NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar
amounts in thousands, except share, per share and unit amounts)
(unaudited)
NOTE
1 – BUSINESS ORGANIZATION AND NATURE OF OPERATIONS
Lazydays
Holdings, Inc. (the “Company” or “Holdings”), a Delaware corporation, was originally formed on October 24, 2017,
as a wholly owned subsidiary of Andina Acquisition Corp. II (“Andina”), an exempted company incorporated in the Cayman Islands
on July 1, 2015 for the purpose of entering into a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization
or other similar business combination with one or more business targets. On October 27, 2017, a merger agreement was entered into by
and among Andina, Andina II Holdco Corp. (“Holdco”), a Delaware corporation and wholly-owned subsidiary of Andina, Andina
II Merger Sub Inc., a Delaware corporation and wholly-owned subsidiary of Holdco (“Merger Sub”), Lazy Days’ R.V. Center,
Inc. (and its subsidiaries), a Delaware corporation (“Lazydays RV”) and solely for certain purposes set forth in the merger
agreement, A. Lorne Weil (the “Merger Agreement”). The Merger Agreement provided for a business combination transaction by
means of (i) a merger of Andina with and into Holdco, with Holdco surviving, changing its name to Lazydays Holdings, Inc. and becoming
a new public company (the “Redomestication Merger”) and (ii) a merger of Lazydays RV with and into Merger Sub with Lazydays
RV surviving and becoming a direct wholly-owned subsidiary of Holdings (the “Transaction Merger” and together with the Redomestication
Merger, the “Mergers”). On March 15, 2018, the Mergers were consummated.
Lazydays
RV has subsidiaries that operate recreational vehicle (“RV”) dealerships in twelve locations including two in the state of
Florida, two in the state of Colorado, two in the state of Arizona, three in the state of Tennessee, one in the state of Minnesota and
two in the state of Indiana. Lazydays RV also has a dedicated service center location near Houston, Texas. Through its subsidiaries,
Lazydays RV sells and services new and pre-owned RVs, and related parts and accessories. The Company also arranges financing and extended
service contracts for vehicle sales through third-party financing sources and extended warranty providers. It also offers to its customers
such ancillary services as overnight campground and restaurant facilities.
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting
principles in the United States of America (“GAAP”) and the rules and regulations of the United States Securities and Exchange
Commission (the “SEC”). Accordingly, these condensed consolidated financial statements do not include all of the information
and footnotes required by GAAP for complete financial statements. For additional information, these condensed consolidated financial
statements should be read in conjunction with Lazydays Holdings, Inc.’s consolidated financial statements and notes as of December
31, 2020 and 2019 included in the Annual Report on Form 10-K/A filed with the SEC on June 25, 2021. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.
Principles
of Consolidation
The
condensed consolidated financial statements include the accounts of Holdings, Lazydays RV and its wholly owned subsidiary LDRV Holdings
Corp. LDRV Holdings Corp is the sole owner of Lazydays Land Holdings, LLC, Lazydays Tampa Land Holdings, LLC, Lazydays RV America, LLC,
Lazydays RV Discount, LLC, Lazydays Mile Hi RV, LLC, LDRV of Tennessee LLC, Lazydays of Minneapolis LLC, Lazydays of Central Florida,
LLC, Lone Star Acquisition LLC, Lone Star Diversified LLC, LDRV Acquisition Group of Nashville LLC, LDRV of Nashville LLC, Lazydays RV
of Phoenix, LLC, Lazydays RV of Elkhart, LLC, Lazydays Land of Elkhart, LLC, Lazydays Service of Elkhart, LLC, Lazydays RV of Chicagoland,
LLC and Lazydays Land of Chicagoland, LLC (collectively, the “Company”, “Lazydays” or “Successor”).
All significant inter-company accounts and transactions have been eliminated in consolidation.
Restatement
of Previously Reported Financial Statements
The
notes included herein should be read in conjunction with the Company’s restated audited consolidated financial statements included
in the 2020 Form 10-K/A. As previously disclosed in the 2020 Form 10-K/A, the Company restated its previously issued consolidated financial
statements for the years ended December 31, 2020, 2019 and 2018 to make the necessary accounting adjustments related to warrant accounting.
The Company has restated herein its condensed consolidated financial statements for the three and six months ended June 30, 2020 and related amounts
within the accompanying footnotes to the condensed consolidated financial statements. Restated net income for the three months ended
June 30, 2020 is $5.3 million, a decrease of $2.8 million from the previously disclosed net income of $8.1 million. Restated net income
for the six months ended June 30, 2020 is $8.7 million, a decrease of $2.4 million from the previously disclosed net income of $11.1
million.
The
tables below set forth the unaudited condensed consolidated balance sheet as of June 30, 2020 originally reported, adjustments and the
restated balances, and the condensed consolidated statement of income for the three and six months ended June 30, 2020 originally
reported, adjustments, and the restated balances and the condensed consolidated statement of cash flow amounts for the six months ended
June 30, 2020 originally reported, adjustments, and the restated balances.
SCHEDULE OF ORIGINALLY REPORTED, ADJUSTMENTS, AND RESTATED BALANCES
|
|
Previous
|
|
|
Adjustment
|
|
|
Restated
|
|
|
|
June 30, 2020 (unaudited)
|
|
|
|
As Previously Reported
|
|
|
Restatement
Adjustments
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
414,722
|
|
|
$
|
-
|
|
|
$
|
414,722
|
|
Liabilities and Stockholder’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
149,211
|
|
|
$
|
-
|
|
|
|
149,211
|
|
Financing liability, non-current portion, net of debt discount
|
|
|
71,403
|
|
|
|
-
|
|
|
|
71,403
|
|
Long term debt, non-current portion, net of debt discount
|
|
|
15,679
|
|
|
|
-
|
|
|
|
15,679
|
|
Operating lease liability, non-current portion
|
|
|
13,616
|
|
|
|
-
|
|
|
|
13,616
|
|
Deferred tax liability
|
|
|
16,450
|
|
|
|
-
|
|
|
|
16,450
|
|
Warrant liabilities
|
|
|
-
|
|
|
|
3,093
|
|
|
|
3,093
|
|
Total liabilities
|
|
|
266,359
|
|
|
|
3,093
|
|
|
|
269,452
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A Convertible Preferred Stock; 600,000 shares, designated, issued, and outstanding as of December 31, 2020; liquidation preference of $60,000 as of December 31, 2020
|
|
|
64,221
|
|
|
|
-
|
|
|
|
64,221
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock, $0.0001 par value; 5,000,000 shares authorized;
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Common stock, $0.0001 par value; 100,000,000 shares authorized; 8,548,524 shares issued and 8,407,225 outstanding at June 30, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Additional paid-in capital
|
|
|
78,712
|
|
|
|
(8,991
|
)
|
|
|
69,721
|
|
Treasury Stock, at cost, 141,299 shares at June 30, 2020
|
|
|
(499
|
)
|
|
|
-
|
|
|
|
(499
|
)
|
Retained earnings
|
|
|
5,929
|
|
|
|
5,898
|
|
|
|
11,827
|
|
Total stockholders’ equity
|
|
|
84,142
|
|
|
|
(3,093
|
)
|
|
|
81,049
|
|
Total liabilities and stockholders’ equity
|
|
$
|
414,722
|
|
|
$
|
-
|
|
|
$
|
414,722
|
|
|
|
As Previously Reported
|
|
|
Restatement
Adjustments
|
|
|
As Restated
|
|
|
As Previously Reported
|
|
|
Restatement
Adjustments
|
|
|
As Restated
|
|
|
|
Three months ended June 30, 2020 (Unaudited)
|
|
|
Six months ended June 30, 2020 (Unaudited)
|
|
|
|
As Previously Reported
|
|
|
Restatement
Adjustments
|
|
|
As Restated
|
|
|
As Previously Reported
|
|
|
Restatement
Adjustments
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Operations
|
|
$
|
12,628
|
|
|
$
|
-
|
|
|
$
|
12,628
|
|
|
$
|
19,412
|
|
|
$
|
-
|
|
|
$
|
19,412
|
|
Other income/expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sale of property and equipment
|
|
|
(6
|
)
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
(8
|
)
|
|
|
-
|
|
|
|
(8
|
)
|
Interest expense
|
|
|
(2,018
|
)
|
|
|
-
|
|
|
|
(2,018
|
)
|
|
|
(4,513
|
)
|
|
|
-
|
|
|
|
(4,513
|
)
|
Change in fair value of warrant liabilities
|
|
|
-
|
|
|
|
(2,758
|
)
|
|
|
(2,758
|
)
|
|
|
-
|
|
|
|
(2,346
|
)
|
|
|
(2,346
|
)
|
Total other expense
|
|
|
(2,024
|
)
|
|
|
(2,758
|
)
|
|
|
(4,782
|
)
|
|
|
(4,521
|
)
|
|
|
(2,346
|
)
|
|
|
(6,867
|
)
|
Income tax expense
|
|
|
(2,536
|
)
|
|
|
-
|
|
|
|
(2,536
|
)
|
|
|
(3,836
|
)
|
|
|
-
|
|
|
|
(3,836
|
)
|
Net income
|
|
$
|
8,068
|
|
|
$
|
(2,758
|
)
|
|
$
|
5,310
|
|
|
$
|
11,055
|
|
|
$
|
(2,346
|
)
|
|
$
|
8,709
|
|
Dividends of Series A Convertible Preferred Stock
|
|
|
(1,684
|
)
|
|
|
-
|
|
|
|
(1,684
|
)
|
|
|
(3,328
|
)
|
|
|
-
|
|
|
|
(3,328
|
)
|
Net income attributable to common stock and participating securities
|
|
$
|
6,384
|
|
|
$
|
(2,758
|
)
|
|
$
|
3,626
|
|
|
$
|
7,727
|
|
|
$
|
(2,346
|
)
|
|
$
|
5,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted income per share
|
|
$
|
0.39
|
|
|
$
|
(0.14
|
)
|
|
$
|
0.25
|
|
|
$
|
0.48
|
|
|
$
|
(0.10
|
)
|
|
$
|
0.38
|
|
Weighted average shares outstanding basic and diluted
|
|
|
9,715,677
|
|
|
|
9,715,677
|
|
|
|
9,715,677
|
|
|
|
9,736,133
|
|
|
|
9,736,133
|
|
|
|
9,736,133
|
|
|
|
As
Previously Reported
|
|
|
Restatement
Adjustments
|
|
|
As
Restated
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2020
|
|
|
|
As Previously Reported
|
|
|
Restatement
Adjustments
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
11,055
|
|
|
$
|
(2,346
|
)
|
|
$
|
8,709
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
72,555
|
|
|
|
|
|
|
|
72,555
|
|
Change in fair value of warrant liabilities
|
|
|
-
|
|
|
|
2,346
|
|
|
|
2,346
|
|
Net cash provided by operating activities
|
|
|
83,610
|
|
|
|
-
|
|
|
|
83,610
|
|
Net cash used in investing activities
|
|
|
(765
|
)
|
|
|
-
|
|
|
|
(765
|
)
|
Net cash used in financing activities
|
|
|
(52,253
|
)
|
|
|
-
|
|
|
|
(52,253
|
)
|
Net change in cash and cash equivalents
|
|
|
30,592
|
|
|
|
-
|
|
|
|
30,592
|
|
Cash - Beginning
|
|
|
31,458
|
|
|
|
-
|
|
|
|
31,458
|
|
Cash - Ending
|
|
$
|
62,050
|
|
|
$
|
-
|
|
|
$
|
62,050
|
|
Use
of Estimates in the Preparation of Financial Statements
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Significant estimates include the assumptions used in the valuation of the net assets acquired in business combinations, goodwill and
other intangible assets, provision for charge-backs, inventory write-downs, allowance for doubtful accounts and stock-based compensation
and fair value of warrant liabilities.
Revenue
Recognition
The
core principle of revenue recognition is that an entity recognizes revenue to depict the transfer of promised goods or services to customers
in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The
Company applies a five-step model for revenue measurement and recognition.
Revenues
are recognized when control of the promised goods or services is transferred to the customers at the expected amount the Company is entitled
to for such goods and services. Taxes collected on revenue producing transactions are excluded from revenue in the condensed consolidated
statements of income. The following table represents the Company’s disaggregation of revenue:
SCHEDULE OF DISAGGREGATION OF REVENUE
|
|
Three months ended
|
|
Six months ended
|
|
|
June
30, 2021
|
|
|
June 30, 2020
|
|
|
June 30, 2021
|
|
|
June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New vehicle revenue
|
|
$
|
201,560
|
|
|
$
|
129,398
|
|
|
$
|
368,971
|
|
|
$
|
231,842
|
|
Preowned vehicle revenue
|
|
|
88,653
|
|
|
|
62,107
|
|
|
|
166,123
|
|
|
|
126,851
|
|
Parts, accessories, and related services
|
|
|
12,077
|
|
|
|
9,165
|
|
|
|
22,338
|
|
|
|
19,930
|
|
Finance and insurance revenue
|
|
|
19,738
|
|
|
|
12,763
|
|
|
|
34,346
|
|
|
|
24,035
|
|
Campground and other revenue
|
|
|
763
|
|
|
|
528
|
|
|
|
2,006
|
|
|
|
2,157
|
|
Total
|
|
$
|
322,791
|
|
|
$
|
213,961
|
|
|
$
|
593,784
|
|
|
$
|
404,815
|
|
Revenue
from the sale of vehicles is recognized at a point in time on delivery, transfer of title and completion of financing arrangements.
Revenue
from the sale of parts, accessories and related service is recognized as services and parts are delivered or as a customer approves elements
of the completion of service. Revenue from the sale of parts, accessories and related service is recognized in other revenue in the accompanying
condensed consolidated statements of income.
The
Company receives commissions from the sale of insurance and vehicle service contracts to customers. In addition, the Company arranges
financing for customers through various financial institutions and receives commissions. The Company may be charged back (“charge-backs”)
for financing fees, insurance or vehicle service contract commissions in the event of early termination of some contracts by its customers.
The revenues from financing fees and commissions are recorded at the time of the sale of the vehicles and an allowance for future charge-backs
is established based on historical operating results and the termination provision of the applicable contracts. The estimates for future
charge-backs require judgment by management, and as a result there is an element of risk associated with these revenue streams. The Company
recognized finance and insurance revenues, less the additions to the charge-back allowance, which is included in other revenue as follows
(unaudited):
SCHEDULE OF REVENUE RECOGNIZED OF FINANCE AND INSURANCE REVENUES
|
|
June 30, 2021
|
|
|
June 30, 2020
|
|
|
June 30, 2021
|
|
|
June 30, 2020
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
June 30, 2021
|
|
|
June 30, 2020
|
|
|
June 30, 2021
|
|
|
June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross finance and insurance revenues
|
|
$
|
21,866
|
|
|
$
|
13,917
|
|
|
$
|
37,921
|
|
|
$
|
26,500
|
|
Additions to charge-back allowance
|
|
|
(2,128
|
)
|
|
|
(1,154
|
)
|
|
|
(3,575
|
)
|
|
|
(2,465
|
)
|
Net Finance Revenue
|
|
$
|
19,738
|
|
|
$
|
12,763
|
|
|
$
|
34,346
|
|
|
$
|
24,035
|
|
The
Company has an accrual for charge-backs, which totaled $7,028 and $5,553 at June 30, 2021 and December 31, 2020, respectively, and is
included in “Accounts payable, accrued expenses and other current liabilities” in the accompanying condensed consolidated
balance sheets.
Deposits
on vehicles received in advance are accounted for as a liability and recognized into revenue upon completion of each respective transaction.
These contract liabilities are included in Note 5 – Accounts Payable, Accrued Expenses, and Other Current Liabilities as customer
deposits. During the six months ended June 30, 2021, $4,361 of contract liabilities as of December 31, 2020 were recognized in revenue.
Inventories
Vehicle
and parts inventories are recorded at the lower of cost or net realizable value, with cost determined by the last-in, first-out (“LIFO”)
method. Cost includes purchase costs, reconditioning costs, dealer-installed accessories and freight. For vehicles accepted in trades,
the cost is the fair value of such pre-owned vehicles at the time of the trade-in. Other inventory includes parts and accessories as
well as retail travel and leisure specialty merchandise. The current replacement costs of LIFO inventories exceeded their recorded values
by $5,691 and $3,627 as of June 30, 2021 and December 31, 2020, respectively.
Cumulative
Redeemable Convertible Preferred Stock
The
Company’s Series A Preferred Stock (See Note 10 – Preferred Stock) is cumulative redeemable convertible preferred stock.
Accordingly, it is classified as temporary equity and is shown net of issuance costs and the relative fair value of warrants issued in
conjunction with the issuance of the Series A Preferred Stock. Unpaid preferred dividends are accumulated, compounded at each quarterly
dividend date and presented within the carrying value of the Series A Preferred Stock until a dividend is declared by the Company’s
board of directors (the “Board”).
Stock
Based Compensation
The
Company accounts for stock-based compensation for employees and directors in accordance with ASC 718, Compensation. ASC 718 requires
all share-based payments to employees, including grants of employee stock options, to be recognized in the statement of income based
on their fair values. Under the provisions of ASC 718, stock-based compensation costs are measured at the grant date, based on the fair
value of the award, and are recognized as expense over the employee’s requisite or derived service period. In accordance with ASC
718, excess tax benefits realized from the exercise of stock-based awards are classified as cash flows from operating activities. All
excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) are recognized as income
tax expenses or benefits in the condensed consolidated statements of income.
Earnings
Per Share
The
Company computes basic and diluted earnings/(loss) per share (“EPS”) by dividing net earnings/(loss) by the weighted average
number of shares of common stock outstanding during the period.
The
Company is required, in periods in which it has net income, to calculate EPS using the two-class method. The two-class method is required
because the Company’s Series A Preferred Stock have the right to receive dividends or dividend equivalents should the Company declare
dividends on its common stock. Under the two-class method, earnings for the period are allocated on a pro-rata basis to the common and
preferred stockholders. The weighted-average number of common and preferred shares outstanding during the period is then used to calculate
basic EPS for each class of shares.
In
periods in which the Company has a net loss, basic loss per share is calculated by dividing the loss attributable to common stockholders
by the weighted-average number of common shares outstanding during the period. The two-class method is not used, because the preferred
stock does not participate in losses.
The
following table summarizes net income attributable to common stockholders used in the calculation of basic and diluted income (loss)
per common share:
SUMMARY OF NET INCOME (LOSS) ATTRIBUTE TO COMMON STOCKHOLDERS
|
|
June 30, 2021
|
|
|
June 30, 2020
|
|
|
June 30, 2021
|
|
|
June 30, 2020
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30, 2021
|
|
|
June 30, 2020
|
|
|
June 30, 2021
|
|
|
June 30, 2020
|
|
(Dollars in thousands - except share and per share amounts)
|
|
|
|
|
(Restated)
|
|
|
|
|
|
(Restated)
|
|
Distributed earning allocated to common stock
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Undistributed earnings allocated to common stock
|
|
|
18,506
|
|
|
|
2,473
|
|
|
|
24,345
|
|
|
|
3,741
|
|
Net earnings allocated to common stock
|
|
|
18,506
|
|
|
|
2,473
|
|
|
|
24,345
|
|
|
|
3,741
|
|
Net earnings allocated to participating securities
|
|
|
5,606
|
|
|
|
1,153
|
|
|
|
7,427
|
|
|
|
1,640
|
|
Net earnings allocated to common stock and participating securities
|
|
$
|
24,112
|
|
|
$
|
3,626
|
|
|
$
|
31,772
|
|
|
$
|
5,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding for basic earning per common share
|
|
|
10,677,495
|
|
|
|
8,376,178
|
|
|
|
10,637,060
|
|
|
|
8,396,634
|
|
Dilutive effect of warrants and options
|
|
|
300,357
|
|
|
|
1,339,499
|
|
|
|
300,357
|
|
|
|
1,339,499
|
|
Weighted average shares outstanding for diluted earnings per share computation
|
|
|
10,977,852
|
|
|
|
9,715,677
|
|
|
|
10,937,417
|
|
|
|
9,736,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per common share
|
|
$
|
1.69
|
|
|
$
|
0.25
|
|
|
$
|
2.23
|
|
|
$
|
0.38
|
|
Diluted income per common share
|
|
$
|
1.21
|
|
|
$
|
0.25
|
|
|
$
|
1.63
|
|
|
$
|
0.38
|
|
During
the three and six months ended June 30, 2021 and 2020, respectively, the denominator of the basic EPS was calculated as follow:
SCHEDULE OF DENOMINATOR OF BASIC EARNINGS PER SHARE
|
|
June 30,2021
|
|
|
June 30, 2020
|
|
|
June 30,2021
|
|
|
June 30, 2020
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
|
June 30,2021
|
|
|
June 30, 2020
|
|
|
June 30,2021
|
|
|
June 30, 2020
|
|
Weighted average outstanding common shares
|
|
|
10,677,495
|
|
|
|
8,376,178
|
|
|
|
10,637,060
|
|
|
|
8,396,634
|
|
Weighted average prefunded warrants
|
|
|
300,357
|
|
|
|
1,339,499
|
|
|
|
300,357
|
|
|
|
1,339,499
|
|
Weighted shares outstanding - basic
|
|
$
|
10,977,852
|
|
|
$
|
9,715,677
|
|
|
$
|
10,937,417
|
|
|
$
|
9,736,133
|
|
During
the three and six months ended June 30, 2021 and 2020, respectively, the denominator of the dilutive EPS was calculated as follows:
SCHEDULE OF DENOMINATOR OF DILUTIVE EARNINGS PER SHARE
|
|
June 30,2021
|
|
|
June 30, 2020
|
|
|
June 30,2021
|
|
|
June 30, 2020
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
|
June 30,2021
|
|
|
June 30, 2020
|
|
|
June 30,2021
|
|
|
June 30, 2020
|
|
Weighted average outstanding common shares
|
|
|
10,677,495
|
|
|
|
8,376,178
|
|
|
|
10,637,060
|
|
|
|
8,396,634
|
|
Weighted average prefunded warrants
|
|
|
300,357
|
|
|
|
1,339,499
|
|
|
|
300,357
|
|
|
|
1,339,499
|
|
Weighted average warrants
|
|
|
1,730,719
|
|
|
|
-
|
|
|
|
1,730,719
|
|
|
|
-
|
|
Weighted average options
|
|
|
2,125,161
|
|
|
|
-
|
|
|
|
2,125,161
|
|
|
|
-
|
|
Weighted average convertible preferred stock
|
|
|
6,081,689
|
|
|
|
6,147,975
|
|
|
|
6,199,354
|
|
|
|
6,293,466
|
|
Weighted shares outstanding - basic and diluted
|
|
|
20,915,421
|
|
|
|
15,863,652
|
|
|
|
20,992,651
|
|
|
|
16,029,599
|
|
The
following common stock equivalent shares were excluded from the computation of the diluted income per share, since their inclusion would
have been anti-dilutive:
SCHEDULE OF ANTI-DILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE
|
|
Three months ended
|
|
Six months ended
|
|
|
June 30,2021
|
|
|
June 30, 2020
|
|
|
June 30,2021
|
|
|
June 30, 2020
|
|
Shares underlying Series A Convertible Preferred Stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Shares underlying warrants
|
|
|
-
|
|
|
|
4,677,458
|
|
|
|
-
|
|
|
|
4,677,458
|
|
Stock options
|
|
|
-
|
|
|
|
3,993,759
|
|
|
|
-
|
|
|
|
3,993,759
|
|
Share equivalents excluded from EPS
|
|
|
-
|
|
|
|
8,671,217
|
|
|
|
-
|
|
|
|
8,671,217
|
|
As
of June 30, 2021, the Company had declared dividends of $1,197 on its Series A Convertible Preferred Stock, which are included in dividends
payable on the accompanying Condensed Consolidated Balance Sheets. The dividend was paid on July 1, 2021. As a result, the Series A Convertible
Preferred Stock was convertible into 5,962,733 shares of common stock as of June 30, 2021. Upon conversion, the Company has the option
to pay accrued dividends in cash or allow conversion into common stock.
Prior
Period Financial Statement Correction of an Immaterial Misstatement
During
the fourth quarter of 2020, the Company identified adjustments required to correct earnings per share for the first three quarters of
2020. The errors discovered resulted in an understatement in earning per share of $0.06 and $0.07 for the three and six months ended
June 30, 2020, respectively.
Based
on an analysis of “Accounting Changes and Error Corrections” (“ASC 250”), Staff Accounting Bulletin 99 –
“Materiality” (“SAB 99”) and Staff Accounting Bulletin 108 – “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”), the Company determined
that these errors were immaterial to the previously issued condensed consolidated financial statements, and as such, no restatement was
necessary. Correcting prior period financial statements for immaterial errors would not require previously filed reports to be amended.
Such correction may be made the next time the registrant files the prior period financial statements. Accordingly, the misstatements
are being corrected prospectively in this Form 10-Q for the quarter ended June 30, 2021.
Advertising
Costs
Advertising
and promotion costs are charged to operations in the period incurred. Advertising and promotion costs totaled approximately $5,201 and
$2,862 for the three months ended June 30, 2021 and June 30, 2020, respectively, and $9,613 and $7,221 for the six months ended June
30, 2021 and June 30, 2020, respectively.
Income
Taxes
The
Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in
the condensed consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences
are expected to reverse. The Company estimates the degree to which tax assets and credit carry forwards will result in a benefit based
on expected profitability by tax jurisdiction.
In
its interim condensed consolidated financial statements, the Company follows the guidance in ASC 270, “Interim Reporting”
and ASC 740 “Income Taxes”, whereby the Company utilizes the expected annual effective tax rate in determining its income
tax provisions for the interim periods.
Seasonality
The
Company’s operations generally experience modestly higher volumes of vehicle sales in the first half of each year due in part to
consumer buying trends and the hospitable warm climate during the winter months at the Company’s Florida and Arizona locations.
In addition, the northern locations in Colorado, Tennessee, Minnesota and Indiana generally experience moderately higher vehicle sales
during the spring months.
Vendor
Concentrations
The
Company purchases its new RVs and replacement parts from various manufacturers. During the three months ended June 30, 2021, three major
manufacturers accounted for 40.9%, 28.4% and 25.6% of RV purchases. During the six months ended June 30, 2021, three major manufacturers
accounted for 44.4%, 28.4%, and 22.4% of RV purchases.
During
the three months ended June 30, 2020, four major manufacturers accounted for 35.0%, 22.5%, 21.5% and 16.9% of RV purchases. During the
six months ended June 30, 2020, four major manufacturers accounted for 31.5%, 21.2%, 20.2% and 19.0% of RV purchases.
The
Company is subject to dealer agreements with each manufacturer. The manufacturer is entitled to terminate the dealer agreement if the
Company is in material breach of the agreement’s terms.
Geographic
Concentrations
The
percent of revenues generated by the Florida locations, Colorado locations, Arizona locations and Tennessee locations, which generate
greater than 10% of revenues, were as follows (unaudited):
SCHEDULE OF GEOGRAPHIC CONCENTRATION RISK PERCENTAGE
|
|
Three months ended
|
|
Six months ended
|
|
|
|
June 30, 2021
|
|
|
June 30, 2020
|
|
|
June 30, 2021
|
|
|
June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Florida
|
|
|
46
|
%
|
|
|
61
|
%
|
|
|
51
|
%
|
|
|
68
|
%
|
Colorado
|
|
|
13
|
%
|
|
|
17
|
%
|
|
|
12
|
%
|
|
|
14
|
%
|
Arizona
|
|
|
13
|
%
|
|
|
<10
|
%
|
|
|
12
|
%
|
|
|
<10
|
%
|
Tennessee
|
|
|
16
|
%
|
|
|
<10
|
%
|
|
|
14
|
%
|
|
|
<10
|
%
|
These
geographic concentrations increase the exposure to adverse developments related to competition, as well as economic, demographic and
weather.
Impact
of COVID-19
In
March 2020, the World Health Organization declared the outbreak of the novel coronavirus (“COVID-19”) pandemic, which continues
to spread throughout the United States and globally. Beginning in mid-to-late March of 2020, the COVID-19 pandemic led to severe disruptions
in general economic activity as businesses and federal, state and local governments took increasingly broad actions to mitigate the impact
of the COVID-19 pandemic on public health, including through “shelter in place” or “stay at home” orders in the
states in which we operate. As we modified our business practices to conform to government guidelines and best practices to ensure the
health and safety of our customers, employees and the communities we serve, we saw significant early declines in new and pre-owned vehicle
unit sales, sales of parts, accessories and related services, including finance and insurance revenues as well as campground and miscellaneous
revenues.
We
took a number of actions in April 2020 to adjust resources and costs to align with reduced demand caused by the COVID-19 pandemic. These
actions included:
|
●
|
Reduction
of our workforce by 25%;
|
|
●
|
Temporary
reduction of senior management salaries (April 2020 through May 2020);
|
|
●
|
Suspension
of 2020 annual pay increases;
|
|
●
|
Temporary
suspension of 401k match (April 2020 through May 2020);
|
|
●
|
Delay
of non-critical capital projects; and
|
|
●
|
Focus
of resources on core sales and service operations.
|
As
described under Note 7 - Debt below, to further protect our liquidity and cash position, we negotiated with our lenders for the temporary
suspension of scheduled principal and interest payments on our term and mortgage loans from April 15, 2020 through June 15, 2020 and
for the temporary suspension of scheduled floorplan curtailment payments from April 1, 2020 through June 15, 2020. We also received $8,704
in loans (the “PPP Loans”) under the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act
(“CARES Act”). We applied for loan forgiveness under the PPP Loans. As of June 30, 2021, all of the PPP Loans had a portion forgiven
for a total of $6,626.
The
improvement in sales beginning in May 2020 likely relates, at least in part, to an increase in consumer demand as consumers seek outdoor
travel and leisure activities that permit appropriate social distancing. However, we can provide no assurances that such growth in sales
will continue at the same rate that occurred between May 2020 and June 2021, or at all, over any time period, and sales may ultimately
decline. Furthermore, our improved sales and cost savings measures to date may not be sufficient to offset any later impacts of the COVID-19
pandemic, including the Delta variant, and our liquidity could be negatively impacted, if prior sales trends from May 2020 through June
30, 2021 are reversed, which may occur, for example, if consumer preferences shift toward cruise line, air travel and hotel industries.
Our
operations also depend on the continued health and productivity of our employees at our dealerships service locations and corporate headquarters
throughout the COVID-19 pandemic. The extent to which the COVID-19 pandemic ultimately impacts our business, results of operations and
financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including the severity and
duration of the COVID-19 pandemic, the efficacy and availability of vaccines, and further actions that may be taken by individuals, businesses
and federal, state and local governments in response. Even after the COVID-19 pandemic has subsided, the Company may experience significant
adverse effects to its business as a result of its global economic impact, including any economic recession or downturn and the impact
of such a recession or downturn on unemployment levels, consumer confidence, levels of personal discretionary spending and credit availability.
Reclassifications
Certain
amounts in prior periods have been reclassified to conform to the current period presentation. These reclassifications had no effect
on the previously reported net income.
Recently
Issued Accounting Standards
In
March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). This standard, effective
for reporting periods through December 31, 2022, provides accounting relief for contract modifications that replace an interest rate
impacted by reference rate reform (e.g., London Interbank Offered Rate (“LIBOR”)) with a new alternative reference rate.
The guidance is applicable to investment securities, receivables, loans, debt, leases, derivatives and hedge accounting elections and
other contractual arrangements. The new standard provides temporary optional expedients and exceptions to current GAAP guidance on contract
modifications and hedge accounting. Specifically, a modification to transition to an alternative reference rate is treated as an event
that does not require contract remeasurement or reassessment of a previous accounting treatment. The standard is generally effective
for all contract modifications made and hedging relationships evaluated through December 31, 2022, as a result of reference rate reform.
The Company is currently evaluating the impact that this new standard will have on our condensed consolidated financial statements.
Recently
Adopted Accounting Pronouncements
In
June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”). This standard
requires the use of a forward-looking expected loss impairment model for trade and other receivables, held-to-maturity debt securities,
loans and other instruments. This standard also requires impairments and recoveries for available-for-sale debt securities to be recorded
through an allowance account and revises certain disclosure requirements. In April 2019, the FASB issued ASU 2019-04, Codification Improvements,
which provides guidance on accounting for credit losses on accrued interest receivable balances and guidance on including recoveries
when estimating the allowance. In May 2019, the FASB issued ASU 2019-05, Targeted Transition Relief, which allows entities with an option
to elect fair value for certain instruments upon adoption of Topic 326. The standard is effective for the Company for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted ASU 2016-13 on January 1, 2021 and
the adoption did not materially impact its condensed consolidated financial statements.
Lease
recognition
At
the inception of a contract, we determine whether an arrangement is or contains a lease. For all leases, we determine the classification
as either operating or financing.
Operating
lease assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make
lease payments under the lease. Lease recognition occurs at the commencement date and lease liability amounts are based on the present
value of lease payments over the lease term. Our lease terms may include options to extend or terminate the lease when it is reasonably
certain that we will exercise that option. Because most of our leases do not provide information to determine an implicit interest rate,
we use our incremental borrowing rate in determining the present value of lease payments. Operating lease assets also include any lease
payments made prior to the commencement date and exclude lease incentives received. Operating lease expense is recognized on a straight-line
basis over the lease term. We have lease agreements with both lease and non-lease components, which are generally accounted for together
as a single lease component.
Subsequent
Events
Management
of the Company has analyzed the activities and transactions subsequent to June 30, 2021 through the date these condensed consolidated
financial statements were issued to determine the need for any adjustments to or disclosures within the condensed consolidated financial
statements. The Company did not identify any recognized or non-recognized subsequent events that would require disclosure in the condensed
consolidated financial statements other than the following item.
On
July 14, 2021, the Company executed an amended and restated credit agreement with M&T, as a Lender, Administrative Agent, Swingline
Lender, and Issuing Bank, and other financial institutions as Lender parties. The credit agreement evidences an approximately $369.1 million
aggregate credit facility, consisting of a $327 million floor plan credit facility, a term loan of approximately $11.3 million, a $25
million revolving credit and a $5.8 million mortgage loan facility.
On August 3, 2021, the Company completed its acquisition of BYRV, Inc.
(“BYRV”) located in Portland, Oregon and BYRV Washington, Inc. (“BYRV Washington”) located in Woodland, Washington
in one transaction (“BYRV”). The purchase price for the transaction consists of the following, in each case subject to adjustment
in accordance with the terms of the purchase agreement: (a) a cash payment, subject to a working capital adjustment and an inventory adjustment
and (b) the assumption of BYRV’s floorplan debt, which was paid off and added to the Company’s current floorplan.
NOTE
3 – BUSINESS COMBINATION
Acquisitions
of Dealerships
On
May 19, 2020, the Company consummated the acquisition contemplated by the Company’s asset purchase agreement with Korges Enterprises,
Inc. (“Korges”). The purchase price consisted solely of cash paid to Korges. As part of the acquisition, the Company acquired
the inventory of Korges and has added the inventory to the M&T Floor Plan Line of Credit (as defined below).
On
October 6, 2020, the Company consummated the acquisition contemplated by the Company’s asset purchase agreement with Total Value
Recreation Vehicles of Indiana, Inc. (“Total RV”). The purchase price consisted solely of cash paid to Total RV. As part
of the acquisition, the Company acquired the inventory of Total RV and has added the inventory to the M&T Floor Plan Line of Credit
(as defined below).
On
December 1, 2020, the Company consummated the acquisition contemplated by the Company’s asset purchase agreement with Camp-Land,
Inc. (“Camp-Land”). The purchase price consisted of cash paid to Camp-Land and a note payable to the seller of Camp-Land.
The note payable is a four year note which matures on January 5, 2025, which requires annual payments of $435 in principal and interest.
The note bears interest at 3.35% per year. As part of the acquisition, the Company acquired the inventory of Camp-Land and has added
the inventory to the M&T Floor Plan Line of Credit (as defined below).
On
March 23, 2021, the Company consummated the acquisition contemplated by the Company’s asset purchase agreement with Chilhowee Trailer
Sales, Inc. (“Chilhowee”). The purchase price consisted solely of cash paid to Chilhowee. As part of the acquisition, the
Company acquired the inventory of Chilhowee and has added the inventory to the M&T Floor Plan Line of Credit (as defined below).
The
Company accounted for the asset purchase agreements as business combinations using the purchase method of accounting as it was determined
that Korges, Total RV, Camp-Land and Chilhowee each constituted a business. As a result, the Company determined its preliminary allocation
of the fair value of the assets acquired and the liabilities assumed for these dealerships as follows:
SCHEDULE OF FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Inventories
|
|
$
|
3,590
|
|
|
$
|
18,932
|
|
Accounts receivable and prepaid expenses
|
|
|
150
|
|
|
|
1,167
|
|
Property and equipment
|
|
|
392
|
|
|
|
5,417
|
|
Intangible assets
|
|
|
1,220
|
|
|
|
8,480
|
|
Total assets acquired
|
|
|
5,352
|
|
|
|
33,996
|
|
|
|
|
|
|
|
|
|
|
Accounts payable, accrued expenses and other current liabilities
|
|
|
748
|
|
|
|
1,004
|
|
Floor plan notes payable
|
|
|
2,443
|
|
|
|
20,855
|
|
Total liabilities assumed
|
|
|
3,191
|
|
|
|
21,859
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
2,161
|
|
|
$
|
12,137
|
|
The
fair value of consideration paid was as follows:
SCHEDULE OF FAIR VALUE OF CONSIDERATION PAID
|
|
2021
|
|
|
2020
|
|
Purchase Price:
|
|
$
|
4,302
|
|
|
$
|
16,653
|
|
Note payable issued to former owners
|
|
|
-
|
|
|
|
1,600
|
|
Total consideration
|
|
$
|
4,302
|
|
|
$
|
18,253
|
|
Goodwill
represents the excess of the purchase price over the estimated fair value assigned to tangible and identifiable intangible assets acquired
and liabilities assumed from, Korges, Total RV, Camp-Land and Chilhowee. Goodwill associated with the transactions is detailed below:
SCHEDULE OF GOODWILL ASSOCIATED WITH MERGER
|
|
2021
|
|
|
2020
|
|
Total consideration
|
|
$
|
4,302
|
|
|
$
|
18,253
|
|
Less net assets acquired
|
|
|
2,161
|
|
|
|
12,137
|
|
Goodwill
|
|
$
|
2,141
|
|
|
$
|
6,116
|
|
Goodwill
is expected to be deductible to the extent the Company has tax basis.
The
following table summarizes the Company’s allocation of the purchase price to the identifiable intangible assets acquired
as of the date of the closings.
SCHEDULE OF IDENTIFIABLE INTANGIBLE ASSETS ACQUIRED
|
|
Gross Asset Amount at Acquisition Date
|
|
|
Weighted Average Amortization Period in Years
|
|
Customer Lists
|
|
$
|
470
|
|
|
|
10 years
|
|
Dealer Agreements
|
|
$
|
9,000
|
|
|
|
10 years
|
|
Noncompete Agreement
|
|
$
|
230
|
|
|
|
5 years
|
|
The
Company recorded approximately $53,119 in revenue and $7,091 in net income prior to income taxes during the period from April 1, 2021
to June 30, 2021 related to these acquisitions. The Company recorded approximately $83,237 in revenue and $9,701 in net income prior
to income taxes for the six months ended June 30, 2021 related to these acquisitions.
Pro
Forma Information
The
following unaudited pro forma financial information summarizes the combined results of operations for the Company as though the purchase
of Korges, Total RV, Camp-Land and Chilhowee had been consummated on January 1, 2020.
SCHEDULE OF PRO FORMA FINANCIAL INFORMATION
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
For the three months ended June 30,
|
|
For the six months ended June 30,
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Revenue
|
|
$
|
322,791
|
|
|
$
|
240,670
|
|
|
$
|
600,117
|
|
|
$
|
459,725
|
|
Income before income taxes
|
|
$
|
34,805
|
|
|
$
|
8,134
|
|
|
$
|
49,173
|
|
|
$
|
12,160
|
|
Net income
|
|
$
|
25,718
|
|
|
$
|
5,538
|
|
|
$
|
34,623
|
|
|
$
|
8,754
|
|
The
Company adjusted the combined income of Lazydays RV with Korges, Total RV, Camp-Land and Chilhowee, and adjusted net income to eliminate
business combination expenses as well as the incremental depreciation and amortization associated with the preliminary purchase price
allocation to determine pro forma net income.
NOTE
4 – INVENTORIES
Inventories
consist of the following:
SCHEDULE OF INVENTORIES
|
|
As of
|
|
|
As of
|
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
|
(Unaudited)
|
|
|
|
|
New recreational vehicles
|
|
$
|
55,900
|
|
|
$
|
92,434
|
|
Pre-owned recreational vehicles
|
|
|
31,453
|
|
|
|
22,967
|
|
Parts, accessories and other
|
|
|
5,594
|
|
|
|
4,493
|
|
|
|
|
92,947
|
|
|
|
119,894
|
|
Less: excess of current cost over LIFO
|
|
|
(5,691
|
)
|
|
|
(3,627
|
)
|
Total
|
|
$
|
87,256
|
|
|
$
|
116,267
|
|
NOTE
5 – ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accounts
payable, accrued expenses and other current liabilities consist of the following:
SCHEDULE OF ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
|
|
As of
|
|
|
As of
|
|
|
|
June 30,2021
|
|
|
December 31, 2020
|
|
|
|
(Unaudited)
|
|
|
|
|
Accounts payable
|
|
$
|
27,557
|
|
|
$
|
18,077
|
|
Other accrued expenses
|
|
|
5,963
|
|
|
|
4,713
|
|
Customer deposits
|
|
|
9,299
|
|
|
|
6,002
|
|
Accrued compensation
|
|
|
5,768
|
|
|
|
4,311
|
|
Accrued charge-backs
|
|
|
7,028
|
|
|
|
5,553
|
|
Accrued interest
|
|
|
83
|
|
|
|
125
|
|
Total
|
|
$
|
55,698
|
|
|
$
|
38,781
|
|
NOTE
6 – LEASES
The
Company leases property and equipment throughout the United States primarily under operating leases. Leases with lease terms of 12 months
or less are expensed on a straight-line basis over the lease term and are not recorded in the Condensed Consolidated Balance Sheets.
Most
leases include one or more options to renew, with renewal terms that can extend the lease term up to 20 years (some leases include multiple
renewal periods). The exercise of lease renewal options is at our sole discretion. In addition, some of our lease agreements include
rental payments adjusted periodically for inflation. Our lease agreements neither contain any residual value guarantees nor impose any
significant restrictions or covenants.
The
Company leases properties for its RV retail locations through twelve operating leases. The Company also leases billboards and certain
of its equipment through operating leases. The related right-of-use (“ROU”) assets for these operating leases are included
in operating lease assets.
On
May 19, 2020, the Company entered into a new lease for the property associated with the Korges acquisition. The lease was evaluated as
a finance lease. As a result, a right of use asset was recorded in property and equipment for $4,015 with an offsetting $4,015 financing
liability.
As
of June 30, 2021, the weighted-average remaining lease term and weighted-average discount rate of operating leases was 4.8 years and
5.0%, respectively.
Operating
lease costs for the six month period ended June 30, 2021 was $1,961, including variable lease costs. There were no short term leases
for the six months ended June 30, 2021.
Maturities
of lease liabilities as of June 30, 2021 were as follows:
SCHEDULE OF MATURITIES OF LEASE LIABILITIES
Maturity Date
|
|
|
Operating Leases
|
|
Remaining six months ending December 31, 2021
|
|
|
$
|
2,009
|
|
2022
|
|
|
|
3,792
|
|
2023
|
|
|
|
3,589
|
|
2024
|
|
|
|
2,699
|
|
2025
|
|
|
|
1,979
|
|
Thereafter
|
|
|
|
2,181
|
|
Total
lease payments
|
|
|
|
16,249
|
|
Less: Imputed Interest
|
|
|
|
1,881
|
|
Present
value of lease liabilities
|
|
|
$
|
14,368
|
|
The
following presents supplemental cash flow information related to leases during 2021:
SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION RELATED TO LEASES
|
|
For the six
months ended
June 30, 2021
|
|
|
|
Cash paid for amounts included in the measurement of lease liability:
|
|
|
|
|
Operating cash flows for operating leases
|
|
$
|
1,961
|
|
|
|
|
|
|
ROU assets obtained in exchange for lease liabilities:
|
|
|
|
|
Operating leases
|
|
$
|
656
|
|
Finance lease
|
|
$
|
24
|
|
ROU assets obtained in
exchange for lease liabilities
|
|
$
|
680
|
|
On
March 10, 2020, the Company entered into an agreement for the sale of land to LD Murfreesboro TN Landlord, LLC (“LDMTL”)
for $4,921. The Company has entered into a lease agreement with LDMTL with lease payments to commence upon granting of a certificate
of occupancy and completion of planned construction, the cost of which was be paid for by LDMTL. The commencement date of the lease occurred
at the completion of construction which occurred in late March 2021. The lease has been evaluated in accordance with ASC 842 and determined
to be a failed sale leaseback. As such, it has been recorded as a finance lease and classified as financing liability in the Condensed
Consolidated Balance Sheets. Lease payments began in April 2021.
On
June 22, 2021, the Company entered into an agreement for the sale of property to CARS-DB13, LLC (“CARS”) for $4.8 million.
The Company has entered into a lease agreement with CARS with lease payments commencing on June 22, 2021. The lease has been evaluated
in accordance with ASC 842 and determined to be a failed sale leaseback. As such, it has been recorded as a finance lease and classified
as financing liability in the Condensed Consolidated Balance Sheets.
NOTE
7 – DEBT
M&T
Financing Agreement
On
March 15, 2018, the Company terminated and replaced the Bank of America (“BOA”) credit facility with a $200,000 Senior Secured
Credit Facility with M&T Bank (the “M&T Facility”). The M&T Facility includes a Floor Plan Facility (the “M&T
Floor Plan Line of Credit”), a Term Loan (the “M&T Term Loan”) and a Revolving Credit Facility (the “M&T
Revolver”). The M&T Facility was originally due to mature on March 15, 2021. On February 13, 2021, the Company signed an agreement
with M&T to extend the maturity date to June 15, 2021. On June 14, 2021, an additional agreement was signed to extend the maturity
date to September 15, 2021. The M&T Facility requires the Company to meet certain financial and other covenants and is secured by
substantially all the assets of the Company. The costs of the M&T Facility were recorded as a debt discount.
On
March 6, 2020, the Company entered into the Third Amendment and Joinder to Credit Agreement (the “Third Amendment”) on the
M&T Facility. Pursuant to the Third Amendment, Lone Star Land of Houston, LLC (the “Mortgage Loan Borrower”) and Lone
Star Diversified, LLC (“Diversified”), wholly owned subsidiaries of LDRV Holdings Corp., became parties to the Credit Agreement
and were identified as Additional Loan Parties. The existing borrowers and guarantors also requested that the lenders provide a mortgage
loan credit facility in the aggregate principal amount of acquisition, construction and permanent mortgage financing for a property acquired
by the Mortgage Loan Borrower. The amount borrowed under the mortgage was $6,136. The mortgage shall bear interest at (a) LIBOR plus
an applicable margin of 2.25% or (b) the Base Rate plus a margin of 1.25%. The mortgage requires monthly payments of principal of $0.03
million and was originally due to mature on March 15, 2021. On February 13, 2021, the Company signed an agreement with M&T to extend
the maturity date to June 15, 2021. On June 14, 2021, an additional agreement was signed to extend the maturity date to September 15,
2021. As of June 30, 2021, the mortgage balance was $5,855 and the interest rate was 2.375%.
To
help mitigate the early effects of the COVID-19 pandemic, the Company entered into the Fourth Amendment to the M&T Facility on April
15, 2020 (the “Fourth Amendment”). Pursuant to the Fourth Amendment, the parties agreed to a suspension of scheduled principal
payments on the term loans and mortgage loans (to the extent the permanent loan period has begun for the mortgage loans) for the period
from April 15, 2020 through June 15, 2020. Interest on the outstanding principal balances of the term loans and mortgage loans continued
to accrue and be paid at the applicable interest rate during the deferment period. At the end of the deferment period, the borrowers
resumed making all required payments of principal on the term loans and mortgage loans. All principal payments of the term loans and
mortgage loans deferred during the deferment period are due and payable on the term loan maturity date or the mortgage loan maturity
date, as applicable. Additionally, all principal payments deferred during the deferment period are due and payable (a) as described above
or (b) if earlier, the date all outstanding amounts are otherwise due and payable under the terms of the credit documents (including,
without limitation, upon maturity, acceleration or, to the extent applicable under the credit documents, demand for payment). In addition,
the amendment includes a temporary suspension of scheduled curtailment payments required by the credit agreement for the period from
April 1, 2020 through June 15, 2020. Amounts related to floor plan unused commitment fees and interest on the outstanding principal balance
of the M&T Floor Plan Line of Credit (as defined below) continued to accrue and be paid at the applicable rate and on the terms set
forth in the credit agreement during the suspension period.
As
of June 30, 2021, the payment of dividends by the Company (other than from proceeds of revolving loans) was permitted under the M&T
Facility, so long as at the time of payment of any such dividend, no event of default existed under the M&T Facility, or would result
from the payment of such dividend, and so long as any such dividend was permitted under the M&T Facility. As of June 30, 2021 and
taking into account the effect of the Fourth Amendment to the Credit Agreement entered into on April 15, 2020, the maximum amount of
cash dividends that the Company could make from legally available funds to its stockholders was limited to an aggregate of $49,523 pursuant
to a trailing twelve month calculation as defined in the M&T Facility.
On
July 14, 2021, the Company executed an amended and restated credit agreement with M&T, as a Lender, Administrative Agent, Swingline
Lender, and Issuing Bank, and other financial institutions as Lender parties. The credit agreement evidences an approximately $369.1
million aggregate credit facility, consisting of a $327 million floor plan credit facility, a term loan of approximately $11.3 million,
a $25 million revolving credit and a $5.8 million mortgage loan facility.
Floor
Plan Line of Credit
The
$175,000 M&T Floor Plan Line of Credit may be used to finance new vehicle inventory, but only $45,000 may be used to finance pre-owned
vehicle inventory and $4,500 may be used to finance rental units. Principal becomes due upon the sale of the related vehicle. The M&T
Floor Plan Line of Credit shall accrue interest at either: (a) the fluctuating 30-day LIBOR rate plus an applicable margin which ranges
from 2.00% to 2.30% based upon the Company’s total leverage ratio (as defined in the M&T Facility) or (b) the Base Rate plus
an applicable margin ranging from 1.00% to 1.30% based upon the Company’s total leverage ratio (as defined in the M&T Facility).
The Base Rate is defined in the M&T Facility as the highest of M&T’s prime rate, the Federal Funds rate plus 0.50% or one-month
LIBOR plus 1.00%. In addition, the Company will be charged for unused commitments at a rate of 0.15%. As of June 30, 2021, the interest
rate on the M&T Floor Plan Line of Credit was approximately 2.10425%.
The
M&T Floor Plan Line of Credit consists of the following:
SCHEDULE OF FLOOR PLAN NOTES PAYABLE
|
|
As of
June 30, 2021
|
|
As of
December 31, 2020
|
|
|
(Unaudited)
|
|
|
Floor plan notes payable, gross
|
|
$
|
63,980
|
|
|
$
|
105,486
|
|
Debt discount
|
|
|
(67
|
)
|
|
|
(87
|
)
|
Floor plan notes payable, net of debt discount
|
|
$
|
63,913
|
|
|
$
|
105,399
|
|
Term
Loan
The
$20,000
M&T Term Loan will be repaid in equal monthly principal installments of $242
plus accrued interest through the maturity date. On February 13, 2021, the Company signed an agreement with M&T to extend the
maturity date of the credit facility to June
15, 2021. At the maturity date, the Company must pay a principal balloon payment of $11,300
plus any accrued interest. The M&T Term Loan shall bear interest at: (a) LIBOR plus an applicable margin of 2.25%
to 3.00%
based on the total leverage ratio (as defined in the M&T Facility) or (b) the Base Rate plus a margin of 1.25%
to 2.00%
based on the total leverage ratio (as defined in the M&T Facility). As of June 30, 2021, there was $11,300
outstanding under the M&T Term Loan. As of June 30, 2021, the interest rate on the M&T Term Loan was 2.375%. On July 14, 2021 the Company executed an amended and restated credit agreement as noted above.
Revolver
The
$5,000 M&T Revolver allows the Company to draw up to $5,000. The M&T Revolver bears interest at: (a) 30-day LIBOR plus an applicable
margin of 2.25% to 3.00% based on the total leverage ratio (as defined in the M&T Facility) or (b) the Base Rate plus a margin of
1.25% to 2.00% based on the total leverage ratio (as defined in the M&T Facility). The M&T Revolver is also subject to unused
commitment fees at rates varying from 0.25% to 0.50% based on the total leverage ratio (as defined in the M&T Facility). During the
three and six month periods ended June 30, 2021, there were no outstanding borrowings under the M&T Revolver.
PPP
Loan
In
response to economic uncertainty caused by the COVID-19 pandemic, subsidiaries of the Company took the additional step of applying for
the PPP Loans with M&T Bank (the “Lender”). On April 28, 2020, certain of the Company’s subsidiaries executed promissory
notes (the “Notes”) in favor of the Lender for the PPP Loans in an aggregate amount of $6,831 which mature on April 29, 2022.
Applications were submitted by other subsidiaries of the Company, which resulted in the execution of a promissory note on April 30, 2020
for $1,236 and on May 4, 2020 for $637, which will mature on April 30, 2022 and May 4, 2022, respectively. Pursuant to the promissory
notes evidencing the PPP Loans (the “Notes”), such PPP Loans will bear interest at a rate of 1.0% per year. Commencing six
months after each PPP Loan was disbursed, monthly payments of principal and interest will be required in amounts necessary to fully amortize
the principal amount by the maturity date. The PPP Loans are unsecured and are non-recourse obligations. The Notes provide for customary
events of default, and the PPP Loans may be accelerated upon the occurrence of an event of default. All or a portion of the PPP Loans
may be forgiven upon application to the Lender for payroll and certain other costs incurred during the 8-week period beginning on the
date each PPP Loan is disbursed, in accordance with the requirements and limitations under the CARES Act. As of June 30, 2021, all of
the PPP Loans had a portion forgiven for a total of $6,626.
NOTE
8 – INCOME TAXES
The
Company recorded a provision for federal and state income taxes of $9,496 and $2,536 for the three months ended June 30, 2021 and 2020,
respectively, which represent effective tax rates of approximately 27.3% and 32.3%, respectively. The Company recorded a provision for
federal and state income taxes of $14,973 and $3,836 for the six months ended June 30, 2021 and 2020, respectively, which represent effective
tax rates of 30.5% and 30.6%.
The
Company’s effective tax rates differ from the federal statutory rate of 21% primarily due to local and state income tax rates,
net of the federal tax effect as well as the non-deductibility of stock-based compensation expense and the change in the fair value of
warrants recorded for financial statement purposes.
NOTE
9 - COMMITMENTS AND CONTINGENCIES
Employment
Agreements
The
Company entered into an employment agreement with the Chief Executive Officer (“CEO”) of the Company effective as of the
consummation of the Mergers. The employment agreement with the CEO provides for an initial base salary of $540 subject to annual discretionary
increases. In addition, the CEO is eligible to participate in any employee benefit plans adopted by the Company from time to time and
is eligible to receive an annual cash bonus based on the achievement of performance objectives. The CEO’s target bonus is 100%
of his base salary. The employment agreement also provides that the CEO is to be granted an option to purchase shares of common stock
of the Company (See Note 11 – Stockholders’ Equity).
The
employment agreement provides that if the CEO is terminated for any reason, he is entitled to receive any accrued benefits, including
any earned but unpaid portion of base salary through the date of termination, subject to withholding and other appropriate deductions.
In addition, in the event the CEO resigns for good reason or is terminated without cause (all as defined in the employment agreement)
prior to January 1, 2022, subject to entering into a release, the Company will pay the CEO severance equal to two times the base salary
in effect immediately prior to the date of termination and the average of the annual bonus actually paid to the CEO in each of the three
years immediately preceding the year in which the date of termination occurs.
During
May 2018, the Company entered into an offer letter with the Chief Financial Officer (the “CFO”) of the Company. The offer
letter provides for an initial base salary of $325 per year subject to annual discretionary increases. In addition, the CFO is eligible
to participate in any employee benefit plans adopted by the Company from time to time and is eligible to receive an annual cash bonus
based on the achievement of performance objectives. The CFO’s target bonus is 75% of his annual base salary (with a potential to
earn a maximum of up to 150% of his target bonus). He was also provided with a relocation allowance of $100, which the CFO would have
been required to repay if he had resigned from the Company or had been terminated by the Company for cause within two years of his start
date. If he is terminated without cause, he will receive twelve months of his base salary as severance. If he is terminated following
a change in control, he is also eligible to receive a pro-rated bonus, if the Board determines that the performance objectives have been
met. He also was granted an option to purchase shares of common stock of the Company (See Note 11- Stockholders’ Equity).
Director
Compensation
The
Company’s non-employee members of the Board receive annual cash compensation of $50 for serving on the Board, $5 for serving on
a committee of the Board (other than the Chairman of each of the committees) and $10 for serving as the Chairman of any of the committees
of the Board.
Legal
Proceedings
The
Company is a party to multiple legal proceedings that arise in the ordinary course of business. The Company has certain insurance coverage
and rights of indemnification. The Company does not believe that the ultimate resolution of these matters will have a material adverse
effect on the Company’s business, results of operations, financial condition, or cash flows. However, the results of these matters
cannot be predicted with certainty and an unfavorable resolution of one or more of these matters could have a material adverse effect
on the Company’s business, results of operations, financial condition and/or cash flows.
NOTE
10 – PREFERRED STOCK
On
March 15, 2018, the Company consummated a private placement with institutional investors for the sale of convertible preferred stock,
common stock and warrants for an aggregate purchase price of $94,800 (the “PIPE Investment”). At the closing, the Company
issued an aggregate of 600,000 shares of Series A Preferred Stock for gross proceeds of $60,000. The investors in the PIPE Investment
were granted certain registration rights as set forth in the securities purchase agreements. The holders of the Series A Preferred Stock
include 500,000 shares owned by funds managed by a member of the Board.
The
Series A Preferred Stock ranks senior to all outstanding stock of the Company. Holders of the Series A Preferred Stock are entitled to
vote on an as-converted basis together with the holders of the common stock, and not as a separate class, at any annual or special meeting
of stockholders. Each share of Series A Preferred Stock is convertible at the holder’s election at any time, at an initial conversion
price of $10.0625 per share, subject to adjustment (as applicable, the “Conversion Price”). Upon any conversion of the Series
A Preferred Stock, the Company will be required to pay each holder converting shares of Series A Preferred Stock all accrued and unpaid
dividends, in either cash or shares of common stock, at the Company’s option. The Conversion Price will be subject to adjustment
for stock dividends, forward and reverse splits, combinations and similar events, as well as for certain dilutive issuances.
Dividends
on the Series A Preferred Stock accrue at an initial rate of 8% per annum (the “Dividend Rate”), compounded quarterly, on
each $100 of Series A Preferred Stock (the “Issue Price”) and are payable quarterly in arrears. Accrued and unpaid dividends,
until paid in full in cash, will accrue at the then applicable Dividend Rate plus 2%. The Dividend Rate will be increased to 11% per
annum, compounded quarterly, in the event that the Company’s senior indebtedness less unrestricted cash during any trailing twelve-month
period ending at the end of any fiscal quarter is greater than 2.25 times earnings before interest, taxes, depreciation and amortization
(“EBITDA”). The Dividend Rate will be reset to 8% at the end of the first fiscal quarter when the Company’s senior
indebtedness less unrestricted cash during the trailing twelve-month period ending at the end of such quarter is less than 2.25 times
EBITDA.
If
there is a current registration statement in effect, at any time following the second anniversary of the issuance of the Series A Preferred
Stock, the volume weighted average price of the Company’s common stock equals or exceeds $25.00 per share (as adjusted for stock
dividends, splits, combinations and similar events) for a period of thirty consecutive trading days, the Company may elect to force the
conversion of any or all of the outstanding Series A Preferred Stock at the Conversion Price then in effect. From and after the eighth
anniversary of the issuance of the Series A Preferred Stock, the Company may elect to redeem all, but not less than all, of the outstanding
Series A Preferred Stock in cash at the Issue Price plus all accrued and unpaid dividends. From and after the ninth anniversary of the
issuance of the Series A Preferred Stock, each holder of Series A Preferred Stock has the right to require the Company to redeem all
of the holder’s outstanding shares of Series A Preferred Stock in cash at the Issue Price plus all accrued and unpaid dividends.
In
the event of any liquidation, merger, sale, dissolution or winding up of the Company, holders of the Series A Preferred Stock will have
the right to (i) receive payment in cash of the Issue Price plus all accrued and unpaid dividends, or (ii) convert the shares of Series
A Preferred Stock into common stock and participate on an as-converted basis with the holders of common stock.
So
long as the Series A Preferred Stock is outstanding, the holders thereof, by the vote or written consent of the holders of a majority
in voting power of the outstanding Series A Preferred Stock, shall have the right to designate two members to the Board.
In
addition, five-year warrants to purchase 596,273 shares of common stock at an exercise price of $11.50 per share were issued in conjunction
with the issuance of the Series A Preferred Stock. The warrants may be exercised for cash or, at the option of the holder, on a “cashless
basis” pursuant to the exemption provided by Section 3(a)(9) of the Securities Act. The warrants may be called for redemption in
whole and not in part, at a price of $0.01 per share of common stock, if the last reported sales price of the Company’s common
stock equals or exceeds $24.00 per share for any 20 trading days within a 30-day trading period ending on the third business day prior
to the notice of redemption to warrant holders, if there is a current registration statement in effect with respect to the shares underlying
the warrants.
The
Series A Preferred Stock, while convertible into common stock, is also redeemable at the holder’s option and, as a result, is classified
as temporary equity in the condensed consolidated balance sheets. An analysis of its features determined that the Series A Preferred
Stock was more akin to equity. While the embedded conversion option (“ECO”) was subject to an anti-dilution price adjustment,
since the ECO was clearly and closely related to the equity host, it was not required to be bifurcated and it was not accounted for as
a derivative liability under ASC 815, Derivatives and Hedging.
After
factoring in the relative fair value of the warrants issued in conjunction with the Series A Preferred Stock, the effective conversion
price is $9.72 per share, compared to the market price of $10.29 per share on the date of issuance. As a result, a $3,392 beneficial
conversion feature was recorded as a deemed dividend in the condensed consolidated statement of income because the Series A Preferred
Stock is immediately convertible, with a credit to additional paid-in capital. The relative fair value of the warrants issued with the
Series A Preferred Stock of $2,035 was recorded as a reduction to the carrying amount of the preferred stock in the condensed consolidated
balance sheet. In addition, aggregate offering costs of $2,981 consisting of cash and the value of five-year warrants to purchase 178,882
shares of common stock at an exercise price of $11.50 per share issued to the placement agent were recorded as a reduction to the carrying
amount of the preferred stock. The $632 value of the warrants was determined utilizing the Black-Scholes option pricing model using a
term of 5 years, a volatility of 39%, a risk-free interest rate of 2.61% and a 0% rate of dividends.
The
discount associated with the Series A Preferred Stock was not accreted during the three or six month periods ended June 30, 2021 because
redemption was not currently deemed to be probable.
The
Board declared a dividend payment on the Series A Preferred Stock of $1,197 for the three months ended June 30, 2021 which is included
in dividends payable in the accompanying condensed consolidated balance sheet. The dividend was paid on July 1, 2021 to the holders.
NOTE
11 – STOCKHOLDERS’ EQUITY
Authorized
Capital
The
Company is authorized to issue 100,000,000 shares of common stock, $0.0001 par value, and 5,000,000 shares of preferred stock, $0.0001
par value. The holders of the Company’s common stock are entitled to one vote per share. The holders of Series A Preferred Stock
are entitled to the number of votes equal to the number of shares of common stock into which the holder’s shares are convertible.
These holders of Series A Preferred Stock also participate in dividends if they are declared by the Board. See Note 10 – Preferred
Stock, for additional information associated with the Series A Preferred Stock.
2018
Long-Term Incentive Equity Plan
On
March 15, 2018, the Company adopted the 2018 Long-Term Incentive Equity Plan (the “2018 Plan”). The 2018 Plan reserves up
to 13% of the shares of common stock outstanding on a fully diluted basis. The 2018 Plan is administered by the Compensation Committee
of the Board, and provides for awards of options, stock appreciation rights, restricted stock, restricted stock units, warrants or other
securities which may be convertible, exercisable or exchangeable for or into common stock. Due to the fact that the fair market value
per share immediately following the closing of the Mergers was greater than $8.75 per share, the number of shares authorized for awards
under the 2018 Plan was increased by a formula (as defined in the 2018 Plan) not to exceed 18% of shares of common stock then outstanding
on a fully diluted basis. On May 20, 2019, the Company’s stockholders approved the adoption of the Lazydays Holdings, Inc. Amended
and Restated 2018 Long Term Incentive Plan (the “Incentive Plan”). The Incentive Plan amends and restates the previously
adopted 2018 Plan in order to replenish the pool of shares of common stock available under the Incentive Plan by adding an additional
600,000 shares of common stock and making certain changes in light of the Tax Cuts and Jobs Act and its impact on Section 162(m) of the
Internal Revenue Code of 1986, as amended. As of June 30, 2021, there were 279,557 shares of common stock available to be issued under
the Incentive Plan.
2019
Employee Stock Purchase Plan
On
May 20, 2019, the Company’s stockholders approved the 2019 Employee Stock Purchase Plan (the “ESPP”). The ESPP reserved
900,000 shares of common stock for purchase by participants in the ESPP. Participants in the plan may purchase shares of common stock
at a purchase price which will not be less than the lesser of 85% of the fair market value per share of the common on the first day of
the purchase period or the last day of the purchase period. The initial offering and purchase period under the ESPP commenced on July
7, 2019 with the first purchase date to be December 2, 2019. During the three and six month periods ended June 30, 2021, the Company
recorded $104 and $206, respectively, of stock based compensation related to the ESPP.
Warrants
The
Company had the following activity related to shares of common stock underlying warrants:
SCHEDULE OF WARRANTS ACTIVITY
|
|
Shares Underlying Warrants
|
|
Weighted Average
Exercise Price
|
Warrants outstanding January 1, 2021
|
|
|
4,632,087
|
|
|
$
|
11.50
|
|
Granted
|
|
|
—
|
|
|
$
|
—
|
|
Cancelled or Expired
|
|
|
—
|
|
|
$
|
—
|
|
Exercised
|
|
|
(1,127,258
|
)
|
|
$
|
—
|
|
Warrants outstanding June 30, 2021
|
|
|
3,504,829
|
|
|
$
|
11.50
|
|
The
table above excludes perpetual non-redeemable prefunded warrants to purchase 300,357 shares of common stock with an exercise price of
$0.01 per share.
On
March 17, 2021, two institutional investors exercised warrants issued in the PIPE Investment with respect to an aggregate of 1,005,308
shares of our common stock for cash, resulting in the issuance of 1,005,308 shares of common stock and gross proceeds to the Company
of $11,315,250 pursuant to agreements executed with the Company. The above issuances were exempt from registration under the Securities
Act of 1933, as amended (the “Securities Act”) pursuant to Section 4(a)(2) of such act, and Rule 506(b) thereunder, as issuances
made in a private placement to accredited investors. The Company recorded an inducement loss on warrant conversion of $246 related to
these warrant exercises.
The
Company accounts for its warrants in the following ways: (i) the public warrants (“Public Warrants”) as equity for all periods
presented; (ii) the private placement warrants (“Private Warrants”) as liabilities for all periods presented; and (iii) the
warrants issued in connection with the Private Investment in Public Equity (“PIPE”) transaction (“PIPE Warrants”)
as liabilities for all periods presented. The Company determined the following fair values for the outstanding common stock warrants
recorded as liabilities:
SCHEDULE OF FAIR VALUES FOR OUTSTANDING WARRANTS LIABILITIES
|
|
|
|
|
December 31, 2020
|
|
|
|
June 30, 2021
|
|
|
(Restated)
|
|
PIPE Warrants
|
|
$
|
15,525
|
|
|
$
|
13,716
|
|
Private Warrants
|
|
|
2,127
|
|
|
|
1,380
|
|
Total warrant liabilties
|
|
$
|
17,652
|
|
|
$
|
15,096
|
|
Stock
Options
Stock
option activity is summarized below:
SCHEDULE OF STOCK OPTION ACTIVITY
|
|
Shares Underlying Options
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining Contractual Life
|
|
|
Aggregate Intrinsic Value
|
|
Options outstanding at January 1, 2021
|
|
|
4,063,362
|
|
|
$
|
10.60
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
20,000
|
|
|
$
|
23.11
|
|
|
|
|
|
|
|
|
|
Cancelled or terminated
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(71,196
|
)
|
|
$
|
9.88
|
|
|
|
|
|
|
|
|
|
Options outstanding at June 30, 2021
|
|
|
4,012,166
|
|
|
$
|
10.69
|
|
|
|
2.17
|
|
|
$
|
45,389
|
|
Options vested at June 30, 2021
|
|
|
1,851,039
|
|
|
$
|
10.95
|
|
|
|
1.85
|
|
|
$
|
32,922
|
|
Awards
with Market Conditions
On
March 16, 2018, the Company granted five-year incentive stock options to purchase an aggregate of 3,573,113 shares of common stock at
an exercise price of $11.10 per share to employees pursuant to the 2018 Plan, including 1,458,414 shares of common stock underlying the
CEO’s stock options and 583,366 shares of common stock underlying the former CFO’s stock options. A set percentage of the
stock options shall vest upon the volume weighted average price (“VWAP”) of the common stock, as defined in the option agreements,
being equal to or greater than a specified price per share for at least 30 out of 35 consecutive trading days, as follows and are exercisable
only to the extent that they are vested: 30% of the options shall vest upon the VWAP exceeding $13.125 per share; an additional 30% of
the options shall vest upon the VWAP exceeding $17.50 per share; an additional 30% of the options shall vest upon the VWAP exceeding
$21.875 per share; and an additional 10% of the options shall vest upon exceeding $35.00 per share; provided that the option holder remains
continuously employed by the Company (and/or any of its subsidiaries) from the grant date through (and including) the relevant date of
vesting. On May 7, 2018, the Company hired a new CFO who received a stock option award exercisable for 583,366 shares of common stock
under the same terms as the former CFO. On June 15, 2018, the former CFO forfeited her existing 583,366 options.
The
fair value of the awards issued on March 16, 2018 of $15,004 was determined using a Monte Carlo simulation based on a 5-year term, a
risk-free rate of 2.62%, an annual dividend yield of 0% and an annual volatility of 42.8%. The expense is being recognized over the derived
service period of each vesting tranche which was determined to be 0.74 years, 1.64 years, 2.24 years and 3.13 years.
The
fair value of the awards issued on May 7, 2018 of $2,357 was determined using a Monte Carlo simulation based on a 5- year term, a risk-free
rate of 2.74%, an annual volatility of 54.70% and an annual dividend yield of 0%. The expense is being recognized over the derived service
period of each vesting tranche which was determined to be 0.97 years, 1.75 years, 2.15 years and 2.96 years.
The
expense recorded for awards with market conditions was $22 and $96 during the three and six month periods ended June 30, 2021, and $220
and $774 during the three and six month periods ended June 30, 2020, which is included in stock-based compensation in the condensed consolidated
statements of income.
Awards
with Service Conditions
During
the year ended December 31, 2020, stock options to purchase 530,000
shares of common stock were issued to employees
and board members. The options have an exercise price of $7.91, $8.50 or $14.68. The options had a five
year life and a four
year vesting period. The fair value of the awards
of $1,915
was determined using the Black-Scholes option
pricing model based on a 3.50-3.75
year expected life, a risk free rate of 0.25%-0.43%,
an annual dividend yield of 0%
and an annual volatility of 55%-73%.
During
the six months ended June 30, 2021, stock options to purchase 20,000 shares of common stock were issued to board members. The options
have an exercise price of $23.11. The options have a five year life and a three year vesting period. The fair value of the awards of
$257 was determined using the Black-Scholes option pricing model. The fair values for the 2021 and 2020 options was based on the following
range of assumptions:
SCHEDULE OF FAIR VALUE ASSUMPTIONS OF AWARDS
|
|
For the six months
ended June 30, 2021
|
|
Risk free interest rate
|
|
|
0.77
|
%
|
Expected term (years)
|
|
|
3.5
|
|
Expected volatility
|
|
|
81
|
%
|
Expected dividends
|
|
|
0.00
|
%
|
The
expected life was determined using the simplified method as the awards were determined to be plain-vanilla options.
The
expense recorded for awards with service conditions was $185 and $381 for the three and six month periods ended June 30, 2021, and $91
and $179 for the three and six month periods ended June 30, 2020, which is included in stock-based compensation in the condensed consolidated
statements of income.
As
of June 30, 2021, total unrecorded compensation cost related to all non-vested awards was $1,993 which is expected to be amortized over
a weighted average service period of approximately 2.59 years.
NOTE
12 – FAIR VALUE MEASURES
The
fair value of financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale.
The
Company utilizes the suggested accounting guidance for the three levels of inputs that may be used to measure fair value:
|
Level
1 -
|
Observable
inputs such as quoted prices in active markets for identical assets or liabilities;
|
|
Level
2 -
|
Observable
inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and
|
|
Level
3 -
|
Unobservable
inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions
|
The
Company has assessed that the fair value of cash and cash equivalents, trade receivables, trade payables, and other current liabilities
approximate their carrying amounts.
The
Public Warrants trade in active markets. When classified as liabilities, warrants traded in active markets with sufficient trading volume
represent Level 1 financial instruments as they are publicly traded in active markets and thus have observable market prices which are
used to estimate the fair value adjustments for the related common stock warrant liabilities. When classified as liabilities, warrants
not traded in active markets, or traded with insufficient volume, represent Level 3 financial instruments that are valued using a Black-Scholes
option-pricing model to estimate the fair value adjustments for the related common stock warrant liabilities.
Warrant
Liabilities:
The
PIPE Warrants are considered a Level 1 measurement, since they are similar to the Public Warrants which trade under the symbol LAZYW
and thus have observable market prices which were used to estimate the fair value adjustments for the PIPE Warrants liabilities. The
Private Warrants are considered a Level 3 measurement and were valued using a Black-Scholes Valuation Model to estimate the fair value
adjustments for the Private Warrants liabilities.
SCHEDULE OF FAIR VALUE ADJUSTMENTS FOR THE PRIVATE WARRANTS LIABILITIES
|
|
|
|
|
December 31. 2020
|
|
|
|
June 30, 2021
|
|
|
(Restated)
|
|
|
|
Carrying Amount
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Carrying Amount
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PIPE Warrants
|
|
$
|
15,525
|
|
|
$
|
15,525
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
13,716
|
|
|
$
|
13,716
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Private Warrants
|
|
|
2,127
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,127
|
|
|
|
1,380
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,380
|
|
Total
|
|
$
|
17,652
|
|
|
$
|
15,525
|
|
|
$
|
-
|
|
|
$
|
2,127
|
|
|
$
|
15,096
|
|
|
$
|
13,716
|
|
|
$
|
-
|
|
|
$
|
1,380
|
|
Level
3 Disclosures
The
Company utilizes a Black Scholes option-pricing model to value the Private Warrants at each reporting period and transaction date, with
changes in fair value recognized in the statements of income. The estimated fair value of the warrant liabilities is determined using
Level 3 inputs. Inherent in the pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest
rate and dividend yield. The Company estimates the volatility of its ordinary shares based on historical volatility that matches the
expected remaining life of the warrants. The risk-free interest rate is based on the continuously compounded interest rate on U.S. Treasury
Separate Trading of Registered Interest and Principal of Securities having a maturity similar to the contractual life of the warrants.
The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the
historical rate, which the Company anticipates to remain at zero.
The
following table provides quantitative information regarding Level 3 fair value measurements:
SCHEDULE OF FAIR VALUE MEASUREMENTS
|
|
|
|
|
December 31. 2020
|
|
|
|
June 30, 2021
|
|
|
(Restated)
|
|
Stock Price
|
|
$
|
22.00
|
|
|
$
|
16.25
|
|
Strike Price
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
Expected life
|
|
|
1.71
|
|
|
|
2.20
|
|
Volatility
|
|
|
91.3
|
%
|
|
|
81.2
|
%
|
Risk Free rate
|
|
|
0.20
|
%
|
|
|
0.14
|
%
|
Dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Fair value of warrants
|
|
$
|
6.86
|
|
|
$
|
4.45
|
|
The
following table presents changes in Level 3 liabilities measured at fair value for the six months ended June 30, 2021:
SCHEDULE OF FAIR VALUE MEASURED LIABILITIES
|
|
PIPE Warrants
|
|
|
Private Warrants
|
|
Balance at December 31, 2020 (restated)
|
|
$
|
13,717
|
|
|
$
|
1,380
|
|
Exercise or conversion
|
|
|
(10,697
|
)
|
|
|
-
|
|
Measurement adjustment
|
|
|
12,505
|
|
|
|
747
|
|
Balance at June 30, 2021
|
|
$
|
15,525
|
|
|
$
|
2,127
|
|