UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): April 27, 2021 (April 21, 2021)
SEQUENTIAL BRANDS GROUP, INC.
(Exact name of registrant as specified in its charter)
|
|
|
Delaware |
001-37656 |
47-4452789 |
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
1407 Broadway, 38th Floor, New York, NY 10018
(Address of Principal Executive Offices/Zip Code)
(646) 564-2577
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
|
|
|
|
◻ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|
|
|
|
◻ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
|
|
|
|
◻ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
|
|
|
|
◻ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
|
|
|
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Common stock, par value $0.01 per share |
SQBG |
NASDAQ Capital Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ◻
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Item 1.01. Entry into a Material Definitive Agreement.
On April 21, 2021, Sequential Brands Group, Inc. (“Sequential” or the “Company”) entered into an asset purchase agreement (the “Purchase Agreement”) under Heeling Sports Limited, a wholly-owned subsidiary of the Company, with BBC International LLC (the “Buyer”), pursuant to which Sequential agreed to sell the Buyer the Heely’s intangible assets for $11,000,000 in cash consideration. The sale closed on April 21, 2021.
The Purchase Agreement included customary representations, warranties and covenants of Sequential and the Buyer. The Purchase Agreement also contained indemnification provisions pursuant to which Sequential has agreed to indemnify the Buyer against certain losses, subject to the limitations set forth therein, including losses related to breaches of representations, warranties and covenants.
The foregoing description of the Purchase Agreement and the transactions contemplated thereby is qualified in its entirety by the full text of the Purchase Agreement, which is filed as an exhibit to this Form 8-K.
The Purchase Agreement is included to provide investors and security holders with information regarding its terms. It is not intended to provide any other factual information about Sequential or the Buyer or any of their respective businesses, subsidiaries or affiliates. The representations, warranties and covenants contained in the Purchase Agreement (a) were made by the parties thereto only for purposes of that agreement and as of specific dates; (b) were made solely for the benefit of the parties to the Purchase Agreement; (c) may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the Purchase Agreement (such disclosures include information that has been included in public disclosures, as well as additional non-public information); (d) may have been made for the purposes of allocating contractual risk between the parties to the Purchase Agreement instead of establishing these matters as facts; and (e) may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of Sequential or the Buyer or any of their respective subsidiaries or affiliates. Additionally, the representations, warranties, covenants, conditions and other terms of the Purchase Agreement may be subject to subsequent waiver or modification. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Purchase Agreement, which subsequent information may or may not be fully reflected in Sequential’s public disclosures. The Purchase Agreement should not be read alone, but should instead be read in conjunction with the other information regarding Sequential that is or will be contained in, or incorporated by reference into, the Forms 10-K, Forms 10-Q and other documents that are filed with the Securities and Exchange Commission.
Item 2.01. Completion of Acquisition or Disposition of Assets.
Item 1.01 is incorporated by reference.
Item 2.04. Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement
As a result of the transaction described in Item 1.01 above, Sequential made principal prepayments of $1.9 million on its Tranche A Term Loan in accordance with the terms under the amended Third Amended and Restated Credit Agreement with Bank of America, N. A., as administrative and collateral agent and the lenders party thereto and $3.2 million on its second lien Term Loan under the amended Third Amended and Restated Credit Agreement with Wilmington Trust, National Association, as administrative agent and collateral agent and the lenders party thereto. Sequential made an additional prepayment of $1.1 million on its Tranche A Term Loan.
Item 7.01. Regulation FD Disclosure
On April 26, 2021, Sequential issued a press release announcing the sale of Heelys and principal repayment on a portion of its outstanding debt described in Items 1.01, 2.01 and 2.04, a copy of which is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.
The information in this Item 7.01, including Exhibit 99.1, is furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities under that section, and shall not be deemed to be incorporated by reference into the filings of Sequential under the Securities Act of 1933, as amended, regardless of any general incorporation language in those filings.
Item 9.01. Financial Statements and Exhibits
|
|
|
|
(b) |
Pro Forma Financial Information. |
The pro forma financial information required under this Item 9.01(b) is attached to this Current Report on Form 8-K as Exhibit 99.2 and is incorporated herein by reference.
|
|
|
|
(d) |
Exhibits. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
|
|
|
|
Sequential Brands Group, Inc. |
||
|
|
|
|
Date: April 27, 2021 |
By: |
/s/ Lorraine DiSanto |
|
|
Name: |
Lorraine DiSanto |
|
|
Title: |
Chief Financial Officer |
Exhibit 10.1
Execution Version
This SALE AND PURCHASE AGREEMENT (this “Agreement”) is entered into as of April 21, 2021 (the “Closing Date”), by and between Heeling Sports Limited, a Delaware corporation (“Seller”), and BBC International LLC, a Florida limited liability company (“Buyer”).
RECITALS
WHEREAS, Buyer desires to purchase from Seller the Purchased Assets (as defined below) and Seller desires to sell the Purchased Assets to Buyer, on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants, representations, warranties, conditions, and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Parties agree as follows:
The following terms shall have the meanings set forth below in this Article 1.
1.1“Affiliate” means with respect to any Person, any other Person which is controlling, controlled by, or under common control with, directly or indirectly, through any Person, the Person referred to, and, if the Person referred to is a natural person, any member of such Person’s immediate family. The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”) as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract, or otherwise.
1.2“Agreement” means this Sale and Purchase Agreement, as executed on the date hereof and as amended or supplemented in accordance with the terms hereof, including the Schedules and Exhibits hereto.
1.3“Business” means all activities by Seller or any Affiliate of Seller associated with the ownership licensing, and marketing of the Purchased Trademarks.
1.4“Business Day” means any day which is not a Saturday, Sunday, or legal holiday in the State of New York, United States of America.
1.5“Buyer” has the meaning set forth in the first paragraph hereof.
1.6“Closing” means the consummation of the transactions contemplated by this Agreement, as provided for in Section 2.3.
1.7“Contract” means any contract, agreement, understanding, lease, indenture, mortgage, deed of trust, evidence of indebtedness, binding commitment or instrument, open purchase order, or offer, written or oral, express or implied, to which Seller is a party or by which it or any of its assets is bound that is in effect as of the Closing.
1.8“Government” means the United States of America, any other nation or state, any U.S. state, any federal, bilateral, or multilateral governmental authority, any possession, territory, local county, district, city, or other governmental unit or subdivision, and any branch, entity, agency, or judicial body of any of the foregoing.
1.9“Intellectual Property Assets” means all right, title and interest in the Purchased Trademarks, and all other Intellectual Property Rights owned by Seller or its Affiliates exclusively relating to the Business, including as listed in Schedule 3.5.
1.10“Intellectual Property Rights” means all worldwide statutory or non-statutory legal rights in (i) trademarks, service marks, trade names, brand names, product names, logos and corporate names, slogans, product source identifiers, and other indicia of source of origin, whether in connection with products or services, whether or not registered, including all common law rights thereto and all goodwill associated therewith, and registrations and applications for registration thereof (herein “Trademarks”); (ii) copyrights, whether registered or common law, and registrations and applications for registration thereof, original works of authorship, derivative works and other copyrightable works of any nature and fixations of any of the foregoing, including the right to make derivative works and all other associated statutory rights (herein “Copyrights”); (iii) domain names, uniform resource locators, and domain name registrations, websites and all social media platforms; (iv) all design and utility patents, designs, and design rights, including any issued registration or pending application therefor, reissues, divisions, continuations, continuations-in-part, reexaminations, renewals and substitutes thereof, foreign counterparts of the foregoing, term restorations or other extensions of the term of any issued or granted patents anywhere in the world (herein “Patents”); (v) trade secrets, know-how and proprietary information; (vi) all rights to any of the foregoing provided in, or by, international treaties and convention rights; (vii) the right and power to assert, defend and recover title to any of the foregoing; (viii) all rights to assert, defend and obtain all remedies, including recovering past damages and other remedies for past, present and future infringement, misuse, misappropriation, impairment, unauthorized use or other violation of any of the foregoing; and (ix) all administrative rights arising from the foregoing, including the right to prosecute applications and oppose, interfere with or challenge the applications of others, the rights to obtain renewals, continuations, divisions, reissues, reexaminations, and extensions of legal protection pertaining to any of the foregoing, and substitutes for any of the foregoing.
1.11“knowledge of Seller” means the actual knowledge of the President and Chief Financial Officer of Seller and Arta Isovski and Tracy Soinger.
1.12“Law” means any statute, law, ordinance, decree, order, injunction, rule, directive, or regulation of any Government or quasi-Governmental authority, and includes rules and regulations of any regulatory or self-regulatory authority compliance with which is required by Law.
1.13“Lien” means any lien, security interest, mortgage, indenture, deed of trust, pledge, charge, adverse claim, easement, restriction, or other encumbrance.
1.14“Order” means an order, writ, injunction, or decree of any court or Government.
1.15“Parties” means Buyer and Seller (and each a “Party”).
1.16“Person” means and shall include a natural person, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof) and shall be construed broadly.
1.17“Seller” has the meaning set forth in the first paragraph hereof.
1.18"Primary Jurisdictions" means: (i) for any Primary Trademark, the country where each such Primary Trademark is registered as set forth on Schedule 3.5(b); and (ii) for any Listed Patent, the country where each of the Listed Patents is registered as set forth on Schedule 3.5(d). For the avoidance of doubt, for purposes of the representations and warranties in Article 3, (x) not all Primary Trademarks are registered in the same country(ies), and a country shall only be deemed a “Primary Jurisdiction” for the applicable Primary Trademark(s), and (y) not all Listed Patents are registered in the same country(ies), and a country shall only be deemed a “Primary Jurisdiction” for the applicable Listed Patent(s).
1.19“Primary Trademarks” means the registrations and applications for the Trademarks set forth in the attached Schedule 1.19, together with all goodwill associated therewith, in each case only for the class of goods detailed for each such Trademark on Schedule 3.5(b).
1.20“Purchased Trademarks” means the Primary Trademarks and such other Trademarks as are set forth in the attached Schedule 3.5(b), together with all goodwill associated therewith.
2
1.21Table of Definitions. The following terms have the meanings set forth in the Sections referenced below.
ActionSection 3.4
AgreementPreamble
AllocationSection 3.4
Basket AmountSection 6.6(b)
BuyerPreamble
Buyer Indemnified PersonsSection 6.2
Buyer LiabilitiesSection 2.1(c)
Closing DatePreamble
CodeSection 5.6
CopyrightsSection 1.10
Excluded LiabilitiesSection 2.1(c)
Existing LicenseSection 5.7
Indemnified LossesSection 6.2
Indemnified PartySection 6.4
Indemnifying PartySection 6.4
Listed PatentsSection 6.2
LossesSection 6.2
PatentsSection 1.10
Purchase PriceSection 2.2
Purchased AssetsSection 2.1(a)
SellerPreamble
Seller Indemnified PersonsSection 6.3
Third PersonSection 6.5
Third Person ClaimSection 6.5
TrademarksSection 1.10
Transferred ContractsSection 2.1(a)(iv)
3
4
Seller hereby makes the following representations and warranties, each of which is true and correct on the date hereof and shall survive the Closing and the transactions contemplated hereby to the extent set forth herein.
5
6
7
Buyer hereby makes the following representations and warranties, each of which is true and correct on the date hereof and shall survive the Closing and the transactions contemplated hereby to the extent set forth herein.
8
that may be based on such information or errors therein or omissions therefrom. Buyer has not relied and is not relying on any statement, representation, or warranty, oral or written, express or implied (including any representation or warranty as to merchantability or fitness for a particular purpose), made by Seller or any of its Affiliates or representatives, except as expressly set forth in Article 3.
9
become involved, directly or indirectly, in the sale, offer to sale, promotion and/or manufacture of any wheeled footwear; provided, however, that (i) the foregoing shall not restrict Seller from continuing or extending any activity (other than the Business) in which Seller is engaged as of the Closing Date, including with respect to non-wheeled footwear, and (ii) nothing herein shall be construed as a waiver of any potential causes of action or remedies otherwise available to Buyer with respect to any Intellectual Property Rights.
10
11
If to Buyer: |
BBC International LLC
|
With a copy to: |
Sarah T. Zampino, Esq.
|
12
Fax: 212-808-5300
E-mail: sarah@zampinolaw.com
If to Seller: |
Heeling Sports Limited
|
601 W. 26th Street
Suite 900
New York, NY 10001
Attention: Eric Gul
Email: EGul@sbg-ny.com
With a copy to: |
Gibson, Dunn & Crutcher LLP
|
13
14
that no ambiguity herein should be construed against the draftsman. The Schedules shall be arranged in separate pages corresponding to the numbered and lettered sections, and the disclosure in any Schedule shall be deemed to relate to and to qualify only the particular representation or warranty set forth in the corresponding numbered or lettered Schedule, and not any other representation or warranty (unless an express and specific reference to any other Schedule which clearly identifies the particular item being referred is set forth therein).
[Signature pages follow.]
15
IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to be executed as of the date first above written.
BBC INTERNATIONAL LLC “BUYER”
By:/s/ Josue Solano
Name:Josue Solano
Title:CEO
HEELING SPORTS LIMITED “SELLER”
By:/s/ Lorraine DiSanto
Name:Lorraine DiSanto
Title:Chief Financial Officer
Exhibit A-1
TRADEMARK ASSIGNMENT AGREEMENT
This TRADEMARK ASSIGNMENT (this “Assignment”) is made and entered into as of April 21, 2021 (the “Effective Date”) by and between Heeling Sports Limited, a Delaware corporation (“Assignor”), and BBC International LLC, a Florida limited liability company (“Assignee”). Assignor and Assignee are individually referred to herein as a “Party,” and collectively as the “Parties.”
WHEREAS, Assignor and Assignee have entered into the Sale and Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”);
WHEREAS, capitalized terms used herein and not otherwise defined have the meanings ascribed to such terms in the Purchase Agreement;
WHEREAS, in connection with the Purchase Agreement, Assignor has agreed to transfer to Assignee, among other things, all right, title and interest of Assignor in and to the Purchased Trademarks set forth on Attachment 1 hereto (together with all goodwill associated therewith and symbolized thereby in each case) (collectively, the “Assigned Trademarks”); and
WHEREAS, Assignee wishes to acquire all of Assignor’s right, title and interest in and to the Assigned Trademarks, and Assignor wishes to assign such right, title and interest in and to such Assigned Trademarks to Assignee.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending legally to be bound, hereby agree as follows:
1
[Signature page follows.]
2
IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to be executed as of the date first above written.
ASSIGNOR:
HEELING SPORTS LIMITED
By:/s/ Lorraine DiSanto
Name:Lorraine DiSanto
Title:Chief Financial Officer
ASSIGNEE:
BBC INTERNATIONAL LLC
By:/s/ Josue Solano
Name:Josue Solano
Title:CEO
Exhibit A-2
COPYRIGHT ASSIGNMENT AGREEMENT
This COPYRIGHT ASSIGNMENT (this “Assignment”) is made and entered into as of April 21, 2021 (the “Effective Date”) by and between Heeling Sports Limited, a Delaware corporation (“Assignor”), and BBC International LLC, a Florida limited liability company (“Assignee”). Assignor and Assignee are individually referred to herein as a “Party,” and collectively as the “Parties.”
WHEREAS, Assignor and Assignee have entered into the Sale and Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”);
WHEREAS, capitalized terms used herein and not otherwise defined have the meanings ascribed to such terms in the Purchase Agreement;
WHEREAS, in connection with the Purchase Agreement, Assignor has agreed to transfer to Assignee, among other things, all right, title and interest of Assignor in and to the Copyrights set forth on Attachment 1 hereto (collectively, the “Assigned Copyrights”); and
WHEREAS, Assignee wishes to acquire all of Assignor’s right, title and interest in and to the Assigned Copyrights, and Assignor wishes to assign such right, title and interest in and to such Assigned Copyrights to Assignee.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending legally to be bound, hereby agree as follows:
1
[Signature page follows.]
2
IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to be executed as of the date first above written.
ASSIGNOR:
HEELING SPORTS LIMITED
By:/s/ Lorraine DiSanto
Name:Lorraine DiSanto
Title:Chief Financial Officer
ASSIGNEE:
BBC INTERNATIONAL LLC
By:/s/ Josue Solano
Name:Josue Solano
Title:CEO
Exhibit A-3
PATENT ASSIGNMENT AGREEMENT
This PATENT ASSIGNMENT (this “Assignment”) is made and entered into as of April 21, 2021 (the “Effective Date”) by and between Heeling Sports Limited, a Delaware corporation (“Assignor”), and BBC International LLC, a Florida limited liability company (“Assignee”). Assignor and Assignee are individually referred to herein as a “Party,” and collectively as the “Parties.”
WHEREAS, Assignor and Assignee have entered into the Sale and Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”);
WHEREAS, capitalized terms used herein and not otherwise defined have the meanings ascribed to such terms in the Purchase Agreement;
WHEREAS, in connection with the Purchase Agreement, Assignor has agreed to transfer to Assignee, among other things, all right, title and interest of Assignor in and to the Listed Patents set forth on Attachment 1 hereto (together with all related continuations, continuations-in-part, divisionals, reissues, re-examinations, substitutions, and extensions thereof, and all benefits, privileges, causes of action, and remedies relating thereto throughout the world) (collectively, the “Assigned Patents”); and
WHEREAS, Assignee wishes to acquire all of Assignor’s right, title and interest in and to the Assigned Patents, and Assignor wishes to assign such right, title and interest in and to such Assigned Patents to Assignee.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending legally to be bound, hereby agree as follows:
1
[Signature page follows.]
2
IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to be executed as of the date first above written.
ASSIGNOR:
HEELING SPORTS LIMITED
By:/s/ Lorraine DiSanto
Name:Lorraine DiSanto
Title:Chief Financial Officer
ASSIGNEE:
BBC INTERNATIONAL LLC
By:/s/ Josue Solano
Name:Josue Solano
Title:CEO
Exhibit B
ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Assignment and Assumption”) is made and entered into as of April 21, 2021 (the “Effective Date”) by and between Heeling Sports Limited, a Delaware corporation (“Assignor”), and BBC International LLC, a Florida limited liability company (“Assignee”). Assignor and Assignee are individually referred to herein as a “Party,” and collectively as the “Parties.”
WHEREAS, Assignor and Assignee have entered into the Sale and Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”);
WHEREAS, capitalized terms used herein and not otherwise defined have the meanings ascribed to such terms in the Purchase Agreement;
WHEREAS, the Purchase Agreement provides for, among other things, the assignment and assumption of the Transferred Contracts from Assignor to Assignee; and
WHEREAS, Assignor has agreed to assign to the Assignee, and Assignee has agreed to assume, all of Assignor’s rights and obligations under the Transferred Contracts.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending legally to be bound, hereby agree as follows:
1
[Signature page follows.]
2
IN WITNESS WHEREOF, each of the Parties hereto has caused this Assignment and Assumption to be executed as of the date first above written.
ASSIGNOR:
HEELING SPORTS LIMITED
By:/s/ Lorraine DiSanto
Name:Lorraine DiSanto
Title:Chief Financial Officer
ASSIGNEE:
BBC INTERNATIONAL LLC
By:/s/ Josue Solano
Name:Josue Solano
Title:CEO
Exhibit 99.1
Sequential Brands Group Announces Sale of Heelys Brand
NEW YORK, April 26, 2021 (GLOBE NEWSWIRE) -- Sequential Brands Group, Inc. (Nasdaq:SQBG) announced today that it has closed on the sale of its Heelys brand to BBC International for $11 million in cash proceeds.
“The divestiture of the Heelys brand was an outcome of the Board’s exploration of strategic alternatives, a process that is still underway,” said William Sweedler, Executive Chairman of Sequential. “The Heelys brand was originally acquired in 2013 for a net purchase price of approximately $5.5 million (after accounting for cash on the Heelys balance sheet that we received at the time of the 2013 purchase). BBC International has been the core licensee of Heelys since 2013. We believe the brand is in great hands under BBC’s leadership going forward.”
The majority of the net proceeds from the sale will be used to pay down debt.
About Heelys
Founded in 2000, Heelys are patented products that feature a removable wheel located in the heel, transforming the shoes into stealth skates and giving users the freedom to seamlessly transition from walking or running to skating by shifting their weight to their heel. When the wheels are easily removed, the shoe performs just like any other shoe. The Heelys vision is to inspire kids and adults alike to be active, explore their freedom, unleash the fun and be fearless. Heelys are an attitude, a way to express themselves, push their own boundaries and experience the world around them in a truly unique way.
About Sequential Brands Group, Inc.
Sequential Brands Group, Inc. (Nasdaq: SQBG) owns, promotes, markets, and licenses a portfolio of consumer brands in the active and lifestyle categories. Sequential seeks to ensure that its brands continue to thrive and grow by employing strong brand management, and marketing teams. Sequential has licensed and intends to license its brands in a variety of consumer categories to retailers, wholesalers and distributors in the United States and around the world. For more information, please visit Sequential's website at: www.sequentialbrandsgroup.com. To inquire about licensing opportunities, please email: newbusiness@sbg-ny.com.
For Media and Investor Relations inquiries, contact:
Sequential Brands Group, Inc.
Katherine Nash
T: +1 512-757-2566
E: knash@sbg-ny.com
Exhibit 99.2
Unaudited Pro Forma Condensed Consolidated Financial Statements
On April 21, 2021, Sequential Brands Group, Inc. (“Sequential” or the “Company”) entered into an asset purchase agreement (the “Purchase Agreement”) under Heeling Sports Limited, a wholly-owned subsidiary of the Company, with BBC International LLC (the “Buyer”), pursuant to which Sequential has agreed to sell the Buyer the Heely’s intangible assets for $11,000,000 in cash consideration. The sale was completed on April 21, 2021.
The following unaudited pro forma condensed consolidated financial statements present Sequential’s historical condensed consolidated balance sheet as of December 31, 2020 and the historical unaudited condensed consolidated statements of operations for Sequential for the years ended December 31, 2020 and 2019. The unaudited pro forma condensed consolidated balance sheet has been prepared to reflect the sale as if the sale had occurred as of December 31, 2020. The unaudited condensed consolidated statements of operations have been prepared to reflect the sale as if the sale had occurred on January 1, 2019. The pro forma condensed consolidated statements have been presented for information purposes only and is not necessarily indicative of what Sequential’s financial position or results of operations actually would have been had the sale taken place as of the dates indicated.
The unaudited pro forma condensed consolidated financial statements are derived from and should be read in conjunction with historical consolidated financial statements and related notes of the Company, which are included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as previously filed with the Securities and Exchange Commission (“SEC”). The unaudited pro forma condensed consolidated balance sheet as of December 31, 2020, the unaudited pro forma condensed consolidated statements of operations for the years ended December 31, 2020 and 2019, are presented herein.
The pro forma adjustments are preliminary and have been made solely for the purpose of providing pro forma financial statements prepared in accordance with the rules and regulations of the SEC. Differences between these preliminary estimates and the final accounting may occur and these differences could have a material impact on the accompanying pro forma condensed consolidated financial statements.
1
See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements.
2
See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements.
3
See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements.
4
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
NOTE 1 – BASIS OF PRO FORMA PRESENTATION
The unaudited pro forma condensed consolidated financial statements are based on Sequential Brand Group, Inc.’s (the “Company’s”) historical condensed consolidated financial statements as adjusted to give effect to pro forma events that are transaction accounting adjustments with U.S. generally accepted accounting principles (“GAAP”) and reflects the application of required accounting to the disposition of Heelys. The unaudited pro forma condensed consolidated statements of operations for the years ended December 31, 2020 and 2019 give effect to the sale as if it had occurred on January 1, 2019. The unaudited pro forma condensed consolidated balance sheet as of December 31, 2020 give effect to the sale as if it had occurred as of December 31, 2020.
The unaudited pro forma condensed consolidated financial statements do not reflect anticipated savings due to costs that may be reduced or eliminated.
NOTE 2 – PRO FORMA ADJUSTMENTS
The following pro forma adjustments have been reflected in the unaudited condensed consolidated financial statements. The unaudited pro forma condensed consolidated balance sheet has been prepared to reflect the sale as if the sale had occurred as of December 31, 2020. Therefore, the historical unaudited pro forma condensed consolidated balance sheet prepared does not reflect changes to assets of Heelys sold subsequent to those dates.
A. | Net proceeds received less estimated transaction costs: |
|
|
|
|
Pro Forma Adjustment |
|
|
(in thousands) |
|
Cash proceeds of the sale |
$ |
11,000 |
Less: Estimated transaction costs |
|
300 |
Total net proceeds less estimated transaction costs |
$ |
10,700 |
Net cash proceeds less estimated transaction costs of $10.7 million have been included as an adjustment to cash on the unaudited pro forma condensed consolidated balance sheet as of December 31, 2020.
B. | Represents the assets of Heelys which are subject to sale under the Purchase Agreement as of the respective balance sheet date. |
C. | Represents the changes in deferred income taxes due to the sale of Heelys. |
D. | Represents the gain on sale of Heelys if we had completed the sale as of December 31, 2020. The estimated gain has not been reflected in the unaudited pro forma condensed consolidated statement of operations as it is considered to be nonrecurring in nature. No adjustment has been made to the sale proceeds to give effect to any post-closing adjustments. |
E. | Represents the elimination of Heelys revenue. |
F. | Represents the elimination of operating expenses. Not included in the pro forma results are anticipated savings due to costs that may be reduced or eliminated. |
G. | Represents the allocation of interest expense to Heelys for the years ended December 31, 2020 and 2019 in accordance with ASC 205-20-45-6 based on required debt repayments of $1.9 million on the Company’s Tranche A Term Loan and $3.2 million on the Company’s second lien Term Loan. |
5
H. | Deferred tax provision attributable to Heelys. |
NOTE 3 – USE OF PROCEEDS
The Company used cash proceeds from the Heelys sale to repay $3.0 million and $3.2 million on its Tranche A Term Loan and second lien Term Loan, respectively. The pro forma adjustment assumes that the debt was repaid as of December 31, 2020.
I. | Represents the debt repayments against the Tranche A and second lien Term Loans as if the transaction had occurred as of December 31, 2020. |
.
6