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Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
The aggregate market value of the registrant’s
voting and non-voting common equity held by non-affiliates as of July 2, 2021, was $10.9 million. For purposes of this computation,
all officers, directors, and 10% beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed
to be an admission that such officers, directors, or 10% beneficial owners are, in fact, affiliates of the registrant.
The number of shares issued and outstanding of
the registrant’s common stock as of March 11, 2022 was 2,164,708.
Except as described above, no other changes have
been made to the Original Filing. The Original Filing continues to speak as of the date of the Original Filing, and we have not updated
the disclosures contained therein to reflect any events which occurred at a date subsequent to the filing of the Original Filing.
As used in this Amendment, unless the context requires
otherwise, “our company,” “Summer,” “our” and “we” means Summer Infant, Inc. and
its consolidated subsidiaries.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Executive Officers
Information concerning our current executive officers
is set forth below. All executive officers hold their positions for an indefinite term and serve at the pleasure of the Company’s
Board of Directors (the “Board”).
Stuart
Noyes, 58, has been our Chief Executive Officer and a director since December 2020, and was initially appointed as
the Company’s Interim Chief Executive Officer in December 2019. Mr. Noyes is a Senior Managing Director at Riveron
RTS, LLC, a business advisory firm. Prior to that, Mr. Noyes was managing partner of Winter Harbor, LLC, a consulting firm
specializing in turnaround and restructuring services, which he co-founded in January 2012, until it was acquired by Riveron in
November 2020. He has more than 25 years of experience in executive and general management, operations, procurement, creditor
negotiations, and finance, providing strategic and tactical turnaround solutions to a variety of clients. From February 2016
through April 2016, Mr. Noyes served as Chief Restructuring Officer of The Mid-States Supply Company, which filed a
voluntary petition for bankruptcy in February 2016. From September 2016 through November 2016, Mr. Noyes served
as Chief Restructuring Officer for TPP Acquisition (d/b/a The Picture People), which filed a voluntary petition for bankruptcy in
September 2016. From November 2012 until December 2015, Mr. Noyes served as Chief Restructuring Officer, and
then Assignee for Creditors, of AFL Quality, Inc. and its related entities, AFL Quality NY LLC and DGF, Inc., which were
subject to an involuntary petition for liquidation in February 2013 that was later dismissed in April 2013. Mr. Noyes
is a member of the Turnaround Management Association and holds a Master of Business Administration from the University of Utah and
Bachelor of Business Administration from the University of Maine.
Bruce Meier,
54, was appointed Interim Chief Financial Officer effective March 19, 2021. Mr. Meier is Managing Director at Riveron and prior
to that was a managing director at Winter Harbor, LLC, a consulting firm specializing in turnaround and restructuring services, from June 2014
until it was acquired by Riveron in November 2020. Mr. Meier possesses more than 20 years of diversified experience in the areas
of financial management and performance improvement, organizational restructuring, cash management discipline, strategic planning and
development and evaluation of business plans. He commenced his employment with Winter Harbor in 2014, where he has provided interim management
and advisory services to a variety of clients. He has been working as a business and financial advisor to Summer Infant, Inc., reporting
directly to Mr. Noyes, since December 2019. From February 2017 until February 2018, he served as a consultant and,
for a period of seven months as Interim Chief Financial Officer, to K’Nex Limited Partnership Group, LP (“K’Nex”).
K’Nex was ultimately sold to a strategic buyer and the residual assets were transferred to an assignee in an assignment for the
benefit of creditors. Mr. Meier holds a Master of Business Administration degree with a concentration in Accounting from Hofstra
University and a Bachelor of Business Administration degree with a concentration in finance from Loyola University (previously named Loyola
College) in Maryland. Mr. Meier is a Certified Public Accountant (CPA) and a Certified Insolvency and Restructuring Advisor (CIRA).
Directors
Our Board currently has six directors. Biographical
information for our current directors is set forth below, other than for Mr. Noyes whose biography is set forth above under “Executive
Officers.”
Evelyn D’An,
60, a director since November 2016, is President of D’An Financial Services, a strategic consulting firm she established in
2004. Ms. D’An is an experienced independent board director and experienced chair of audit, compensation and nominating/governance
committee, with senior finance experience, including at a $5 billion global distributor and service provider for the wireless industry.
Ms. D’An is a former partner of Ernst & Young, where she spent 18 years serving clients in retail, consumer products,
technology, financial services, media and other sectors. Ms. D’An has served on numerous corporate boards since 2006, and she
served as a director of Enochian Biosciences, Inc., a publicly traded, pre-clinical stage biotechnology company, from March 2018
until April 2021. She graduated with a Bachelor of Science in Accounting from the State University of Albany.
Robin Marino,
67, a director since August 2015, is currently an independent brand consultant. From June 2011 to November 2014, Ms. Marino
served as Group President, Accessories and Home, of LFUSA/Global Brands Group (GBG), a branded apparel, footwear, fashion accessories
and related lifestyle product company, where she oversaw five divisions. Prior to joining GBG, Ms. Marino was President and CEO of
Merchandising at Martha Stewart Living Omnimedia, which she originally joined in 2005. Ms. Marino was also President and COO of Kate
Spade from 1999 to 2005. Prior to that, she served in a variety of management positions for fashion and retail companies such as Burberry
Limited, Wathne LTD and Federated Department Stores, Inc. Ms. Marino holds a B.B.A. from Stetson University.
Alan
Mustacchi, 61, director since May 2015, is Managing Director at EROC Advisors, LLC, a strategic advisory firm. Prior
to joining EROC, Mr. Mustacchi served as Executive Vice President, Capital Markets of GreenSky, Inc., a technology-focused
consumer finance platform, from 2014 until 2020, and was Managing Director and Head of Consumer Products & Specialty Retail
Investment Banking of Dresner Partners, a middle market investment bank specializing in merger & acquisition advisory,
institutional private placements of debt and equity, financial restructuring and corporate turnaround, valuation and strategic
consulting, from 2013 until 2014. From 2005 until 2013, Mr. Mustacchi was at Navigant Capital Advisors, LLC, where he was
Managing Director, Investment Banking. He was also Managing Director, Merchant Banking Group, at BNP Paribas, where he spent 11
years, and Vice President of The Bank of New York in its commercial finance group. Early in his career, Mr. Mustacchi spent six
years as a Certified Public Accountant. He holds a B.S. in Accounting and Economics from New York University’s College of
Business and Public Administration and a M.B.A. in Finance and International Business from New York University’s Graduate
School of Business Administration.
Andrew Train,
40, has been a director since August 2017. Since May 2014, Mr. Train has been President of OBERLAND, a purpose driven branding
agency based in New York City which he co-founded. Prior to founding OBERLAND, Mr. Train was the Advertising Business Director at
J. Walter Thompson New York, a branding, marketing and advertising agency, from May 2009 until May 2014. Earlier in his career,
he worked on well-known global brands such as HSBC, Verizon, UPS, Puma, and Lufthansa in North America and China while at J. Walter Thompson
and other advertising agencies. Mr. Train has been recognized by several national and global organizations for cause marketing and
driving social change through traditional, digital, social and mobile campaigns. Mr. Train holds a B.A. in Economics from the University
of Richmond.
Stephen J. Zelkowicz,
49, has been a director since August 2014. Since 1999, he has served as an equity research analyst at Wynnefield Capital, Inc.,
an investment firm specializing in small, publicly-traded companies. He currently serves on the board of directors of DLH Holdings, Corp.
(member – Management Resources and Compensation Committee and member - Audit Committee). Mr. Zelkowicz holds a B.A. from the
University of Pennsylvania and a M.B.A. from Columbia University.
Corporate Governance
Audit Committee and Audit Committee Financial Expert
Our Board has established a separately-designated
standing Audit Committee in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). The Audit Committee currently consists of three members: Alan Mustacchi (Chairman), Evelyn D’An and Robin Marino. Each
member of the Audit Committee is an “independent” director under applicable SEC and Nasdaq Stock Market rules. Our Board has
determined that each of Mr. Mustacchi and Ms. D’An qualifies as an “audit committee financial expert” within
the meaning of SEC rules.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires
our directors and executive officers, and persons who beneficially own more than 10% of a registered class of our equity securities, to
file reports with the SEC relating to their ownership and changes in ownership of our common stock and other equity securities. Based
solely on our review of our records, SEC filings and on written representations from our executive officers and directors, we believe
that each person who, at any time during the fiscal year, was a director, officer or beneficial owner of more than 10% of our common stock,
complied with all Section 16(a) requirements during the fiscal year, except for the following: (i) Mr. Train filed
one late Form 4 reporting the sale of shares of common stock in a single transaction, and (ii) Jason Macari two late Form 4s,
each reporting the sale of common stock in a single transaction.
Process for Stockholder Nominations
There have been no material changes to the procedures
by which security holders may recommend nominees to our Board.
Item 11. Executive Compensation
Overview
We are an infant and juvenile products company
originally founded in 1985 and have publicly traded on the Nasdaq Stock Market since 2007 under the symbol “SUMR.” We are
a recognized authority in the juvenile industry, providing parents and caregivers a full range of innovative, high-quality, and high-value
products to care for babies and toddlers.
Our industry is highly
competitive and has many participants, and our ability to compete effectively in our industry is dependent in part on our ability to attract,
motivate and retain key management personnel and qualified employees. Our Board has appointed a Compensation Committee consisting
of independent directors as required by applicable SEC and Nasdaq Stock Market rules. The Compensation Committee is authorized to determine
and approve, or make recommendations to our Board with respect to, the compensation of our chief executive officer, chief financial officer
and our other executive officers, and to grant or recommend the grant of stock-based compensation to our executive officers and employees.
The Compensation Committee also reviews our compensation policies and practices for all employees.
We have experienced changes in our senior management
since December 2019. Stuart Noyes was originally appointed as the Company’s Interim Chief Executive Officer pursuant to an
engagement with Winter Harbor, LLC, a consulting firm specializing in turnaround and restructuring services that was subsequently acquired
by Riveron RTS, LLC, in December 2019, and was appointed Chief Executive Officer and a director in December 2020. In May 2020,
we announced the retirement of Paul Francese, our Chief Financial Officer, who was succeeded by Edmund J. Schwartz, an independent consultant
who served as our Chief Financial Officer from June 2020 until March 2021. In February 2021, we announced Mr. Schwartz’s
retirement, and he was succeeded by Bruce Meier, our current Interim Chief Financial Officer, in March 2021. As described below under
“Riveron Engagement,” the services of each of Mr. Noyes and Mr. Meier are provided to the Company pursuant
to the Company’s engagement agreement with Riveron, and not on an individual basis.
Proposed Merger
with Kids2, Inc. In March 2022, the Company announced that it entered into an Agreement and Plan of Merger (the “Merger
Agreement”) by and among the Company, Kids2, Inc., a Georgia corporation (“Parent”), and Project Abacus Acquisition
Corp., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”). The Merger Agreement provides, subject
to its terms and conditions, for the acquisition of the Company by Parent through the merger of Merger Sub with and into the Company,
with the Company surviving the Merger as a wholly owned subsidiary of Parent (the “Proposed Merger”). As described below under
“Riveron Engagement,” Riveron will receive a success fee of approximately $258,120 upon the completion of the Proposed
Merger. Please see the Company’s Current Report on Form 8-K filed with the SEC on March 17, 2022 for information concerning
the Proposed Merger.
Role of the Compensation Committee and Management
The Compensation Committee is responsible for determining
or recommending to the Board the compensation of our chief executive officer, chief financial officer and our other executive officers.
Our Compensation Committee, together with our Board, is responsible for evaluating the performance of and determining the compensation
of our chief executive officer in light of the goals and objectives of our compensation program for that year. With respect to the Company’s
current chief executive officer and chief financial officer, the Compensation Committee recommended, and the Board approved, the engagement
of Riveron to provide executive services as described below under “Riveron Engagement.” Our Compensation Committee
annually assesses the performance of our other executive officers and considers recommendations from our chief executive officer when
determining the compensation of our other executive officers. As discussed below, the Compensation Committee may also consider input from
other independent directors, our compensation consultant and benchmarking studies and surveys, but retains absolute discretion as to whether
to adopt any recommendations as it deems appropriate. At the request of our Compensation Committee, our chief executive officer, chief
financial officer and other executive officers may attend our Compensation Committee meetings, including meetings at which our compensation
consultant is present. Our chief executive officer does not attend any portion of meetings at which his compensation is discussed.
The Compensation Committee also, in consultation
with its independent compensation consultant, considers changes to our compensation programs as appropriate in response to input from
stockholders through our annual Say on Pay vote and evolving factors such as the business environment and competition for talent. As part
of its 2021 compensation setting process, the Compensation Committee reviewed the results of the Say on Pay vote regarding executive compensation
paid in 2020, in which approximately 99.3% of the votes cast were voted in favor of our named executive officer compensation in 2020.
The Compensation Committee has authority to retain
(at our Company’s expense) outside counsel, compensation consultants and other advisors to assist as needed. The Compensation Committee
considers input and recommendations from our outside compensation consultants in connection with its review of our Company’s compensation
programs and its annual review of the performance of the other executive officers. In fiscal 2021, the Compensation Committee did not
engage the services of an independent compensation consultant.
Named Executive Officer Compensation in 2021
Our named executive officers for 2021 were Stuart
Noyes, Chief Executive Officer, Bruce Meier, our current Interim Chief Financial Officer, and Edmund Schwartz, former Chief Financial
Officer.
Riveron Engagement
Executive Services.
Neither Mr. Noyes nor Mr. Meier receives any compensation directly or indirectly from the Company, but are engaged pursuant
to the terms of an engagement letter between the Company and Riveron RTS, LLC (formerly Winter Harbor, LLC), first entered into on December 9,
2019 (as subsequently amended, the “Letter Agreement”). Pursuant to the Letter Agreement, Mr. Noyes initially acted as
the Company’s Interim CEO, effective December 16, 2019, and then in December 2020 was appointed as the CEO and a director
of the Company. Under the Letter Agreement, from December 2019 until February 2020, compensation paid to Riveron for services
of Mr. Noyes and other Winter Harbor employees, including Mr. Meier, our current Interim CFO, was determined for the first ten
weeks of the engagement based on agreed-upon hourly rates, subject to a cap of $35,000 per week (other than holiday weeks, which were
capped at $15,000 each week) and thereafter upon actual hours worked or such other mutually agreed upon fee structure, plus any out-of-pocket
expenses. In February 2020, the Compensation Committee approved, and the Company entered into, an amendment to the Letter Agreement
that provided for compensation at a weekly rate of $40,000, effective beginning the week of February 24, 2020 through the termination
of the engagement letter, to compensate Riveron for the services of Messrs. Noyes and Mr. Meier, plus expenses and administrative
fees. In January 2022, the Compensation Committee approved, and the Company entered into, an amendment to the Letter Agreement that
provides for compensation at a weekly rate of $46,000, effective beginning the week of January 2, 2022 through the termination of
the engagement letter, which compensates Riveron for the services of Messrs. Noyes and Meier, plus expenses and administrative fees.
The Company has also agreed to indemnify Riveron, Mr. Noyes, Mr. Meier and other Riveron personnel in connection with the engagement,
subject to customary terms and conditions.
Either party may terminate the Letter Agreement
upon 6 months’ prior written notice, which period may be terminated early upon the appointment of a replacement chief executive
officer. In addition, the Letter Agreement will automatically terminate immediately following a “Change in Control” (as defined
in the Company’s Amended and Restated Change in Control Plan). The Letter Agreement also provides that, if the Company consummates
a transaction constituting a “Change in Control” (a “Sale Transaction”), then the Company shall pay Riveron a
success fee, payable at the closing of the Sale Transaction, based upon the per share consideration received by holders of the Company’s
common stock in the Sale Transaction. With respect to the Proposed Merger described above, this success fee would be approximately $258,120.
Termination upon Change in Control.
Immediately after the consummation of a Change in Control (as defined in the Company’s Amended and Restated Change in Control
Plan), this Agreement shall be automatically terminated without further action by the parties hereto. Upon and concurrently with the
closing of the Sale Transaction, the Company shall pay Riveron for all Services rendered and expenses incurred through the date of
the consummation of the Change in Control transaction.
As previously disclosed, neither Mr. Noyes
nor Mr. Meier will receive any compensation from the Company for their services, rather, the Company compensates Riveron in accordance
with the Letter Agreement.
Advisory Services.
Prior to entering into the Letter Agreement, in November 2019 in connection with the Company’s amendment to its credit facilities,
the Company engaged Riveron (formerly Winter Harbor) to provide financial advisory services (the “Advisor Agreement”) and
paid a retainer of $25,000. Compensation under the Advisor Agreement is determined based on agreed-upon hourly rates for actual hours
worked, plus any out-of-pocket expenses and a 1% administrative fee on the total amount of each invoice to cover administrative costs.
As of January 1, 2022, the Company had paid or accrued approximately $70,000 related to services provided under the Advisor Agreement,
including expenses and administrative fees. Fees for services under the Advisor Agreement engagement are separate from, and in addition
to, fees paid under the Letter Agreement. Fees paid to Riveron under the Letter Agreement are included in the Summary Compensation Table
set forth in the Executive Compensation section below.
Other Named Executive
Officers in 2021
Edmund J. Schwartz.
Mr. Schwartz, who served as our Chief Financial Officer from June 2020 until March 2021, was compensated pursuant
to the terms of a consulting agreement with the Company pursuant to which he received compensation of $5,000 for the month of May 2020,
and thereafter received $20,000 per month, plus living and commuting expenses that were reimbursed by the Company. In addition, Mr. Schwartz
was eligible to receive a payment equal to 40% of his annual compensation for the third and fourth quarters based on the Company’s
performance in the third and fourth quarters of fiscal year 2020, as if he was a participant under the Company’s 2020.
SUMMARY COMPENSATION TABLE
The following table sets forth, for fiscal years
2020 and 2021, information regarding compensation of our named executive officers:
Name
and Principal Position | |
Year | | |
Salary
($) | | |
Bonus
($) | | |
All
Other Compensation ($) | | |
Total
($) | |
Stuart
Noyes | |
2021 | | |
| -- | | |
| -- | | |
| 2,201,721 | (1) | |
| 2,201,721 | |
Chief
Executive Officer | |
2020 | | |
| -- | | |
| -- | | |
| 2,161,118 | | |
| 2,161,118 | |
| |
| | |
| | | |
| | | |
| | | |
| | |
Bruce
Meier | |
2021 | | |
| -- | | |
| -- | | |
| -- | (1) | |
| -- | |
Interim
Chief Financial Officer | |
| | |
| | | |
| | | |
| | | |
| | |
| |
| | |
| | | |
| | | |
| | | |
| | |
Edmund
Schwartz | |
2021 | | |
| 60,000 | | |
| -- | | |
| 4,447 | (2) | |
| 64,447 | |
Former
Chief Financial Officer | |
2020 | | |
| 145,000 | | |
| 27,000 | | |
| 20,397 | | |
| 192,397 | |
(1) | Represents fees paid to Riveron RTS, LLC pursuant to the Letter Agreement described above under “Riveron Engagement”
during fiscal year 2021 for the services of Mr. Noyes and Mr. Meier, who became our current Interim CFO in March 2021.
Consists of (i) $2,080,000 of monthly fees and (ii) $121,721 of expenses and administrative fees. The amounts in this table
do not include fees paid to Riveron for services under the Advisor Agreement as described above under “Riveron Engagement”
and below under “Certain Relationships and Related Transactions.” |
(2) | Represents commuting expenses. |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
There were no outstanding equity awards held by
the named executive officers at the end of fiscal 2021.
Change in Control Plan
In February 2018, the Board approved a Change
in Control Plan, which was subsequently amended and restated in February 2022 to extend the plan to February 9, 2024. Under
the “double trigger” provisions of the Change in Control Plan, a participant will be entitled to certain payments if (1) there
is a change in control and (2) within the 12-month period following the change in control, the participant’s employment is
terminated without cause by the Company or for good reason by the participant. If these events occur, a participant will be entitled to
receive payments based on their tier under the Plan for a period of time following the termination.
Neither our current Chief Executive Officer, Mr. Noyes,
nor our current Interim Chief Financial Officer, Mr. Meier, participate in the Change in Control Plan. Mr. Schwartz, our former
Chief Financial Officer, did not participate in the Change in Control Plan.
Participants in the plan receive benefits depending
on their Tier as follows: (i) a cash payment equal to his annual base salary times the applicable tier multiplier (2.0x for CEO;
1.0x for CFO), payable over a period of time following termination (24 months for CEO; 12 months for CFO); (ii) a cash payment equal
to the pro-rated portion of the participant’s annual cash bonus actually achieved for the fiscal year in which the termination occurs,
payable when such payment would otherwise be paid after the end of the relevant performance period; and (iii) a cash payment equal
to one times the monthly premiums for the participant’s group medical, dental and vision coverage for a period of time (24 months
for CEO; 12 months for CFO), payable monthly provided that such payments will end if the participant becomes eligible to participate in
similar plans with a subsequent employer.
In addition, any unvested equity awards held by
participants that were granted prior to the change in control will accelerate and vest in full as of the participant’s termination
date, and any unvested performance-based equity awards will be deemed vested and earned assuming achievement at the target performance
level. As a condition to receiving payments under the Plan, participants must execute a severance agreement and release, which includes
non-competition and similar covenants that remain in effect for a period of time, depending on the Tier of participation.
Retirement Plans
We have a Section 401(k) plan and provide
an employer matching contribution, which is the same that we provide all of our employees. We do not offer our employees any nonqualified
pension plans, supplemental executive retirement plans, deferred compensation plans or other forms of compensation for retirement.
Director Compensation
For fiscal 2021, the following director compensation
program was in place for our non-employee directors:
| • | an annual retainer fee of $90,000 for the Chairperson and $45,000 for other
non-employee directors; |
| • | for any meetings beyond four regularly scheduled board meetings per year,
a fee of $1,000 for each board meeting attended in person; |
| • | the chairpersons of the Audit, Compensation and Nominating/Governance received
an additional annual fee of $15,000, $10,000, and $8,000, respectively; |
| • | each director serving as a member of the Audit, Compensation and Nominating/Governance
Committees (other than the chairperson of each such committee) received an annual fee of $5,000; and |
| • | on the date of our annual meeting of stockholders, each director other than
our Chairperson received an annual equity award equal in value to approximately $45,000, in the form of 3,930 fully vested shares of our
common stock, and the Chairperson received an annual equity award equal in value to approximately $60,000, in the form of 5,240 fully
vested shares of our common stock. |
We also generally reimburse non-employee directors
for travel expenses incurred in connection with their duties as directors. In addition, our Board of Directors may from time to time also
provide for cash compensation, as recommended by the Compensation Committee, payable to members of special or ad hoc committees of the
Board of Directors. In 2021, the Board of Directors formed a transaction committee and approved compensation of cash fees equal to $5,000
per month to the chairperson of the committee and $3,000 per month to each other member of the committee for their service on the committee.
Other than as disclosed in this proxy statement,
we do not pay any directors who are also executive officers any additional compensation for service as directors.
Director Compensation in 2021
The following table shows non-employee director
compensation in 2021. Stuart Noyes served as our Chief Executive Officer during 2021 and did not receive any compensation for his service
as a director. For information on compensation paid to Riveron for Mr. Noyes’ services as Chief Executive Officer, please see
“Executive Compensation - Summary Compensation Table” above.
Name | |
Fees
Earned or Paid in Cash ($)(1) | | |
Stock
Awards ($)(2) | | |
All
Other Compensation ($) | | |
Total
($) | |
Evelyn
D’An | |
| 57,500 | | |
| 44,999 | | |
| -- | | |
| 102,499 | |
Robin
Marino | |
| 101,000 | | |
| 59,998 | | |
| -- | | |
| 160,998 | |
Alan
Mustacchi | |
| 68,500 | | |
| 44,999 | | |
| -- | | |
| 113,499 | |
Andrew
Train | |
| 47,500 | | |
| 44,999 | | |
| -- | | |
| 92,499 | |
Stephen
J. Zelkowicz | |
| 65,500 | | |
| 44,999 | | |
| -- | | |
| 110,499 | |
(1) | Represents fees earned or paid in cash in 2021, including annual retainer fees and committee fees. |
(2) | The amounts reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation
of these amounts are included in Note 7 to our audited consolidated financial statements for the fiscal year ended January 1, 2022. |
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
Equity Compensation Plan Information
The following table summarizes information, as
of January 1, 2022, regarding our equity compensation plans (on a post-split adjusted basis).
Plan Category | |
Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | | |
Weighted Average Exercise Price of Outstanding Options, Warrants, and Rights (b) | | |
Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans [excluding securities reflected in column (a)] (c) | |
Equity compensation plans approved by stockholders | |
| 76,707 | (1) | |
$ | 11.20 | | |
| 202,576 | |
Total | |
| 76,707 | | |
$ | 11.20 | | |
| 202,576 | |
| (1) | Includes 6,072 shares issuable upon vesting of outstanding restricted stock awards granted to employees which have not yet vested.
Such shares are not included in the calculation of the weighted average exercise price reflected in column (b). |
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding
the beneficial ownership of our common stock as of March 31, 2022 by:
| • | each person known by us to be the beneficial owner of more than 5% of our
outstanding shares of common stock; |
| • | each of our directors and named executive officers; and |
| • | all of our current executive officers and directors as a group. |
Name and Address of Beneficial Owner (1) | |
Amount and Nature of Beneficial Ownership (2) | | |
Percent of Common Stock (3) | |
5% Stockholders | |
| | | |
| | |
Wynnefield Capital Management LLC and related parties (4) | |
| 784,183 | | |
| 36.2 | % |
Jason Macari (5) | |
| 364,117 | | |
| 16.8 | % |
Directors and Named Executive Officers | |
| | | |
| | |
Evelyn D’An | |
| 9,712 | | |
| * | |
Robin Marino | |
| 33,456 | | |
| 1.6 | % |
Bruce Meier | |
| -- | | |
| -- | |
Alan Mustacchi | |
| 16,394 | | |
| * | |
Stuart Noyes | |
| -- | | |
| -- | |
Edmund J. Schwartz (6) | |
| -- | | |
| -- | |
Andrew Train | |
| 7,408 | | |
| * | |
Stephen J. Zelkowicz | |
| 14,289 | | |
| * | |
All current directors and executive officers as a group (7 persons) | |
| 81,259 | | |
| 3.8 | % |
* Less
than 1%
(1) | Unless otherwise noted, the business address of each named person is 1275 Park East Drive, Woonsocket, Rhode Island 02895. |
(2) | Unless otherwise noted, each person named in the table has sole voting and investment power with regard to all shares beneficially
owned, subject to applicable community property laws. |
(3) | The percentages shown are calculated based on 2,164,708 shares of common stock issued and outstanding on March 31, 2022. In calculating
the percentage of ownership, all shares of common stock that the identified person or group had the right to acquire within 60 days of
March 31, 2022 are deemed to be outstanding for the purpose of computing the percentage of the shares of common stock owned by that
person or group, but are not deemed to be outstanding for the purpose of computing the percentage of the shares of common stock owned
by any other person or group. |
(4) | The information is as reported on Amendment No. 12 to Schedule 13D filed with the SEC on March 22, 2022. The address for
Wynnefield Capital Management, LLC and related entities is 450 Seventh Avenue, Suite 509, New York, NY 10123. Of the shares indicated,
236,595 shares are beneficially owned by Wynnefield Partners Small Cap Value, L.P. (“Partners”), 358,792 shares are beneficially
owned by Wynnefield Partners Small Cap Value, L.P. I (“Partners I”), 164,523 shares are beneficially owned by Wynnefield Small
Cap Value Offshore Fund, Ltd. (“Fund”), and 24,273 shares are beneficially owned by Wynnefield Capital, Inc. Profit Sharing &
Money Purchase Plan (“Plan”) |
|
Wynnefield Capital Management, LLC (“WCM”) is the sole general partner of Partners and Partners I and, accordingly, may be
deemed to be the indirect beneficial owner (as that term is defined under Rule 13d-3 under the Exchange Act) of the shares that
Partners and Partners I beneficially own. WCM, as the sole general partner of Partners and Partners I, has the sole power to direct the
voting and disposition of the shares that Partners and Partners I beneficially own. Nelson Obus and Joshua Landes are the co-managing
members of WCM and, accordingly, each of Messrs. Obus and Landes may be deemed to be the indirect beneficial owner (as that term
is defined under Rule 13d-3 under the Exchange Act) of the shares that WCM may be deemed to beneficially own. Each of Messrs. Obus
and Landes, as co-managing members of WCM, share the power to direct the voting and disposition of the shares that WCM may be deemed
to beneficially own. |
|
Wynnefield Capital, Inc. (“WCI”) is the sole investment manager of the Fund and, accordingly, may be deemed to be the
indirect beneficial owner (as that term is defined under Rule 13d-3 under the Exchange Act) of the shares that the Fund beneficially
owns. WCI, as the sole investment manager of the Fund, has the sole power to direct the voting and disposition of the shares that the
Fund beneficially owns. Messrs. Obus and Landes are executive officers of WCI and, accordingly, each may be deemed to be the indirect
beneficial owner (as that term is defined under Rule 13d-3 under the Exchange Act) of the shares that WCI may be deemed to beneficially
own. Messrs. Obus and Landes, as executive officers of WCI, share the power to direct the voting and disposition of the shares that
WCI may be deemed to beneficially own. |
|
The Plan is an employee profit sharing plan. Messrs. Obus and Landes are the co-trustees of the Plan and accordingly, Messrs. Obus
and Landes may be deemed to be the indirect beneficial owner (as that term is defined under Rule 13d-3 under the Exchange Act) of
the shares that the Plan may be deemed to beneficially own. Each of Messrs. Obus and Landes, as the trustees of the Plan, shares
with the other the power to direct the voting and disposition of the shares beneficially owned by the Plan. |
|
The information set forth in this footnote with respect to WCM, WCI and Messrs. Obus and Landes, shall not be considered an admission
that any of such persons, for the purpose of Section 16(b) of the Exchange Act, are the beneficial owners of any shares in
which such persons do not have a pecuniary interest. Each of WCM, WCI and Messrs. Obus and Landes disclaims any beneficial ownership
of these shares. |
(5) | The information is as reported on Amendment No. 2 to Schedule 13D filed with the SEC on September 12, 2016 and a Form 4/A
filed on March 29, 2021. The address of Mr. Macari is 3100 Diamond Hill Road, Cumberland, Rhode Island 02864. Includes 473 shares
held by Mr. Macari’s daughter, of which Mr. Macari disclaims beneficial ownership. |
(6) | Mr. Schwartz served as the Company’s CFO from June 2020 until March 2021. |
Changes in Control.
There are no arrangements, known to the Company, including any pledge by any person of securities of the Company, the operation of which
may at a subsequent date result in a change in control of the Company, other than the proposed acquisition of the Company by Kids2, Inc.
as described above under “Executive Compensation – Overview - Proposed Merger with Kids2, Inc.”
Item 13. Certain Relationships and Related Transactions, and Director
Independence
Independence of Directors
In determining the independence of directors, our
Board analyzes each director’s relationship with our Company and our subsidiaries to determine whether our directors are independent
under the applicable rules of the Nasdaq Stock Market and the SEC. Our Board has determined that each of our current directors is
“independent” within the meaning of the independence rules of the Nasdaq Stock Market and the SEC, other than Mr. Noyes.
Certain Relationships and Related Transactions
Woonsocket Lease.
In March 2009, our wholly owned subsidiary, Summer Infant (USA), Inc. (“Summer USA”), entered into a definitive
agreement with Faith Realty II, LLC, a company whose members include Jason P. Macari, a current stockholder of the Company and our former
Chief Executive Officer and a former director. Under this agreement, Faith Realty purchased our corporate headquarters located at 1275
Park East Drive, Woonsocket, Rhode Island for $4,052,500 and subsequently leased the headquarters back to Summer USA. The lease was last
amended in May 2020 and, among other things, extended the term of the lease until June 30, 2025, reduced annual base rent payments
commencing on July 1, 2020 to $303,180 (with incremental annual increases thereafter pursuant to the amended lease), and provided
Summer USA with two options to extend the term of the lease, each for an additional five-year term. In fiscal 2020, payments under this
lease totaled $431,680. In fiscal 2021, payments under this lease totaled $306,212.
Riveron Engagement.
As described above under “Executive Compensation - Riveron Engagement,” Mr. Noyes, our current CEO and a director,
is Senior Managing Director, and Mr. Meier, our current Interim CFO, is a Managing Director, of Riveron. We pay Riveron for the services
of Messrs. Noyes and Meier under the Letter Agreement, and pay Riveron for advisory services under the Advisor Agreement, each as
described above under “Executive Compensation - Riveron Engagement.” In fiscal 2020, we paid Riveron $2,161,118 under
the Letter Agreement and $71,825 under the Advisor Agreement. In fiscal 2021, we paid Riveron $2,201,721 under the Letter Agreement and
$68,680 under the Advisor Agreement.
Wynnefield Term
Loan. On January 28, 2022, the Company and Summer USA, as borrowers, entered into a Loan and Security Agreement among
the Company and Summer USA, as borrowers, the guarantors from time to time party thereto, certain financial institutions as lenders (“Lenders”),
and Wynnefield Capital, Inc., as agent for the lenders (the “Wynnefield Loan Agreement”). The Lenders, Wynnefield Partners
Small Cap Value, L.P. and Wynnefield Partners Small Cap Value, L.P. I, are existing stockholders of the Company and, together with affiliates,
beneficially own approximately 36% of the Company’s outstanding common stock, and an employee of Wynnefield Capital, Inc.,
Stephen Zelkowicz, serves on the Board. Because the New Loan Agreement is a related party transaction, it was reviewed and approved by
the Audit Committee of the Board.
The Wynnefield Loan Agreement provides for a second
lien, subordinated term loan in an amount up to $5 million, with requests for the funding of tranches limited to every 30 days subject
to certain conditions. Borrowings under the agreement bear interest at a rate of 5.0% per annum until January 27, 2024, and thereafter
at a rate of 9.0% per annum, payable in arrears on a quarterly basis. The Company requested and received an initial funding of $2,000,000
at closing of the Wynnefield Loan Agreement. As of April 2, 2022, the amount of principal outstanding under the Wynnefield Loan Agreement
was $1, 950,000, and the Company had repaid $50,000 of principal and $17,916.67 in interest on the loan.
Item 14. Principal Accountant Fees and Services
Our Audit and Finance Committee appointed RSM US,
LLP (“RSM”), an independent registered public accounting firm, to audit the consolidated financial statements of our company
for the fiscal year ending January 1, 2022.
Fees
The following table shows the aggregate fees paid
or accrued for audit and other services provided for fiscal years 2021 and 2020:
| |
2021 | | |
2020 | |
Audit Fees | |
$ | 318,887 | | |
$ | 301,033 | |
Audit-Related Fees | |
| 25,000 | | |
| -- | |
Tax Fees | |
| -- | | |
| -- | |
All Other Fees | |
| -- | | |
| -- | |
Total Fees | |
$ | 343,887 | | |
$ | 301,033 | |
Audit Fees
in 2021 and 2020 were for professional services rendered for the audit of our annual consolidated financial statements and related procedures
and review of consolidated financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided
by RSM in connection with statutory and regulatory filings or engagements. Audit-Related Fees in 2021 were for consents provided
in connection with the filing of a Registration Statement on Form S-8 and in connection with third party workpaper review.
Audit Committee Policy on Pre-Approval of Audit and Permissible
Non-Audit Services of Independent Auditors
The Audit and Finance Committee pre-approves all
audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit
services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year, and any pre-approval
is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent registered
public accounting firm and management are required to periodically report to the Audit and Finance Committee regarding the extent of services
provided by the independent registered public accounting firm in accordance with the pre-approval, and the fees for the services performed
to date. The Audit and Finance Committee may also pre-approve particular services on a case-by-case basis.