EDGAR 10-K Filing

Company CIK: 1078207
Filing Year: 2024
Filename: 1078207_10-K_2024_0001078207-24-000092.json

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ITEM 1. BUSINESS
Item 1. Business
OVERVIEW
BowFlex Inc. and subsidiaries (collectively, "BowFlex" or the "Company") was founded in 1986 and is headquartered in Vancouver, Washington and incorporated in the State of Washington. Our common stock is currently quoted on the OTC under the symbol “BFXXQ.” As previously reported, substantially all of the Company's assets were sold in the Asset Sale and there were insufficient proceeds from the Asset Sale for common stockholders to receive value for their shares. Further, the Company's operations are limited to winding down the business and there are insufficient funds for the Company to make, and the Company will not be making, any future distributions to stockholders.
BANKRUPTCY
On March 4, 2024 (the "Petition Date"), the Company and certain of its subsidiaries (together, the “Company Parties”) filed voluntary petitions (the “Bankruptcy Petitions”) for relief under chapter 11 of title 11 of the United States Code 11 U.S.C. §§ 101-1532 (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of New Jersey (the “Bankruptcy Court”). The chapter 11 cases for the Company Parties (the “Chapter 11 Cases”) are being jointly administered under the caption In re BowFlex Inc., et al., Case No. 24-12364. Through the Chapter 11 Cases, the Company Parties sought to implement a sale of substantially all of their assets pursuant to Section 363 of the Bankruptcy Code.
On March 4, 2024, the Company entered into a “stalking horse” asset purchase agreement (the “Asset Purchase Agreement”) with Johnson Health Tech Retail, Inc. ("Johnson Health Tech") to sell the assets of the Company (the “Acquired Assets”) identified in the Asset Purchase Agreement, representing substantially all of the assets of the Company, for a total of $37,500,000 in cash at the closing of the transaction, including a deposit of $3,750,000 paid into an escrow account on March 4, 2024, but less closing adjustment amounts for accounts receivable, inventory and certain transfer taxes. On April 15, 2024, the Bankruptcy Court entered an order authorizing the sale of the Acquired Assets pursuant to the terms of the Asset Purchase Agreement (the “Asset Sale”) and on April 22, 2024, the Asset Sale closed (the “Closing”). As previously reported, there were insufficient proceeds from the Asset Sale for common stockholders to receive value for their shares. Further, there are insufficient funds for the Company to make, and the Company will not be making, any future distributions to stockholders
On April 22, 2024, proceeds from the Asset Sale were used to repay the Company’s obligations under the existing Term Loan Credit Agreement, dated as of November 30, 2022, as amended, by and among the Company and Nautilus Fitness Canada, Inc., a British Columbia company and subsidiary of the Company, as borrowers, and Crystal Financial LLC d/b/a SLR Credit Solutions, as administrative agent and a lender. Immediately upon such repayment, the Term Loan Credit Agreement was terminated.
BUSINESS
Following the closing of the Asset Sale, the Company has been in the process of winding down, liquidating and dissolving all of its business and operations, including transferring the Acquired Assets to Johnson Health Tech, reconciling claims in the Chapter 11 Cases, preparing financial reports, winding down foreign affiliated entities, and preparing for emergence from bankruptcy as contemplated in a liquidation plan filed in the Chapter 11 Cases. The Company has sold substantially all of its assets and is no longer operating its business, other than to complete the liquidation of any remaining assets and wind down any remaining operations.
Our common stock is currently quoted on OTC under the symbol “BFXXQ.” As previously reported, there were insufficient proceeds from the Asset Sale for common stockholders to receive value for their shares. Further, the Company's operations are limited to winding down the business and there are insufficient funds for the Company to make, and the Company will not be making, any future distributions to stockholders.
This is the last filing that the Company anticipates making with the SEC. The Company filed a Form 15 with the SEC on April 25, 2024, to terminate its future filing obligations with the SEC.
BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION
We previously conducted our business in two segments, Direct and Retail. Our Direct business offered products directly to consumers primarily through our websites. Our Retail business offered products through a network of independent companies to reach consumers in the home use markets in the U.S. and internationally.
For further information regarding our segments and geographic information, see Note 26, Segment and Enterprise-Wide Information, to our consolidated financial statements in Part II, Item 8 of this report.
EMPLOYEES
As of May 30, 2024, we had 46 full-time employees. None of our employees are subject to collective bargaining agreements.
SIGNIFICANT CUSTOMER
For the fiscal years ended March 31, 2024 and March 31, 2023, the following customer accounted for more than 10% of our total net sales as follows:
Year Ended March 31,
2024 2023
Amazon.com 12.0% 19.3%
GOVERNMENT REGULATION
Our business, as previously operated was, and as we wind down operations is, subject to international, federal and state laws and governmental regulations. These laws and regulations relate to, among other things, bankruptcy, privacy, data protection, data breach notification, content regulation, intellectual property, consumer protection, e-commerce, marketing, advertising, messaging, rights of publicity, health and safety, employment and labor, environmental standards, product quality and safety, accessibility, competition, customs and international trade, and taxation. These laws and regulations are constantly evolving and frequently change. Further, these laws and regulations may be interpreted, applied, created, or amended in a manner that could harm our business and operations, cause our regulatory burden to increase, or increase our costs.
AVAILABLE INFORMATION
Our common stock is currently quoted on the OTC under the symbol “BFXXQ.” As previously reported, there were insufficient proceeds from the Asset Sale for common stockholders to receive value for their shares. Further, the Company's operations are limited to winding down the business and there are insufficient funds for the Company to make, and the Company will not be making, any future distributions to stockholders. Our principal executive offices are located at 1220 Main Street, Suite 400, Vancouver, Washington 98660, and our telephone number is (360) 585-8592.
We file annual reports, quarterly reports, current reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended. The SEC maintains a website at http://www.sec.gov where you can access copies of most of our SEC filings.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
Our business, as previously operated was, and as we wind down operations is, operated in an environment that involves a number of risks and uncertainties. The risks and uncertainties described in this Annual Report on Form 10-K are not the only risks and uncertainties that we face. Additional risks and uncertainties that presently are not considered material or are not known to us, and therefore are not mentioned herein, may impair our business, operations and financial results. If any of the risks described in this Annual Report on Form 10-K actually occur, our business, operating results and financial position could be adversely affected.
We have sold substantially all of our assets as part of our Chapter 11 Cases and the Asset Sale, and no proceeds were available for distribution to the Company’s common stockholders.
On April 22, 2024, we completed the Asset Sale and disposed of substantially all of our assets. Following the closing of the Asset Sale, the Company has been in the process of winding down, liquidating and dissolving all of its business and operations, including transferring the Acquired Assets to Johnson Health Tech, reconciling claims in the Chapter 11 Cases, preparing financial reports, winding down foreign affiliated entities, and preparing for emergence from bankruptcy as contemplated in a liquidation plan filed in the Chapter 11 Cases. The Company has sold substantially all of its assets and is no longer operating its business, other than to complete the liquidation of any remaining assets and wind down any remaining operations.
There were insufficient proceeds from the Asset Sale for common stockholders to receive value for their shares.
Our common stock has no value and we will not be making any distributions to stockholders.
While our common stock is quoted on OTC under the symbol “BFXXQ,” as previously reported, there were insufficient proceeds from the Asset Sale for common stockholders to receive value for their shares. Further, there are insufficient funds for the Company to make, and the Company will not be making, any future distributions to stockholders.
We have experienced the departure of a majority of the Company’s key executives and members of the Board of Directors, as well as significant employee departures.
Following the completion of the Asset Sale, our former Chief Executive Officer, former Chief Financial Officer, former Chief Operating Officer, and former Chief Marketing Officer separated from service with the Company, and four members of the Board of Directors resigned from the Company. Further, we have experienced significant departures of employees following the completion of the Asset Sale. The departure of executives, members of the board of directors, and large numbers of employees significantly impacts our ability to effectively manage our operations and efficiently wind down, liquidate and dissolve our business and operations.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
None.

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ITEM 2. PROPERTIES
Item 2. Properties
Following is a summary of each of our properties as of March 31, 2024:
Company Location Primary Function(s) Owned or
Leased
Bowflex Washington Corporate headquarters, customer call center, and R&D facility Leased
Bowflex California Warehouse and distribution facility Leased
Bowflex Ohio Warehouse and distribution facility Leased
Nautilus (Shanghai) Fitness Equipments, Co., Ltd.
China Quality assurance and software engineering offices Leased
Nautilus Switzerland AG
Switzerland Software engineering offices Leased
Our properties were used by both our Direct and Retail segments. We believe our properties were generally well-maintained, adequate and suitable for their intended purposes.
Leases for all BowFlex US locations were rejected as part of the Bankruptcy Cases on May 31, 2024. We negotiated exit and termination arrangements for our leases in China in May 2024, and subsequently entered into a new leasing arrangement for our China location because the Chinese government requires a physical address until the entity is fully dissolved. Nautilus Switzerland AG filed bankruptcy through the courts of Switzerland on April 26, 2024, causing the lease for the Swiss location to become a liability of the entity to be extinguished through its bankruptcy process.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
The disclosure regarding the Company’s bankruptcy proceedings included in Part I, Item 1 under the heading "Business - Bankruptcy” is incorporated herein by reference.
From time to time, in the ordinary course of business, we may be involved in various claims, lawsuits and other proceedings. These legal proceedings involve uncertainty as to the eventual outcomes and losses which may be realized when one or more future events occur or fail to occur.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market for our Common Stock
Our common stock is available for quotation of the OTC under the symbol “BFXXQ.” As previously reported, there were insufficient proceeds from the Asset Sale for common stockholders to receive value for their shares. Further, the Company's operations are limited to winding down the business and there are insufficient funds for the Company to make, and the Company will not be making, any future distributions to stockholders. As of May 30, 2024, there were 42 holders of record of our common stock.
We did not pay any dividends on our common stock in fiscal years 2024 or 2023. We will not pay any future dividends.
Equity Compensation Plans
See Part III, Item 12 for equity compensation plan information.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. [Reserved]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes that are included in Part II, Item 8 of this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties.
NYSE DELISTING NOTIFICATION
See Note 4 - NYSE Delisting Notification of Notes to Consolidated Financial Statements.
BANKRUPTCY PROCEEDINGS
The disclosure regarding the Company’s bankruptcy proceedings included in Part I, Item 1 under the heading "Business - Bankruptcy” is incorporated herein by reference. See also Note 2 - Bankruptcy Proceedings of Notes to Consolidated Financial Statements.
OVERVIEW
Following the closing of the Asset Sale, the Company has been in the process of winding down, liquidating and dissolving all of its business and operations, including transferring the Acquired Assets to Johnson Health Tech, reconciling claims in the Chapter 11 Cases, preparing financial reports, winding down foreign affiliated entities, and preparing for emergence from bankruptcy as contemplated in a liquidation plan filed in the Chapter 11 Cases. The Company has sold substantially all of its assets and is no longer operating its business, other than to complete the liquidation of any remaining assets and wind down any remaining operations.
While our common stock is available for quotation on OTC under the symbol “BFXXQ,” as previously reported, there were insufficient proceeds from the Asset Sale for common stockholders to receive value for their shares. Further, there are insufficient funds for the Company to make, and the Company will not be making, any future distributions to stockholders.
This is the last filing that the Company anticipates making with the SEC. The Company filed a Form 15 with the SEC on April 25, 2024, to terminate its future filing obligations with the SEC.
We previously marketed our products through two distinct distribution channels, Direct and Retail, which we consider to be separate business segments. Our Direct business offered products directly to consumers primarily through our websites. Our Retail business offered our products through a network of independent retail companies to reach consumers in the home use markets in the U.S. and internationally. We also previously derived a portion of our revenue from the licensing of our brands and intellectual property.
COMPANY RESULTS
Comparison for the Fiscal Year Ended March 31, 2024 ("fiscal 2024" or "2024") to the Fiscal Year Ended March 31, 2023 ("fiscal 2023" or "2023")
•Net sales were $206.0 million for 2024, reflecting a 28.2% decrease as compared to net sales of $286.8 million for 2023.
•Net sales for our Direct segment decreased by $27.6 million, or 19.8%, in 2024, compared to 2023.
•Net sales for our Retail segment decreased by $51.0 million, or 35.4%, in 2024, compared to 2023.
•Royalty income for 2024 decreased by $2.3 million, or 66.9% compared to 2023.
•Gross profit was $49.9 million, compared to $52.0 million last year. Gross profit margin was 24.2% compared to 18.1% last year. The 6 ppt increase in gross profit margin was primarily due to lower landed product costs (+11 ppts), partially offset by unfavorable absorption of JRNY COGS (-4 ppts), higher outbound freight (-1 ppt) and increased warranty costs (-1 ppt).
•Operating expenses were $139.6 million compared to $145.3 million last year. The decrease of $5.7 million, or 3.9%, was primarily due to a $10.7 million decrease in media spending, an $8.6 million decrease in personnel expenses, a $1.8 million decrease in third-party logistics and parking expenses, a $1.3 million decrease in finance fees, a $1.0 million decrease in rent expense, a $1.0 million decrease in insurance, taxes, and other general and administrative expenses, a $1.0 million decrease in product development expenses, and a $0.5 million decrease in software costs, partially offset by a $12.7 million increase in impairment charges, a $6.5 million increase in contractor fees, a $0.3 million increase in legal expenses and a $0.3 million increase in bad debt expense. Total advertising expenses were $12.6 million versus $23.3 million last year.
•Operating loss was $89.7 million, or a negative 43.5% operating margin, compared to an operating loss of $93.4 million, or a negative 32.6% operating margin, for last year, primarily due to lower operating expenses.
•Income tax expense from continuing operations was $1.8 million this year compared to a $9.4 million tax benefit last year. The income tax expense in the current year was primarily the result of income in non-U.S. jurisdictions, as well as the recording of a deferred tax asset valuation allowance in non-U.S. jurisdictions and recording unrecognized tax benefits in fiscal 2024. The effective tax rate was (2.0)% this year compared to (9.5)% last year.
•Loss from continuing operations was $90.4 million, or $2.56 per diluted share, compared to loss of $107.5 million, or $3.40 per diluted share, last year. The decrease in loss from continuing operations was primarily due to lower operating expenses as discussed in more detail above.
•Net loss was $90.4 million, compared to a net loss of $105.4 million last year. Net loss per diluted share was $2.56, compared to net loss per diluted share of $3.34 last year. The decrease in net loss was primarily due to higher operating expenses as discussed in more detail above.
DISCONTINUED OPERATIONS
Results from discontinued operations relate to the disposal of our former Nautilus® Commercial business, which was completed in April 2011. We reached substantial completion of asset liquidation at December 31, 2012. Although there was no revenue related to the Commercial business in fiscal 2024 or 2023, we incurred an immaterial amount of product liability expenses associated with products previously sold into the Commercial channel.
In the second quarter of fiscal 2023, we completed the tax deregistration of a foreign entity that was part of the discontinued operations. As a result, the previously unrecognized tax benefit and associated accrued interest and penalty in the amount of $2.1 million was released and recorded as a component of income taxes from discontinued operations during the quarter ended September 30, 2022. There were no further significant activities or changes to our discontinued operations during fiscal 2023 and no activity to our discontinued operations during fiscal 2024.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, related disclosures of contingent assets and liabilities, and liabilities subject to compromise in the consolidated financial statements. An accounting estimate is considered to be critical if it meets both of the following criteria: (i) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and (ii) the impact of the estimate on financial condition or operating performance is material.
RESULTS OF OPERATIONS
The discussion that follows regarding our financial condition and results of operations for fiscal 2024 compared to fiscal 2023 should be read in conjunction with our consolidated financial statements and the related notes in this report. All comparisons to prior year results are in reference to continuing operations only in each period, unless otherwise indicated. A discussion regarding our financial condition and results of operations for fiscal 2023 compared to fiscal 2022 can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, filed with the SEC on June 1, 2023, which is available free of charge on the SEC’s website at www.sec.gov.
Results of operations information was as follows (in thousands):
Year Ended March 31,
2024 2023 Change % Change
Net sales $ 205,964 $ 286,773 $ (80,809) (28.2) %
Cost of sales 156,047 234,819 (78,772) (33.5) %
Gross profit 49,917 51,954 (2,037) (3.9) %
Operating expenses:
Selling and marketing 34,665 51,505 (16,840) (32.7) %
General and administrative 36,632 42,474 (5,842) (13.8) %
Research and development 16,528 21,822 (5,294) (24.3) %
Goodwill and asset impairment charge
39,635 26,965 12,670 47.0 %
Restructuring and exit charges 12,110 2,549 9,561 375.1 %
Total operating expenses 139,570 145,315 (5,745) (4.0) %
Operating loss (89,653) (93,361) 3,708 (4.0) %
Other income (expense):
Interest income 25 9 16
Interest expense (7,257) (3,795) (3,462)
Other, net 10,233 (982) 11,215
Total other income (expense), net
3,001 (4,768) 7,769
Loss from continuing operations before income taxes (86,652) (98,129) 11,477
Reorganization items, net (1,897) - (1,897)
Income tax expense
1,821 9,359 (7,538)
Loss from continuing operations (90,370) (107,488) 17,118
Income from discontinued operations, net of income taxes
- 2,089 (2,089)
Net loss $ (90,370) $ (105,399) $ 15,029
Results of operations information by segment and major product lines was as follows (in thousands):
Year Ended March 31,
2024 2023 Change % Change
Net Sales
Direct net sales:
Cardio products(1)
$ 64,798 $ 93,889 $ (29,091) (31.0) %
Strength products(2)
46,919 45,400 1,519 3.3 %
Direct 111,717 139,289 (27,572) (19.8) %
Retail net sales:
Cardio products(1)
46,422 62,225 (15,803) (25.4) %
Strength products(2)
46,709 81,888 (35,179) (43.0) %
Retail 93,131 144,113 (50,982) (35.4) %
Royalty income 1,116 3,371 (2,255) (66.9) %
$ 205,964 $ 286,773 $ (80,809) (28.2) %
Cost of sales:
Direct $ 84,419 $ 110,625 $ (26,206) (23.7) %
Retail 71,628 124,194 (52,566) (42.3) %
$ 156,047 $ 234,819 $ (78,772) (33.5) %
Gross profit:
Direct $ 27,298 $ 28,664 $ (1,366) (4.8) %
Retail 21,503 19,919 1,584 8.0 %
Royalty 1,116 3,371 (2,255) (66.9) %
$ 49,917 $ 51,954 $ (2,037) (3.9) %
Gross margin:
Direct 24.4 % 20.6 % 380 basis points
Retail 23.1 % 13.8 % 930 basis points
Contribution:
Direct $ (22,479) $ (29,626) $ 7,147 -24.1 %
Retail 6,843 (5,720) 12,563 (219.6) %
Contribution rate:
Direct (20.1) % (21.3) % 120 basis points
Retail 7.3 % (4.0) % 1,130 basis points
(1) Cardio products include: connected-fitness bikes like the Bowflex® C6, VeloCore® and Schwinn® IC4, Max Trainer®, Zero Runner®, treadmills, other exercise bikes, ellipticals and subscription services.
(2) Strength products include: home gyms and Bowflex® SelectTech® dumbbells, kettlebell and barbell weights, and accessories
Comparison of the Twelve Months Ended March 31, 2024 to the Twelve Months ended March 31, 2023
Net Sales and Gross Profit
Direct Segment
Net sales were $111.7 million for 2024, compared to $139.3 million, a decline of 19.8%, versus 2023. The net sales decrease was primarily driven by lower strength sales.
Cardio sales decreased 31.0% in 2024 versus 2023. Lower cardio sales this year were primarily driven by lower demand for Max Trainer® and elliptical equipment. Strength product sales were flat versus 2023.
Gross profit margin was 24.4% in 2024 versus 20.6% last year. The 4 ppt increase in gross profit margin was primarily due to lower landed product costs (+9 ppts), and favorable logistics overhead absorption (+1 ppt), partially offset by unfavorable absorption of JRNY® COGS (-6 ppts). Gross profit in 2024 was $27.3 million, a decrease of 4.8% versus 2023.
Segment contribution loss was $22.5 million for 2024, compared to segment contribution loss of $29.6 million for 2023. The decrease was primarily driven by lower cost of sales as discussed above and decrease in media spend, partially offset by lower sales. Advertising expenses were $12.6 million in 2024 compared to $23.3 million in 2023.
Combined consumer credit approvals by our primary and secondary U.S. third-party financing providers were 54.2% in 2024 compared to 52.5% in 2023. The increase in approvals reflects higher credit quality applications.
Retail Segment
Net sales were $93.1 million for 2024, compared to $144.1 million, a decline of 35.4%, in 2023. Retail segment sales outside the United States and Canada increased 28.3% in 2024 as compared to 2023. The overall net sales decrease compared to last year was primarily driven by lower demand from retailers.
Cardio sales decreased 25.4% in 2024 compared to 2023. Lower cardio sales this year were primarily driven by lower bike demand. Strength product sales declined 43.0% in 2024 versus 2023. Lower strength sales in 2024 were primarily driven by lower demand for home gyms.
Gross profit margin was 23.1% in 2024 versus 13.8% in 2023. The 9 ppt increase in gross profit margin was primarily driven by lower landed products (+11 ppts), and decreased discounting (+1 ppt), partially offset by unfavorable logistics overhead absorption (-2 ppts) and increased warranty costs (-2 ppts). Gross profit was $21.5 million in 2024, a decrease of 8.0% versus 2023.
Segment contribution income for 2024 was $6.8 million, or 7.3% of sales, compared to contribution loss of $5.7 million, or 4.0% of sales, last year. The increase was primarily driven by lower cost of sales as explained above, partially offset by lower sales.
Royalty
Royalty income decreased by $2.3 million, or 66.9%, to $1.1 million in 2024 compared 2023, primarily due to the sale of Nautilus® brand trademarks and related royalty licenses in fiscal 2024.
Operating Expenses
Operating expenses for 2024 were $139.6 million, a decrease of $5.7 million, or 4.0%, as compared to operating expenses of $145.3 million for 2023. The decrease was primarily due to a $10.7 million decrease in media spending, an $8.6 million decrease in personnel expenses, a $1.8 million decrease in third-party logistics and packaging expenses, a $1.3 million decrease in finance fees, a $1.0 million decrease in rent expense, a $1.0 million decrease in insurance, taxes and other general and administrative expenses, a $1.0 million decrease in product development costs, and a $0.5 million decrease in software expenses, partially offset by a $12.7 million increase in impairment charges, a $6.5 million increase in consulting and contractor fees, a $0.3 million increase in legal expenses and a $0.3 million increase in bad debt expense.
Selling and Marketing
Selling and marketing expenses include payroll, employee benefits, and other headcount-related expenses associated with sales and marketing personnel, and the costs of media advertising, promotions, trade shows, seminars, sales incentives related to our JRNY® platform and other programs.
Selling and marketing information was as follows (dollars in thousands):
Year Ended March 31, Change
2024 2023 $ %
Selling and marketing $ 34,665 $ 51,505 $ (16,840) (32.7)%
As % of net sales 16.8% 18.0%
The decrease in selling and marketing in 2024 compared to 2023 was primarily due to a $10.7 million decrease in media spend, a $2.0 million decrease in personnel expenses due to the reduction in force implemented in 2023, a $1.4 million decrease in finance fees, a $1.3 million decrease in consulting fees and a $0.8 million decrease in other marketing expenses.
Media advertising expense is the largest component of selling and marketing and was as follows (dollars in thousands):
Year Ended March 31, Change
2024 2023 $ %
Total advertising $ 12,583 $ 23,250 $ (10,667) (45.9)%
The $10.7 million decrease in media advertising in 2024 compared to 2023 reflects a return to more historical, pre-pandemic levels of advertising.
General and Administrative
General and administrative expenses include payroll, employee benefits, stock-based compensation expense, and other headcount-related expenses associated with finance, legal, facilities, certain human resources and other administrative personnel, acquisition costs and other administrative fees.
General and administrative expense was as follows (dollars in thousands):
Year Ended March 31, Change
2024 2023 $ %
General and administrative $ 36,632 $ 42,474 $ (5,842) (13.8)%
As % of net sales 17.8% 14.8%
The $5.8 million decrease in general and administrative in 2024 compared to 2023 was primarily due to a $5.0 million decrease in personnel expenses, a $0.8 million decrease in consulting fees, a $0.4 million decrease in depreciation expense, a $0.4 million decrease in information technology expenses, a $0.2 million decrease in state taxes, and a $0.2 million decrease in asset impairment charge, partially offset by a $1.3 million increase in bonus expense.
The increase in general and administrative as a percentage of net sales was due to the decreases in spending being more than offset by lower net sales.
Research and Development
Research and development expenses include payroll, employee benefits, other headcount-related expenses and information technology associated with product development.
Research and development expenses was as follows (dollars in thousands):
Year Ended March 31, Change
2024 2023 $ %
Research and development $ 16,528 $ 21,822 $ (5,294) (24.3)%
As % of net sales 8.0% 7.6%
The $5.3 million decrease in research and development in 2024 compared to 2023 was primarily driven by a $3.0 million decrease in consulting fees, a $1.0 million decrease in personnel expenses, a $1.0 million decrease in product development costs and a $0.2 million decrease in software costs.
The increase in research and development as a percentage of net sales was due to the decrease in spending being more than offset by lower net sales.
Goodwill and Asset Impairment Charge
Due to certain triggering events during 2024 that had a material adverse effect on our results of operations, cash flows and long-lived assets, we performed an asset impairment test on our long-lived assets in the third and fourth quarters of fiscal 2024 which resulted in a total impairment charge of $39.6 million.
As a result of the decline in our market value relative to the market and our industry, which was identified as a triggering event, we performed an interim evaluation and a market capitalization reconciliation during the first quarter of fiscal 2023 which resulted in a non-cash goodwill and indefinite-lived intangible assets impairment charge of $27.0 million.
See Note 8, Goodwill and Asset Impairment Charge of Notes to Consolidated Financial Statements for additional information.
Restructuring and Exit Charges
In February 2023, we announced and began implementing a restructuring plan that included a reduction in workforce and other exit costs.
Restructuring and exit charges were $12.1 million in 2024 compared to $2.5 million in 2023, an increase of 375.0%. The $9.6 million increase in restructuring and exit charges was primarily driven by an increase of $ 7.9 million in consulting and contract services, a $1.7 million increase in temporary labor, and a $1.3 million increase in salaries and wages, partially offset by a $ 1.7 million decrease in severance and termination plan benefits.
See Note 6, Restructuring and Exit Charges of Notes to Consolidated Financial Statements for additional information.
Operating Loss
Operating loss for 2024 was $89.7 million, a decrease of $3.7 million, as compared to an operating loss of $93.4 million for 2023. The decrease was primarily driven by lower cost of sales, and lower operating expenses, partially offset by lower sales.
Interest Expense
The increase in interest expense of $7.3 million in 2024 compared to $3.8 million 2023 was primarily driven by a $3.7 million of capitalized fees written off during 2024 due to loan extinguishment, partially offset by a $0.2 million decrease in interest expense and a $0.1 million decrease in amortization of fees.
Other, Net
Other, net relates to the effect of exchange rate fluctuations with the U.S., the valuation of warrants and our foreign subsidiaries and an intellectual property asset sale.
Other, net was as follows (in thousands):
Year Ended March 31, Change
2024 2023 $ %
Other, net $ 10,233 $ (982) $ 11,215 1,142.1%
The increase in other, net was primarily due to a $6.4 million net gain on the sale of intellectual property, a $2.9 million gain related to the revaluation of warrants sold in the first quarter of fiscal 2024, and a $2.2 million net gain on the sale of equity investments in 2024 compared to a $0.7 million net loss on equity investments in 2023, partially offset by a $0.7 million loss on foreign exchange and a $0.4 million expense related to the capital raise transaction.
Reorganization Charges
Reorganization charges include expenses associated with bankruptcy proceedings. Reorganization charges for 2024 were $1.9 million compared to $0.0 million for 2023.
Income Tax Expense
Income tax expense includes U.S. and international income taxes, and interest and penalties on uncertain tax positions.
Income tax expense was as follows (dollars in thousands):
Year Ended March 31, Change
2024 2023 $ %
Income tax expense
$ 1,821 $ 9,359 $ (7,538) (80.5)%
Effective tax rate (2.0)% (9.5)%
The income tax expense for 2024 was primarily the result of income in non-U.S. jurisdictions, the recording of a deferred tax asset valuation allowance in non-U.S. jurisdictions to reduce the existing deferred tax assets to their anticipated realizable value, and recording unrecognized tax positions as the result of a U.S. tax examination. The income tax expense for 2023 was primarily driven by recording a U.S. deferred tax asset valuation allowance to reduce the existing U.S. domestic deferred tax assets to their anticipated realizable value.
See Note 21 - Income Taxes of Notes to Consolidated Financial Statements for additional information.
Loss from Continuing Operations
Loss from continuing operations was $90.4 million for 2024, or $2.56 per diluted share, compared to loss from continuing operations of $107.5 million, or $3.40 per diluted share, for 2023. The decrease in loss from continuing operations was primarily due to lower cost of sales and lower operating expenses, partially offset by lower sales.
Net Loss
Net loss was $90.4 million for 2024, compared to a net loss of $105.4 million for 2023. Net loss per diluted share was $2.56 for 2024, compared to net loss per diluted share of $3.34 for 2023.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2024, we had $21.9 million of cash and restricted cash compared to cash and restricted cash of $18.3 million as of March 31, 2023.
The disclosure regarding the Company’s bankruptcy proceedings included in Part I, Item 1 under the heading "Business - Bankruptcy” is incorporated herein by reference.
Going Concern
The disclosure regarding the Company’s bankruptcy proceedings included in Part I, Item 1 under the heading "Business - Bankruptcy” is incorporated herein by reference.
The consolidated financial statements have been prepared on a “going concern” basis, which means that the continuation of the Company is presumed even though events and conditions - particularly the Chapter 11 Cases - exist that, when considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern. This also means that the condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. For example, these consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from this uncertainty. Such adjustments could be material.
Operating Activities
Cash provided by operating activities was $6.1 million for fiscal 2024, compared to cash provided by operating activities of $18.8 million for fiscal 2023. The decrease in cash flows from operating activities for fiscal 2024 compared to fiscal 2023 was primarily due to changes in our operating assets and liabilities discussed below, offset by a decrease in our net loss.
Trade receivables decreased by $9.9 million to $11.6 million as of March 31, 2024, compared to $21.5 million as of March 31, 2023. The decrease in trade receivables was primarily driven by lower sales in the fourth quarter of fiscal 2024.
Inventory decreased by $13.5 million to $33.1 million as of March 31, 2024, compared to $46.6 million as of March 31, 2023. The decrease in inventory was due to the Company Parties filing the Bankruptcy Petitions on March 4, 2024, after which time inventory purchases were halted. As of March 31, 2024, we had no inventory in-transit.
Prepaids and other current assets increased by $0.9 million to $8.9 million as of March 31, 2024, compared to $8.0 million as of March 31, 2023.
Trade payables decreased by $23.6 million to $5.7 million as of March 31, 2024, compared to $29.4 million as of March 31, 2023, primarily due to change in cash management strategy leading up to bankruptcy.
Accrued liabilities decreased by $4.0 million to $11.6 million as of March 31, 2024, compared to $15.6 million as of March 31, 2023, primarily driven by a $1.1 million decrease in severance accrual, a $1.0 million decrease for licensing expense accrual, a $1.0 million decrease in accrued bonuses, a $0.5 million decrease in accrued chargebacks, and a $0.3 million decrease in sales return reserve.
Cash provided by investing activities of $10.0 million in fiscal 2024 was primarily due to $10.5 million from the sale of intellectual property and $2.4 million from the sale of an equity investment, partially offset by $2.9 million of capital purchases related to our digital platform.
Financing Activities
Cash used in financing activities of $12.3 million in fiscal 2024 was primarily related to payments on our long-term debt of $32.1 million and payment of debt issuance costs of $1.4 million, offset by proceeds from long-term debt of $17.2 million and net proceeds from our public securities offering in the first quarter of 2024 of $4.5 million.
Free Cash Flow
Free cash flow is a non-GAAP financial measure. We define free cash flow as net cash provided by (used in) operating activities minus capital expenditures. We believe that, when viewed with our GAAP results, free cash flow provides management, investors and other users of our financial information with a more complete understanding of factors and trends affecting our cash flows. We believe free cash flow provides useful additional information to users of our financial information and is an important metric because it represents a measure of how much cash we have available for discretionary and non-discretionary items after the deduction of capital expenditures. We use this metric internally, as we believe our sustained ability to generate free cash flow is an important driver of value creation. However, this non-GAAP financial measure is not intended to supersede or replace our GAAP results.
The following table presents a reconciliation of free cash flow, a non-GAAP financial measure, to Net cash provided by operating activities, the most directly comparable financial measure prepared in accordance with GAAP (in thousands):
Year Ended March 31,
2024 2023
Net cash provided by operating activities
$ 6,117 $ 18,846
Purchase of property, plant and equipment (2,891) (12,618)
Free cash flow $ 3,226 $ 6,228
Net loss $ (90,370) $ (105,399)
Free cash flow as percentage of net loss 3.6 % 5.9 %
Financing Arrangements
DIP Credit Facility
As previously disclosed, on November 30, 2022, we entered into a Term Loan Credit Agreement (the “SLR Credit Agreement”) with Crystal Financial LLC D/B/A SLR Credit Solutions, a Delaware limited liability company, as administrative agent (“SLR”) and lenders from time to time party thereto (collectively the “Lenders”).
On April 22, 2024, proceeds from the Asset Sale were used to repay the Company’s obligations under the SLR Credit Agreement. Immediately upon such repayment, the SLR Credit Agreement was terminated.
As of March 31, 2024, our interest rate was 13.85% for the SLR Term Loan. Interest on the SLR Term Loan accrues at the Secured Overnight Financing Rate ("SOFR") plus a margin of 7.75% to 8.25% (based on fixed charge coverage ratio).
The balance sheet classification of the borrowing under the loan facility has been determined in accordance with ASC 470, Debt.
WF ABL Revolving Facility
As previously disclosed, we entered into that certain Credit Agreement dated as of January 31, 2020, by and among the lenders identified on the signature pages thereof (such lenders, the “Lenders”), and Wells Fargo Bank, National Association, a national banking association (the “Agent”), as administrative agent for the Lenders (as amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”).
On February 26, 2024, the Company entered into a payoff letter for a voluntary prepayment of the Credit Agreement (the “Payoff Letter”). Pursuant to the Payoff Letter, the Company paid a total of approximately $3.2 million to the Agent, comprised of $0.2 million interest and bank fees included as a component of Other, net in our Condensed Consolidated Statement of Operations, $0.2 million in legal fees included as a component of Restructuring and Exit Charges in our Condensed Consolidated Statements of Operations and $2.8 million cash collateral held by the lender and presented as a component of Restricted Cash in our Condensed Consolidated Balance Sheets and hereby terminated the Credit Agreement. There was no difference between contracted amounts and interest expense. No early termination penalty was paid in connection with the Payoff Letter.
Pursuant to the Payoff Letter, all of the Obligations (and any guarantees thereof) were satisfied in full and the Credit Agreement and any and all other Loan Documents were automatically and irrevocably discharged and terminated.
For additional information subsequent to year-end related to our Borrowings see Note 20.
Commitments and Contingencies
For a description of our commitments and contingencies, refer to Note 27, Commitments and Contingencies, to our consolidated financial statements in Part II, Item 8 of this report.
Off-Balance Sheet Arrangements
In the ordinary course of business, we enter into agreements that require us to indemnify counterparties against third-party claims. These may include: agreements with vendors and suppliers, under which we may indemnify them against claims arising from our use of their products or services; agreements with customers, under which we may indemnify them against claims arising from their use or sale of our products; real estate and equipment leases, under which we may indemnify lessors against third-party claims relating to the use of their property; agreements with licensees or licensors, under which we may indemnify the licensee or licensor against claims arising from their use of our intellectual property or our use of their intellectual property; and agreements with parties to debt arrangements, under which we may indemnify them against claims relating to their participation in the transactions.
The nature and terms of these indemnifications vary from contract to contract, and generally a maximum obligation is not stated. We hold insurance policies that mitigate potential losses arising from certain types of indemnifications. Because we are unable to estimate our potential obligation, and because management does not expect these obligations to have a material adverse effect on our consolidated financial position, results of operations or cash flows, no liabilities were recorded as of March 31, 2024.
NEW ACCOUNTING PRONOUNCEMENTS
See Note 1, Significant Accounting Policies, to our consolidated financial statements in Part II, Item 8 of this report.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
BowFlex Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of BowFlex Inc. (a Washington corporation) and subsidiaries (the “Company”) as of March 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, statements of shareholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Notes 1 and 2 to the consolidated financial statements the continued challenging retail operating environment, deteriorating macroeconomic conditions, and decline in customer demand negatively affected liquidity projections, the Company, together with and certain of its subsidiaries, filed voluntary petitions for relief under the Bankruptcy Code, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to this matter are also described in Notes 1 and 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matters
The critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
We determined that there are no critical audit matters.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2021.
Bellevue, Washington
August 5, 2024
BOWFLEX INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
(In thousands)
As of March 31,
2024 2023
Assets
Cash $ 8,658 $ 17,362
Restricted cash 13,274 950
Trade receivables, net of allowances 11,602 21,489
Inventories 33,104 46,599
Prepaids and other current assets 8,923 8,033
Income taxes receivable 6,883 1,789
Total current assets 82,444 96,222
Property, plant and equipment, net 284 32,789
Operating lease right-of-use assets - 19,078
Intangible assets, net
2,900 6,787
Deferred income tax assets, non-current - 554
Income taxes receivable, non-current - 5,673
Other assets 679 2,429
Total assets $ 86,307 $ 163,532
Liabilities and Shareholders' Equity
Trade payables $ 5,737 $ 29,378
Accrued liabilities 11,571 15,575
Operating lease liabilities, current portion 4,734 4,427
Financing lease liabilities, current portion 125 122
Warranty obligations, current portion 2,360 2,564
Income taxes payable 911 328
Debt payable, current portion, net of unamortized debt issuance costs 15,998 1,642
Total current liabilities 41,436 54,036
Operating lease liabilities, non-current 11,457 16,380
Financing lease liabilities, non-current 167 282
Warranty obligations, non-current 834 703
Income taxes payable, non-current 2,105 2,316
Deferred income tax liabilities, non-current 99 253
Other long-term liabilities 176 1,978
Debt payable, non-current, net of unamortized debt issuance costs - 26,284
Liabilities subject to compromise
53,846 -
Total liabilities 110,120 102,232
Commitments and contingencies (Note 27)
Shareholders' equity:
Common stock - no par value, 75,000 shares authorized, 36,412 and 31,845 shares issued and outstanding
15,384 10,084
Retained earnings (deficit)
(37,676) 52,694
Accumulated other comprehensive loss (1,521) (1,478)
Total shareholders' equity (deficit)
(23,813) 61,300
Total liabilities and shareholders' equity $ 86,307 $ 163,532
See accompanying notes to consolidated financial statements.
BOWFLEX INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Year Ended March 31,
2024 2023
Net sales $ 205,964 $ 286,773
Cost of sales 156,047 234,819
Gross profit 49,917 51,954
Operating expenses:
Selling and marketing 34,665 51,505
General and administrative 36,632 42,474
Research and development 16,528 21,822
Goodwill and asset impairment charge
39,635 26,965
Restructuring and exit charges 12,110 2,549
Total operating expenses 139,570 145,315
Operating loss (89,653) (93,361)
Other income (expense):
Interest income 25 9
Interest expense (7,257) (3,795)
Other, net
10,233 (982)
Total other income (expense), net
3,001 (4,768)
Loss from continuing operations before reorganization items and income taxes
(86,652) (98,129)
Reorganization items, net
(1,897) -
Income tax expense
1,821 9,359
Loss from continuing operations (90,370) (107,488)
Discontinued operations:
Loss from discontinued operations before income taxes - (47)
Income tax benefit of discontinued operations
- (2,136)
Income from discontinued operations
- 2,089
Net loss $ (90,370) $ (105,399)
Basic loss per share from continuing operations $ (2.56) $ (3.40)
Basic income per share from discontinued operations - 0.06
Basic loss per share
$ (2.56) $ (3.34)
Diluted loss per share from continuing operations
$ (2.56) $ (3.40)
Diluted income per share from discontinued operations
- 0.06
Diluted net loss per share
$ (2.56) $ (3.34)
Shares used in per share calculations:
Basic 35,294 31,585
Diluted 35,294 31,585
See accompanying notes to consolidated financial statements.
BOWFLEX INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
Year Ended March 31,
2024 2023
Net loss
$ (90,370) $ (105,399)
Other comprehensive loss:
Foreign currency translation adjustment, net of income tax expense of $5 and $62
(43) (951)
Other comprehensive loss
(43) (951)
Comprehensive loss
$ (90,413) $ (106,350)
See accompanying notes to consolidated financial statements.
BOWFLEX INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
Common Stock Retained
Earnings (Deficit)
Accumulated Other Comprehensive Loss
Total
Shareholders'
Equity (Deficit)
Shares Amount
Balances at March 31, 2022 31,268 $ 6,483 $ 158,093 $ (527) $ 164,049
Net loss - - (105,399) - (105,399)
Foreign currency translation adjustment, net of income tax expense of $62
- - - (951) (951)
Stock-based compensation expense - 3,885 - - 3,885
Common stock issued under equity compensation plan, net of shares withheld for tax payments 458 (497) - - (497)
Common stock issued under employee stock purchase plan 119 213 - - 213
Balances at March 31, 2023 31,845 10,084 52,694 (1,478) 61,300
Net loss - - (90,370) - (90,370)
Foreign currency translation adjustment, net of income tax expense of $5
- - - (43) (43)
Issuance of common stock upon sale of shares and exercise of pre-funded warrants
4,098 1,671 - - 1,671
Stock-based compensation expense - 3,688 - - 3,688
Common stock issued under equity compensation plan, net of shares withheld for tax payments 393 (123) - - (123)
Common stock issued under employee stock purchase plan 76 64 - - 64
Balances at March 31, 2024 36,412 $ 15,384 $ (37,676) $ (1,521) $ (23,813)
See accompanying notes to consolidated financial statements.
BOWFLEX INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended March 31,
2024 2023
Cash flows from operating activities:
Loss from continuing operations
$ (90,370) $ (107,488)
Income from discontinued operations
- 2,089
Net loss
(90,370) (105,399)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 11,197 11,103
Provision for allowance for doubtful accounts 1,078 761
Inventory lower-of-cost or net realizable value adjustments
- 821
Stock-based compensation expense 3,688 3,885
Gain on asset dispositions
(9,021) (2)
Loss on debt extinguishment 353 228
Goodwill and asset impairment charge
39,635 26,965
Deferred income taxes, net of valuation allowances 868 8,958
Reorganization items
534 -
Other 1,631 691
Changes in operating assets and liabilities:
Trade receivables 8,864 39,247
Inventories 13,986 64,954
Prepaids and other assets 4,432 11,077
Income taxes receivable 581 221
Trade payables 25,621 (22,061)
Liability-classified stock-based compensation expense (24) 24
Accrued liabilities and other liabilities, including warranty obligations (6,936) (22,627)
Net cash provided by operating activities
6,117 18,846
Cash flows from investing activities:
Proceeds from sale of equity investment
2,350 -
Proceeds from sale of intellectual property
10,500 -
Purchases of property, plant and equipment and capitalized software development (2,891) (12,618)
Net cash provided by (used in) investing activities
9,959 (12,618)
Cash flows from financing activities:
Proceeds from long-term debt 17,200 88,261
Payments on long-term debt (32,101) (89,660)
Payment of debt issuance costs (1,400) (2,153)
Early termination of debt
(353) -
Payments on finance lease liabilities (120) (119)
Proceeds from public offering net of transaction costs
4,547 -
Proceeds from employee stock purchases 64 213
Tax payments related to stock award issuances (123) (497)
Net cash used in financing activities
(12,286) (3,955)
Effect of exchange rate changes (170) (2,059)
Net increase in cash and restricted cash
3,620 214
Cash and restricted cash at beginning of period 18,312 18,098
Cash and restricted cash at end of period $ 21,932 $ 18,312
Supplemental disclosure of cash flow information:
Cash (received) paid for income taxes, net
$ (57) $ 255
Cash paid for interest 2,290 2,886
Supplemental disclosure of non-cash investing activities:
Capital expenditures incurred but not yet paid $ 39 $ 379
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets to the total of the same amounts shown above:
Year Ended March 31,
2024 2023
Cash $ 8,658 $ 17,362
Restricted cash 13,274 950
Total cash and restricted cash
$ 21,932 $ 18,312
See accompanying notes to consolidated financial statements.
BOWFLEX INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
BowFlex Inc. and subsidiaries (collectively, "Bowflex," the "Company," "we" or "us") was founded in 1986 and incorporated in the State of Washington in 1993. Our headquarters are located in Vancouver, Washington.
We previously marketed our products through two distinct distribution channels, Direct and Retail, which we consider to be separate business segments. Our Direct business offered products directly to consumers through television and internet advertising, catalogs and our websites. Our Retail business offered our products through a network of independent retail companies and specialty retailers with stores and websites located in the U.S. and internationally. We also previously derived a portion of our revenue from the licensing of our brands and intellectual property.
Going Concern
The accompanying condensed consolidated financial statements of the Company have been prepared assuming the Company will continue as a going concern in accordance with U.S. GAAP. The going concern basis of presentation assumes that the Company will continue in operation one year after the date these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.
Pursuant to the requirements of the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date these financial statements are issued. This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.
As a result of the continued challenging retail operating environment, deteriorating macroeconomic conditions, and decline in customer demand, we experienced a significant year over year decline in our revenue. Additionally, we now believe that conditions will not improve in the next several quarters, which is negatively affecting our liquidity projections.
As further described in Note 2, we filed voluntary petitions for relief under the Bankruptcy Code on March 4, 2024. As a result of these conditions and events, management believes there is substantial doubt about our ability to continue as a going concern within one year after the date of issuance of these Consolidated Financial Statements. The accompanying Consolidated Financial Statements have been prepared under the going concern basis of accounting as required by U.S. GAAP and do not include any adjustments that might be necessary should we be unable to continue as a going concern.
Bankruptcy Accounting
As a result of the Bankruptcy Petitions with the Bankruptcy Court, we have applied the provisions of ASC 852, Reorganization, in preparing the accompanying Consolidated Financial Statements. ASC 852 requires that, for periods including and after the filing of a chapter 11 petition, the Consolidated Financial Statements distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business.
Accordingly, for the period beginning March 2024, pre-petition unsecured and undersecured claims related to the Debtors that may be impacted by the bankruptcy reorganization process have been classified as Liabilities subject to compromise in the Consolidated Balance Sheets. Liabilities subject to compromise include pre-petition liabilities for which there is uncertainty about whether such pre-petition liabilities could be impaired as a result of the Chapter 11 Cases. Liabilities subject to compromise are recorded at the expected amount of the total allowed claim, even if they may ultimately be settled for different amounts. See Note 2 for additional information. The following table sets forth, as of March 31, 2024, information about the amounts presented as Liabilities subject to compromise in our Consolidated Balance Sheets (in thousands):
Year Ended March 31, 2024
Accounts Payable $ 48,682
Accrued Expenses 5,164
Total $ 53,846
Additionally, certain expenses resulting from and recognized during our bankruptcy proceedings are now being recorded in Reorganization items, net in our Consolidated Statements of Operations. The following table sets forth, for the year ended March 31, 2024, information about the amounts presented as Reorganization items, net in our Consolidated Statements of Operations (in thousands):
Year Ended March 31, 2024
Professional Fees $ 1,439
Debt Financing Fees 458
Total $ 1,897
Basis of Consolidation and Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and relate to the Company and its subsidiaries, all of which are wholly-owned, directly or indirectly. Intercompany transactions and balances have been eliminated in consolidation.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Unless indicated otherwise, all information regarding our operating results pertain to our continuing operations.
Discontinued Operations
Results from discontinued operations relate to the disposal of our former Nautilus® Commercial business, which was completed in April 2011. We reached substantial completion of asset liquidation at December 31, 2012. Although there was no revenue related to our former Commercial business from January 1, 2021 through March 31, 2024, we continued to accrue interest associated with an uncertain tax position on discontinued international operations, and incurred an immaterial amount of product liability expenses associated with products previously sold into the Commercial channel through fiscal 2023.
Results of operations related to the Commercial business have been presented in the consolidated financial statements as discontinued operations for all periods presented.
Use of Management's Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities in the financial statements. Our critical accounting estimates relate to goodwill, other long-term assets and liabilities subject to compromise. Actual results could differ from our estimates.
Concentrations
Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents held in bank accounts in excess of federally-insured limits and trade receivables. Trade receivables are generally unsecured and therefore collection is affected by the economic conditions in each of our principal markets.
We rely on third-party contract manufacturers in Asia for substantially all of our products and for certain product engineering support. Business operations could be disrupted by natural disasters, difficulties in transporting products from non-U.S. suppliers, as well as political, social or economic instability in the countries where contract manufacturers or their vendors or customers conduct business. While any such contract manufacturing arrangement could be replaced over time, the temporary loss of the services of any primary contract manufacturer could delay product shipments and cause a significant disruption in our operations. In the fiscal year ended March 31 2024 ("fiscal 2024") we had two vendors that each individually accounted for more than 11%, but less than 49% of our trade payables. In the fiscal year ended March 31 2023 ("fiscal 2023") we had one vendor that accounted for 37% of our trade payables.
We derive a significant portion of our net sales from a small number of our Retail customers. A loss of business from one or more of these large customers, if not replaced with new business, would negatively affect our operating results and cash flows. In fiscal 2024, we had one customer that accounted for 12% of our net sales. In fiscal 2023, we had one customer that accounted for 19% of our net sales.
In fiscal 2024, we had three customers that each individually accounted for more than 10%, but less than 29% of our trade receivables. In fiscal 2023, we had three customers that each individually accounted for more than 10%, but less than 39% of our trade receivables.
Restricted Cash
We are required by our banking partner to maintain a restricted bank account to cover for exposures on corporate credit cards and letters of credits. The use of these funds are restricted until the exposure with the banking partner is closed. In addition, restricted cash on March 31, 2024 includes a $3.75 million escrow deposit received in relation to our bankruptcy proceedings. See Note 2, Bankruptcy Proceedings.
Derivative Securities
We enter into foreign exchange forward contracts to offset the earnings impacts of exchange rate fluctuations on certain monetary assets and liabilities. A hypothetical 10% increase in interest rates, or a 10% movement in the currencies underlying our foreign currency derivative positions, would have material impacts on our results of operations, financial position or cash flows. Gains and losses on foreign currency forward contracts are recognized in the Other, net line of our consolidated statements of operations.
We do not enter into derivative instruments for any purpose other than to manage our interest rate or foreign currency exposure. That is, we do not engage in interest rate or currency exchange rate speculation using derivative instruments. For additional information, refer to Note 10, Derivatives.
Trade Receivables
Accounts receivable primarily consists of trade receivables due from our Retail segment customers. Pursuant to the requirements of the Financial Accounting Board's Accounting Standards Codification Topic 326, "Financial Instruments - Credit Losses, we measure credit losses utilizing a methodology that reflects expected credit losses and consider a broader range of reasonable and supportable information to inform credit loss estimates. We determine an allowance for doubtful accounts based on historical customer experience and other currently available evidence. When a specific account is deemed uncollectible, the account is written off against the allowance. For additional information, refer to Note 11, Trade Receivables.
Inventories
Inventories are stated at the lower of cost and net realizable value ("NRV"), with cost determined based on the first-in, first-out method. We establish inventory allowances for excess, slow-moving and obsolete inventory based on inventory levels, expected product life and forecasted sales. Inventories are written down to NRV based on historical demand, competitive factors, changes in technology and product lifecycles. For additional information, refer to Note 12, Inventories.
Property, Plant and Equipment
Property, plant and equipment is stated at cost, net of accumulated depreciation. Improvements or betterments which add new functionality or significantly extend the life of an asset are capitalized. Software costs related to an asset developed for internal use are capitalized after the preliminary project stage, management has committed to the completion of the project and it is probable the project will be complete and used as intended. Expenditures for maintenance and repairs are expensed as incurred. The cost of assets retired, or otherwise disposed of, and the related accumulated depreciation, are removed from the accounts at the time of disposal. Gains and losses resulting from asset sales and dispositions are recognized in the period in which assets are disposed. Depreciation is recognized, using the straight-line method, over the lesser of the estimated useful lives of the assets or, in the case of leasehold improvements, the lease term, including renewal periods if we expect to exercise our renewal options. Depreciation on automobiles, computer software and equipment, machinery and equipment is determined based on estimated useful lives, which generally range from two to seven years, and leasehold improvements four to twenty years and furniture and fixtures which generally range from five to twenty years. For additional information, refer to Note 13, Property, Plant and Equipment.
Intangible Assets
Indefinite-lived intangible assets consist of acquired trademarks, specifically trade names and are stated at cost and are not amortized; instead, they are tested for impairment at least annually. We assess the value of indefinite-lived intangible assets under either a qualitative or quantitative approach. Under a qualitative approach, we consider various market factors, including applicable key assumptions also used in the quantitative assessment listed below. If we determine that it is more likely than not that an indefinite-lived intangible assets is impaired, the quantitative approach is used to assess the fair value and the amount of the impairment. We review our indefinite-lived trademarks for impairment in the fourth quarter of each year or when events or changes in circumstances indicate that the assets may be impaired. The fair value of trademarks is estimated using the relief-from-royalty method to estimate the value of the cost savings and a discounted cash flows method to estimate the value of future income. The sum of these two values for each trademark is the fair value of the trademark. If the carrying amount of trademarks exceeds the estimated fair value, we calculate impairment as the excess of carrying amount over the estimate of fair value.
We tested our indefinite-lived trademarks for impairment in the fourth quarter of fiscal 2024 and fiscal 2023. Due to ongoing bankruptcy proceedings, we determined that an impairment charge of $0.1 million was necessary for the fiscal year ended March 31, 2024. See Note 8 and Note 15 .
Definite-lived intangible assets consist primarily of acquired trade names, customer relationships, patents and patent rights and are stated at cost, net of accumulated amortization. Definite-lived intangible assets are evaluated for impairment as discussed below under Impairment of Long-Lived Assets. We recognize amortization expense for our definite-lived intangible assets on a straight-line basis over the estimated useful lives. For further information regarding other intangible assets, see Note 15, Intangible Assets.
Impairment of Long-Lived Assets
Long-lived assets, including property, plant and equipment and definite-lived intangible assets, are evaluated for impairment periodically whenever events or changes in circumstances indicate that related carrying amounts may not be recoverable from undiscounted cash flows. These events include, but are not limited to, significant declines in our market capitalization, history of losses and adverse market conditions. During the quarter ended December 31, 2023, we determined that a triggering event occurred and performed an asset impairment test, which resulted in a $20.9 million impairment charge. Additionally, during the quarter ended March 31, 2024, we determined that, due to ongoing bankruptcy proceedings, an additional triggering event had occurred resulting in a $18.8 million impairment charge. See Note 8, Goodwill and Asset Impairment Charge for additional information.
No long-lived asset impairment was recorded in fiscal 2023.
Equity Investments
ASU 2016-01 Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, requires us to measure all equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in earnings. We do not hold any equity investments where we use quoted market prices to determine the fair values. For equity securities without readily determinable fair values, we have elected the measurement alternative under which we measure these investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
For the year ended March 31, 2023, we recognized an impairment of $0.7 million as we made a qualitative assessment of the investment after observing impairment indicators upon receipt of the most recent financial statements and third-party valuation reports. The fair value was determined by reviewing the financial information and financial performance indicating a significant adverse change in the general market conditions in which the investee operates.
No impairment was recorded during the year ended March 31, 2024 and we have not recognized any upward adjustments on either an annual or cumulative basis due to observable price changes.
See Note 16, Equity Investments for additional information.
Revenue Recognition
Our Direct and Retail revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. For our Direct channel, control is transferred when products are shipped to customers as the entity has fulfilled the promise to transfer the goods. For Retail, control is transferred when contractual shipping terms are performed for the customer, generally upon our delivery to the carrier, in accordance with the terms of a sales contract.
Our product sales and shipping revenues are reported net of promotional discounts, returns allowances, contractual rebates, and consideration payable to our customers. We estimate the revenue impact of retail sales incentive programs based on the planned duration of the program and historical experience. If the amount of sales incentives is reasonably estimable, the impact of such incentives is recorded at the later of the time the customer is notified of the sales incentive or the time of the sale.
We estimate our liability for product returns based on historical experience, and record the expected customer refund liability as a reduction of revenue, and the expected inventory right of recovery, net of estimated scrap, as a reduction of cost of sales. If actual return costs differ from previous estimates, the amount of the liability and corresponding revenue are adjusted in the period in which such costs occur.
We provide standard assurance-type warranties on our products which cover defective materials or nonconforming products, and is included with each product at no additional charge. In addition, we offer service-type/extended warranties for an additional fee to our Direct channel customers and Retail specialty and commercial customers. These warranty contracts provide coverage on labor and parts beyond the standard assurance warranty period.
For our product sales, services, and freight and delivery fees, we are the principal in the contract and recognize revenue at a point in time. For our Direct channel extended warranty contracts, we are the agent and recognize revenue on a net basis because our performance obligation is to facilitate the arrangement between our customers and the third-party performance obligor.
Sales of our subscriptions are deemed to be one performance obligation and we recognize revenue from these arrangements ratably over the subscription term as the performance obligation is satisfied. Revenue generated from subscriptions is recorded in our Direct segment.
We offer free trials of subscriptions, bundled with product offerings (e.g., subscription for premium content). For these types of transactions that involve multiple performance obligations, the transaction price require allocations to the distinct performance obligation, as the free trial provides a material right. The transaction price is then allocated to each performance obligation based on relative standalone selling price. We determine stand-alone selling price based on prices charged to customers. Breakage is factored into the determination of the stand-alone selling price of a free trial. Breakage or activation rate, is defined as a percentage of those that never activate a free-trial offering.
Some of our contracts with customers contain multiple performance obligations. For customer contracts that include multiple performance obligations, we account for individual performance obligations if they are distinct. We allocate the transaction price to each performance obligation based on its relative standalone selling price. We generally determine standalone selling price based on prices charged to customers on standalone sales or using expected cost plus margin.
Significant judgement, such as breakage or activation rate, is factored into the determination of the stand-alone selling price of a subscription. Breakage or activation rate, is defined as a percentage of those that never activate a free-trial offering.
Payment terms for our retail partners depend on the country of sale or agreement with the customer and payment is generally required within 90 days or less of shipment to or receipt by the retail partner. Payment is due at the time of sale for our e-commerce transactions.
Deferred net revenue occurs because sales transactions include future update rights and performance obligations, which are subject to a recognition period. This balance increases from period to period by revenue that is deferred from current sales with these types of service obligations and is reduced by the recognition of revenue from prior sales that were deferred. Generally, revenue is recognized as the services are provided.
Many Direct business customers finance their purchases through a third-party credit provider, for which we pay a commission or financing fee to the credit provider. Revenue for such transactions is recognized based on the sales price charged to the customer, net of promotional discounts, and the related commission or financing fee is included in selling and marketing expense.
Exemptions and Elections
We apply the practical expedient as per ASC 606-10-50-14 and do not disclose information related to remaining performance obligations due to their original expected durations are one year or less.
We expense sales commissions when incurred because the amortization period would have been less than one year. These costs are recorded in selling and marketing expense.
We generally account for our shipping and handling activities as a fulfillment activity, consistent with the timing of revenue recognition; that is, when our customer takes control of the transferred goods. In the event that a customer were to take control of a product prior to shipment, we make an accounting policy election to treat such shipping and handling activities as a fulfillment cost. For additional information, see Note 7, Revenues.
Sales Discounts and Returns Allowance
Product sales and shipping revenues are reported net of promotional discounts and return allowances. We estimate the revenue impact of retail sales incentive programs based on the planned duration of the program and historical experience. If the amount of sales incentives is reasonably estimable, the impact of such incentives is recorded at the later of the time the customer is notified of the sales incentive or the time of the sale. We estimate our liability for product returns based on historical experience, and record the expected customer refund liability as a reduction of revenue, and the expected inventory right of recovery, net of estimated scrap, as a reduction of cost of sales. If actual return costs differ from previous estimates, the amount of the liability and corresponding revenue are adjusted in the period in which such costs occur.
Activity in our sales discounts and returns allowance was as follows (in thousands):
Year Ended March 31,
2024 2023
Balance at beginning of period $ 8,695 $ 12,179
Charges to reserve 14,717 29,871
Reductions for sales discounts and returns (20,306) (33,355)
Balance at end of period $ 3,106 $ 8,695
Taxes Collected from Customers and Remitted to Governmental Authorities
Taxes collected from customers and remitted to governmental authorities are recorded on a net basis and excluded from net sales.
Shipping and Handling Fees
Shipping and handling fees billed to customers are recorded net of discounts and included in both net sales and cost of sales. We generally account for our shipping and handling activities as a fulfillment activity, consistent with the timing of revenue recognition; that is, when our customer takes control of the transferred goods.
Cost of Sales
Cost of sales primarily consists of: inventory costs; royalties paid to third parties; employment and occupancy costs of warehouse and distribution facilities, including depreciation of improvements and equipment; transportation expenses; product warranty expenses; distribution information systems expenses; and allocated expenses for shared administrative functions.
Product Warranty Obligations
Our products carry defined warranties for defects in materials or workmanship which, according to their terms, generally obligate us to pay the costs of supplying and shipping replacement parts to customers and, in certain instances, pay for labor and other costs to service products. Outstanding product warranty periods range from thirty days to, in limited circumstances, the lifetime of certain product components. We record a liability at the time of sale for the estimated costs of fulfilling future warranty claims. If necessary, we adjust the liability for specific warranty-related matters when they become known and are reasonably estimable. Estimated warranty expense is included in cost of sales, based on historical warranty claim experience and available product quality data. Warranty expense is affected by the performance of new products, significant manufacturing or design defects not discovered until after the product is delivered to the customer, product failure rates, and higher or lower than expected repair costs. If warranty expense differs from previous estimates, or if circumstances change such that the assumptions inherent in previous estimates are no longer valid, the amount of product warranty obligations is adjusted accordingly.
Litigation and Loss Contingencies
From time to time, we may be involved in various claims, lawsuits and other proceedings. These legal proceedings involve uncertainty as to the eventual outcomes and losses which may be realized when one or more future events occur or fail to occur. We record expenses for litigation and loss contingencies as a component of general and administrative expense when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. When a loss contingency is not both probable and estimable, we do not establish an accrued liability. However, if the loss (or an additional loss in excess of the accrual) is at least a reasonable possibility and material, then we disclose an estimate of the possible loss or range of loss, if such estimate can be made, or disclose that an estimate cannot be made. For additional information, see Note 27, Commitments and Contingencies.
Advertising and Promotion
We expense our advertising and promotion costs as incurred. Production costs of television advertising commercials are recorded in prepaids and other current assets until the initial broadcast, at which time such costs are expensed. Advertising and promotion costs are included in selling and marketing expenses and totaled $12.6 million and $23.2 million for fiscal 2024 and fiscal 2023, respectively. Prepaid advertising and promotion costs were $0.1 million and $0.2 million for fiscal 2024 and fiscal 2023, respectively.
Research and Development
Internal research and development costs, which primarily consist of salaries and wages, employee benefits, expenditures for materials, and fees to use licensed technologies, are expensed as incurred. Third-party research and development costs for products under development or being researched, if any, are expensed as the contracted work is performed. Improvements or betterments which add new functionality or significantly extend the life of an asset are capitalized. Software costs related to an asset developed for internal use are capitalized after the preliminary project stage, management has committed to the completion of the project and it is probable the project will be complete and used as intended.
Income Taxes
We account for income taxes based on the asset and liability method, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates expected to be in effect when the temporary differences are expected to be included, as income or expense, in the applicable tax return. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period of the enactment. Valuation allowances are provided against deferred income tax assets if we determine it is more likely than not that such assets will not be realized.
Unrecognized Tax Benefits
We recognize a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained based on the technical merits of the position upon examination, including resolutions of any related appeals or litigation. We recognize tax-related interest and penalties as a component of income tax expense.
Foreign Currency Translation
We translate the accounts of our non-U.S. subsidiaries into U.S. dollars as follows: revenues, expenses, gains and losses are translated at weighted-average exchange rates during the year; and assets and liabilities are translated at the exchange rate on the balance sheet date. Translation gains and losses are reported in our Consolidated Balance Sheets as a component of accumulated other comprehensive loss.
Gains and losses arising from foreign currency transactions, including transactions between us and our non-U.S. subsidiaries, are recorded as a component of other income (expense) in our Consolidated Statements of Operations.
Fair Value of Financial Instruments
The carrying values of cash, restricted cash, trade receivables, prepaids and other current assets, trade payables and accrued liabilities approximate fair value due to their short maturities.
For additional information on financial instruments recorded at fair value on a recurring basis refer to Note 9, Fair Value Measurements.
Stock-Based Compensation
We recognize stock-based compensation expense on a straight-line basis over the applicable requisite service period, based on the grant-date fair value of the award. To the extent a stock-based award is subject to performance conditions, the amount of expense recorded in a given period, if any, reflects our assessment of the probability of achieving the performance targets.
Fair value of stock options and shares subject to our employee stock purchase plan are estimated using the Black-Scholes valuation model; fair value of performance share unit ("PSU") awards, restricted stock unit ("RSU") awards and restricted stock awards ("RSA") is based on the closing market price on the day preceding the grant. Our accounting treatment of forfeiture expenses reversals is at the forfeiture date and do not estimate future forfeitures prior to their actual occurrence.
Shares to be issued upon the exercise of stock options or the requisite service period of stock awards will come from newly issued shares.
Income (Loss) Per Share Amounts
Basic income per share amounts were computed using the weighted average number of common shares outstanding. Diluted income per share amounts were calculated using the number of basic weighted average shares outstanding increased by dilutive potential common shares related to stock-based awards, as determined by the treasury stock method. If there is a loss from continuing operations, diluted earnings per share is the same as basic earnings per share.
Recent Accounting Pronouncements
Newly-Adopted Pronouncements
ASU 2016-13
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. In May 2019, the FASB issued ASU 2019-05, which provides entities to have certain instruments with an option to irrevocably elect the fair value option. In November 2019, the FASB issued ASU 2019-11, which provides clarification and addresses specific issues about certain aspects of ASU 2016-13. In March 2020, the FASB issued ASC 2020-03, which provides an update to clarify or address specific issues. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those years. We adopted ASU 2016-13 on April 1, 2023 and it had no material impact on our financial position, results of operations or cash flows.
ASU 2020-06
In August 2020, the FASB issued ASU No. 2020-06, "Debt-Debt with Conversion and Other Options (Subtopic 470-20)" and "Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity," which address issues identified as a result of the complexity associated with applying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and equity. ASU No. 2020-06 will become effective for us on January 1, 2024. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. FASB specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. We early adopted ASU No. 2020-06 on April 1, 2023 and it had no material impact on our financial position, results of operations or cash flows.
(2) BANKRUPTCY PROCEEDINGS
Voluntary Petitions for Bankruptcy
On March 4, 2024 (the “Petition Date”), the Company and certain of its subsidiaries (together, the “Company Parties”) filed voluntary petitions (the “Bankruptcy Petitions”) for relief under chapter 11 of title 11 of the United States Code 11 U.S.C. §§ 101-1532 (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of New Jersey (the “Bankruptcy Court”). The chapter 11 cases for the Company Parties (the “Chapter 11 Cases”) are being jointly administered under the caption In re BowFlex Inc., et al., Case No. 24-12364. Through the Chapter 11 Cases, the Company Parties sought to implement a sale of substantially all of their assets pursuant to Section 363 of the Bankruptcy Code.
When we filed the Bankruptcy Petitions with the Bankruptcy Court, we expressed our intention to sell substantially all of our assets as part of the Chapter 11 Cases. The court approved the continued operation of our business as debtors in possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. Additionally, the Bankruptcy Court approved certain motions filed by us requesting relief intended to enable continued ordinary course operations and facilitate an orderly transition of the assets. As of and for the fiscal year ended March 31, 2024, claims from creditors are reflected in the Consolidated Balance Sheets and in Note 3 BowFlex Inc. Condensed Combined Financial Statements as Liabilities subject to compromise in accordance with ASC 852. It is anticipated that additional claims may arise post-filing due to the rejection of contracts and from the determination by the Bankruptcy Court, or agreed to by parties in interest, of allowed claims for contingencies and other disputed amounts.
Additional information about the Chapter 11 Cases is available online at https://dm.epiq11.com/case/bowflex/info.
Stalking Horse Asset Purchase Agreement
On March 4, 2024, the Company entered into a “stalking horse” asset purchase agreement (the “Asset Purchase Agreement”) with Johnson Health Tech Retail, Inc. ("Johnson Health Tech") to sell the assets of the Company (the “Acquired Assets”) identified in the Asset Purchase Agreement, representing substantially all of the assets of the Company, for a total of $37.5 million in cash at the closing of the transaction, including a deposit of $3.75 million paid into an escrow account on March 4, 2024, but less closing adjustment amounts for accounts receivable, inventory and certain transfer taxes. Refer to Note 28, Subsequent Events for additional information.
As of March 31, 2024, the acquisition of the Acquired Assets by the Bidder pursuant to the Stalking Horse Asset Purchase Agreement was subject to approval by the Bankruptcy Court and an auction process to solicit higher or otherwise more favorable bids.
On April 15, 2024, the Bankruptcy Court entered an order authorizing the sale of the Acquired Assets pursuant to the terms of the Asset Purchase Agreement (the “Asset Sale”) and on April 22, 2024, the Asset Sale closed (the “Closing”). As previously reported, there were insufficient proceeds from the Asset Sale for common stockholders to receive value for their shares. Further, there are insufficient funds for the Company to make, and the Company will not be making, any future distributions to stockholders.
DIP Credit Facility
Subject to the approval of the Bankruptcy Court, we amended our existing Term Loan Credit Agreement with Crystal Financial LLC d/b/a SLR Credit Solutions (“SLR”) and its affiliates dated November 30, 2022 (the “DIP Amendment”) to, among other things, make available to us a debtor-in-possession financing facility in an aggregate amount up to $25 million, comprised of a $9 million revolving commitment and $16 million term loan reflecting the roll-up of our pre-petition term loans of approximately $16 million with SLR (the “DIP Facility”).
On April 22, 2024, proceeds from the Asset Sale were used to repay the Company’s obligations under the DIP Facility, and immediately upon such repayment, the DIP Facility was terminated.
(3) BOWFLEX INC. CONDENSED COMBINED FINANCIAL STATEMENTS
On the Petition Date, the Company Parties filed the Bankruptcy Petitions for relief under the Bankruptcy Code in the Bankruptcy Court. The following financial statements (Balance Sheets and Statements of Operations and Cash Flows) are presented as of and for the year ended March 31, 2024. For additional information regarding the Bankruptcy Petitions, refer to Note 2, Bankruptcy and Note 28, Subsequent Events.
BOWFLEX INC.
(DEBTOR-IN-POSSESSION)
BALANCE SHEET
(In thousands)
As of March 31,
Assets 2024
Cash $ 15,815
Trade receivables, net of allowances 7,705
Intercompany trade receivables (6,742)
Inventories 29,529
Prepaids and other current assets 8,574
Income taxes receivable 6,959
Total current assets 61,840
Property, plant and equipment, net 284
Operating lease right-of-use assets -
Other intangible assets, net 2,900
Other assets 537
Total assets $ 65,562
Liabilities and Shareholders' Equity
Trade payables $ 2,934
Intercompany trade payables 1,575
Accrued liabilities 9,062
Operating lease liabilities, current portion 4,507
Financing lease liabilities, current portion 125
Warranty obligations, current portion 1,875
Income taxes payable 1,735
Debt payable, current portion, net of unamortized debt issuance costs 15,999
Total current liabilities 37,812
Operating lease liabilities, non-current 11,026
Financing lease liabilities, non-current 167
Warranty obligations, non-current 617
Income taxes payable, non current 2,105
Deferred income tax liabilities, non-current 100
Other long-term liabilities 175
Liabilities subject to compromise 53,846
Total liabilities 105,848
Shareholders' equity (deficit):
Common stock - no par value, 75,000 shares authorized, 36,412 and 31,845 shares issued and outstanding
15,384
Retained deficit (55,710)
Accumulated other comprehensive income 40
Total shareholders' deficit (40,286)
Total liabilities and shareholders' equity $ 65,562
See accompanying notes to consolidated financial statements
BOWFLEX INC.
(DEBTOR-IN-POSSESSION)
STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
Year Ended March 31,
Net Sales $ 180,988
Cost and expenses:
Cost of sales 135,037
Selling, operating and administrative 137,684
Other income, net
3,631
Loss from continuing operations before reorganization items and income taxes (88,102)
Reorganization items, net (1,897)
Income tax expense
1,309
Loss from continuing operations (91,308)
Discontinued operations: -
Loss from discontinued operations -
Income tax benefit of discontinued operations -
Income from discontinued operations -
Net loss $ (91,308)
See accompanying notes to consolidated financial statements
BOWFLEX INC.
(DEBTOR-IN-POSSESSION)
STATEMENT OF CASH FLOWS
(In thousands)
Year Ended March 31,
Cash flows from operating activities:
Loss from continuing operations
$ (91,308)
Gain from discontinued operations
-
Net loss
(91,308)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization 11,160
Provision for allowance for doubtful accounts 998
Stock-based compensation expense 3,688
Gain on asset dispositions
(9,021)
Loss on debt extinguishment 353
Asset impairment charge 38,874
Deferred income taxes, net of valuation allowance 868
Reorganization items 534
Other 4,189
Changes in operating assets and liabilities:
Trade receivables 18,770
Inventories 6,473
Prepaids and other assets 4,033
Income taxes receivable 359
Trade payables 26,019
Liability-classified stock-based compensation expense (24)
Accrued liabilities and other liabilities, including warranty obligations (7,819)
Net cash provided by operating activities (1)
8,146
Cash flows from investing activities:
Proceeds from sale of equity investments 2,350
Proceeds from sale of intellectual properties 10,500
Purchases of property, plant and equipment (2,895)
Net cash provided by investing activities (1)
9,955
Cash flows from financing activities:
Proceeds from long-term debt 17,200
Payments on long-term debt (32,101)
Payments of debt issuance costs (1,400)
Early termination of debt (353)
Payments on finance lease liabilities (120)
Proceeds from public offering net of transaction costs 4,547
Proceeds from employee stock purchases 64
Tax payments related to stock award issuances (123)
Net cash used in financing activities
(12,286)
Effect of exchange rate changes on cash and cash equivalents 51
Increase in cash, cash equivalents and restricted cash
5,866
Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash at beginning of period
9,949
Cash, cash equivalents and restricted cash at end of period $ 15,815
(1) The difference between the amount of Net cash provided by operating activities and Net cash provided by investing activities included in the table above and the amount of Net cash provided by operating activities and Net cash provided by investing activities included in the Consolidated Statements of Cash Flows for the same period primarily related to the fact that the table above: (i) excludes the operating cash flows of Non-Debtor subsidiaries, which are included in the Consolidated Statements of Cash Flows, and (ii) includes the effects of operating and investing cash flows of the Debtors with the Non-Debtor subsidiaries, which are eliminated in the Consolidated statements of Cash Flows
See accompanying notes to consolidated financial statements
(4) NYSE DELISTING NOTIFICATION
On September 21, 2023, we received notice from the New York Stock Exchange (the “NYSE”) that we were not in compliance with the continued listing standard set forth in Section 802.01C of the NYSE’s Listed Company Manual because the average closing price of our common stock was less than $1.00 per share over a consecutive 30 trading-day period. On November 27, 2023, we received written notice from the NYSE that we were not in compliance with the continued listing standard set forth in Section 802.01B of the NYSE Listed Company Manual because our average global market capitalization over a consecutive 30 trading-day period was less than $50.0 million and, at the same time, our last reported stockholders’ equity was less than $50.0 million.
We submitted our compliance plan (the "Plan") to the NYSE, and if that Plan had been accepted by NYSE, we would have had up to 18 months to cure the global market capitalization deficiency and to return to compliance with Sections 802.01B and 802.01C of the NYSE continued listing standards.
On March 5, 2024, the Company received a written notice from the staff of NYSE Regulation notifying the Company that NYSE Regulation had determined to commence proceedings to delist the Company’s common stock (NYSE: BFX) from the New York Stock Exchange (“NYSE”). Trading in the Company’s common stock on the NYSE was suspended immediately.
NYSE Regulation reached its decision that the Company was no longer suitable for listing pursuant to Section 802.01D of the NYSE’s Listed Company Manual after the Company disclosed that the Company and certain of its subsidiaries had voluntarily initiated the Chapter 11 Cases in the Bankruptcy Court. In reaching its delisting determination, NYSE Regulation noted the uncertainty as to the ultimate effect of this process on the value of the Company’s common stock.
NYSE Regulation applied to the Securities and Exchange Commission (the “SEC”) to delist the Company’s common stock on March 15, 2024.
The Company is under no obligation to develop or maintain a market in the common stock. The Company cannot provide assurance that its common stock will trade on the OTC or any other market, that brokers will provide public quotes of the Company's common stock, that a market for the Company's common stock will develop or be maintained, or that the trading volume of the Company's common stock will be sufficient to generate an efficient trading market. Holders of common stock may not be able to sell or otherwise transfer such common stock.
(5) DISCONTINUED OPERATIONS
We completed the tax deregistration of a foreign entity that was part of the discontinued operations during fiscal 2023. As a result, the previously unrecognized tax benefit and associated accrued interest and penalty in the amount of $2.1 million was released and recorded as a component of income taxes from discontinued operations during fiscal 2023. There were no further significant activities or changes to our discontinued operations during fiscal 2023 and no material activity to our discontinued operations during fiscal 2024.
(6) RESTRUCTURING AND EXIT CHARGES
In February 2023, we announced and began implementing a restructuring plan that included a reduction in workforce and other exit costs.
The following table summarizes restructuring reserve activity during fiscal 2023 and 2024 (in thousands):
Employee Severance and Benefits Third-Party Costs
Total
Accrued liability as of March 31, 2022
$ - $ - $ -
Charges
1,657 892 2,549
Payments
(547) (769) (1,316)
Accrued liability as of March 31, 2023
1,110 123 1,233
Charges
1,480 10,630 12,110
Payments
(1,110) (9,203) (10,313)
Accrued liability as of March 31, 2024
$ 1,480 $ 1,550 $ 3,030
The charges incurred due to the restructuring plan are included within Restructuring and exit charges in the Consolidated Statements of Operations and the accrued charges are included in Accrued Liabilities on our Consolidated Balance Sheets. Accrued employee severance is primarily related to obligations to employees at our Swiss subsidiary, while third party costs represent consulting and professional services incurred after we filed petitions for Bankruptcy on March 4, 2024.
(7) REVENUES
Our revenues from contracts with customers disaggregated by revenue source, excluding sales-based taxes, were as follows (in thousands):
Year Ended March 31,
2024 2023
Product sales $ 185,975 $ 264,077
Extended warranties and services 3,843 4,896
Royalty income 1,116 3,371
Other(1)
15,030 14,429
Net sales $ 205,964 $ 286,773
(1) Other revenue is primarily subscription revenue and freight and delivery.
Our revenues disaggregated by geographic region, based on ship-to address, were as follows (in thousands):
Year Ended March 31,
2024 2023
United States $ 165,163 $ 232,139
Canada 19,268 37,820
Europe, the Middle East and Africa 18,517 4,371
All other 3,016 12,443
Net sales $ 205,964 $ 286,773
The following table provides information about our liabilities from contracts with customers, primarily customer deposits and deferred revenue for which advance consideration is received prior to the transfer of control or the performance obligation is not satisfied. Revenue is recognized when transfer of control occurs. All customer deposits and deferred revenue received are short-term in nature, recognized over the next twelve months. Significant changes in contract liabilities balances, including revenue recognized in the reporting period that was included in opening contract liabilities, are shown below (in thousands):
Year Ended March 31,
2024 2023
Balance at beginning of period $ 5,075 $ 6,285
Cash additions 188 1,258
Deferred revenue 6,732 7,228
Revenue recognition (6,913) (9,696)
Balance at end of period $ 5,082 $ 5,075
(8) GOODWILL AND ASSET IMPAIRMENT CHARGE
Goodwill and asset impairment charge consisted of the following (in thousands):
Year Ended March 31,
2024 2023
Goodwill
$ - $ 24,510
Intangible assets
137 2,455
Property, plant and equipment
24,255 -
Right of use assets
15,243 -
Total Goodwill and asset impairment
$ 39,635 $ 26,965
(9) FAIR VALUE MEASUREMENTS
Factors used in determining the fair value of financial assets and liabilities are summarized into three broad categories:
•Level 1 - observable inputs such as quoted prices (unadjusted) in active liquid markets for identical securities as of the reporting date;
•Level 2 - other significant directly or indirectly observable inputs, including quoted prices for similar securities, interest rates, prepayment speeds and credit risk; or observable market prices in markets with insufficient volume and/or infrequent transactions; and
•Level 3 - significant inputs that are generally unobservable inputs for which there is little or no market data available, including our own assumptions in determining fair value.
We did not have any assets measured at fair value on a recurring basis as of March 31, 2024 or 2023. Liabilities measured at fair value on a recurring basis were as follows (in thousands):
March 31, 2024
Level 1 Level 2 Level 3 Total
Liabilities:
Common Warrants $ - $ - $ 50 $ 50
Total liabilities at fair value $ - $ - $ 50 $ 50
March 31, 2023
Level 1 Level 2 Level 3 Total
Liabilities:
Derivatives
Foreign currency forward contracts $ - $ 141 $ - $ 141
Total liabilities at fair value $ - $ 141 $ - $ 141
We did not have any changes to our valuation techniques during any periods presented.
The fair value of our foreign currency forward contracts was calculated as the present value of estimated future cash flows using discount factors derived from relevant Level 2 market inputs, including forward curves and volatility levels.
The carrying value of our debt approximates its fair value and falls under Level 2 of the fair value hierarchy, as the interest rate is variable and based on current market rates.
We determined the fair value of the Common Warrants liability using the Black Scholes Option Pricing methodology with Level 3 inputs.
The following table presents the change in the fair value of Common Warrants for the periods indicated below (in thousands):
Total
Liability balance as of March 31, 2023 $ -
Additions of common warrant liability 2,994
Change in fair value of common warrant liability
(2,944)
Liability balance as of March 31, 2024
$ 50
Inherent in a Black Scholes valuation model are assumptions related to expected stock price, exercise price, stock-price volatility derived using our historical volatility, expected term, risk-free interest rate and dividend yield. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected term of the Common Warrants. The dividend yield percentage is zero based on our current expectations related to the payment of dividends during the expected term of the Common Warrants.
The key inputs into the Black Scholes pricing model were as follows:
Year Ended March 31, 2024
Stock Price $0.02
Exercise Price $1.35
Expected Life (years) 4.72
Expected Volatility 165.51%
See Notes 1, Significant Accounting Policies for a discussion of assets measured at fair value on a non-recurring basis.
(10) DERIVATIVES
From time to time, we enter into interest rate swaps to fix a portion of our interest expense, and foreign exchange forward contracts to offset the earnings impacts of exchange rate fluctuations on certain monetary assets and liabilities. We do not enter into derivative instruments for any purpose other than to manage interest rate or foreign currency exposure. That is, we do not engage in interest rate or currency exchange rate speculation using derivative instruments.
We may hedge our net recognized foreign currency assets and liabilities with forward foreign exchange contracts to reduce the risk that our earnings and cash flows will be adversely affected by changes in foreign currency exchange rates. These derivative instruments hedge assets and liabilities that are denominated in foreign currencies and are carried at fair value with changes in the fair value recorded as other income. These derivative instruments do not subject us to material balance sheet risk due to exchange rate movements because gains and losses on these derivatives are intended to offset gains and losses on the assets and liabilities being hedged.
As of March 31, 2024, we did not have any outstanding contract notional amounts.
The fair value of our derivative instruments was included in our Consolidated Balance Sheets as follows (in thousands):
Balance Sheet Classification As of March 31,
2024 2023
Derivative instruments not designated as cash flow hedges:
Foreign currency forward contracts Accrued liabilities $ - $ 141
The effect of derivative instruments on our Consolidated Statements of Operations was as follows (in thousands):
Statement of Operations Classification Year Ended March 31,
2024 2023
Derivative instruments not designated as cash flow hedges:
Gain (loss) recognized in earnings
Other, net $ 178 $ (24)
Income tax expense
Income tax expense
44 6
For additional information related to our derivatives, see Notes 9 and 22.
(11) TRADE RECEIVABLES
Trade receivables, net, consisted of the following (in thousands):
As of March 31,
2024 2023
Trade receivables $ 12,045 $ 22,107
Allowance for doubtful accounts (443) (618)
Trade receivables, net of allowance $ 11,602 $ 21,489
After closing adjustments, $8.6 million of the consolidated trade receivables balance at March 31, 2024 was subsequently sold to Johnson Health Tech Retail Inc. in the asset sale approved by the Bankruptcy Court on April 22, 2024. Refer to Note 28 - Subsequent Events.
Changes in our allowance for doubtful trade receivables were as follows (in thousands):
Year Ended March 31,
2024 2023
Beginning balance $ 618 $ 598
Charges to bad debt expense 1,078 761
Write-offs, net (1,253) (741)
Ending balance $ 443 $ 618
(12) INVENTORIES
Our inventories consisted of the following (in thousands):
As of March 31,
2024 2023
Finished goods $ 30,179 $ 42,463
Parts and components 2,925 4,136
Total inventories $ 33,104 $ 46,599
After closing adjustments, $30.2 million of the consolidated inventory balance at March 31, 2024 was subsequently sold to Johnson Health Tech Retail Inc. in the asset sale approved by the Bankruptcy Court on April 22, 2024. Refer to Note 28 - Subsequent Events.
(13) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in thousands):
Estimated
Useful Life
(in years) As of March 31,
2024 2023
Automobiles 5 $ - $ 23
Leasehold improvements 4 to 20 - 3,426
Computer software and equipment 2 to 7 - 57,223
Machinery and equipment 3 to 5 569 14,953
Furniture and fixtures 5 to 20 - 2,034
Work in progress (1)
N/A - 4,061
Total cost 569 81,720
Accumulated depreciation (285) (48,931)
Total property, plant and equipment, net $ 284 $ 32,789
(1) Work in progress includes information technology assets and production tooling.
See Note 1, Significant Accounting Policies and Note 8, Goodwill and asset impairment charge for information regarding non-cash impairment charges in fiscal 2024 and 2023.
Depreciation expense was as follows (in thousands):
Year Ended March 31,
2024 2023
Depreciation expense $ 11,144 $ 11,042
(14) LEASES
We have several noncancelable operating leases, primarily for office space, that expire at various dates over the next five years. These leases generally contain renewal options to extend for one lease term of five years. For leases that we are reasonably certain we will exercise the lease renewal options, the options were considered in determining the lease term, and associated potential option payments are included in the lease payments. The payments used in the renewal term were estimated using the percentage rate increase of historical rent payments for each location where the renewal will be exercised.
Payments due under the lease contracts include annual fixed payments for office space. Variable payments including payments for our proportionate share of the building’s property taxes, insurance, and common area maintenance are treated as non-lease components and are recognized in the period for which the costs occur.
The components of lease cost were as follows (in thousands):
Year Ended March 31,
2024 2023
Operating lease expense $ 4,791 $ 5,807
Amortization of right of use assets of finance leases assets 114 114
Interest expense of finance lease liabilities 7 10
Total lease expense $ 4,912 $ 5,931
Other information related to leases was as follows (dollars in thousands):
As of March 31,
2024 2023
Supplemental cash flow information related to leases was as follows:
Operating leases:
Operating lease right-of-use assets $ - $ 19,078
Operating lease liabilities, non-current $ 11,457 $ 16,380
Operating lease liabilities, current 4,734 4,427
Total operating lease liabilities $ 16,191 $ 20,807
Finance leases:
Property, plant and equipment, at cost $ 569 $ 569
Accumulated depreciation (285) (171)
Property, plant and equipment, net $ 284 $ 398
Finance lease liabilities, non-current $ 167 $ 282
Finance lease liabilities, current 125 122
Total finance lease liabilities $ 292 $ 404
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flow from operating leases $ 5,800 $ 6,226
Finance cash flows from finance leases 120 119
Additional operating lease information:
ROU assets obtained in exchange for operating lease obligations $ - $ 100
Reductions to ROU assets resulting from reductions to operating lease obligations 955 1,175
Reductions to ROU assets resulting from asset impairments
8,850 -
Weighted Average Remaining Lease Term:
Operating leases 4.3 years 5.0 years
Finance leases 2.5 years 3.5 years
Weighted Average Discount Rate:
Operating leases 5.07 % 5.05 %
Finance leases 2.08 % 2.08 %
We determined the discount rate for leases using a portfolio approach to determine an incremental borrowing rate to calculate the right-of-use assets and lease liabilities.
See Note 1, Significant Accounting Policies and Note 8, Goodwill and asset impairment charge for information regarding non-cash impairment charges in fiscal 2024 and 2023.
Maturities of lease liabilities under non-cancelable leases were as follows (in thousands):
As of March 31, 2024
Operating leases Finance leases
Year ending:
2025 $ 5,453 $ 120
2026 4,523 120
2027 2,364 60
2028 2,062 -
Thereafter 3,734 -
Total undiscounted lease payments 18,136 300
Less imputed interest (1,945) (8)
Total lease liabilities $ 16,191 $ 292
(15) INTANGIBLE ASSETS
Intangible assets consisted of the following (in thousands):
Estimated
Useful Life
(in years) As of March 31,
2024 2023
Indefinite-lived trademarks(1)
N/A $ 2,900 $ 6,597
Definite-lived patents
7 to 24 - 1,043
2,900 7,640
Accumulated amortization - Definite-lived patents
- (853)
$ 2,900 $ 6,787
See Note 1, Significant Accounting Policies and Note 8, Goodwill and asset impairment charge for information regarding non-cash impairment charges in fiscal 2024 and 2023.
Amortization expense was as follows (in thousands):
Year Ended March 31,
2024 2023
Amortization expense $ 53 $ 61
Future amortization is as follows (in thousands):
2025 $ -
2026 -
2027 -
2028 -
2029 -
Thereafter -
$ -
$2.9 million of the consolidated intangible asset balance at March 31, 2024 was subsequently sold to Johnson Health Tech Retail Inc. in the Asset Sale approved by the Bankruptcy Court on April 22, 2024. Refer to Note 28 - Subsequent Events.
(16) EQUITY INVESTMENTS
In 2019, we made strategic equity securities investments to increase our digital capabilities.
During fiscal 2023, we recorded an impairment of $0.7 million related to one of our equity investments. See Note 1 - Significant Accounting Policies for additional information.
On May 1, 2023, we completed the sale of Vi Labs for $2.3 million as part of our comprehensive strategic review. The was no carrying value related to the assets sold and transaction costs of the sale were $0.1 million. The resulting gain of $2.2 million was recorded in the Condensed Consolidated Statements of Operations as Other, net and in the Condensed Consolidated Statements of Cash Flows as Proceeds from sale of equity investment for the quarter ended June 30, 2023.
The carrying value of our equity investments was included in the following line item in our consolidated balance sheets (in thousands):
Measurement Alternative - No Readily Determinable Fair Value
As of March 31,
2024 2023
Other assets $ 292 $ 292
(17) CAPITAL STOCK
Issuance of Common Stock
On June 15, 2023, we entered into a securities purchase agreement (“Securities Purchase Agreement”) with an institutional investor (“Purchaser”). Pursuant to the Securities Purchase Agreement, we sold in a registered direct offering (“Registered Direct Offering”) 3,525,000 shares ("Shares") of our common stock, no par value ("Common Stock") at $1.22 per share and purchase contracts issued as pre-funded warrants ("Pre-Funded Warrants" and together with the Shares, the "Securities") to purchase up to 573,362 shares of Common Stock for $1.2199 per share. The Pre-Funded Warrants were to be issued to the extent that the Purchaser determined, in its sole discretion, that such Purchaser would beneficially own in excess of 4.99% (or at the Purchaser’s election, 9.99%) of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of the Securities. The Pre-Funded Warrants had an exercise price of $0.0001 per share, were immediately exercisable and could be exercised at any time after their original issuance date until such Pre-Funded Warrants were exercised in full. On July 28, 2023, all 573,362 Pre-Funded Warrants were exercised, resulting in the issuance of 573,362 shares of Common Stock.
Pursuant to the Securities Purchase Agreement, in a concurrent private placement (together with the Registered Direct Offering, the "Offerings"), we also issued to the Purchaser unregistered warrants (“Common Warrants”) to purchase up to 4,098,362 shares of Common Stock. Each Common Warrant has an exercise price of $1.35 per share, is exercisable at any time beginning six months following their original issuance date of June 15, 2023 and will expire five and a half years from the original issuance date. As of March 31, 2024, the Common Warrants had not been exercised.
In the event of any Fundamental Transaction (as such term is defined in the Securities Purchase Agreement), including any merger or consolidation, sale of substantially all of our assets, tender or exchange offer for 50% or more of our outstanding common stock, reclassification, reorganization or recapitalization of our shares of common stock, or purchase of 50% or more of our outstanding shares of common stock, then upon any subsequent exercise of a Common Warrant, the holder thereof will have the right to receive as alternative consideration, for each share of common stock that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, the number of shares of common stock of the successor or acquiring corporation of our company, if it is the surviving corporation, and any additional consideration receivable upon or as a result of such transaction by a holder of the number of shares of common stock for which the Common Warrant is exercisable immediately prior to such event. Notwithstanding the foregoing, in the event of a Fundamental Transaction, the holders of the Common Warrants have the right to require us or a successor entity to redeem the Common Warrants for cash in the amount of the Black Scholes Value (as such term is defined in the Securities Purchase Agreement) of the unexercised portion of the Common Warrants concurrently with or within 30 days following the consummation of such Fundamental Transaction.
We account for our Common Warrants in accordance with the guidance contained in ASC 815-40, Derivatives and Hedging - Contracts on an Entity’s Own Equity, and determined that the Common Warrants do not meet the criteria
for equity treatment thereunder. As such, each Common Warrant must be recorded as a liability and is subject to re-measurement at each balance sheet date. Refer to Note 9 - Fair Value Measurements for further details. Changes in fair value are recognized in Other, net in our Condensed Consolidated Statements of Operations.
Roth Capital Partners, LLC (the “Placement Agent”) acted as the exclusive placement agent for the Offerings, pursuant to a Placement Agency Agreement, dated June 15, 2023 (the “Placement Agreement”).
Pursuant to the Placement Agreement, we paid the Placement Agent a cash placement fee equal to 7.0% of the aggregate gross proceeds raised in the Offerings from sales arranged for by the Placement Agent. Subject to certain conditions, we also agreed to reimburse all reasonable travel and other out-of-pocket expenses of the Placement Agent in connection with the Offerings, including but not limited to legal fees, up to a maximum of $75,000. The Placement Agreement contains customary representations, warranties and agreements by us and customary conditions to closing. We agreed to indemnify the Placement Agent against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”), and liabilities arising from breaches of representations and warranties contained in the Placement Agreement, or to contribute to payments that the Placement Agent may be required to make in respect of those liabilities.
We received net proceeds of $4.6 million from the Offerings, net of offering expenses paid to the Placement Agent totaling $0.4 million, which proceeds will be used for general corporate purposes.
The closing of the Offerings took place on June 20, 2023. The Securities were offered and sold pursuant to our shelf registration statement on Form S-3 (File No. 333-249979) initially filed with the Securities and Exchange Commission (the “Commission”) on November 9, 2020 and declared effective on October 28, 2021. A prospectus supplement relating to the Registered Direct Offering was filed with the Commission on June 15, 2023. None of the Common Warrants or the shares of Common Stock issuable upon the exercise of the Common Warrants are registered under the Securities Act. The Common Warrants and the shares of Common Stock issuable upon exercise thereof will be issued in reliance on the exemptions from registration provided by Section 4(a)(2) under the Securities Act and Regulation D promulgated thereunder for transactions not involving a public offering.
(18) ACCRUED LIABILITIES
Accrued liabilities consisted of the following (in thousands):
As of March 31,
2024 2023
Payroll and related liabilities $ 4,483 $ 5,220
Deferred revenue 5,081 5,075
Reserves(1)
421 1,200
Accrued Tariffs 1,201 1,167
Legal settlement(2)
- 5
Other 385 2,908
Total accrued liabilities $ 11,571 $ 15,575
(1) Reserves primarily consists of inventory, sales return, sales tax and product liability reserves.
(2) Legal settlement is a loss contingency accrual related to a legal settlement involving a class action lawsuit related to advertisement of our treadmills. For further information, see Note 27, Commitments and Contingencies.
(19) PRODUCT WARRANTIES
Changes in our product warranty obligations were as follows (in thousands):
Year Ended March 31,
2024 2023
Balance at beginning of period $ 3,267 $ 6,216
Accruals 5,139 4,569
Payments (5,212) (7,518)
Balance at end of period $ 3,194 $ 3,267
(20) BORROWINGS
DIP Credit Facility
As previously disclosed, on November 30, 2022, we entered into a Term Loan Credit Agreement (the “SLR Credit Agreement”) with Crystal Financial LLC D/B/A SLR Credit Solutions, a Delaware limited liability company, as administrative agent (“SLR”) and lenders from time to time party thereto (collectively the “Lenders”).
On April 22, 2024, proceeds from the Asset Sale were used to repay the Company’s obligations under the SLR Credit Agreement. Immediately upon such repayment, the SLR Credit Agreement was terminated.
As of March 31, 2024, our interest rate was 13.85% for the SLR Term Loan. Interest on the SLR Term Loan accrues at the Secured Overnight Financing Rate ("SOFR") plus a margin of 7.75% to 8.25% (based on fixed charge coverage ratio).
The balance sheet classification of the borrowing under the loan facility has been determined in accordance with ASC 470, Debt.
WF ABL Revolving Facility
As previously disclosed, we entered into that certain Credit Agreement dated as of January 31, 2020, by and among the lenders identified on the signature pages thereof (such lenders, the “Lenders”), and Wells Fargo Bank, National Association, a national banking association (the “Agent”), as administrative agent for the Lenders (as amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”).
On February 26, 2024, the Company entered into a payoff letter for a voluntary prepayment of the Credit Agreement (the “Payoff Letter”). Pursuant to the Payoff Letter, the Company paid a total of approximately $3.2 million to the Agent, comprised of $0.2 million interest and bank fees included as a component of Other, net in our Condensed Consolidated Statement of Operations, $0.2 million in legal fees included as a component of Restructuring and Exit Charges in our Condensed Consolidated Statements of Operations and $2.8 million cash collateral held by the lender and presented as a component of Restricted Cash in our Condensed Consolidated Balance Sheets and hereby terminated the Credit Agreement. There was no difference between contracted amounts and interest expense. No early termination penalty was paid in connection with the Payoff Letter.
Pursuant to the Payoff Letter, all of the Obligations (and any guarantees thereof) were satisfied in full and the Credit Agreement and any and all other Loan Documents were automatically and irrevocably discharged and terminated.
(21) INCOME TAXES
Income Tax Expense
Income (loss) from continuing operations before reorganization items and income taxes was as follows (in thousands):
Year Ended March 31,
2024 2023
U.S. $ (90,124) $ (101,458)
Non-U.S. 1,575 3,329
Loss from continuing operations before income taxes
$ (88,549) $ (98,129)
Income tax expense (benefit) from continuing operations was as follows (in thousands):
Year Ended March 31,
2024 2023
Current:
U.S. federal $ 990 $ (232)
U.S. state 1 124
Non-U.S. 371 509
Total current 1,362 401
Deferred:
U.S. federal (4) 7,047
U.S. state 91 1,959
Non-U.S. 372 (48)
Total deferred 459 8,958
Income tax expense (benefit) $ 1,821 $ 9,359
Following is a reconciliation of the U.S. statutory federal income tax rate with our effective income tax rate for continuing operations:
Year Ended March 31,
2024 2023
U.S. statutory income tax rate 21.0 % 21.0 %
State tax, net of U.S. federal tax benefit 3.6 3.7
Non-U.S. income taxes 0.2 -
Nondeductible operating expenses (0.3) (1.5)
Section 162(m) limitation - (0.1)
Non-deductible foreign employee stock compensation (0.3) (0.1)
Research and development credit 0.1 0.2
Change in deferred tax measurement rate (0.1) -
Change in uncertain tax positions (0.6) (0.1)
Excess tax benefit or detriment from stock plans (0.8) (0.5)
Change in valuation allowance (25.5) (25.9)
Impairment of intangibles - (6.2)
Other 0.6 -
Effective income tax rate (2.1) % (9.5) %
The income tax expense from continuing operations for the year ended March 31, 2024 was primarily driven by income in non-U.S. jurisdictions, the recording of a deferred tax asset valuation allowance in non-U.S. jurisdictions,
and the recording of unrecognized tax positions as the result of a U.S. tax examination, which also affected the effective tax rate from continuing operations compared to the statutory rate.
Deferred Income Taxes
Individually significant components of deferred income tax assets and liabilities were as follows (in thousands):
As of March 31,
2024 2023
Deferred income tax assets:
Accrued liabilities $ 2,298 $ 2,773
Allowance for doubtful accounts 18 59
Inventory valuation 218 347
Capitalized indirect inventory costs 357 366
Stock-based compensation expense 380 715
Deferred rent 3,849 4,919
Deferred revenue 965 1,003
Interest expense 2,992 1,247
Net operating loss carryforward 19,416 13,979
Basis difference on long-lived assets 7,693 1,300
Section 174 capitalization 11,031 6,028
Credit carryforward 713 667
Capital losses 25,091 25,791
Other 253 301
Gross deferred income tax assets 75,274 59,495
Valuation allowance (74,371) (51,902)
Deferred income tax assets, net of valuation allowance 903 7,593
Deferred income tax liabilities:
Prepaid advertising (27) (29)
Other prepaids (114) (191)
Basis difference of long-lived assets (845) (2,631)
Deferred rent - (4,440)
Other (16) (1)
Deferred income tax liabilities (1,002) (7,292)
Net deferred income tax assets (liabilities)
$ (99) $ 301
Our deferred income tax assets and liabilities were recorded on our Consolidated Balance Sheets as follows (in thousands):
As of March 31,
2024 2023
Deferred income tax assets, non-current $ - $ 554
Deferred income tax liabilities, non-current (99) (253)
Net deferred income tax assets (liabilities) $ (99) $ 301
Valuation Allowance
Under ASC Topic 740, Accounting for Income Taxes, we must periodically evaluate deferred tax assets to determine if it is more-likely-than-not that the future tax benefits will be realized. If the negative evidence outweighs the positive, a valuation allowance must be recognized to reduce the net carrying amount of the deferred tax assets to the amount more-likely-than-not to be realized.
Evaluating the need for, and amount of, a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all available evidence on a jurisdiction-by-jurisdiction basis. Such judgments require us to interpret existing tax law and other published guidance as applied to our circumstances. As part of this assessment, we consider both positive and negative evidence. The weight given to the potential effect of positive and negative evidence must be commensurate with the extent to which the strength of the evidence can be objectively verified. We generally consider the following, but are not limited to, objectively verified evidence to determine the likelihood of realization of the deferred tax assets:
•Our current financial position and our historical results of operations for recent years. We generally consider cumulative pre-tax losses in the three year period ending with the current quarter or a projected three year cumulative loss position within the next 12 months following the current quarter to be significant negative evidence.
•A pattern of objectively-measured historical and current financial reporting loss trend is heavily weighted as a source of negative evidence.
•Sources of taxable income of the appropriate character. Future realization of deferred tax assets is dependent on projected taxable income of the appropriate character. Future reversals of existing temporary differences are heavily weighted sources of objectively verifiable evidence. Projections of future taxable income exclusive of reversing temporary differences are a source of positive evidence only when the projections are combined with a history of recent profits and current financial trends and can be reasonably estimated.
•Carry-back and carry-forward periods available. The carry-back and carry-forward periods permitted under the tax law are objectively verified evidence.
•Tax planning strategies. Tax planning strategies can be, depending on their nature, heavily-weighted sources of objectively verifiable positive evidence when the strategies are available and can be reasonably executed. We consider tax planning strategies only if they are feasible and justifiable considering our current operations and our strategic plan. Tax planning strategies, if executed, may accelerate the recovery of a deferred tax asset so the tax benefit of the deferred tax asset can be carried back.
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. In the fourth quarter of fiscal 2024, a significant new piece of objective negative evidence evaluated was the company’s filing of Chapter 11 bankruptcy. Such objective evidence limits our ability to consider other subjective evidence, such as our projections for future growth.
Based on this evaluation, in the fourth quarter of fiscal 2024, we concluded that it was no longer more likely than not that the tax benefits from the existing non-U.S deferred tax assets would be realized. Accordingly, we recorded a valuation allowance in the fourth quarter of fiscal 2024 against our non-U.S. uncovered net deferred tax assets. A valuation allowance was recorded against our U.S. net deferred tax assets in fiscal 2023. We sustain the same position as of March 31, 2024 and continue to recognize a valuation allowance to reduce our U.S. deferred tax assets to an anticipated realizable value. We recognized a $22.5 million valuation allowance in fiscal 2024 primarily against our domestic uncovered net deferred tax assets.
As of March 31, 2024, we had a valuation allowance against net deferred income tax assets of $74.4 million. Of the valuation allowance, $73.4 million relates to domestic valuation allowance and the remainder of $1.0 million relates to certain foreign intangible assets and net operating loss carry-forwards. Should it be determined in the future that it is more likely than not that our deferred income tax assets will be realized, an appropriate portion of valuation allowance would be released during the period in which such an assessment is made.
Income Tax Carryforwards
As of March 31, 2024, we had the following income tax carryforwards (in millions):
Amount Expires in
Net operating loss carryforwards
U.S. federal $ 72.1 Indefinite
U.S. state $ 62.6 2028 - 2044
U.S. state $ 17.0 Indefinite
Capital loss carryforwards
U.S federal and state $ 101.4 2025 - 2029
Income tax credit carryforwards
U.S. federal $ 0.5 2043 - 2044
U.S. state $ 0.4 Indefinite
The timing and manner in which we are permitted to utilize our net operating loss carryforwards may be limited by Internal Revenue Code Section 382, Limitation on Net Operating Loss Carry-forwards and Certain Built-in-Losses Following Ownership Change.
Unrecognized Tax Benefits
Following is a reconciliation of gross unrecognized tax benefits from uncertain tax positions, excluding the impact of penalties and interest (in thousands):
Year Ended March 31,
2024 2023
Balance at beginning of period $ 1,707 $ 1,782
Additions for tax positions taken in prior years 363 -
Reductions for tax positions taken in prior years (4) (26)
Additions for tax positions related to the current year 7 59
Other - (108)
Balance at end of period $ 2,073 $ 1,707
As of March 31, 2024, of the $2.1 million of gross unrecognized tax benefits from uncertain tax positions outstanding, $1.9 million would affect our effective tax rate if recognized.
We recorded tax-related interest and penalty expense (benefit) of $0.3 million for 2024 and $(1.9) million for 2023. We had a cumulative liability for interest and penalties related to uncertain tax positions as of March 31, 2024 and 2023 of $0.6 million and $0.4 million, respectively.
Our U.S. federal income tax returns for 2008 through 2016 are currently open for limited review and for 2017 through 2023 are open for full review by the U.S. Internal Revenue Service. Further Our state income tax returns for 2008 through 2023 are open to review, depending on the respective statute of limitation in each state. Currently, our U.S. corporate income tax returns for 2016 through 2019 are under IRS examination. In addition, we file income tax returns in several non-U.S. jurisdictions with varying statutes of limitation.
As of March 31, 2024, we believe it is reasonably likely that, within the next twelve months, $0.9 million of the previously unrecognized tax benefits will be recognized due to the expirations of the statutes of limitations.
(22) ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss, net of applicable taxes, reported on our Consolidated Balance Sheets consists of foreign currency translation adjustments. The following table sets forth the changes in accumulated other comprehensive loss, net of tax (in thousands):
Foreign Currency Translation Adjustments Accumulated Other Comprehensive (Loss) Income
Balance, March 31, 2022 (527) (527)
Current period other comprehensive loss before reclassifications (951) (951)
Balance, March 31, 2023 $ (1,478) $ (1,478)
Current period other comprehensive loss before reclassifications (43) (43)
Balance, March 31, 2024
$ (1,521) $ (1,521)
Unrealized losses on available-for-sale securities were immaterial and amounts were reclassified to foreign currency translation adjustments.
(23) STOCK-BASED COMPENSATION
2015 Long-Term Incentive Plan
Our 2015 Long-Term Incentive Plan (the “2015 Plan”) is administered by the Compensation Committee of our Board of Directors and authorizes us to grant various types of stock-based awards including: stock options, stock appreciation rights, RSAs, RSUs, and PSUs. Stock options granted under the 2015 Plan shall not have an exercise price less than the fair market value of our common stock on the date of the grant. The exercise price of a stock option or stock appreciation right may not be reduced without shareholder approval. Stock options generally vest over periods of three or four years of continuous service, commencing on the date of grant. Stock options granted under the 2015 Plan have a seven-year contractual term.
Upon adoption, there were approximately 4.8 million shares available for issuance under the 2015 Plan. The number of shares available for issuance upon adoption of the 2015 Plan included new shares approved, plus any shares of common stock which were previously reserved for issuance under our preceding plan that were not subject to grant as of April 28, 2015, or as to which the stock-based compensation award is forfeited on or after April 28, 2015. The number of shares available for issuance is reduced by (i) two shares for each share delivered in settlement of any stock appreciation rights, RSA, RSU or PSU awards, and (ii) one share for each share delivered in settlement of a stock option award. In no event shall more than 1.0 million aggregate shares of common stock subject to stock options, stock appreciation rights, RSA, RSU or PSU awards be granted to any one participant in any one year under the 2015 Plan.
2015 Long-Term Incentive Plan, As Amended
On May 1, 2020, our shareholders approved the amendment and restatement of our 2015 Plan (the "Amended 2015 Plan"). Prior to the amendment, there were approximately 4.8 million shares available for issuance under the 2015 Plan, 3.5 million shares originally reserved under the previous Long Term Incentive Plan and 1.3 million shares of common stock authorized under the 2015 Plan. The Amended 2015 Plan added an additional 2.0 million shares to be reserved for issuance. Upon adoption, there were approximately 6.8 million shares available for issuance under the Amended 2015 Plan.
The maximum aggregate number of shares of common stock subject to stock options, stock appreciation rights, restricted stock or stock unit awards which may be granted to any one participant in any one year under the Amended 2015 Plan is 1.0 million.
The aggregate number of shares available for issuance under the Amended 2015 Plan will be reduced by one and half (1.5) shares for each share delivered in settlement of any stock appreciation rights, restricted stock, restricted stock unit or performance unit award, and one (1) share for each share delivered in settlement of a stock option award.
At March 31, 2024, we had (0.7) million shares available for future grant under our Amended 2015 Plan, and a total of 3.8 million shares of our common stock are reserved for future issuance pursuant to awards currently outstanding under the Amended 2015 Plan and our previous plan combined.
Stock Option Activity
Stock option activity was as follows (shares in thousands):
Options Outstanding Weighted-
Average
Exercise
Price
Outstanding at March 31, 2023 1,805 1.63
Granted 914 1.19
Forfeited, canceled or expired (169) 1.40
Outstanding at March 31, 2024 2,550 1.49
Certain information regarding options outstanding at March 31, 2024 was as follows:
Options Outstanding Options Exercisable Options Vested and Expected to Vest
Number (in thousands) 2,550 907 2,550
Weighted-average exercise price $ 1.49 $ 1.68 $ 1.49
Aggregate intrinsic value (in thousands) $ - $ - $ -
Weighted average remaining contractual term (in years) 7.82 5.84 7.82
RSA Activity
Compensation expense for RSAs is recognized over the estimated requisite service period. Following is a summary of RSA activity (shares in thousands):
RSAs Outstanding Weighted-
Average
Grant Date Fair Value per Share
Outstanding at March 31, 2023 127 $ 5.23
Granted - -
Vested (98) 2.10
Outstanding at March 31, 2024 29 15.54
RSU Activity
Compensation expense for RSUs is recognized over the estimated requisite service period. Following is a summary of RSU activity (shares in thousands):
RSUs Outstanding Weighted-
Average
Grant Date Fair Value per Share
Outstanding at March 31, 2023 869 6.80
Granted 894 1.19
Forfeited, canceled or expired (328) 7.39
Vested (429) 2.78
Outstanding at March 31, 2024 1,006 2.88
PSU Activity
Performance-based share units (PSU) require achievement of certain performance criteria, which are predefined by the Compensation Committee of the Board of Directors at time of grant. Compensation expense for PSUs is recognized over the estimated requisite service period based on the number of PSUs ultimately expected to vest.
In February 2018, we granted PSU awards to certain of our executive officers and management team covering a total of 119,351 shares of our common stock. The fair value of these performance based units use the quoted market value of the Company's stock on the grant date. The PSUs vest based on achievement of goals established for growth in operating income as a percentage of net revenue and return on invested capital over the three year performance period ended December 31, 2020. The number of shares vesting could range from 60% of the PSU awards if minimum thresholds are achieved to a maximum of 150%. The performance criteria was not met and all 119,351 shares were forfeited.
In May 2020, we granted PSU awards to certain of our executive officers and management team covering a total of 262,999 shares of our common stock. The fair value of these performance based units was determined using the Monte Carlo valuation model. The PSUs vest based on achievement of the goal that measures our relative total shareholder return against pre-approved peers over a three year performance period ended May 5, 2023. The number of shares that ultimately vest following conclusion of the performance period will be determined based on the level at which the financial goals are achieved. The number of shares vesting can range from 60% of the PSU awards if minimum thresholds are achieved to a maximum of 150%. These awards are expected to vest at 0% achievement. As of March 31, 2024, there were 0 PSU shares remained, net of actual forfeitures to date.
In May and September 2021, we granted PSU awards to certain of our executive officers and management team covering a total of 510,404 shares of our common stock. The fair value of these performance based units use the quoted market value of the Company's stock on the grant date. The PSUs vest based on achievement of our goal regarding paid subscribers, cumulative revenue and cumulative adjusted operating income over a three year performance period ending May 14, 2024. The number of shares that ultimately vest following conclusion of the performance period will be determined based on the level at which the financial goals are achieved. The number of shares that vest can range from 30% of the PSU awards if minimum thresholds are achieved to a maximum of 200%. These awards are expected to vest at 0% achievement. As of March 31, 2024, 447,133 PSU shares remained, net of actual forfeitures to date.
In February 2022, we granted PSU awards to certain of our management team covering a total of 271,938 shares of our common stock. The fair value of these performance based units was determined using the Monte Carlo valuation model. The PSUs vest based on achievement of the goal of the closing price for our common stock reaching $10 and having a volume weighted average price of at least $10 for 60 consecutive trading days at any time thereafter during the three year period ending February 23, 2025. The number of shares that ultimately vest following conclusion of the performance period will be determined based on the level at which the financial goals are achieved. The number of shares vesting can range from 50% of the PSU awards if minimum thresholds are achieved to a maximum of 100%. These awards are expected to vest at 0% achievement. As of March 31, 2024, 112,806 PSU shares remained, net of actual forfeitures to date.
In August 2022, we granted PSU awards to certain of our management team covering a total of 463,200 shares that could be paid out in a combination of cash equivalent shares that will be subject to liability accounting or shares of our common stock. The fair value of these performance based units use the quoted market value of the Company's stock on the grant date. The PSUs vest based on achievement of paid subscribers and net promoter score of the Bowflex brand measured at March 31, 2025. The number of shares that ultimately vest following conclusion of the performance period will be determined based on the level at which the financial goals are achieved. The number of shares vesting can range from 30% of the PSU awards if minimum thresholds are achieved to a maximum of 200%. These awards are expected to vest at 50% achievement. As of March 31, 2024, 314,106 PSU shares remained, net of actual forfeitures to date.
Following is a summary of PSU activity (shares in thousands):
PSUs Outstanding Weighted-
Average
Grant Date Fair Value per Share
Outstanding at March 31, 2023 1,169 7.02
Granted and additional goal shares awarded - -
Forfeited, canceled or expired (294) (6.75)
Vested
(1) (17.42)
Outstanding at March 31, 2024 874 7.10
Stock-Based Compensation
Stock-based compensation expense, primarily included in general and administrative expense, was as follows (in thousands):
Year Ended March 31,
2024 2023
Stock options $ 650 $ 190
RSAs 95 213
RSUs 81 3,598
PSUs 2,479 (238)
ESPP 50 122
$ 3,355 $ 3,885
Certain other information regarding our stock-based compensation was as follows (in thousands):
Year Ended March 31,
2024 2023
Total intrinsic value of stock options exercised $ - $ -
Fair value of RSUs vested 433 1,549
As of March 31, 2024, unrecognized compensation expense for outstanding, but unvested stock-based awards was $2.5 million, which is expected to be recognized over a weighted average period of 1.0 years.
Employee Stock Purchase Plan
Our Employee Stock Purchase Plan (the “ESPP”) is administered by the Compensation Committee of our Board of Directors and provides eligible employees with an opportunity to purchase shares of our common stock at a discount using payroll deductions. The ESPP authorizes the issuance of up to 0.5 million shares of our common stock, subject to adjustment as provided in the ESPP for stock splits, stock dividends, recapitalizations and other similar events.
Pursuant to the ESPP, and subject to certain limitations specified therein, eligible employees may elect to purchase shares of our common stock in one or more of a series of offerings conducted pursuant to the procedures set forth in the ESPP at a purchase price equal to 90% of the lower of the fair market value of the common stock on the first trading day of the offering period or on the last day of the offering period. Offering periods commence on May 15 and November 15 of each year and are six-months in duration. Purchases under the ESPP may be made exclusively through payroll deductions.
Persons eligible to participate in the ESPP generally include employees who have been employed for at least three months prior to the applicable offering date and who, immediately upon purchasing shares under the ESPP, would own directly or indirectly, an aggregate of less than 5% of the total combined voting power or value of all outstanding shares of our common stock.
Compensation expense for the ESPP is recognized over the six-month offering period based on the total estimated participant contributions and number of shares expected to be purchased.
ESPP activity was as follows (shares in thousands):
Shares Available for Issuance Weighted-
Average
Purchase Price Weighted-Average Discount per Share
Balance at March 31, 2023 34
Employee shares purchased 76 $ 0.85 $ 0.09
Balance at March 31, 2024 110
Assumptions used in calculating the fair value of stock option grants and employee stock purchases were as follows:
Year Ended March 31,
2024 2023
ESPP ESPP
Dividend yield -% -%
Risk-free interest rate 5.2% 3.1%
Expected life (years) N/A N/A
Expected volatility 53% 73%
Dividend yield is based on our current expectation that no dividend payments will be made in future periods.
Risk-free interest rate is the U.S. Treasury zero-coupon rate, as of the grant date, for issues having a term approximately equal to the expected life of the stock option. For the ESPP, it is the U.S. Treasury six-month constant maturities rate, as of the offering date.
Expected life is the period of time over which stock options are expected to remain outstanding. We calculate expected term based on the average of the sum of the requisite service periods and the full contractual term.
Expected volatility is the percentage amount by which the price of our common stock is expected to fluctuate annually during the estimated expected life for stock options. Expected price volatility is calculated using historical daily closing prices over a period matching the weighted-average expected life for stock options, as management believes such changes are the best indicator of future volatility. For the ESPP, expected volatility is the percentage amount by which the price of our common stock is expected to fluctuate semi-annually during the offering period.
(24) (LOSS) INCOME PER SHARE
The weighted average numbers of shares outstanding used to compute basic and diluted loss per share amounts were as follows (in thousands):
Year Ended March 31,
2024 2023
Shares used for basic per share calculations 35,294 31,585
Dilutive effect of outstanding options, RSUs, and PSUs - -
Shares used for diluted per share calculations 35,294 31,585
The weighted average numbers of shares outstanding listed in the table below were anti-dilutive and excluded from the computation of diluted per share since we were in a loss position from continuing operations.
These shares may be dilutive potential common shares in the future (in thousands):
Year Ended March 31,
2024 2023
Stock options - 38
RSUs 19 161
PSUs 6 4
Total potential dilutive shares excluded due to net loss 25 203
The weighted average numbers of shares outstanding listed in the table below were anti-dilutive and excluded from the computation of diluted loss per share. In the case of RSUs, this is because unrecognized compensation expense exceeds the current value of the awards (i.e., grant date market value was higher than current average market price). In the case of stock options, this is because the average market price did not exceed the exercise price.
These shares may be dilutive potential common shares in the future (in thousands):
Year Ended March 31,
2024 2023
Stock options 1,190 579
RSUs 2,463 987
Total anti-dilutive shares excluded 3,653 1,566
(25) 401(k) SAVINGS PLAN
We sponsor a 401(k) savings plan that allows eligible employees to contribute a certain percentage of their salary. Employees are automatically enrolled within the first month of employment and have the ability to opt out. As a safe harbor plan sponsor, we are subject to non-discretionary matching contributions. Currently, we match 100% of the employee's first 1% of eligible pay contributed plus 50% of eligible pay contributed on the next 5%, for a maximum employer matching of 3.5%. Employees with less than one year of employment do not get any vesting employer contribution match. For employees with one to two years of employment vest 25% of employer contribution match. Employees with more than two years of employment vest 100% of the employer contribution match. All active employees on February 1, 2023 were accelerated to 100% vested in employer match. On June 1st, 2023, the 401 (k) employer match contribution was suspended. Our matching contributions for the savings plan were as follows (in thousands):
Year Ended March 31,
2024 2023
401(k) matching contributions $ 249 $ 1,152
(26) SEGMENT AND ENTERPRISE-WIDE INFORMATION
We have two operating segments - Direct and Retail. There were no changes in our operating segments during the year ended March 31, 2024.
We evaluate performance using several factors, of which the primary financial measures are net sales and reportable segment contribution. Contribution is the measure of profit or loss, defined as net sales less product costs and directly attributable expenses. Directly attributable expenses include selling and marketing expenses, general and administrative expenses, and research and development expenses that are directly related to segment operations. Segment assets are those directly assigned to an operating segment's operations, primarily accounts receivable, inventories, goodwill and other intangible assets. Unallocated assets primarily include cash and cash equivalents, available-for-sale securities, derivative securities, shared information technology infrastructure, distribution centers, corporate headquarters, prepaids and other current assets, deferred income tax assets and other assets. Capital expenditures directly attributable to the Direct and Retail segments were not significant in any period.
Following is summary information by reportable segment (in thousands):
Year Ended March 31,
2024 2023
Net Sales:
Direct $ 111,717 $ 139,289
Retail 93,131 144,113
Unallocated royalty 1,116 3,371
Consolidated net sales $ 205,964 $ 286,773
Contribution:
Direct $ (22,479) $ (29,626)
Retail 6,843 (5,720)
Unallocated royalty 1,116 3,371
Consolidated contribution $ (14,520) $ (31,975)
Reconciliation of consolidated contribution to loss from continuing operations:
Consolidated contribution $ (14,520) $ (31,975)
Amounts not directly related to segments:
Operating expenses (75,133) (61,386)
Reorganization items, net
(1,897) -
Other, net
3,001 (4,768)
Income tax expense
1,821 9,359
Loss from continuing operations
$ (90,370) $ (107,488)
Depreciation and amortization expense:
Direct $ 4,630 $ 4,691
Retail 4,587 3,994
Unallocated corporate 1,980 2,418
Total depreciation and amortization expense $ 11,197 $ 11,103
As of March 31,
Assets: 2024 2023
Direct $ 19,665 $ 50,493
Retail 26,922 58,214
Unallocated corporate 39,720 54,825
Total assets $ 86,307 $ 163,532
There are no material long-lived assets held outside of the U.S.
During the periods presented, the following customer accounted for 10% or more of total net sales as follows:
Year Ended March 31,
2024 2023
Amazon.com 12.0% 19.3%
(27) COMMITMENTS AND CONTINGENCIES
Operating leases
We lease property and equipment under non-cancellable operating leases which, in the aggregate, extend through 2029. Many of these leases contain renewal options and provide for rent escalations and payment of real estate taxes, maintenance, insurance and certain other operating expenses of the properties.
For additional information related to leases, see Note 14, Leases.
Guarantees, Commitments and Off-Balance Sheet Arrangements
As of March 31, 2024, we had standby letters of credit of $2.1 million.
We have long lead times for inventory purchases and, therefore, must secure factory capacity from our vendors in advance. As of March 31, 2024, we had approximately $2.1 million, compared to $12.1 million as of March 31, 2023, in non-cancelable market-based purchase obligations, primarily for inventory purchases expected to be received within the next twelve months. Purchase obligations can vary from quarter-to-quarter and versus the same period in prior years due to a number of factors, including the number of products that are shipped directly to Retail customer warehouses versus through the Company warehouses. As of March 31, 2024, we had no outstanding letters of credit with any of our vendors.
In the ordinary course of business, we enter into agreements that require us to indemnify counterparties against third-party claims. These may include: agreements with vendors and suppliers, under which we may indemnify them against claims arising from use of their products or services; agreements with customers, under which we may indemnify them against claims arising from their use or sale of our products; real estate and equipment leases, under which we may indemnify lessors against third-party claims relating to the use of their property; agreements with licensees or licensors, under which we may indemnify the licensee or licensor against claims arising from their use of our intellectual property or our use of their intellectual property; and agreements with parties to debt arrangements, under which we may indemnify them against claims relating to their participation in the transactions.
The nature and terms of these indemnification obligations vary from contract to contract, and generally a maximum obligation is not stated within the agreements. We hold insurance policies that mitigate potential losses arising from certain types of indemnification obligations. Management does not deem these obligations to be significant to our financial position, results of operations or cash flows and, therefore, no related liabilities were recorded as of March 31, 2024.
Legal Matters
From time to time, in the ordinary course of business, we may be involved in various claims, lawsuits and other proceedings. These legal proceedings involve uncertainty as to the eventual outcomes and losses which may be realized when one or more future events occur or fail to occur.
Litigation and jury verdicts are, to some degree, inherently unpredictable, and although we have determined that a loss is not probable in connection with any current legal proceeding except for the noted one below, it is reasonably possible that a loss may be incurred in connection with proceedings to which we are a party. Assessment of whether incurrence of a loss is probable, or a reasonable possibility, in connection with a particular proceeding, and estimation of the loss, or a range of loss, involves complex judgments and numerous uncertainties. Management is unable to estimate a range of reasonably possible losses related to litigation in which the damages sought are indeterminate, or the legal and factual basis for the relevant claims have not been developed with specificity.
During the second quarter of fiscal 2022, we recorded a $4.7 million loss contingency related to a legal settlement involving a class action lawsuit related to advertisement of our treadmills. The settlement includes damages, a one-year free membership to JRNY®, and administrative fees and was included as a component of general and administrative on our Consolidated Statements of Operations.
On June 27, 2022, the Court approved the settlement and no appeals were filed. We paid the settlement damages and related administrative fees during the second quarter of fiscal 2023.
We regularly monitor our estimated exposure to these contingencies and, as additional information becomes known, may change our estimates accordingly. We evaluate, on a quarterly basis, developments in legal proceedings, investigations or claims that could affect the amount of any accrual, as well as any developments that would make a loss probable or reasonably possible, and whether the amount of a probable or reasonably possible loss is estimable. Among other factors, we evaluate the advice of internal and external counsel, the outcomes from similar litigation, current status of the lawsuits (including settlement initiatives), legislative developments and other factors. Due to the numerous variables associated with these judgments and assumptions, both the precision and reliability of the resulting estimates of the related loss contingencies are subject to substantial uncertainties.
As of the date of filing of this Annual Report on Form 10-K, we were not involved in any other material legal proceedings other than the Company's bankruptcy proceedings discussed in Note 2 Bankruptcy Proceedings.
(28) SUBSEQUENT EVENTS
Bankruptcy
On April 15, 2024, the Bankruptcy Court authorized the sale of the Acquired Asset pursuant to the terms of the Stalking Horse Asset Purchase Agreement and on April 22, 2024, the Asset Sale closed. Proceeds from the Asset Sales were approximately $37.5 million. As previously reported, there were insufficient proceeds from the Asset Sale for common stockholders to receive value for their shares.
On April 22, 2024, proceeds from the Asset Sale were used to repay the Company’s obligations under the existing Term Loan Credit Agreement, dated as of November 30, 2022, as amended, by and among the Company and Nautilus Fitness Canada, Inc., a British Columbia company and subsidiary of the Company, as borrowers, and Crystal Financial LLC d/b/a SLR Credit Solutions, as administrative agent and a lender. Immediately upon such repayment, the Term Loan Credit Agreement was terminated.
Below is a schedule of assets sold to Johnson Health Tech Retail Inc, as of March 31, 2024, and as of the closing date of the Asset Purchase Agreement on April 22, 2024 (in thousands), net of closing adjustments:
Carrying value as of:
Assets Sold March 31, 2024 April 22, 2024
Accounts Receivable
U.S. Accounts Receivable $ 7,705 $ 7,961
Canada Accounts Receivable 911 1,004
Total Accounts Receivable 8,616 8,965
Inventory
U.S. Inventory 29,529 27,897
Canada Inventory 688 641
Total Inventory 30,217 28,538
Total Intellectual Property 2,900 2,900
Total Sold Assets $ 41,733 $ 40,403
Termination of Leases
Leases for all BowFlex US locations were rejected as part of the Bankruptcy Cases on May 31, 2024. We negotiated exit and termination arrangements for our leases in China in May 2024, and subsequently entered into a new leasing arrangement for our China location because the Chinese government requires a physical address until the entity is fully dissolved. Nautilus Switzerland AG filed bankruptcy through the courts of Switzerland on April 26, 2024, causing the lease for the Swiss location to become a liability of the entity to be extinguished through its bankruptcy process.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
As of March 31, 2024, we conducted an evaluation under the supervision and with the participation of our management, including our former Chief Executive Officer and former Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our former Chief Executive Officer and former Chief Financial Officer concluded as of March 31, 2024 that our disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act, is recorded, processed, and summarized, and that such information is accumulated and communicated to our management, including our former Chief Executive Officer and former Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Management's Report On Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Exchange Act. This rule defines internal control over financial reporting as a process designed by, or under the supervision of, our Principal Executive Officer and Principal Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that:
•Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management's Assessment
Based on our assessment under the framework in Internal Control-Integrated Framework (2013 framework), our management concluded that our internal control over financial reporting was not effective as of March 31, 2024, due to the existence of material weakness. Management did not maintain effective controls related to identification of a triggering event under ASC 360. This was caused by an insufficient number of qualified resources and inadequate oversight of the financial reporting process.
Management, with the oversight of the Audit Committee of the Board of Directors, will take steps necessary to remedy the material weaknesses to reinforce the capability of our control environment.
Changes In Internal Control Over Financial Reporting
There were changes in our internal control over financial reporting that occurred subsequent to March 31, 2024. After the Asset Sale on April 22, 2024 the company began wind down operations. While the company retained
qualified staffing to support the financial reporting process there was an insufficient number of qualified resources to provide adequate oversight of the financial reporting process, as discussed in management’s assessment on controls.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
DIRECTORS
The following table identifies our directors as of the date of this Form 10-K.
Name
Age
Director Since
Independent
Other Public Boards
Anne G. Saunders 62 2012 Yes
Ruby Sharma 56 2022 Yes
Anne G. Saunders
Anne joined our Board in April 2012 and currently serves as the Chair of the Board and a member of the Audit Committee. Since February 2023, Ms. Saunders has been a board member of Reser's Fine Foods, a private company that manufactures and distributes fresh and refrigerated prepared foods. Since March 2019, Ms. Saunders has also served as a non-executive director for the WD-40 Company (NASDAQ: WDFC) a global consumer products company with an iconic brand. She chairs the Compensation Committee, and also serves on the Nominating/Governance Committee. From April 2016 to January 2017, Ms. Saunders was U.S. President of NakedWines.com, where she delivered record growth for a disruptive e-commerce business selling boutique wines directly to consumers. From September 2014 to April 2016, Ms. Saunders was U.S. President of FTD, Inc. (NYSE: FTD), where she ran the P&L for the $1B US e-commerce floral and gifting businesses. From August 2012 to January 2014, Ms. Saunders was President of Redbox, a $2B company that revolutionized home entertainment. From March 2009 until January 2012, Ms. Saunders was Executive Vice President and Chief Marketing Officer for Knowledge Universe, a privately-held, multi-brand, for-profit education company with 1,800 schools globally. From February 2008 until March 2009, Ms. Saunders was Senior Vice President, Consumer Bank Executive and, from May 2007 until February 2008, she was Senior Vice President, Brand Executive, for Bank of America Corporation (NYSE: BAC). Between 2001 and 2007, Ms. Saunders held a variety of positions with Starbucks Coffee Co. (NASDAQ: SBUX), including Senior Vice President, Global Brand, during that company’s period of most rapid domestic and international growth. Ms. Saunders has also held executive and senior management positions with eSociety, a Saas e-commerce platform, AT&T Wireless and Young & Rubicam. Additionally, Ms. Saunders served, from 2006 until 2007, as a director for Blue Nile, Inc. (NASDAQ: NILE). She received a B.A. from Northwestern University and an M.B.A. from Fordham University.
Our Board has determined that Ms. Saunders’s more than a decade of public board experience and success as a CEO and President of e-commerce and subscription businesses, across an array of diverse industries: retail, manufacturing, telecom, fintech, software development, entertainment/content, among other things, makes her highly qualified to serve on the Board.
Ruby Sharma
Ruby joined our Board in May 2022 and currently serves as the Chair of the Audit Committee and member of the Corporate Governance Committee. She is a multi-cultural, global business advisor with comprehensive expertise in strategy, operational risk transformation, M&A, governance, audit, and accounting. Ruby is also a member of the
board at Southwest Gas Holdings, Inc. (NYSE: SWX); S&C Electric Company (private); SoundThinking, Inc. (formerly ShotSpotter; NASDAQ: SSTI); and ATI Inc. (NYSE: ATI). Previously she has served as the Chair of the Audit Committee at Penn Medicine Princeton Health; on the Board of Trustees for Aspira Women’s Health (NASDAQ: AWH), with the National Ascend Organization; and as a Member of the Asia Society Business Council.
Ruby retired as a senior partner at Ernst & Young LLP (“EY”) with a proven capacity to develop and manage new business ventures, and generate sustained revenue growth. A frequent keynote speaker and panelist on corporate governance topics, Ruby has authored several audit committee handbooks and guides, as well as white papers on governance, value protection, and diversity and inclusion topics.
Ruby was honored as an Outstanding 50 Asian Americans in Business in the Americas in 2011 by the Asian American Business Development Center. She is a Fellow Chartered Accountant (Institute of Chartered Accountants in England & Wales) and holds a B. A. in Economics from Delhi University, India. Sharma also attended the Executive Education program for EY Partners at Northwestern University, Kellogg School of Management.
Our Board has determined that Ms. Sharma’s considerable experience as a strategic advisor to public company boards and management teams and comprehensive background in M&A, Governance, Audit & Accounting, among other things, makes her highly qualified to serve on the Board.
EXECUTIVE OFFICERS
The following table identifies our executive officers as of the date of this Form 10-K, the positions they held and the year in which they began serving as officers of BowFlex Inc.
Name
Age
Current Position(s) with BowFlex
Officer Since
Robert D. Hoge
53 General Counsel and Chief Wind-Down Officer
Robert D. Hoge
Robert joined BowFlex Inc. in April 2014 as its Director, Intellectual Property and was promoted to his current position as General Counsel and Chief Wind-Down Officer in April 2024. Robert has more than 27 years of diversified experience in legal and engineering operations across a variety of firms. Prior to joining BowFlex Inc., Robert was a patent attorney at the law firm of Dorsey & Whitney LLP and previously Intellectual Property Counsel at CH2M HILL, Inc. Robert holds Bachelor of Science degrees from the University of Utah and Oregon State University in Civil Engineering and Computer Science, respectively, a Master of Science degree in Civil Engineering from the University of Michigan, and a juris doctorate degree from the University of Denver Sturm College of Law.
No family relationship exists among any of the directors or executive officers. No arrangement or understanding exists between any director or executive officer and any other person pursuant to which any director was selected as a director or executive officer of Nautilus.
CORPORATE GOVERNANCE
Our Board is responsible for providing oversight of the Company’s business and affairs, including the Company’s strategic direction and the management of the financial and operational execution that will best facilitate the success of the business and support the long-term interests of our stockholders. To effectively support its responsibilities, the Board has three standing committees: an Audit Committee, a Compensation Committee and a Corporate Governance Committee. Each of these Board committees is comprised solely of independent directors. These Board committees carry out the responsibilities set out in the specific committee charters approved by the Board that are consistent with applicable requirements of the New York Stock Exchange (“NYSE”) and the Securities and Exchange Commission (“SEC”). The Board and each committee may from time-to-time form other committees or sub-committees for specified purposes. The Board and each committee may also, at its discretion, retain outside advisors at the Company’s expense in carrying out its responsibilities.
Our Board is committed to good corporate governance practices and seeks to represent stockholder interests through the exercise of sound judgment. To this end, the Board has adopted Corporate Governance Policies (“Governance Policies”) that provide the framework for the governance of the Board and Company and a Code of
Business Conduct and Ethics (“Code of Conduct”), which applies to all of our directors, officers and employees, that represents our commitment to the highest standards of ethics and integrity in the conduct of our business. The Board committee charters, the Governance Policies and the Code of Conduct, as well as any amendments we may make to these documents from time to time and together with our charter and bylaws, serve as our governance and compliance framework.
Committees of the Board
Our Board currently has three standing committees: an Audit Committee, a Compensation Committee, and a Corporate Governance Committee. Each committee is governed by a written charter.
The current composition of our three standing committees is as follows:
Name1
Audit Committee2
Compensation Committee4
Corporate Governance Committee2
Anne G. Saunders ☑
Ruby Sharma3
☑
☑
1.All Committee members qualify as an “independent director” under our Corporate Governance Policies, Section 303A.02 of the Listed Company Manual of the New York Stock Exchange (“NYSE”), and applicable rules of the SEC, and each such person is free of any relationship that would interfere with the individual exercise of independent judgment.
2.Our Board has further determined that each member of the Board’s Audit Committee meets the independence requirements applicable to those committees prescribed by the Listed Company Manual and the SEC, including Rules 10A-3(b)(1) and 10C-1 under the Exchange Act related to independence of audit committee.
3.Qualifies as an “audit committee financial expert”.
4.As of April 22, 2024, the Compensation Committee has no remaining members due to Board resignations. Because of the planned liquidation of the of the Company, the members of the Compensation Committee have not been replaced.
☑ Indicates Committee Chair
During FY 2024, the Audit Committee consisted of three independent directors: Ruby Sharma (Chair), Anne G. Saunders, and Kelley Hall. Each member of the Audit Committee met the independence, financial literacy and experience requirements contained in the corporate governance listing standards of the NYSE relating to audit committees.
DELINQUENT SECTION 16(A) REPORTS
Section 16(a) of the Exchange Act requires our directors and executive officers, as well as persons who own more than 10% of our outstanding common stock, to file with the SEC initial reports of beneficial ownership and reports of changes in beneficial ownership of shares of our common stock. Based solely on a review of copies of such forms filed with the SEC and written representations from our executive officers, directors and 10% shareholders that no other reports were required to be filed during the fiscal year ended March 31, 2024, we believe that all Section 16(a) filing requirements attributable to the Company were timely made with respect to the fiscal year ended March 31, 2024; except that due to a clerical error, a Form 4 for Patricia M. Ross, a former member of our Board, related to an award of restricted stock on July 3, 2023, was filed on February 14, 2024.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
SUMMARY COMPENSATION TABLE
The following table provides information about the compensation of each Named Executive Officer ("NEO") for the fiscal years ended March 31, 2024 and March 31, 2023.
Fiscal Year
Salary
Bonus1
StockAwards2
Option Awards3
All Other Compensation4
Total
James Barr, IV | Chief Executive Officer
2024 $625,000 $300,000 $29,750 $482,102 $5,407 $1,442,259
2023 $625,000 $0 $439,946 $912,471 $10,675 $1,988,092
Aina E. Konold | Chief Financial Officer
2024 $410,000 $300,000 $99,166 $74,244 $3,239 $886,649
2023 $385,000 $0 $135,300 $379,675 $4,912 $904,887
Alan L. Chan | Chief Legal and People Officer
2024 $350,000 $50,000 $81,024 $54,839 $3,013 $538,876
2023 $325,000 $0 $100,088 $35,509 $11,050 $471,647
1.The amounts reported reflect cash bonus payments to Mr. Barr and Ms. Konold paid pursuant to the key executive compensation plan and spot bonuses paid to Ms. Konold and Mr. Chan.
2.The amounts reported reflect the aggregate grant date fair value of equity awards granted under our 2015 LTIP. For further information regarding our stock-based compensation, see Notes 1 and 23 of Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for the fiscal year ended March 31, 2024. Additionally, FY 2024 amounts include the cash-settled PSUs at the aggregate grant date fair value of the PSU equity award grant.
3.The amount reflects the aggregate grant date fair value of a stock option awarded to the NEOs.
4.The amounts reported in this column reflect employer paid 401(k) match and/or taxable fringe benefits.
PERQUISITES & OTHER BENEFITS
Prior to the Chapter 11 Cases, our executive officers were permitted to participate in our prior medical, dental, vision, flexible spending, health savings account, 401(k), life, disability, employee stock purchase plan, and wellness programs on similar terms as non-executive employees, subject to legal contribution limits. No significant perquisites are provided to our executive officers.
TAX & ACCOUNTING CONSIDERATIONS
Section 162(m) of the Internal Revenue Code generally limits the deductible compensation to $1 million per year for certain executive officers. The Tax Cuts and Jobs Act of 2017 eliminated the performance-based compensation exception for tax years starting after December 31, 2017, with some transition rules. For the fiscal year ending March 31, 2024, some compensation paid to James Barr, IV, was not deductible.
CLAWBACK POLICY
We have adopted an executive compensation clawback policy. Pursuant to the clawback policy, the Board is required to seek recovery of incentive-based compensation that is erroneously received by a current or former executive officer during the three completed fiscal years immediately preceding the year in which the company is required to prepare an accounting restatement due to material noncompliance with financial reporting requirements.
HEDGING POLICY
We prohibit executive officers and non-executive employees from short sales and transactions involving publicly-traded options. Executives cannot hold our securities in margin accounts or pledge them as loan collateral, with limited exceptions, aligning their interests with those of our stockholders.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information regarding outstanding stock-based awards held by our NEOs as of March 31, 2024.
OPTION AWARDS
Name Grant Date Number of Securities Underlying Unexercised
Options -
Exercisable (#) Number of Securities Underlying Unearned Unexercised Options - Unexercisable (#) Option
Exercise
Price Option
Expiration
Date1
James Barr, IV 7/29/20192
454,775 - $1.79 7/29/2027
8/22/20223
69,847 139,650 $2.10 8/22/2032
11/28/20222
200,040 399,960 $1.41 11/28/2032
7/3/20234
- 568,182 $1.19 7/03/2033
Aina E. Konold 8/22/20223
10,757 21,506 $2.10 8/22/2032
11/28/20222
133,360 266,640 $1.41 11/28/2032
7/3/20234
- 87,500 $1.19 7/03/2033
Alan L. Chan 8/22/20223
7,945 - $2.10 8/22/2032
7/3/20234
- - $1.19 7/03/2033
STOCK AWARDS
Name Grant
Date Number of
Shares of
Units of Stock
That Have Not
Vested (#) Market Value of
Shares of Units
of Stock That
Have Not Vested
($) Equity Incentive
Plan Awards:
Number of Unearned
Shares, Units or Other
Rights That Have Not
Vested (#) Equity Incentive
Plan Awards:
Market or Payout Value
of Unearned Shares, Units
or Other Rights That Have
Not Vested ($)
James Barr, IV 5/5/20205
- - - -
2/16/20215
- - - -
5/14/20215
9,788 $186 29,364 $558
2/23/2022 - - 53,615 $1,019
8/22/20228
- - 209,498 $3,980
7/3/20239
25,000 $475 - -
Aina E. Konold 12/11/2019 - - - -
2/16/20215
- - - -
5/14/20215
3,014 $57 9,044 $172
2/23/2022 - - 33,027 $628
8/22/20226,8
14,337 $272 43,016 $817
7/3/20239,10
83,333 $1,583 - -
Alan L. Chan 8/3/20215
- - - -
2/23/2022 - - - -
8/22/20226,8
- - - -
7/3/20239,10
- - - -
1.Options granted under our 2015 LTIP and prior plans generally expire ten years from the date of grant. All options described in the table were granted under our 2015 LTIP.
2.Option awards vest in three equal annual installments, beginning on the first anniversary of the grant date.
3.Option awards vest in three equal annual installments. The first occurs on the anniversary of the grant date. The second and third vests occur on the anniversary of the May 17, 2022 board meeting.
4.Option awards vest in three equal annual installments. The first occurs on the anniversary of the grant date. The second and third vests occur on the anniversary of the May 16, 2023 board meeting.
5.RSUs vest in three equal annual installments, beginning on the first anniversary of the grant date.
6.RSUs vest in three equal annual installments. The first occurs on the anniversary of the grant date. The second and third vests occur on the anniversary of the May 17, 2022 board meeting.
7.PSU awards will be earned and vest if the applicable performance goal(s) have been achieved at the end of the three-year performance period.
8.This grant includes the cash-settled PSUs granted on August 22, 2022.
9.One-time RSU awards vest in three annual installments. 40% in year 1 on the anniversary of the grant date, 40% in year 2 and 20% in year 3 on the anniversary of the May 16, 2023 board meeting.
10.RSUs vest in three equal annual installments. The first occurs on the anniversary of the grant date. The second and third vests occur on the anniversary of the May 16, 2023 board meeting.
Director Compensation
BowFlex has a Director Compensation Program that provides for compensation of the non-employee members of our Board. Director compensation consists of annual retainers, fees for service as a committee chair, and awards of equity compensation. Directors who are employees receive no additional or special remuneration for serving as directors.
Annual Retainer, Committee Chair & Member Fees
Under the Director Compensation Program, each non-employee director receives an annual retainer of $57,500. Our Board’s Chair receives an additional annual fee of $35,000. Each director serving on a committee of our Board receives an additional fee of $6,000. The Chair of the Audit Committee receives an additional annual retainer of $17,500, while the Chairs of the Compensation Committee and the Corporate Governance Committee each receive an additional annual retainer of $8,750. We also reimburse non-employee director expenses for attending meetings of the Board of Directors.
Initial Equity Grant
Our Director Compensation Program provides that, upon initial election to our Board, each non-employee director will be granted 10,000 restricted stock units with one-third vesting each year over three years.
Annual Equity Grant
Each non-employee director re-elected to the Board in August 2023 received a grant of 26,515 shares of BowFlex restricted stock. Due to volatility in the price of BowFlex common stock, the number of shares of restricted stock granted to non-employee directors was determined by using a forty-five day moving average of the price of BowFlex common stock. The shares subject to the restricted stock awards are subject to forfeiture until vesting on the first anniversary of the grant date, subject to continued service of the director through such date.
FY 2024 DIRECTOR COMPENSATION
Name Fees Earned or Paid Cash Stock Awards1
Totals
Kelley Hall2
$69,500 $35,000 $104,500
Shailesh Prakash2
$71,877 $35,000 $106,877
Patty Ross2
$84,083 $35,000 $119,083
Anne G. Saunders $98,500 $35,000 $133,500
Ruby Sharma $87,000 $35,000 $122,000
1.Stock award amounts reflect the aggregate grant date fair value of awards granted during FY 2024, based on a grant of 26,515 restricted shares for all directors. See Notes 1 and 20 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024, for information on determining the fair value of stock awards and other related information.
2.Ms. Hall, Ms. Prakash, and Ms. Ross no longer serve on the Board.
EQUITY AWARDS OUTSTANDING AT MARCH 31, 2024
Name
Unvested Stock Awards (# of Shares)
Option Awards (# of Shares)
Kelley Hall
29,8481
-
Shailesh Prakash
29,8482
-
Patty Ross
26,5153
15,0006
Anne G. Saunders
26,5154
-
Ruby Sharma
29,8485
-
1.Consists of (a) 3,333 RSU awards that were scheduled to vest on October 21, 2024, and (b) 26,515 restricted stock awards that were scheduled to vest on July 3, 2024. A condition to the vesting of the awards was the director’s continued service with the Company through the date of vesting. Because of Ms. Hall’s resignation from the Board on April 22, 2024, none of these awards vested.
2.Consists of 26,515 RSU awards that were scheduled to vest on October 21, 2024, and (b) 26,515 restricted stock awards that were scheduled to vest on July 3, 2024. A condition to the vesting of the awards was the director’s continued service with the Company through the date of vesting. Because of Ms. Prakash’s resignation from the Board on April 22, 2024, none of these awards vested.
3.Consists of 26,515 restricted stock awards that were scheduled to vest on July 3, 2024. A condition to the vesting of the awards was the director’s continued service with the Company through the date of vesting. Because of Ms. Ross’s resignation from the Board on April 22, 2024, none of these awards vested.
4.Consists of 26,515 restricted stock awards that vested on July 3, 2024.
5.Consists of (a) 3,333 RSU awards that vested on May 18, 2024, and (b) 26,515 restricted stock awards that vested on July 3, 2024.
6.Consists of 15,000 stock options that vested and became exercisable on March 9, 2021.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Equity Compensation Plan Information
The following table provides information about our equity compensation plans as of March 31, 2024 (shares in thousands):
Plan Category Number of securities
to be issued upon exercise
of outstanding options,
warrants and rights(1),(2)
(a)
Weighted average
exercise price of
outstanding options,
warrants and rights(3)
(b)
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(c)
Equity compensation plans approved by security holders 2,550 $ 1.63 (668)
Equity compensation plans not approved by security holders - - -
Total 2,550 $ 1.63 (668)
(1) Includes approximately 1,169 PSU awards granted to certain executive officers and management team. The awards vest based on service requirements along with achievement of certain financial goals established for a three year performance period, and can range from 30% of the PSU awards if minimum thresholds are achieved to a maximum of 200%. Of the 1,169 PSU shares, 333 are calculated at an estimated 100% of the target award.
(2) Excludes 996 RSA and RSU awards outstanding at March 31, 2024, of which 127 RSA shares are subject to vesting and release, and 869 RSU shares are subject to a requisite service period, release and forfeiture.
(3) Weighted average exercise price shown in column (b) does not take into account the PSU awards included in column (a) of the table.
For further information regarding our equity compensation plan, refer to Note 23, Stock-Based Compensation, to our consolidated financial statements in Part II, Item 8 of this report.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS & MANAGEMENT
The following table summarizes certain information regarding the beneficial ownership of our outstanding common stock, as of May 30, 2024 by: 1) each director; 2) each of the named executive officers included in the Summary Compensation Table; 3) all persons that we know are beneficial owners of 5% or more of our common stock as of the record date; and 4) all directors and executive officers as a group. Except as otherwise indicated, and subject to applicable community property laws, each owner has sole voting and sole investment powers with respect to all shares beneficially owned.
Name of Beneficial Owner
Total Shares Beneficially Owned2
Percentage Beneficially Owned2
Namdar Family Holding LLC3
3,178,769 8.73 %
Safe Asset Management, LP4
1,760,367 4.83 %
Directors1
Anne G. Saunders 89,292 *
Ruby Sharma 56,068 *
Named Executive Officers1
James Barr, IV5
372,479 1.02 %
Aina E. Konold 215,176 *
Alan L. Chan 9,708 *
All Directors & Executive Officers as a Group (3 persons)6
742,723 2.04 %
*Less than 1%
1 The address for each director and executive officer is c/o Bowlex, Inc., 2114 Main Street, Suite 100-341 Vancouver, Washington 98660.
2 This table is based upon information supplied by officers, directors and principal shareholders and Schedules 13D and 13G, if any, filed with the SEC. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, the Company believes that each of the shareholders named in this table has sole voting and investment power with respect the shares indicated as beneficially owned. Applicable percentages are based on 36,411,534 shares outstanding on May 30, 2024, adjusted as required by rules promulgated by the SEC.
3 Information is based on the Schedule 13G/A filed on April 24, 2023 by Namdar Family Holding LLC, Igal Namdar, and Namdar Realty LLC (collectively, “Namdar”). Namdar has sole voting power with respect to 3,178,769 shares, shared voting power with respect to 0 shares, sole dispositive power with respect to 3,178,769 shares, and shared dispositive power with respect to 0 shares. The address of Namdar is 150 Great Neck Road, Suite 304, Great Neck, New York 11021.
4 Information is based on the Schedule 13D filed on November 7, 2023 by Safe Asset Management, LP and Pathik Rami (collectively, “SAM”). SAM has sole voting power with respect to 1,760,367 shares, shared voting power with respect to 0 shares, sole dispositive power with respect to 1,760,367 shares, and shared dispositive power with respect to 0 shares. The address of SAM is 1711 Monkton Farms Drive,Monkton, Maryland, 21111.
5 Consists of of (a) 372,479 shares of common stock held by Mr. Barr and (b) 724,662 shares issuable upon exercise of stock options that are currently exercisable or exercisable within 60 days of May 30, 2024.
6 Consists of (a) 666,327 shares of common stock held by our directors and officers, and (b) 182,464 shares issuable upon exercise of stock options held by our directors and officers that are currently exercisable or exercisable within 60 days of May 30, 2024.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
Our Board recognizes that “transactions” with a “related person” (as such terms are defined in Item 404 of Regulation S-K) present a heightened risk of conflict of interest and/or improper valuation (or the perception thereof) and, therefore, has adopted a policy which shall be followed in connection with all related person transactions. Specifically, this policy addresses our procedures for the review, approval, and ratification of all related person transactions.
Our Board has determined that the Audit Committee is best suited to review and approve related person transactions. Accordingly, any related person transactions recommended by management shall be presented to the Audit Committee for approval at a regularly scheduled meeting of the Audit Committee. Any related person transaction shall be consummated or shall continue only if the Audit Committee approves the transaction, the disinterested members of our Board approve the transaction, or the transaction involves compensation approved by the Compensation Committee.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services
We understand the need for Grant Thornton to maintain objectivity and independence in its audit of our financial statements. To minimize relationships that could appear to impair the objectivity of Grant Thornton, our Audit Committee has restricted the non-audit services that Grant Thornton may provide. These determinations are among the key practices adopted by the Audit Committee in its Policies and Procedures for the Approval of Audit and Non-Audit Services Provided by the Independent Auditor (the “Independent Auditor Pre-Approval Policy”). Under the Independent Auditor Pre-Approval Policy, we may use Grant Thornton for the following categories of non-audit services only with the pre-approval of the Audit Committee: merger and acquisition due diligence and audit services; tax services; employee benefit plan audits; and reviews and procedures that we engage Grant Thornton to undertake to provide assurances on matters not required by laws or regulations. All of the services performed by Grant Thornton in FY 2024 and FY 2023 were pre-approved in accordance with the Independent Auditor Pre-Approval Policy.
The following table presents fees for professional audit services rendered by Grant Thornton for the audits of our annual financial statements for the fiscal years ended March 31, 2024 and March 31, 2023, respectively, and fees billed for other services rendered by Grant Thornton during those periods.
Types of Fees
FY 2024
FY 2023
Audit Fees1
$752,937 $668,071
Audit-Related Fees2
92,125 26,500
Tax Fees3
71,127 64,811
Total
$916,189 $759,382
1.Fees for the audit of our consolidated financial statements included in our Annual Reports on Form 10-K, review of our condensed consolidated financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the accountant in connection with our statutory and regulatory filings or engagements, including the audit of internal control over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002.
2.Audit-related fees includes fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements.
3.Fees billed for tax compliance, tax advice and tax planning services rendered during the respective periods. Tax advice fees encompass a variety of permissible tax services, including technical tax advice related to federal and state and international income tax matters, assistance with sales tax and assistance with tax audits.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules
Financial Statements and Schedules
The consolidated financial statements, together with the report thereon of Grant Thornton LLP is included on the pages indicated below:
Page
Reports of Independent Registered Public Accounting Firms
PCAOB ID: 248
Consolidated Balance Sheets as of March 31, 2024 and 2023
Consolidated Statements of Operations for the years ended March 31, 2024 and 2023
Consolidated Statements of Comprehensive Loss for the years ended March 31, 2024 and 2023
Consolidated Statements of Shareholders' Equity (Deficit) for the years ended March 31, 2024 and 2023
Consolidated Statements of Cash Flows for the years ended March 31, 2024 and 2023
Notes to Consolidated Financial Statements 24
Financial statement schedules have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
Exhibits
The following exhibits are filed herewith and this list is intended to constitute the exhibit index.
Exhibit No. Description
3.1
Amended and Restated Articles of Incorporation - Incorporated by reference to Exhibit A to Schedule 14A, as filed with the Commission on April 22, 2008.
3.2
Amended and Restated Bylaws - Incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K, as filed with the Commission on April 5, 2005.
3.3
Amendment to Amended and Restated Bylaws of the Company - Incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K, as filed with the Commission on January 31, 2007.
3.4
Amendment to Amended and Restated Bylaws of the Company - Incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K, as filed with the Commission on April 23, 2024.
4.1
Form of Pre-Funded Common Stock Purchase Warrant - Incorporated by reference to Exhibit 4.1 of our Current Report on Form 8-K, as filed with the Commission on June 15, 2023.
4.2
Form of Common Stock Purchase Warrant - Incorporated by reference to Exhibit 4.2 of our Current Report on Form 8-K, as filed with the Commission on June 15, 2023.
10.1*
Form of Non-Employee Director Nonstatutory Stock Option Agreement - Incorporated by reference to Exhibit 10.2 of our Form 10-Q for the three months ended March 31, 2012 as filed with the Commission on May 9, 2012.
10.2*
Form of Non-Employee Director Restricted Stock Unit Award Agreement - Incorporated by reference to Exhibit 10.2 of our Form 10-Q for the three months ended June 30, 2013 as filed with the Commission on August 8, 2013.
10.3*
The Company 2015 Long-Term Incentive Plan - Incorporated by reference to Exhibit 10.1 of our Form 8-K dated April 28, 2015 as filed with the Commission on May 4, 2015.
10.4*
The Company 2015 Long-Term Incentive Plan Amended - Incorporated by reference to Exhibit 10.1 of our Form 8-K dated May 1, 2020 as filed with the Commission on May 4, 2020.
10.5
Stock Purchase Agreement dated October 14, 2020 between the Company and True Fitness Technology, Inc. - Incorporated by reference to Exhibit 2.1 of our Form 8-K as filed with the Commission on October 15, 2020.
10.6*
Form of Employee Performance Unit Award Agreement - Incorporated by reference to Exhibit 10.1 of our Form 8-K dated May 14, 2021 as filed with the Commission On May 20, 2021.
10.7*
Form of Employee Restricted Stock Unit Award Agreement - Incorporated by reference to Exhibit 10.2 of our Form 8-K dated May 14, 2021 as filed with the Commission On May 20, 2021.
10.8*
Form of Inducement Restricted Stock Unit Agreement for Vay AG Employees dated September 15, 2021, by and between the Company and Vay Employees - Incorporated by reference to Exhibit 99.1 of our Form S-8 dated September 15, 2021 as filed with the Commission on September 15, 2021.
10.9*
Form of Inducement Performance Unit Agreement for Vay AG Employees dated September 15, 2021, by and between the Company and Vay Employees - Incorporated by reference to Exhibit 99.2 of our Form S-8 dated September 15, 2021 as filed with the Commission on September 15, 2021.
10.10*
Form of Inducement Stock Plan for Vay AG Employees dated September 15, 2021, by and between the Company and Vay Employees - Incorporated by reference to Exhibit 99.3 of our Form S-8 dated September 15, 2021 as filed with the Commission on September 15, 2021.
10.11*
Form of Employee Performance Unit Award Agreement - Incorporated by reference to Exhibit 10.1 of our Form 8-K dated February 23, 2022 as filed with the Commission On February 25, 2022.
10.12
Form of Placement Agency Agreement by and between the Company and Roth Capital Partners, LLC, dated June 15, 2023 - Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K, as filed with the Commission on June 15, 2023.
10.13*
BowFlex Inc. Key Executive Compensation Plan - Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K, as filed with the Commission on February 5, 2024.
Exhibit No. Description
10.14
Asset Purchase Agreement, by and between Bowflex Inc., Nautilus Fitness Canada, Inc. and Johnson Health Tech Retails, Inc., dated March 4, 2024 - Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K, as filed with the Commission on March 5, 2024.
Subsidiaries of the Company.
31.1
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
32.1
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
97.1
Clawback Policy
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File, formatted in Inline XBRL (contained in Exhibit 101).
* Indicates management contract, compensatory agreement or arrangement, in which our directors or executive officers may participate.