Summer Infant
Annual Report 2020

Plain-text annual report

UNITEDSTATESSECURITIESANDEXCHANGECOMMISSIONWashington,D.C.20549FORM10-K(MarkOne)☒ANNUALREPORTPURSUANTTOSECTION13or15(d)OFTHESECURITIESEXCHANGEACTOF1934ForthefiscalyearendedJanuary2,2021Or☐TRANSITIONREPORTPURSUANTTOSECTION13or15(d)OFTHESECURITIESEXCHANGEACTOF1934ForthetransitionperiodfromtoCommissionFileNo.001-33346SUMMERINFANT,INC.(Exactnameofregistrantasspecifiedinitscharter)Delaware(Stateorotherjurisdictionofincorporation)20-1994619(I.R.S.EmployerIdentificationNo.)1275ParkEastDrive,Woonsocket,RhodeIsland(Addressofprincipalexecutiveoffices)02895(ZipCode)(401)671-6550(Registrant’stelephonenumber,includingareacode)SecuritiesregisteredpursuanttoSection12(b)oftheAct:TitleofeachclassTradingSymbol(s)NameofeachexchangeonwhichregisteredCommonStock,ParValue$0.0001SUMRNasdaqCapitalMarketSecuritiesregisteredpursuanttoSection12(g)oftheAct:NoneIndicatebycheckmarkiftheregistrantisawell-knownseasonedissuer,asdefinedinRule405oftheSecuritiesAct.Yes☐No☒IndicatebycheckmarkiftheregistrantisnotrequiredtofilereportspursuanttoSection13orSection15(d)oftheAct.Yes☐No☒Indicatebycheckmarkwhethertheregistrant:(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof1934duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtofilesuchreports),and(2)hasbeensubjecttosuchfilingrequirementsforthepast90days.Yes☒No☐IndicatebycheckmarkwhethertheregistranthassubmittedelectronicallyeveryInteractiveDataFilerequiredtobesubmittedpursuanttoRule405ofRegulationS-T(§232.405ofthischapter)duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtosubmitsuchfiles).Yes☒No☐Indicatebycheckmarkwhethertheregistrantisalargeacceleratedfiler,anacceleratedfiler,anon-acceleratedfilerasmallerreportingcompany,oranemerginggrowthcompany.Seethedefinitionsof“largeacceleratedfiler,”“acceleratedfiler,”“smallerreportingcompany,”and“emerginggrowthcompany”inRule12b-2oftheExchangeAct.Largeacceleratedfiler☐Acceleratedfiler☐Non-acceleratedfiler☒Smallerreportingcompany☒Emerginggrowthcompany☐Ifanemerginggrowthcompany,indicatebycheckmarkiftheregistranthaselectednottousetheextendedtransitionperiodforcomplyingwithanyneworrevisedfinancialaccountingstandardsprovidedpursuanttoSection13(a)oftheExchangeAct.☐Indicatebycheckmarkwhethertheregistranthasfiledareportonandattestationtoitsmanagement’sassessmentoftheeffectivenessofitsinternalcontroloverfinancialreportingunderSection404(b)oftheSarbanes-OxleyAct(15U.S.C.7262(b))bytheregisteredpublicaccountingfirmthatpreparedorissueditsauditreport.☐Indicatebycheckmarkwhethertheregistrantisashellcompany(asdefinedinRule12b-2oftheAct).Yes☐No☒Theaggregatemarketvalueoftheregistrant’svotingandnon-votingcommonequityheldbynon-affiliatesasofJune26,2020,was$6.4million.Forpurposesofthiscomputation,allofficers,directors,and10%beneficialownersoftheregistrantaredeemedtobeaffiliates.Suchdeterminationshouldnotbedeemedtobeanadmissionthatsuchofficers,directors,or10%beneficialownersare,infact,affiliatesoftheregistrant.Thenumberofsharesissuedandoutstandingoftheregistrant’scommonstockasofMarch12,2021was2,133,260,DOCUMENTSINCORPORATEDBYREFERENCEPortionsoftheregistrant’sProxyStatementforits2021AnnualMeetingofStockholdersareincorporatedbyreferenceintoPartIIIofthisAnnualReportonForm10-K.INDEXTOFORM10-KFORTHEFISCALYEARENDEDJANUARY2,2021PAGEPARTIITEM1.Business.......................................................3ITEM1A.RiskFactors....................................................7ITEM1B.UnresolvedStaffComments.........................................15ITEM2.Properties......................................................15ITEM3.LegalProceedings................................................15ITEM4.MineSafetyDisclosures............................................15PARTIIITEM5.MarketforRegistrant’sCommonEquity,RelatedStockholderMattersandIssuerPurchasesofEquitySecurities.......................................16ITEM6.SelectedFinancialData............................................16ITEM7.Management’sDiscussionandAnalysisofFinancialConditionandResultsofOperations.....................................................16ITEM7A.QuantitativeandQualitativeDisclosuresAboutMarketRisk..................26ITEM8.FinancialStatementsandSupplementaryData............................26ITEM9.ChangesinandDisagreementswithAccountantsonAccountingandFinancialDisclosure.....................................................26ITEM9A.ControlsandProcedures...........................................26ITEM9B.OtherInformation................................................27PARTIIIITEM10.Directors,ExecutiveOfficersandCorporateGovernance.....................28ITEM11.ExecutiveCompensation...........................................28ITEM12.SecurityOwnershipofCertainBeneficialOwnersandManagementandRelatedStockholderMatters..............................................28ITEM13.CertainRelationshipsandRelatedTransactions,andDirectorIndependence.......28ITEM14.PrincipalAccountantFeesandServices.................................28PARTIVITEM15.ExhibitsandFinancialStatementSchedules..............................29ITEM16.Form10-KSummary..............................................29SIGNATURES...........................................................322PARTIWhenusedinthisreport,theterms“Summer,”the“Company,”“we,”“us,”and“our”meanSummerInfant,Inc.anditssubsidiaries.NotethatalldollaramountsinPartIareinthousandsofU.S.dollarsunlessotherwisenoted.Item1.BusinessOverviewWeareaninfantandjuvenileproductscompanydoingbusinessunderthenameSUMRBrands.Wearearecognizedauthorityinthejuvenileproductindustry,providingparentsandcaregiversafullrangeofinnovative,high-quality,andhigh-valueproductstocareforbabiesandtoddlers.Weseektoimprovethequalityoflifeofparents,caregivers,andbabiesthroughourproductofferings,whileatthesametimemaximizingshareholdervalueoverthelongterm.Weoperateinoneprincipalindustrysegmentacrossgeographicallydiversemarketplaces,sellingourproductsgloballytolarge,nationalretailersaswellasindependentretailers,onourpartner’swebsites,andourowndirecttoconsumerwebsite.InNorthAmerica,ourcustomersincludeAmazon.com,Wal-Mart,Target,BuyBuyBaby,HomeDepot,andLowe’s.OurlargestEuropean-basedcustomersareSmythsToysandAmazon.Wealsosellthroughinternationaldistributors,representatives,andtoselectinternationalretailcustomersingeographiclocationswherewedonothaveadirectsalespresence.Ourcompanywasoriginallyfoundedin1985andhaspubliclytradedontheNasdaqStockMarketsince2007underthesymbol“SUMR”.StrategicPrioritiesOurgoalistobecomeagloballyrecognizedleaderinthejuvenileproductindustrybycreatingproductsthatfamilieseverywhereneed,want,loveanddependon.Tosupportourroadmapforsustainablegrowthin2021andbeyond,wewillcontinuetoseektodevelopandlaunchnewproductsbasedonconsumerdemand,whilealsostrengtheningourcoreproductofferings.Additionally,wewillcontinuetoexpandourreachthroughaportfolioofbrands,strategicallypositionedtoappealtomultipleconsumerdemographics,andfurtherdevelopourkeycustomerrelationships.Inadditiontoorganicgrowth,wewillconsideracquisitionsofproductsorbusinesses,consistentwithourroadmap.Webelievethefollowingkeystrategicprioritiespositionustocapitalizeonmarkettrendsandfuelourfuturegrowth:•Growththroughproduct.Wecontinuouslyseektocreatedifferentiatedproductsthatappealtoconsumerswhoincreasinglydemandhigh-quality,long-lastingproductsthatmakefamilylifeeasier,safer,andmorefun.Weprideourselvesasleadersofinnovationwithinthejuvenileproductsindustry.Westrivetodeliverinnovationinvariouswaysbaseduponproductcategory,includingdesigninnovationinpottiesandgates,newconveniencefeaturesinbathandstrollers,andanexpandedrangeofsafe-sleepsolutionswithinourSwaddleMe®brandedproductline.Inadditiontobeingleadersofinnovationinthejuvenileproductsindustry,in2021,weareconsideringplanstoexpandintothepetindustrywithanewbrandfeaturingproductsforpetsthatarecongruentwithourjuvenileassortment.Webelievethatwithourabilitytoanalyzeamarkettofindopportunisticgrowth,combinedwithourcoredevelopmentcapabilities,aswellasourstrongmanufacturingpartnerships,thepetindustryisanopportunityforincrementalgrowthinadditiontothejuvenileproductsindustry.•Growththroughbrand.Bymaintainingastrategicapproachtoourconsumerbrands,webelievewearepositionedtoexpandourappealtoawidevarietyofconsumerdemographicswhileprovidingretailerdifferentiation.Wecontinuetotakeadigital-firstapproachtomarketingcommunicationsandbranddevelopment.Inaddition,weexpecttocontinuetofocusononlinemerchandisingtodriveconversionratesbothin-storeandonline,asamajorityofconsumersresearchproductsonlinebeforebuyingeitheratretailorthroughe-commerce.•Growththroughdistribution.WehavestrongpartnershipswithoursuppliersintheU.S.,Mexico,andAsia.Webelievethatourabilitytodevelopproductsthatarepreferredbyconsumersandcost-efficientgivesusacompetitiveadvantageinmeetingourcustomerdemands.Wehavelong-standing3relationshipswithourbrickandmortarande-commerceretailcustomersintheU.S.,andwillcontinuetofocusonstrengtheningthemtoincreaseourpresenceinstoresandonline.•Continuousinfrastructureimprovement.Alargepercentageofour2020initiativeswerefocusedonoperationalcostreductions,productsourcingandtariffmitigation,andstreamliningimprovements.ActiveprogramsincludeongoingSKUreductionsandrationalization,warehouselaborreductions,leaseholdrationalizationandthesublettingofexcessspacewhereapplicable.Additionally,weplanonincreasingourdirectimportbusinessandrelocatingproductmanufacturingfromAsiatoreducetariffsandothercosts.ProductsWecurrentlymarketourproductsinseveralproductcategoriesincludinggates,potty,bath,entertainers,babymonitors,specialtyblankets,strollers,carseatsandtravelsystems.WeareaNorthAmericanmarketleaderinthegate,bath,andthepottycategoriesaswellasaNorthAmericanmarketleaderintheconveniencestrollersegment.Wemarketourcoreproducts,underourSummer™andSwaddleMe®brandnames.Withingates,weofferaproductrangeofmorethan30products.Ourlineofgatesoffersversatilitythatcoversuseinhome,easeofinstallation,andaestheticallypleasingdesigns.Wecontinuetoreceivepositivefeedbackfromretailersasweexpandourportfoliowithconsumerpreferredfeaturesandstyling.Wefirstenteredtheinfantbathingcategoryin2002,andwehavecontinuedtocreateusefulandsafesolutionsforbathing.Ourinnovativebathproduct,MyBathSeat™continuestobeextremelypopularwithconsumers.Wehaveanestablishedroadmapfordevelopingproductsinthefourphasesofbathing(sponges,bathers,bathtubs,andbathseats)toaddressconsumerneedsasbabygrows,andtocreateloyaltytoourbrands.OurMySize™PottyandtheMySize™PottyTrain&Transitionhavebeenwell-receivedbyretailersandconsumersalike.Inlate2020andearly2021,welaunchedanexpandedrangeofpottytrainingproducts.Weareamarketshareleaderinpotties,withadditionalofferingsthatsupportdifferentconsumerneedsandvariouspricepointsinregardstopottytraining.WeareaNorthAmericanmarketleaderintheconveniencesegmentofstrollers.Our3Dlite®ConvenienceStrollercontinuestobeafavoriteamongparents.Wehavecontinuedtoexpandourrangeofconveniencestrollerplatformstoappealtotheexperiencedparent.Inaddition,in2020,welaunchedtheMyriamodulartravelsystemandtheAffirm335infantcarseatthatattractfirsttimeexpectantparentstoourproducts.Ourmonitorswerefirstintroducedin2001andaredistinguishedbyeaseofuse,innovativefeatures,andtheirhighquality.Currently,weofferaudioandvideomonitorsundertheSummer™brand.Ourmonitorsfeaturehighqualitycomponents,intendedtofulfillthedesireforconsumerstoconnectwithbabyatanytimeorplace.OurspecialtyblanketsincludeSwaddleMe®specialtyblanketsaswellasourexpandedlineofSlumberBuddysoothers.Acquiredin2008,SwaddleMe®continuestobeatrustedbrandsynonymouswithinfantsafesleep.Anewbrandrefreshandanexpandedrangeofproductswerelaunchedin2020,andweexpecttocontinuetoaddnewstagesofsleepproductstoouravailableassortment.ProductDevelopmentandDesignAthoroughunderstandingofourconsumer,thecompetition,andourcustomerretailpartnersdrivesourproductdevelopment.Developingandmarketinginnovativesolutionsareacriticalelementofourstrategy.Westrivetoproduceproprietaryproductsthatofferdistinctivebenefits,arevisuallyappealing,andprovidesafe,thoughtfulsolutions.Weconductmarketanalysesinourgeographicregionsofpriority,evaluateidentifiedopportunities,anddesignproductsaccordingly.ThemajorityofourproductsarecurrentlydesignedatourRhodeIslandheadquarters.Whenappropriate,wealsopartnerwithmanufacturersinAsiaonproductdevelopment.Inadditiontonewproductdevelopment,wecontinuouslylookforwaystoimproveuponexistingproductsbasedonconsumerinsightswithastrongfocusontheend-userexperience.4SuppliersandManufacturingWesourceourproductsgloballyfromavarietyofsuppliersandmanufacturers,includingfromChina,Vietnam,theUnitedStatesandMexico.Wearenotdependentonanyonesupplierasweusemanydifferentmanufacturersandpresentlyownthetoolingandmoldsusedforourproducts.OurHongKongsubsidiaryprovidesuswithanAsiansourcingpresenceandtheabilitytooverseequality,electronicengineeringandotherissuesthatmayariseduringproduction.Generally,webuyfinishedgoodsfrommanufacturers,andthusdonotdirectlyprocurerawmaterialsforproductmanufacturing.Historically,wehavenotexperiencedanysignificantdisruptionofsupplyasaresultofrawmaterialshortagesorothermanufacturingfactors,butthereisthepossibilitythatshortagescouldoccurinthefuturebasedonavarietyoffactorsbeyondourcontrol.Asian-madegoodsareshippedonthewatertoourwarehouses,whichtypicallytakesuptofourweeks.Wealsoutilizeadirectimportprogram,toreducecostsandshippingtimetocertaincustomers.WemaintaininventoryinwarehouseslocatedintheUnitedStatesandCanadaaswellasathird-partylogisticswarehouseinChina.Mostofourcustomerspickuptheirgoodsatourwarehouses.Wealsodelivershipmentsdirecttocustomersforsalesfromourownwebsiteandourconsumerreplacementsprogramaswellasforothersmallerretailpartnersthatrequestsucharrangements.SalesandMarketingOurproductsarelargelymarketedandsoldthroughourowndirectsalesforce.Wehavealsoestablishedastrongnetworkofindependentmanufacturers’representativesanddistributorstoprovidesalesandcustomerservicesupportforretailcustomersinNorthAmericaandinternationally.Weseektoexpandourdirect-to-consumersales,whichwebelievewillalsoincreaseoverallbrandawareness.Salesarerecognizedupontransferoftitletoourcustomersandaremadeutilizingstandardcredittermsofapproximately60days.Wegenerallyacceptreturnsonlyfordefectivemerchandise.Marketing,promotionandconsumerengagementarekeyelementsinthejuvenileindustry.Historically,asignificantpercentageofourpromotionalspendinghasbeenstructuredincoordinationwithlargeretailpartners.Wecontinuetofocusourmarketingeffortsongrowingbrandawarenessamongourtargetconsumerdemographic,optimizingmarketinginvestments,andexecutinganintegratedmarketingstrategy.Webelieveanimportantcomponentofourfuturegrowthisbasedonspeakingtotherightcustomer,withtherightcontent,intherightchannel,attherighttime.Wehaveimplementedonlinemarketing,socialmedia,anddigitalanalyticstools,whichallowustobettermeasuretheperformanceofourmarketingactivities,learnfromourconsumers,andreceivevaluableinsightsintoindustryandcompetitoractivities.Customerserviceisacriticalcomponentofourmarketingstrategy.WemaintainaU.S.-basedinternalcustomerservicedepartmentthatrespondstocustomerinquiries,investigatesandresolvesissues,andisavailabletoassistcustomersandconsumersduringbusinesshours.CompetitionThejuvenileproductindustryhasmanyparticipants,noneofwhichhasdominantmarketshare,thoughcertaincompaniesmayhavedisproportionatestrengthinspecificproductcategories.Wecompetewithanumberofdifferentcompaniesinavarietyofcategories,althoughthereisnosinglecompanythatcompeteswithusacrossallofourproductcategories.OurlargestdirectcompetitorsareTomyCompany,Ltd.,DorelIndustries,Inc.,RegaloBaby®,Munchkin®,GB®(GoodbabyInternationalHoldings,Ltd.),Graco®(asubsidiaryofNewellRubbermaid),Chicco®,Fisher-Price®(asubsidiaryofMattel,Inc.),Aden&Anais®,andMotorola®(alicensedbrandofBinatoneCommunicationsGroup).Theprimarymethodofcompetitionintheindustryconsistsofbrandpositioning,productinnovation,quality,price,andtimelydistribution.Ourcompetitivestrengthsincludeourabilitytodevelopinnovativenewproducts,speedtomarket,ourrelationshipswithmajorretailers,andthequalityandpricingofourproducts.IntellectualPropertyWerelyonacombinationoftrademarks,patents,andtradesecretstoprotectourintellectualproperty.OurcurrentU.S.patentsincludevariousdesignfeaturesrelatedtosafetygates,bouncers,bathers,and5monitorswithseveralotherpatentsunderreviewbytheUnitedStatesPatentandTrademarkOffice(USPTO).TheissuedU.S.patentsexpireatvarioustimesdependingonthedateofissuanceduringthenext18years.Incertaincircumstances,wewillpartnerwiththirdpartiestodevelopproprietaryproducts,and,whereappropriate,wehavelicenseagreementsrelatedtotheuseofthird-partyinnovationinourproducts.Thedurationofourtrademarkregistrationsvariesfromcountrytocountry.However,trademarksaregenerallyvalidandmayberenewedindefinitelyaslongastheyareinuseand/ortheirregistrationsareproperlymaintained.CustomersSalestotheCompany’stopsevencustomerstogethercomprisedapproximately87%ofoursalesinfiscal2020and81%ofoursalesinfiscal2019.Ofthesecustomers,threegeneratedmorethan10%ofsalesforfiscal2020:Amazon.com(33%),Walmart(28%),andTarget(17%).Infiscal2019,threecustomersgeneratedmorethan10%ofsales:Amazon.com(26%),Walmart(25%),andTarget(17%).Wehavenolong-termcontractswiththesecustomers,andasaresult,oursuccessdependsheavilyonourcustomers’willingnesstopurchaseandprovideshelfspaceforourproducts.SeasonalityWedoexperiencesomevariationsinseasonaldemandforourproductsinoursecondandthirdquartersofeachyear.However,weexpecttogeneratehigherthanaveragevolumesfortheinitialshipmentofnewproductswhichtypicallyincludesenoughinventorytofilleachstoreplusadditionalamountstobekeptatthecustomer’sdistributioncenter.Thetimingoftheseinitialshipmentsvariesbycustomerdependingonwhentheyfinalizestorelayoutsfortheupcomingyearandwhetherthereareanymid-yearproductintroductions.RegulatoryMattersEachofourproductsisdesignedtocomplywithallapplicablemandatoryandvoluntarysafetystandards.IntheUnitedStates,thesesafetystandardsarepromulgatedbyfederal,stateandindependentagenciessuchastheUSConsumerProductSafetyCommission,ASTM,theFederalCommunicationsCommission,theFoodandDrugAdministration,theFederalTradeCommission,andvariousstatesAttorneyGeneralsandstateregulatoryagencies.AllofourproductsareindependentlytestedbythirdpartylaboratoriesacceptedbytheConsumerProductSafetyCommissiontoverifycompliancetoapplicablesafetystandards.Asimilarapproachisusedtodesignandtestproductssoldinternationally.InsuranceWecarryproductliabilityinsurancethatprovidesuswith$15,000coveragewithaminimaldeductible.Weconsultwithourinsurerstoascertainappropriateliabilitycoverageforourproductmix.Webelieveourcurrentcoverageisadequateforourexistingbusinessandwillcontinuetoevaluateourcoverageinthefutureinlinewithourexpandingsalesandproductbreadth.EmployeesWebelievethatthedevelopment,attractionandretentionofemployeesisanimportantfactortoourCompany’ssuccess.Weofferouremployeesawiderangeofbenefits,andtosupporttheadvancementofouremployees,weoffertraininganddevelopmentprogramsencouragingadvancementfromwithin.AsofJanuary2,2021,wehad119employees,115ofwhomwerefulltimeemployeesand55ofwhomworkedinourRhodeIslandheadquarters.AvailableInformationTheCompanyisincorporatedunderthelawsoftheStateofDelaware.Ourprincipalexecutiveofficesarelocatedat1275ParkEastDrive,Woonsocket,RhodeIsland02895,andourtelephonenumberis(401)671-6550.Wemaintainourcorporatewebsiteatwww.summerinfant.com.6WefilereportswiththeSecuritiesandExchangeCommission(“SEC”),includinganannualreportonForm10-K,quarterlyreportsonForm10-Q,currentreportsonForm8-K,andamendmentstothosereportsthatwefilewith,orfurnishto,theSEC.TheSECmaintainsanInternetwebsite,www.sec.gov,thatcontainsreports,proxyandinformationstatementsandotherinformationthatwefileelectronicallywiththeSEC.Ourwebsitealsoincludescorporategovernanceinformation,includingourCodeofEthicsandourBoardcommitteecharters.Theinformationcontainedonourwebsitedoesnotconstituteapartofthisreport.Item1A.RiskFactorsAninvestmentinoursecuritiesinvolvesahighdegreeofrisk.Youshouldcarefullyconsidertherisksdescribedbelowbeforemakinganinvestmentdecision.Ifanyoftheeventsorcircumstancesdescribedinthefollowingrisksactuallyoccur,ourbusiness,financialconditionorresultsofoperationscouldbemateriallyadverselyaffectedandthetradingpriceofourcommonstockcoulddecline.Theriskfactorslistedbelowarenotexhaustive.Weoperateinaverycompetitiveandrapidlychangingenvironmentinwhichnewfactorsmayemergefromtimetotime,anditisnotpossibleformanagementtopredicttheimpactofallofthesefactorsonourbusiness,financialconditionorresultsofoperations.RisksRelatingtoCOVID-19WefacerisksrelatedtothewidespreadCOVID-19pandemicthatimpactedourbusinessin2020,andmaycontinuetoimpactourbusinessandfinancialperformance.In2020,wesawtheCOVID-19pandemicnegativelyimpacttheglobaleconomy,disruptglobalsupplychainsandcreatesignificantvolatilityanddisruptionoffinancialmarkets.Thepandemicexposesustoanumberofrisks,includingthefollowing:•Operationalrisks.Earlyinthepandemic,weexperiencedsomesupplychaindisruptionasmostofourproductissourcedfromChina,whichexperiencedwidespreadshutdownsinresponsetotheCOVID-19outbreakinlate2019/early2020.WhilewehaveseenproductionfromChinareturningtonormallevels,ifthereisanotheroutbreakofCOVID-19inChina,oursupplychaincouldagainbedisrupted.OursupplierslocatedinothercountriesmayalsoexperienceshutdownsduetoCOVID-19outbreaksthatmayimpactoursupplychain.IntheU.S.,wehavecontinuedtooperateourdistributioncenterinCalifornia,asproductsareconsidered“essential.”Whilewehaveimplementedadditionalsafetymeasuresforourworkersinthedistributioncenter,wemayberequiredtotemporarilyclosethefacilityifthereareanyconfirmedcasesofCOVID-19atthefacility,whichwouldimpactourabilitytotimelyshipproducttoourcustomers.•Customer-relatedrisks.InresponsetotheCOVID-19pandemic,someofourcustomersclosedretailstores,andgiventheongoingnatureofthepandemic,insomecaseshaveclosedlocationsorhaveoperatedatareducedlevel.WhilewearecautiouslyoptimisticthatvaccinationeffortsintheU.S.mayresultinareturntoamorenormallevelofretailconsumeractivity,wecannotpredicthowourcustomerswilladjusttodemand,andifdemandwillcontinuetoshifttoonlineactivity.Totheextentthesecustomers,especiallyourmid-sizeandsmallercustomers,experiencefinancialdifficultiesasaresultofthepandemic,wemayseethesecustomerspermanentlyclosestores,reduceorders,orfileforbankruptcy,thusimpactingsales.Inadditiontothespecificriskstoourbusinessnotedabove,wewillalsobesubjecttothelong-termeffectstheCOVID-19pandemicmayhaveontheU.S.economyasawhole.WhileeconomicstimuluseffortsintheU.S.mayalleviatetheimpactofthepandemicontheU.S.economy,totheextenttheCOVID-19pandemicisprolonged,orifitworsens,itwilllikelycontinuetoimpactconsumerdiscretionaryspending,andthereforedemandforourproducts.Inadditiontotherisksspecificallydescribedabove,theimpactofCOVID-19islikelytoimplicateandexacerbateotherrisksdisclosedinthisItem1A.RisksRelatingtoOurBusinessandFinancialConditionTheconcentrationofourbusinesswithcertainretailcustomersmeansthatchangesinthepurchasingpoliciesofthesecustomerscouldhaveasignificantimpactonourbusinessandoperatingresults.Infiscal2020,salestoourtopsevencustomers,includingAmazon.com,Wal-Mart,andTarget,accountedforapproximately87%ofourtotalsales.Wedonothavelong-termcommitmentsorcontracts7withanyofourretailcustomers,andretailersmakepurchasesbydeliveringone-timepurchaseorders.Assuch,anycustomercouldpotentiallyrenegotiatethetermsofourbusinessrelationshipatanytime,whichmightincludereducingoverallpurchasesofourproducts,alteringpricing,reducingthenumberandvarietyofourproductscarriedandtheshelfspaceallottedforourproducts,andreducingcooperativeadvertisingormarketingsupport.Becauseofthecurrentconcentrationofourbusinesswiththeseretailcustomers,achangeinourrelationshipwithanyofthesecustomerscouldadverselyaffectourresultsofoperationsandfinancialcondition.Increasedtariffs,additionaltariffsorotherimportorexporttaxesonourproductscouldhaveanadverseimpactonthecostofourproducts,thedemandforourproductsandourbusiness,financialconditionandresultsofoperations.TheUnitedStatesandothercountrieshaveleviedtariffsandtaxesoncertaingoods,includingproductsimportedintotheUnitedStatesfromChina.ThemajorityofourproductsaremanufacturedoutsidetheUnitedStates,mainlyinChina,andimportedforsaleintheUnitedStates.Tariffsenactedin2019impactedour2019and2020results,andcausedmarketdisruptionamongstourmajorcustomersin2019.Inaddition,whileexclusionsfromtariffsweregrantedforcertainofourproductsin2019and2020,theseexclusionshavenowexpiredandwedonotexpectthatanyfurtherexclusionswillbegranted.WhilewehavetakenactionstomitigatetheimpactofthesetariffsandareexploringalternativesourcesofsupplyoutsideofChina,ifexistingtariffsareincreasedorifadditionaltariffsortraderestrictionsareimplementedbytheUnitedStates,Chinaorothercountries,thecostofourproductsmanufacturedinChinaorothercountriesandimportedintotheUnitedStateswouldincreasesubstantially,whichwouldforceustoincreasethepricesoftheaffectedproducts.Thereisnoassurancethatwewouldbesuccessfulinmitigatingtheimpactofincreasedoradditionaltariffs,andanyincreaseinpricingtoallowustomaintainreasonablemarginscouldadverselyaffectthedemandforthoseproductsandmayresultindecreasedprofitabilityandlowersales,therebyhavinganadverseeffectonourbusiness,resultsofoperationsandfinancialcondition.Ifwedonotappropriatelymanageoursupplychain,maintainsufficientinventorylevelsorifweareunabletodeliverourproductstoourcustomersinsufficientquantities,oronatimelybasis,orifourinventorylevelsaretoohigh,ouroperatingresultswillbeadverselyaffected.Ourbusinessplacesstringentdemandsonourinventoryforecastingandproductionplanningprocesses.Thisinventorymanagementapproachmaybeparticularlychallengingwhencombinedwith“just-in-time”inventorymanagementsystemscommonlyusedbycustomerstominimizetheirinventorylevels.Ifwefailtomeettightshippingschedules,wecoulddamageourrelationshipswithcustomers,increaseourshippingcostsorcausesalesopportunitiestobedelayedorlost.Inaddition,theCOVID-19pandemiccanimpacttimelydeliveryofourproducts.Todeliverourmerchandiseonatimelybasis,weneedtomaintainadequateinventorylevelsofthedesiredproducts.Thisapproachrequiresustobegintoplaceordersforcomponentsforcertainproductsuptoayearinadvance,andweprocureasignificantamountofproductmonthsinadvanceofcertaintimeperiods.Atthetimeweplacefactoryorders,wemaynothavefirmordersfromcustomersoracompleteunderstandingofwhatconsumerdemandforthoseproductswillbe.Ifourinventoryforecastingprocessesarenotaccurate,itmayresultininventorylevelsinexcessofthelevelsforecastedandwemaynothavesufficientspaceatourmaindistributioncentertoaccommodateexcessinventory.Asaresult,wecouldberequiredtorecordinventorywrite-downsforexcessandobsoleteinventory,and/orincuradditionalexpenseforstorageofexcessinventory,whichwouldadverselyaffectouroperatingresults.Inaddition,ifourprocessesresultinourinventorylevelsbeingtoolowtomeetcustomerdemand,wemaylosesales,whichcouldadverselyaffectouroperatingresults.Logisticalchallengesrelatedtothelackofavailabilityoftruckers,containersandshippersisariskwhichcouldcausedelaysinprocuringproductforvendorsaswellasshippingtocustomers,andcouldultimatelyresultinsignificantincreasesintransportationcosts.Wemaynotachievesomeoralloftheexpectedbenefitsoforsavingsfromourrestructuringinitiatives,andourrestructuringinitiativesmayadverselyimpactourbusiness,financialconditionandresultsofoperations.In2020,weannouncedrestructuringinitiativestofurtherstreamlineouroperationsandimproveourfinancialoutlook.Wemaynotbeabletoobtainthecostsavingsandbenefitsthatareinitiallyanticipatedin8connectionwiththeserestructuringinitiatives.Reorganizationandrestructuringcanrequireasignificantamountofmanagementandotheremployees’timeandfocus,whichmaydivertattentionfromoperatingandgrowingourbusiness.Iftheseinitiativesarenotimplementedinatimelymanner,anticipatedcostsavingsandbenefitsarenotrealized,businessdisruptionoccursduringthependencyoforfollowingsuchactions,orunanticipatedchargesareincurred,particularlyifmaterial,theremaybeanegativeeffectonourbusiness,financialconditionandresultsofoperations.Theintensecompetitioninourmarketcouldreduceournetsalesandprofitability.Weoperateinahighlycompetitivemarketandcompetewithseverallargedomesticandforeigncompaniesandwithsmallerproducersofinfantandjuvenileproducts.Manyofourcompetitorshavelongeroperatinghistories,greaterbrandrecognition,andgreaterfinancial,technical,marketingandotherresourcesthanus,orhavegreatere-commerceandsocialmediapresencethanus.Weexperiencepricecompetitionforourproductsandcompetitionforshelfspaceatretailers,allofwhichmayincreaseinthefuture.Inaddition,withtheaccelerationinconsumerspurchasingonline,thereisalowbarriertoentryintoourmarketfornewer,smallercompaniesthatsolelyoperateane-commercebusiness.Ifwecannotadjusttochangesinourmarketandcompetesuccessfullyinthefuture,ournetsalesandprofitabilitywilllikelydecline.Ourabilitytogrowandcompetewillbeharmedifwedonotsuccessfullysatisfyconsumerpreferences,enhanceexistingproducts,developandintroducenewproducts,andsuccessfullymarketandachieveacceptanceofourproducts.Ourbusinessandoperatingresultsdependlargelyuponprovidingourcustomerswithproductsthatappealtotheenduser.Consumerpreferencesareconstantlychanging,particularlyamongparentswhomareoftentheendpurchasersofourproducts.Oursuccesslargelydependsonourabilitytoidentifyemergingtrendsintheinfantandjuvenilehealth,safetyandwellnessmarketplace,andtodesignqualityproductsthataddressconsumerpreferencesandprovesafeandcosteffective.Ourabilitytomaintainandincreaseourcurrentmarketsharewilldependuponourabilitytoanticipatechangesinconsumerpreferencesandsatisfythesepreferences,enhanceexistingproducts,developandintroducenewproducts,growexistingdistributionchannelsandseekadditionaldistributionchannelsfortheseproducts,successfullymarkettheproductsand,ultimately,achieveconsumeracceptanceoftheseproducts.Afailuretoachievemarketacceptanceofourproductscouldharmourabilitytogrowourbusiness.Aninabilitytodevelopandintroduceplannednewproductsorproductlinesinatimelyandcost-effectivemannermaydamageourbusiness.Indevelopingnewproductsandproductlines,wehaveanticipateddatesforassociatedproductintroductions.Whenwestatethatwewillintroduce,oranticipateintroducing,aparticularproductorproductlineatacertaintimeinthefuture,thoseexpectationsarebasedoncompletingtheassociateddevelopment,implementation,marketingwork,andmanufacturinginaccordancewithourcurrentlyanticipateddevelopmentschedule.Unforeseendelaysordifficultiesinthedevelopmentprocess,significantincreasesintheplannedcostofdevelopment,changesinanticipatedconsumerdemandforourproducts,anddelaysinthemanufacturingprocessmaycausetheintroductiondateforproductstobelaterthananticipatedor,insomesituations,maycauseaproductintroductiontobediscontinued.Theriskisalsoheightenedbythesophisticationofcertainproductswearedesigning,intermsofcombiningdigitalandanalogtechnologies,andprovidinggreaterinnovationandproductdifferentiation.Ifweareunabletomanufacture,sourceandshipnewproductsinatimelymannerandonacosteffectivebasis,itcouldhaveanadverseeffectonourbusinessandoperatingresults.Covenantsinourloanagreementmayaffectourliquidityorlimitourabilitytocompleteacquisitions,incurdebt,makeinvestments,sellassets,mergeorcompleteothersignificanttransactions.Deviationsfromexpectedresultsofoperationsandexpectedcashrequirementscouldresultinafailuretomeetfinancialcovenants,whichwouldadverselyaffectourfinancialconditionandresultsofoperations.Werelyonthecreditfacilityunderourloanagreementandcashgeneratedfromouroperationstomeetourworkingcapitalneeds.Ourloanagreementincludescertaincovenantsthatplacelimitationsonor9restrictanumberofouractivities,includingourabilitytoincuradditionaldebt,createliensonourassetsormakeguarantees,makecertaininvestmentsorloans,paydividendsormakedistributions,disposeoforsellassets,orenterintoamergerorsimilartransaction.Theserestrictivecovenantsmaylimitourabilitytoengageinactsthatmaybeinourbestlong-terminterests.Anysignificantdeviationinactualresultsfromourexpectedresultsofoperations,orinthetimingofmaterialexpendituresfromcurrentestimates,anysignificantbusinessorproductacquisitions,orothersignificantunanticipatedexpensescouldresultinusnotmeetingapplicablefinancialcovenants.Non-compliancewiththecovenantsinourloanagreementcouldresultinusbeingunabletoutilizeborrowingsunderourcreditfacility,acircumstancewhichpotentiallycouldoccurwhenoperatingshortfallswouldmostrequiresupplementaryborrowingstoenableustocontinuetofundouroperations.Ifaccesstoourcreditfacilityislimitedorterminated,ourliquiditywouldbeconstrained,affectingouroperationsandgrowthprospects,andwewouldneedtoseekamendmentstoourcreditfacilityorobtainadditionalequityordebtfinancingorfacedefault.Thereisnoassurancethatsuchfinancingwouldbeavailableonacceptabletermsoratall.Furthermore,anyequityfinancingmayresultindilutiontoexistingstockholdersandanydebtfinancingmayincluderestrictivecovenantsthatcouldimpedeourabilitytoeffectivelyoperateandgrowourbusinessinthefuture.WemaynotbeentitledtoforgivenessofourPPPloan,andourapplicationforthePaycheckProtectionProgramLoancouldinthefuturebedeterminedtohavebeenimpermissible.InAugust2020,wereceivedloanproceedsofapproximately$1,956(the“PPPLoan”)pursuanttothePaycheckProtectionProgramundertheCoronavirusAid,Relief,andEconomicSecurityAct(the“CARESAct”)administeredbytheU.S.SmallBusinessAdministration(the“SBA”).WeusedthePPPLoantoretaincurrentemployees,maintainpayrollandmakeleaseandutilitypayments.UndertheCARESAct,loanforgivenessisgenerallyavailableifproceedswereusedforqualifyingexpensesinaccordancewiththeCARESAct.TheamountofthePPPLoaneligibletobeforgivenmaybereducedincertaincircumstances,includingasaresultofcertainheadcountorsalaryreductions.Wewillberequiredtorepayanyportionoftheoutstandingprincipalthatisnotforgiven,alongwithaccruedinterest,andwecannotprovideanyassurancethatwewillbeeligibleforloanforgivenessorthatanyamountofthePPPLoanwillultimatelybeforgivenbytheSBA.OnFebruary18,2021,theCompanyappliedforfullforgivenessofthePPPloanthroughBankofAmericaandtheapplicationiscurrentlyunderreviewbyBankofAmerica.InordertoapplyforthePPPLoan,wewererequiredtocertify,amongotherthings,thatthecurrenteconomicuncertaintymadethePPPLoanrequestnecessarytosupportourongoingoperations.If,despiteourgood-faithbeliefthatgivenourcircumstanceswesatisfiedalleligiblerequirementsforthePPPLoan,wearelaterdeterminedtohaveviolatedanyapplicablelawsorregulationsthatmayapplytousinconnectionwiththePPPLoanoritisotherwisedeterminedthatwewereineligibletoreceivethePPPLoan,wemayberequiredtorepaythePPPLoaninitsentiretyand/orbesubjecttoadditionalpenalties,whichcouldalsoresultinadversepublicityanddamagetoourreputation.Anyoftheseeventscouldhaveanadverseeffectonourbusiness,resultsofoperationsandfinancialcondition.Liquidityproblemsorbankruptcyofourkeyretailcustomerscouldhaveasignificantadverseeffectonourbusiness,financialcondition,andresultsofoperations.Asignificantportionofourrevenueiswithkeyretailcustomers.Duetothecurrentpressureontraditionalbrick-and-mortarretailers,thereisincreasedriskthatretailersmaysuffermateriallossesorfileforapetitionforbankruptcy.Salestoretailcustomersaretypicallymadeoncreditwithoutcollateral.Ifacustomerfilesforbankruptcy,ourpre-petitionaccountsreceivablemaynotberealizedandpost-petitionordersreducedorcancelled.Thebankruptcylawsmayseverelylimitourabilitytocollectpre-petitionaccountsreceivable.Ifkeycustomers,ceasedoingbusinessasaresultofbankruptcy,orsignificantlyreducethenumberofstoresoperatedandthereforetheamountofproductsorderedfromus,itcouldhaveanadverseeffectonourbusiness,financialcondition,andresultsofoperations,includingourabilitytoaccessavailabilityunderourcreditfacility.10Becausewerelyonforeignsuppliersandwesellourproductsinforeignmarkets,wearesubjecttonumerousrisksassociatedwithinternationalbusinessthatcouldincreaseourcostsordisruptthesupplyofourproducts,resultinginanegativeimpactonourbusinessandfinancialcondition.WhilemostofoursalescontinuetobeinNorthAmerica,weoperatefacilitiesandsellproductsincountriesoutsidetheUnitedStates.Additionally,aswediscussbelow,weutilizethird-partysuppliersandmanufacturerslocatedinAsiatoproduceamajorityofourproducts.Thesesalesandmanufacturingoperations,includingoperationsinemergingmarketsthatwehaveentered,mayenter,ormayincreaseourpresencein,aresubjecttotherisksassociatedwithinternationaloperations,including:•economicandpoliticalinstability;•restrictiveactionsbyforeigngovernments;•greaterdifficultyenforcingintellectualpropertyrightsandweakerlawsprotectingintellectualpropertyrights;•traderestrictions;•workstoppagesorotherchangesinlaborconditions;•reductioninbusinessactivityinsomepartsoftheworld;•currencyfluctuationsanddevaluations;•changesinimportdutiesorimportorexportrestrictions;•compliancewithanti-briberyandanti-corruptionregulations;•untimelyshippingofproductandunloadingofproductthroughWestCoastports,aswellasuntimelytruckdeliverytoourwarehouses;•complicationsincomplyingwiththelawsandpoliciesoftheUnitedStatesaffectingtheimportationofgoods,includingduties,quotas,andtaxes;•limitationsonrepatriationofforeignearnings;and•complicationsincomplyingwithforeigntaxlaws.FuturechangestotheU.S.tariffandimport/exportregulationscouldhaveanegativeeffectonourresultsofoperations.DuetoourrelianceofmanufacturerslocatedinChina,fromwhichweimportamajorityofourproducts,theoccurrenceofsuchtradereformsorrestrictionscouldimpactourbusinessinanadversemanner.Asaresultofourinternationaloperations,wearesubjecttotheU.S.ForeignCorruptPracticesActandsimilarforeignanti-corruptionandanti-briberylaws.Recentyearshaveseenasubstantialincreaseintheglobalenforcementofanti-corruptionlaws,withmorefrequentvoluntaryself-disclosuresbycompanies,aggressiveinvestigationsandenforcementproceedingsbyboththeU.S.DepartmentofJusticeandtheSECresultinginrecordfinesandpenalties,increasedenforcementactivitybynon-U.S.regulators,andincreasesincriminalandcivilproceedingsbroughtagainstcompaniesandindividuals.Ourfailuretosuccessfullycomplywithanysuchlegalrequirementscouldsubjectustomonetaryliabilitiesandothersanctionsthatcouldharmourbusinessandfinancialcondition.Also,becausewegeneratesomeofourrevenueoutsidetheUnitedStatesbutreportourfinancialresultsinU.S.dollars,ourfinancialresultsareimpactedbyfluctuationsinforeigncurrencyexchangerates.IftheU.S.dollarisstrongagainstforeigncurrencies,ourtranslationofforeigncurrencydenominatedrevenueorexpensecouldresultinlowerU.S.dollardenominatednetrevenueandexpense.Anyadversechangeinourrelationshipwithoursupplierscouldharmourbusiness.Werelyonnumerousthird-partysupplierslocatedinAsiaforthemanufactureofmostofourproducts.Whilewebelievethatalternativesupplierscouldbelocatedifrequired,ourproductsourcingcouldbeaffectedifanyofthesesuppliersdonotcontinuetomanufactureourproductsinrequiredquantitiesoratall,orwiththerequiredlevelsofquality.Wedonothaveanylong-termsupplycontractswithourforeignsuppliers;11rather,weenterintopurchaseorderswiththesesuppliers.Inaddition,difficultiesencounteredbythesesuppliersinthecountrieswheretheyoperate,suchasfire,accident,naturaldisasters,outbreaksofcontagiousdiseases,orpoliticalunrest,couldhaltordisruptproductionattheaffectedlocations,resultingindelayorcancellationoforders.Forinstance,therecentcoronavirusoutbreakinChinamayresultindelaysinmanufacturingofourproductsduetoclosureoffactoriesanddelaysinshippingproductstotheU.S.,whichcouldimpactoursaleforecastsandinventorylevels.Anyoftheseeventscouldresultindelayeddeliveriesbyusofourproducts,causingreducedsalesandharmtoourreputationandbrandname.Increasesinthecostofmaterialsorlaborusedtomanufactureourproductscoulddecreaseourprofitabilityandthereforenegativelyimpactourbusinessandfinancialcondition.Becauseourproductsaremanufacturedbythird-partysuppliers,wedonotdirectlypurchasethematerialsusedinthemanufactureofourproducts.However,thepricespaidbyustothesesupplierscouldincreaseifrawmaterials,labor,orothercostsincrease.Ifwecannotpasstheseincreasesalongtoourcustomers,ourprofitabilitywillbeadverselyaffected.Earthquakes,floods,fire,epidemicsorothercatastrophiceventsoutofourcontrolmaydamageorimpacttheoperationsofourprimarydistributionfacilityandharmourresultsofoperations.OurprimarydistributionfacilityislocatedinRiverside,California,nearmajorearthquakefaults.Acatastrophicevent,suchasanearthquake,flood,fire,orothernaturalormanmadedisaster,couldimpactoperationsatthisfacility.Inaddition,thestateofCaliforniahasdeclaredastateofemergencyrelatedtotherecentcoronavirusoutbreak,andoperationsatourdistributionfacilitycouldbedisruptedorrequiredtocloseifthereareanyemployeeswhoarediagnosedwiththecoronavirusorthereisagovernmentally-imposedquarantineorothergeographiclimitationsimposedoncompaniesdoingbusinessinCalifornia.Anyoftheseeventscouldimpairdistributionofourproducts,damageinventory,interruptcriticalfunctions,orotherwiseaffectourbusinessnegatively,harmingourresultsofoperations.Intellectualpropertyclaimsrelatingtoourproductscouldincreaseourcostsandadverselyaffectourbusiness.Wereceive,fromtimetotime,claimsofallegedinfringementofpatentsrelatingtocertainofourproducts,andwemayfacesimilarclaimsinthefuture.Thedefenseofintellectualpropertyclaimscanbecostlyandtimeconsuming,evenincircumstanceswheretheclaimiswithoutmerit.Wemayberequiredtopaysubstantialdamagesorsettlementcostsinordertoresolvethesetypesofclaims.Inaddition,theseclaimscouldmateriallyharmourbrandname,reputationandoperations.Asamanufacturerofconsumerproducts,wearesubjecttovariousgovernmentregulationsandmaybesubjecttoadditionalregulationsinthefuture,violationofwhichcouldsubjectustosanctionsorotherwiseharmourbusiness.Inaddition,wecouldbethesubjectoffutureproductliabilitysuits,productrecalls,andotherclaimsrelatingtotheuseofourproducts,whichcouldharmourbusiness.Becauseweproduceinfantandjuvenilehealth,safetyandwellnessconsumerproducts,wearesubjecttosignificantgovernmentregulationandfaceproductliabilityrisksrelatingtoconsumeruseofourproducts.Wemustcomplywithavarietyofstateandfederalproductsafetyandproducttestingregulations.Inparticular,ourproductsaresubjecttotheConsumerProductSafetyAct,theFederalHazardousSubstancesAct(“FHSA”)andtheConsumerProductSafetyImprovementAct(“CPSIA”),whichempowertheConsumerProductSafetyCommission(the“CPSC”),totakeactionagainsthazardspresentedbyconsumerproducts.WithexpandedauthorityundertheCPSIA,theCPSChasandcontinuestoadoptnewregulationsforsafetyandproductstestingthatapplytoourproducts.Theseregulationshaveorlikelywillsignificantlyincreasetheregulatoryrequirementsgoverningthemanufactureandsaleofchildren’sproductsandincreasethepotentialpenaltiesfornoncompliancewithapplicableregulations.TheCPSChastheauthoritytoexcludefromthemarketandrecallcertainconsumerproductsthatarefoundtobepotentiallyhazardous.ConsumerproductsafetylawsalsoexistinsomestatesandcitieswithintheUnitedStatesandinCanadaandEurope,aswellascertainothercountries.Ifwefailtocomplywiththeselawsandregulations,orifwefaceproductliabilityclaims,wemaybesubjecttodamageawardsorsettlementcoststhatexceedanyavailableinsurancecoverageandwemayincursignificantcostsincomplyingwithrecallrequirements.12Wemaintainaqualitycontrolprogramtohelpensurecompliancewithapplicableproductsafetyrequirements.Nonetheless,wehaveexperienced,andmayinthefutureexperience,issuesinproductsthatmayleadtoproductliability,personalinjuryorpropertydamageclaims,recalls,withdrawals,replacementsofproducts,orregulatoryactionsbygovernmentalauthorities.Aproductrecallcouldhaveanadverseeffectonourresultsofoperationsandfinancialcondition,dependingontheproductaffectedbytherecallandtheextentoftherecalleffortsrequired.Aproductrecallcouldalsonegativelyaffectourreputationandthesalesofotherproducts.Furthermore,concernsaboutpotentialliabilitymayleadustovoluntarilyrecallselectedproducts.Complyingwithexistingornewregulationsorrequirementscouldimposeincreasedcostsonourbusinessoperations,decreasesales,increaselegalfeesandothercosts,andputusatacompetitivedisadvantagecomparedtoothermanufacturersnotaffectedbysimilarissueswithproducts,anyofwhichcouldhaveanadverseeffectonourfinancialcondition.Similarly,increasedpenaltiesfornon-compliancecouldsubjectustogreaterexpenseifourproductswerefoundtonotcomplywithsuchregulations.Inadditiontoproductliabilityrisksrelatingtotheusebyconsumersofourproducts,wealsomustcomplywithavarietyofstateandfederallawsandregulationswhichprohibitunfairordeceptivetradepractices,includingdisseminationoffalseormisleadingadvertising.Whilewetakestepsthatwebelievearenecessarytocomplywiththeselawsandregulations,therecanbenoassurancethatwewillalwaysbeincompliance.Compliancewiththesevariouslawsandregulationscouldimposesignificantcostsonourbusinessifwefailtocomply,andcouldresultinmonetaryliabilitiesandotherpenaltiesandleadtosignificantnegativemediaattentionandconsumerdissatisfaction,whichcouldhaveanadverseeffectonourbusiness,financialconditionandresultsofoperations.Wemayhaveexposuretogreaterthananticipatedtaxliabilitiesthat,ifnotidentified,couldnegativelyaffectourconsolidatedoperatingresultsandnetworth.Ourprovisionforincometaxesissubjecttovolatilityandcouldbeadverselyaffectedbynondeductibleequity-basedcompensation,earningsbeinglowerthananticipatedinjurisdictionswherewehavelowerstatutoryratesandbeinghigherthananticipatedinjurisdictionswherewehavehigherstatutoryrates,transferpricingadjustments,notmeetingthetermsandconditionsoftaxholidaysorincentives,changesinthevaluationofourdeferredtaxassetsandliabilities,changesinactualresultsversusourestimates,orchangesintaxlaws,regulations,accountingprinciplesorinterpretationsthereof,andtaxesrelatingtodeemeddividendsresultingfromforeignguaranteesmadebycertainofourforeignsubsidiaries.Inaddition,likeothercompanies,wemaybesubjecttoexaminationofourincometaxreturnsbytheU.S.InternalRevenueServiceandothertaxauthorities.Whileweregularlyassessthelikelihoodofadverseoutcomesfromsuchexaminationsandtheadequacyofourprovisionforincometaxes,therecanbenoassurancethatsuchprovisionissufficientandthatadeterminationbyataxauthoritywillnothaveanadverseeffectonourresultsofoperations.Wecouldsufferadversetaxandotherfinancialconsequencesiftaxingauthoritiesdonotagreewithourtaxpositions,orweareunabletoutilizeournetoperatinglosses.Weareperiodicallysubjecttoanumberoftaxexaminationsbytaxingauthoritiesinthestatesandcountrieswherewedobusiness.Wealsohavesignificantdeferredtaxassetsrelatedtoournetoperatinglosses(NOLs)inU.S.federalandstatetaxingjurisdictions.Generally,forU.S.federalandstatetaxpurposes,NOLscanbecarriedforwardandusedforuptotwentyyears,andallofourtaxyearswillremainsubjecttoexaminationuntilthreeyearsafterourNOLsareusedorexpire.Inaddition,U.S.federal,stateandlocal,areextremelycomplexandsubjecttovaryinginterpretations.Werecognizetaxbenefitsofuncertaintaxpositionswhenwebelievethepositionsaremorelikelythannotofbeingsustaineduponachallengebytherelevanttaxauthority.Infiscal2020,wewilltakeataxdeductionrelatedtoaworthlessstocklossinconnectionwiththedissolutionofoneofoursubsidiaries,BornFreeHoldingsLimited,however,becauseoftheuncertaintyastowhetherthispositionmaybechallengedbytheU.S.taxauthorities,wehavedeterminedthistaxbenefittobeanuncertaintaxpositionandhavefullyreservedforthetaxbenefitassociatedwiththededuction.Iftherearetaxbenefits,including,butnotlimitedto,theworthlessstocklossdeductionorouruseofNOLs,orothertaxattributes,thatarechallengedsuccessfullybyataxingauthority,wemayberequiredtopayadditionaltaxesorwemayseektoenterintosettlementswiththetaxingauthorities,whichcouldrequiresignificantpaymentsorotherwisehaveanadverseeffectonourbusiness,resultsofoperationsandfinancialcondition.13Inaddition,wemaybelimitedinourabilitytoutilizeourNOLstooffsetfuturetaxableincomeandtherebyreduceourotherwisepayableincometaxes.OurabilitytoutilizeourNOLsisalsodependent,inpart,uponushavingsufficientfutureearningstoutilizeourNOLsbeforetheyexpire.IfmarketconditionschangemateriallyandwedeterminethatwewillbeunabletogeneratesufficienttaxableincomeinthefuturetoutilizeourNOLs,wecouldberequiredtorecordanadditionalvaluationallowance.OurNOLsarealsosubjecttoreviewandpotentialdisallowanceuponauditbythetaxingauthoritiesofthejurisdictionswheretheNOLswereincurred,andfuturechangesintaxlawsorinterpretationsofsuchtaxlawscouldlimitmateriallyourabilitytoutilizeourNOLs.IfweareunabletouseourNOLsoruseofourNOLsislimited,wemayhavetomakesignificantpaymentsorotherwiserecordchargesorreduceourdeferredtaxassets,whichcouldhaveanadverseeffectonourbusiness,resultsofoperationsandfinancialcondition.Amaterialimpairmentinthecarryingvalueofotherintangibleassetscouldnegativelyaffectourconsolidatedresultsofoperationsandnetworth.Aportionofourassetsareintangible,whicharereviewedonanannualbasisand/orwhenevereventsandchangesincircumstancesindicatethatthecarryingamountofanassetmaynotberecoverable.Ifthecarryingvalueoftheseassetsexceedsthecurrentfairvalue,theassetisconsideredimpairedandisreducedtofairvalue,resultinginanon-cashchargetoearningsduringtheperiodinwhichanyimpairmentisdetermined.Ifwemakechangesinourbusinessstrategy,ourfutureoperatingperformancewastofallsignificantlybelowforecastlevelsorifexternalconditionsadverselyaffectourbusinessoperations,wemayberequiredtorecordanimpairmentchargeforintangibles,whichwouldleadtodecreasedassetsandreducednetoperatingresultsandnetworth.Wemaybeunabletoadequatelyprotectourinformationsystemsfromcyberattacks,whichcouldresultinthedisclosureofconfidentialorproprietaryinformation,includingpersonaldata,damageourreputation,disruptouroperationsandsubjectustosignificantfinancialandlegalexposure.Werelyoninformationtechnologysystems,includingsystemsmanagedbythirdparties,acrossouroperations,includingformanagementofoursupplychain,saleanddeliveryofourproducts,andvariousotherprocessesandtransactions,includingcreditcardprocessingforonlinesales.Inthecourseofouroperations,wemaycollectanduseconfidentialcustomerdataandavarietyofpersonaldata.Asuccessfulcyberattackcouldresultinthetheftordestructionofintellectualproperty,data,orothermisappropriationofassets,orotherwisecompromiseourconfidentialorproprietaryinformationanddisruptouroperations.Cyberattacksareincreasingintheirfrequency,sophisticationandintensity,includingwrongfulconductbyhostileforeigngovernments,industrialespionage,wirefraudandotherformsofcyberfraud,thedeploymentofharmfulmalware,denial-of-serviceandsocialengineeringfraud.Cyberattackshavebecomeincreasinglydifficulttodetect,andasuccessfulcyberattackcouldcauseseriousnegativeconsequencesforus,includingthedisruptionofoperationsandthemisappropriationofconfidentialbusinessinformationorpersonaldata.Althoughwedevoteresourcestoprotectourinformationsystems,werealizethatcyberattacksareathreat,andtherecanbenoassurancethatoureffortswillpreventinformationsecuritybreachesthatwouldresultinbusiness,legal,financialorreputationalharmtous,orwouldhaveanadverseeffectonourresultsofoperationsandfinancialcondition.Anyfailuretopreventormitigatesecuritybreachesorimproperaccessto,useof,ordisclosureofpersonaldatacouldresultinsignificantliabilityunderstate,federalandinternationallawsregardingdataprivacy,andmaycauseanadverseimpacttoourreputationandpotentiallydisruptourbusiness.RisksRelatedtoanInvestmentinOurSecuritiesOurstockpricehasbeenandmaycontinuetobevolatile.Themarketpriceofourcommonstockhasbeen,andislikelytocontinuetobe,volatile.Whenweorourcompetitorsannouncenewproducts,experiencequarterlyfluctuationsinoperatingresults,announcestrategicrelationships,acquisitionsordispositions,changeearningsestimates,publishfinancialresultsorothermaterialnews,ourstockpriceisoftenaffected.Thevolatilityofourstockpricemaybeaccentuatedduringperiodsoflowvolumetrading,whichmayrequireastockholderwishingtosellalargenumberofsharestodosoinincrementsovertimetomitigateanyadverseimpactofthesalesonthemarketpriceofourstock.14Anti-takeoverprovisionsinourorganizationaldocumentsandDelawarelawmaylimittheabilityofourstockholderstocontrolourpoliciesandeffectachangeofcontrolofourCompanyandmaypreventattemptsbyourstockholderstoreplaceorremoveourcurrentmanagement,whichmaynotbeinyourbestinterests.Thereareprovisionsinourcertificateofincorporationandbylawsthatmaydiscourageathirdpartyfrommakingaproposaltoacquireus,evenifsomeofourstockholdersmightconsidertheproposaltobeintheirbestinterests,andmaypreventattemptsbyourstockholderstoreplaceorremoveourcurrentmanagement.TheseprovisionsinourcertificateofincorporationincludeauthorizationforourBoardofDirectorstoissuesharesofpreferredstockwithoutstockholderapprovalandtoestablishthepreferencesandrightsofanypreferredstockissued,andtoissueoneormoreclassesorseriesofpreferredstockthatcoulddiscourageordelayatenderofferorchangeincontrol.Ourbylawsrequireadvancewrittennoticeofstockholderproposalsanddirectornominations.Additionally,wearesubjecttoSection203oftheDelawareGeneralCorporationLaw,which,ingeneral,imposesrestrictionsuponacquirersof15%ormoreofourstock.Finally,theBoardofDirectorsmayinthefutureadoptotherprotectivemeasures,suchasastockholderrightsplan,whichcoulddelay,deterorpreventachangeofcontrol.Item1B.UnresolvedStaffCommentsNone.Item2.PropertiesWeareheadquarteredina20,200squarefootfacilityinWoonsocket,RhodeIsland.Wehavealeaseonthisfacility,whichwillexpirein2025.WealsoleasesmallofficesinArkansas,Canada,theUnitedKingdomandHongKong.WemaintaininventoryatleasedwarehousesinCalifornia(approximately460,000squarefeet)andCanada(approximately61,000squarefeet).Theseleasesexpireatvarioustimesthrough2026.Item3.LegalProceedingsTheCompanyisapartytoroutinelitigationandadministrativecomplaintsincidentaltoitsbusiness.TheCompanydoesnotbelievethattheresolutionofanyorallofsuchcurrentroutinelitigationandadministrativecomplaintsislikelytohaveamaterialadverseeffectontheCompany’sfinancialconditionorresultsofoperations.Item4.MineSafetyDisclosuresNotapplicable.15PARTIIItem5.MarketforRegistrant’sCommonEquity,RelatedStockholderMattersandIssuerPurchasesofEquitySecuritiesMarketInformationOurcommonstockistradedontheNasdaqCapitalMarketunderthesymbol“SUMR”.HoldersofCommonStockAsofMarch12,2021therewereapproximately34holdersofrecordofourcommonstock.Becausesharesofourcommonstockareheldbydepositaries,brokersandothernominees,thenumberofbeneficialholdersofoursharesissubstantiallylargerthanthenumberofrecordholders.IssuerRepurchasesofEquitySecuritiesNone.RecentSalesofUnregisteredSecuritiesNotapplicable.Item6.SelectedConsolidatedFinancialDataNotrequired.Item7.Management’sDiscussionandAnalysisofFinancialConditionandResultsofOperationsThefollowingdiscussionisintendedtoassistintheassessmentofsignificantchangesandtrendsrelatedtoourresultsofoperationsandfinancialcondition.Theinformationcontainedinthissectionhasbeenderivedfromourconsolidatedfinancialstatementsandshouldbereadtogetherwithourconsolidatedfinancialstatementsandrelatednotesincludedelsewhereinthisreport.Readersshouldalsoreviewandconsiderourdisclosuresundertheheading“SpecialNoteRegardingForward-LookingStatements”describingvariousfactorsthatcouldaffectourbusinessandthedisclosuresundertheheading“RiskFactors”inthisreport.NotethatalldollaramountsinthisItem7areinthousandsofU.S.dollars,exceptshareandpersharedata.OverviewWeareaninfantandjuvenileproductscompanydoingbusinessunderthenameSUMRBrands.Wearearecognizedauthorityinthejuvenileproductindustry,providingparentsandcaregiversafullrangeofinnovative,high-quality,andhigh-valueproductstocareforbabiesandtoddlers.Weseektoimprovethequalityoflifeofparents,caregivers,andbabiesthroughourproductofferings,whileatthesametimemaximizingshareholdervalueoverthelongterm.Weoperateinoneprincipalindustrysegmentacrossgeographicallydiversemarketplaces,sellingourproductsgloballytolarge,nationalretailersaswellasindependentretailers,onourpartner’swebsites,andourowndirecttoconsumerwebsite.InNorthAmerica,ourcustomersincludeAmazon.com,Wal-Mart,Target,BuyBuyBaby,HomeDepot,andLowe’s.OurlargestEuropean-basedcustomersareSmythsToysandAmazon.Wealsosellthroughinternationaldistributors,representatives,andtoselectinternationalretailcustomersingeographiclocationswherewedonothaveadirectsalespresence.InMarch2020,wesuccessfullycompleteda1-for-9reversestocksplitofourCompany’sissuedandoutstandingsharesofcommonstockinordertoregaincompliancewithNasdaq’sminimumbidpricerequirement.Accordingly,informationinthefinancialstatementsandaccompanyingnotesincludedinthis16AnnualReportonForm10-Krelatedtofiscal2019giveeffecttothereversestocksplitasifitoccurredatthefirstperiodpresented.Netsalesinthefourthquarterof2020decreased15.6%fromthepreviousyearquarter,andnetsalesforthefullyeardecreased10.3%fromtheprioryear.Netsalesforthefourthquarterandthefullyearin2020declinedprimarilyasaresultofthefollowing:(a)asalesdeclineatmid-tiercustomersresultingfrombrickandmortarstoreclosuresandsignificantclose-outsalesthatoccurredinthefourthquarterof2019thatwerenotrepeatedinthefourthquarterof2020,(b)areductionininternationalbusinessresultingfromCOVID-19retailstoreclosuresandasaconsequenceoftherestructuringoftheinternationalbusinesswherebycertaincustomersthatwereservicedoutofourwarehousewerenolongerabletobedistributedtointhetransitiontoathirdpartyserviceprovider,and(c)thetransitionofmoreofourbusinesstodirectimportwherebycertainlogisticalcostswereeliminatedbuttherewasalsoaconsequentreductioninsales.Inthefourthquarter,netlossincreasedto$3,389in2020fromanetlossof$882in2019primarilyasaresultofa$1,800lossontheearlyextinguishmentofdebtanda$676write-offofintangibleassetsrelatedtotheCompany’sdecisiontodissolveitsBornFreeHoldingsentity.Forthefullyear2020,netlosswas$1,102comparedtoanetlossof$4,164in2019.Generalandadministrativeexpensesdeclinedby$5,463asaresultofrestructuringinitiativesimplementedin2020whichstreamlinedouroperationsandimprovedourfinancialperformance.Additionally,althoughtherewasa$1,800lossfromtheextinguishmentofdebtanda$676write-offofintangibleassets,weendedfiscal2020withnetlossof$0.52pershareascomparedtoanetlossof$1.98pershareinfiscal2019.Inthefourthquarter,weannouncedthecompletionofadebtrefinancingwithBankofAmerica,whichweexpecttoreduceprospectiveinterestexpenseandallowsustocontinuetofocusonachievingsustainablegrowthfortheCompany.Duringtheendoffiscal2020,weannouncedtheappointmentofStuartNoyesasChiefExecutiveOfficerandasamemberofourBoardofDirectors,effectiveNovember30,2020.Mr.NoyeshasservedastheCompany’sinterimCEOsinceDecember16,2019.WealsoannouncedatransitionintheroleofChiefFinancialOfficer.OurcurrentChiefFinancialOfficer,EdmundJ.Schwartz,willretirefromtheCompanyeffectiveMarch31,2021andwillstepdownasChiefFinancialOfficereffectiveMarch19,2021,whenhewillbesucceededbyBruceMeierasInterimChiefFinancialOfficer.Mr.MeierhasbeenworkingwithMr.NoyesoverseeingtheoperationalandfinancialsideoftheCompany’sbusinesssinceDecember2019.COVID-19ImpactAspreviouslydisclosed,theCOVID-19pandemicimpactedourbusinessinfiscal2020.InMarch2020,webegantoseecustomersthathaveretailstoresreduceordersastheyexperiencedoranticipatedclosuresofthosestores.Whilewedidseeanuptickinsalestothosecustomerswithsignificante-commercecapabilities,itdidnotoffsetthereducedordersfromourmid-sizeandsmallercustomers.Webelievethatcustomerswithe-commercecapabilitieswillcontinuetohaveincreaseddemand.However,giventheunpredictabilityoftheCOVID-19pandemic,itispossiblethatsomestoreswillremainclosedshouldtherebearesurgenceofCOVID-19outbreaksorthatthesecustomerswillcloseorreducethenumberofstoresthattheyoperateinresponsetotheCOVID-19pandemic.TheCOVID-19pandemiccontinuedtoimpactourbusinessinthefourthquarter,asweexperiencedchallengesinourshippinganddistributionchannelsthroughoutourglobalsupplychainandcontinuedtoseelowerdemandfromourmid-sizedandsmallercustomers.Asweenter2021,wecontinuetoseedisruptioninourshippinganddistributionchannelsthroughoutourglobalsupplychainincludingcongestioninportsanddistributioncenters,containershortagesandlackoftruckdrivers.ThepotentialexiststhatwemightnotbeabletomeetdemandduetothesechallengesandforcertainproductsthataremanufacturedbysuppliersinChinaorelsewherethatmaybesubjecttoclosureshouldtherebearesurgenceofCOVID-19outbreaks.Wealsoexpectourcostsassociatedwiththesematterswillincrease,aswellascostsassociatedwithourdistributioncenter,withnewleasetermstobeeffectiveinthefourthquarterof2021thatwillincreaseourleasecosts.Totheextentwedonotmeetourfinancialprojections,areunabletomitigatetheimpactofongoingtariffs,areimpactedbyaresurgentcoronavirusoutbreak,orarenotsuccessfulinrealizingthesavingsanticipatedfromourrestructuringinitiatives,ourbusiness,financialposition,resultsofoperationsandcashflowswouldbeadverselyaffected.17WewillcontinuetoassesstheimpactoftheCOVID-19pandemiconthesupplychain,consumerdemandandoverallbusinessoperationsinto2021.WebelieveCOVID-19intheUnitedStatesandinothercountrieshasaddedgreateruncertaintyandunpredictableeconomicconsequencesinthecomingmonths,andthereforewecannotcurrentlypredicthowitwillimpactourbusinessinthelongterm.SummaryofCriticalAccountingPoliciesandEstimatesThefollowingsummaryofourcriticalaccountingpoliciesispresentedtoassistinunderstandingourconsolidatedfinancialstatements.Theconsolidatedfinancialstatementsandnotesarerepresentationsofourmanagement,whoareresponsiblefortheirintegrityandobjectivity.TheseaccountingpoliciesconformtoaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmericaandhavebeenconsistentlyappliedinthepreparationoftheconsolidatedfinancialstatements.AdditionalinformationaboutouraccountingpoliciesandestimatesmaybefoundinNote1toourconsolidatedfinancialstatementsincludedinthisreport.Wemakecertainestimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesandthereportedamountsofrevenuesandexpenses.Theaccountingpoliciesdescribedbelowarethoseweconsidercriticalinpreparingourfinancialstatements.Someofthesepoliciesincludesignificantestimatesmadebymanagementusinginformationavailableatthetimetheestimatesweremade.However,theseestimatescouldchangemateriallyifdifferentinformationorassumptionswereused.RevenueRecognitionWerecognizerevenuetodepictthetransferofpromisedgoodsorservicestocustomersinanamountthatreflectswhatweexpecttoreceiveinexchangeforthegoodsorservices.Ourprincipalactivityfromwhichwegeneraterevenueisproductsales.Revenueismeasuredbasedonconsiderationspecifiedinacontractwithacustomer.TheCompanyrecognizesrevenuewhenitsatisfiesaperformanceobligationinacontractbytransferringcontroloveraproducttoacustomerwhenproductdeliveryoccurs.Aperformanceobligationisapromiseinacontracttotransferadistinctproducttothecustomer,whichfortheCompanyisatransferofitsproductstoitscustomers.Thetransactionpriceofacontractisallocatedtoeachdistinctperformanceobligationandrecognizedasrevenuewhenorasthecustomerreceivesthebenefitoftheperformanceobligation.AtransactionpriceistheamountofconsiderationtheCompanyexpectstoreceiveunderthearrangement.TheCompanyisrequiredtoestimatevariableconsideration(ifany)andtofactorthatestimationintothedeterminationofthetransactionprice.TheCompanyconductsitsbusinesswithcustomersthroughvalidpurchaseorsalesorderseachofwhichisconsideredaseparatecontractbecauseindividualordersarenotinterdependentononeanother.Producttransactionpricesonapurchaseorsaleorderarediscreteandstand-alone.Purchaseorsalesordersmaybeissuedundereitheracustomermasterserviceagreementoraresellerallowanceagreement.Purchaseorsalesorders,masterserviceagreements,andresellerallowanceagreementswhicharespecificanduniquetoeachcustomer,mayincludeproductpricediscounts,markdownallowances,returnallowances,and/orvolumerebateswhichreducetheconsiderationduefromcustomers.Variableconsiderationisestimatedusingthemostlikelyamountmethod,whichisbasedonourhistoricalexperienceaswellascurrentinformationsuchassalesforecasts.ContractsmayalsoincludecooperativeadvertisingarrangementswheretheCompanyallowsadiscountfrominvoicedproductamountsinexchangeforcustomerpurchasedadvertisingthatfeaturestheCompany’sproducts.Theseallowancesaregenerallybaseduponproductpurchasesorspecificadvertisingcampaigns.Suchallowancesareaccruedwhentherelatedrevenueisrecognized.Thesecooperativeadvertisingarrangementsprovideadistinctbenefitandfairvalueandareaccountedforasdirectsellingexpenses.TradeReceivablesTradereceivablesarecarriedattheiroutstandingunpaidprincipalbalancesreducedbyanallowancefordoubtfulaccounts.Theallowancefordoubtfulaccountsrepresentsadjustmentstocustomertradeaccountsreceivableforamountsdeemeduncollectible.Theallowancefordoubtfulaccountsreducesgrosstradereceivablestotheirestimatednetrealizablevalue.TheCompanyestimatesdoubtfulaccountsbasedon18historicalbaddebts,factorsrelatedtospecificcustomers’abilitytopayandcurrenteconomictrends.TheCompanywritesoffaccountsreceivableagainsttheallowancewhenabalanceisdeterminedtobeuncollectible.Amountsareconsideredtobeuncollectablebaseduponhistoricalexperienceandmanagement’sevaluationofoutstandingaccountsreceivable.InventoryValuationInventoryiscomprisedoffinishedgoodsandisstatedatthelowerofcost,inclusiveoffreightandduty,ormarket(netrealizablevalue)usingthefirst-in,first-out(FIFO)methodornetrealizablevalue.Ourwarehousingcostsarechargedtoexpenseasincurred.Weregularlyreviewslow-movingandexcessinventoryandwrite-downinventoriesasappropriate.Managementusesestimatestorecordwrite-downsbasedonitsreviewofinventorybyproductcategoryincludinglengthoftimeonhandandestimatesoffutureordersforeachproduct.Changesinconsumerpreferences,aswellasdemandforproducts,customerbuyingpatternsandinventorymanagementcouldimpacttheinventoryvaluation.Long-LivedAssetswithFiniteLivesWereviewlong-livedassetswithfinitelivesforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountofalong-livedassetmaynotberecoverable.Anassetisconsideredtobeimpairedwhenitscarryingamountexceedsboththesumoftheundiscountedfuturenetcashflowsexpectedtoresultfromtheuseoftheassetanditseventualdispositionandtheasset’sfairvalue.Long-livedassetsincludepropertyandequipmentandfinite-livedintangibleassets.Theamountofimpairmentloss,ifany,ischargedbyustocurrentoperations.Indefinite-LivedIntangibleAssetsWeaccountforindefinite-livedintangibleassetsinaccordancewithaccountingguidancethatrequiresindefinite-livedintangibleassetsbetestedannuallyforimpairmentandmorefrequentlyifeventsorchangesincircumstancesindicatethattheassetmightbeimpaired.Ourannualimpairmenttestingisconductedinthefourthquarterofeveryyear.Wetestindefinite-livedintangibleassetsforimpairmentbycomparingtheasset’sfairvaluetoitscarryingamount.Ifthefairvalueislessthanthecarryingamount,theexcessofthecarryingamountoverfairvalueisrecognizedasanimpairmentchargeandtheadjustedcarryingamountbecomestheasset’snewaccountingbasis.Managementalsoevaluatestheremainingusefullifeofanintangibleassetthatisnotbeingamortizedeachreportingperiodtodeterminewhethereventsandcircumstancescontinuetosupportanindefiniteusefullife.Ifanintangibleassetthatisnotbeingamortizedissubsequentlydeterminedtohaveafiniteusefullife,itisamortizedprospectivelyoveritsestimatedremainingusefullife.IncomeTaxesIncometaxesarecomputedusingtheassetandliabilitymethodofaccounting.Undertheassetandliabilitymethod,adeferredtaxassetorliabilityisrecognizedforestimatedfuturetaxeffectsattributabletotemporarydifferencesandcarryforwards.Themeasurementofdeferredincometaxassetsisadjustedbyavaluationallowance,ifnecessary,torecognizefuturetaxbenefitsonlytotheextent,basedonavailableevidence,itismorelikelythannotthatsuchbenefitwillberealized.Werecognizeinterestandpenalties,ifany,relatedtouncertaintaxpositionsininterestexpense.Onaglobalbasis,theopentaxyearssubjecttoexaminationbymajortaxingjurisdictionsinwhichweoperateisbetween2014and2020.19ResultsofOperationsThefollowingtablepresentsselectedconsolidatedfinancialinformationforourCompanyforthefiscalyearsendedJanuary2,2021(“fiscal2020”)andDecember28,2019(“fiscal2019”).YearendedJanuary2,2021YearEndedDecember28,2019Netsales.......................................$155,299100.0%$173,181100.0%Costofgoodssold................................104,44867.3%118,29668.3%Grossprofit.....................................50,85132.7%54,88531.7%Generalandadministrativeexpenses....................29,36018.9%34,82320.1%Sellingexpenses..................................12,5748.1%14,5408.4%Depreciationandamortization.......................3,3482.2%3,7202.2%Impairmentofintangibleasset.......................6760.4%——Incomefromoperations............................4,8933.1%1,8021.0%Interestexpense,net...............................4,0782.6%4,8712.8%Lossfromextinguishmentofdebt.....................1,8001.2%——Lossbeforeprovisionforincometaxes..................(985)(0.7)%(3,069)(1.8)%Provisionforincometaxes...........................117(0.1)%1,095(0.6)%Netloss........................................$(1,102)(0.8)%$(4,164)(2.4)%Fiscal2020ComparedwithFiscal2019Netsalesdecreased10.3%to$155,299forfiscal2020from$173,181forfiscal2019dueprimarilytothedeclineinsalestointernationalandmid-tiercustomers.Forfiscal2020,salestoourtopthreecustomersincreasedbyapproximately5.3%overthepriorfiscalyearandsalesincreasedacrossseveralofourproductcategoriesincludingspecialtyblankets,entertainersandplayards.However,theseincreaseswereoffsetby(a)thenegativeimpactofincreasedtariffsimposedongoodsimportedintotheUnitedStatesfromChinathatledtohigherretailpricepoints,(b)aplanneddeclineduetotherestructuringofourinternationalbusiness,(c)adeclineinourmid-tierandinternationalsalesthatwereaffectedbyfewerdistributionchannelsasmanyofthesecustomerswereclosedforasmuchasthreemonthsasaresultoftheCOVID-19pandemic,and(d)acontinuedshifttodirectimportbusiness.Costofgoodssoldincludesthecostofthefinishedproductfromsuppliers,dutiesandtariffsoncertainimporteditems,freight-infromsuppliers,andmiscellaneouscharges.Thecomponentsofcostofgoodssoldremainedsubstantiallythesameforfiscal2020ascomparedtofiscal2019.Grossprofitdecreased7.3%to$50,851forfiscal2020from$54,885forfiscal2019,butgrossmarginincreasedinfiscal2020to32.7%fromfiscal2019at31.7%.Grossprofitdollarsdecreasedprimarilyduetolowersales.Grossprofitasapercentofnetsalesimprovedprimarilyduetotariffexclusionsoncertaingate,bath,andbedrailproductsthatbecameeffectivebetweenDecember2019andMay2020andwereretroactivetoSeptember2018resultingin$2,483ofthetariffrefundsasabenefittocostofsalesinthetwelvemonthsendingJanuary2,2021comparedtoa$1,470benefittocostofsalesinthefourthquarterof2019.TariffexclusionsreceivedsinceDecember2019expiredinAugust2020,however,wehavebeentakingactionsthatweexpecttomitigatetheresumptionofthesetariffswithcustomerpriceincreases,supplierconcessions,andproductcostreductions.Generalandadministrativeexpensesdeclined15.7%to$29,360forfiscal2020comparedto$34,823forfiscal2019anddecreasedasapercentofsalesto18.9%forfiscal2020from20.1%forfiscal2019.Thedecreaseindollarsandasapercentofsaleswasprimarilyattributabletorestructuringinitiativesimplementedinthefirstquarterof2020thatincludedareductioninworkforceandothercostreductionspartiallyoffsetbyseveranceandotherrestructuringcosts.Sellingexpensesdecreasedby13.5%to$12,574forfiscal2020from$14,540forfiscal2019andasapercentofsalesto8.1%forfiscal2020from8.4%forfiscal2019.Thedecreaseinsellingexpensedollarswasprimarilyduetolowernetsales,lowercooperativeadvertisingandfreightoutcosts,anincreaseindirect20importsalesandthestrategicrestructuringofourinternationalbusiness.Thedecreaseasapercentageofnetsalesisprimarilyattributabletoadecreaseinfreightexpensewhichistheresultofashiftinourdistributionmodelandachangeincustomermix.Thedistributionmodelchangeincludedtransitioningmoresalestodirectimportandtherestructuringofourinternationalbusiness.Thecustomermixchangeistheresultofalowerlevelofbusinesswithinternationalcustomers,mid-tiercustomersandourdirecttoconsumerbusiness.Depreciationandamortizationdecreasedto$3,348forfiscal2020from$3,720infiscal2019.Inthefourthquarter,theCompanyalsorecordedanassetimpairmentchargeof$676,representingtheremainingunamortizedbalanceofthedefinite-livedassetrelatedtotheCompany’sBornFreeHoldingLimited(BFH)trademarks.Thisintangibleassetwasdeterminedtohaveacarryingvaluethatwasnon-recoverable.ThedeterminationresultedfromtheCompany’sdecisiontodissolvetheBFHentitywhichwascompletedinDecember2020.TheCompanyalsoconsideredwhetherotherlong-livedassetsinotherassetgroupswereimpairedandconcludedthattheywerenot.Nootherimpairmentwasrecorded.Capitalexpendituresdecreasedinfiscal2020to$1,258from$1,991infiscal2019.Netinterestexpensedecreased16.3%to$4,078forfiscal2020from$4,871infiscal2019.Interestexpensedecreasedprimarilyasaresultoflowerdebtlevelsduringfiscal2020comparedtofiscal2019,butalsoasaresultoflowerinterestratesinthefourthquarterof2020fromtheLoanAgreementdescribedbelow,whichweenteredintointhefourthquarterof2020,partlyoffsetbythewrite-offof$266ofpreviouslyunamortizedfinancingfeesassociatedwiththereductioninthetotalrevolvercommitmentsundertheCompany’sBankofAmericacreditfacilityinMarch2020anda$1,800lossfromtheextinguishmentofdebt.Forfiscal2020,werecordeda$117taxprovisionon$985ofpretaxlossfortheperiod.Thetaxprovisionforfiscal2020includeda$7,435federalbenefitfortheworthlessstocklossofBFH,aswellasanet$236decreaseinvaluationallowancefornondeductibleinterestexpense,a$273decreaseinvaluationallowanceagainstourstateresearchanddevelopmenttaxcreditdeferredtaxasset,anda$253valuationallowanceagainstforeignsubsidiarynetoperatinglossdeferredtaxassets,offsetbya$7,543provisionforuncertaintaxpositions.Theuncertaintaxpositionprovisionrelatestotheworthlessstocklossbenefitnotedabove.Duetotheuncertainnatureofworthlessstockdeductions,wedeterminedtheassociatedtaxbenefittobeanuncertaintaxpositionandaccordingly,wehavefullyreservedforthetaxbenefit.ThistaxpositionmaybesubjecttoauditandfutureadjustmentbytheIRS,whichcouldresultinareversalofnone,part,oralloftheincometaxbenefitorcouldresultinabenefithigherthanthenetamountrecorded.IftheIRSrejectsorreducestheamountoftheincometaxbenefitrelatedtotheworthlessstockloss,wemayhavetopayadditionalcashincometaxes,whichcouldadverselyaffectourresultsofoperations,financialcondition,andcashflows.Wecannotguaranteewhattheultimateoutcomeoramountofthebenefitwereceive,ifany,willbe.Thetaxprovisionforfiscal2019includeda$191adjustmentfortheforfeitureofunexercisedstockoptionsaswellasa$911valuationallowancefornondeductibleinterestexpenseanda$333valuationallowanceagainstourUnitedKingdomsubsidiary’snetoperatinglossdeferredtaxassetthatwereinstituteduntilsuchtimeaswewereabletodemonstrateitismorelikelythannotthatthoseassetswouldbeusedinthenearfuture.LiquidityandCapitalResourcesCashFlowsWefundouroperationsandworkingcapitalneedsthroughcashgeneratedfromoperationsandborrowingsunderourcreditfacility.Inourtypicaloperationalcashflowcycle,inventoryispurchasedinU.S.dollarstomeetexpecteddemandplusasafetystock.ThemajorityofoursuppliersarebasedinAsiaandsuchinventorytypicallytakesfromthreetofourweekstoarriveatthevariousdistributionpointswemaintainintheUnitedStatesandCanada.Paymenttermsforthesevendorsareapproximately60-75daysfromthedatetheproductshipsfromAsiaandthereforewearegenerallypayingfortheproductashorttimeafteritisphysicallyreceivedintheUnitedStates.Inturn,salestocustomersgenerallyhavepaymenttermsof60days,resultinginan21accountsreceivableandincreasingtheamountofcashrequiredtofundworkingcapital.Tobridgethegapbetweenpayingoursuppliersandreceivingpaymentfromourcustomersforgoodssold,werelyonourcreditfacility.Themajorityofourcapitalexpendituresarefortoolsandmoldsrelatedprimarilytonewproductintroductions.Wereceiveindicationsfromretailersnearthemiddleofeachyearastowhatproductstheywillbetakingintotheirproductlinesfortheupcomingyear.Basedontheseindications,wewillthenacquirethetoolsandmoldsrequiredtobuildandproducetheproducts.Inmostcases,thepaymentsforthetoolsarespreadoutoverathreetofourmonthperiod.Forfiscal2020,netcashprovidedbyoperatingactivitieswasapproximately$17,607generatedprimarilyfromoperatingperformanceandimprovedworkingcapitalefficiency.Forfiscal2019,netcashprovidedbyoperatingactivitieswasapproximately$2,197generatedprimarilyfromoperatingperformance,includingareductionininventory.Forfiscal2020,netcashusedininvestingactivitieswasapproximately$1,278.Forfiscal2019,netcashusedininvestingactivitieswasapproximately$2,326.Thedeclineintheuseofcashininvestingactivitieswasprimarilyattributabletoareductionincapitalexpendituresinfiscal2020.Forfiscal2020,netcashusedinfinancingactivitieswasapproximately$16,644,representingasignificantnetpaydownoffundeddebt.Forfiscal2019,netcashprovidedbyfinancingactivitieswasapproximately$57whichrepresentedanetdrawonourrevolvingcreditfacility.Basedprimarilyontheabovefactors,netcashincreasedforfiscal2020by$115,resultinginacashbalanceofapproximately$510atfiscalyearend.Thefollowingtablesummarizesoursignificantcontractualcommitmentsatfiscal2020yearend:PaymentDuebyFiscalPeriodContractualObligationsTotal202120222023202420252026andbeyondRevolvingFacility..............$21,467————$21,467—TermLoanFacility..............7,1251,5001,1251,5001,5001,500—FILOLoan...................2,344625469625625——PPPLoan....................1,95698391391391391294EstimatedfutureinterestpaymentsonRevolvingFacility.............2,666601601601601262—EstimatedfutureinterestpaymentsonTermLoanFacility............6632371891368714—EstimatedfutureinterestpaymentsonFILOLoanFacility............17374543411——Operatingleases................4,0882,491635473325164—Totalcontractualcashobligations...$40,482$5,626$3,464$3,760$3,540$23,798$294EstimatedfutureinterestpaymentsonourRevolvingFacilityandTermLoanFacilityarebasedupontheinterestratesineffectatJanuary2,2021.CapitalResourcesInadditiontooperatingcashflow,wealsorelyonourasset-basedrevolvingcreditfacilityandFILOloanwithBankofAmerica,N.A.tomeetourfinancingrequirements,whicharesubjecttochangesinourinventoryandaccountreceivablelevels.Weregularlyevaluatemarketconditions,ourliquidityprofile,andvariousfinancingalternativesforopportunitiestoenhanceourcapitalstructure.Ifweareunabletomeetourcurrentfinancialprojections,donotadequatelycontrolexpenses,oradjustouroperationsaccordingly,wemayexperienceconstraintsonourliquidityandmaynotmeetthefinancialandothercovenantsunderourrevolvingcreditfacilityandFILOloanagreement,whichcould22impactouravailability.Thereisnoassurancethatwewillmeetallofourfinancialorothercovenantsinthefuture,orthatourlenderwillgrantwaiversoragreetoamendthetermsofouragreementiftherearecovenantviolations.Insuchcase,wemayberequiredtoseektoraiseadditionalfundsthroughdebtorequityfinancings,restructureourexistingdebt,engageinstrategiccollaborations,and/orastrategictransactionthatisinthebestinterestofourstockholders.Anysuchfinancingorstrategictransactioncouldresultinsignificantdilutiontoourexistingstockholders,dependingonthetermsofthetransaction.Ifweareunabletoidentifyastrategictransaction,raiseadditionalfunds,and/orrestructureourexistingdebt,ouroperationscouldbelimitedandwemaynotbeabletomeetallofourobligationsunderourrevolvingcreditfacilityandFILOloanagreement.Basedonpastperformanceandcurrentexpectations,webelievethatouranticipatedcashflowfromoperationsandavailabilityunderourexistingcreditfacilitiesaresufficienttofundourworkingcapital,capitalexpendituresanddebtservicerequirementsforatleastthenext12months.LoanAgreementwithBofAWeandourwhollyownedsubsidiary,SummerInfant(USA),Inc.,arepartiestoaThirdAmendedandRestatedLoanandSecurityAgreement(the“LoanAgreement”)withBankofAmerica,N.A.,asagent,thatprovidesfor(i)a$40,000asset-basedrevolvingcreditfacility,witha$5,000unusedletterofcreditsub-linefacilityasofJanuary2,2021,(ii)a$7,500termloanand(iii)a$2,500FILO(first-in,last-out)loan.TheLoanAgreementreplacedourpriorcreditfacilitywithBofAandtermloanwithPathlightCapital.AsofJanuary2,2021theoutstandingrevolvingcreditfacility,FILOandtermloanbalanceswere$21,467,$2,344and$7,125,respectively.PursuanttotheLoanAgreement,totalborrowingcapacityundertherevolvingcreditfacilityisbasedonaborrowingbase,whichisgenerallydefinedas85%ofeligiblereceivablesplusthelesserof(i)70%ofthevalueofeligibleinventory(subjecttocertainlimitations)or(ii)85%ofthenetorderlyliquidationvalueofeligibleinventory,lessapplicablereserves.ThescheduledmaturitydateoftheloansundertherevolvingcreditfacilityisOctober15,2025(subjecttocustomaryearlyterminationprovisions).Loansundertherevolvingcreditfacilitybearinterest,atouroption,atabaserateoratLIBOR,plusapplicablemarginsbasedonaveragequarterlyavailability.Interestpaymentsareduemonthly,payableinarrears.Wearealsorequiredtopayanannualnon-usefeeonunusedamountsundertherevolvingcreditfacility,aswellasothercustomaryfeesasaresetforthintheLoanAgreement.AsofJanuary2,2021,theinterestrateonLIBORbasedrevolverloansandonbaseraterevolverloanswas2.625%and4.500%,respectively.Theprincipalofthetermloanistoberepaid,onaquarterlybasis,ininstallmentsof$375,untilpaidinfullonterminationandsubjecttomandatoryrepaymentincertaincircumstances.ThescheduledmaturitydateofthetermloanisOctober15,2025orearlier,iftherevolvingcreditfacilityisterminated.Thetermloanbearsinterest,atouroption,atabaserateoratLIBOR,plusapplicablemargins,andinterestpaymentsareduemonthly,inarrears.AsofJanuary2,2021,theinterestrateonLIBORbasedtermloansandonbaseratetermloanswas3.875%and5.75%%,respectively.ThetotalborrowingcapacityundertheFILOloanisthelesserof(i)thethenapplicableaggregateFILOcommitmentamountand(ii)aborrowingbase,generallydefinedasaspecificpercentageofthevalueofeligibleaccounts,plusaspecifiedpercentageofthevalueofeligibleinventory.TheaggregateFILOcommitmentamountwillbeproportionatelyreducedeachquarteruntiltheFILOloanisterminatedatmaturityonOctober15,2024.TherecanbenovoluntaryrepaymentontheFILOloanaslongasthereareloansoutstandingundertherevolvingcreditfacility,unless(i)thereisanoveradvanceundertheFILOloan,or(ii)suchprepaymentisaccompaniedbyapermanentdollarfordollarreductionintheaggregateFILOcommitmentamountsuchthat,aftergivingeffecttosuchprepaymentandreduction,theoutstandingprincipalamountoftheFILOloanisequaltobutdoesnotexceedthelesserof(A)theaggregateFILOcommitmentamountand(B)theFILOborrowingbase.TheFILOloanbearsinterest,atouroption,atabaserateoratLIBOR,plusapplicablemargins,andinterestpaymentsareduemonthly,inarrears.AsofJanuary2,2021,theinterestrateonLIBORbasedFILOloansandonbaserateFILOloanswas3.625%%and5.50%%,respectively.AllobligationsundertheLoanAgreementaresecuredbysubstantiallyalltheassetsoftheCompany,andoursubsidiaries,SummerInfantCanadaLimitedandSummerInfantEuropeLimited,areguarantors23undertheLoanAgreement.TheLoanAgreementcontainscustomaryaffirmativeandnegativecovenants.Amongotherrestrictions,wearerestrictedinourabilitytoincuradditionaldebt,makeacquisitionsorinvestments,disposeofassets,ormakedistributionsunlessineachcasecertainconditionsaresatisfied.UntilthetermloanandFILOloanhavebeenrepaidinfull,wemustmaintainafixedchargecoverageratioattheendofeachfiscalmonthofatleast1.00to1.00forthetwelve-monthperiodthenended.AfterthetermloanandFILOloanhavebeenrepaidinfull,wewillberequiredtomaintainthefixedchargecoverageratioifavailabilityfallsbelow$5,000.TheLoanAgreementalsocontainscustomaryeventsofdefault,includingifwefailtocomplywithanyrequiredfinancialcovenants,ifthereisaneventofdefaultunderthePPPLoan(describedbelow)andtheoccurrenceofachangeofcontrol.Intheeventofadefault,alloftheobligationsundertheLoanAgreementmaybedeclaredimmediatelydueandpayable.Forcertaineventsofdefaultrelatingtoinsolvencyandreceivership,alloutstandingobligationsbecomedueandpayable.ForadditionalinformationontheLoanAgreement,pleaseseeNote5toourconsolidatedfinancialstatementsincludedinthisAnnualReportonForm10-K.PPPLoanIn2020,weappliedforandreceivedloanproceedsof$1,956(the“PPPLoan”)pursuanttothePaycheckProtectionProgram(“PPP”)administeredbytheU.S.SmallBusinessAdministrationundertheU.S.CARESAct.ThePPPLoan,whichwasintheformofapromissorynote(the“PPPNote”),betweentheCompanyandBofA,asthelender,maturesonJuly27,2025andbearsinterestatafixedrateof1%perannum.Monthlyprincipalandinterestpaymentsaredeferreduntil(i)thedateonwhichtheamountofforgivenessisremittedtotheCompany’slender,(ii)thedateonwhichtheCompany’slenderprovidesnoticethattheCompanyisnotentitledtoloanforgiveness,and(iii)ifaborrowerdoesnotapplyforloanforgiveness,10monthsafterthedateoftheloanforgivenesscoveredperiod.TheCompanymayvoluntarilyprepaytheborrowingsinfullwithnoassociatedpenaltyorpremium.UnderthetermsofthePPP,theprincipalandinterestmaybeforgivenifthePPPLoanproceedsareusedforqualifyingexpenses,includingpayrollcosts,rentandutilitycosts.ThePPPNotecontainscustomaryrepresentations,warranties,andcovenantsforthistypeoftransaction,includingcustomaryeventsofdefaultrelatingto,amongotherthings,paymentdefaultsandbreachesofrepresentationsandwarrantiesorotherprovisionsofthePPPNote.Theoccurrenceofaneventofdefaultmayresultin,amongotherthings,theCompanybecomingobligatedtorepayallamountsoutstandingunderthePPPNote.OnFebruary18,2021,theCompanyappliedforfullforgivenessofthePPPloanthroughBankofAmericaandtheapplicationiscurrentlyunderreviewbyBankofAmerica.Off-BalanceSheetArrangementsWedidnothaveanyoff-balancesheetarrangementsduringtheyearendedJanuary2,2021ortheyearendedDecember28,2019.RecentlyIssuedAccountingPronouncementsInFebruary2016,theFASBissuedASUNo.2016-02,Leases(“ASU2016-02”).ASU2016-02requireslesseestorecognizemostleasesontheirbalancesheetasaright-of-useassetandaleaseliability.Leasesareclassifiedaseitheroperatingorfinance,andclassificationisbasedoncriteriasimilartopastleaseaccounting,butwithoutexplicitbrightlines.InJuly2018,theFASBissuedASUNo.2018-10,“CodificationImprovementstoTopic842,Leases”(“ASU2018-10”),whichprovidesnarrowamendmentstoclarifyhowtoapplycertainaspectsofthenewleasestandard,andASUNo.2018-11,“Leases(Topic842)—TargetedImprovements”(ASU2018-11),whichaddressesimplementationissuesrelatedtothenewleasestandard.TheguidancebecameeffectiveforannualreportingperiodsbeginningafterDecember15,2018andinterimperiodswithinthosefiscalyears.TheCompanyadoptedthestandardontheeffectivedateofDecember30,2018byapplyingthenewleaserequirementsattheeffectivedate.TheCompanyalsoelectedthepackageofpracticalexpedientspermittedunderthetransitionguidancewithinthenewstandard,which,amongotherthings,allowsthe24Companytocarryforwardthehistoricalleaseclassification.TheimpactoftheadoptionofASC842-Leases(“ASC842”)ontheconsolidatedbalancesheetonthedateofadoptionwasanincreaseof$6,411inassetsandanincreaseof$7,037ofliabilitiesfortherecognitionofright-of-useassetsandleaseliabilities.TheadoptionofASC842wasimmaterialtotheconsolidatedresultsofoperationsandcashflows.InJune2016,theFASBissuedASU2016-13,FinancialInstruments-CreditLosses(Topic326):MeasurementofCreditLossesonFinancialInstrumentsandasubsequentamendmenttotheinitialguidance,ASU2018-19CodificationImprovementstoTopic325,FinancialInstruments-CreditLosses(collectively,Topic326).Topic326requiresmeasurementandrecognitionofexpectedcreditlossesforfinancialassetsheld,whichinclude,butarenotlimitedto,tradeandotherreceivables.ThenewstandardiseffectiveforfiscalyearsbeginningafterDecember,15,2022.TheCompanyiscurrentlyevaluatingtheimpactofthisguidanceonitsconsolidatedfinancialstatements.Managementdoesnotbelievethatanyotherrecentlyissued,butnotyeteffective,accountingstandardsifcurrentlyadoptedwouldhaveamaterialeffectontheaccompanyingfinancialstatements.SpecialNoteRegardingForwardLookingStatementsThisreportcontains“forward-lookingstatements”withinthemeaningofSection27AoftheSecuritiesActof1933,asamended,andSection21EoftheSecuritiesExchangeActof1934,asamended.Thesestatementsconcernmanagement’scurrentassumptions,estimates,beliefs,plans,strategiesandexpectationsandanticipatedeventsortrendsandsimilarexpressionsconcerningmattersthatarenothistoricalfacts.Suchforward-lookinginformationmaybeidentifiedbytermssuchas“expect,”“anticipate,”“believe,”“outlook,”“may,”“estimate,”“should,”“predict”andsimilartermsorvariationsthereof,andincludesstatementsregardingourexpectationswithrespecttoourroadmapforsustainablegrowthin2021andbeyond,ourstrategicpriorities,oureffortstomitigatetheimpactoftariffs,thebenefitsofandsavingsfromourrestructuringinitiatives,theongoingimpactofthecoronaviruspandemiconourbusinessaswellastheUSandglobaleconomies,ourliquidityforthenext12months,andexpectedtrendsandproductofferingsin2021.Thesestatementsarebasedonaseriesofexpectations,assumptions,estimatesandprojectionsaboutourCompany,arenotguaranteesoffutureresultsorperformance,andinvolvesignificantrisks,uncertaintiesandotherfactors,includingassumptionsandprojections,forallforwardperiods.Ouractualresultsmaydiffermateriallyfromanyfutureresultsexpressedorimpliedbysuchforward-lookingstatements.Suchfactorsinclude,amongothers,thefollowing:•thewidespreadnatureoftheCOVID-19pandemic;•theimpactofincreasedtariffs,additionaltariffsorimportorexporttaxesonthecostofourproductsandthereforedemandforourproducts;•theconcentrationofourbusinesswithcertainretailcustomerswhomaychangetheirpurchasingpoliciesorsufferliquidityproblemsorbankruptcy;•ourabilitytocompetebyintroducingnewproductsorenhancingexistingproductsthatsatisfyconsumerpreferences;•ourabilitytodevelopandintroducenewproductsinatimelyandcosteffectivemanner;•ourabilitytocompeteeffectivelywithlargerandsmallercompaniesthathavemorefinancialresourcesandgreatere-commercepresencethanus;•ourabilitytoimplementandtoachievetheexpectedbenefitsandsavingsofourrestructuringinitiatives;•ourabilitytomanageinventorylevelsandmeetcustomerdemand;•ourabilitytomaintainsufficientavailabilityunderandtocomplywithfinancialandothercovenantsinourloanagreement;•ourabilitytomanageourdebttoprovideadditionalliquiditytosupportgrowth;•ourabilitytoobtainforgivenessofouroutstandingPPPloan;•ourrelianceonforeignsuppliersandpotentialdisruptioninforeignmarketsinwhichweoperate;25•increasesinthecostofrawmaterialsusedtomanufactureourproducts;•increasesinthecostsandavailabilityasitrelatestoshippingandtransportingourproductsfrommanufacturerstotheCompanyandfromtheCompanytoourcustomers;•ourabilitytoprotectourintellectualproperty;•compliancewithsafetyandtestingregulationsforourproducts;•productliabilityclaimsarisingfromuseofourproducts;•potentialexposuretogreaterthananticipatedtaxliabilities;•animpairmentofotherintangibleassets;and•anyfailure,inadequacyorinterruptionofourinformationtechnologysystemsresultingfromcyberattacksorotherfailuresthatmaydisruptouroperationsandleadtodisclosureofconfidentialorproprietarydata.Theforegoinglistofimportantfactorsdoesnotincludeallsuchfactors,nornecessarilypresenttheminorderofimportance.Inaddition,pleaserefertothe“RiskFactors”sectionofthisreportforadditionalinformationregardingfactorsthatcouldaffectourresultsofoperations,financialconditionandliquidity.Weintendourforward-lookingstatementstospeakonlyasofthetimeofsuchstatementsanddonotundertakeorplantoupdateorrevisethemasmoreinformationbecomesavailableortoreflectchangesinexpectations,assumptionsorresults.Wecannotgiveanyassurancethatsuchexpectationsorforward-lookingstatementswillprovetobecorrect.Anoccurrenceof,oranymaterialadversechangein,oneormoreoftheriskfactorsorrisksanduncertaintiesreferredtointhisreportorincludedinourotherperiodicreportsfiledwiththeSECcouldmateriallyandadverselyimpactouroperationsandourfuturefinancialresults.Anypublicstatementsordisclosuresbyusfollowingthisreportthatmodifyorimpactanyoftheforward-lookingstatementscontainedinoraccompanyingthisreportwillbedeemedtomodifyorsupersedesuchoutlookorotherforward-lookingstatementsinoraccompanyingthisreport.Item7A.QuantitativeandQualitativeDisclosuresAboutMarketRiskNotrequired.Item8.FinancialStatementsandSupplementaryDataThefinancialstatementsrequiredbythisitemareattachedtothisAnnualReportonForm10-KbeginningonPageF-1.Item9.ChangesinandDisagreementsWithAccountantsonAccountingandFinancialDisclosureNone.Item9A.ControlsandProcedures(a)EvaluationofDisclosureControlsandProceduresAsrequiredbyRule13a-15undertheSecuritiesExchangeActof1934,asoftheendoftheperiodcoveredbythisreport,wecarriedoutanevaluation,underthesupervisionandwiththeparticipationofourChiefExecutiveOfficerandourChiefFinancialOfficer,oftheeffectivenessofourdisclosurecontrolsandproceduresasofJanuary2,2021.Ourprincipalexecutiveofficerandprincipalfinancialofficerhaveconcluded,basedontheirevaluation,thatourdisclosurecontrolsandprocedureswereeffectiveasofJanuary2,2021.(b)Management’sReportonInternalControloverFinancialReportingManagementofourCompanyisresponsibleforestablishingandmaintainingadequateinternalcontroloverfinancialreporting.AsdefinedinRule13a-15(f)undertheExchangeAct,internalcontrolover26financialreportingisaprocessdesignedby,orunderthesupervisionof,acompany’sprincipalexecutiveandprincipalfinancialofficersandeffectedbyacompany’sboardofdirectors,managementandotherpersonnel,toprovidereasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternalpurposesinaccordancewithgenerallyacceptedaccountingprinciples.Itincludesthosepoliciesandproceduresthat:1)Pertaintothemaintenanceofrecordsthatinreasonabledetailaccuratelyandfairlyreflectthetransactionsanddispositionsoftheassetsofacompany;2)Providereasonableassurancethattransactionsarerecordedasnecessarytopermitpreparationoffinancialstatementsinaccordancewithgenerallyacceptedaccountingprinciples,andthatreceiptsandexpendituresofacompanyarebeingmadeonlyinaccordancewithauthorizationsofmanagementandtheboardofdirectorsofthecompany;and3)Providereasonableassuranceregardingpreventionortimelydetectionofunauthorizedacquisition,useordispositionofacompany’sassetsthatcouldhaveamaterialeffectonitsfinancialstatements.Becauseoftheinherentlimitations,internalcontroloverfinancialreportingmaynotpreventordetectmisstatements.Also,projectionsofanyevaluationofeffectivenesstofutureperiodsaresubjecttotheriskthatcontrolsmaybecomeinadequatebecauseofchangesinconditions,orthatthedegreeofcompliancewiththepoliciesorproceduresmaydeteriorate.TheCompany’smanagementhasusedthecriteriaestablishedinthe2013“InternalControl—IntegratedFramework”issuedbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommission(“COSOFramework”)toevaluatetheeffectivenessoftheCompany’sinternalcontroloverfinancialreporting.ManagementoftheCompanyconductedanevaluationoftheeffectiveness,asofJanuary2,2021,oftheCompany’sinternalcontroloverfinancialreportingandbasedonitsevaluationundertheCOSOFramework,managementhasconcludedthattheCompany’sinternalcontroloverfinancialreportingwaseffectiveasofJanuary2,2021.(c)ChangesinInternalControlOverFinancialReportingTherewasnochangeinourinternalcontroloverfinancialreportingthatoccurredduringthequarterendedJanuary2,2021thathasmateriallyaffected,orisreasonablylikelytomateriallyaffect,ourinternalcontroloverfinancialreporting.Item9B.OtherInformationTheCompanycurrentlyanticipatesthatits2021annualmeetingofstockholders(the“2021AnnualMeeting”)willbeheldonMay19,2021.Becausethedateofthe2021AnnualMeetingrepresentsachangeofmorethan30daysfromtheanniversaryoftheCompany’s2020annualmeetingofstockholders,inaccordancewithRule14a-5(f)undertheSecuritiesExchangeActof1934,asamended(the“ExchangeAct”),theCompanyisinformingstockholdersofthischange.Thetimeandlocationofthe2021AnnualMeetingwillbespecifiedintheCompany’sproxystatementforthe2021AnnualMeeting.PursuanttoRule14a-8undertheExchangeAct,astockholderintendingtopresentaproposaltobeincludedintheproxystatementforthe2021AnnualMeetingmustdeliveraproposalinwritingtoourprincipalexecutiveofficesnolaterthanareasonabletimebeforewebegintoprintandmailtheproxymaterialsforthe2021AnnualMeeting.SuchproposalmustalsocomplywiththeapplicablerequirementsastoformandsubstanceestablishedbytheSecuritiesandExchangeCommissionifthoseproposalsaretobeincludedintheproxystatementandformofproxy.Accordingly,thedeadlineforsubmissionofproposalstobeincludedintheproxystatementforthe2021AnnualMeetingisMarch31,2021.TheCompany’sBylawssetforthadvancenoticeprocedureswithregardtootherstockholderproposals,includingnominationsfortheelectionofdirectorsandbusinessproposalstobebroughtbeforeanannualmeetingofstockholdersbyanystockholder(otherthanmattersincludedinourproxymaterialsinaccordancewithRule14a-8undertheExchangeAct).Withrespecttothe2021AnnualMeeting,suchnoticewillbe27consideredtimelyifwereceivenoticeofsuchproposeddirectornominationortheproposalofotherbusinessatourcorporateofficesinWoonsocket,RhodeIsland,notlaterthanthecloseofbusinessonMarch31,2021.PARTIIIItem10.Directors,ExecutiveOfficersandCorporateGovernanceTheinformationrelatingtodirectors,directornomineesandexecutiveofficersoftheCompanyissetforthinourdefinitiveProxyStatementtobefiledwiththeSECinconnectionwithour2021AnnualMeetingofStockholders(the“2021ProxyStatement”)andisincorporatedhereinbyreference.TheinformationrelatingtoSection16(a)beneficialownershipreportingcomplianceissetforthinthe2021ProxyStatementandisincorporatedhereinbyreference.WehaveadoptedaCodeofEthicsthatappliestoallofourdirectors,officersandemployees.TheCodeofEthicsispubliclyavailableintheInvestorRelationssectionofourwebsiteatwww.summerinfant.com.AmendmentstotheCodeofEthicsandanygrantofawaiverfromaprovisionoftheCodeofEthicsrequiringdisclosureunderapplicableSECandNasdaqruleswillbedisclosedonourwebsite.TheinformationrelatingtotheCompany’sAuditCommitteeanditsdesignatedauditcommitteefinancialexpertissetforthinthe2021ProxyStatementandisincorporatedhereinbyreference.Theinformationconcerningproceduresbywhichstockholdersmayrecommenddirectornomineesissetforthinthe2021ProxyStatementandisincorporatedhereinbyreference.Item11.ExecutiveCompensationTheinformationrelatingtoexecutivecompensationandtheCompany’sCompensationCommitteeissetforthinthe2021ProxyStatementandisincorporatedhereinbyreference,providedthattheinformationunderthecaption“CompensationCommitteeReport”shallbedeemed“furnished”andshallnotbedeemed“filed”withthisreport,notdeemedincorporatedbyreferenceintoanyfilingundertheSecuritiesActof1933,asamended,exceptonlyasmaybeexpresslysetforthinanysuchfilingbyspecificreference.Item12.SecurityOwnershipofCertainBeneficialOwnersandManagementandRelatedStockholderMattersTheinformationrelatingtosecurityownershipofmanagement,certainbeneficialowners,andtheCompany’sequityplansissetforthinthe2021ProxyStatementandisincorporatedhereinbyreference.Item13.CertainRelationshipsandRelatedTransactions,andDirectorIndependenceTheinformationrelatingtocertainrelationshipsandrelatedpartytransactionsanddirectorindependenceissetforthinthe2021ProxyStatementandisincorporatedhereinbyreference.Item14.PrincipalAccountantFeesandServicesTheinformationrelatingtotheindependentregisteredpublicaccountingfirmfeesandservicesandtheCompany’spre-approvalpoliciesandproceduresforauditandnon-auditservicesprovidedbysuchaccountingfirmissetforthinthe2021ProxyStatementandisincorporatedhereinbyreference.28PARTIVItem15.ExhibitsandFinancialStatementSchedules(a)(1)FinancialStatementsThelistofconsolidatedfinancialstatementsandnotesrequiredbythisItem15(a)(1)issetforthinthe“IndextoFinancialStatements”onpageF-1ofthisAnnualReportonForm10-K.(2)FinancialStatementSchedulesAllscheduleshavebeenomittedbecausetherequiredinformationisincludedinthefinancialstatementsornotesthereto.(3)ExhibitsTheexhibitsrequiredbyItem601ofRegulationS-KandItem15(b)arelistedinthe“IndextoExhibits”below.(b)ExhibitsTheexhibitslistedinthe“IndextoExhibits”belowarefiledaspartofthisAnnualReportonForm10-K.Item16.Form10-KSummaryNotapplicable.29IndextoExhibitsExhibitNo.Description2.1AgreementandPlansofReorganization,datedasofSeptember1,2006,byandamongKBLHealthcareAcquisitionCorp.II,anditswhollyownedsubsidiary,SIIAcquisitionInc.,andSummerInfant,Inc.,SummerInfantEuropeLimited,SummerInfantAsia,Ltd.andtheirrespectivestockholders(IncorporatedbyreferencetoExhibit10.1totheRegistrant’sCurrentReportonForm8-KfiledonSeptember5,2006)2.2PurchaseandSaleAgreement,datedMarch24,2009,betweenSummerInfant(USA),Inc.andFaithRealtyII,LLC(IncorporatedbyreferencetoExhibit2.1totheRegistrant’sQuarterlyReportonForm10-Q/AfiledonAugust18,2009)2.3LeaseAgreement,datedMarch24,2009,betweenSummerInfant(USA),Inc.andFaithRealtyII,LLC(IncorporatedbyreferencetoExhibit2.2totheRegistrant’sQuarterlyReportonForm10-Q/AfiledonAugust18,2009)2.4StockPurchaseAgreement,datedasofMarch24,2011,byandamongtheRegistrant,SummerInfant(USA),Inc.,BornFreeHoldingsLtd.,andeachstockholderofBornFreeHoldingsLtd.(IncorporatedbyreferencetoExhibit2.1totheRegistrant’sCurrentReportonForm8-KfiledonMarch28,2011)3.1AmendedandRestatedCertificateofIncorporation,asamended(IncorporatedbyreferencetoExhibit3.1totheRegistrant’sAnnualReportonForm10-KfiledonMarch18,2020)3.2AmendedandRestatedBylaws,asamendedthroughMay5,2016(IncorporatedbyreferencetoExhibit3.1totheRegistrant’sCurrentReportonForm8-KfiledonMay9,2016)4.1SpecimenCommonStockCertificate(IncorporatedbyreferencetoExhibit4.2totheRegistrant’sForm8-AfiledonMarch6,2007)4.2DescriptionofRegistrant’sSecurities(IncorporatedbyreferencetoExhibit4.2totheRegistrant’sAnnualReportonForm10-KfiledonMarch18,2020)10.1RegistrationRightsAgreementbyandamongtheRegistrant,JasonMacariandStevenGibree(IncorporatedbyreferencetoExhibit10.9totheRegistrant’sCurrentReportonForm8-KfiledonSeptember5,2006)10.2*2006PerformanceEquityPlan(IncorporatedbyreferencetoAppendixAtotheRegistrant’sDefinitiveProxyStatementonSchedule14AfiledonApril29,2008,SECFileNo.001-33346)10.3ThirdAmendedandRestatedLoanandSecurityAgreement,datedasofOctober15,2020,amongSummerInfant,Inc.andSummerInfant(USA),Inc.,asborrowers,theguarantorsfromtimetotimepartythereto,thefinancialinstitutionsfromtimetotimepartytheretoaslenders,andBankofAmerica,N.A.,asagentandsecuritytrusteeforthelenders(IncorporatedbyreferencetoExhibit10.1totheRegistrant’sCurrentReportonForm8-KfiledonOctober16,2020)10.4*2012IncentiveCompensationPlan,asamended(IncorporatedbyreferencetoExhibit10.1totheRegistrant’sCurrentReportonForm8-KfiledonAugust5,2015)10.5*SummerInfant,Inc.FormofIndemnificationAgreement(forofficersanddirectors)(IncorporatedbyreferencetoExhibit10.3totheRegistrant’sCurrentReportonForm8-KfiledonJanuary17,2014,SECFileNo.001-33346)10.6AmendmenttoLease,datedMay13,2015,byandbetweenFaithRealtyII,LLCandSummerInfant(USA),Inc.(IncorporatedbyreferencetoExhibit10.1totheRegistrant’sCurrentReportonForm8-KfiledonMay19,2015)10.7SecondAmendmenttoLease,datedJanuary22,2018,byandbetweenFaithRealtyII,LLCandSummerInfant(USA),Inc.(IncorporatedbyreferencetoExhibit10.1totheRegistrant’sCurrentReportonForm8-KfiledonJanuary26,2018)10.8ThirdAmendmenttoLease,datedApril24,2020,byandbetweenFaithRealtyII,LLCandSummerInfant(USA),Inc.(IncorporatedbyreferencetoExhibit10.1totheRegistrant’sCurrentReportonForm8-KfiledonApril30,2020)30ExhibitNo.Description10.9*SummerInfant,Inc.ChangeinControlPlan(asamendedthroughMay11,2020)(IncorporatedbyreferencetoExhibit10.3totheRegistrant’sQuarterlyReportonForm10-QfiledonAugust11,2020)10.10EngagementLetter,effectiveasofDecember9,2019,betweenSummerInfant,Inc.andWinterHarborLLC(IncorporatedbyreferencetoExhibit10.16totheRegistrant’sAnnualReportonForm10-KfiledonMarch18,202010.11**AmendmenttoEngagementLetter,datedFebruary28,2020,betweenSummerInfant,Inc.andWinterHarborLLC(IncorporatedbyreferencetoExhibit10.1totheRegistrant’sQuarterlyReportonForm10-QfiledonMay12,2020)10.12SecondAmendmenttoEngagementLetter,effectiveasofNovember30,2020,betweenSummerInfant,Inc.andWinterHarborLLC(IncorporatedbyreferencetoExhibit10.1totheRegistrant’sCurrentReportonForm8-KfiledonDecember1,2020)10.13LetterAgreement,datedMay12,2020,amongEdmundJ.Schwartz,SummerInfant,Inc.andSummerInfant(USA),Inc.(IncorporatedbyreferencetoExhibit10.1totheRegistrant’sCurrentReportonForm8-KfiledonOctober1,2020)10.14Amendment,datedSeptember29,2020,toLetterAgreementamongEdmundJ.Schwartz,SummerInfant,Inc.andSummerInfant(USA),Inc.datedMay12,2020(IncorporatedbyreferencetoExhibit10.2totheRegistrant’sCurrentReportonForm8-KfiledonOctober1,2020)21.1+ListofSubsidiaries23.1+ConsentofIndependentRegisteredPublicAccountingFirm31.1+CertificationofChiefExecutiveOfficerpursuanttoSection302oftheSarbanes-OxleyActof200231.2+CertificationofChiefFinancialOfficerpursuanttoSection302oftheSarbanes-OxleyActof200232.1+CertificationofChiefExecutiveOfficerpursuantto18U.S.C.Section1350(Section906oftheSarbanes-OxleyActof2002)32.2+CertificationofChiefFinancialOfficerpursuantto18U.S.C.Section1350(Section906oftheSarbanes-OxleyActof2002)101.INSXBRLInstanceDocument101.SCHXBRLTaxonomyExtensionSchemaDocument101.CALXBRLTaxonomyExtensionCalculationLinkbaseDocument101.DEFXBRLTaxonomyExtensionDefinitionLinkbaseDocument101.LABXBRLTaxonomyExtensionLabelsLinkbaseDocument101.PREXBRLTaxonomyExtensionPresentationLinkbaseDocument*Managementcontractorcompensatoryplanorarrangement.**PortionsofthisExhibithavebeenomittedpursuanttoagrantofconfidentialtreatment.+Filedherewith.31SIGNATURESPursuanttotherequirementsofSection13or15(d)oftheSecuritiesExchangeActof1934,theregistranthasdulycausedthisreporttobesignedonitsbehalfbytheundersigned,thereuntodulyauthorizedonthe16thdayofMarch,2021.SUMMERINFANT,INC.By:/s/EDMUNDSCHWARTZEdmundSchwartzChiefFinancialOfficerPursuanttotherequirementsoftheSecuritiesExchangeActof1934,thisreporthasbeensignedbelowbythefollowingpersonsonbehalfoftheregistrantandinthecapacitiesandonthedatesindicated.NameTitleDate/s/STUARTNOYESStuartNoyesChiefExecutiveOfficer(PrincipalExecutiveOfficer)andDirectorMarch16,2021/s/EDMUNDSCHWARTZEdmundSchwartzSeniorVicePresidentandChiefFinancialOfficer(PrincipalFinancialandAccountingOfficer)March16,2021/s/ROBINMARINORobinMarinoChairwomanoftheBoardMarch16,2021/s/EVELYND’ANEvelynD’AnDirectorMarch16,2021/s/ALANMUSTACCHIAlanMustacchiDirectorMarch16,2021/s/ANDREWW.TRAINAndrewW.TrainDirectorMarch16,2021/s/STEPHENZELKOWICZStephenZelkowiczDirectorMarch16,202132SummerInfant,Inc.andSubsidiariesIndextoFinancialStatementsReportofIndependentRegisteredPublicAccountingFirm........................F-2ConsolidatedBalanceSheets..............................................F-4ConsolidatedStatementsofOperations......................................F-5ConsolidatedStatementsofComprehensiveLoss...............................F-6ConsolidatedStatementsofCashFlows......................................F-7ConsolidatedStatementsofStockholders’Equity...............................F-8NotestoConsolidatedFinancialStatements...................................F-9–F-27F-1ReportofIndependentRegisteredPublicAccountingFirmTotheStockholdersandtheBoardofDirectorsofSummerInfantInc.OpinionontheFinancialStatementsWehaveauditedtheaccompanyingconsolidatedbalancesheetsofSummerInfant,Inc.anditssubsidiaries(theCompany)asofJanuary2,2021andDecember28,2019,therelatedconsolidatedstatementsofoperations,comprehensiveloss,stockholders’equityandcashflowsfortheyearsthenended,andtherelatednotestotheconsolidatedfinancialstatements(collectively,thefinancialstatements).Inouropinion,thefinancialstatementspresentfairly,inallmaterialrespects,thefinancialpositionoftheCompanyasofJanuary2,2021andDecember28,2019,andtheresultsofitsoperationsanditscashflowsfortheyearsthenended,inconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.BasisforOpinionThesefinancialstatementsaretheresponsibilityoftheCompany’smanagement.OurresponsibilityistoexpressanopinionontheCompany’sfinancialstatementsbasedonouraudits.WeareapublicaccountingfirmregisteredwiththePublicCompanyAccountingOversightBoard(UnitedStates)(PCAOB)andarerequiredtobeindependentwithrespecttotheCompanyinaccordancewithU.S.federalsecuritieslawsandtheapplicablerulesandregulationsoftheSecuritiesandExchangeCommissionandthePCAOB.WeconductedourauditsinaccordancewiththestandardsofthePCAOB.Thosestandardsrequirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreeofmaterialmisstatement,whetherduetoerrororfraud.TheCompanyisnotrequiredtohave,norwereweengagedtoperform,anauditofitsinternalcontroloverfinancialreporting.AspartofourauditswearerequiredtoobtainanunderstandingofinternalcontroloverfinancialreportingbutnotforthepurposeofexpressinganopinionontheeffectivenessoftheCompany’sinternalcontroloverfinancialreporting.Accordingly,weexpressnosuchopinion.Ourauditsincludedperformingprocedurestoassesstherisksofmaterialmisstatementofthefinancialstatements,whetherduetoerrororfraud,andperformingproceduresthatrespondtothoserisks.Suchproceduresincludedexamining,onatestbasis,evidenceregardingtheamountsanddisclosuresinthefinancialstatements.Ourauditsalsoincludedevaluatingtheaccountingprinciplesusedandsignificantestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.Webelievethatourauditsprovideareasonablebasisforouropinion.CriticalAuditMattersThecriticalauditmatterscommunicatedbelowaremattersarisingfromthecurrentperiodauditofthefinancialstatementsthatwerecommunicatedorrequiredtobecommunicatedtotheauditcommitteeandthat:(1)relatetoaccountsordisclosuresthatarematerialtothefinancialstatementsand(2)involvedourespeciallychallenging,subjective,orcomplexjudgments.Thecommunicationofcriticalauditmattersdoesnotalterinanywayouropiniononthefinancialstatements,takenasawhole,andwearenot,bycommunicatingthecriticalauditmattersbelow,providingseparateopinionsonthecriticalauditmattersorontheaccountsordisclosurestowhichtheyrelate.Indefinite-livedTradeNameImpairmentAssessmentAsdescribedinNotes1and4totheconsolidatedfinancialstatements,theCompany’sindefinite-livedtradenamebalancewas$8,400,000asofJanuary2,2021.Indefinite-livedintangibleassetsaretestedforimpairmentannuallyduringthefourthfiscalquarterandwhenevereventsorcircumstancesmayindicatethatanimpairmenthasoccurred.Thefairvalueoftheindefinite-livedtradenameisgenerallyestimatedusingdiscountedcashflowmethodologies.Thediscountedcashflowmethodologyrequiressignificantjudgment,includingestimationoffuturerevenue,whichisdependentoninternalforecasts,theestimationofthelong-termrevenuegrowthrateoftheCompany’sbusiness,thedeterminationoftheCompany’sweightedaveragecostofcapital,androyaltyrates.F-2WeidentifiedtheCompany’sindefinite-livedtradenameimpairmentassessmentasacriticalauditmatterbecauseofthesignificantassumptionsandjudgmentsmadebymanagementwhenestimatingthefairvalueoftheindefinite-livedtradename.Auditingmanagement’sassumptionsandjudgmentsregardingfuturerevenues,theweightedaveragecostofcapital,andtheroyaltyrateinvolvedahighdegreeofauditorjudgmentandanincreasedeffort,includingtheuseofourvaluationspecialists.Ourauditproceduresrelatedtofuturerevenues,royaltyrate,andtheweightedaveragecostofcapitalutilizedinthevaluationoftheCompany’sindefinite-livedtradenameincludedthefollowing,amongothers:•Withtheassistanceofourvaluationspecialists,weevaluatedthereasonablenessoftheweightedaveragecostofcapitalandtestedtherelevanceandreliabilityofsourceinformationunderlyingthedeterminationoftherates,testedthemathematicalaccuracyofthecalculation,andevaluatedthereasonablenessoftheroyaltyrateselectedbymanagement.•Weevaluatedthereasonablenessoffuturerevenuesby:•Comparingmanagement’sforecaststohistoricalresultsfortheCompany.•Comparingmanagement’sforecaststothird-partyindustrydata.•Weevaluatedtheimpactofchangestorevenueforecastsandrevenuegrowthratesonthefairvalueoftheindefinite-livedtradename.DeferredTaxAssetValuationAllowanceandUncertainTaxPositionAsdescribedinNote6totheconsolidatedfinancialstatements,theCompany’sgrossdeferredtaxassetandvaluationallowancewas$5,700,000and$4,700,000,respectively,asofJanuary2,2021.TheCompanyrecognizesdeferredincometaxesfordifferencesbetweenthefinancialreportingandtaxbasisofassetsandliabilities.Deferredtaxassetsincludelossandcreditcarryforwardsandarereducedbyavaluationallowanceif,basedonavailableevidence,itismorelikelythannotthatsomeportionofthedeferredtaxassetswillnotberealized.TheCompanyregularlyreviewsthedeferredtaxassetsforrecoverabilityconsideringhistoricalprofitability,projectedtaxableincome,theexpectedtimingofthereversalsofexistingtemporarydifferencesandtaxplanningstrategies.Theprincipalconsiderationsforourdeterminationthatperformingproceduresrelatingtomanagement’sdeterminationofthevalueofdeferredtaxassetsisacriticalauditmatterarethatthereissignificantjudgmentbymanagementinthedeterminationthatitismorelikelythannotthatsufficienttaxableincomewillbegeneratedtorealizedeferredtaxassetsandintherecognitionofpotentialuncertaintaxpositions,andauditingthevaluationofdeferredtaxassetsinvolvedespeciallysubjectivejudgment.Ourauditproceduresrelatedtothedeterminationthatitismorelikelythannotthatsufficienttaxableincomewillbegeneratedtorealizedeferredtaxassetsaswellasmanagement’sidentificationofanuncertaintaxpositionincludedthefollowing,amongothers:•Weevaluatedthereasonablenessofmanagement’sestimatesoffuturetaxableincomebyconsideringtheweightappliedtonegativeevidenceandpositiveevidencethatisobjectivelyverifiable.•WeevaluatedtheCompany’s“morelikelythannot”conclusionwithregardtodeferredtaxassetsthatareconsideredrealizableandrecomputedthevaluationallowanceanduncertaintaxpositionforthosethatwerenotconsideredrealizable.•Weevaluatedmanagement’sidentificationofanuncertaintaxpositionanditsapplicationoftaxlaw.•WeevaluatedtheCompany’s“morelikelythannot”conclusionwithregardtothetaxdeductiontobetakenrelatedtothedissolutionoftheCompany’sBornFreebrand./s/RSMUSLLPWehaveservedastheCompany’sauditorsince2010.Boston,MassachusettsMarch16,2021F-3SummerInfant,Inc.andSubsidiariesConsolidatedBalanceSheetsNotethatallamountspresentedinthetablebelowareinthousandsofU.S.dollars,exceptshareamountsandparvaluepershare.January2,2021December28,2019ASSETSCURRENTASSETSCashandcashequivalents......................................$510$395Tradereceivables,netofallowancefordoubtfulaccountsof$197and$542atJanuary2,2021andDecember28,2019,respectively..................25,99532,787Inventory,net...............................................25,12328,056Prepaidsandothercurrentassets.................................1,8502,946TOTALCURRENTASSETS.................................53,47864,184Propertyandequipment,net......................................4,7898,788Intangibleassets,net...........................................11,73912,896Rightofuseassets,noncurrent....................................3,6254,578Deferredtaxassets,net..........................................1,001996Otherassets.................................................105101TOTALASSETS..........................................$74,737$91,543LIABILITIESANDSTOCKHOLDERS’EQUITYCURRENTLIABILITIESAccountspayable............................................$27,986$25,396Accruedexpenses............................................6,0647,289Leaseliabilities,current........................................2,3492,495Currentportionoflong-termdebt................................2,125875TOTALCURRENTLIABILITIES.............................38,52436,055Long-termdebt,lesscurrentportionandunamortizeddebtissuancecosts......27,53645,359Leaseliabilities,noncurrent.......................................1,4932,546Otherliabilities...............................................2,0642,000TOTALLIABILITIES......................................69,61785,960STOCKHOLDERS’EQUITYPreferredStock,$0.0001parvalue,1,000,000authorized,noneissuedoroutstandingatJanuary2,2021andDecember28,2019................——CommonStock$0.0001parvalue,authorized,issuedandoutstandingof49,000,000,2,162,459,and2,132,275atJanuary2,2021and49,000,000,2,138,927,and2,108,743atDecember28,2019,respectively.............22TreasuryStockatcost(30,184sharesatJanuary2,2021andDecember28,2019)...................................................(1,283)(1,283)Additionalpaid-incapital......................................77,97977,715Accumulateddeficit..........................................(70,190)(69,088)Accumulatedothercomprehensiveloss.............................(1,388)(1,763)TOTALSTOCKHOLDERS’EQUITY...........................5,1205,583TOTALLIABILITIESANDSTOCKHOLDERS’EQUITY...............$74,737$91,543Seenotestoconsolidatedfinancialstatements.F-4SummerInfant,Inc.andSubsidiariesConsolidatedStatementsofOperationsNotethatallamountspresentedinthetablebelowareinthousandsofU.S.dollars,exceptshareandpershareamounts.ForthefiscalyearendedJanuary2,2021December28,2019Netsales..................................................$155,299$173,181Costofgoodssold...........................................104,448118,296Grossprofit................................................50,85154,885Generalandadministrativeexpenses...............................29,36034,823Sellingexpenses.............................................12,57414,540Depreciationandamortization...................................3,3483,720Impairmentofintangibleasset...................................676—Operatingincome..........................................4,8931,802Interestexpense,net..........................................4,0784,871Lossfromextinguishmentofdebt.................................1,800—Lossbeforeprovisionforincometaxes..........................(985)(3,069)Provisionforincometaxes......................................1171,095Netloss...............................................$(1,102)$(4,164)Netlosspershare:BASIC...................................................$(0.52)$(1.98)DILUTED................................................$(0.52)$(1.98)Weightedaveragesharesoutstanding:BASIC...................................................2,119,4992,100,730DILUTED................................................2,133,1712,100,730Seenotestoconsolidatedfinancialstatements.F-5SummerInfant,Inc.andSubsidiariesConsolidatedStatementsofComprehensiveLossNotethatallamountspresentedinthetablebelowareinthousandsofU.S.dollars.ForthefiscalyearendedJanuary2,2021December28,2019Netloss....................................................$(1,102)$(4,164)Othercomprehensiveloss:Foreigncurrencytranslationadjustments...........................375158Comprehensiveloss............................................$(727)$(4,006)Seenotestoconsolidatedfinancialstatements.F-6SummerInfant,Inc.andSubsidiariesConsolidatedStatementsofCashFlowsNotethatallamountspresentedinthetablebelowareinthousandsofU.S.dollars.ForthefiscalyearendedJanuary2,2021December28,2019Cashflowsfromoperatingactivities:Netloss....................................................$(1,102)$(4,164)Adjustmentstoreconcilenetlosstonetcashprovidedbyoperatingactivities:Depreciationandamortization...................................3,3483,720Impairmentofintangibleassets..................................676Stock-basedcompensation.....................................253319Lossfromextinguishmentofdebt................................1,800—Amortizationofdeferredfinancingcosts............................651662Provisionforallowancesfordoubtfulaccounts........................—316Deferredincometaxes.........................................51,084Amortizationofrighttouseasset................................2,4311,833Changesinassetsandliabilities....................................Decrease(increase)inaccountsreceivable...........................6,763(1,583)Decreaseininventory.........................................2,9268,328Decreaseinleaseliabilities......................................(2,678)(1,370)Decrease(increase)inprepaidsandotherassets.......................1,118(1,939)Decrease(increase)inotherassets................................—(10)Increase(decrease)inaccountspayableandaccruedexpenses.............1,416(4,999)Netcashprovidedbyoperatingactivities.............................17,6072,197Cashflowsfrominvestingactivities:Acquisitionsofpropertyandequipment............................(1,258)(1,991)Acquisitionsofintangibleassets..................................(20)(335)Netcashusedininvestingactivities.................................(1,278)(2,326)Cashflowsfromfinancingactivities:RepaymentofPriorTermLoanFacility............................(16,406)—Paymentoffinancingfeesandothercosts...........................(1,522)—ProceedsfromNewTermLoanFacility............................7,500—ProceedsfromFILOLoanFacility................................2,500—RepaymentofNewTermLoanFacility............................(375)(875)RepaymentofFILOLoanFacility................................(156)—Netborrowings(repayments)onrevolvingfacilities....................(10,152)932ProceedsfromPPPLoan.......................................1,956—Issuanceofcommonstockuponexerciseofstockoptions................11—Netcash(usedin)providedbyfinancingactivities.......................(16,644)57Effectofexchangeratechangesoncashandcashequivalents...............430(254)Netincrease(decrease)incashandcashequivalents....................115(326)Cashandcashequivalentsatbeginningofyear.......................395721Cashandcashequivalentsatendofyear............................$510$395Supplementaldisclosureofcashflowinformation:Cashpaidduringtheyearforinterest..............................$2,777$3,781Cash(refunded)paidduringtheyearforincometaxes..................$(199)$7Supplementaldisclosureofnon-cashinvestingandfinancingactivities:Derecognitionofabuildingsale-leasebackfixedasset,netofdepreciation....$2,357—Derecognitionofabuildingsale-leasebackfinancialobligation............$(2,390)—Right-of-useassetacquiredthroughnewoperatinglease.................$(1,457)—Leaseliabilityacquiredthroughnewoperatinglease....................$1,457—Seenotestoconsolidatedfinancialstatements.F-7ConsolidatedStatementsofStockholders’EquityFortheFiscalYearsEndedJanuary2,2021andDecember28,2019NotethatallamountspresentedinthetablebelowareinthousandsofU.S.dollars,exceptshareandpersharedata.CommonStockAdditionalPaidinCapitalTreasuryStockAccumulatedDeficitAccumulatedComprehensiveLossTotalEquitySharesAmountBalanceatDecember29,2018....2,091,178$2$77,396$(1,283)$(64,924)$(1,921)$9,270Issuanceofcommonstockuponvestingofrestrictedshares...17,565Stock-basedcompensation....319319Netlossfortheyear.........(4,164)(4,164)Foreigncurrencytranslationadjustment.............158158BalanceatDecember28,2019..2,108,743$2$77,715$(1,283)$(69,088)$(1,763)$5,583Issuanceofcommonstockuponvestingofrestrictedshares...20,438Issuanceofcommonstockuponexerciseofstockoptions....1,4741111Stock-basedcompensation....253253Fractionalshareissuanceuponreversestocksplit.........1,620Netlossfortheyear.........(1,102)(1,102)Foreigncurrencytranslationadjustment.............375375BalanceatJanuary2,2021......2,132,275$2$77,979$(1,283)$(70,190)$(1,388)$5,120Seenotestoconsolidatedfinancialstatements.F-8SUMMERINFANT,INC.ANDSUBSIDIARIESNOTESTOCONSOLIDATEDFINANCIALSTATEMENTS1.SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIESNatureofOperationsTheCompanydesigns,marketsanddistributesbrandedjuvenilesafetyandconvenienceproductsthataresoldgloballytolargenationalretailersaswellasindependentretailers,primarilyinNorthAmerica.TheCompanycurrentlymarketsitsproductsinseveralproductcategoriesincludingmonitoring,safety,nursery,andbabygear.MostproductsaresoldunderourcorebrandnamesofSummer™andSwaddleMe®.Whenusedherein,thetermsthe“Company,”“we,”“us,”and“our”meanSummerInfant,Inc.anditsconsolidatedsubsidiaries.ReverseStockSplitOnMarch13,2020,theCompanycompletedareversestocksplitandreduceditscommonstockoutstandingbyaratioofonefornine.PerASC505-10,ifareversestocksplitoccursafterthedateofthelatestreportedbalancesheetbutbeforethereleaseofthefinancialstatements,thensuchchangesinthecapitalstructuremustbegivenretroactiveeffectinthebalancesheet.Assuch,thereversestocksplithasbeenretroactivelyappliedtoallyearsreportedinthesefinancialstatements.BasisofPresentationandPrinciplesofConsolidationItistheCompany’spolicytoprepareitsfinancialstatementsontheaccrualbasisofaccountinginconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.Theconsolidatedfinancialstatementsincludetheaccountsofitswholly-ownedsubsidiaries.Allsignificantintercompanyaccountsandtransactionshavebeeneliminatedintheconsolidation.AlldollaramountsincludedintheNotestoConsolidatedFinancialStatementsareinthousandsofU.S.dollarsexceptshareandpershareamounts.FiscalYearTheCompany’sfiscalyearendsontheSaturdayclosesttoDecember31ofeachcalendaryear.TherewerefiftythreeweeksinthefiscalyearendedJanuary2,2021andfiftytwoweeksinthefiscalyearendedDecember28,2019.ReclassificationPreviouslyreportedamountshavebeenrevisedintheaccompanyingconsolidatedstatementofcashflowstoproperlystatethe2019amortizationofdeferredfinancingcosts.TheserevisionsincreasedtheCompany’snetcashprovidedbyoperatingactivitiesanddecreasedtheCompany’snetcashprovidedbyfinancingactivities.Netdecreaseincashandcashequivalentsremainedunchanged.SummaryofSignificantAccountingPoliciesRevenueRecognitionTheCompanyappliesFASBASCTopic606,RevenuefromContractswithCustomers(“ASC606”).Theguidancesetsforthafive-steprevenuerecognitionmodelandisintendedtoeliminatenumerousindustry-specificpiecesofrevenuerecognitionguidancethathavehistoricallyexistedinU.S.GAAP.Theunderlyingprincipleofthestandardisthatabusinessorotherorganizationwillrecognizerevenuetodepictthetransferofpromisedgoodsorservicestocustomersinanamountthatreflectswhatitexpectstoreceiveinexchangeforthegoodsorservices.Thestandardalsorequiresmoredetaileddisclosuresandprovidesadditionalguidancefortransactionsthatwerenotaddressedcompletelyintheprioraccountingguidance.TheCompany’sprincipalactivitiesfromwhichitgeneratesitsrevenueisproductsales.TheCompanyhasonereportablesegmentofbusiness.F-9Revenueismeasuredbasedonconsiderationspecifiedinacontractwithacustomer.TheCompanyrecognizesrevenuewhenitsatisfiesaperformanceobligationinacontractbytransferringcontroloveraproducttoacustomerwhenproductdeliveryoccurs.Considerationistypicallypaidapproximately60daysfromthetimecontrolistransferred.Taxesassessedbyagovernmentalauthoritythatarebothimposedonandconcurrentwithaspecificrevenue-producingtransaction,thatarecollectedbytheCompanyfromacustomer,areexcludedfromrevenue.Shippingandhandlingcostsassociatedwithoutboundfreightaftercontroloveraproducthastransferredtoacustomerareaccountedforasafulfillmentcostandareincludedinsellingcosts.Aperformanceobligationisapromiseinacontracttotransferadistinctproducttothecustomer,whichfortheCompanyistransferofjuvenileproductstoitscustomers.Thetransactionpriceofacontractisallocatedtoeachdistinctperformanceobligationandrecognizedasrevenuewhenorasthecustomerreceivesthebenefitoftheperformanceobligation.AtransactionpriceistheamountofconsiderationtheCompanyexpectstoreceiveunderthearrangement.TheCompanyisrequiredtoestimatevariableconsideration(ifany)andtofactorthatestimationintothedeterminationofthetransactionprice.TheCompanyconductsitsbusinesswithcustomersthroughvalidpurchaseorsalesorderseachofwhichisconsideredaseparatecontractbecauseindividualordersarenotinterdependentononeanother.Producttransactionpricesonapurchaseorsaleorderarediscreteandstand-alone.Purchaseorsalesordersmaybeissuedundereitheracustomermasterserviceagreementoraresellerallowanceagreement.Purchaseorsalesorders,masterserviceagreements,andresellerallowanceagreementswhicharespecificanduniquetoeachcustomer,mayincludeproductpricediscounts,markdownallowances,returnallowances,and/orvolumerebateswhichreducetheconsiderationduefromcustomers.Variableconsiderationisestimatedusingthemostlikelyamountmethod,whichisbasedonourhistoricalexperienceaswellascurrentinformationsuchassalesforecasts.ContractsmayalsoincludecooperativeadvertisingarrangementswheretheCompanyallowsadiscountfrominvoicedproductamountsinexchangeforcustomerpurchasedadvertisingthatfeaturestheCompany’sproducts.Theseallowancesaregenerallybaseduponproductpurchasesorspecificadvertisingcampaigns.Suchallowancesareaccruedwhentherelatedrevenueisrecognized.Thesecooperativeadvertisingarrangementsprovideadistinctbenefitandfairvalueandareaccountedforasdirectsellingexpenses.UseofEstimatesThepreparationoffinancialstatementsinconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmericarequiresmanagementtomakeestimatesandassumptionsthataffectcertainreportedamountsanddisclosures.Theseestimatesarebasedonmanagement’sbestknowledgeofcurrenteventsandactionstheCompanymayundertakeinthefuture.Accordingly,actualresultscoulddifferfromthoseestimates.CashandCashEquivalentsCashflows,cashandcashequivalentsincludemoneymarketaccountsandinvestmentswithanoriginalmaturityofthreemonthsorless.Attimes,theCompanypossessescashbalancesinexcessoffederally-insuredlimits.TradeReceivablesTradereceivablesarecarriedattheiroutstandingunpaidprincipalbalancesreducedbyanallowancefordoubtfulaccounts.TheCompanyestimatesdoubtfulaccountsbasedonhistoricalbaddebts,factorsrelatedtospecificcustomers’abilitytopayandcurrenteconomictrends.TheCompanywritesoffaccountsreceivableagainsttheallowancewhenabalanceisdeterminedtobeuncollectible.Amountsareconsideredtobeuncollectablebaseduponhistoricalexperienceandmanagement’sevaluationofoutstandingaccountsreceivable.F-10Changesintheallowancefordoubtfulaccountsareasfollows:ForthefiscalyearendedJanuary2,2021December28,2019Allowancefordoubtfulaccounts,beginningofperiod..............$542$304Chargesto(recoveryof)costsandexpenses.....................(27)316Accountwrite-offsandother...............................(318)(78)Allowancefordoubtfulaccounts,endofperiod..................$197$542InventoryValuationInventoryiscomprisedmostlyoffinishedgoodsandsomecomponentpartsandisstatedatthelowerofcostusingthefirst-in,first-out(FIFO)method,ornetrealizablevalue.TheCompanyregularlyreviewsslow-movingandexcessinventories,andwritesdowninventoriestonetrealizablevalueiftheultimateexpectednetproceedsfromthedisposalsofexcessinventoryarelessthanthecarryingcostofthemerchandise.LeasesTheCompanydeterminesifanarrangementisaleaseatinception.Operatingleasesareincludedinoperatingleaseright-of-use(“ROU”)assetsandleaseliabilitiesintheCompany’sconsolidatedbalancesheets.ROUassetsrepresenttheCompany’srighttouseanunderlyingassetfortheleasetermandleaseliabilitiesrepresenttheCompany’sobligationtomakeleasepaymentsarisingfromthelease.OperatingleaseROUassetsandliabilitiesarerecognizedatcommencementdatebasedonthepresentvalueofleasepaymentsovertheleaseterm.AstheCompany’sleasesdonotprovideanimplicitrate,theCompany’susesitsincrementalborrowingratebasedontheinformationavailableatcommencementdateindeterminingthepresentvalueofleasepayments.TheoperatingleaseROUassetalsoincludesanyleasepaymentsmadeandexcludesleaseincentives.TheCompany’sleasetermsmayincludeoptionstoextendorterminatetheleasewhenitisreasonablycertainthattheCompanywillexercisethatoption.Thecomponentsofaleaseshouldbesplitintothreecategories:leasecomponents(e.g.,land,building,etc.),non-leasecomponents(e.g.,commonareamaintenance,maintenance,consumables,etc.),andnon-components(e.g.,propertytaxes,insurance,etc.).Thenthefixedandin-substancefixedcontractconsideration(includinganyrelatedtonon-components)mustbeallocatedbasedonfairvaluestotheleasecomponentsandnon-leasecomponents.Althoughseparationofleaseandnon-leasecomponentsisrequired,certainpracticalexpedientsareavailabletoentities.Entitieselectingthepracticalexpedientwouldnotseparateleaseandnon-leasecomponents.Rather,theywouldaccountforeachleasecomponentandtherelatednon-leasecomponenttogetherasasinglecomponent.TheCompany’sfacilitiesoperatingleaseshaveleaseandnon-leasecomponentstowhichtheCompanyhaselectedtoapplythepracticalexpedientandaccountforeachleasecomponentandrelatednon-leasecomponentasonesinglecomponent.TheleasecomponentresultsinaROUassetbeingrecordedonthebalancesheet.Leaseexpenseforleasepaymentsisrecognizedonastraight-linebasisovertheleaseterm.PropertyandEquipmentPropertyandequipmentarerecordedatcost.TheCompanyownsthetoolsandmoldsusedintheproductionofitsproductsbythirdpartymanufacturers.Capitalizedmoldcostsincludecostsincurredforthepre-productiondesignanddevelopmentofthemolds.Depreciationisprovidedovertheestimatedusefullivesoftherespectiveassetsusingthestraight-linemethod.Long-LivedAssetswithFiniteLivesTheCompanyreviewslong-livedassetswithfinitelivesforimpairmentonanassetgrouplevelwhenevereventsorchangesincircumstancesindicatethatthecarryingamountofalong-livedassetmayF-11notberecoverable.Anassetisconsideredtobeimpairedwhenitscarryingamountexceedsboththesumoftheundiscountedfuturenetcashflowsexpectedtoresultfromtheuseoftheassetanditseventualdispositionandtheassets’fairvalue.Long-livedassetsincludepropertyandequipmentandfinite-livedintangibleassets.Theamountofimpairmentloss,ifany,ischargedbytheCompanytocurrentoperations.Indefinite-LivedIntangibleAssetsTheCompanyaccountsforintangibleassetsinaccordancewithaccountingguidancethatrequiresthatintangibleassetswithindefiniteusefullivesbetestedannuallyforimpairmentandmorefrequentlyifeventsorchangesincircumstancesindicatethattheassetmightbeimpaired.TheCompany’sannualimpairmenttestingisconductedinthefourthquarterofeveryyear.TheCompanytestsindefinite-livedintangibleassetsforimpairmentbycomparingtheasset’sfairvaluetoitscarryingamount.Ifthefairvalueislessthanthecarryingamount,theexcessofthecarryingamountoverfairvalueisrecognizedasanimpairmentchargeandtheadjustedcarryingamountbecomestheassets’newcostbasis.Managementalsoevaluatestheremainingusefullifeofanintangibleassetthatisnotbeingamortizedeachreportingperiodtodeterminewhethereventsandcircumstancescontinuetosupportanindefiniteusefullife.Ifanintangibleassetthatisnotbeingamortizedissubsequentlydeterminedtohaveafiniteusefullife,itisamortizedprospectivelyoveritsestimatedremainingusefullife.FairValueMeasurementsTheCompanyfollowsASC820,“FairValueMeasurementsandDisclosures”whichincludesaframeworkformeasuringfairvalueandexpandedrelateddisclosures.Broadly,theframeworkrequiresfairvaluetobedeterminedbasedontheexchangepricethatwouldbereceivedforanassetorpaidtotransferaliability(anexitprice)intheprincipalormostadvantageousmarketfortheassetorliabilityinanorderlytransactionbetweenmarketparticipants.Thestandardestablishedathree-levelvaluationhierarchybaseduponobservableandnon-observableinputs.Observableinputsreflectmarketdataobtainedfromindependentsources,whileunobservableinputsreflectourmarketassumptions.Preferenceisgiventoobservableinputs.Thesetwotypesofinputscreatethefollowingfairvaluehierarchy:Level1—Quotedpricesforidenticalinstrumentsinactivemarkets.Level2—Quotedpricesforsimilarinstrumentsinactivemarkets;quotedpricesforidenticalorsimilarinstrumentsinmarketsthatarenotactive;andmodel-derivedvaluationswhoseinputsareobservableorwhosesignificantvaluedriversareobservable.Level3—Significantinputstothevaluationmodelareunobservable.TheCompanymaintainspoliciesandprocedurestovalueinstrumentsusingthebestandmostrelevantdataavailable.Inaddition,theCompanyutilizesthirdpartyspecialiststhatreviewvaluation,includingindependentpricevalidation.TheCompany’sfinancialinstrumentsincludecashandcashequivalents,accountsreceivable,accountspayable,accruedexpenses,andshortandlong-termborrowings.Becauseoftheirshortmaturity,thecarryingamountsofcashandcashequivalents,accountsreceivable,accountspayable,andaccruedexpensesapproximatefairvalue.ThecarryingvalueoftheCompany’sdebtapproximatesfairvaluesincethestatedrateissimilartoratescurrentlyavailabletotheCompanyfordebtwithsimilartermsandremainingmaturities.TheCompany’sassetsmeasuredatfairvalueonanonrecurringbasisincludelong-livedassetsandfinite-livedintangibles.TheCompanytestsitsindefinite-livedassetsforimpairmentatleastannuallyandwhenevereventsorchangesincircumstancesindicatethatthecarryingvaluemaynotberecoverableorthatthecarryingvaluemayexceeditsfairvalue.TheresultingfairvaluemeasurementsareconsideredtobeLevel3inputs.Duringthefourthquarteroffiscal2020,theCompanydeterminedthattheestimatedfairvalueofadefinite-livedassetwasnon-recoverableandtheCompanyrecordedanon-cashimpairmentchargeF-12of$676whichreducedthevalueoftheintangibleassetto$0,asmorefullydescribedin“Note4totheConsolidatedFinancialStatements-IntangibleAssets.”TheCompanydidnotrecordanimpairmentchargeinfiscal2019.IncometaxesIncometaxesarecomputedusingtheassetandliabilitymethodofaccounting.Undertheassetandliabilitymethod,adeferredtaxassetorliabilityisrecognizedforestimatedfuturetaxeffectsattributabletotemporarydifferencesandcarryforwards.Themeasurementofdeferredincometaxassetsisadjustedbyavaluationallowance,ifnecessary,torecognizefuturetaxbenefitsonlytotheextent,basedonavailableevidence,itismorelikelythannotthatsuchbenefitswillberealized.Deferredincometaxassetsarerecordedonanetbasisasalongtermasset.TheCompanyfollowstheapplicableguidancerelativetouncertaintaxpositions.Thisstandardprovidesdetailedguidanceforthefinancialstatementrecognition,measurementanddisclosureofuncertaintaxpositionsrecognizedinthefinancialstatements.Uncertaintaxpositionsmustmeetarecognitionthresholdofmore-likely-than-notinorderforthosetaxpositionstoberecognizedinthefinancialstatements.TranslationofForeignCurrenciesAssetsandliabilitiesoftheCompany’sforeignsubsidiarieswhosefunctionalcurrencyisitslocalcurrency,aretranslatedintoU.S.dollarsattheexchangerateineffectattheendofthequarterandtheincomeandexpenseaccountsoftheseaffiliateshavebeentranslatedataverageratesprevailingduringeachrespectivequarter.Resultingtranslationadjustmentsaremadetoaseparatecomponentofstockholders’equitywithinaccumulatedothercomprehensiveloss.AssetsandliabilitiesoftheCompany’sforeignsubsidiarieswhosefunctionalcurrencyistheU.S.dollarareremeasuredintoU.S.dollarsattheirhistoricalratesortheexchangerateineffectattheendofthequarterandtheincomeandexpenseaccountsoftheseaffiliateshavebeenremeasuredataverageratesprevailingduringeachrespectivequarter.Resultingremeasurementadjustmentsaremadetotheconsolidatedstatementofoperations.Foreignexchangetransactiongainsandlossesareincludedintheaccompanyinginterimconsolidatedstatementofoperations.ShippingCostsShippingcoststocustomersareincludedinsellingexpensesandamountedtoapproximately$2,485and$3,509forthefiscalyearsendedJanuary2,2021andDecember28,2019,respectively.AdvertisingCostsTheCompanychargesadvertisingcoststosellingexpenseasincurred.Advertisingexpense,whichconsistsprimarilyofpromotionalandcooperativeadvertisingallowancesprovidedtocustomers,wasapproximately$9,215and$10,379forthefiscalyearsendedJanuary2,2021andDecember28,2019,respectively.SegmentInformationOperatingsegmentsareidentifiedascomponentsofanenterpriseaboutwhichseparate,discretefinancialinformationisavailableforevaluationbythechiefoperatingdecision-maker,ordecision-makinggroup,inmakingdecisionsonhowtoallocateresourcesandassessperformance.TheCompanyviewsitsoperationsandmanagesitsbusinessasoneoperatingsegmentutilizinganomni-channeldistributionstrategy.NetIncome/LossPerShareBasicincomeorlosspersharefortheCompanyiscomputedbydividingnetincomeorlossbytheweighted-averagenumberofsharesofcommonstockoutstandingduringtheperiod.Dilutedincomeorlosspershareincludesthedilutiveimpactofoutstandingstockoptionsandunvestedrestrictedshares.Dilutedincome/losspersharefortheCompanyiscomputedbydividingnetincome/lossbythedilutiveweightedaveragesharesoutstandingwhichincludes:thedilutiveimpact(usingthe“treasurystock”F-13method)of“inthemoney”stockoptionsandunvestedrestrictedsharesissuedtoemployees.Optionstopurchase52,272and101,320sharesoftheCompany’scommonstockand9,662and22,392ofrestrictedshareswerenotincludedinthecalculation,duetothefactthattheseinstrumentswereanti-dilutiveforthefiscalyearsendedJanuary2,2021andDecember28,2019,respectively.NewAccountingPronouncementsInFebruary2016,theFASBissuedASUNo.2016-02,Leases(“ASU2016-02”).ASU2016-02requireslesseestorecognizemostleasesontheirbalancesheetasaright-of-useassetandaleaseliability.Leasesareclassifiedaseitheroperatingorfinance,andclassificationisbasedoncriteriasimilartopastleaseaccounting,butwithoutexplicitbrightlines.InJuly2018,theFASBissuedASUNo.2018-10,“CodificationImprovementstoTopic842,Leases”(“ASU2018-10”),whichprovidesnarrowamendmentstoclarifyhowtoapplycertainaspectsofthenewleasestandard,andASUNo.2018-11,“Leases(Topic842)—TargetedImprovements”(ASU2018-11),whichaddressesimplementationissuesrelatedtothenewleasestandard.TheguidancebecameeffectiveforannualreportingperiodsbeginningafterDecember15,2018andinterimperiodswithinthosefiscalyears.TheCompanyadoptedthestandardontheeffectivedateofDecember30,2018byapplyingthenewleaserequirementsattheeffectivedate.TheCompanyalsoelectedthepackageofpracticalexpedientspermittedunderthetransitionguidancewithinthenewstandard,which,amongotherthings,allowstheCompanytocarryforwardthehistoricalleaseclassification.TheimpactoftheadoptionofASC842-Leases(“ASC842”)ontheconsolidatedbalancesheetonthedateofadoptionwasanincreaseof$6,411inassetsandanincreaseof$7,037ofliabilitiesfortherecognitionofright-of-useassetsandleaseliabilities.TheadoptionofASC842wasimmaterialtotheconsolidatedresultsofoperationsandcashflows.InJune2016,theFASBissuedASU2016-13,FinancialInstruments-CreditLosses(Topic326):MeasurementofCreditLossesonFinancialInstrumentsandasubsequentamendmenttotheinitialguidance,ASU2018-19CodificationImprovementstoTopic325,FinancialInstruments-CreditLosses(collectively,Topic326).Topic326requiresmeasurementandrecognitionofexpectedcreditlossesforfinancialassetsheld,whichinclude,butarenotlimitedto,tradeandotherreceivables.ThenewstandardiseffectiveforfiscalyearsbeginningafterDecember,15,2022.TheCompanyiscurrentlyevaluatingtheimpactofthisguidanceonitsconsolidatedfinancialstatements.Managementdoesnotbelievethatanyotherrecentlyissued,butnotyeteffective,accountingstandardsifcurrentlyadoptedwouldhaveamaterialeffectontheaccompanyingfinancialstatements.2021PlanandCOVID-19PandemicTheCompanybelievesthatitsexistingplanwillgeneratesufficientcashwhich,alongwithitsexistingcashandavailabilityunderitsfacilities,willenableittofundoperationsthroughatleastthenext12months.However,shouldtheCompanyrequireadditionalcash,orshouldtheimpactfromtheCOVID-19pandemicdiscussedbelowbemoreseverethanexpected,theCompanywouldidentifyothercostreductionsorseekadditionalresources.Beginninginthefirstquarterof2020,theCOVID-19pandemicnegativelyimpactedthemacroeconomicenvironmentintheUnitedStatesandglobally,andtheCompany’sbusiness.Whileourproductsareconsidered“essential”andourdistributioncenterlocatedinCaliforniacontinuestooperate,someofourcustomershavebeenimpactedandwehaveandmaycontinuetoseesupplychaindisruption.TheultimateimpactoftheCOVID-19pandemicwilldependonnumerousevolvingfactorsthattheCompanymaynotbeabletoaccuratelypredict,includingthedurationandextentofthepandemic,theimpactoffederal,state,localandforeigngovernmentalactions,consumerbehaviorinresponsetothepandemicandothereconomicandoperationalconditionstheCompanymayface.TheCompanyisnotcurrentlyawareofanyeventsorcircumstancesarisingfromtheCOVID-19pandemicthatwouldrequireustoupdateanyestimates,judgmentsormateriallyrevisethecarryingvalueofourassetsorliabilities.TheCompany’sestimatesmaychange,however,aseventsevolveandadditionalinformationisobtained,andanysuchchangeswillberecognizedintheconsolidatedfinancialstatements.F-142.REVENUEDisaggregationofRevenueTheCompany’srevenueisprimarilyfromdistinctfixed-priceproductsalesinthejuvenileproductmarket,tosimilarcustomersandchannelsutilizingsimilartypesofcontractsthatareshortterminnature(lessthanoneyear).TheCompanydoesnotsellserviceagreementsorgoodsoveraperiodoftimeanddoesnotsellorutilizecustomerfinancingarrangementsortime-and-materialcontracts.Thefollowingisatablethatpresentsnetsalesbygeographicalarea:ForthefiscalyearendedJanuary2,2021December28,2019UnitedStates..........................................$140,173$148,326AllOther............................................15,12624,855$155,299$173,181AllOtherconsistsofCanada,Europe,SouthAmerica,Mexico,Asia,andtheMiddleEast.ContractBalancesTheCompanydoesnothaveanycontractassetssuchaswork-in-processorcontractliabilitiessuchascustomeradvances.AlltradereceivablesontheCompany’sconsolidatedbalancesheetarefromcontractswithcustomers.ContractCostsCostsincurredtoobtainacontractarecapitalizedunlessshortterminnature.Asapracticalexpedient,coststoobtainacontractthatareshortterminnatureareexpensedasincurred.Allcontractcostsincurredin2020and2019fallundertheprovisionsofthepracticalexpedientandhavethereforebeenexpensed.3.PROPERTYANDEQUIPMENTPropertyandequipment,atcost,consistedofthefollowing:ForthefiscalyearendedJanuary2,2021December28,2019Depreciation/AmortizationPeriodComputer-related..........................$4,560$4,5115yearsTools,dies,prototypes,andmolds..............27,84927,4571–5yearsBuilding................................—4,15630yearsOther..................................7,6717,4741–15years40,08043,598Less:accumulateddepreciation................35,29134,810Propertyandequipment,net..................$4,789$8,788Propertyandequipmentincludedamountsacquiredundercapitalleasesofapproximately$0and$589atJanuary2,2021andDecember28,2019,respectively,withrelatedaccumulateddepreciationofapproximately$0and$115,respectively.Totaldepreciationexpensewas$2,847and$2,982forthefiscalyearsendedJanuary2,2021andDecember28,2019,respectively.InMay2020,theCompanyenteredintoaleaseagreementamendmentrelatedtoourheadquartersinWoonsocket,RhodeIsland.TheagreementdecreasedtheleasedpremisessquarefootageandextendedtheF-15currentterm,whichwassettoendinMarch2021priortotheamendmenttoJune2025.Itadditionallygrantedtwo5-yeartermextensionoptions.TheCompanywasaccountingfortheleaseinWoonsocketasasale-leasebackwiththebuildingonthebalancesheetaspropertyandequipment,netandacorrespondingfinancingobligationinlong-termliabilities.Upontheexecutionoftheleaseamendment,theCompanyre-assessedtheclassificationoftheleaseanddeterminedittobeanoperatinglease,asthecriteriaforasale-leasebackhadnotbeenmet.Thisresultedinthede-recognitionofthebuilding,frompropertyandequipment,of$2,357,netofaccumulateddepreciationandtheadditionofaright-of-useassetandcorrespondingliabilityof$1,457.4.INTANGIBLEASSETSIntangibleassetsconsistedofthefollowing:ForthefiscalyearendedJanuary2,2021December28,2019Brandnames..........................................$10,900$11,819Patentsandlicenses.....................................4,1254,101Customerrelationships...................................6,9466,946Otherintangibles.......................................1,8821,88223,85324,748Less:accumulatedamortization.............................(12,114)(11,852)Intangibleassets,net.....................................$11,739$12,896Theamortizationperiodforthemajorityoftheintangibleassetsrangesfrom5to20yearsforthoseassetsthathaveanestimatedlife;certainassetshaveindefinitelives(abrandname).Totalofintangiblesnotsubjecttoamortizationamountedto$8,400forthefiscalyearsendedJanuary2,2021andDecember28,2019.Amortizationexpenseamountedto$501and$738forthefiscalyearsendedJanuary2,2021andDecember28,2019,respectively.Inthefourthquarter,theCompanyrecordedanassetimpairmentchargeof$676representingtheremainingunamortizedbalanceofthedefinitelong-livedassetrelatedtotheCompany’sBornFreeHoldingsLimited(BFH)trademarks.Thisintangibleassetwasdeterminedtohaveacarryingvaluethatwasnon-recoverable.ThedeterminationresultedfromtheCompany’sdecisiontodissolvetheBFHentitywhichwascompletedinDecember2020.TheCompanyperformeditsannualindefinite-livedintangibleassetimpairmentanalysisinthefourthfiscalquarter.NoassetimpairmentwasrecordedforthefiscalyearsendedJanuary2,2021andDecember28,2019.Estimatedamortizationexpensefortheremainingdefinite-livedassetsforthenextfiveyearsisasfollows:FiscalYearending2021.............................................................4382022.............................................................4382023.............................................................4382024.............................................................4382025.............................................................4345.DEBTLoanAgreementwithBankofAmerica.OnOctober15,2020,theCompanyanditswhollyownedsubsidiary,SummerInfant(USA),Inc.,becamepartiestoaThirdAmendedandRestatedLoanandSecurityAgreement(the“LoanAgreement”)F-16withBankofAmerica,N.A.,asagent,thatprovidesfor(i)a$40,000asset-basedrevolvingcreditfacility,witha$5,000unusedletterofcreditsub-linefacilityasofJanuary2,2021,(ii)a$7,500termloanand(iii)a$2,500FILO(first-in,last-out)loan.TheLoanAgreementreplacedtheCompany’sprioragreementwithBofAandtermloanwithPathlightCapital.PursuanttotheLoanAgreement,totalborrowingcapacityundertherevolvingcreditfacilityisbasedonaborrowingbase,whichisgenerallydefinedas85%ofeligiblereceivablesplusthelesserof(i)70%ofthevalueofeligibleinventory(subjecttocertainlimitations)or(ii)85%ofthenetorderlyliquidationvalueofeligibleinventory,lessapplicablereserves.ThescheduledmaturitydateoftheloansundertherevolvingcreditfacilityisOctober15,2025(subjecttocustomaryearlyterminationprovisions).Loansundertherevolvingcreditfacilitybearinterest,attheCompany’soption,atabaserateoratLIBOR,plusapplicablemarginsbasedonaveragequarterlyavailability.Interestpaymentsareduemonthly,payableinarrears.TheCompanyisalsorequiredtopayanannualnon-usefeeonunusedamountsundertherevolvingcreditfacility,aswellasothercustomaryfeesasaresetforthintheLoanAgreement.AsofJanuary2,2021,theinterestratewas2.625%onLIBORbasedrevolverloans.TheamountoutstandingontheRestatedBofAAgreementatJanuary2,2021was$21,467.TotalborrowingbaseatJanuary2,2021was$32,628andborrowingavailabilitywas$11,161.Theprincipalofthetermloanistoberepaid,onaquarterlybasis,ininstallmentsof$375,untilpaidinfullonterminationandsubjecttomandatoryrepaymentincertaincircumstances.ThescheduledmaturitydateofthetermloanisOctober15,2025orearlier,iftherevolvingcreditfacilityisterminated.Thetermloanbearsinterest,attheCompany’soption,atabaserateoratLIBOR,plusapplicablemargins,andinterestpaymentsareduemonthly,inarrears.AsofJanuary2,2021,theinterestrateonLIBORbasedtermloansandonbaseratetermloanswas3.875%and5.750%,respectively.TheamountoutstandingonthetermloanundertheRestatedBofAAgreementwas$7,125asofJanuary2,2021.ThetotalborrowingcapacityundertheFILOloanisthelesserof(i)thethenapplicableaggregateFILOcommitmentamountand(ii)aborrowingbase,generallydefinedasaspecificpercentageofthevalueofeligibleaccounts,plusaspecifiedpercentageofthevalueofeligibleinventory.TheaggregateFILOcommitmentamountasofJanuary2,2021was$2,344withnofurtheravailability,andsuchamountwillbeproportionatelyreducedeachquarteruntiltheFILOloanisterminatedatmaturityonOctober15,2024.TherecanbenovoluntaryrepaymentontheFILOloanaslongasthereareloansoutstandingundertherevolvingcreditfacility,unless(i)thereisanoveradvanceundertheFILOloan,or(ii)suchprepaymentisaccompaniedbyapermanentdollarfordollarreductionintheaggregateFILOcommitmentamountsuchthat,aftergivingeffecttosuchprepaymentandreduction,theoutstandingprincipalamountoftheFILOloanisequaltobutdoesnotexceedthelesserof(A)theaggregateFILOcommitmentamountand(B)theFILOborrowingbase.TheFILOloanbearsinterest,attheCompany’soption,atabaserateoratLIBOR,plusapplicablemargins,andinterestpaymentsareduemonthly,inarrears.AsofJanuary2,2021,theinterestrateontheLIBORbasedFILOloansandonbaserateFILOloanswas3.625%and5.500%,respectively.AllobligationsundertheLoanAgreementaresecuredbysubstantiallyalltheassetsoftheCompany,andtheCompany’ssubsidiaries,SummerInfantCanadaLimitedandSummerInfantEuropeLimited,areguarantorsundertheLoanAgreement.TheLoanAgreementcontainscustomaryaffirmativeandnegativecovenants.Amongotherrestrictions,theCompanyisrestrictedinitsabilitytoincuradditionaldebt,makeacquisitionsorinvestments,disposeofassets,ormakedistributionsunlessineachcasecertainconditionsaresatisfied.UntilthetermloanandFILOloanhavebeenrepaidinfull,theCompanymustmaintainafixedchargecoverageratioattheendofeachfiscalmonthofatleast1.00to1.00forthetwelve-monthperiodthenended.AfterthetermloanandFILOloanhavebeenrepaidinfull,theCompanywillberequiredtomaintainthefixedchargecoverageratioifavailabilityfallsbelow$5,000.TheLoanAgreementalsocontainscustomaryeventsofdefault,includingiftheCompanyfailstocomplywithanyrequiredfinancialcovenants,ifthereisaneventofdefaultunderthePPPLoan(describedbelow)andtheoccurrenceofachangeofcontrol.Intheeventofadefault,alloftheobligationsundertheLoanAgreementmaybedeclaredimmediatelydueandpayable.Forcertaineventsofdefaultrelatingtoinsolvencyandreceivership,alloutstandingobligationsbecomedueandpayable.F-17AsofJanuary2,2021,undertheRestatedBofAAgreement,theinterestrateonLIBORbasedrevolverloansandonbaseraterevolverloanswas2.625%and4.500%,respectively.TheamountoutstandingontheRestatedBofAAgreementatJanuary2,2021was$21,467.TotalborrowingcapacityatJanuary2,2021was$32,628andborrowingavailabilitywas$11,161.TheCompanyhasnotusedanycapacityunderitsletterofcreditfacility.PriorBankofAmericaCreditFacility.OnJune28,2018,theCompanyandSummerInfant(USA),Inc.,asborrowers,enteredintoaSecondAmendedandRestatedLoanandSecurityAgreementwithBankofAmerica,N.A.,asagent,thefinancialinstitutionspartytotheagreementfromtimetotimeaslenders,andcertainsubsidiariesoftheCompanyasguarantors(asamended,the“RestatedBofAAgreement”).TheRestatedBofAAgreementreplacedtheCompany’spriorcreditfacilitywithBankofAmerica,andprovidedforanasset-basedrevolvingcreditfacility,witha$5,000letterofcreditsub-linefacility.Thetotalborrowingcapacitywasbasedonaborrowingbase,whichwasdefinedas85%ofeligiblereceivablesplusthelesserof(i)70%ofthevalueofeligibleinventoryor(ii)85%ofthenetorderlyliquidationvalueofeligibleinventory,lessapplicablereserves.ThescheduledmaturitydateofloansundertheRestatedBofAAgreementwasJune28,2023(subjecttocustomaryearlyterminationprovisions).OnOctober15,2020,theRestatedBofAAgreementwasreplacedbytheLoanAgreementdescribedabove.LoansundertheRestatedBofAAgreementboreinterest,attheCompany’soption,atabaserateoratLIBOR,plusapplicablemarginsbasedonaveragequarterlyavailabilityundertheRestatedBofAAgreement.Interestpaymentswereduemonthly,payableinarrears.PriorTermLoanAgreement.OnJune28,2018,theCompanyandSummerInfant(USA),Inc.,asborrowers,enteredintoaTermLoanandSecurityAgreement(asamended,the“TermLoanAgreement”)withPathlightCapitalLLC,asagent,eachlenderfromtimetotimeapartytotheTermLoanAgreement,andcertainsubsidiariesoftheCompanyasguarantors,providingfora$17,500termloan(the“TermLoan”).TheprincipaloftheTermLoanwasbeingrepaid,onaquarterlybasis,ininstallmentsof$219,withthefirstinstallmenthavingbeenpaidonDecember1,2018,untilpaidinfullontermination,providedthat,inconnectionwiththeamendmentstotheTermLoanAgreement,principalpaymentsforMarch,JuneandSeptember2020weresuspended.TheTermLoanwasrepaidinfullonOctober15,2020.Therefinancingtransactionwasevaluatedtodeterminetheproperaccountingtreatmentforthetransaction.Accordingly,debtextinguishmentaccountingwasusedtoaccountfortheprepaymentofthepriortermloanfacilitywithPathlightCapital,LLC,resultinginalossfromtheextinguishmentofdebtof$1,800forthetwelvemonthsendedJanuary2,2021.PPPLoanOnAugust3,2020,theCompanyreceivedloanproceedsof$1,956(the“PPPLoan”)pursuanttothePaycheckProtectionProgram(“PPP”)administeredbytheU.S.SmallBusinessAdministrationundertheU.S.CARESAct.ThePPPLoan,whichwasintheformofapromissorynote(the“PPPNote”),betweentheCompanyandBofA,asthelender,maturesonJuly27,2025andbearsinterestatafixedrateof1%perannum.Monthlyprincipalandinterestpaymentsaredeferreduntil(i)thedateonwhichtheamountofforgivenessisremittedtotheCompany’slender,(ii)thedateonwhichtheCompany’slenderprovidesnoticethattheCompanyisnotentitledtoloanforgiveness,and(iii)ifaborrowerdoesnotapplyforloanforgiveness,10monthsafterthedateoftheloanforgivenesscoveredperiod.TheCompanymayvoluntarilyprepaytheborrowingsinfullwithnoassociatedpenaltyorpremium.UnderthetermsofthePPP,theprincipalandinterestmaybeforgivenifthePPPLoanproceedsareusedforqualifyingexpenses,includingpayrollcosts,rentandutilitycosts.Thereisnoguarantythatalloraportionofthisloanwillbeforgiven.ThePPPNotecontainscustomaryrepresentations,warranties,andcovenantsforthistypeoftransaction,includingcustomaryeventsofdefaultrelatingto,amongotherthings,paymentdefaultsandbreachesofrepresentationsandwarrantiesorotherprovisionsofthePPPNote.Theoccurrenceofaneventofdefaultmayresultin,amongotherthings,theCompanybecomingobligatedtorepayallamountsoutstandingunderthePPPNote.ThePPPLoanbalanceof$1,956isincludedinOtherliabilitiesontheconsolidatedbalancesheet.OnFebruary18,2021,theCompanyappliedforfullforgivenessofthePPPloanthroughBankofAmericaandtheapplicationiscurrentlyunderreviewbyBankofAmerica.F-18AggregatematuritiesofbankdebtrelatedtotheLoanAgreementandthePPPLoanareasfollows:FiscalYearending:2021..........................................................2,2232022..........................................................1,9852023..........................................................2,5162024..........................................................2,5162025andbeyond.................................................23,652Total..........................................................$32,892Unamortizeddebtissuancecostswere$1,275atJanuary2,2021and$2,398atDecember28,2019,andarepresentedasadirectdeductionoflong-termdebtontheconsolidatedbalancesheets.Sale-LeasebackOnMarch24,2009,SummerInfant(USA),Inc.,(“SummerUSA”)theCompany’swhollyownedsubsidiary,enteredintoadefinitiveagreementwithFaithRealtyII,LLC,aRhodeIslandlimitedliabilitycompany(“FaithRealty”)(theownerofwhichisJasonMacari,theformerChiefExecutiveOfficer,formerdirectoroftheCompany,andcurrentinvestor),pursuanttowhichFaithRealtypurchasedthecorporateheadquartersoftheCompanylocatedat1275ParkEastDrive,Woonsocket,RhodeIsland(the“Headquarters”),for$4,052andsubsequentlyleasedtheHeadquartersbacktoSummerUSAforanannualrentof$390duringtheinitialsevenyeartermofthelease,payablemonthlyandinadvance.Theoriginalleasewastoexpireontheseventhanniversaryofitscommencement.Mr.MacarihadgivenapersonalguaranteetosecuretheFaithRealtydebtonitsmortgage;therefore,duetohiscontinuinginvolvementinthebuildingtransaction,thetransactionhadbeenrecordedasafinancinglease,withnogainrecognition.OnFebruary25,2009,theCompany’sBoardofDirectors(withMr.Macariabstainingfromsuchaction)approvedthesaleleasebacktransaction.Inconnectiontherewith,theBoardofDirectorsgrantedapotentialwaiver,totheextentnecessary,ifatall,oftheconflictofinterestprovisionsoftheCompany’sCodeofEthics,effectiveuponexecutionofdefinitiveagreementswithintheparametersapprovedbytheBoard.Inconnectionwithgrantingsuchpotentialwaiver,theBoardofDirectorsengagedindependentcounseltoreviewthesaleleasebacktransactionandanindependentappraisertoascertain(i)thevalueoftheHeadquartersand(ii)themarketrentfortheHeadquarters.InreachingitsconclusionthatthesaleleasebacktransactionisfairtotheCompany,theBoardofDirectorsconsideredanumberoffactors,includingSummerUSA’sabilitytorepurchasetheheadquartersat110%oftheinitialsalepriceattheendoftheinitialterm.TheCompany’sAuditCommitteeapprovedthesaleleasebacktransaction(asarelatedpartytransaction)andthepotentialwaiverandrecommendedthemattertoavoteoftheentireBoardofDirectors(whichapprovedthetransaction).OnMay13,2015,SummerUSAenteredintoanamendment(the“Amendment”)toitsleasedatedMarch24,2009(the“Lease”)withFaithRealty(the“Landlord”).PursuanttotheAmendment,(i)theinitialtermoftheLeasewasextendedfortwoadditionalyears,suchthattheinitialtermwouldendonMarch31,2018,andthetermoftheLeasecouldbeextendedatSummerUSA’selectionforoneadditionaltermofthreeyears(ratherthanfiveyears)upontwelvemonths’priornotice,(ii)theannualrentforthelasttwoyearsofthenewlyamendedinitialtermwassetat$429andtheannualrentfortheextensionperiod,ifelected,wassetat$468and(iii)theLandlordagreedtoprovideanaggregateimprovementallowanceofnotmorethan$78forthenewlyamendedinitialterm,tobeappliedagainstSummerUSA’smonthlyrent,andanadditionalimprovementallowanceof$234fortheextensionterm,ifelected,tobeappliedagainstSummerUSA’smonthlyrentduringsuchextensionterm.TheAmendmentwasreviewedandapprovedbytheauditcommitteebecauseitwasarelatedpartytransaction.OnJanuary22,2018,SummerUSAenteredintoasecondamendment(the“SecondAmendment”)totheLease.PursuanttotheSecondAmendment,(i)thetermoftheLeasewasextendedtoMarch31,2021,withnofurtherrightsofextension,(ii)theannualrentforthelastthreeyearsofthenewlyamendedtermwassetat$468,(iii)SummerUSAnolongerhastheoptiontopurchasethepropertysubjecttotheLeaseand(iv)theLandlordandSummerUSAagreedtocertainexpenses,repairsandmodificationstothepropertythatF-19issubjecttotheLease.TheSecondAmendmentwasreviewedandapprovedbytheauditcommitteebecauseitwasarelatedpartytransaction.AtDecember28,2019,approximately$441oftheleaseobligationwasincludedinaccruedexpenses,withthebalanceofapproximately$2,000includedinotherliabilities,intheaccompanyingconsolidatedbalancesheet.OnMay1,2020,SummerUSAenteredintoathirdamendment(the“ThirdAmendment”)totheLease.Theagreementdecreasedtheleasedpremisessquarefootageandextendedthecurrentterm,whichwassettoendinMarch2021priortotheamendment,toJune2025.Itadditionallygrantedtwo5-yeartermextensionoptions.Upontheexecutionoftheleaseamendment,theCompanyre-assessedtheclassificationoftheleaseanddeterminedittobeanoperatinglease,asthecriteriaforasale-leasebackhadnotbeenmet.Thisresultedinthede-recognitionofthebuildingof$2,357,netofdepreciationandtheadditionofaright-of-useof$1,457alongwithashort-termleaseliabilityandalong-termleaseliabilityfor$264and$1,193,respectively.6.INCOMETAXESInDecember2017,theU.S.governmentenactedcomprehensivetaxlegislationcommonlyreferredtoastheTaxCutsandJobsAct(the“TaxAct”)thatsignificantlyrevisedtheU.S.taxcodeeffectiveJanuary1,2018by,amongotherthings,loweringthecorporateincometaxratefromatopmarginalrateof35%toaflat21%,limitingdeductibilityofinterestexpenseandperformancebasedincentivecompensationandimplementingaterritorialtaxsystem.AsaresultoftheTaxActinthefiscalyearendingJanuary2,2021andDecember28,2019theCompanyhadnon-deductibleinterestfortaxpurposesresultinginadeferredtaxassetintheamountof$1,643and$1,880respectively.TheCompanyrecordedavaluationallowanceonthevalueofthisdeferredtaxassetuntilsuchtimeasitbecomesmorelikelythannotthatthisassetwillberecognized.Theprovision(benefit)forincometaxesissummarizedasfollows:Fiscal2020Fiscal2019Current:Federal.............................................$108$—Foreign.............................................2—Stateandlocal........................................211Totalcurrent...........................................11211Deferred:Federal.............................................(5)$683Foreign.............................................6222Stateandlocal........................................4179Totaldeferred..........................................51,084Totalprovision..........................................$117$1,095F-20Thetaxeffectsoftemporarydifferencesthatcomprisethedeferredtaxliabilitiesandassetsareasfollows:January2,2021December28,2019Deferredtaxassets:Accountsreceivable....................................$51$53InventoryandUniformCapitalizationreserve..................475506Interestdeductionlimitation..............................1,6431,880LeaseLiabilityandaccruedexpenses........................8061,093Researchanddevelopmentcredit..........................2,2922,547Foreigntaxcredit.....................................795795Netoperatinglosscarry-forward............................2,5652,256Totaldeferredtaxassets..................................8,6279,130Deferredtaxliabilities:Intangibleassetsandother...............................(2,132)(2,099)ROUAssetsanddeferredrent.............................(833)(1,036)Property,plantandequipment............................28(54)Totaldeferredtaxliabilities................................(2,937)(3,189)Valuationallowance.....................................(4,689)(4,945)Deferredtaxliabilitiesandvaluationallowance..................(7,626)(8,134)Netdeferredincometaxasset...............................$1,001$996ThefollowingreconcilesthebenefitforincometaxesattheU.S.federalincometaxstatutoryratetothebenefitintheconsolidatedfinancialstatements:Fiscal2020Fiscal2019Taxbenefitatstatutoryrate.................................$(207)$(644)Stateincometaxes,netofU.S.federalincometaxbenefit............5150Adjustmenttouncertaintaxposition..........................7,543—Stockoptions...........................................517Foreigntaxratedifferential.................................2(5)Taxcredits.............................................258312Worthlessstockdeduction..................................(7,435)—Non-deductibleexpenses...................................149117Expirationofunexercisedstockoptions........................90191Increase/(Decrease)invaluationallowance......................(255)927Other................................................(38)30Totalprovision..........................................$117$1,095TheincometaxprovisionfortheyearendedJanuary2,2021wasprimarilytheresultofadeductionrelatedtoaworthlessstocklossintheCompany’sinvestmentinitswhollyownedsubsidiary,BornFreeHoldingsLimited(“BFH”),netofreserveforuncertaintaxpositions.TheCompany,afteranalyzingthefactsandcircumstances,determinedtonolongerinvestinBFHandliquidatedtheentity.TheCompanyhasmaintainedapermanentinvestmentpositionand,therefore,hasnotpreviouslyrecordedadeferredtaxassetforthebasisdifferenceinthisentity.Theoriginalacquisitionandfinancialresultsofthisentityhavecreatedanexcessoftaxbasisoverthebookbasisinwhichtheworthlessstockthatwillbedeductedforincometaxpurposesisapproximately$26,933,resultinginanestimatednettaxbenefitof$7,435.TheCompanyanalyzedthistransactionanddeterminedthatthisworthlessstockdeductionqualifiesasanordinaryloss.F-21WhiletheCompanybelievesthisisavalidincometaxdeduction,duetotheuncertainnatureofworthlessstockdeductions,theCompanyhasdeterminedthistaxbenefittobeanuncertaintaxposition.Accordingly,theCompanyhasfullyreservedforthetaxbenefitassociatedwiththeworthlessstockdeduction.AsofJanuary2,2021,theCompanyhadapproximately$3,807ofUSfederalandstatenetoperatinglosscarryforwards(or“NOLs”)tooffsetfuturefederaltaxableincome.ThefederalNOLwillbegintoexpirein2031andthestateNOLbegantoexpirein2020.AsofJanuary2,2021,theCompanyhadapproximately$893,$304,$2,776,$644,and$2,165ofNOLsinCanada,Australia,Israel,Asia,andtheUnitedKingdom,respectively,whichcanbecarriedforwardindefinitely.Authoritativeguidancerequiresavaluationallowancetoreducethedeferredtaxassetsreported,ifbasedontheweightoftheevidence,itismorelikelythannotthatsomeportionorallofthedeferredtaxassetswillnotberealized.Afterconsiderationofallevidence,includingtheCompany’spastearningshistoryandfutureearningsforecast,managementdeterminedthatavaluationallowanceintheamountof$2,251atJanuary2,2021and$2,270atDecember28,2019relatingtocertainfederalandstatetaxcreditsandforeignNOLswasnecessary.DuetotheTaxAct,theCompanydeterminedavaluationallowanceintheamountof$2,438atJanuary2,2021and$2,675atDecember28,2019relatingtointerestdeductionlimitationsandforeigntaxcreditswasnecessary.WeapplytheaccountingguidanceinASC740relatedtoaccountingforuncertaintyinincometaxes.Ourreservesrelatedtotaxesarebasedonadeterminationofwhether,andhowmuchof,ataxbenefittakenbyusinourtaxfilingsorpositionsismorelikelythannottoberealizedfollowingresolutionofanypotentialcontingenciespresentrelatedtothetaxbenefit.AsummaryoftheCompany’sadjustmenttoitsuncertaintaxpositionsinfiscalyearsendedJanuary2,2021andDecember28,2019issetforthbelow:January2,2021December28,2019Balance,atbeginningoftheyear............................$—$—Increasefortaxpositionsrelatedtothecurrentyear.............7,543—Balance,atendofyear...................................$7,543$—Theunrecognizedtaxbenefitsmentionedaboveincludedanaggregateof$0ofaccruedinterestandpenaltybalancesrelatedtouncertaintaxpositions.TheCompanyrecognizesinterestandpenaltiesrelatedtouncertaintaxpositionsinincometaxexpense.TheCompanydoesnotanticipatethatitsaccrualforuncertaintaxpositionswillbereducedbyamaterialamountoverthenexttwelvemonthperiod,asitdoesnotexpecttosettleanypotentialdisputeditemswiththeappropriatetaxingauthoritiesnordoesitexpectthestatuteoflimitationstoexpireforanyitems.TheCompanyissubjecttoU.S.federalincometax,aswellastoincometaxofmultiplestateandforeigntaxjurisdictions.Onaglobalbasis,theopentaxyearssubjecttoexaminationbymajortaxingjurisdictionsinwhichtheCompanyoperatesisbetweentwotosixyears.7.SHAREBASEDCOMPENSATIONTheCompanyiscurrentlyauthorizedtoissueupto188,889sharesforequityawardsundertheCompany’s2012IncentiveCompensationPlan(asamended,“2012Plan”).Periodically,theCompanymayalsograntequityawardsoutsideofits2012Planasinducementgrantsfornewhires.TheCompanywasauthorizedtoissueupto333,334sharesforequityawardsunderits2006PerformanceEquityPlan(“2006Plan”).InMarch2017,the2006Planexpiredandnoadditionalequityawardscanbegrantedunderthe2006Plan.Underthe2012Plan,awardsmaybegrantedtoparticipantsintheformofnon-qualifiedstockoptions,incentivestockoptions,restrictedstock,deferredstock,restrictedstockunitsandotherstock-basedawards.Subjecttotheprovisionsoftheplans,awardsmaybegrantedtoemployees,officers,directors,advisorsandconsultantswhoaredeemedtohaverenderedorareabletorendersignificantservicestotheCompanyoritssubsidiariesandwhoaredeemedtohavecontributedortohavethepotentialtocontributeF-22totheCompany’ssuccess.TheCompanyaccountsforoptionsunderthefairvaluerecognitionstandard.Theapplicationofthisstandardresultedinshare-basedcompensationexpenseforthetwelvemonthsendedJanuary2,2021andDecember28,2019of$253and$319,respectively.Sharebasedcompensationexpenseisincludedinselling,generalandadministrativeexpenses.AsofJanuary2,2021,thereare64,776sharesavailabletograntunderthe2012Plan.StockOptionsThefairvalueofeachoptionawardisestimatedonthedateofgrantusingtheBlack-Scholesoptionvaluationmodelthatusestheassumptionsnotedinthetablebelow.TheCompanyusesthesimplifiedmethodtoestimatetheexpectedtermoftheoptionsforgrantsof“plainvanilla”stockoptionsasprescribedbytheSecuritiesandExchangeCommission.Forfeituresareestimatedatthetimeofgrantandrevised,ifnecessary,insubsequentperiodsifactualforfeituresdifferfromthoseestimates.Share-basedcompensationexpenserecognizedintheconsolidatedfinancialstatementsinfiscal2019and2018isbasedonawardsthatareultimatelyexpectedtovest.ThefollowingtablesummarizestheweightedaverageassumptionsusedforoptionsgrantedduringthefiscalyearsendedJanuary2,2021andDecember28,2019.Fiscal2020Fiscal2019Expectedlife(inyears)...........................................4.75.0Risk-freeinterestrate............................................0.3%2.3%Volatility.....................................................98.9%64.2%Dividendyield.................................................0.0%0.0%Forfeiturerate.................................................26.5%24.2%Theweighted-averagegrantdatefairvalueofoptionsgrantedduringtheyearendedJanuary2,2021was$2.61pershare.Theweighted-averagegrantdatefairvalueofoptionsgrantedduringtheyearendedDecember28,2019was$3.42pershare.AsummaryofthestatusoftheCompany’soptionsasofJanuary2,2021andchangesduringtheyearthenendedispresentedbelow:NumberOfSharesWeighted-AverageExercisePriceOutstandingatbeginningofyear.........................101,390$14.35Granted...........................................21,433$3.65Exercisedorreleased..................................(1,474)$7.53Canceledorforfeited..................................(60,265)$14.03Expired...........................................(445)$70.11Outstandingatendofyear.............................60,639$10.63OptionsexercisableatJanuary2,2021......................28,175$16.37OutstandingstockoptionsvestedandexpectedtovestasofJanuary2,2021is50,094.Theintrinsicvalueofoptionsexercisedtotaledwas$13and$0forthefiscalyearsendedJanuary2,2021andDecember28,2019,respectively.F-23ThefollowingtablesummarizesinformationaboutstockoptionsatJanuary2,2021:OptionsOutstandingOptionsExercisableRangeofExercisePricesNumberOutstandingRemainingContractualLife(years)WeightedAverageExercisePriceNumberExercisableRemainingContractualLifeWeightedAverageExercisePrice$3.51–$6.00.................19,0718.4$3.651398.6$3.51$6.01–$9.00.................16,1548.0$6.665,9277.8$6.86$9.01–$18.00.................16,5366.1$14.8913,2316.0$15.02$18.01–$32.00................8,2095.0$22.268,2095.0$22.26$32.01–$66.96................6690.6$57.726690.6$57.7260,6397.1$10.6328,1755.9$16.37TheaggregateintrinsicvalueofoptionsoutstandingandexercisableatJanuary2,2021andDecember28,2019are$73and$0,respectively.AsofJanuary2,2021,therewasapproximately$48ofunrecognizedcompensationcostrelatedtonon-vestedstockoptionawards,whichisexpectedtoberecognizedoveraremainingweighted-averagevestingperiodof2.5years.RestrictedStockAwardsRestrictedstockawardsrequirenopaymentfromthegrantee.Therelatedcompensationcostofeachawardiscalculatedusingthemarketpriceonthegrantdateandisexpensedequallyoverthevestingperiod.AsummaryofrestrictedstockawardsmadeintheyearendedJanuary2,2021,isasfollows:NumberofSharesGrantDateFairValueNon-vestedrestrictedstockawardsasofDecember28,2019..........22,410$10.78Granted...............................................25,202$9.14Vestedandreleased.......................................(20,453)$11.02Forfeited..............................................(12,192)$9.56Non-vestedrestrictedstockawardsasofJanuary2,2021.............14,967$8.68AsofJanuary2,2021,therewasapproximately$57ofunrecognizedcompensationcostrelatedtonon-vestedstockcompensationarrangementsgrantedundertheCompany’sstockincentiveplanforrestrictedstockawards.Thatcostisexpectedtoberecognizedoverthenext2.5years.OnMarch13,2020,theCompanycompleteda1-for-9reversestocksplitreducingtheoutstandingcommonsharesto2,108,743.Transactionsthatoccurredpriortothecompletionofthereversestocksplithadtheeffectofbeingdividedbynine.8.PROFITSHARINGPLANSummerInfant(USA),Inc.maintainsadefinedcontributionsalarydeferralplanunderSection401(k)oftheInternalRevenueCode.Allemployeeswhomeettheplan’seligibilityrequirementscanparticipate.Employeesmayelecttomakecontributionsuptofederallimitations.In2007,theCompanyadoptedamatchingplanwhichwasfurtheramendedin2013,andwhichwasfundedthroughouttheyear.FortheyearsendedJanuary2,2021andDecember28,2019,theCompanyrecorded401(k)matchingexpenseof$278and$311,respectively.9.MAJORCUSTOMERSSalestotheCompany’stopsevencustomerstogethercomprisedapproximately87%ofoursalesinfiscal2020and81%ofoursalesinfiscal2019.Ofthesecustomers,threegeneratedmorethan10%ofsalesforfiscal2020:Amazon.com(33%),Walmart(28%),andTarget(17%).Infiscal2019,threecustomersgeneratedmorethan10%ofsales:Amazon.com(26%),Walmart(25%),andTarget(17%).F-2410.COMMITMENTSANDCONTINGENCIESLeasesTheCompanyleasesofficespaceanddistributioncentersprimarilyrelatedtoitsUnitedStates,Canada,UnitedKingdom,andHongKongoperations.Inconnectionwiththeseleases,therewerenocashincentivesfromthelandlordtobeusedfortheconstructionofleaseholdimprovementswithinthefacility.InMay2020,theCompanyenteredintoaleaseagreementamendmentrelatedtoourheadquartersinWoonsocket,RhodeIsland.Theagreementdecreasedtheleasedpremisessquarefootageandextendedthecurrentterm,whichwassettoendinMarch2021priortotheamendmenttoJune2025.Itadditionallygrantedtwo5-yeartermextensionoptions.TheCompanywasaccountingfortheleaseinWoonsocketasasale-leasebackwiththebuildingonthebalancesheetaspropertyandequipment,netandacorrespondingfinancingobligationinlong-termliabilities.Upontheexecutionoftheleaseamendment,theCompanyre-assessedtheclassificationoftheleaseanddeterminedittobeanoperatinglease,asthecriteriaforasalehadbeenmet.Aspartofthisre-classification,theCompanyderecognizedthefinancingobligationof$2,390fromlong-termliabilitiesandtheamountrelatedtothepropertyandequipment,netof$2,357fromthebalancesheetandrecordedaROUassetandleaseliabilityof$1,457respectively.TheCompanydidnotincludeeitherofthetermextensionoptionsinthecalculationoftheROUassetandleaseliability.InApril2020,theCompanyenteredintoatwelve-monthsubleaseagreementforaportionofthedistributionwarehouselocatedinRiverside,California.Fixedsubleasepaymentsreceivedarerecognizedonastraight-linebasisoverthesubleasetermingeneralandadministrativeexpenses.InFebruary2021,SummerUSAextendeditsleaseatitsRiverside,Californiadistributioncenter.TheexistingleasewassettoexpireonSeptember30,2021andhasbeenextendedfor61monthsthroughOctober31,2026.TheCompanyhasnotincludedthisleaseextensioninthecalculationofROUassetandleaseliabilityasofJanuary2,2021becauseitwasnotreasonablycertainthatwewouldbeextendingthisleaseuntilonoraroundthedatethatweenteredintothisagreement.TheCompanyidentifiedandassessedthefollowingsignificantassumptionsinrecognizingtheright-of-useassetandcorrespondingliabilities:•Expectedleaseterm—Theexpectedleasetermincludesbothcontractualleaseperiodsand,whenapplicable,cancelableoptionperiodswhenitisreasonablycertainthattheCompanywouldexercisesuchoptions.Theseleaseshaveremainingleasetermsbetween0.75and4.5years.TheWoonsocketleasehastwo5-yearextensionoptionsandtheCanadaleasehasone5-yearextensionoptionthathavenotbeenincludedintheleaseterm.•Incrementalborrowingrate—TheCompany’sleaseagreementsdonotprovideanimplicitrate.AstheCompanydoesnothaveanyexternalborrowingsforcomparabletermsofitsleases,theCompanyestimatedtheincrementalborrowingratebasedonsecuredborrowingsavailabletotheCompanyforthenext5years.ThisistheratetheCompanywouldhavetopayifborrowingonacollateralizedbasisoverasimilarterminanamountequaltotheleasepaymentsinasimilareconomicenvironment.•Leaseandnon-leasecomponents—IncertaincasestheCompanyisrequiredtopayforcertainadditionalchargesforoperatingcosts,includinginsurance,maintenance,taxes,andothercostsincurred,whicharebilledbasedonbothusageandasapercentageoftheCompany’sshareoftotalsquarefootage.TheCompanydeterminedthatthesecostsarenon-leasecomponentsandtheyarenotincludedinthecalculationoftheleaseliabilitiesbecausetheyarevariable.Paymentsforthesevariable,non-leasecomponentsareconsideredvariableleasecostsandarerecognizedintheperiodinwhichthecostsareincurred.F-25ThecomponentsoftheCompany’sleaseexpensefortheyearsendedJanuary2,2021andDecember28,2019wereasfollows:YearEndedJanuary2,2021YearEndedDecember28,2019Operatingleasecost...............................$2,710$2,499Variableleasecost.................................1,0571,152Less:subleaseincome............................(749)—Totalleaseexpense................................$3,018$3,651Weighted-averageremainingleaseterm..................1.2years2.1yearsWeighted-averagediscountrate:.......................5.00%5.00%CashpaidforamountsincludedinthemeasurementoftheCompany’sleaseliabilitieswere$2,911and$2,613fortheyearsendedJanuary2,2021andDecember28,2019respectively.AsofJanuary2,2021,thepresentvalueofmaturitiesoftheCompany’soperatingleaseliabilitieswereasfollows:FiscalYearEnding:2021...........................................................$2,4772022...........................................................6422023...........................................................4762024...........................................................3252025...........................................................163Lessimputedinterest...............................................(241)Total.........................................................$3,842Thefuturefixedsubleasereceiptsundernon-cancelableoperatingleaseagreementsasofJanuary2,2021areasfollows:FiscalYearEnding:2021............................................................$250Thereafter........................................................—Total..........................................................$250EmploymentContractsInaccordancewithapplicablelocallaw,SummerInfantEuropeLimitedisrequiredtohaveemploymentcontractswithallofitsemployees.Inconnectionwiththesecontracts,SummerInfantEuropeLimitedmakesindividualpensioncontributionstocertainemployeesatvaryingratesfrom1-7%oftheemployee’sannualsalary,aspartoftheirtotalcompensationpackage.Thesepensioncontributionsareexpensedasincurred.Therearenoterminationbenefitprovisionsinthesecontracts.LitigationTheCompanyisapartytoroutinelitigationandadministrativecomplaintsincidentaltoitsbusiness.TheCompanydoesnotbelievethattheresolutionofanyorallofsuchcurrentroutinelitigationandadministrativecomplaintsislikelytohaveamaterialadverseeffectontheCompany’sfinancialconditionorresultsofoperations.11.GEOGRAPHICALINFORMATIONTheCompanysellsproductsthroughouttheUnitedStates,Canada,andtheUnitedKingdom,andvariousotherpartsoftheworld.TheCompanydoesnotdiscloseproductlinerevenuesasitisnotpracticablefortheCompanytodoso.F-26Thefollowingisatablethatpresentsnetrevenuebygeographicarea:ForthefiscalyearendedJanuary2,2021December28,2019UnitedStates........................................$140,173$148,326AllOther...........................................15,12624,855$155,299$173,181Thefollowingisatablethatpresentstotalassetsbygeographicarea:January2,2021December28,2019UnitedStates........................................$70,689$80,693AllOther...........................................4,04810,850$74,737$91,543Thefollowingisatablethatpresentstotallong-livedassetsbygeographicarea:January2,2021December28,2019UnitedStates........................................$19,983$24,804AllOther...........................................1,2762,555$21,259$27,35912.SUBSEQUENTEVENTSTheCompanyhasevaluatedalleventsortransactionsthatoccurredafterJanuary2,2021throughthedateofthisAnnualReportonForm10-KanddoesnothaveanydisclosureshereexceptaspreviouslydisclosedinNote10,CommitmentsandContingencies,relatingtotheextensionofourleaseagreementatourRiverside,Californiadistributioncenter.F-27

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