing

policies or suffer liquidity problems or bankruptcy;

• our ability to compete by introducing new products or enhancing existing products that satisfy

consumer preferences;

• our ability to develop and introduce new products in a timely and cost effective manner;

• our ability to compete effectively with larger and smaller companies that have more financial

resources and greater e-commerce presence than us;

• our ability to implement and to achieve the expected benefits and savings of our restructuring

initiatives;

• our ability to manage inventory levels and meet customer demand;

• our ability to maintain sufficient availability under and to comply with financial and other

covenants in our credit facility and term loan agreement;

• our ability to manage our debt to provide additional liquidity to support growth;

• the potential disruption to our business resulting from the coronavirus outbreak, including our

suppliers located outside the U.S. and our distribution facility located in California;

• our reliance on foreign suppliers and potential disruption in foreign markets in which we

operate;

• increases in the cost of raw materials used to manufacture our products;

• our ability to protect our intellectual property;

• compliance with safety and testing regulations for our products;

• product liability claims arising from use of our products;

• our ability to identify and hire a permanent President and CEO;

• potential exposure to greater than anticipated tax liabilities;

• an impairment of other intangible assets;

• any failure, inadequacy or interruption of our information technology systems resulting from

cyberattacks or other failures that may disrupt our operations and lead to disclosure of
confidential or proprietary data; and

• our ability to maintain the listing of our common stock on the Nasdaq Stock Market.

The foregoing list of important factors does not include all such factors, nor necessarily present

them in order of importance. In addition, please refer to the ‘‘Risk Factors’’ section of this report for
additional information regarding factors that could affect our results of operations, financial condition
and liquidity.

We intend our forward-looking statements to speak only as of the time of such statements and do

not undertake or plan to update or revise them as more information becomes available or to reflect
changes in expectations, assumptions or results. We cannot give any assurance that such expectations or
forward-looking statements will prove to be correct. An occurrence of, or any material adverse change
in, one or more of the risk factors or risks and uncertainties referred to in this report or included in
our other periodic reports filed with the SEC could materially and adversely impact our operations and
our future financial results.

Any public statements or disclosures by us following this report that modify or impact any of the

forward-looking statements contained in or accompanying this report will be deemed to modify or
supersede such outlook or other forward-looking statements in or accompanying this report.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Not required.

Item 8. Financial Statements and Supplementary Data

The financial statements required by this item are attached to this Annual Report on Form 10-K

beginning on Page F-1.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period
covered by this report, we carried out an evaluation, under the supervision and with the participation of
our Interim Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures as of December 28, 2019. Our principal executive officer and
principal financial officer have concluded, based on their evaluation, that our disclosure controls and
procedures were effective as of December 28, 2019.

(b) Management’s Report on Internal Control over Financial Reporting

Management of our Company is responsible for establishing and maintaining adequate internal
control over financial reporting. As defined in Rule 13a-15(f) under the Exchange Act, internal control
over financial reporting is a process designed by, or under the supervision of, a company’s principal
executive and principal financial officers and effected by a company’s board of directors, management
and other personnel, 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. It includes those policies and procedures that:

1) Pertain to the maintenance of records that in reasonable detail accurately and fairly

reflect the transactions and dispositions of the assets of a company;

2) Provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of a company are being made only in accordance with
authorizations of management and the board of directors of the company; and

3) Provide reasonable assurance regarding prevention or timely detection of unauthorized

acquisition, use or disposition of a company’s assets that could have a material effect on its
financial statements.

Because of the inherent limitations, internal control over financial reporting may not prevent or

detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.

The Company’s management has used the criteria established in the 2013 ‘‘Internal Control—

Integrated Framework’’ issued by the Committee of Sponsoring Organizations of the Treadway
Commission (‘‘COSO Framework’’) to evaluate the effectiveness of the Company’s internal control over
financial reporting.

Management of the Company conducted an evaluation of the effectiveness, as of December 28,

2019, of the Company’s internal control over financial reporting and based on its evaluation under the
COSO Framework, management has concluded that the Company’s internal control over financial
reporting was effective as of December 28, 2019.

There was no change in our internal control over financial reporting that occurred during the
quarter ended December 28, 2019 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

Item 9B. Other Information

None.

Item 10. Directors, Executive Officers and Corporate Governance

PART III

The information relating to directors, director nominees and executive officers of the Company is

set forth in our definitive Proxy Statement to be filed with the SEC in connection with our 2020
Annual Meeting of Stockholders (the ‘‘2020 Proxy Statement’’) and is incorporated herein by reference.

The information relating to Section 16(a) beneficial ownership reporting compliance is set forth in

the 2020 Proxy Statement and is incorporated herein by reference.

We have adopted a Code of Ethics that applies to all of our directors, officers and employees. The

Code of Ethics is publicly available in the Investor Relations section of our website at
www.summerinfant.com. Amendments to the Code of Ethics and any grant of a waiver from a provision
of the Code of Ethics requiring disclosure under applicable SEC and Nasdaq rules will be disclosed on
our website.

The information relating to the Company’s Audit Committee and its designated audit committee

financial expert is set forth in the 2020 Proxy Statement and is incorporated herein by reference.

The information concerning procedures by which stockholders may recommend director nominees

is set forth in the 2020 Proxy Statement and is incorporated herein by reference.

Item 11. Executive Compensation

The information relating to executive compensation and the Company’s Compensation Committee

is set forth in the 2020 Proxy Statement and is incorporated herein by reference, provided that the
information under the caption ‘‘Compensation Committee Report’’ shall be deemed ‘‘furnished’’ and
shall not be deemed ‘‘filed’’ with this report, not deemed incorporated by reference into any filing
under the Securities Act of 1933, as amended, except only as may be expressly set forth in any such
filing by specific reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters

The information relating to security ownership of management, certain beneficial owners, and the

Company’s equity plans is set forth in the 2020 Proxy Statement and is incorporated herein by
reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information relating to certain relationships and related party transactions and director
independence is set forth in the 2020 Proxy Statement and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information relating to the independent registered public accounting firm fees and services

and the Company’s pre-approval policies and procedures for audit and non-audit services provided by
such accounting firm is set forth in the 2020 Proxy Statement and is incorporated herein by reference.

Item 15. Exhibits and Financial Statement Schedules

(a) (1) Financial Statements

PART IV

The list of consolidated financial statements and notes required by this Item 15(a)(1) is set forth in

the ‘‘Index to Financial Statements’’ on page F-1 of this Annual Report on Form 10-K.

(2) Financial Statement Schedules

All schedules have been omitted because the required information is included in the financial

statements or notes thereto.

(3) Exhibits

The exhibits required by Item 601 of Regulation S-K and Item 15(b) are listed in the ‘‘Index to

Exhibits’’ below.

(b) Exhibits

The exhibits listed in the ‘‘Index to Exhibits’’ below are filed as part of this Annual Report on

Form 10-K.

Item 16. Form 10-K Summary

Not applicable.

Exhibit
No.

2.1

2.2

2.3

2.4

Index to Exhibits

Description

Agreement and Plans of Reorganization, dated as of September 1, 2006, by and among
KBL Healthcare Acquisition Corp. II, and its wholly owned subsidiary,
SII Acquisition Inc., and Summer Infant, Inc., Summer Infant Europe Limited, Summer
Infant Asia, Ltd. and their respective stockholders (Incorporated by reference to
Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 5, 2006)

Purchase and Sale Agreement, dated March 24, 2009, between Summer Infant
(USA), Inc. and Faith Realty II, LLC (Incorporated by reference to Exhibit 2.1 to the
Registrant’s Quarterly Report on Form 10-Q/A filed on August 18, 2009)

Lease Agreement, dated March 24, 2009, between Summer Infant (USA), Inc. and Faith
Realty II, LLC (Incorporated by reference to Exhibit 2.2 to the Registrant’s Quarterly
Report on Form 10-Q/A filed on August 18, 2009)

Stock Purchase Agreement, dated as of March 24, 2011, by and among the Registrant,
Summer Infant (USA), Inc., Born Free Holdings Ltd., and each stockholder of Born Free
Holdings Ltd. (Incorporated by reference to Exhibit 2.1 to the Registrant’s Current
Report on Form 8-K filed on March 28, 2011)

3.1+ Amended and Restated Certificate of Incorporation, as amended

3.2

4.1

Amended and Restated Bylaws, as amended through May 5, 2016 (Incorporated by
reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on May 9,
2016)

Specimen Common Stock Certificate (Incorporated by reference to Exhibit 4.2 to the
Registrant’s Form 8-A filed on March 6, 2007)

4.2+ Description of Registrant’s Securities

10.1

10.2*

Registration Rights Agreement by and among the Registrant, Jason Macari and Steven
Gibree (Incorporated by reference to Exhibit 10.9 to the Registrant’s Current Report on
Form 8-K filed on September 5, 2006)

2006 Performance Equity Plan (Incorporated by reference to Appendix A to the
Registrant’s Definitive Proxy Statement on Schedule 14A filed on April 29, 2008, SEC File
No. 001-33346)

10.3** Second Amended and Restated Loan and Security Agreement, dated as of June 28, 2018,
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 10.1 to the Registrant’s Current Report on Form 8-K filed on
June 29, 2018)

10.4

Amendment No. 1 to Second Amended and Restated Loan and Security Agreement,
dated as of March 25, 2019, 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 10.1 to the Registrant’s Quarterly Report on
Form 10-Q filed on May 7, 2019)

Exhibit
No.

Description

10.5** Amendment No. 2 to Second Amended and Restated Loan and Security Agreement,

dated as of November 1, 2019, 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 10.1 to the Registrant’s
Current Report on Form 8-K filed on November 5, 2019)

10.6** Term Loan and Security Agreement, dated as of June 28, 2018, 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 10.2 to the Registrant’s Current Report on Form 8-K filed on June 29, 2018)

10.7

Amendment No. 1 to Term Loan and Security Agreement, dated as of March 25, 2019,
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 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on May 7, 2019)

10.8** Amendment No. 2 to Term Loan and Security Agreement, dated as of November 1, 2019,
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 10.1 to the Registrant’s Current Report on Form 8-K filed on November 5,
2019)

10.9*

2012 Incentive Compensation Plan, as amended (Incorporated by reference to Exhibit 10.1
to the Registrant’s Current Report on Form 8-K filed on August 5, 2015)

10.10*

Summer Infant, Inc. Form of Indemnification Agreement (for officers and directors)
(Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on
Form 8-K filed on January 17, 2014, SEC File No. 001-33346)

10.11

10.12

Amendment to Lease, dated May 13, 2015, by and between Faith Realty II, LLC and
Summer Infant (USA), Inc. (Incorporated by reference to Exhibit 10.1 to the Registrant’s
Current Report on Form 8-K filed on May 19, 2015)

Second Amendment to Lease, dated January 22, 2018, by and between Faith
Realty II, LLC and Summer Infant (USA), Inc. (Incorporated by reference to Exhibit 10.1
to the Registrant’s Current Report on Form 8-K filed on January 26, 2018)

10.13*

Summer Infant, Inc. Change in Control Plan (Incorporated by reference to Exhibit 10.1 to
the Registrant’s Current Report on Form 8-K filed on February 9, 2018)

10.14* Offer Letter by and between the Registrant and Paul Francese (Incorporated by reference

to Exhibit 10.19 to the Registrant’s Annual Report on Form 10-K filed on February 20,
2019)

10.15*

Separation Agreement and General Release by and among Summer Infant, Inc., Summer
Infant (USA), Inc. and Mark Messner, dated as of November 19, 2019 (Incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on
November 20, 2019)

10.16+ Engagement Letter, effective as of December 9, 2019, between Summer Infant, Inc. and

Winter Harbor LLC

Exhibit
No.

21.1

List of Subsidiaries (Incorporated by reference to Exhibit 21.1 to the Registrant’s Annual
Report on Form 10-K filed on March 13, 2013)

Description

23.1+ Consent of Independent Registered Public Accounting Firm

31.1+ Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley

Act of 2002

31.2+ Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act

of 2002

32.1+ Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 (Section 906

of the Sarbanes-Oxley Act of 2002)

32.2+ Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (Section 906 of

the Sarbanes-Oxley Act of 2002)

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

* Management contract or compensatory plan or arrangement.

** Portions of this Exhibit have been omitted pursuant to a grant of confidential treatment.

+ Filed herewith.

Pursuant to the requirements of Section 13 or 15(d) 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 on the 18th day of March, 2020.

SIGNATURES

SUMMER INFANT, INC.

By:

/s/ PAUL FRANCESE

Paul Francese
Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed

below by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.

Name

Title

Date

/s/ STUART NOYES

Stuart Noyes

/s/ PAUL FRANCESE

Paul Francese

/s/ ROBIN MARINO

Robin Marino

/s/ EVELYN D’AN

Evelyn D’An

/s/ MARTIN FOGELMAN

Martin Fogelman

/s/ ALAN MUSTACCHI

Alan Mustacchi

/s/ ANDREW W. TRAIN

Andrew W. Train

/s/ STEPHEN ZELKOWICZ

Stephen Zelkowicz

Interim Chief Executive Officer
(Principal Executive Officer)

March 18, 2020

Senior Vice President and Chief
Financial Officer (Principal Financial and March 18, 2020
Accounting Officer)

Chairwoman of the Board

March 18, 2020

Director

Summer Infant, Inc. and Subsidiaries
Index to Financial Statements

F-2
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . .
F-3
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-4
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-5
Consolidated Statements of Comprehensive Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-6
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-7
Consolidated Statements of Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8 - F-30

F-1

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Summer Infant Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Summer Infant, Inc. and its
subsidiaries (the Company) as of December 28, 2019 and December 29, 2018, the related consolidated
statements of operations, comprehensive loss, stockholders’ equity and cash flows for the years then
ended, and the related notes to the consolidated financial statements (collectively, the financial
statements). In our opinion, the financial statements present fairly, in all material respects, the financial
position of the Company as of December 28, 2019 and December 29, 2018, and the results of its
operations and its cash flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility

is to express an opinion on the Company’s financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require

that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an understanding of internal control over
financial reporting but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of
the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ RSM US LLP

We have served as the Company’s auditor since 2010.

Boston, Massachusetts
March 18, 2020

F-2

Summer Infant, Inc. and Subsidiaries

Consolidated Balance Sheets

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

amounts and par value per share.

ASSETS
CURRENT ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade receivables, net of allowance for doubtful accounts of $542 and

$304 at December 28, 2019 and December 29, 2018, respectively . . . . . .
Inventory, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaids and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Right of use assets, noncurrent
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 28,
2019

December 29,
2018

395

721

32,787
28,056
2,946

64,184
8,788
12,896
4,578
996
101

31,223
36,066
997

69,007
9,685
13,300
—
2,127
97

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 91,543

$ 94,216

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease liabilities, current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt

TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt, less current portion and unamortized debt issuance costs . .
Lease liabilities, noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

STOCKHOLDERS’ EQUITY

Preferred Stock, $0.0001 par value, 1,000,000 authorized, none issued or

outstanding at December 28, 2019 and December 29, 2018 . . . . . . . . . .

Common Stock $0.0009 par value, authorized, issued and outstanding of

5,444,445, 2,138,926, and 2,108,743 at December 28, 2019 and 5,444,445,
2,121,362, and 2,091,178 at December 29, 2018, respectively . . . . . . . . .

Treasury Stock at cost (30,184 shares at December 28, 2019 and

$ 25,396
7,289
2,495
875

36,055
45,359
2,546
2,000

85,960

—

December 29, 2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,283)
77,715
(69,088)
(1,763)

TOTAL STOCKHOLDERS’ EQUITY . . . . . . . . . . . . . . . . . . . . . . . .

5,583

$ 28,120
8,939
—
875

37,934
44,641
—
2,371

84,946

—

(1,283)
77,396
(64,924)
(1,921)

9,270

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY . . . . . . . . . . . .

$ 91,543

$ 94,216

See notes to consolidated financial statements.

F-3

Summer Infant, Inc. and Subsidiaries

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.

For the fiscal year ended

December 28,
2019

December 29,
2018

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 173,181
118,296

$ 173,619
118,500

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Loss before provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net loss per share, basic and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average shares outstanding, basic and diluted . . . . . . . . . . . . . . . .

54,885
34,823
14,540
3,720

1,802
4,871

(3,069)
1,095

(4,164)

(1.98)
2,100,730

55,119
38,880
12,430
4,182

(373)
4,442

(4,815)
(564)

(4,251)

(2.04)
2,082,714

See notes to consolidated financial statements.

F-4

Summer Infant, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Loss

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

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss):

For the fiscal year
ended

December 28,
2019

December 29,
2018

$(4,164)

$(4,251)

Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . .

158

(669)

Comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(4,006)

$(4,920)

See notes to consolidated financial statements.

F-5

Summer Infant, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

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

Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net loss to net cash provided by operating

activities:

Bad debt expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write off of unamortized deferred financing costs . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of right of use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in assets and liabilities, net of effects of acquisitions

(Increase) decrease in accounts receivable . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) in prepaids and other current assets . . . . . . . . . . . . . . . . . . . .
(Decrease) in lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Decrease) increase in accounts payable and accrued expenses . . . . . . . . .

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash flows from investing activities:
Acquisitions of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash flows from financing activities:
Repayment of Prior Term Loan Facility . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of Prior FILO Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of financing fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from New Term Loan Facility . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of New Term Loan Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net borrowings (repayments) on revolving facilities . . . . . . . . . . . . . . . . . . .
Issuance of common stock upon exercise of stock options . . . . . . . . . . . . . .

Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . .

Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . .

Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . .

For the fiscal year
ended

December 28,
2019

December 29,
2018

$(4,164)

$ (4,251)

316
3,720
319
—
1,084
1,833

(1,583)
8,328
(1,939)
(1,370)
(10)
(4,999)

1,535

(1,991)
(335)

(2,326)

—
—
—
—
(875)
1,594
—

719

(254)

(326)
721

1,963
4,182
523
518
(193)
—

3,035
(2,524)
(71)
—
(42)
2,406

5,546

(3,472)
—

(3,472)

(5,000)
(1,250)
(1,958)
17,500
(219)
(11,097)
25

(1,999)

(35)

40
681

721

Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . .

395

Supplemental disclosure of cash flow information:
Cash paid during the year for interest

. . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,781

Cash paid during the year for income taxes

. . . . . . . . . . . . . . . . . . . . . . . .

$ 2,944

280

See notes to consolidated financial statements.

F-6

Consolidated Statements of Stockholders’ Equity

For the Fiscal Years Ended December 28, 2019 and December 29, 2018

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

and per share data.

Common Stock

Amount

Additional
Paid in
Capital

Treasury Accumulated Comprehensive

Stock

Deficit

Loss

Total
Equity

Accumulated

Balance at December 30, 2017, as

reported . . . . . . . . . . . . . . . . . 2,069,971

$76,848 $(1,283) $(59,634)

$(2,291)

$13,642

Revision for foreign currency

adjustments . . . . . . . . . . . . .
Balance at December 30, 2017, as

(1,039)

1,039

revised . . . . . . . . . . . . . . . . . . 2,069,971

$76,848 $(1,283) $(60,673)

$(1,252)

$13,642

Issuance of common stock

upon vesting of restricted
shares . . . . . . . . . . . . . . . . .

Issuance of common stock
upon exercise of stock
options . . . . . . . . . . . . . . . .
Stock-based compensation . . . .
Net loss for the year . . . . . . . .
Foreign currency translation

adjustment . . . . . . . . . . . . .

18,923

2,284

25
523

(4,251)

25
523
(4,251)

(669)

Balance at December 29, 2018 . 2,091,178

$77,396 $(1,283) $(64,924)

$(1,921)

$ 9,270

Issuance of common stock

upon vesting of restricted
shares . . . . . . . . . . . . . . . . .
Stock-based compensation . . . .
Net loss for the year . . . . . . . .
Foreign currency translation

adjustment . . . . . . . . . . . . .

17,565

319

(4,164)

319
(4,164)

158

Balance at December 28, 2019 . . 2,108,743

77,715 $(1,283) $(69,088)

$(1,763)

$ 5,583

See notes to consolidated financial statements.

F-7

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. 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
monitoring, safety, nursery, and baby gear. Most products are sold under our core brand names of
Summer(cid:31), SwaddleMe(cid:30), and born free(cid:30).

Reverse Stock Split

As a subsequent event, on March 13, 2020, the Company successfully completed its reverse stock

split and reduced its common stock outstanding by a ratio of one for nine. Per ASC 505-10, if a reverse
stock split occurs after the date of the latest reported balance sheet but before the release of the
financial statements, then such changes in the capital structure must be given retroactive effect in the
balance sheet. As such, the reverse stock split has been retroactively applied to all years reported in
these financial statements.

Basis of Presentation and Principles of Consolidation

It is the Company’s policy to prepare its financial statements on the accrual basis of accounting in

conformity with accounting principles generally accepted in the United States of America. The
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 Consolidated Financial Statements are in thousands of

U.S. dollars except share and per share amounts.

Fiscal Year

The Company’s fiscal year ends on the Saturday closest to December 31 of each calendar year.

There were fifty two weeks in the fiscal years ended December 28, 2019 and December 29, 2018.

Reclassification

Previously reported amounts have been revised in the accompanying consolidated balance sheet
and statements of stockholders’ equity to properly state certain foreign currency transactions. As of
December 29, 2018 and December 30, 2017, accumulated deficit has been increased by $1,039 and
accumulated comprehensive loss has been decreased by the same amount. These revisions had no
impact on the company’s net income and total stockholders’ equity for the year ended December 29,
2018.

Summary of Significant Accounting Policies

Revenue Recognition

As of December 31, 2017, the Company adopted FASB ASC Topic 606, Revenue from Contracts
with Customers (‘‘ASC 606’’). The guidance sets forth a new five-step revenue recognition model which
replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous
industry-specific pieces of revenue recognition guidance that have historically existed in U.S. GAAP.

F-8

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The underlying principle of the new standard is that a business or other organization will recognize
revenue to depict the transfer of promised goods or services to customers in an amount that reflects
what it expects to receive in exchange for the goods or services. The standard also requires more
detailed disclosures and provides additional guidance for transactions that were not addressed
completely in the prior accounting guidance.

The Company reviewed all contracts at the date of initial application and elected to use the
modified retrospective transition method, where the cumulative effect of the initial application is
recognized as an adjustment to opening retained earnings at December 31, 2017. The impact of the
adoption was immaterial. Refer to Note 2 for additional information regarding the Company’s adoption
of ASC 606.

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.

F-9

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted

in the United States of America requires management to make estimates and assumptions that affect
certain reported amounts and disclosures. These estimates are based on management’s best knowledge
of current events and actions the Company may undertake in the future. Accordingly, actual results
could differ from those estimates.

Cash and Cash Equivalents

Cash flows, cash and cash equivalents include money market accounts and investments with an

original maturity of three months or less. At times, the Company possesses cash balances in excess of
federally-insured limits.

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
fiscal year ended

December 28,
2019

December 29,
2018

Allowance for doubtful accounts, beginning of period . . . .
Charges to costs and expenses . . . . . . . . . . . . . . . . . . . . .
Account write-offs and other . . . . . . . . . . . . . . . . . . . . . .

Allowance for doubtful accounts, end of period . . . . . . . .

$304
316
(78)

$542

$ 1,622
1,963
(3,281)

304

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
ultimate 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 lease liabilities in the Company’s consolidated
balance sheets.

F-10

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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.

Property and Equipment

Property and equipment are recorded at cost. The Company owns the tools and molds used in the

production of its products by third party manufacturers. Capitalized mold costs include costs incurred
for the pre-production design and development of the molds.

Depreciation is provided over the estimated useful lives of the respective assets using the

straight-line method.

Long-Lived Assets with Finite Lives

The Company reviews long-lived assets with finite lives for impairment on an asset group level
whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset
may not be recoverable. An asset is considered to be impaired when its carrying amount exceeds both
the sum of the undiscounted future net cash flows expected to result from the use of the asset and its
eventual disposition and the assets’ fair value. Long-lived assets include property and equipment and
finite-lived intangible assets. The amount of impairment loss, if any, is charged by the Company to
current operations.

Indefinite-Lived Intangible Assets

The Company accounts for intangible assets in accordance with accounting guidance that requires

that intangible assets with indefinite useful lives be tested annually for impairment and more frequently

F-11

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

if events or changes in circumstances indicate that the asset might be impaired. The Company’s annual
impairment testing is conducted in the fourth quarter of every year.

The Company tests indefinite-lived intangible assets for impairment by comparing the asset’s fair

value to its carrying amount. If the fair value is less than the carrying amount, the excess of the
carrying amount over fair value is recognized as an impairment charge and the adjusted carrying
amount becomes the assets’ new cost basis.

Management also evaluates the remaining useful life of an intangible asset that is not being

Fair Value Measurements

The Company follows ASC 820, ‘‘Fair Value Measurements and Disclosures’’ which includes a
framework for measuring fair value and expanded related disclosures. Broadly, the framework requires
fair value to be determined based on the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability
in an orderly transaction between market participants. The standard established a three-level valuation
hierarchy based upon observable and non-observable inputs.

Observable inputs reflect market data obtained from independent sources, while unobservable
inputs reflect our market assumptions. Preference is given to observable inputs. These two types of
inputs create the following fair value hierarchy:

Level 1—Quoted prices for identical instruments in active markets.

Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical
or similar instruments in markets that are not active; and model-derived valuations whose inputs
are observable or whose significant value drivers are observable.

Level 3—Significant inputs to the valuation model are unobservable.

The Company maintains policies and procedures to value instruments using the best and most
relevant data available. In addition, the Company utilizes third party specialists that review valuation,
including independent price validation.

The Company’s financial instruments include cash and cash equivalents, accounts and notes
receivable, accounts payable, accrued expenses, and short and long-term borrowings. Because of their
short maturity, the carrying amounts of cash and cash equivalents, accounts and notes receivable,
accounts payable, and accrued expenses approximate fair value. The carrying value of the Company’s
debt approximates fair value since the stated rate is similar to rates currently available to the Company
for debt with similar terms and remaining maturities.

The Company’s assets measured at fair value on a nonrecurring basis include long-lived assets and

finite-lived intangibles. The Company tests its indefinite-lived assets for impairment at least annually
and whenever events or changes in circumstances indicate that the carrying value may not be
recoverable or that the carrying value may exceed its fair value. The resulting fair value measurements
are considered to be Level 3 inputs.

F-12

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income taxes

Income taxes are computed using the asset and liability method of accounting. Under the asset and

liability method, a deferred tax asset or liability is recognized for estimated future tax effects
attributable to temporary differences and carryforwards. 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, it is more likely than not that such benefits will be realized.
Deferred income tax assets are recorded on a net basis as a long term asset.

The Company follows the applicable 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.

Translation of Foreign Currencies

The assets and liabilities of the Company’s European, Canadian, Israeli, and Asian operations,
each of which uses its local currency as their functional currency, have been translated into U.S. dollars
at year-end exchange rates and the income and expense accounts of these subsidiaries have been
translated at average rates prevailing during each respective year. Resulting translation adjustments are
made to a separate component of stockholders’ equity within accumulated other comprehensive loss.
Foreign exchange transaction gains and losses are included in the accompanying consolidated
statements of operations.

Shipping Costs

Shipping costs to customers are included in selling expenses and amounted to approximately $3,509

and $2,045 for the fiscal years ended December 28, 2019 and December 29, 2018, respectively.

Advertising Costs

The Company charges advertising costs to selling expense as incurred. Advertising expense, which

consists primarily of promotional and cooperative advertising allowances provided to customers, was
approximately $10,379 and $9,555 for the fiscal years ended December 28, 2019 and December 29,
2018, respectively.

Segment Information

Operating segments are identified as components of an enterprise about which separate, discrete

financial information is available for evaluation by the chief operating decision-maker, or decision-
making group, in making decisions on how to allocate resources and assess performance. The Company
views its operations and manages its business as one operating segment utilizing an omni-channel
distribution strategy.

Net Loss Per Share

Basic earnings per share is calculated by dividing net loss for the period by the weighted average

number of common stock outstanding during the period.

F-13

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Diluted loss per share for the Company is computed by dividing net loss by the dilutive weighted
average shares outstanding which includes: the dilutive impact (using the ‘‘treasury stock’’ method) of
‘‘in the money’’ stock options and unvested restricted shares issued to employees. Options to purchase
101,320 and 123,114 shares of the Company’s common stock and 22,392 and 30,220 of restricted shares
were not included in the calculation, due to the fact that these instruments were anti-dilutive for the
fiscal years ended December 28, 2019 and December 29, 2018, respectively.

New Accounting Pronouncements

The Company adopted the standard on the effective date of December 30, 2018 by applying the

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

2020 Plan

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. However, should the Company require additional cash, the Company would identify
other cost reductions or seek additional resources.

F-14

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. REVENUE

Disaggregation of Revenue

The Company’s revenue is primarily from distinct fixed-price product sales in the juvenile product

market, to similar customers and channels utilizing similar types of contracts that are short term in
nature (less than one year). The Company does not sell service agreements or goods over a period of
time and does not sell or utilize customer financing arrangements or time-and-material contracts.

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

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the
fiscal year ended

December 28,
2019

December 29,
2018

$148,326
24,855
$173,181

$145,534
28,085
$173,619

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 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 2019 fall under the provisions of the practical expedient and have therefore
been expensed.

3. PROPERTY AND EQUIPMENT

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

For the
fiscal year ended

December 28,
2019

December 29,
2018

Depreciation/
Amortization Period

Computer-related . . . . . . . . . . . . . . . .
Tools, dies, prototypes, and molds . . . .
Building . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . .

Less: accumulated depreciation . . . . . .
Property and equipment, net . . . . . . . .

$ 4,511
27,457
4,156
7,474
43,598
34,810
$ 8,788

$ 4,556
28,361
4,156
7,148
44,221
34,536
$ 9,685

5 years
1 - 5 years
30 years
1 - 15 years

Property and equipment included amounts acquired under capital leases of approximately $589 and
$589 at December 28, 2019 and December 29, 2018, respectively, with related accumulated depreciation
of approximately $115 and $31, respectively. Total depreciation expense was $2,982 and $3,436 for the
fiscal years ended December 28, 2019 and December 29, 2018, respectively.

F-15

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. INTANGIBLE ASSETS

Intangible assets consisted of the following:

Brand names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Patents and licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: accumulated amortization . . . . . . . . . . . . . . . . . . . .

For the
fiscal year ended

December 28,
2019

December 29,
2018

$ 11,819
4,101
6,946
1,882

24,748
(11,852)

$ 11,819
3,766
6,946
1,882

24,413
(11,113)

Intangible assets, net

. . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 12,896

$ 13,300

The amortization period for the majority of the intangible assets ranges from 5 to 20 years for
those assets that have an estimated life; certain assets have indefinite lives (a brand name). Total of
intangibles not subject to amortization amounted to $8,400 for the fiscal years ended December 28,
2019 and December 29, 2018.

Amortization expense amounted to $738 and $746 for the fiscal years ended December 28, 2019

and December 29, 2018, respectively.

The Company performed its annual indefinite-lived intangible asset impairment analysis in the
fourth fiscal quarter. No asset impairment was recorded for the fiscal years ended December 28, 2019
and December 29, 2018.

Estimated amortization expense for the remaining definite-lived assets for the next five years is as

follows:

Fiscal Year ending

2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

488
488
488
488
488

5. DEBT

Bank of America Credit Facility. On June 28, 2018, the Company and Summer Infant (USA), Inc.,

as borrowers, entered into a Second Amended and Restated Loan and Security Agreement with Bank
of America, N.A., as agent, the financial institutions party to the agreement from time to time as
lenders, and certain subsidiaries of the Company as guarantors (as amended, the ‘‘Restated BofA
Agreement’’). The Restated BofA Agreement replaced the Company’s prior credit facility with Bank of
America, and provided for an asset-based revolving credit facility, with a $5,000 letter of credit sub-line
facility. Total revolver commitments under the credit facility were $60,000 as of December 28, 2019, and
were reduced to $48,000 as of March 10, 2020. 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

F-16

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. DEBT (Continued)

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). The Restated BofA Agreement was amended on March 25,
2019 and November 1, 2019 to, among other things, (i) modify certain definitions, (ii) increase the
applicable margins on base rate and LIBOR revolver loans by 50 basis points, (iii) modify the
definition of Financial Covenant Trigger Amount; and (iv) require that the Company engage a financial
advisor to assist with providing a weekly, 13-week cash flow forecast. Subsequent to fiscal year end, on
January 17, 2020 and March 10, 2020, the Company entered into further amendments to the Restated
BofA Agreement. See Note 12 for information regarding these amendments.

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 and 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.

The Restated BofA Agreement also contains customary events of default, including a cross default

with the Term Loan Agreement and 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 December 28, 2019, under the Restated BofA Agreement, the rate on base-rate loans was

6.50% and the rate on LIBOR-rate loans was 4.625%. The amount outstanding on the Restated BofA
Agreement at December 28, 2019 was $32,226. Total borrowing capacity at December 28, 2019 was
$39,109 and borrowing availability was $6,883.

Prior to entering into the Restated BofA Agreement, the Company and Summer Infant
(USA), Inc. were parties to an amended and restated loan and security agreement with Bank of
America, N.A., as agent, which provided for an asset-based credit facility (the ‘‘Prior Credit Facility’’).

F-17

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. DEBT (Continued)

The Prior Credit Facility consisted of a $60,000 asset-based revolving credit facility, with a $10,000
letter of credit sub-line facility (the ‘‘Revolving Facility’’), a $5,000 ‘‘first in last out’’ revolving credit
facility (the ‘‘FILO Facility’’) and a $10,000 term loan facility (the ‘‘Term Loan Facility’’). The total
borrowing capacity under the Revolving Facility was based on a borrowing base, generally defined as
85% of the value of eligible accounts plus the lesser of (i) 70% of the value of eligible inventory or
(ii) 85% of the net orderly liquidation value of eligible inventory, less reserves. The total borrowing
capacity under the FILO Facility was based on a borrowing base, generally defined as a specified
percentage of the value of eligible accounts that steps down over time, plus a specified percentage of
the value of eligible inventory that stepped down over time. As noted above, all obligations under the
Revolving Facility and Term Loan Facility were repaid in connection with the Restated BofA
Agreement and Term Loan Agreement described below. Loans under the FILO Facility were repaid on
April 21, 2018.

Term Loan Agreement. On June 28, 2018, the Company and Summer Infant (USA), Inc., as

borrowers, entered into a Term Loan and Security Agreement (as amended, the ‘‘Term Loan
Agreement’’) with Pathlight Capital LLC, as agent, each lender from time to time a party to the Term
Loan Agreement, and certain subsidiaries of the Company as guarantors, providing for a $17,500 term
loan (the ‘‘Term Loan’’). Proceeds from the Term Loan were used to satisfy existing debt, pay fees and
transaction expenses associated with the closing of the Term Loan and may be used to pay obligations
under the Term Loan Agreement, and for lawful corporate purposes, including working capital. The
Term Loan is secured by a lien on certain assets of the Company, including a first priority lien on
intellectual property, machinery and equipment, and a pledge of (i) 100% of the ownership interests of
domestic subsidiaries and (ii) 65% of the ownership interests in certain foreign subsidiaries of the
Company, and a junior lien on certain assets subject to the liens under the Restated BofA Agreement
described above. The Term Loan matures on June 28, 2023. Summer Infant Canada Limited and
Summer Infant Europe Limited, subsidiaries of the Company, are guarantors under the Term Loan
Agreement. The Term Loan Agreement was amended on March 25, 2019 and November 1, 2019 to,
among other things, (i) amend certain definitions to be consistent with the Restated BofA Agreement,
(ii) amend the definition of IP Advance Rate Reduction; and (iii) consistent with the Restated BofA
Agreement, require that the Company engage a financial advisor to assist with providing a weekly,
13-week cash flow forecast. Subsequent to fiscal year end, on January 17, 2020 and March 10, 2020, the
Company entered into further amendments to the Term Loan Agreement was further amended. See
Note 12 for information regarding these amendments.

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, provided
that, in connection with the recent amendments to the Term Loan Agreement, principal payments for
March, June and September 2020 have been suspended, and such payments will resume effective
March 2021. The Term Loan bears interest at an annual rate equal to LIBOR, plus 9.0%. Interest
payments are due monthly, in arrears. In addition, in connection with the recent amendments to the
Term Loan Agreement, 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),

F-18

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. DEBT (Continued)

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 restrictions on prepayment and a prepayment penalty if the Term Loan
is repaid prior to the third anniversary of the closing of the Term Loan.

The Term Loan Agreement contains customary affirmative and negative covenants and financial
covenants that are substantially the same as the Restated BofA Agreement. 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,
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 December 28, 2019, the interest rate on the Term Loan was 10.91%. The amount

outstanding on the Term Loan at December 28, 2019 was $16,406.

The Restated BofA Agreement and the Term Loan Agreement were evaluated to determine the

proper accounting treatment for the refinancing transaction as of June 28, 2018. Accordingly, debt
extinguishment accounting was used to account for the prepayment of the prior term loan facility and
to prepay two members of the lender group for the prior credit facility with Bank of America that did
not continue in the second amended and restated credit facility, resulting in the write off of $518 in
remaining unamortized deferred financing costs for the twelve months ended December 29, 2018. Debt
modification accounting was used for the remaining member of the lender group for the prior credit
facility, resulting in remaining unamortized deferred financing costs of $675 and the new financing costs
of $1,958 to be capitalized and amortized over the life of the new credit facility.

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

Agreement:

Fiscal Year ending:

2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

875
875
875
46,007

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$48,632

Unamortized debt issuance costs were $2,398 at December 28, 2019 and $2,395 at December 29,

2018, and are presented as a direct deduction of long-term debt on the consolidated balance sheets.

F-19

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. DEBT (Continued)

Sale-Leaseback

On March 24, 2009, Summer Infant (USA), Inc., (‘‘Summer USA’’) the Company’s wholly owned

subsidiary, entered into a definitive agreement with Faith Realty II, LLC, a Rhode Island limited
liability company (‘‘Faith Realty’’) (the owner of which is Jason Macari, the former Chief Executive
Officer, former director of the Company, and current investor), pursuant to which Faith Realty
purchased the corporate headquarters of the Company located at 1275 Park East Drive, Woonsocket,
Rhode Island (the ‘‘Headquarters’’), for $4,052 and subsequently leased the Headquarters back to
Summer USA for an annual rent of $390 during the initial seven year term of the lease, payable
monthly and in advance. The original lease was to expire on the seventh anniversary of its
commencement. Mr. Macari had given a personal guarantee to secure the Faith Realty debt on its
mortgage; therefore, due to his continuing involvement in the building transaction, the transaction had
been recorded as a financing lease, with no gain recognition.

On February 25, 2009, the Company’s Board of Directors (with Mr. Macari abstaining from such

action) approved the sale leaseback transaction. In connection therewith, the Board of Directors
granted a potential waiver, to the extent necessary, if at all, of the conflict of interest provisions of the
Company’s Code of Ethics, effective upon execution of definitive agreements within the parameters
approved by the Board. In connection with granting such potential waiver, the Board of Directors
engaged independent counsel to review the sale leaseback transaction and an independent appraiser to
ascertain (i) the value of the Headquarters and (ii) the market rent for the Headquarters. In reaching
its conclusion that the sale leaseback transaction is fair to the Company, the Board of Directors
considered a number of factors, including Summer USA’s ability to repurchase the headquarters at
110% of the initial sale price at the end of the initial term. The Company’s Audit Committee approved
the sale leaseback transaction (as a related party transaction) and the potential waiver and
recommended the matter to a vote of the entire Board of Directors (which approved the transaction).

On May 13, 2015, Summer USA entered into an amendment (the ‘‘Amendment’’) to its lease dated
March 24, 2009 (the ‘‘Lease’’) with Faith Realty (the ‘‘Landlord’’). Pursuant to the Amendment, (i) the
initial term of the Lease was extended for two additional years, such that the initial term would end on
March 31, 2018, and the term of the Lease could be extended at Summer USA’s election for one
additional term of three years (rather than five years) upon twelve months’ prior notice, (ii) the annual
rent for the last two years of the newly amended initial term was set at $429 and the annual rent for
the extension period, if elected, was set at $468 and (iii) the Landlord agreed to provide an aggregate
improvement allowance of not more than $78 for the newly amended initial term, to be applied against
Summer USA’s monthly rent, and an additional improvement allowance of $234 for the extension term,
if elected, to be applied against Summer USA’s monthly rent during such extension term. The
Amendment was reviewed and approved by the audit committee because it was a related party
transaction.

On January 22, 2018, Summer USA entered into a second amendment (the ‘‘Second

Amendment’’) to the Lease. Pursuant to the Second Amendment, (i) the term of the Lease was
extended to March 31, 2021, with no further rights of extension, (ii) the annual rent for the last three
years of the newly amended term was set at $468, (iii) Summer USA no longer has the option to
purchase the property subject to the Lease and (iv) the Landlord and Summer USA agreed to certain
expenses, repairs and modifications to the property that is subject to the Lease. The Second

F-20

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. DEBT (Continued)

Amendment was reviewed and approved by the audit committee because it was a related party
transaction.

At December 28, 2019, approximately $441 of the lease obligation was included in accrued
expenses, with the balance of approximately $2,000 included in other liabilities, in the accompanying
consolidated balance sheet. This obligation is reduced each month (along with a charge to interest
expense) as the rent payment is made to Faith Realty.

Approximate future minimum sale-leaseback payments due under the lease is as follows:

Fiscal Year Ending:

2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

468
117

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$585

6. INCOME TAXES

In December 2017, the U.S. government enacted comprehensive tax legislation commonly referred

to as the Tax Cuts and Jobs Act (the ‘‘Tax Act’’) that significantly revised the U.S. tax code effective
January 1, 2018 by, among other things, lowering the corporate income tax rate from a top marginal
rate of 35% to a flat 21%, limiting deductibility of interest expense and performance based incentive
compensation and implementing a territorial tax system. As a result of the Tax Act in the fiscal year
ending December 28, 2019 and December 29, 2018 the Company had non-deductible interest for tax
purposes resulting in a deferred tax asset in the amount of $1,880 and $933 respectively. The Company
recorded a valuation allowance on the value of this deferred tax asset until such time as it becomes
more likely than not that this asset will be recognized.

The provision (benefit) for income taxes is summarized as follows:

Fiscal 2019

Fiscal 2018

Current:

Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ —
—
11

$ 683
222
179

1,084

Total provision (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,095

$ —
(382)
11

(371)

$ 114
(109)
(198)

(193)

$(564)

F-21

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. INCOME TAXES (Continued)

The tax effects of temporary differences that comprise the deferred tax liabilities and assets are as

follows:

December 28,
2019

December 29,
2018

Deferred tax assets:

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory and Unicap reserve . . . . . . . . . . . . . . . . . . .
Interest deduction limitation . . . . . . . . . . . . . . . . . . . .
Lease Liability and accrued expenses . . . . . . . . . . . . . .
Research and development credit . . . . . . . . . . . . . . . . .
Foreign tax credit . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss carry-forward . . . . . . . . . . . . . . . . . . .

Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred tax liabilities:

Intangible assets and other . . . . . . . . . . . . . . . . . . . . .
ROU Assets and deferred rent
. . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . .

Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred tax liabilities and valuation allowance . . . . . . . .

53
506
1,880
1,093
2,547
795
2,256

9,130

(2,099)
(1,036)
(54)

(3,189)
(4,945)

(8,134)

43
492
933
—
3,059
795
2,699

8,021

(1,834)
—
(42)

(1,876)
(4,018)

(5,894)

Net deferred income tax asset . . . . . . . . . . . . . . . . . . . . .

996

$ 2,127

The following reconciles the benefit for income taxes at the U.S. federal income tax statutory rate

to the benefit in the consolidated financial statements:

Fiscal 2019

Fiscal 2018

Tax benefit at statutory rate . . . . . . . . . . . . . . . . . . . . . . . . .
State income taxes, net of U.S. federal income tax benefit . . .
Adjustment to uncertain tax position . . . . . . . . . . . . . . . . . . .
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign tax rate differential
. . . . . . . . . . . . . . . . . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-deductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expiration of unexercised stock options . . . . . . . . . . . . . . . . .
Increase in valuation allowance . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (644)
150
—
17
(5)
312
117
191
927
30

Total benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,095

$(1,014)
(147)
(325)
46
108
(515)
158
—
1,229
(104)

$ (564)

As of December 28, 2019, the Company had approximately $2,955 of US federal and state net

operating loss carry forwards (or ‘‘NOLs’’) to offset future federal taxable income. The federal NOL
will begin to expire in 2031 and the state NOL began to expire in 2019. As of December 28, 2019, the
Company had approximately $874, $322, $2,871, $489, and $1,753 of NOLs in Canada, Australia, Israel,
Asia, and the United Kingdom, respectively, which can be carried forward indefinitely.

F-22

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. INCOME TAXES (Continued)

Authoritative guidance requires a valuation allowance to reduce the deferred tax assets reported, if
based on the weight of the evidence, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. After consideration of all evidence, including the Company’s past
earnings history and future earnings forecast, management determined that a valuation allowance in the
amount of $2,270 at December 28, 2019 and $2,290 at December 29, 2018 relating to certain state tax
credits and foreign NOLs was necessary. Due to the Tax Act, the Company determined a valuation
allowance in the amount of $2,675 at December 28, 2019 and $1,728 at December 29, 2018 relating to
interest deduction limitations and foreign tax credits was necessary.

A summary of the Company’s adjustment to its uncertain tax positions in fiscal years ended

December 28, 2019 and December 29, 2018 is set forth below:

Balance, at beginning of the year . . . . . . . . . . . . . . . . . . .
Decrease for lapses of statute of limitations . . . . . . . . .

Balance, at end of year . . . . . . . . . . . . . . . . . . . . . . . . . .

$—
—

$—

$ 325
(325)

$ —

December 28,
2019

December 29,
2018

The unrecognized tax benefits mentioned above included an aggregate of $65 of accrued interest

and penalty balances related to uncertain tax positions. The Company recognizes interest and penalties
related to uncertain tax positions in income tax expense. The entire balance of $325 was reversed as of
the year-ended December 29, 2018 due to lapse of statute of limitations.

The Company is subject to U.S. federal income tax, as well as to income tax of multiple state and

foreign tax jurisdictions. On a global basis, the open tax years subject to examination by major taxing
jurisdictions in which the Company operates is between two to six years.

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. The
Company was authorized to issue up to 333,334 shares for equity awards under its 2006 Performance
Equity Plan (‘‘2006 Plan’’). In March 2017, the 2006 Plan expired and no additional equity awards can
be granted under the 2006 Plan.

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. The application of this standard resulted in share-based compensation
expense for the twelve months ended December 28, 2019 and December 29, 2018 of $319 and $523,
respectively. Share based compensation expense is included in selling, general and administrative
expenses.

F-23

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. SHARE BASED COMPENSATION (Continued)

As of December 28, 2019, there are 71,468 shares available to grant under the 2012 Plan.

Stock Options

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 for grants of ‘‘plain vanilla’’ stock
options as prescribed by the Securities and Exchange Commission. Forfeitures are estimated at the time
of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
Share-based compensation expense recognized in the consolidated financial statements in fiscal 2019
and 2018 is based on awards that are ultimately expected to vest.

The following table summarizes the weighted average assumptions used for options granted during

the fiscal years ended December 28, 2019 and December 29, 2018.

Expected life (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeiture rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal
2019

Fiscal
2018

4.9

5.0
2.3% 2.7%
64.2% 64.1%
0.0% 0.0%
24.2% 23.2%

The weighted-average grant date fair value of options granted during the year ended December 28,

2019 was $3.42 per share. The weighted-average grant date fair value of options granted during the
year ended December 29, 2018 was $4.95 per share.

A summary of the status of the Company’s options as of December 28, 2019 and changes during

the year then ended is presented below:

Outstanding at beginning of year . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number
Of
Shares

123,114
27,112
48,906

Outstanding at end of year . . . . . . . . . . . . . . . . . . . . . . .

101,320

Options exercisable at December 28, 2019 . . . . . . . . . . . .

56,266

Weighted-Average
Exercise Price

$18.00
$ 6.30
$19.08

$14.31

$18.36

Outstanding stock options vested and expected to vest as of December 28, 2019 is 87,771. The
intrinsic value of options exercised totaled was $0 and $18 for the fiscal years ended December 28,
2019 and December 29, 2018, respectively.

F-24

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. SHARE BASED COMPENSATION (Continued)

The following table summarizes information about stock options at December 28, 2019:

Options Outstanding

Options Exercisable

Range of
Exercise Prices

Number
Outstanding

Remaining
Contractual
Life (years)

$3.52 - $9.00
$9.01 - $13.50
$13.51 - $18.00
$18.01 - $32.00
$32.01 - $64.00

37,223
16,128
31,139
14,667
2,163

101,320

9.0
7.8
6.7
5.4
1.4

7.4

Weighted
Average
Exercise
Price

$ 6.75
$11.25
$16.83
$24.30
$64.53

$14.31

Number
Exercisable

Remaining
Contractual
Life

5,556
11,074
24,195
13,278
2,163

56,266

8.5
7.7
6.6
5.2
1.4

6.5

Weighted
Average
Exercise
Price

$ 7.47
$11.07
$16.56
$24.66
$64.53

$18.36

The aggregate intrinsic value of options outstanding and exercisable at December 28, 2019 and
December 29, 2018 are $0, respectively. As of December 28, 2019, there was approximately $117 of
unrecognized compensation cost related to non-vested stock option awards, which is expected to be
recognized over a remaining weighted-average vesting period of 2.2 years.

Restricted Stock Awards

Restricted stock awards require no payment from the grantee. The related compensation cost of

each award is calculated using the market price on the grant date and is expensed equally over the
vesting period. A summary of restricted stock awards made in the year ended December 28, 2019, is as
follows:

Non-vested restricted stock awards as of December 29, 2018 . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested and released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-vested restricted stock awards as of December 28, 2019 . .

Number of Grant Date
Fair Value

30,220
19,167
18,545
8,450

22,392

$15.75
$ 6.21
$12.87
$13.86

$10.80

As of December 28, 2019, there was approximately $121 of unrecognized compensation cost
related to non-vested stock compensation arrangements granted under the Company’s stock incentive
plan for restricted stock awards. That cost is expected to be recognized over the next 2.2 years.

As a subsequent event, on March 13, 2020, the Company completed a 1-for-9 reverse stock split
reducing the outstanding common shares to 2,108,743. All of the above transactions occurred prior to
the completion of the reverse stock split and, the issuances noted above had the effect of being divided
by nine.

8. PROFIT SHARING PLAN

Summer Infant (USA), Inc. maintains a defined contribution salary deferral plan under
Section 401(k) of the Internal Revenue Code. All employees who meet the plan’s eligibility
requirements can participate. Employees may elect to make contributions up to federal limitations. In

F-25

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. PROFIT SHARING PLAN (Continued)

2007, the Company adopted a matching plan which was further amended in 2013, and which was
funded throughout the year. For the years ended December 28, 2019 and December 29, 2018, the
Company recorded 401(k) matching expense of $311 and $380, respectively.

9. MAJOR CUSTOMERS

10. COMMITMENTS AND CONTINGENCIES

Leases

The Company leases office space and distribution centers primarily related to its Riverside
California, Canada, United Kingdom, and Hong Kong operations. In November 2019, the Company
signed a new two-year lease agreement to continue occupying the same office space in Hong Kong. The
agreement did not include any termination or extension options. In connection with these leases, there
were no cash incentives from the landlord to be used for the construction of leasehold improvements
within the facility. Our headquarters in Woonsocket, Rhode Island continues to be accounted for as a
sale-leaseback lease.

The Company identified and assessed the following significant assumptions in recognizing the

right-of-use asset and corresponding liabilities:

• Expected lease term—The expected lease term includes both contractual lease periods and, when
applicable, cancelable option periods when it is reasonably certain that the Company would
exercise such options. These leases have remaining lease terms between 1.75 and 3.5 years. The
Canada lease has one 5-year extension option that has also not been included in the lease term.

• Incremental borrowing rate—The Company’s lease agreements do not provide an implicit rate. As

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

• Lease and non-lease components—In certain cases the Company is required to pay for certain

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

F-26

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. COMMITMENTS AND CONTINGENCIES (Continued)

The components of the Company’s lease expense for the year ended December 28, 2019 were as

follows:

Operating lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Variable lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total lease expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended
December 28, 2019

2,499
1,152

3,651

Weighted-average remaining lease term . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average discount rate:

2.1 years

5.00%

Cash paid for amounts included in the measurement of the Company’s lease liabilities were $2,613

for the year ended December 28, 2019.

As of December 28, 2019, the present value of maturities of the Company’s operating lease

liabilities were as follows:

Fiscal Year Ending:

2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less imputed interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,690
2,159
321
153
0
(282)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,041

Prior to the adoption of ASU 2016-02 and for the year ended December 29, 2018, the Company

recognized rent expense on a straight-line basis over the lease period and recorded deferred rent
expense for rent expense incurred but not yet paid. The Company also recorded deferred rent
attributable to cash incentives received under its lease agreements which are amortized to rent expense
over the lease term. During the year ended December 29, 2018, the Company recognized rent expense
of $2,736.

F-27

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. COMMITMENTS AND CONTINGENCIES (Continued)

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

Under ASC 840 ‘‘Leases’’, approximate future minimum rental payments due under these leases as

of December 29, 2018 were as follows:

Fiscal Year Ending:

2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 and beyond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,627
2,556
2,048
323
154

Total(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$7,708

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

headquarters.

Employment Contracts

In accordance with applicable local law, Summer Infant Europe Limited is required to have
employment contracts with all of its employees. In connection with these contracts, Summer Infant
Europe Limited makes individual pension contributions to certain employees at varying rates from
1-7% of the employee’s annual salary, as part of their total compensation package. These pension
contributions are expensed as incurred. There are no termination benefit provisions in these contracts.

Litigation

11. GEOGRAPHICAL INFORMATION

The Company sells products throughout the United States, Canada, and the United Kingdom, and

various other parts of the world. The Company does not disclose product line revenues as it is not
practicable for the Company to do so.

The following is a table that presents net revenue by geographic area:

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$148,326
24,855

$145,534
28,085

$173,181

$173,619

For the fiscal year
ended

December 28,
2019

December 29,
2018

F-28

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. GEOGRAPHICAL INFORMATION (Continued)

The following is a table that presents total assets by geographic area:

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 28,
2019

December 29,
2018

$80,693
10,850

$91,543

$82,631
11,585

$94,216

The following is a table that presents total long-lived assets by geographic area:

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 28,
2019

December 29,
2018

$24,804
2,555

$27,359

$23,165
2,044

$25,209

12. SUBSEQUENT EVENTS

The Company has evaluated all events or transactions that occurred after December 28, 2019

through the date of this Annual Report on Form 10-K except as set forth herein

Loan Amendments

Following the end of the period covered by this report, the Company and Summer Infant

(USA), Inc., as borrowers, entered into amendments to each of the Restated BofA Agreement and the
Term Loan Agreement as described below. Please see Note 5 for additional information regarding the
Restated BofA Agreement and the Term Loan Agreement.

Amendments to Restated BofA Agreement.

On January 17, 2020, the Company and Summer Infant (USA), Inc., as borrowers, entered into

Amendment No. 3 to the Restated BofA Agreement (the ‘‘BofA Amendment No. 3’’). BofA
Amendment No. 3 amended the terms of the Restated BofA Agreement to, among other things,
(a) modify the definition of Financial Covenant Trigger Amount so that the amount is $4,000 through
February 29, 2020, and at any time thereafter, $5,000; and (ii) reduce the lenders’ aggregate revolver
commitments to $50,000.

On March 10, 2020, the Company and Summer Infant (USA), Inc., as borrowers, entered into

Amendment No. 4 to the Restated BofA Agreement (the ‘‘BofA Amendment No. 4’’). BofA
Amendment No. 4 amended the terms of the Restated BofA Agreement to, among other things:
(a) amend the definition of EBITDA to exclude fees and expenses paid to Winter Harbor and any
investment bank retained by the Company; (b) modify the definition of Financial Covenant Trigger
Amount so that the amount is (i) $3,000 through May 31, 2020, (ii) $3,500 from June 1 through
June 30, 2020, (iii) $3,750 from July 1 through August 31, 2020, (iv) $4,000 from September 1 through
September 30, 2020, (v) $4,250 from October 1 through October 31, 2020, (vi) $4,500 from November 1
through November 30, 2020, and (vii) $5,000 at any time from and after December 1, 2020; (c) reduce

F-29

SUMMER INFANT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. SUBSEQUENT EVENTS (Continued)

the lenders’ aggregate revolver commitments to $48,000; (d) require that the Company meet certain
minimum net sales amounts for each period of three consecutive fiscal months through the three-
month period ending December 31, 2020; (e) require that the Company 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 period; (f) increase the applicable margin and applicable unused line fee rate;
and (g) modify certain reporting requirements.

Amendment to Term Loan Agreement.

On January 17, 2020, the Company and Summer Infant (USA), Inc., as borrowers, entered into
Amendment No. 3 to the Term Loan Agreement (the ‘‘Term Loan Amendment No. 3’’). Term Loan
Amendment No. 3 amended the terms of the Term Loan Agreement to, among other things,
(a) modify the definition of Financial Covenant Trigger Amount to be consistent with the BofA
Amendment and (ii) modify the definition of IP Advance Rate Reduction to provide that the amount
of reduction will be 5.0 percentage points through February 29, 2020, and at any time thereafter,
10.0 percentage points

On March 10, 2020, the Company and Summer Infant (USA), Inc., as borrowers, entered into

Amendment No. 4 to the Term Loan Agreement (the ‘‘Term Loan Amendment No. 4’’). Term Loan
Amendment No. 4 amended the terms of the Term Loan Agreement to, among other things, (a) amend
the definition of Term Loan Borrowing Base to deduct a specified equipment reserve amount from the
calculation of the borrowing base; (b) amend the definitions of EBITDA and Financial Covenant
Trigger Amount consistent with BofA Amendment No. 4; (c) modify the definition of IP Advance Rate
to be 55%, provided that such rate shall be reduced by 1.0% per month on and after the earlier of
(i) the due date of the Company’s borrowing base certificate for September 2020 and (ii) the date such
borrowing base certificate is delivered; (d) suspend principal payments on the term loan for 2020, such
payments to resume in March 2021; (e) require that the Company meet certain financial covenants,
consistent with BofA Amendment No. 4; and (f) modify certain reporting requirements, consistent with
BofA Amendment No. 4.

In addition, pursuant to Term Loan Amendment No. 4, beginning on March 10, 2020, the term

loan will begin to bear additional interest, to be paid in kind (‘‘PIK interest’’) at annual rate of 4.0%,
such PIK interest to be payable upon the earliest to occur of (i) the sale or merger of the Company,
(ii) the repayment in full of the term loan and termination of commitments, (iii) the occurrence of a
default or event of default under the Term Loan Agreement, (iv) the Company achieving adjusted
EBITDA of $12.0 million (calculated on a trailing 12-month basis). If PIK interest becomes due and
payable as a result of the Company achieving adjusted EBITDA event described in clause (iv), then the
Company shall pay all outstanding PIK interest accrued as of such date and PIK interest shall continue
to accrue thereafter and be paid on each subsequent anniversary of such event.

Reverse Stock Split

The Company filed a Certificate of Amendment to its Certificate of Incorporation with the
Secretary of State of the State of Delaware to effect a 1-for-9 reverse stock split of the Company’s
issued and outstanding shares of common stock, effective following the close of business on March 13,
2020. Unless otherwise indicated, the financial statements and accompanying notes give effect to the
1-for-9 reverse stock split as if it occurred at the first period presented.

F-30

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A
(Amendment No. 1)

(Mark One)

(cid:95) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended December 28, 2019

(cid:134)

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

For the transition period from to

Commission File No. 001-33346

SUMMER INFANT, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation)

1275 Park East Drive, Woonsocket, Rhode Island
(Address of principal executive offices)

20-1994619
(I.R.S. Employer
Identification No.)

02895
(Zip Code)

(401) 671-6550
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common Stock, Par Value $0.0001

Trading Symbol(s)
SUMR

Securities registered pursuant to Section 12(g) of the Act: None

Name of each exchange on which
registered
Nasdaq Capital Market

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:134)

No (cid:95)

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes (cid:134) No (cid:95)

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 (cid:95) No (cid:134)

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 (cid:95) No (cid:134)

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.
Non-accelerated filer (cid:95)
Large accelerated filer (cid:134)

Accelerated filer (cid:134)

Smaller reporting company (cid:95)
Emerging growth company (cid:134)

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. (cid:134)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:134) No (cid:95)

The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates as of June 29,
2019, was $4.2 million (and has not been adjusted to reflect the reverse stock split effective March 13, 2020). For purposes of this
computation, all officers, directors, and 10% beneficial owners of the registrant are deemed to be affiliates. Such determination should
not be deemed to be an admission that such officers, directors, or 10% beneficial owners are, in fact, affiliates of the registrant.

The number of shares issued and outstanding of the registrant’s common stock as of March 16, 2020 was 2,111,427
(excluding unvested restricted shares that have been issued to employees) reflecting the reverse stock split effective March 13, 2020.

EXPLANATORY NOTE

This Amendment No. 1 to Form 10-K (this “Amendment”) amends our Annual Report on Form 10-K for the fiscal year

ended December 28, 2019, originally filed with the Securities and Exchange Commission on March 18, 2020 (the “Original Filing”).
We are filing this Amendment to amend Part III of the Original Filing to include the information required by and not included in Part
III of the Original Filing, as we do not intend to file a definitive proxy statement for an annual meeting of stockholders within 120
days of the end of our fiscal year ended December 28, 2019. In addition, in connection with the filing of this Amendment and
pursuant to the rules of the Securities and Exchange Commission, we are including with this Amendment new certifications of our
principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Accordingly,
Item 15 of Part IV has also been amended to reflect the filing of these new certifications.

Except as described above, no other changes have been made to the Original Filing. The Original Filing continues to speak

as of the date of the Original Filing, and we have not updated the disclosures contained therein to reflect any events which occurred at
a date subsequent to the filing of the Original Filing.

As used in this Amendment, unless the context requires otherwise, “our company,” “Summer,” “our” and “we” means

Summer Infant, Inc. and its consolidated subsidiaries.

INDEX TO AMENDMENT NO. 1 TO FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 28, 2019

PAGE

ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.

Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

ITEM 15.
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .

Exhibits and Financial Statement Schedules

PART IV

1
3
10
12
13

13
14

(This page has been left blank intentionally.)

Item 10. Directors, Executive Officers and Corporate Governance

Executive Officers

PART III

Information concerning our current executive officers is set forth below. All executive officers hold their positions for an

indefinite term and serve at the pleasure of the Company’s Board of Directors (the “Board”).

Stuart Noyes, 56, was appointed our Interim Chief Executive Officer in December 2019. Mr. Noyes is managing partner of
Winter Harbor, LLC, a consulting firm specializing in turnaround and restructuring services, which he co-founded in January 2012.
He has more than 25 years of experience in executive and general management, operations, procurement, creditor negotiations, and
finance, providing strategic and tactical turnaround solutions to a variety of clients. From February 2016 through April 2016, Mr.
Noyes served as Chief Restructuring Officer of The Mid-States Supply Company, which filed a voluntary petition for bankruptcy in
February 2016. From September 2016 through November 2016, Mr. Noyes served as Chief Restructuring Officer for TPP Acquisition
(d/b/a The Picture People), which filed a voluntary petition for bankruptcy in September 2016. From November 2012 until December
2015, Mr. Noyes served as Chief Restructuring Officer, and then Assignee for Creditors, of AFL Quality, Inc. and its related entities,
AFL Quality NY LLC and DGF, Inc., which were subject to an involuntary petition for liquidation in February 2013 that was later
dismissed in April 2013. From Mr. Noyes is a member of the Turnaround Management Association and holds a Master of Business
Administration from the University of Utah and Bachelor of Business Administration from the University of Maine.

Paul Francese, 64, was appointed our Senior Vice President and Chief Financial Officer in November 2018. Mr. Francese

previously served as our Chief Financial Officer from September 2012 until November 2014. Most recently, Mr. Francese was Chief
Financial Officer of Rain Carbon Inc., a global chemical company, which he joined in 2015. Mr. Francese was Chief Financial
Officer of OCI Enterprises Inc., a soda ash, hydrogen peroxide and sodium percarbonate producer and solar energy developer, from
December 2004 until September 2012. Prior to joining OCI Enterprises, Mr. Francese served as Chief Financial Officer of
Cannondale Bicycle Corp, a designer and manufacturer of high-end bicycles and consumer sporting goods accessories. Mr. Francese
holds a B.A. from Rutgers University and a M.B.A. from the University of New Haven.

Directors

Our Board currently has six directors, and one vacancy. Biographical information for our current directors is set forth below.

Evelyn D’An, 58, a director since November 2016, is President of D’An Financial Services, a strategic consulting firm she

established in 2004. She also worked in various positions of increasing responsibility at Brightstar Corporation from 2010-2014, prior
to which she provided the company with consulting/advisory services. Her last position at Brightstar was CFO of the joint venture
Brightstar ERV, managing all financial aspects of the organization, which handles the recycling of mobile devices. Ms. D’An was
employed by Ernst & Young from 1986 until 2004 and became the first Hispanic female partner in the Southeast region. Since March
2018, Ms. D’An has served as a director of Enochian Biosciences, Inc., a publicly traded, pre-clinical stage biotechnology company.
She graduated with a Masters of Accounting from Florida International University and a Bachelor of Science from the State
University of Albany.

Martin Fogelman, 76, a director since March 2007, is an independent consultant and private investor in the juvenile products
industry. He was instrumental in the conception and development of the Babies R Us retail chain and served as senior vice president
of both Toys R Us and Babies R Us, where he was employed from 1986 to May 2003. From May 2003 until March 2007, Mr.
Fogelman was President of Baby Trend, Inc., a manufacturer of infant products. He also served as an advisory board member of
Babyganics Products, pbc, a baby healthcare products company.

Robin Marino, 65, a director since August 2015, is currently an independent brand consultant. From June 2011 to November

2014, Ms. Marino served as Group President, Accessories and Home, of LFUSA/Global Brands Group (GBG), a branded apparel,
footwear, fashion accessories and related lifestyle product company, where she oversaw five divisions. Prior to joining GBG, Ms.
Marino was President and CEO of Merchandising at Martha Stewart Living Omnimedia, which she originally joined in 2005. Ms.
Marino was also President and COO of Kate Spade from 1999 to 2005. Prior to that, she served in a variety of management positions
for fashion and retail companies such as Burberry Limited, Wathne LTD and Federated Department Stores, Inc. Ms. Marino served as
a director of Hampshire Group, Limited from February 2016 until September 2016. Ms. Marino holds a B.B.A. from Stetson
University.

Alan Mustacchi, 59, a director since May 2015, served most recently as Executive Vice President, Capital Markets of

GreenSky, Inc., a technology-focused consumer finance platform, from November 2014 until April 2020. Prior to joining GreenSky,
Mr. Mustacchi was Managing Director and Head of Consumer Products & Specialty Retail Investment Banking of Dresner Partners, a
middle market investment bank specializing in merger & acquisition advisory, institutional private placements of debt and equity,
financial restructuring and corporate turnaround, valuation and strategic consulting, from 2013 until 2014. From 2005 until 2013, Mr.
Mustacchi was at Navigant Capital Advisors, LLC, where he was Managing Director, Investment Banking. He was also Managing
Director, Merchant Banking Group, at BNP Paribas, where he spent 11 years, and Vice President of The Bank of New York in its
commercial finance group. Early in his career, Mr. Mustacchi spent six years as a Certified Public Accountant. He holds a B.S. in
Accounting and Economics from New York University’s College of Business and Public Administration and a M.B.A. in Finance and
International Business from New York University’s Graduate School of Business Administration.

Andrew Train, 38, has been a director since August 2017. Since May 2014, Mr. Train has been President of OBERLAND, a

purpose driven branding agency based in New York City which he co-founded. Prior to founding OBERLAND, Mr. Train was the
Advertising Business Director at J. Walter Thompson New York, a branding, marketing and advertising agency, from May 2009 until
May 2014. Earlier in his career, he worked on well-known global brands such as HSBC, Verizon, UPS, Puma, and Lufthansa in North
America and China while at J. Walter Thompson and other advertising agencies. Mr. Train has been recognized by several national
and global organizations for cause marketing and driving social change through traditional, digital, social and mobile campaigns. Mr.
Train holds a B.A. in Economics from the University of Richmond.

Stephen J. Zelkowicz, 47, has been a director since August 2014. Since 1999, he has served as an equity research analyst at
Wynnefield Capital, Inc., an investment firm specializing in small, publicly-traded companies. Mr. Zelkowicz holds a B.A. from the
University of Pennsylvania.

Corporate Governance

Audit Committee and Audit Committee Financial Expert

Our Board has established a separately-designated standing Audit Committee in accordance with Section 3(a)(58)(A) of the

Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Audit Committee currently consists of three members: Alan
Mustacchi (Chairman), Evelyn D’An and Robin Marino. Each member of the Audit Committee is an “independent” director under
applicable SEC and Nasdaq Stock Market rules. Our Board has determined that each of Mr. Mustacchi and Ms. D’An qualifies as an
“audit committee financial expert” within the meaning of SEC rules.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who beneficially own more than
10% of a registered class of our equity securities, to file reports with the SEC relating to their ownership and changes in ownership of
our common stock and other equity securities. Based solely on our review of our records, SEC filings and on written representations
from our executive officers and directors, we believe that each person who, at any time during the fiscal year, was a director, officer or
beneficial owner of more than 10% of our common stock, complied with all Section 16(a) requirements during the fiscal year, except
for Jason Macari, who filed two late Form 4 filings reporting five purchase transactions.

Process for Stockholder Nominations

There have been no material changes to the procedures by which security holders may recommend nominees to our Board.

Item 11. Executive Compensation

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.

Our industry is highly competitive and has many participants, and our ability to compete effectively in our industry is

dependent in part on our ability to attract, motivate and retain key management personnel and qualified employees. Historically, we
have followed a pay-for-performance compensation philosophy, with the intent to, over time, bring salaries and total executive
compensation in line with approximately the median (50th percentile) of the companies represented in our peer group. However, we
have not been able to compensate our executives anywhere near this level in past years due to our Company’s financial performance,
stock price and the limited pool of shares available for issuance under our equity plan.

The below discussion outlines the Company’s approach to executive compensation leading up to 2019. However, in 2019,
given the uncertainty of the impact on the Company’s results of trade tariffs on imported Chinese goods, including tariffs imposed in
2018, proposed new tariffs and increases in existing tariffs, the Compensation Committee, with the approval of the Board, determined
not to adopt an annual bonus incentive program for fiscal 2019. The Company’s actual fiscal 2019 sales ended relatively flat,
declining by 0.3%. In late 2019, we experienced a change in senior management, with Mark Messner, our former Chief Executive
Officer stepping down. In light of the Company’s financial situation at the end of 2019, the Board appointed Stuart Noyes as the
Company’s Interim Chief Executive Officer pursuant to an engagement with Winter Harbor, LLC, a consulting firm specializing in
turnaround and restructuring services.

Our Board has appointed a Compensation Committee consisting of independent directors as required by applicable SEC and
Nasdaq Stock Market rules. The Compensation Committee is authorized to determine and approve, or make recommendations to our
Board with respect to, the compensation of our chief executive officer, chief financial officer and our other executive officers, and to
grant or recommend the grant of stock-based compensation to our executive officers and employees. The Compensation Committee
also reviews our compensation policies and practices for all employees.

Historically, our philosophy is to compensate our executives at levels that enable us to attract, motivate and retain highly
qualified executives. In the past, the components of executive compensation have been base salary, annual incentive bonuses and
equity award grants. The Compensation Committee aims to provide salaries that are competitive with those paid by comparable
companies for similar work, based on each executive’s experience and performance. In prior years, our compensation program has
included an annual bonus program designed to reward individuals for performance based primarily on the Company’s achievement of
financial goals as well as the individual’s achievement of personal and strategic goals that contribute to building stockholder value. In
addition, annual grants of stock-based awards are intended to provide additional incentive to executives to work to enhance long-term
total return to stockholders and to align the interests of our executives with those of our stockholders. Total compensation levels
reflect the executive’s position, responsibilities, tenure, individual experience and achievement of goals. Compensation levels may
vary from year to year and among our various executive officers with fixed and variable pay components. The Compensation
Committee and the Board may also, from time to time, desire to recognize individual contributions to the Company and to encourage
continued outstanding performance by granting discretionary bonuses, in the form of cash or equity awards.

We provide only certain executive fringe benefits. Generally our executives receive health and welfare benefits, such as

group medical, dental, life and long-term disability coverage, under plans generally available to all other employees. We believe that
our executives should be able to provide for their retirement needs from the total annual compensation they earn based on our
performance. Accordingly, other than an employer matching contribution under our 401(k) plan, which is the same that we provide
all of our employees, we do not offer our executives any nonqualified pension plans, supplemental executive retirement plans,
deferred compensation plans or other forms of compensation for retirement. We may provide for fringe benefits, such as auto
allowances, commuting benefits, housing or relocation benefits in individually negotiated executive employment agreements.

Role of the Compensation Committee and Management

The Compensation Committee currently determines or recommends to the Board the compensation of our chief executive
officer, chief financial officer and our other executive officers. Annually, our Compensation Committee, together with our Board,
evaluates the performance of and determines the compensation of our chief executive officer in light of the goals and objectives of our
compensation program for that year. Our Compensation Committee annually assesses the performance of our other executive officers
and considers recommendations from our chief executive officer when determining the compensation of our other executive officers.
As discussed below, the Compensation Committee may also consider input from other independent directors, our compensation
consultant and benchmarking studies and surveys, but retains absolute discretion as to whether to adopt any recommendations as it
deems appropriate.

At the request of our Compensation Committee, our chief executive officer, chief financial officer and other executive

officers may attend our Compensation Committee meetings, including meetings at which our compensation consultant is present.
This enables our Compensation Committee to review with senior management the strategic and individual goals. Our Compensation
Committee ultimately makes all determinations regarding financial and individual goals and targets. Our chief executive officer does
not attend any portion of meetings at which his compensation is discussed.

The Compensation Committee also, in consultation with its independent compensation consultant, considers changes to our

compensation programs as appropriate in response to input from stockholders through our annual Say on Pay vote and evolving
factors such as the business environment and competition for talent. As part of its 2019 compensation setting process, the
Compensation Committee reviewed the results of the Say on Pay vote regarding executive compensation paid in 2018, in which
approximately 99% of the votes cast were voted in favor of our executive compensation program.

The Compensation Committee has authority to retain (at our Company’s expense) outside counsel, compensation consultants

and other advisors to assist as needed. The Compensation Committee considers input and recommendations from our outside
compensation consultants in connection with its review of our Company’s compensation programs and its annual review of the
performance of the other executive officers. In 2019, the Compensation Committee engaged the services of an independent
compensation consultant, Pearl Meyer. The Compensation Committee retains Pearl Meyer directly, although in carrying out
assignments Pearl Meyer also interacts with management when necessary and appropriate to obtain compensation and performance
data. As required under SEC rules, the Compensation Committee reviews the services of its compensation consultant to evaluate
whether any conflicts of interest are raised, taking into consideration certain factors, including whether the consultant provides any
other services to our Company, the amount of fees our Company pays to the consultant, whether there are any business or personal
relationships with an executive officer of our Company or with any committee member, and whether the consultant owns any stock of
our Company. On an annual basis, the Compensation Committee will continue to monitor the independence of its compensation
consultants. The Compensation Committee determined, based on its evaluation, that the work of Pearl Meyer has not created any
conflict of interest. In 2019, Pearl Meyer assisted the Compensation Committee with the following: (i) attended Compensation
Committee meetings as requested; (ii) provided advice and analysis of the design of the Company’s short-term and long-term
incentive programs; and (iii) reviewed and provided comments on named executive officers’ compensation and the disclosure
regarding executive compensation in the proxy statement for the 2019 annual meeting of stockholders.

Compensation Benchmarking

In determining compensation levels, the Compensation Committee believes that it is important when making compensation-
related decisions to be informed as to the practices of publicly-held companies of similar size, revenue and market focus. As a result,
the Compensation Committee relies on its independent compensation consultant to help define the appropriate competitive market
using a combination of peer group companies and industry-specific compensation surveys. The Company’s peer group currently
consists of the companies noted below.

Acme United Corporation
Black Diamond, Inc.
Crown Crafts, Inc.
CSS Industries Inc.
Delta Apparel, Inc.
Escalade Inc.

Named Executive Officer Compensation in 2019

JAKKS Pacific, Inc.
Lifetime Brands, Inc.
Nautilus Inc.
Rocky Brands, Inc.
Turtle Beach Corporation
ZAGG Inc.

Our named executive officers for 2019 were Stuart Noyes, Interim Chief Executive Officer, Paul Francese, Senior Vice
President and Chief Financial Officer, and Mark Messner, former President and Chief Executive Officer. Mr. Noyes joined our
Company in December 2019, replacing Mr. Messner.

Interim CEO

Winter Harbor Engagement. Mr. Noyes does not receive any compensation directly from the Company, but was engaged
pursuant to the terms of an engagement letter between the Company and Winter Harbor, LLC dated December 9, 2019 (the “Letter
Agreement”), to act as the Company’s Interim CEO, effective December 16, 2019. Mr. Noyes reports to the Board, and, together with
other Winter Harbor advisors, provides restructuring and advisory services to the Company. Compensation for the services provided
under the Agreement for the first ten weeks of the engagement were determined based on agreed-upon hourly rates, subject to a cap of
$35,000 per week (other than holiday weeks, which were capped at $15,000 each week) and thereafter upon actual hours worked or
such other mutually agreed upon fee structure, plus any out-of-pocket expenses. In February 2020, the Compensation Committee
approved, and the Company entered into, an amendment to the Letter Agreement that provides for compensation at a weekly rate of
$40,000, effective beginning the week of February 24, 2020 through the termination of the engagement letter. The Letter Agreement,
as amended, also includes a bonus (within a range of $50,000 to $550,000) payable to Winter Harbor if the Company engages in a
transaction that constitutes a “change in control” (as defined in the Company’s existing Change in Control Plan) and the Company’s
stockholders receive a specified amount of per share consideration, the amount of such bonus to vary depending on such per share
consideration. The Company has also agreed to indemnify Winter Harbor, Mr. Noyes and other Winter Harbor personnel in
connection with the engagement, subject to customary terms and conditions. Either party may terminate the Letter Agreement upon 30
days’ prior written notice.

Prior to entering into the Letter Agreement, in November 2019 in connection with the Company’s amendment to its credit

facilities, the Company engaged Winter Harbor to provide financial advisory services (the “Advisor Agreement”) and paid a retainer
of $25,000. Compensation under the Advisor Agreement is determined based on agreed-upon hourly rates for actual hours worked,
plus any out-of-pocket expenses and a 1% administrative fee on the total amount of each invoice to cover administrative costs. As of
December 28, 2019, the Company had paid or accrued approximately $35,774 related to services provided under the Advisory
Agreement, including expenses and administrative fees. Fees for services under the Advisor Agreement engagement are separate
from, and in addition to, fees paid under the Letter Agreement. Fees paid to Winter Harbor under the Letter Agreement are included
in the Summary Compensation Table set forth in the Executive Compensation section below.

Other Named Executive Officers

Base Salaries. There were no base salary increases for Messrs. Messner or Francese in 2019.

Annual Incentive Bonus. As discussed above, no annual incentive bonus program was approved for fiscal 2019.

Long-Term Equity Incentive Awards. For 2019, our annual equity-based incentive compensation awards for executive

officers and senior management employees were in the form of restricted stock awards and stock options in amounts generally below
the market 25th percentile for similar companies due to our stock price and share pool size. Messrs. Messner and Francese each
received an annual equity award comparable to prior years. The vesting schedule for these awards is 25% per year, with vesting
beginning on the first anniversary of the grant date. In connection with his separation from the Company as described below, a portion
of Mr. Messner’s 2019 annual equity award was accelerated.

The following table sets forth, for fiscal years 2018 and 2019, information regarding compensation of our named executive

SUMMARY COMPENSATION TABLE

officers:

Name and
Principal Position
Stuart Noyes

Interim Chief Executive Officer

Paul Francese

Senior Vice President and Chief
Financial Officer

Mark Messner (4)

Former President and Chief
Executive Officer

Year
2019

2019
2018

Salary
($)

—

330,000
17,769

403,846
420,000

Bonus
($)

—

—
—

Stock
Awards
($) (1)

Option
Awards
($) (1)

—

All Other
Compensation
($)
76,194(2)

Total
($)
76,194

6,900
18,800

7,800
15,900

11,175(3)
3,899

355,875
56,368

13,800
16,400

15,600
18,000

293,086(4)
96,667

726,332
551,667

(1) The amounts for 2019 reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718.

(2) Represents fees paid to Winter Harbor, LLC pursuant to the Letter Agreement described above under “Winter Harbor

Engagement” during the year ending December 28, 2019. Consists of (i) $30,620 hourly fees paid for services of Mr. Noyes, (ii)
$18,331 hour fees paid for services of other Winter Harbor employees, (iii) a $25,000 retainer paid upon entering into the Letter
Agreement and (iv) $2,243 of expenses.

(3)

Includes (i) $175 of relocation expenses and (ii) $11,000 of employer contributions to our Company’s 401(k) plan.

(4) Mr. Messner stepped down as the Company’s CEO effective December 13, 2019. The amount in the All Other Compensation

column for 2019 includes (i) $30,505 of living expenses, (ii) $44,191 of travel expenses to and from Mr. Messner’s residence to
our Company’s executive offices, (iii) an auto allowance of $8,250, (iv) $11,000 of employer contributions to our Company’s 401
(k) plan, (v) $22,353 of accrued paid time-off that was paid to Mr. Messner upon his separation from the Company, (vi) $15,158
of value for equity awards accelerated upon his separation from the Company, (vii) $150,000 cash severance payment, (viii)
$6,175 lease liability assumed under Mr. Messner’s separation agreement and (ix) $5,454 post-termination payment for COBRA.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table provides information about outstanding equity awards held by the named executive officers at the end of

2019. Mr. Noyes has received no equity awards from the Company. Share amounts in the table below have been adjusted to reflect
the 9-for-1 reverse stock split that occurred in March 2020.

Name
Paul Francese

Mark Messner (2)

Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable

833
—
—
—

9,723
4,862
3,429
1,667
556

Option Awards
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
2,500
—
2,223
—

—
—
—
—
—

Option
Exercise
Price
Per
Share
($)

8.46
—
6.21
—

15.30
17.73
10.71
7.38
6.21

Award
Grant Date
(1)
11/27/2018
11/27/2018
05/10/2019
05/10/2019

07/13/2016
02/22/2017
03/19/2018
05/02/2018
05/10/2019

Option
Expiration
Date
11/27/2028
—
05/10/2029
—

06/30/2020
06/30/2020
06/30/2020
06/30/2020
06/30/2020

Stock Awards

Number of
Shares or
Units of
Stock That
Have Not
Vested (#)

Market Value
of Shares or
Units of Stock
That Have Not
Vested ($)

1,667

1,111

3,450

2,300

(1) Unless otherwise noted, (i) option grants vest as follows: 25% of the total number of shares subject to the options vest and

become exercisable on each of the first, second, third and fourth anniversaries of the date of grant and (ii) restricted stock grants
have a vesting schedule as follows: 25% of the total number of shares underlying the award vest on each of the first, second, third
and fourth anniversaries of the date of grant.

(2) Mr. Messner stepped down as the Company’s CEO effective December 13, 2019. Under his separation agreement with the

Company, (i) the vesting of a portion of outstanding, unvested option awards was accelerated and the period in which to exercise
vested options was extended to June 30, 2020, and unvested option awards were terminated, and (ii) the vesting of a portion of
outstanding, unvested stock awards was accelerated and remaining unvested stock awards were terminated.

Employment Arrangements with Current Named Executive Officers

Stuart Noyes. Our Interim CEO, Mr. Noyes, does not receive any compensation directly from the Company. See “Winter

Harbor Engagement” and the Summary Compensation Table above regarding compensation paid to Winter Harbor, LLC for Mr.
Noyes’ services.

Paul Francese. Pursuant to the terms of his offer letter with the Company, Mr. Francese receives an initial annual base salary

of $330,000, and is eligible to participate in the Company’s short-term incentive bonus program beginning in fiscal year 2019, with a
target equal to 40% of his base salary. He is also eligible to participate in our long-term incentive plan and any other bonus plans, as
determined by the Compensation Committee, and is eligible to receive all medical, dental and other benefits to the same extent as
provided to other senior management employees. Further, the Company agreed to reimburse Mr. Francese for certain living expenses
incurred during his first month of employment in an amount not to exceed $8,000. If Mr. Francese’s employment is terminated by us
without cause, or Mr. Francese terminates his employment for good reason, then he is entitled to receive a cash severance payment
equal to six months of his then current base salary, payable in accordance with the Company’s customary payroll practices and subject
to the Company’s receipt of a general release and termination agreement from Mr. Francese. Mr. Francese is a participant in the
Company’s Change in Control Plan, described below, pursuant to which he is entitled to compensation in the event he is terminated
for certain reasons following a change in control of the Company.

Separation Agreement and General Release with Former Chief Executive Officer

In November 2019, the Company, Summer Infant (USA), Inc. and Mr. Messner entered into a Separation Agreement and
General Release (the “Separation Agreement”) regarding the terms of his departure from the Company. Pursuant to the Separation
Agreement, in consideration for a general release and covenants from Mr. Messner, Mr. Messner received (i) cash severance totaling
$150,000.00, (ii) accelerated vesting of a total of 31,250 shares (3,473 shares on a post-split adjusted basis) under outstanding
restricted share awards, (iii) accelerated vesting of a total of 31,250 stock options (3,473 options on a post-split adjusted basis) under
outstanding stock option awards, (iv) an extension of the option exercise period for all vested and unexercised stock option awards
until June 30, 2020, and (v) reimbursement for COBRA coverage expense up to November 30, 2020. In addition, the Company
assumed remaining obligations under Mr. Messner’s apartment lease in Rhode Island and will provide, at its expense, outplacement
services to Mr. Messner for a period of up to 12 months following his separation.

Change in Control Plan

In February 2018, the Board approved a Change in Control Plan. Under the “double trigger” provisions of the Change in
Control Plan, a participant will be entitled to certain payments if (1) there is a change in control and (2) within the 12-month period
following the change in control, the participant’s employment is terminated without cause by the Company or for good reason by the
participant. If these events occur, a participant will be entitled to receive payments based on their tier under the Plan for a period of
time following the termination. Our Interim CEO, Mr. Noyes, does not participate in the Change in Control Plan. Our CFO, Mr.
Francese, is a Tier 2 participant in the Change in Control Plan, and would receive the following benefits:

(cid:120)

a cash payment equal to his annual base salary times the applicable tier multiplier (1.0x for our CFO), payable over
a period of time following termination (12 months for our CFO);

a cash payment equal to the pro-rated portion of the participant’s annual cash bonus actually achieved for the fiscal
year in which the termination occurs, payable when such payment would otherwise be paid after the end of the
relevant performance period; and

a cash payment equal to one times the monthly premiums for the participant’s group medical, dental and vision
coverage for a period of time (12 months for our CFO), payable monthly provided that such payments will end if the
participant becomes eligible to participate in similar plans with a subsequent employer.

In addition, any unvested equity awards held by our CFO that were granted prior to the change in control will accelerate and

vest in full as of the participant’s termination date, and any unvested performance-based equity awards will be deemed vested and
earned assuming achievement at the target performance level. As a condition to receiving payments under the Plan, participants must
execute a severance agreement and release, which includes non-competition and similar covenants that remain in effect for 12 months
for our CFO.

Retirement Plans

We have a Section 401(k) plan and provide an employer matching contribution, which is the same that we provide all of our

employees. We do not offer our executives any nonqualified pension plans, supplemental executive retirement plans, deferred
compensation plans or other forms of compensation for retirement.

Director Compensation

For fiscal 2019, the following director compensation program was in place for our non-employee directors:

(cid:120)

for the first two quarters of 2019, an annual retainer fee of $90,000 for the Chairperson and $45,000 for other non-
employee directors, which was reduced to $70,000 and $35,000, respectively, beginning in the third quarter of 2019;

for any meetings beyond four regularly scheduled board meetings per year, a fee of $1,000 for each board meeting
attended in person;

(cid:120)

the chairpersons of the Audit, Compensation, Nominating/Governance and Marketing Committees received an additional
annual fee of $15,000, $10,000, $8,000 and $8,000, respectively;

each director serving as a member of the Audit, Compensation and Nominating/Governance Committees (other than the
chairperson of each such committee) received an annual fee of $5,000; and

on the date of our annual meeting of stockholders, each director other than our Chairperson received an annual equity
award, in the form of 7,500 shares (834 shares on a post-split adjusted basis) and the Chairperson received an annual
equity award, in the form of shares of our common stock, of 15,000 shares (1,667 shares on a post-split adjusted basis).

We also generally reimburse non-employee directors for travel expenses incurred in connection with their duties as directors.
In addition, our Board of Directors may from time to time also provide for cash compensation, as recommended by the Compensation
Committee, payable to members of special or ad hoc committees of the Board of Directors.

Other than as disclosed in this proxy statement, we do not pay any directors who are also executive officers any additional

compensation for service as directors.

Director Compensation in 2019

The following table shows non-employee director compensation in 2019. Mark Messner, our former Chief Executive

Officer, served on the Board during 2019 and did not receive any additional compensation for his service as a director. For
information on compensation received by Mr. Messner for his services as former Chief Executive Officer, please see “Executive
Compensation - Summary Compensation Table” above.

Name
Evelyn D’An
Marty Fogelman
Robin Marino
Alan Mustacchi
Andrew Train
Stephen J. Zelkowicz

Fees Earned or
Paid in Cash ($)(1)

Stock
Awards
($)(2)

All Other
Compensation
($)

55,000
45,000
90,000
60,000
48,000
53,000

5,175
5,175
10,350
5,175
5,175
5,175

—
—
—
—
—
—

Total ($)

60,175
50,175
100,350
65,175
53,175
58,175

(1) Represents fees earned or paid in cash in 2019, including annual retainer fees and committee fees.

(2) The amounts reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718.

Assumptions used in the calculation of these amounts are included in Note 7 to our audited consolidated financial
statements for the fiscal year ended December 28, 2019, included in our Original Filing. As of December 28, 2019,
Mr. Train had 278 unvested restricted shares (on a post-split basis).

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Equity Compensation Plan Information

The following table summarizes information, as of December 28, 2019, regarding our equity compensation plans (on a post-

split adjusted basis).

Number of
Securities to Be
Issued Upon
Exercise
of Outstanding
Options,
Warrants and
Rights (a)

Weighted
Average
Exercise Price
of
Outstanding
Options,
Warrants, and
Rights (b)

Number of
Securities
Remaining
Available
for Future
Issuance
under Equity
Compensation
Plans
[excluding
securities
reflected in
column (a)] (c)

Plan Category

Equity compensation plans approved by stockholders
Equity compensation plans not approved by stockholders

Total

105,604(1) $
18,196(2)
123,800

13.46
18.59
14.21

71,468
—
71,468

(1)

Includes 21,716 shares issuable upon vesting of outstanding restricted stock awards granted to employees which have not yet
vested. Such shares are not included in the calculation of the weighted average exercise price reflected in column (b).

(2) Represents awards granted as inducement grants to newly-hired employees that were not subject to shareholder approval

pursuant to applicable Nasdaq Stock Market Rules. Includes 694 shares issuable upon vesting of outstanding restricted stock
awards granted to employees which have not yet vested. Such shares are not included in the calculation of the weighted
average exercise price reflected in column (b).

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information regarding the beneficial ownership of our common stock as of March 31, 2020 by:

(cid:120)

each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;

each of our directors and named executive officers; and

all of our current executive officers and directors as a group.

Name and Address of Beneficial Owner (1)
5% Stockholders
Wynnefield Capital Management LLC and related parties (4)
Jason Macari (5)

Directors and Named Executive Officers
Evelyn D’An
Marty Fogelman (6)
Paul Francese (7)
Robin Marino
Mark Messner (8)
Alan Mustacchi
Stuart Noyes
Andrew Train
Stephen J. Zelkowicz
All current directors and executive officers as a group (8 persons) (7)

* Less than 1%

Amount and
Nature of
Beneficial
Ownership (2)

Percent of
Common Stock (3)

758,788
385,432

3,546
14,590
4,448
23,744
38,642
10,228
—
3,964
8,123
68,643

36.0%
18.3%

*
*
*
1.1%
1.8%
*
—
*
*
3.3%

(1) Unless otherwise noted, the business address of each named person is 1275 Park East Drive, Woonsocket, Rhode Island 02895.

(2) Unless otherwise noted, each person named in the table has sole voting and investment power with regard to all shares

beneficially owned, subject to applicable community property laws.

(3) The percentages shown are calculated based on 2,111,427 shares of common stock issued and outstanding on March 31, 2020.
In calculating the percentage of ownership, all shares of common stock that the identified person or group had the right to
acquire within 60 days of March 31, 2020 are deemed to be outstanding for the purpose of computing the percentage of the
shares of common stock owned by that person or group, but are not deemed to be outstanding for the purpose of computing the
percentage of the shares of common stock owned by any other person or group.

(4) The information is as reported on Amendment No. 11 to Schedule 13D filed with the SEC on March 12, 2019. The address for
Wynnefield Capital Management, LLC and related entities is 450 Seventh Avenue, Suite 509, New York, NY 10123. Of the
shares indicated, 228,644 shares are beneficially owned by Wynnefield Partners Small Cap Value, L.P. (“Partners”), 346,343
shares are beneficially owned by Wynnefield Partners Small Cap Value, L.P. I (“Partners I”), 159,527 shares are beneficially
owned by Wynnefield Small Cap Value Offshore Fund, Ltd. (“Fund”), and 24,274 shares are beneficially owned by
Wynnefield Capital, Inc. Profit Sharing & Money Purchase Plan (“Plan”).

Wynnefield Capital Management, LLC (“WCM”) is the sole general partner of Partners and Partners I and, accordingly, may
be deemed to be the indirect beneficial owner (as that term is defined under Rule 13d-3 under the Exchange Act) of the shares
that Partners and Partners I beneficially own. WCM, as the sole

general partner of Partners and Partners I, has the sole power to direct the voting and disposition of the shares that Partners and
Partners I beneficially own. Nelson Obus and Joshua Landes are the co-managing members of WCM and, accordingly, each of
Messrs. Obus and Landes may be deemed to be the indirect beneficial owner (as that term is defined under Rule 13d-3 under
the Exchange Act) of the shares that WCM may be deemed to beneficially own. Each of Messrs. Obus and Landes, as co-
managing members of WCM, share the power to direct the voting and disposition of the shares that WCM may be deemed to
beneficially own.

Wynnefield Capital, Inc. (“WCI”) is the sole investment manager of the Fund and, accordingly, may be deemed to be the
indirect beneficial owner (as that term is defined under Rule 13d-3 under the Exchange Act) of the shares that the Fund
beneficially owns. WCI, as the sole investment manager of the Fund, has the sole power to direct the voting and disposition of
the shares that the Fund beneficially owns. Messrs. Obus and Landes are executive officers of WCI and, accordingly, each
may be deemed to be the indirect beneficial owner (as that term is defined under Rule 13d-3 under the Exchange Act) of the
shares that WCI may be deemed to beneficially own. Messrs. Obus and Landes, as executive officers of WCI, share the power
to direct the voting and disposition of the shares that WCI may be deemed to beneficially own.

The Plan is an employee profit sharing plan. Messrs. Obus and Landes are the co-trustees of the Plan and accordingly, Messrs.
Obus and Landes may be deemed to be the indirect beneficial owner (as that term is defined under Rule 13d-3 under the
Exchange Act) of the shares that the Plan may be deemed to beneficially own. Each of Messrs. Obus and Landes, as the
trustees of the Plan, shares with the other the power to direct the voting and disposition of the shares beneficially owned by the
Plan.

The information set forth in this footnote with respect to WCM, WCI and Messrs. Obus and Landes, shall not be considered an
admission that any of such persons, for the purpose of Section 16(b) of the Exchange Act, are the beneficial owners of any
shares in which such persons do not have a pecuniary interest. Each of WCM, WCI and Messrs. Obus and Landes disclaims
any beneficial ownership of these shares.

(5) The information is as reported on Amendment No. 2 to Schedule 13D filed with the SEC on September 12, 2016 and a Form 4

filed on November 20, 2019. The address of Mr. Macari is 3100 Diamond Hill Road, Cumberland, Rhode Island 02864.

(6) Includes 6,255 shares held by Mr. Fogelman’s spouse.

(7) Includes (i) 834 shares that may be acquired upon exercise of outstanding vested options, (ii) 556 shares that may be acquired
upon exercise of stock options that vest within 60 days of March 31, 2020, and (iii) 278 shares that vest pursuant to outstanding
stock awards that vest within 60 days of March 31, 2020.

(8) Includes 20,237 shares that may be acquired upon exercise of outstanding vested options. Mr. Messner stepped down as the

Company’s CEO effective December 13, 2019.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Independence of Directors

In determining the independence of directors, our Board analyzes each director’s relationship with our Company and our

subsidiaries to determine whether our directors are independent under the applicable rules of the Nasdaq Stock Market and the SEC.
Our Board has determined that each of our current directors is “independent” within the meaning of the independence rules of the
Nasdaq Stock Market and the SEC.

Certain Relationships and Related Transactions

In March 2009, our wholly owned subsidiary, Summer Infant (USA), Inc. (“Summer USA”), entered into a definitive

agreement with Faith Realty II, LLC, a company whose members are Jason P. Macari, our former Chief Executive Officer and a
former director. Under this agreement, Faith Realty purchased our corporate headquarters located at 1275 Park East Drive,
Woonsocket, Rhode Island for $4,052,500 and subsequently leased the headquarters back to Summer USA for an annual rent of
$390,000 for an initial seven-year term. The lease was last amended in January 2018 and extended the term of the lease until March
31, 2021 with annual rent of $468,000.

For a description of the Company’s agreement with Winter Harbor, of which Mr. Noyes is managing partner, see “Executive

Compensation - Winter Harbor Engagement” above.

Item 14. Principal Accountant Fees and Services

Our Audit and Finance Committee appointed RSM US, LLP (“RSM”), an independent registered public accounting firm, to

audit the consolidated financial statements of our company for the fiscal year ending January 2, 2021.

Fees

The following table shows the aggregate fees paid or accrued for audit and other services provided for fiscal years 2019 and

2018:

Audit Fees
Audit-Related Fees
Tax Fees
All Other Fees
Total Fees

2019

2018

338,246
—
—
—
338,246

339,120
12,000
—
—
351,120

Audit Fees in 2018 and 2019 were for professional services rendered for the audit of our annual consolidated financial

statements and related procedures and review of consolidated financial statements included in our Quarterly Reports on Form 10-Q
and services that are normally provided by RSM in connection with statutory and regulatory filings or engagements. Audit-Related
Fees in 2018 were for services rendered with respect to the Company’s adoption of and transition to the new lease accounting standard
(ASC 842, Leases).

Audit Committee Policy on Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

The Audit and Finance Committee pre-approves all audit and permissible non-audit services provided by the independent

registered public accounting firm. These services may include audit services, audit-related services, tax services and other services.
Pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular service or category of
services and is generally subject to a specific budget. The independent registered public accounting firm and management are
required to periodically report to the Audit and Finance Committee regarding the extent of services provided by the independent
registered public accounting firm in accordance with the pre-approval, and the fees for the services performed to date. The Audit and
Finance Committee may also pre-approve particular services on a case-by-case basis.

Item 15. Exhibits and Financial Statement Schedules

PART IV

(a)(3). Exhibits.

Exhibit No.

31.1

31.2

Description

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002

Pursuant to the requirements of Section 13 or 15(d) 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 on the 24th day of April, 2020.

SIGNATURES

SUMMER INFANT, INC.

By:

/s/ PAUL FRANCESE
Paul Francese
Chief Financial Officer
(Principal Financial and Accounting Officer)