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Summary of Significant Accounting Policies; Prior Period Reclassification | 12 Months Ended
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Dec. 31, 2018
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies; Prior Period Reclassification | NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES; PRIOR PERIOD RECLASSIFICATION Principles of Consolidation The Consolidated Financial Statements include the accounts of Cool Holdings and our wholly owned subsidiaries. All material intercompany accounts and transactions are eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In preparing these financial statements, we have made our best estimates and judgments of certain amounts included in the financial statements. Changes in the estimates and assumptions used by us could have a significant impact on our financial results. Actual results could differ from those estimates. Revenue Recognition and Allowance for Returns We adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (ASC Topic 606) on January 1, 2018 using the modified retrospective method to all noncompleted contracts as of the date of adoption. No adjustment of opening retained earnings for the cumulative effect of initially applying the new revenue standard was required. See the Recently Adopted Accounting Standards section for additional information pertaining to the adoption of ASU 2014-09. The comparative information has not been restated and continues to be reported under the accounting standards in effect for 2017. The following accounting policies became effective upon the adoption of ASU 2014-09. Under ASU 2014-09, we apply a five-step approach in determining the amount and timing of revenue to be recognized which includes the following: (1) identifying the contract with a customer, (2) identifying the performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations in the contract and (5) recognizing revenue when the performance obligation is satisfied. In our OneClick retail stores, revenue is recognized at a point in time, which typically is at the time of sale, net of discounts and estimated returns, when collection is reasonably assured and the customer takes possession of the merchandise. Revenues do not include sales taxes or other taxes collected from customers. Products sold in our stores typically come with a manufacturer’s warranty, which is an obligation of the manufacturer. However, our stores also sell AppleCare+ plans to customers that provide extended warranty coverage on their device purchases. Because the service to be provided to the consumer under the AppleCare+ Plan comes directly from Apple, OneClick does not “obtain substantive control” of the service. Consequently, OneClick acts as the “agent” in the sales transaction rather than the “principal,” and records the transaction on a “net” basis with the cost being netted against the sale and only the margin being recorded as revenue. For sales by our Cooltech Distribution unit and our discontinued verykool unit, revenue is recognized when control passes, which generally occurs upon delivery of the product to the customer. Revenue is recorded net of discounts and estimated returns. At our discontinued verykool unit, sales were recorded net of discounts, rebates, cooperative marketing arrangements, returns and allowances. On select sales, we agreed to cooperative arrangements wherein we funded future marketing programs related to the products purchased by the customer. Such arrangements were usually agreed to in advance. The amount of the co-op allowance was recorded as a reduction of the sale and added to accrued expenses as a current liability. Subsequent expenditures made pursuant to the arrangements reduced this liability. To the extent we incurred costs in excess of the established cooperative fund, we recognized the amount as a selling or marketing expense. As part of the sales process, verykool may have performed certain value-added services such as programming, software loading and quality assurance testing. These value-added services were considered an ancillary component of the sales process and amounts attributable to these processes were included in the unit cost to the customer. Furthermore, these value-added services were provided prior to the shipment of the products, and no value-added services were provided after delivery of the products. We recognized as a reserve against the related receivables estimates for product returns based on historical experience and other judgmental factors, evaluated these estimates on an ongoing basis and adjusted our estimates each period based on actual product return activity. We recognized freight costs billed to customers in net sales and actual freight costs incurred as a component of cost of sales. Verykool provided a 1-year limited warranty on its products, for which it is responsible. However, the customer did not have the option to purchase the warranty separately, and the warranty provided only an “assurance” to the customer that the product would function as expected and in accordance with its specifications. It was intended to safeguard the customer against existing defects and did not provide any incremental service to the customer. Consequently, the warranty was not a “separate performance obligation.” Costs incurred to either repair or replace the product were additional costs of providing the initial products. Consequently, for this reason, and because the customer did not have the option to purchase the warranty separately, the warranty was accounted for in accordance with ASC 460. We recorded a cost accrual for our warranty obligations based upon the units still under warranty, expected failure rates and our historical cost to repair. Foreign Currency Transactions Certain of the Company’s foreign subsidiaries (in Argentina and the Dominican Republic) have a functional currency that is not the U.S. Dollar. Assets and liabilities of such subsidiaries are translated to U.S. Dollars using exchange rates in effect at the balance sheet dates. Revenues and expenses are translated at average exchange rates in effect during the period. Translation adjustments are included in stockholders’ deficit in the accompanying consolidated balance sheets as a component of accumulated other comprehensive loss. The International Practices Task Force (“IPTF”) of the Center for Audit Quality discussed the inflationary status of Argentina at its meeting on May 16, 2018 and categorized Argentina as a country with a projected three-year cumulative inflation rate greater than 100%. Therefore, the Company has transitioned its Argentine operations to highly inflationary status as of July 1, 2018. For operations in highly inflationary economies, we use the U.S. dollar as the functional currency. Accordingly, monetary asset and liabilities are remeasured at exchange rates in effect at the balance sheet date, and non-monetary assets and liabilities are remeasured at historical exchange rates. Nonmonetary assets and liabilities existing on July 1, 2018 (the date that the Company adopted highly inflation accounting) were translated using the Argentine Peso to United States Dollar exchange rate in effect on June 30, 2018, which was 28.880. Foreign currency transaction adjustments are reflected in loss on foreign currency translation on the accompanying statement of operations. During the year ended December 31, 2018, the Company recorded a $470,000 loss on foreign currency transactions. Comprehensive Income (Loss) Comprehensive income (loss) as defined by U.S. generally accepted accounting principles (GAAP) includes all changes in equity (net assets) during a period from non-owner sources. The Company’s comprehensive loss includes foreign currency translation adjustments, which are excluded from net income (loss) and are reported as a separate component of stockholders’ deficit as accumulated other comprehensive loss. Cash, Cash Equivalents and Restricted Cash For consolidated financial statement purposes, cash equivalents are defined as investments which have an original maturity of ninety days or less from the original date of purchase. Cash and cash equivalents consist of cash on hand and in banks. The Company maintains its cash, cash equivalents and restricted cash balances in banks that from time to time exceed amounts insured by the Federal Deposit Insurance Corporation. As of December 31, 2018 and 2017, the Company maintained deposits totaling $2,375,000 and $924,000, respectively, with certain financial institutions in excess of federally insured amounts. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash. Amounts included in restricted cash are pledged as collateral to a bank and restricted to use in support of a letter of credit issued to a vendor or vendors for inventory purchases. Trade Accounts Receivable Trade accounts receivable are comprised primarily of amounts due from the Company’s distribution customers, of certain corporate customers of the Company’s OneClick stores and from financial institutions for the settlement of credit card transactions. The Company provides for the possible inability to collect accounts receivable by recording an allowance for doubtful accounts. The Company writes off an account when it is considered to be uncollectible. The Company evaluates the collectability of its accounts receivable on an ongoing basis. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations, the Company records a specific allowance against amounts due to reduce the net recognized receivable to the amount the Company reasonably believes will be collected. For all other customers, the Company recognizes allowances for doubtful accounts based on the length of time the receivables are past due, the current business environment and the Company’s historical experience. The allowance for doubtful accounts was $73,000 and $9,000 at December 31, 2018 and 2017, respectively. During the year ended December 31, 2017, the Company entered into factoring agreements with various financial institutions to sell accounts receivable under non-recourse agreements. These transactions were treated as sales and accounted for as a reduction in accounts receivable because the agreements transferred effective control over the receivables, and risk related thereto, to the buyers. Thus, cash proceeds from these arrangements were reflected as operating activities, including the change of accounts receivable in the consolidated statement of cash flows for the year. The Company did not service any factored accounts after the factoring occurred and did not have any servicing assets or liabilities. During the year ended December 31, 2017, the aggregate gross amount factored under these facilities was $2,557,000, and the cost of factoring such accounts receivable was $85,000, which amount is reflected as interest expense in the accompanying consolidated statement of operations and comprehensive loss. Inventory Inventory is stated at the lower of cost (first-in, first-out) or net realizable value and consists primarily of consumer electronics and accessories. The Company writes down its inventory to net realizable value when it is estimated to be slow-moving or obsolete. As of December 31, 2018 and 2017, the inventory was net of write-downs of $351,000 and $36,000, respectively. Property and Equipment Property and equipment are stated at cost less accumulated depreciation. The Company provides for depreciation using the straight-line method over estimated useful lives of three to five years. Expenditures for maintenance and repairs are charged to operations as incurred while renewals and betterments are capitalized. Gains or losses on the sale of property and equipment are reflected in the statements of operations. Fair Value of Financial Instruments The Company measures its financial instruments in its financial statements at fair value or amounts that approximate fair value. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when developing fair value measurements. When available, the Company uses quoted market prices to measure fair value. If market prices are not available, fair value measurement is based upon models that use primarily market-based or independently-sourced market parameters. If market observable inputs for model-based valuation techniques are not available, the Company makes judgments about assumptions market participants would use in estimating the fair value of the financial instrument. Carrying values of cash, cash equivalents, restricted cash, trade and other accounts receivable, prepaid expenses, accounts payable, accrued expenses, short-term notes payable and short-term notes payable to related parties approximate their fair values due to the short-term nature and liquidity of these financial instruments. The Company estimates that the fair value of its long-term debt and long-term debt to related parties approximates its carrying value based on significant level 2 observable inputs. Business Combinations We account for business combinations under the acquisition method of accounting. This method requires the recording of acquired assets and assumed liabilities at their acquisition date fair values. The excess of the purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Results of operations related to business combinations are included prospectively beginning with the date of acquisition and transaction costs related to business combinations are recorded within selling, general and administrative ("SG&A") expenses. Goodwill and Intangible Assets Goodwill represents the excess purchase price over tangible net assets and identifiable intangible assets acquired. Intangible assets are recorded apart from goodwill if they arise from a contractual right and are capable of being separated from the entity and sold, transferred, licensed, rented or exchanged individually. We are required to evaluate goodwill and other intangible assets not subject to amortization for impairment at least annually or when circumstances indicate the carrying value of the goodwill or other intangible assets might be impaired. Goodwill has been assigned to reporting units for the purpose of impairment testing. Excluding our verykool unit that was discontinued in the fourth quarter of 2018, we have two operating segments: our OneClick retail stores and our Cooltech distribution unit. Within the OneClick retail segment, we define our reporting units by their three geographic country locations: United States, Argentina and the Dominican Republic. The annual impairment tests for the United States and Argentina were performed as of October 1, 2018, while the annual impairment test for the Dominican Republic was performed as of December 31, 2018. In order to test goodwill for impairment, we compare a reporting unit's carrying amount to its estimated fair value. If the reporting unit’s carrying value exceeds its estimated fair value, then an impairment charge is recorded in the amount of the excess, limited to the amount of the goodwill in the reporting unit. The estimated fair value of a reporting unit is determined based on a combination of enterprise market valuation methods including (1) income approach using discounted cash flow analysis based on our long-term financial forecasts, (2) market approach using data for comparable market transactions, and (3) asset approach valuing the individual assets of the reporting unit. The discounted cash flows analysis requires significant assumptions including, among others, a discount rate and a terminal value. The Company elected to early adopt ASU 2017-04, Intangibles-Goodwill and Other (ASC Topic 350) on January 1, 2018, which eliminates step 2 from the impairment test. Goodwill impairment charges of $13.7 million were recognized in 2018, including $3.3 million included in discontinued operations. See Note 6, "Goodwill and Intangible Assets" for additional information. No goodwill impairment charges were recognized in 2017. Our definite-lived intangible assets consist primarily of trade names and covenants not to compete recorded as a result of business acquisitions. The estimated useful life and amortization methodology of intangible assets are determined based on the period in which they are expected to contribute directly to cash flows. Intangible assets that are determined to have a definite life are amortized over that period. Stock-Based Compensation The Company’s share-based compensation plans are described in Note 9. The Company measures compensation cost for all employee stock-based awards at fair value on the date of grant and recognizes compensation expense, net of estimated forfeitures, over the requisite service period, usually the vesting period. The fair value of stock options is determined using the Black-Scholes valuation model. Effective January 1, 2018, the Company adopted ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of Topic 718 to include share-based payment awards to nonemployees. As a result, stock-based awards granted to consultants and non-employees are accounted for in the same manner as awards granted to employees and directors as described above. Advertising Expense The Company expenses all advertising costs, including direct response advertising, as they are incurred. Advertising expense for the years ended December 31, 2018 and 2017 was $ 334,000 and $193,000, respectively. Income Taxes The Company recognizes deferred tax assets and liabilities for the future consequences of events that have been recognized in the Company’s financial statements or tax returns. The measurement of the deferred items is based on enacted tax laws. In the event the future consequences of differences between financial reporting bases and the tax bases of the Company’s assets and liabilities result in a deferred tax asset, the Company performs an evaluation of the probability of being able to realize the future benefits indicated by such asset. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion or the entire deferred tax asset will not be realized. In addition, the Company recognizes the financial statement impact of a tax position when it is more likely than not that the position will be sustained upon examination. The amount recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. The Company recognizes interest and penalties related to tax uncertainties as operating expenses. Based on our evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. Earnings (Loss) Per Share The Company computes basic earnings (loss) per share by dividing income (loss) available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings (loss) per share is computed similarly to basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would be issued as a result of potentially dilutive securities outstanding during the period. Potentially dilutive securities include preferred stock, stock options and warrants. In periods when a net loss is incurred, no additional shares are included in the computation of diluted loss per share because the effect of inclusion would be anti-dilutive. Common shares from exercise of certain options and warrants are excluded from the computation of diluted earnings per share when their exercise prices are greater than the Company’s weighted-average stock price for the period. For the years ended December 31, 2018 and 2017, the number of such shares excluded was 161,000 and 34,000 respectively. In addition, for the year ended December 31, 2018, because their inclusion would have been anti-dilutive to the loss calculation, common shares from exercise of 5,192,000 in-the-money warrants and 322,000 preferred shares were excluded from the computation of net loss per share. No such shares were excluded for the year ended December 31, 2017. All share and per share numbers in this report have been retroactively restated for the Company’s two one-for-five reverse stock splits effected in October 2017 and March 2018. Geographic Reporting The Company allocates revenues to geographic areas based on the location where our retail stores are located or, in the case of Cooltech Distribution, the countries to which the product is shipped. Major Suppliers The Company purchases its Apple products either directly from Apple or from major distributors, depending on availability of product and credit lines at the time of purchase. Ultimately, Apple is the sole source of supply of Apple products, and the Company’s business is highly dependent on Apple for its supply of current and future products. Approximately 77% of the Company’s 2018 sales are comprised of sales of Apple products. In addition, the growth of our business is highly dependent upon our relationship with Apple in providing us with the licenses and approvals necessary to expand our footprint into various countries and regions around the world. Apple has very strict performance standards and guidelines that we must achieve and adhere to in order to be successful and continue to receive their support. Consequently, our performance deterioration or failure to adhere to their guidelines could jeopardize our strategy and adversely affect our financial performance. During the year ended December 31, 2018, the Company’s three largest suppliers accounted for 36%, 24% and 10%, respectively, of total cost of sales. During the year ended December 31, 2017, the Company’s three largest suppliers accounted for 44%, 12% and 11%, respectively, of total cost of sales. Concentrations of Credit Risk, Customers Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. We maintain our cash and cash equivalents with various high-credit-quality financial institutions located primarily in the United States. Currently, the Company’s cash balances are kept primarily in demand accounts at these banks, but the Company may periodically invest excess cash in certificates of deposit or money market accounts in order to maintain safety and liquidity. The Company’s investment strategy generally results in lower yields on investments but reduces the risk to principal in the short term prior to these funds being used in its business. The Company has not experienced any material losses on financial instruments held at financial institutions. The Company’s retail stores sell primarily to end consumers, with periodic sales to corporate customers. The Company’s Cooltech Distribution segment sells primarily to resellers. The Company selectively provides credit to corporate and reseller customers in the normal course of business and generally requires no collateral. The Company performs ongoing credit evaluations of its customers and maintains reserves for potential credit losses based upon the Company’s historical experience related to credit losses and any unusual circumstances that may affect the ability of its customers to meet their obligations. The Company’s bad debt expenses have not been significant relative to its total revenues. In 2018, no customer represented 10% or more of the Company’s total net sales. However, one customer represented approximately 30% of accounts receivable at December 31, 2018. In addition, one customer of the Company’s discontinued verykool business segment represented approximately 49% of the current assets of discontinued operations at December 31, 2018. In 2017, no customer represented 10% or more of the Company’s total sales. However, one customer represented 84% of accounts receivable at December 31, 2017. Recently Adopted Accounting Pronouncements: In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605),” and requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, this guidance requires that entities disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers - Principal versus Agent Considerations (Reporting revenue gross versus net),” which clarifies gross versus net revenue reporting when another party is involved in the transaction. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers - Identifying Performance Obligations and Licensing,” which amends the revenue guidance on identifying performance obligations and accounting for licenses of intellectual property. In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers - Narrow-Scope Improvements and Practical Expedients,” which provides narrow-scope improvements to the guidance on collectability, non-cash consideration, and completed contracts at transition. In December 2016, the FASB issued ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,” which amended the guidance on performance obligation disclosures and makes technical corrections and improvements to the new revenue standard. The Company adopted this guidance effective January 1, 2018, which adoption did not have a material impact on the Company’s consolidated financial statements. In November 2015, the FASB issued ASU No. 2015-17, "Balance Sheet Classification of Deferred Taxes," which requires that deferred tax liabilities and assets be classified on our Consolidated Combined Balance Sheets as noncurrent based on an analysis of each taxpaying component within a jurisdiction. ASU No. 2015-17 was effective for fiscal years commencing after December 15, 2016. The Company adopted this guidance effective January 1, 2017, which adoption did not have a material impact on the Company’s consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. For the Company, ASU 2016-01 was effective for annual reporting periods, including interim reporting periods within those periods, beginning after December 15, 2017, and early adoption is permitted. The Company adopted this guidance effective January 1, 2018, which adoption did not have an impact on the Company’s consolidated financial statements. In May 2017, the FASB issued ASU No. 2017-09, “Compensation—Stock Compensation (Topic 718), Scope of Modification Accounting.” ASU 2017-09 clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions or the classification of the award changes as a result of the change in terms or conditions. The guidance was effective prospectively for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and early adoption is permitted. The Company adopted this guidance effective January 1, 2018, which adoption did not have an impact on the Company’s consolidated financial statements. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 became effective, on a retrospective basis, for the Company on January 1, 2018. All prior periods have been adjusted to conform to the current period presentation, which resulted in a decrease in cash used in investing activities of $1,008,000 for the year ended December 31, 2017 on the Consolidated Statement of Cash Flows. Accounting Pronouncements Issued (Not adopted yet): In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” The guidance in ASU 2016-02 and subsequently issued amendments requires lessees to capitalize virtually all leases with terms of more than twelve months on the balance sheet as a right-of-use asset and recognize an associated lease liability. The right-of-use asset represents the lessee’s right to use, or control the use of, a specified asset for the specified lease term. The lease liability represents the lessee’s obligation to make lease payments arising from the lease, measured on a discounted basis. Based on certain characteristics, leases are classified as financing or operating leases and their classification impacts the recognition of expense in the income statement. Entities are allowed to apply the modified retrospective approach (1) retrospectively to each comparative period presented (comparative method) or (2) retrospectively at the beginning of the period of adoption through a cumulative-effect adjustment (effective date method). ASU 2016‑02 is effective for public companies for interim and annual reporting periods beginning after December 15, 2018. The Company adopted the new standard on January 1, 2019 using the effective date method. Therefore, upon adoption, the Company will recognize and measure leases without revising comparative period information or disclosures. The Company implemented the transition package of three practical expedients permitted within the standard, which among other things, allows for the carryforward of historical lease classifications. The Company will make an accounting policy election to keep leases with terms of twelve months or less off the balance sheet and result in recognizing those lease payments on a straight-line basis over the lease term. As a result of adopting the new standard, the Company estimates it will record initial right-of-use assets of approximately $4,642,000 with a corresponding initial lease liability, which will also be adjusted by reclassifications of existing assets and liabilities primarily related to deferred rent. The adoption of this new standard is not expected to have a material impact on the Company’s consolidated results of operations or cash flows. In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flow - Classification of Certain Cash Receipts and Cash Payments (Topic 230)” ("ASU 2016-15"), which addresses a few specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. For the Company, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If the Company early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The Company is currently evaluating the potential impact this standard may have on its consolidated statement of cash flows and the timing of adoption. Other Accounting Standards Updates not effective until after December 31, 2018 are not expected to have a material effect on the Company’s financial position or results of operations. Prior Period Reclassification: During the preparation of these consolidated financial statements, it was noted that a journal entry for the year ended December 31, 2017 to eliminate pre-acquisition results of the Company’s OneClick Argentino business unit was misclassified as a reduction of cost of goods sold rather than selling, general and administrative expenses. The consolidated statement of operations for the year ended December 31, 2017 has been adjusted to correct this error, the impact of which is as follows:
|  | As Originally Reported |  |  | As Adjusted |  |  | Effect of Change |
Net sales |  | $ | 13,615 |  |  | $ | 13,615 |  |  | $ | — |
Cost of sales |  |  | 11,331 |  |  |  | 12,235 |  |  |  | 904 |
Gross profit |  |  | 2,284 |  |  |  | 1,380 |  |  |  | 904 |
Selling, general and administrative expenses |  |  | 8,998 |  |  |  | 8,094 |  |  |  | (904 | )
Operating loss |  | $ | (6,714 | ) |  | $ | (6,714 | ) |  | $ | — |

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