x
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE
ACT OF 1934
|
FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2007
|
|||
OR
|
o
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE
ACT OF 1934
|
|||
COMMISSION
FILE NUMBER: 000-27707
|
|||
NEXCEN
BRANDS, INC.
|
|||
(EXACT
NAME OF REGISTRANT AS SPECIFIED IN ITS
CHARTER)
|
DELAWARE
|
20-2783217
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(IRS
Employer
Identification
Number)
|
1330
Avenue of the Americas, New York, N.Y.
|
10019-5400
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(Registrant’s
telephone number, including area code): (212)
277-1100
|
|||
SECURITIES
REGISTERED PURSUANT TO SECTION 12(b) OF THE
ACT:
|
Title
of Each Class
|
Name
of Each Exchange on Which Registered
|
|||
Common
Stock, par value $.01
|
The
NASDAQ Stock Market LLC
|
SECURITIES
REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
|
Indicate
by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.
|
Yes o
No x
|
Indicate
by check mark if the registrant is not required to file reports
pursuant
to Section 13 or Section 15(d) of the Act.
|
Yes o
No x
|
Large
accelerated filer
|
o
|
Accelerated
filer
|
x
|
Non-accelerated
filer
|
o
|
PART
I
|
3
|
|||
Item
1
|
Business
|
3
|
||
Item
1A
|
Risk
Factors
|
11
|
||
Item
1B
|
Unresolved
Staff Comments
|
18
|
||
Item
2
|
Properties
|
18
|
||
Item
3
|
Legal
Proceedings
|
19
|
||
Item
4
|
Submission
of Matters to a Vote of Security Holders
|
20
|
||
|
||||
PART
II
|
20
|
|||
|
||||
Item
5
|
Market
for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
20
|
||
Item
6
|
Selected
Financial Data
|
23
|
||
Item
7
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
25
|
||
Item
7A
|
Quantitative
and Qualitative Disclosures About Market Risk
|
34
|
||
Item
8
|
Financial
Statements and Supplementary Data
|
35
|
||
Item
9
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
74
|
||
Item
9A
|
Controls
and Procedures
|
74
|
||
Item
9B
|
Other
Information
|
77
|
||
|
||||
PART
III
|
77
|
|||
|
||||
Item
10
|
Directors,
Executive Officers and Corporate Governance
|
77
|
||
Item
11
|
Executive
Compensation
|
77
|
||
Item
12
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
77
|
||
Item
13
|
Certain
Relationships and Related Transactions, and Director
Independence
|
77
|
||
Item
14
|
Principal
Accounting Fees and Services
|
77
|
||
|
||||
PART
IV
|
78
|
|||
|
||||
Item
15
|
Exhibits,
Financial Statement Schedules
|
78
|
·
|
across
industries, ranging from apparel, footwear and sporting goods to
QSR and
retail franchising;
|
·
|
across
channels of distribution, ranging from luxury to
mass-market;
|
·
|
across
consumer demand categories, ranging from luxury to
mass-market;
|
·
|
across
licensees and franchisees, ranging from large licensees to individual
franchisees;
|
·
|
across
geographies (both within the United States and internationally);
and
|
·
|
across
multiple demographic groups.
|
·
|
our
businesses can grow both domestically and internationally through
organic,
and synergistic growth;
|
·
|
our
businesses can grow organically by expanding and extending owned
brands
into new product categories and retail channels, increasing brand
awareness and executing new licenses or selling new
franchises;
|
·
|
we
can grow through acquisition by acquiring new brands or additional
franchise systems; and
|
·
|
our
business can grow synergistically by leveraging our three operating
segments.
|
·
|
overpaying
for acquired assets or businesses;
|
·
|
being
unable to license, market or otherwise exploit IP that we acquire
on
anticipated terms or at all;
|
·
|
negative
effects on reported results of operations from acquisition-related
expenses, amortization or impairment of acquired intangibles and
impairment of goodwill;
|
·
|
diversion
of management's attention from management of day-to-day operational
issues;
|
·
|
failing
to maintain focus on, or ceasing to execute, core strategies and
business
plans as our brand portfolio grows and becomes more
diversified;
|
·
|
failing
to achieve synergies across our diverse brand
portfolio;
|
·
|
failing
to acquire or hire additional successful managers, or being unable
to
retain critical acquired managers;
|
·
|
potential
adverse effects of a new acquisition on an existing business or business
relationship;
|
·
|
failing
to integrate acquired businesses with our existing businesses due
to
unanticipated costs and difficulties, which may disrupt our existing
businesses or delay or diminish our ability to realize financial
and
operational benefits from those acquisitions;
and
|
·
|
underlying
risks of the businesses that we acquire, which may differ from one
acquisition to the next, including those related to entering new
lines of
business or markets in which we have little or no prior
experience.
|
·
|
Products
using our IP are generally manufactured by third party licensees,
either
directly or through third-party manufacturers on a subcontract basis.
All
manufacturers have limited production capacity, and the ones with
whom we
work (directly or indirectly) may not, in all instances, be able
to
satisfy manufacturing requirements for our (and our licensees’)
products.
|
·
|
We
provide limited training and support to franchisees. Consequently,
franchisees may not successfully operate their businesses in a manner
consistent with our standards and requirements, or may not hire and
train
qualified managers and other store
personnel.
|
·
|
While
we will try to ensure that our licensees and other business partners
maintain a high quality of products and services that use our IP,
they may
take actions that adversely affect the value of our IP or our business
reputation.
|
·
|
Political
and economic instability or civil unrest;
|
·
|
Armed
conflict, natural disasters or terrorism;
|
·
|
Health
concerns or similar issues, such as a pandemic or epidemic;
|
·
|
Multiple
foreign regulatory requirements that are subject to change and that
differ
between jurisdictions;
|
·
|
Changes
in trade protection laws, policies and measures, and other regulatory
requirements effecting trade and investment;
|
·
|
Differences
from one country to the next in legal protections applicable to IP
assets,
including trademarks and similar assets, enforcement of such protections
and remedies available for infringements;
|
·
|
Fluctuations
in foreign currency exchange rates and interest rates; and
|
·
|
Adverse
consequences from changes in tax
laws.
|
2007
|
2006
|
||||||||||||
QUARTER
ENDED
|
HIGH
|
|
LOW
|
|
HIGH
|
|
LOW
|
||||||
March 31
|
$
|
11.04
|
$
|
7.42
|
$
|
3.85
|
$
|
3.13
|
|||||
June 30
|
$
|
12.98
|
$
|
9.98
|
$
|
5.50
|
$
|
3.75
|
|||||
September 30
|
$
|
11.41
|
$
|
5.56
|
$
|
6.33
|
$
|
5.54
|
|||||
December 31
|
$
|
7.37
|
$
|
3.89
|
$
|
7.42
|
$
|
5.71
|
Plan
Category
|
Plan
Name
|
Number
of
securities
to
be
issued upon
exercise
of
outstanding
options,
and
restricted
stock
|
Weighted-average
exercise
price of
outstanding
options,
and
restricted stock
|
Number
of
securities
remaining
available
for
future
issuance
under
equity
compensation
plans
|
|||||||||
Equity
compensation plans approved by security holders
|
1999
Equity
Incentive
Plan
|
3,964,064
|
$
|
4.40
|
—
|
||||||||
2006
Equity
Incentive
Plan
|
1,973,666
|
$
|
7.34
|
1,526,334
|
|||||||||
Equity
compensation plans not approved by security holders
|
Acquisition
Incentive
Plan
|
89,127
|
$
|
2.71
|
—
|
||||||||
Total
|
6,026,857
|
$
|
5.34
|
1,526,334
|
Period |
Total
Number
of
Shares
Purchased
|
Average
Price
Paid
for Shares
|
Total
Number
of
Shares
Purchased
as
Part
of Publicly
Announced
Plans
or
Programs
|
Maximum
Number
of
Shares that
May
Yet Be
Purchased
Under
the
Plans and
Programs
|
|||||||||
January
1 - January 31, 2007
|
-
|
-
|
-
|
-
|
|||||||||
February
1 - February 28, 2007
|
-
|
-
|
-
|
-
|
|||||||||
March
1 - March 31, 2007
|
-
|
-
|
-
|
-
|
|||||||||
April
1 - April 30, 2007
|
-
|
-
|
-
|
-
|
|||||||||
May
1 - May 31, 2007
|
-
|
-
|
-
|
-
|
|||||||||
June
1 - June 30, 2007
|
4,000
|
$
|
3.75
|
-
|
-
|
||||||||
July
1 - July 31, 2007
|
-
|
-
|
-
|
-
|
|||||||||
August
1 - August 31, 2007
|
-
|
-
|
-
|
-
|
|||||||||
September
1 - September 30, 2007
|
-
|
-
|
-
|
-
|
|||||||||
October
1 - October 31, 2007
|
-
|
-
|
-
|
-
|
|||||||||
November
1 - November 30, 2007
|
-
|
-
|
-
|
-
|
|||||||||
December
1 - December 31, 2007
|
2,000
|
$
|
3.75
|
-
|
-
|
||||||||
Total
|
6,000
|
$
|
3.75
|
-
|
-
|
YEAR
ENDED DECEMBER 31,
|
||||||||||||||||
2007
|
2006
|
2005
|
2004
|
2003
|
||||||||||||
(IN
THOUSANDS, EXCEPT PER SHARE AMOUNTS)
|
||||||||||||||||
CONSOLIDATED
STATEMENT OF OPERATIONS DATA:
|
||||||||||||||||
Royalty
revenues
|
$
|
15,289
|
$
|
1,175
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||
Franchise
fee revenues
|
3,464
|
749
|
—
|
—
|
—
|
|||||||||||
Licensing
revenues
|
15,542
|
—
|
—
|
—
|
—
|
|||||||||||
Total
revenues
|
34,295
|
1,924
|
—
|
—
|
—
|
|||||||||||
Total
operating expenses
|
(32,105
|
)
|
(10,413
|
)
|
(5,241
|
)
|
(14,643
|
)
|
(21,796
|
)
|
||||||
Operating
income (loss)
|
2,190
|
(8,489
|
)
|
(5,241
|
)
|
(14,643
|
)
|
(21,796
|
)
|
|||||||
Total
non-operating income (loss)
|
(2,950
|
)
|
3,337
|
1,690
|
(10,000
|
)
|
(3,900
|
)
|
||||||||
Loss
from continuing operations before taxes
|
(760
|
)
|
(5,152
|
)
|
(3,551
|
)
|
(24,643
|
)
|
(25,696
|
)
|
||||||
Income
taxes:
|
—
|
—
|
||||||||||||||
Current
|
(236
|
)
|
(81
|
)
|
—
|
—
|
—
|
|||||||||
Deferred
|
(3,067
|
)
|
—
|
—
|
—
|
—
|
||||||||||
Loss
from continuing operations
|
(4,063
|
)
|
(5,233
|
)
|
(3,551
|
)
|
(24,643
|
)
|
(25,696
|
)
|
||||||
Income
(loss) from discontinued operations, net of tax expense of $64 and
$75 for 2006 and 2003, respectively
|
(586
|
)
|
2,358
|
225
|
(44,510
|
)
|
(23,756
|
)
|
||||||||
Gain
(loss) on sale of discontinued operations
|
—
|
755
|
(1,194
|
)
|
20,825
|
—
|
||||||||||
Net
loss
|
$
|
(4,649
|
)
|
$
|
(2,120
|
)
|
$
|
(4,520
|
)
|
$
|
(48,328
|
)
|
$
|
(49,452
|
)
|
|
Loss
per share (basic and diluted) from continuing operations
|
$
|
(0.08
|
)
|
$
|
(0.11
|
)
|
$
|
(0.08
|
)
|
$
|
(0.57
|
)
|
$
|
(0.60
|
)
|
|
Income
(loss) per share (basic and diluted) from discontinued
operations
|
(0.01
|
)
|
0.07
|
|
(0.02
|
)
|
(0.54
|
)
|
(0.56
|
)
|
||||||
Net
loss per share - basic and diluted
|
$
|
(0.09
|
)
|
$
|
(0.04
|
)
|
$
|
(0.10
|
)
|
$
|
(1.11
|
)
|
$
|
(1.16
|
)
|
|
Weighted
average shares outstanding - basic
and diluted
|
51,889
|
45,636
|
44,006
|
43,713
|
42,616
|
|||||||||||
CONSOLIDATED
BALANCE SHEET DATA:
|
||||||||||||||||
Cash
and cash equivalents (including restricted cash of $7 and $1 million
in 2007 and 2006, respectively)
|
$
|
53,275
|
$
|
84,834
|
$
|
9,725
|
$
|
69,555
|
$
|
39,682
|
||||||
Investments
available for sale - discontinued operations
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
220,849
|
||||||
Trademarks
and goodwill
|
$
|
278,048
|
$
|
64,607
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||
Mortgage-backed
securities, at fair value, discontinued operations
|
$
|
—
|
$
|
—
|
$
|
253,900
|
$
|
62,184
|
$
|
—
|
||||||
Total
assets
|
$
|
359,207
|
$
|
158,385
|
$
|
266,008
|
$
|
136,586
|
$
|
398,105
|
||||||
Repurchase
agreements related to discontinued operations
|
$
|
—
|
$
|
—
|
$
|
133,924
|
$
|
—
|
$
|
—
|
||||||
Total
debt
|
$
|
109,578
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
154,942
|
||||||
Stockholders’
equity
|
$
|
192,813
|
$
|
146,613
|
$
|
126,387
|
$
|
130,590
|
$
|
179,301
|
|
·
|
Bill
Blass (acquired February 15, 2007)
|
· | Waverly (acquired May 2, 2007) |
|
·
|
The
Athlete’s Foot (acquired November 7,
2006)
|
|
·
|
Shoebox
(acquired January 15, 2008)
|
·
|
MaggieMoo’s
(acquired February 28, 2007)
|
|
·
|
Marble
Slab (acquired February 28, 2007)
|
|
·
|
Pretzel
Time (acquired August 7, 2007)
|
|
·
|
Pretzelmaker
(acquired August 7, 2007)
|
|
·
|
Great
American Cookies (acquired January 29,
2008)
|
|
·
|
Comparisons
to prior periods are not yet meaningful, because we did not initiate
our
current business strategy until the second half of 2006 and did not
begin
to earn royalties or license and franchise fees until halfway through
the
fourth quarter of 2006, when we acquired The Athlete’s
Foot.
|
|
·
|
Of
the seven IP brands we owned and operated as of December 31, 2007,
we
owned only one -- The Athlete’s Foot -- for the entire year of 2007. Our
results through December 31, 2007 include Bill Blass for ten and
one half
months, MaggieMoo’s and Marble Slab for ten months, Waverly for
approximately eight months, and Pretzel Time and Pretzelmaker for
approximately five months. In addition, MaggieMoo’s and Marble Slab’s,
Pretzel Time, and Pretzelmaker, revenue streams are subject to wide
seasonal fluctuations. Consequently, our annual results are not indicative
of what we expect our results to be in future
periods.
|
·
|
If
we continue to acquire IP-centric businesses (as we expect to do),
future
period results will continue to change due to the inclusion of such
additional businesses. Accordingly, period-to-period fluctuations
may
continue to be significant. However, as we own a group of businesses
for a
longer period, we expect to be able to evaluate changes in our results
from those businesses owned for multiple periods (isolating the effect
on
our results of newly acquired
businesses).
|
· |
Valuation
of deferred tax assets - We have deferred tax assets as a result
of years
of accumulated tax loss carry forwards. Management is developing
plans to
achieve profitable operations in future years that may enable us
to
recover the benefit of our deferred tax assets. We presently do not
have
sufficient objective evidence to support management’s belief and,
accordingly, we maintain a full valuation allowance for our net deferred
tax assets as required by U.S. generally accepted accounting
principles.
|
·
|
Valuation
of trademarks, goodwill and intangible assets - Trademarks represent
the
present value of future royalty income associated with the ownership
of
each trademark. The Company expects its trademarks to contribute
to cash
flows indefinitely, and therefore will not amortize any trademarks
unless
their useful life is no longer deemed indefinite. Goodwill represents
the
excess of the acquisition cost over the fair value of the net assets
acquired and is not amortized. Goodwill is evaluated for impairment
annually, or more frequently as required in accordance with SFAS
No. 142
“Goodwill and Other Intangible Assets.” Intangible assets with estimable
useful lives are amortized over their respective estimated useful
lives
and are reviewed for impairment in accordance with SFAS No. 144
“Accounting for Impairment or Disposal of Long-Lived Assets.” We will
evaluate the fair value of trademarks and goodwill to assess potential
impairments on an annual basis, or more frequently if events or other
circumstances indicate that we may not be able to recover the carrying
amount of the asset. We will evaluate the fair value of trademarks
and
goodwill at the reporting unit level and make that determination
based upon future cash flow projections. Assumptions to be used in
these
projections, such as forecasted growth rates, cost of capital and
multiples to determine the terminal value of the reporting units,
will be
consistent with internal projections and operating plans. We will
record
an impairment loss when the implied fair value of the trademarks
and
goodwill assigned to the reporting unit is less than the carrying
value of the reporting unit, including trademarks and goodwill. In
accordance with SFAS No. 144, “Accounting for the Impairment or Disposal
of Long-Lived Assets,” whenever events or changes in circumstances
indicate that the carrying values of long-lived assets (which include
our
intangible assets with determinable useful lives) may be impaired,
we will
perform an analysis to determine the recoverability of the asset’s
carrying value. These events or circumstances may include, but are
not
limited to; projected cash flows which are significantly less than
the
most recent historical cash flows; a significant loss of management
contracts without a realistic expectation of a replacement; and economic
events which could cause significant adverse changes and uncertainty
in
business patterns. In our analysis, to determine the recoverability
of the
asset’s carrying value, we will make estimates of the undiscounted cash
flows from the expected future operations of the asset. If the analysis
indicates that the carrying value is not recoverable from future
cash
flows, the asset will be written down to estimated fair value and
an
impairment loss will be recognized.
|
·
|
Valuation
of stock-based compensation - Under the provisions of SFAS 123R,
share-based compensation cost is measured at the grant date, based
on the
calculated fair value of the award, and is recognized as an expense
over
the employee’s requisite service period (generally the vesting period of
the equity grant). SFAS No. 123R also requires the related
excess tax benefit received upon exercise of stock options or vesting
of
restricted stock, if any, to be reflected in the statement of cash
flows
as a financing activity rather than an operating activity.
|
·
|
Valuation
of Allowance for Doubtful Accounts - We maintain an allowance for
doubtful
accounts for estimated losses resulting from the inability of our
customers to make required payments. In evaluating the collectability
of
accounts receivable, we consider a number of factors, including the
age of
the accounts, changes in status of the customers’ financial condition and
other relevant factors. Estimates of uncollectible amounts are revised
each period, and changes are recorded in the period they become
known.
|
(IN
THOUSANDS)
|
2007
|
|
2006
|
|
2005
|
|||||
Net
cash (used in) provided by operating activities
|
$
|
(4,149
|
)
|
$
|
(890
|
)
|
$
|
2,128
|
||
Net
cash (used in) provided by investing activities
|
(146,106
|
)
|
217,609
|
(195,708
|
)
|
|||||
Net
cash provided by (used in) financing activities
|
113,064
|
(134,275
|
)
|
133,949
|
||||||
Net
(decrease) increase in cash and cash equivalents
|
$
|
(37,191
|
)
|
$
|
82,444
|
$
|
(59,631
|
)
|
Payments
due by period
|
||||||||||||||||
Less
than
|
1-3
|
3-5
|
More
than
|
|||||||||||||
Total
|
1
year
|
years
|
years
|
5
years
|
||||||||||||
Contractual
Obligations
|
||||||||||||||||
(in
thousands)
|
||||||||||||||||
Long-Term
Debt
|
$
|
109,578
|
$
|
6,340
|
$
|
30,017
|
$
|
65,856
|
$
|
7,365
|
||||||
Capital
Lease Obligations
|
48
|
27
|
21
|
-
|
-
|
|||||||||||
Operating
Leases
|
16,303
|
1,821
|
3,679
|
3,731
|
7,072
|
|||||||||||
Purchase
Obligations
|
5,627
|
5,627
|
-
|
-
|
-
|
|||||||||||
Other
Long-Term Liabilities Reflected on the Registrant’s Balance Sheet under
GAAP
|
3,815
|
1,562
|
869
|
49
|
1,335
|
|||||||||||
Total
|
$
|
135,371
|
$
|
15,377
|
$
|
34,586
|
$
|
69,636
|
$
|
15,772
|
ITEM 7A. |
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
Report
of Independent Registered Public Accounting Firm
|
36
|
|
Consolidated
Balance Sheets as of December 31, 2007 and 2006
|
37
|
|
Consolidated
Statements of Operations for the years ended December 31, 2007, 2006,
and 2005
|
38
|
|
Consolidated
Statements of Stockholders’ Equity for the years ended December 31,
2007, 2006 and 2005
|
39
|
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2007, 2006
and 2005
|
40
|
|
Notes
to Consolidated Financial Statements
|
41
|
DECEMBER
31,
|
|||||||
2007
|
2006
|
||||||
ASSETS
|
|||||||
Cash
and cash equivalents
|
$
|
46,345
|
$
|
83,536
|
|||
Trade
receivables, net of allowances of $1,173 and $530
|
7,098
|
2,042
|
|||||
Other
receivables
|
2,685
|
511
|
|||||
Restricted
cash
|
5,274
|
—
|
|||||
Prepaid
expenses and other current assets
|
3,871
|
2,210
|
|||||
Total
current assets
|
65,273
|
88,299
|
|||||
Property
and equipment, net
|
4,200
|
389
|
|||||
Goodwill
|
67,224
|
15,607
|
|||||
Trademarks
|
210,824
|
49,000
|
|||||
Other
intangible assets, net of amortization
|
7,546
|
3,792
|
|||||
Deferred
financing costs, net and other assets
|
2,484
|
—
|
|||||
Restricted
cash
|
1,656
|
1,298
|
|||||
Total
Assets
|
$
|
359,207
|
$ | 158,385 | |||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
Accounts
payable and accrued expenses
|
$
|
7,871
|
$
|
3,235
|
|||
Repurchase
agreements and sales tax liabilities - discontinued
operations
|
—
|
1,333
|
|||||
Restructuring
accruals
|
13
|
145
|
|||||
Deferred
revenue
|
3,976
|
40
|
|||||
Current
portion of long-term debt
|
6,340
|
—
|
|||||
Acquisition
related liabilities
|
7,173
|
4,484
|
|||||
Total
current liabilities
|
25,373
|
9,237
|
|||||
Long-term
debt
|
103,238
|
—
|
|||||
Deferred
tax liability
|
27,719
|
218
|
|||||
Acquisition
related liabilities
|
3,785
|
—
|
|||||
Other
long-term liabilities
|
3,239
|
2,317
|
|||||
Total
liabilities
|
163,354
|
11,772
|
|||||
Commitments
and Contingencies
|
|||||||
Minority
Interest
|
3,040
|
—
|
|||||
Stockholders’
equity:
|
|||||||
Preferred
stock, $0.01 par value; 1,000,000 shares authorized; 0 shares issued
and
outstanding as of December 31, 2007 and 2006, respectively
|
—
|
—
|
|||||
Common
stock, $0.01 par value; 1,000,000,000 shares authorized; 55,517,475
and
47,966,085 shares issued and outstanding as of December 31, 2007
and 2006,
respectively
|
557
|
481
|
|||||
Additional
paid-in capital
|
2,667,920
|
2,615,742
|
|||||
Treasury
stock
|
(1,757
|
)
|
(352
|
)
|
|||
Accumulated
deficit
|
(2,473,907
|
)
|
(2,469,258
|
)
|
|||
Total
stockholders’ equity
|
192,813
|
146,613
|
|||||
Total
liabilities and stockholders’ equity
|
$
|
359,207
|
$
|
158,385
|
YEAR
ENDED DECEMBER 31,
|
||||||||||
2007
|
2006
|
2005
|
||||||||
Revenues:
|
||||||||||
Royalty
revenues
|
$
|
15,289
|
$
|
1,175
|
$
|
—
|
||||
Licensing
revenues
|
15,542
|
—
|
—
|
|||||||
Franchise
fee revenues
|
3,464
|
749
|
—
|
|||||||
Total
revenues
|
34,295
|
1,924
|
—
|
|||||||
Operating
expenses:
|
||||||||||
Selling,
general and administrative expenses:
|
||||||||||
Brands
|
(14,352
|
)
|
(453
|
)
|
—
|
|||||
Corporate
|
(12,977
|
)
|
(7,261
|
)
|
(3,645
|
)
|
||||
Professional
fees:
|
||||||||||
Brands
|
(1,605
|
)
|
(115
|
)
|
—
|
|||||
Corporate
|
(1,552
|
)
|
(1,034
|
)
|
(1,444
|
)
|
||||
Depreciation
and amortization
|
(1,619
|
)
|
(471
|
)
|
(159
|
)
|
||||
Restructuring
charges
|
—
|
(1,079
|
)
|
7
|
||||||
Total
operating expenses
|
(32,105
|
)
|
(10,413
|
)
|
(5,241
|
)
|
||||
Operating
income (loss)
|
2,190
|
(8,489
|
)
|
(5,241
|
)
|
|||||
Non-operating
income (expense):
|
||||||||||
Interest
income
|
2,100
|
2,637
|
1,478
|
|||||||
Interest
expense
|
(5,099
|
)
|
—
|
—
|
||||||
Other
income , net
|
318
|
700
|
231
|
|||||||
Minority
interest
|
(269
|
)
|
—
|
—
|
||||||
Investment
loss, net
|
—
|
—
|
(19
|
)
|
||||||
Total
non-operating income (expense)
|
(2,950
|
)
|
3,337
|
1,690
|
||||||
Loss
from continuing operations before income taxes
|
(760
|
)
|
(5,152
|
)
|
(3,551
|
)
|
||||
Income
taxes:
|
||||||||||
Current
|
(236
|
)
|
(81
|
)
|
—
|
|||||
Deferred
|
(3,067
|
)
|
—
|
—
|
||||||
Loss
from continuing operations
|
(4,063
|
)
|
(5,233
|
)
|
(3,551
|
)
|
||||
Discontinued
operations:
|
||||||||||
Income
(loss) from discontinued operations, net of tax expense of $64 for
2006
|
(586
|
)
|
2,358
|
225
|
||||||
Gain
(loss) on sale of discontinued operations
|
—
|
755
|
(1,194
|
)
|
||||||
Net
loss
|
$
|
(4,649
|
)
|
$
|
(2,120
|
)
|
$
|
(4,520
|
)
|
|
Loss
per share (basic and diluted) from continuing operations
|
$
|
(0.08
|
)
|
$
|
(0.11
|
)
|
$
|
(0.08
|
)
|
|
Income
(loss) per share (basic and diluted) from discontinued
operations
|
(0.01
|
)
|
0.07
|
(0.02
|
)
|
|||||
Net
loss per share - basic and diluted
|
$
|
(0.09
|
)
|
$
|
(0.04
|
)
|
$
|
(0.10
|
)
|
|
Weighted
average shares outstanding - basic and diluted
|
51,889
|
45,636
|
44,006
|
UNREALIZED
|
||||||||||||||||||||||
ADDITIONAL
|
GAIN
|
|||||||||||||||||||||
PREFERRED
|
COMMON
|
PAID-IN
|
ACCUMULATED
|
TREASURY
|
(LOSS)
ON
|
|||||||||||||||||
STOCK
|
STOCK
|
CAPITAL
|
DEFICIT
|
STOCK
|
INVESTMENT
|
TOTAL
|
||||||||||||||||
Balance
as of December 31, 2004
|
$
|
-
|
$
|
440
|
$
|
2,592,977
|
$
|
(2,462,611
|
)
|
$
|
-
|
$
|
(216
|
)
|
$
|
130,590
|
||||||
Exercise
of options and warrants
|
-
|
-
|
32
|
(7
|
)
|
-
|
-
|
25
|
||||||||||||||
Stock
based compensation
|
-
|
-
|
76
|
-
|
-
|
-
|
76
|
|||||||||||||||
Unrealized
gain on investments available for sale
|
-
|
-
|
-
|
-
|
-
|
216
|
216
|
|||||||||||||||
Net
loss
|
-
|
-
|
-
|
(4,520
|
)
|
-
|
-
|
(4,520
|
)
|
|||||||||||||
Balance
as of December 31, 2005
|
-
|
440
|
2,593,085
|
(2,467,138
|
)
|
-
|
-
|
126,387
|
||||||||||||||
Exercise
of options and warrants
|
-
|
-
|
1
|
-
|
-
|
-
|
1
|
|||||||||||||||
Stock
based compensation
|
-
|
-
|
3,177
|
-
|
-
|
-
|
3,177
|
|||||||||||||||
Common
stock issued
|
-
|
41
|
19,479
|
-
|
-
|
-
|
19,520
|
|||||||||||||||
Common
stock repurchased
|
-
|
-
|
-
|
-
|
(352
|
)
|
-
|
(352
|
)
|
|||||||||||||
Net
loss
|
-
|
-
|
-
|
(2,120
|
)
|
-
|
-
|
(2,120
|
)
|
|||||||||||||
Balance
as of December 31, 2006
|
-
|
481
|
2,615,742
|
(2,469,258
|
)
|
(352
|
)
|
-
|
146,613
|
|||||||||||||
Surrender
of shares from cashless exercise of warrants
|
-
|
-
|
-
|
-
|
(1,405
|
)
|
-
|
(1,405
|
)
|
|||||||||||||
Exercise
of options and warrants
|
-
|
16
|
4,702
|
-
|
-
|
-
|
4,718
|
|||||||||||||||
Stock
based compensation
|
-
|
-
|
4,335
|
-
|
-
|
-
|
4,335
|
|||||||||||||||
Common
stock issued
|
-
|
60
|
43,141
|
-
|
-
|
-
|
43,201
|
|||||||||||||||
Net
loss
|
-
|
-
|
-
|
(4,649
|
)
|
-
|
-
|
(4,649
|
)
|
|||||||||||||
Balance
as of December 31, 2007
|
$
|
-
|
$
|
557
|
$
|
2,667,920
|
$
|
(2,473,907
|
)
|
$
|
(1,757
|
)
|
$
|
-
|
$
|
192,813
|
2007
|
|
2006
|
2005
|
|
||||||
|
Revised
|
|||||||||
Cash
flows from operating activities:
|
||||||||||
Net
loss from continuing operations
|
$
|
(4,063
|
)
|
$
|
(5,233
|
)
|
$
|
(3,551
|
)
|
|
Adjustments
to reconcile net loss from continuing operations to net cash (used
in)
provided by operating activities:
|
||||||||||
Depreciation
and amortization
|
1,619
|
471
|
159
|
|||||||
Deferred
income taxes
|
3,067
|
—
|
—
|
|||||||
Stock
based compensation
|
4,215
|
1,632
|
76
|
|||||||
Minority
interest
|
269
|
—
|
—
|
|||||||
Amortization
of loan fees
|
309
|
—
|
—
|
|||||||
Realized
losses on long term investments
|
—
|
—
|
19
|
|||||||
Amortization
of mortgage premiums
|
—
|
—
|
670
|
|||||||
Changes
in assets and liabilities, net of acquired assets and
liabilities:
|
||||||||||
(Increase)
in trade receivables, net of allowances
|
(4,719
|
)
|
(791
|
)
|
—
|
|||||
(Increase)
decrease in prepaid expenses and other assets
|
(1,333
|
)
|
(1,096
|
)
|
3,112
|
|||||
(Increase)
decrease in interest and other receivables
|
(1,039
|
)
|
663
|
(818
|
)
|
|||||
Increase
(decrease) in accounts payable and accrued expenses
|
219
|
(249
|
)
|
903
|
||||||
Increase
(decrease) in restructuring accruals and other liabilities
|
—
|
314
|
(1,202
|
)
|
||||||
(Decrease)
in deferred revenue
|
(1,478
|
)
|
—
|
—
|
||||||
Cash
(used in) provided by discontinued operations for operating
activities
|
(1,215
|
)
|
3,399
|
2,760
|
||||||
Net
cash (used in) provided by operating activities
|
(4,149
|
)
|
(890
|
)
|
2,128
|
|||||
Cash
flows from investing activities:
|
||||||||||
(Increase)
decrease in restricted cash
|
(5,632 | ) | 7,335 | 199 | ||||||
Purchases
of property and equipment
|
(3,905
|
)
|
(151
|
)
|
(47
|
)
|
||||
Acquisitions,
net of cash acquired
|
(136,569
|
)
|
(43,189
|
)
|
—
|
|||||
Sales
and maturities of investments available for sale
|
—
|
—
|
45
|
|||||||
Cash
provided by (used in) discontinued operations in investing
activities
|
—
|
253,614
|
(195,905
|
)
|
||||||
Net
cash (used in) provided by investing activities
|
(146,106
|
)
|
217,609
|
(195,708
|
)
|
|||||
Cash
flows from financing activities:
|
||||||||||
Proceeds
from sale of minority interest
|
2,771
|
—
|
—
|
|||||||
Proceeds
from debt borrowings
|
110,801
|
—
|
—
|
|||||||
Financing
costs
|
(2,598
|
)
|
—
|
—
|
||||||
Principal
payments on debt
|
(1,223
|
)
|
—
|
—
|
||||||
Exercise
of options and warrants
|
3,313
|
1
|
25
|
|||||||
Purchase
of treasury stock
|
—
|
(352
|
)
|
—
|
||||||
Cash
(used in) provided by discontinued operations in financing
activities
|
—
|
(133,924
|
)
|
133,924
|
||||||
Net
cash provided by (used in) financing activities
|
113,064
|
(134,275
|
)
|
133,949
|
||||||