Quarterly report pursuant to Section 13 or 15(d)

IT'SUGAR Bankruptcy

IT'SUGAR Bankruptcy
9 Months Ended
Sep. 30, 2020
IT'SUGAR Bankruptcy [Abstract]  
IT'SUGAR Bankruptcy

17.  IT’SUGAR Bankruptcy

On September 22, 2020, IT’SUGAR and its subsidiaries filed voluntary petitions to reorganize under Chapter 11 of the Bankruptcy Code. As a result of the filings, the uncertainties surrounding the nature, timing, and specifics of the bankruptcy proceedings, and the Company’s resulting loss of control and significant influence over IT’SUGAR, the Company determined that IT’SUGAR is a VIE in which the Company is not the primary beneficiary and deconsolidated IT’SUGAR in connection with the filings. In connection with the deconsolidation of IT’SUGAR, the Company recognized a noncontrolling equity investment in IT’SUGAR at its estimated fair value of $12.7 million and a $3.3 million loss based upon the difference between the carrying amount of IT’SUGAR (including its asset and liabilities and the redeemable noncontrolling interest in it) and the Company’s estimated fair value of its noncontrolling equity investment.

The noncontrolling equity investment in IT’SUGAR will subsequently be accounted for at cost less impairment. Equity investments are accounted for at cost less impairment when the investor does not have significant influence over the investee and the equity investment has no readily determinable fair value. Under this method, equity investments are accounted for at historical cost and adjusted if there is evidence that the fair market value of the equity investment has declined below the historical cost. 

IT’SUGAR’s  assets, liabilities, results of operations and cash flows through September 22, 2020 continue to be included as continuing operations in the Company’s financial statements, as the Company continues to hold a substantive equity investment in IT’SUGAR. Additionally, as a result of the Company deconsolidating IT’SUGAR, IT’SUGAR’s $6.2 million notes payable to the Company are no longer eliminated in consolidation and are included in investments in and advances to IT’SUGAR in the Company’s statement of financial condition as of September 30, 2020.

The following table summarizes the assets, liabilities, and net equity of IT’SUGAR as of September 22, 2020, the date it was deconsolidated from the Company’s financial statements:








Balance Sheet





September 22,

(in thousands)







Cash and cash equivalents




Restricted cash




Trade accounts receivable, net




Trade inventory




Property and equipment, net








Intangible assets, net




Operating lease assets




Other assets




Total assets












Accrued expenses




Operating lease liabilities




Notes payable and other borrowings




Total liabilities








Additional paid-in capital




Accumulated earnings




Noncontrolling interests




Total equity




Total liabilities and equity




Included in total liabilities in the above table are approximately $11.7 million of pre-petition liabilities, of which $7.7 million are pre-petition lease payments and $4.0 million are pre-petition obligations to other creditors, including supplies and vendors.

Under the Bankruptcy Code, debtors may assume, assign or reject executory contracts and unexpired leases subject to the approval of the Bankruptcy Court and certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a prepetition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the debtors of performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a pre-petition general unsecured claim for damages caused by such deemed breach subject, in the case of the rejection of unexpired leases of real property, to certain caps on damages. Counterparties to such rejected contracts or leases may assert unsecured claims in the Bankruptcy Court against the applicable debtor’s estate for such damages. Generally, the assumption or assumption and assignment of an executory contract or unexpired lease requires the debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance.

In connection with IT’SUGAR’s Bankruptcy Cases, on October 7, 2020, IT’SUGAR obtained a $4.0 million DIP credit facility from a subsidiary of the Company that was approved by the Bankruptcy Court on an interim basis pending a final hearing. As of November 9, 2020, $2.0 million had been funded to IT’SUGAR. The principal amount outstanding under the DIP facility bears interest at the LIBOR daily floating rate plus 1.50% with monthly interest only payments until the full payment of all principal outstanding.  The maturity date is the earliest of (a) 365 days from the petition date; (b) the effective date of a plan of reorganization or liquidation; (c) the consummation of a sale(s) of all or substantially all of the assets of IT’SUGAR; (d) the occurrence of an Event of Default (as defined in the loan agreement); and (e) the entry of an order by the Bankruptcy Court approving or authorizing any alternative or additional debtor-in-possession financing. Notwithstanding the foregoing, the Company may, in its sole discretion, agree in writing with IT’SUGAR, to a later maturity date