IMEDIA BRANDS, INC., 10-K filed on 4/23/2021
Annual Report
v3.21.1
Document and Entity Information - USD ($)
12 Months Ended
Jan. 30, 2021
Apr. 16, 2021
Jul. 31, 2020
Document and Entity Information [Abstract]      
Document Type 10-K    
Document Annual Report true    
Document Transition Report false    
Document Period End Date Jan. 30, 2021    
Entity File Number 001-37495    
Entity Registrant Name iMedia Brands, Inc.    
Entity Incorporation, State or Country Code MN    
Entity Tax Identification Number 41-1673770    
Entity Address, Address Line One 6740 Shady Oak Road,    
Entity Address, City or Town Eden Prairie,    
Entity Address, State or Province MN    
Entity Address, Postal Zip Code 55344-3433    
City Area Code 952    
Local Phone Number 943-6000    
Title of 12(b) Security Common Stock, $0.01 par value    
Trading Symbol IMBI    
Security Exchange Name NASDAQ    
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Non-accelerated Filer    
Entity Small Business true    
Entity Emerging Growth Company false    
ICFR Auditor Attestation Flag false    
Entity Shell Company false    
Entity Public Float     $ 32,284,000
Entity Common Stock, Shares Outstanding   16,311,236  
Entity Central Index Key 0000870826    
Document Fiscal Year Focus 2020    
Amendment Flag false    
Document Fiscal Period Focus FY    
Current Fiscal Year End Date --01-30    
v3.21.1
CONSOLIDATED BALANCE SHEETS - USD ($)
Jan. 30, 2021
Feb. 01, 2020
Current assets:    
Cash $ 15,485,000 $ 10,287,000
Accounts receivable, net 61,951,000 63,594,000
Inventories 68,715,000 78,863,000
Current portion of television distribution rights, net 19,725,000  
Prepaid expenses and other 7,853,000 8,196,000
Total current assets 173,729,000 160,940,000
Property and equipment, net 41,988,000 47,616,000
Television distribution rights, net 7,028,000  
Other assets 3,892,000 4,187,000
TOTAL ASSETS 226,637,000 212,743,000
Current liabilities:    
Accounts payable 77,995,000 83,659,000
Accrued liabilities 29,509,000 40,250,000
Current portion of television distribution rights obligations 29,173,000  
Current portion of long term credit facility 2,714,000 2,714,000
Current portion of operating lease liabilities 462,000 704,000
Deferred revenue 213,000 141,000
Total current liabilities 140,066,000 127,468,000
Other long term liabilities 8,855,000 335,000
Long term credit facility 50,666,000 66,246,000
Total liabilities 199,587,000 194,049,000
Commitments and contingencies
Shareholders' equity:    
Preferred stock, $0.01 per share par value, 400,000 shares authorized; zero shares issued and outstanding
Common stock, $0.01 per share par value, 29,600,000 and 14,600,000 shares authorized as of January 30, 2021 and February 1, 2020; 13,019,061 and 8,208,227 shares issued and outstanding as of January 30, 2021 and February 1, 2020 130,000 82,000
Additional paid-in capital 474,375,000 452,833,000
Accumulated deficit (447,455,000) (434,221,000)
Total shareholders? equity 27,050,000 18,694,000
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 226,637,000 $ 212,743,000
v3.21.1
CONSOLIDATED BALANCE SHEETS (Parentheticals) - $ / shares
Jan. 30, 2021
Feb. 01, 2020
Statement of Financial Position [Abstract]    
Preferred stock, par value $ 0.01 $ 0.01
Preferred stock, shares authorized 400,000 400,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 29,600,000 14,600,000
Common stock, shares issued 13,019,061 8,208,227
Common stock, shares outstanding 13,019,061 8,208,227
v3.21.1
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
12 Months Ended
Jan. 30, 2021
Feb. 01, 2020
Feb. 02, 2019
Income Statement [Abstract]      
Net sales $ 454,171,000 $ 501,822,000 $ 596,637,000
Cost of sales 287,118,000 338,185,000 389,790,000
Gross profit 167,053,000 163,637,000 206,847,000
Operating expense:      
Distribution and selling 129,920,000 170,587,000 191,917,000
General and administrative 20,336,000 25,611,000 25,883,000
Depreciation and amortization 24,022,000 8,057,000 6,243,000
Restructuring costs 715,000 9,166,000 0
Executive and management transition costs   2,741,000 2,093,000
Gain on sale of television station     (665,000)
Total operating expense 174,993,000 216,162,000 225,471,000
Operating loss (7,940,000) (52,525,000) (18,624,000)
Other income (expense):      
Interest income 3,000 17,000 34,000
Interest expense (5,237,000) (3,777,000) (3,502,000)
Total other expense, net (5,234,000) (3,760,000) (3,468,000)
Loss before income taxes (13,174,000) (56,285,000) (22,092,000)
Income tax provision (60,000) (11,000) (65,000)
Net loss $ (13,234,000) $ (56,296,000) $ (22,157,000)
Net loss per common share $ (1.23) $ (7.54) $ (3.35)
Net loss per common share - assuming dilution $ (1.23) $ (7.54) $ (3.35)
Weighted average number of common shares outstanding:      
Basic 10,745,916 7,462,380 6,607,321
Diluted 10,745,916 7,462,380 6,607,321
v3.21.1
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY - USD ($)
Common Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Deficit
Total
Common Stock, Shares, Outstanding period beginning at Feb. 03, 2018 6,529,045      
Total Shareholders' Equity period beginning at Feb. 03, 2018 $ 65,000 $ 439,699,000 $ (355,768,000) $ 83,996,000
Net income (loss) $ 0 0 (22,157,000) (22,157,000)
Common stock issuances pursuant to equity compensation awards, Shares 262,889      
Common stock issuances pursuant to equity compensation awards, Value $ 3,000 45,000 0 48,000
Share-based payment compensation $ 0 3,064,000 0 3,064,000
Common Stock, Shares, Outstanding period end at Feb. 02, 2019 6,791,934      
Total Shareholders' Equity period end at Feb. 02, 2019 $ 68,000 442,808,000 (377,925,000) 64,951,000
Net income (loss) $ 0 0 (56,296,000) (56,296,000)
Common stock issuances pursuant to equity compensation awards, Shares 225,293      
Common stock issuances pursuant to equity compensation awards, Value $ 2,000 (41,000) 0 (39,000)
Share-based payment compensation $ 0 2,204,000 0 2,204,000
Common stock issuances pursuant to business acquisitions, Shares 391,000      
Common stock issuances pursuant to business acquisitions, Value $ 4,000 1,852,000 0 1,856,000
Common stock and warrant issuance , Shares 800,000      
Common stock and warrant issuance, Value $ 8,000 6,010,000 0 $ 6,018,000
Common Stock, Shares, Outstanding period end at Feb. 01, 2020 8,208,227     8,208,227
Total Shareholders' Equity period end at Feb. 01, 2020 $ 82,000 452,833,000 (434,221,000) $ 18,694,000
Net income (loss) $ 0 0 (13,234,000) (13,234,000)
Common stock issuances pursuant to equity compensation awards, Shares 99,822      
Common stock issuances pursuant to equity compensation awards, Value $ 1,000 (14,000) 0 (13,000)
Share-based payment compensation $ 0 1,960,000 0 1,960,000
Common stock and warrant issuance , Shares 4,596,314      
Common stock and warrant issuance, Value $ 46,000 19,597,000 0 $ 19,643,000
Exercise of warrants,Shares 114,698      
Exercise of warrants,Value $ 1,000 (1,000) 0  
Common Stock, Shares, Outstanding period end at Jan. 30, 2021 13,019,061     13,019,061
Total Shareholders' Equity period end at Jan. 30, 2021 $ 130,000 $ 474,375,000 $ (447,455,000) $ 27,050,000
v3.21.1
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
12 Months Ended
Jan. 30, 2021
Feb. 01, 2020
Feb. 02, 2019
OPERATING ACTIVITIES:      
Net loss $ (13,234) $ (56,296) $ (22,157)
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:      
Depreciation and amortization 27,978 12,014 10,164
Share-based payment compensation 1,960 2,204 3,064
Inventory impairment write-down   6,050  
Payments for television distribution rights (8,567)    
Amortization of deferred financing costs 196 201 215
Gain on sale of television station     (665)
Changes in operating assets and liabilities:      
Accounts receivable, net 1,643 18,285 14,796
Inventories 10,148 (18,816) 3,539
Deferred revenue 98 58 (35)
Prepaid expenses and other 1,360 776 905
Accounts payable and accrued liabilities (15,351) 29,367 (2,614)
Net cash provided by (used for) operating activities 6,231 (6,157) 7,212
INVESTING ACTIVITIES:      
Property and equipment additions (4,892) (7,146) (8,768)
Cash paid for business acquisitions   (638)  
Proceeds from the sale of assets     665
Net cash used for investing activities (4,892) (7,784) (8,103)
FINANCING ACTIVITIES:      
Proceeds from issuance of revolving loan 26,400 188,100 239,300
Proceeds from issuance of common stock and warrants 20,043 6,000  
Proceeds from issuance of term loan     5,821
Proceeds from exercise of stock options     181
Payments on revolving loan (39,300) (188,100) (245,300)
Payments on term loan (2,714) (2,488) (2,325)
Payments for business acquisition (238)    
Payments for common stock issuance costs (216) (109)  
Payments on finance leases (103) (71) (12)
Payments for restricted stock issuance (13) (39) (133)
Payments for deferred financing costs     (96)
Net cash provided by (used for) financing activities 3,859 3,293 (2,564)
Net increase (decrease) in cash and restricted cash equivalents 5,198 (10,648) (3,455)
BEGINNING CASH AND RESTRICTED CASH EQUIVALENTS 10,287 20,935 24,390
ENDING CASH AND RESTRICTED CASH EQUIVALENTS $ 15,485 $ 10,287 $ 20,935
v3.21.1
The Company
12 Months Ended
Jan. 30, 2021
The Company [Abstract]  
The Company

(1)  The Company

iMedia Brands, Inc. (formerly EVINE Live Inc.) and its subsidiaries ("we," "our," "us," or the "Company") are a leading interactive media company that owns a growing portfolio of lifestyle television networks, consumer brands, media commerce services and online marketplaces. The Company's television brands are ShopHQ, ShopBulldogTV and ShopHQHealth. ShopHQ is the Company's nationally distributed shopping entertainment network that offers a mix of proprietary, exclusive and name-brand merchandise in the categories of jewelry & watches, home & consumer electronics, beauty & wellness, and fashion & accessories directly to consumers 24 hours a day in an engaging and informative shopping experience. ShopBulldogTV, which launched in the fourth quarter of fiscal 2019, is a niche television shopping entertainment network that is geared toward male consumers. ShopHQHealth, which launched in the third quarter of fiscal 2020, is a health and wellness focused television shopping entertainment network that offers a robust assortment of products and services dedicated to addressing the physical, spiritual and mental health needs of its customers and their families. The Company's television shopping entertainment programming is distributed through cable and satellite distribution agreements, agreements with telecommunications companies and arrangements with over-the-air broadcast television stations. It is also streamed live online at shophq.com, shopbulldogtv.com and shophqhealth.com, which are comprehensive digital commerce platforms that sell products which appear on the Company's television shopping entertainment networks as well as an extended assortment of online-only merchandise. The Company's programming is also available on mobile channels and over-the-top ("OTT") platforms. Both the Company's programming and products are also marketed via mobile devices, including smartphones and tablets, and through the leading social media channels.

The Company's consumer brands include Christopher & Banks, J.W. Hulme Company ("J.W. Hulme"), Learning to Cook with Shaquille O’Neal, Kate & Mallory, Live Fit MD, and Indigo Thread. The Christopher & Banks brand was acquired subsequent to the end of fiscal 2020 on March 1, 2021 through a licensing agreement with ReStore Capital, a Hilco Global company, whereby the Company will operate the Christopher & Banks business, a specialty retailer of privately branded women's apparel and accessories, throughout all sales channels, including digital, television, catalog, and brick and mortar retail.  J.W. Hulme was acquired during the fourth quarter of fiscal 2019.

The Company's Media Commerce Services brands are Float Left Interactive, Inc. ("Float Left") and third-party logistics business i3PL. Float Left was acquired during the fourth quarter of fiscal 2019. Media Commerce Services offers creative and interactive advertising, OTT app services and third-party logistics.

The Company’s online marketplaces include OurGalleria.com and TheCloseout.com. OurGalleria.com is a higher-end online marketplace for discounted merchandise, offering an exciting shopping experience with a selection of curated flash sales and events. TheCloseout.com is an online retail store offering quality products at deeply discounted prices. The Company obtained a controlling interest in TheCloseout.com subsequent to the end of fiscal 2020 on February 5, 2021.

On July 16, 2019, the Company changed its corporate name to iMedia Brands, Inc. from EVINE Live Inc. Effective July 17, 2019, the Company’s Nasdaq trading symbol also changed from EVLV to IMBI. On August 21, 2019, the Company changed the name of its primary network, Evine, back to ShopHQ, which was the name of the network in 2014.

v3.21.1
Summary of Significant Accounting Policies
12 Months Ended
Jan. 30, 2021
Summary of Significant Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

(2)  Summary of Significant Accounting Policies

Fiscal Year

The Company’s fiscal year ends on the Saturday nearest to January 31 and results in either a 52-week or 53-week fiscal year. References to years in this report relate to fiscal years, rather than to calendar years. The Company’s most recently completed fiscal year, fiscal 2020, ended on January 30, 2021, and consisted of 52 weeks. Fiscal 2019 ended on February 1, 2020 and consisted of 52 weeks. Fiscal 2018 ended on February 2, 2019 and consisted of 52 weeks.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

Revenue Recognition

Revenue is recognized when control of the promised merchandise is transferred to customers in an amount that reflects the consideration the Company expects to receive in exchange for the merchandise, which is upon shipment. Revenue for services is recognized when the services are provided to the customer. Revenue is reported net of estimated sales returns, credits and incentives, and excludes sales taxes. Sales returns are estimated and provided for at the time of sale based on historical experience.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in Accounting Standards Codification ("ASC") 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Substantially all of the Company’s sales are single performance obligation arrangements for transferring control of merchandise to customers.

In accordance with ASC 606-10-50, the Company disaggregates revenue from contracts with customers by significant product groups and timing of when the performance obligations are satisfied. A reconciliation of disaggregated revenue by segment and significant product group is provided in Note 11 - "Business Segments and Sales by Product Group."

As of January 30, 2021, the Company had no remaining performance obligations for contracts with original expected terms of one year or more. The Company has applied the practical expedient to exclude the value of remaining performance obligations for contracts with an original expected term of one year or less.

The Company’s merchandise is generally sold with a right of return for up to a certain number of days after the merchandise is shipped and the Company may provide other credits or incentives, which are accounted for as variable consideration when estimating the amount of revenue to recognize. Merchandise returns and other credits are estimated at contract inception and updated at the end of each reporting period as additional information becomes available.

The Company evaluated whether it is the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis) in certain vendor arrangements where the merchandise is shipped directly from the vendor to the Company’s customer and the purchase and sale of inventory is virtually simultaneous. Generally, the Company is the principal and reports revenues from such vendor arrangements on a gross basis, as it controls the merchandise before it is transferred to the customer. The Company’s control is evidenced by it being primarily responsible to the customers, establishing price and its inventory risk upon customer returns.

Merchandise Returns

The Company records a merchandise return liability as a reduction of gross sales for anticipated merchandise returns. The Company estimates and evaluates the adequacy of its merchandise return liability by analyzing historical returns by merchandise category, looking at current economic trends and changes in customer demand and by analyzing the acceptance of new product lines. Assumptions and estimates are made and used in connection with establishing the merchandise return liability in any accounting period. As of January 30, 2021 and February 1, 2020, the Company recorded a merchandise return liability of $5,271,000 and $5,820,000, included in accrued liabilities, and a right of return asset of $2,749,000 and $3,171,000, included in other current assets.

Shipping and Handling

The Company has elected to account for shipping and handling as activities to fulfill the promise to transfer the merchandise. Shipping and handling fees charged to customers are recognized when the customer obtains control of the merchandise, which is upon shipment. The Company accrues costs for shipping and handling activities, which occur subsequent to transfer of control to the customer and are recorded as cost of sales in the accompanying statements of operations.

Sales Taxes

The Company has elected to exclude from revenue the sales taxes imposed on its sales and collected from customers.

Accounts Receivable

The Company utilizes an installment payment program called ValuePay that entitles customers to purchase merchandise and generally pay for the merchandise in two or more equal monthly credit card installments. The Company has elected the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing component when the payment terms are less than one year. Accounts receivable consist primarily of amounts due from customers for merchandise sales, receivables from credit card companies, and amounts due from vendors for unsold and returned products and are reflected net of reserves for estimated uncollectible amounts. A provision for ValuePay bad debts is provided as a percentage of ValuePay receivables in the period of sale and is based on historical experience. As of January 30, 2021 and February 1, 2020, the Company had approximately $49,736,000 and $56,928,000 of net receivables due from customers under the ValuePay installment program and total reserves for estimated uncollectible amounts of $3,132,000 and $6,579,000.

Cost of Sales and Other Operating Expenses

Cost of sales includes primarily the cost of merchandise sold and services provided, shipping and handling costs, inbound freight costs, excess and obsolete inventory charges, distribution facility depreciation and vendor share based payment compensation. Purchasing and receiving costs, including costs of inspection, are included as a component of distribution and selling expense and were approximately $5,085,000, $8,730,000 and $10,299,000 for fiscal 2020, fiscal 2019 and fiscal 2018. Distribution and selling expense consists primarily of cable and satellite access fees, credit card fees, bad debt expense and costs associated with purchasing and receiving, inspection, marketing and advertising, show production, website marketing and merchandising, telemarketing, customer service, warehousing, fulfillment and share based compensation. General and administrative expense consists primarily of costs associated with executive, legal, accounting and finance, information systems and human resources departments, software and system maintenance contracts, insurance, investor and public relations, share based compensation and director fees.

Cash

Cash consists of cash on deposit. The Company maintains its cash balances at financial institutions in demand deposit accounts that are federally insured. The Company has not experienced losses in such accounts and believes it is not exposed to any significant credit risk on its cash.

Restricted Cash Equivalents

The Company’s restricted cash equivalents consisted of certificates of deposit with original maturities of three months or less and were generally restricted for a period ranging from 30 to 60 days. Interest income is recognized when earned. The following table provides a reconciliation of cash and restricted cash equivalents reported with the consolidated balance sheets to the total of the same amounts shown in the consolidated statements of cash flows:

    

January 30,2021

    

February 1,2020

 

February 2, 2019

Cash

$

15,485,000

$

10,287,000

$

20,485,000

Restricted cash equivalents

 

 

 

450,000

Total cash and restricted cash equivalents

$

15,485,000

$

10,287,000

$

20,935,000

Inventories

Inventories, which consists of consumer merchandise held for resale, are stated at the lower of average cost or net realizable value, giving consideration to obsolescence provision write downs of $5,512,000, $8,798,000 and $5,149,000 for fiscal 2020, fiscal 2019 and fiscal 2018. As of January 30, 2021 and February 1, 2020, inventory obsolescence reserves were $9,985,000 and $12,320,000. Additional disclosure of the fiscal 2019 obsolescence provision write down is provided in Note 17 - "Inventory Impairment Write-down." During fiscal 2020, 2019 and 2018, products purchased from one vendor accounted for approximately 20%, 19% and 14% of the Company’s consolidated net sales. During fiscal 2020, products purchased from a second vendor accounted for approximately 14% of the Company’s consolidated net sales. These two vendors are related parties and additional information is included in Note 19 - "Related Party Transactions."

Marketing and Advertising Costs

Marketing and advertising costs are expensed as incurred and consist primarily of contractual marketing fees paid to certain cable operators for cross channel promotions and online advertising, including amounts paid to online search engine operators and customer mailings. Total marketing and advertising costs and online search marketing fees totaled $3,852,000, $4,673,000 and $4,561,000 for fiscal 2020, fiscal 2019 and fiscal 2018. The Company includes advertising costs as a component of distribution and selling expense in the Company’s consolidated statement of operations.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Improvements and renewals that extend the life of an asset are capitalized and depreciated. Repairs and maintenance are charged to expense as incurred. The cost and accumulated depreciation of property and equipment retired or otherwise disposed of are removed from the related accounts, and any residual values are charged or credited to operations. Depreciation and amortization for financial reporting purposes are provided on a straight-line method based upon estimated useful lives. Costs incurred to develop software for internal use and for the Company’s websites are capitalized and amortized over the estimated useful life of the software. Costs related to maintenance of internal-use software and for the Company’s website are expensed as incurred. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment would be recognized when the carrying amount of an asset or asset group exceeds the future estimated undiscounted cash flows expected to be generated by the asset or asset group. If the carrying amount of the asset or asset group exceeds its estimated future cash flows, an impairment charge is recognized in the amount that the carrying amount of the asset exceeds the fair value of the asset.

Television Distribution Rights

Television distribution rights are affiliation agreements with television service providers for carriage of the Company’s television programming over their systems, including channel placement rights, which generally run from one to three years. Contract payments are made in installments over terms that are generally equal to or shorter than the contract period. Pursuant to accounting guidance for the broadcasting industry, an asset and a liability for the rights acquired and obligations incurred under a license agreement are reported on the balance sheet when the cost of each television distribution right is known or reasonably determinable, has been accepted in accordance with the conditions of the agreement, and is available for its first use on the affiliate’s system. Television distribution rights are recorded at the present value of the contract payments and are amortized on a straight-line basis over the lives of the individual agreements. Amortization expense for television distribution rights is included in depreciation and amortization. Television distribution rights are evaluated for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. Television distribution rights to be used within one year are reflected as a current asset in the accompanying consolidated balance sheets. The liability relating to television distribution rights payable within one year are classified as current in the accompanying consolidated balance sheets. The long-term portion of the obligations is included in other long term liabilities within the accompanying consolidated balance sheets.

Intangible Assets

Identifiable intangibles with finite lives are amortized over their estimated useful lives and those identifiable intangibles with indefinite lives are not amortized. Identifiable intangible assets that are subject to amortization are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Identifiable intangible assets not subject to amortization are tested for impairment annually or more frequently if events warrant. The impairment test consists of a comparison of the fair value of the intangible asset with its carrying amount.

Stock-Based Compensation

Compensation is recognized for all stock-based compensation arrangements by the Company, including employee and non-employee stock option and restricted stock unit grants. The estimated grant date fair value of each stock-based award is recognized as compensation over the requisite service period, which is generally the vesting period. Stock-based compensation expense is recognized net of forfeitures, which the Company estimates based on historical data. The estimated

fair value of each option is calculated using the Black-Scholes option-pricing model for time-based vesting awards and a Monte Carlo valuation model for market-based vesting awards. The estimated fair value of restricted stock grants is based on the grant date closing price of the Company’s stock for time-based vesting awards and a Monte Carlo valuation model for market-based vesting awards.

Income Taxes

The Company accounts for income taxes under the liability method of accounting whereby deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between financial statement and tax basis of assets and liabilities. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of the enactment of such laws. The Company assesses the recoverability of its deferred tax assets and records a valuation allowance when it is more likely than not some portion of the deferred tax asset will not be realized.

The Company recognizes interest and penalties related to uncertain tax positions within income tax expense.

Net Loss Per Common Share

During fiscal 2018, the Company issued a restricted stock award that meets the criteria of a participating security. Accordingly, basic income (loss) per share is computed using the two-class method under which earnings are allocated to both common shares and participating securities. Undistributed net losses are allocated entirely to common shareholders since the participating security has no contractual obligation to share in the losses. All shares of restricted stock are deducted from weighted-average number of common shares outstanding – basic. Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock of the Company during reported periods and is calculated using the treasury method.

A reconciliation of net loss per share calculations and the number of shares used in the calculation of basic net loss per share and diluted net loss per share is as follows:

    

For the Years Ended

January 30, 2021

    

February 1, 2020

    

February 2, 2019

Numerator:

 

  

 

  

 

  

Net loss

$

(13,234,000)

$

(56,296,000)

$

(22,157,000)

Earnings allocated to participating share awards (a)

 

 

 

Net loss attributable to common shares — Basic and diluted

$

(13,234,000)

$

(56,296,000)

$

(22,157,000)

Denominator:

 

  

 

  

 

  

Weighted average number of common shares outstanding — Basic (b)

 

10,745,916

 

7,462,380

 

6,607,321

Dilutive effect of stock options, non-vested shares and warrants (c)

 

 

 

Weighted average number of common shares outstanding — Diluted

 

10,745,916

 

7,462,380

 

6,607,321

Net loss per common share

$

(1.23)

$

(7.54)

$

(3.35)

Net loss per common share — assuming dilution

$

(1.23)

$

(7.54)

$

(3.35)

(a)During fiscal 2018, the Company issued a restricted stock award that is a participating security. For fiscal 2020, fiscal 2019 and fiscal 2018, the entire undistributed loss is allocated to common shareholders.
(b)For fiscal 2020, the basic earnings per share computation included 21,000 outstanding fully-paid warrants to purchase shares of the Company’s common stock at a price of $0.001 per share.
(c)For fiscal 2020, fiscal 2019 and fiscal 2018, there were 591,000, 46,000 and 34,000 incremental, in-the-money, potentially dilutive common shares outstanding. The incremental in-the-money potentially dilutive common stock shares are excluded from the computation of diluted earnings per share, as the effect of their inclusion would be anti-dilutive.

Fair Value of Financial Instruments

GAAP requires disclosures of fair value information about financial instruments for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. GAAP excludes certain financial instruments and all non-financial instruments from its disclosure requirements.

The Company used the following methods and assumptions in estimating its fair values for financial instruments. The carrying amounts reported in the accompanying consolidated balance sheets approximate the fair value for cash, short-term investments, accounts receivable, trade payables and accrued liabilities, due to the short maturities of those instruments. The fair value of the Company’s variable rate PNC Credit Facility, approximates, and is based on, its carrying value due to the variable rate nature of the financial instrument. The additional disclosures regarding the Company’s fair value measurements are included in Note 8 - "Fair Value Measurements."

Fair Value Measurements on a Nonrecurring Basis

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to the Company’s tangible fixed assets and finite-lived intangible assets. These assets and liabilities are recorded at fair value only if an impairment is recognized in the current period. If the Company determines that impairment has occurred, the carrying value of the asset is reduced to fair value and the difference is recorded as a loss within operating income in the consolidated statement of operations. The Company had no remeasurements of such assets or liabilities to fair value during fiscal 2020, fiscal 2019 or fiscal 2018.

Use of Estimates

The preparation of financial statements in conformity with GAAP in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during reporting periods. These estimates relate primarily to the carrying amounts of accounts receivable and inventories, the realizability of certain long-term assets and the recorded balances of certain accrued liabilities and reserves. Ultimate results could differ from these estimates.

Recently Adopted Accounting Standards

In August 2018, the Financial Accounting Standards Board ("FASB") issued Intangibles—Goodwill and Other—Internal-Use Software, Subtopic 350-40 (ASU 2018-15), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted this standard during the first quarter of fiscal 2020 on a prospective basis. The adoption of ASU 2018-15 did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued guidance on the accounting for credit losses on financial instruments, Topic 326, Financial Instruments—Credit Losses (ASU 2016-13). Topic 326 was subsequently amended by ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments and ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. Among other provisions, this guidance introduces a new impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a forward-looking “expected loss” model that will replace the current “incurred loss” model that will generally result in the earlier recognition of allowances for losses. The Company adopted this guidance during the first quarter of fiscal

2021 on a prospective basis. The adoption of the ASU 2016-13 and subsequent amendments did not have a material impact on the Company’s consolidated financial statements.

v3.21.1
Property and Equipment
12 Months Ended
Jan. 30, 2021
Property and Equipment [Abstract]  
Property and Equipment

(3)  Property and Equipment

Property and equipment in the accompanying consolidated balance sheets consisted of the following:

    

Estimated 

    

    

Useful Life 

January 30,

February 1,

(In Years)

2021

2020

Land and improvements

 

$

3,236,000

$

3,236,000

Buildings and leasehold improvements

 

3-40

 

42,441,000

 

42,239,000

Transmission and production equipment

 

5-10

 

8,188,000

 

7,919,000

Office and warehouse equipment

 

3-15

 

18,519,000

 

19,353,000

Computer hardware, software and telephone equipment

 

3-10

 

91,561,000

 

87,348,000

 

163,945,000

 

160,095,000

Less — Accumulated depreciation

 

(121,957,000)

 

(112,479,000)

$

41,988,000

$

47,616,000

Depreciation expense in fiscal 2020, fiscal 2019 and fiscal 2018 was $10,662,000, $10,661,000 and $9,999,000.

v3.21.1
Television Distribution Rights
12 Months Ended
Jan. 30, 2021
Television Distribution Rights [Abstract]  
Television Distribution Rights

(4)  Television Distribution Rights

Television distribution rights in the accompanying consolidated balance sheets consisted of the following:

    

January 30, 2021

    

February 1, 2020

Television distribution rights

$

43,655,000

$

Less accumulated amortization

 

(16,902,000)

 

Television distribution rights, net

$

26,753,000

$

During fiscal 2020, the Company entered into certain affiliation agreements with television service providers for carriage of the Company’s television programming over their systems, including channel placement rights. The rights provide the Company with a channel position on the service provider's channel line-up. The Company recorded television distribution rights of $43.7 million during fiscal 2020, which represents the present value of payments for the television distribution channel placement. Television distribution rights are amortized on a straight-line basis over the lives of the individual agreements. The remaining weighted average lives of the television distribution rights was 1.4 years as of January 30, 2021. Amortization expense related to the television distribution rights was $16,902,000 for fiscal 2020 and is included in depreciation and amortization within the consolidated statements of operations. Estimated amortization expense is $19,725,000 for fiscal 2021 and $7,028,000 for fiscal 2022. The liability relating to the television distribution rights was $36,530,000 as of January 30, 2021, of which $29,173,000 was classified as current in the accompanying consolidated balance sheets. The long-term portion of the obligations is included in other long term liabilities within the accompanying consolidated balance sheets. Interest expense related to the television distribution rights obligation was $1,443,000 during fiscal 2020.

In addition to the channel placement fees, the Company's affiliation agreements generally provide that it will pay each operator a monthly access fee, most often based on the number of homes receiving the Company's programming, and in some cases marketing support payments. Monthly access fees are expensed as distribution and selling expense within the consolidated statement of operations. See Note 16 – “Commitments and Contingencies” for additional information regarding the Company’s cable and satellite distribution agreements.

v3.21.1
Intangible Assets
12 Months Ended
Jan. 30, 2021
Intangible Assets [Abstract]  
Intangible Assets

(5)  Intangible Assets

Intangible assets in the accompanying consolidated balance sheets consisted of the following:

January 30,2021

February 1,2020

Estimated 

Gross 

Gross 

Useful Life 

Carrying 

Accumulated 

Carrying 

Accumulated 

    

(In Years)

    

Amount

    

Amortization

    

Amount

    

Amortization

Trade Names

 

3-15

 

$

1,568,000

 

$

(124,000)

 

$

1,568,000

 

$

(19,000)

Technology

 

4

 

772,000

 

(228,000)

 

772,000

 

(35,000)

Customer Lists

 

3-5

 

339,000

 

(93,000)

 

339,000

 

(14,000)

Vendor Exclusivity

 

5

 

192,000

 

(67,000)

 

192,000

 

(29,000)

Total finite-lived intangible assets

 

$

2,871,000

 

$

(512,000)

 

$

2,871,000

 

$

(97,000)

Finite-lived Intangible Assets

The finite-lived intangible assets are included in other assets in the accompanying balance sheets and consist of the J.W. Hulme trade name and customer list; the Float Left developed technology, customer relationships and trade name; and a vendor exclusivity agreement. Amortization expense related to the finite-lived intangible assets was $415,000, $1,353,000 and $165,000 for fiscal 2020, fiscal 2019 and fiscal 2018. Estimated amortization expense is $415,000 for fiscal 2021, $410,000 for fiscal 2022, $352,000 for fiscal 2023, $156,000 for fiscal 2024 and $105,000 for fiscal 2025.

In November 2019, the Company completed the acquisition of J.W. Hulme Company ("J.W. Hulme"). The intangible assets acquired through the business combination include the J.W. Hulme trade name and J.W. Hulme customer list valued at $1,480,000 and $86,000 and are being amortized over their estimated useful lives of 15 and three years. See Note 13 - "Business Acquisitions" for additional information.

In November 2019, the Company completed the acquisition of Float Left Interactive, Inc. ("Float Left"). The intangible assets acquired through the business combination include the Float Left developed technology, the Float Left customer relationships and the Float Left trade name valued at $772,000, $253,000 and $88,000, respectively, and are being amortized over their estimated useful lives of four, five and 15 years, respectively.

In May 2019, the Company announced the decision to change the name of the Evine network back to ShopHQ, which was the name of the network in 2014. The remaining carrying amount of the Evine trademark was amortized prospectively over the revised remaining useful life through August 21, 2019, the date of the network name change.

In May 2019, we entered into a five-year vendor exclusivity agreement with Sterling Time, LLC ("Sterling Time") and Invicta Watch Company of America, Inc. ("IWCA") in connection with the closing under the private placement securities purchase agreement described in Note 10 below. The vendor exclusivity agreement grants the Company the exclusive right in television shopping to market, promote and sell the products from IWCA. The Company issued five-year warrants to purchase 350,000 shares of our common stock in connection with and as consideration for primarily entering into a vendor exclusivity agreement with the Company, which represented an aggregate value of $193,000. The vendor exclusivity agreement is being amortized as cost of sales over the five-year agreement term. See Note 10 - "Shareholders’ Equity" for additional information.

Sale of Boston Television Station, WWDP and FCC Broadcast License

In August 2017, the Company entered into two agreements with unrelated parties to sell its Boston television station, WWDP, including the Company’s FCC broadcast license, for an aggregate of $13,500,000. During fiscal 2017, the Company closed on the asset purchase agreement to sell substantially all the assets primarily related to its television broadcast station, WWDP(TV), Norwell, Massachusetts (the “Station”), which included an intangible FCC broadcasting license asset. During fiscal 2018, the Company received the remainder of the sales price, which resulted from the satisfaction of the Station being carried by certain designated carriers, and recorded a pre-tax operating gain of $665,000 upon the resolution of this gain contingency.

v3.21.1
Accrued Liabilities
12 Months Ended
Jan. 30, 2021
Accrued Liabilities, Current [Abstract]  
Accrued Liabilities

(6)  Accrued Liabilities

Accrued liabilities in the accompanying consolidated balance sheets consisted of the following:

    

January 30, 2021

    

February 1, 2020

Accrued cable access fees

$

11,150,000

$

18,243,000

Allowance for sales returns

 

5,271,000

 

5,820,000

Accrued salaries, severance and related

 

4,183,000

 

5,937,000

Other

 

8,905,000

 

10,250,000

$

29,509,000

$

40,250,000

v3.21.1
ShopHQ Private Label Consumer Credit Card Program
12 Months Ended
Jan. 30, 2021
Private Label Consumer Credit Card Program [Abstract]  
ShopHQ Private Label Consumer Credit Card Program

(7)  ShopHQ Private Label Consumer Credit Card Program

The Company has a private label consumer credit card program (the "Program"). The Program is made available to all qualified consumers to finance ShopHQ purchases and provides benefits including instant purchase credits, free or reduced shipping promotions throughout the year and promotional low-interest financing on qualifying purchases. Use of the ShopHQ credit card enhances customer loyalty, reduces total credit card expense and reduces the Company’s overall bad debt exposure since the credit card issuing bank bears the risk of loss on ShopHQ credit card transactions except those in the Company’s ValuePay installment payment program. In July 2020, the Company extended the Program through August 2021 by entering into a Private Label Consumer Credit Card Program Agreement Amendment with Synchrony Financial, the issuing bank for the Program.

v3.21.1
Fair Value Measurements
12 Months Ended
Jan. 30, 2021
Fair Value Disclosures [Abstract]  
Fair Value Measurements

(8)  Fair Value Measurements

GAAP utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to observable quoted prices (unadjusted) in active markets for identical assets and liabilities (Level 1 measurement), then priority to quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market (Level 2 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

As of January 30, 2021 and February 1, 2020 the Company also had a long-term variable rate PNC Credit Facility (as defined below), classified as Level 2, with carrying values of $53,380,000 and $68,960,000. As of January 30, 2021 and February 1, 2020, $2,714,000 of the long-term variable rate PNC Credit Facility was classified as current. The fair value of the PNC Credit Facility approximates, and is based on its carrying value due to the variable rate nature of the financial instrument. The Company has no Level 3 investments that use significant unobservable inputs.

v3.21.1
Credit Agreements
12 Months Ended
Jan. 30, 2021
Debt Disclosure [Abstract]  
Credit Agreements

(9)  Credit Agreements

The Company’s long-term credit facility consists of:

    

January 30,2021

    

February 1,2020

PNC revolving loan due July 27, 2023, principal amount

$

41,000,000

$

53,900,000

PNC term loan due July 27, 2023, principal amount

 

12,441,000

 

15,155,000

Less unamortized debt issuance costs

 

(61,000)

 

(95,000)

PNC term loan due July 27, 2023, carrying amount

 

12,380,000

 

15,060,000

Total long-term credit facility

 

53,380,000

 

68,960,000

Less current portion of long-term credit facility

 

(2,714,000)

 

(2,714,000)

Long-term credit facility, excluding current portion

$

50,666,000

$

66,246,000

PNC Credit Facility

On February 9, 2012, the Company entered into a credit and security agreement (as amended through February 5, 2021, the "PNC Credit Facility") with PNC Bank, N.A. ("PNC"), a member of The PNC Financial Services Group, Inc., as lender

and agent. The PNC Credit Facility, which includes CIBC Bank USA (formerly known as The Private Bank) as part of the facility, provides a revolving line of credit of $70.0 million and provides for a term loan on which the Company had originally drawn to fund improvements at the Company’s distribution facility in Bowling Green, Kentucky and subsequently to pay down the Company’s previously outstanding GACP Term Loan (as defined below). The PNC Credit Facility also provides an accordion feature that would allow the Company to expand the size of the revolving line of credit by another $20.0 million at the discretion of the lenders and upon certain conditions being met. Maximum borrowings and available capacity under the revolving line of credit under the PNC Credit Facility are equal to the lesser of $70.0 million or a calculated borrowing base comprised of eligible accounts receivable and eligible inventory.

All borrowings under the PNC Credit Facility mature and are payable on July 27, 2023. Subject to certain conditions, the PNC Credit Facility also provides for the issuance of letters of credit in an aggregate amount up to $6.0 million which, upon issuance, would be deemed advances under the PNC Credit Facility. The PNC Credit Facility is secured by a first security interest in substantially all of the Company’s personal property, as well as the Company’s real properties located in Eden Prairie, Minnesota and Bowling Green, Kentucky. Under certain circumstances, the borrowing base may be adjusted if there were to be a significant deterioration in value of the Company’s accounts receivable and inventory.

The revolving line of credit under the PNC Credit Facility bears interest at either a Base Rate or LIBOR plus a margin consisting of between 2% and 3.5% on Base Rate advances and 3% and 4.5% on LIBOR advances based on the Company’s trailing twelve-month reported leverage ratio (as defined in the PNC Credit Facility) measured semi-annually as demonstrated in its financial statements. The term loan bears interest at either a Base Rate or LIBOR plus a margin consisting of between 4% and 5% on Base Rate term loans and 5% to 6% on LIBOR Rate term loans based on the Company’s leverage ratio measured annually as demonstrated in its audited financial statements.

As of January 30, 2021, the Company had borrowings of $41.0 million under its revolving credit facility. Remaining available capacity under the revolving credit facility as of January 30, 2021 was approximately $12.5 million, which provided liquidity for working capital and general corporate purposes. The PNC Credit Facility also provides for a term loan on which the Company had originally drawn to fund an expansion and improvements at the Company’s distribution facility in Bowling Green, Kentucky and subsequently to partially pay down the Company’s previously outstanding term loan with GACP Finance Co., LLC and reduce its revolving line of credit borrowings. As of January 30, 2021, there was approximately $12.4 million outstanding under the PNC Credit Facility term loan of which $2.7 million was classified as current in the accompanying balance sheet.

Principal borrowings under the term loan are payable in monthly installments over an 84-month amortization period commencing on September 1, 2018 and are also subject to mandatory prepayment in certain circumstances, including, but not limited to, upon receipt of certain proceeds from dispositions of collateral. Borrowings under the term loan are also subject to mandatory prepayment in an amount equal to fifty percent (50%) of excess cash flow for such fiscal year, with any such payment not to exceed $2.0 million in any such fiscal year. The PNC Credit Facility is also subject to other mandatory prepayment in certain circumstances. In addition, if the total PNC Credit Facility is terminated prior to maturity, the Company would be required to pay an early termination fee of 0.5% if terminated on or before July 27, 2021, and no fee if terminated after July 27, 2021. As of January 30, 2021, the imputed effective interest rate on the PNC term loan was 6.4%.

Interest expense recorded under the PNC Credit Facility was $3,497,000, $3,758,000 and $3,499,000 for fiscal 2020, fiscal 2019 and fiscal 2018.

The PNC Credit Facility contains customary covenants and conditions, including, among other things, maintaining a minimum of unrestricted cash plus unused line availability of $10.0 million at all times and limiting annual capital expenditures. Certain financial covenants, including minimum EBITDA levels (as defined in the PNC Credit Facility) and a minimum fixed charge coverage ratio of 1.1 to 1.0, become applicable only if unrestricted cash plus unused line availability falls below $10.8 million. As of January 30, 2021, the Company’s unrestricted cash plus unused line availability was $28.0 million and the Company was in compliance with applicable financial covenants of the PNC Credit Facility and expects to be in compliance with applicable financial covenants over the next twelve months. In addition, the PNC Credit Facility places restrictions on the Company’s ability to incur additional indebtedness or prepay existing indebtedness, to create liens or other encumbrances, to sell or otherwise dispose of assets, to merge or consolidate with other entities, and to make certain restricted payments, including payments of dividends to common shareholders.

Deferred financing costs, net of amortization, relating to the revolving line of credit were $243,000 and $406,000 as of January 30, 2021 and February 1, 2020 and are included within other assets within the accompanying consolidated balance sheets. These costs are being expensed as additional interest over the five-year term of the PNC Credit Facility.

Maturities

The aggregate maturities of the Company’s long-term credit facility as of January 30, 2021 are as follows:

PNC Credit Facility

Fiscal year

    

Term loan

    

Revolving loan

    

Total

2021

$

2,714,000

$

$

2,714,000

2022

 

2,714,000

 

 

2,714,000

2023

 

7,013,000

 

41,000,000

 

48,013,000

$

12,441,000

$

41,000,000

$

53,441,000

Cash Requirements

Currently, the Company's principal cash requirements are to fund business operations, which consist primarily of purchasing inventory for resale, funding ValuePay installment receivables, funding the Company's basic operating expenses, particularly the Company's contractual commitments for cable and satellite programming distribution, and the funding of necessary capital expenditures. The Company closely manages its cash resources and working capital. The Company attempts to manage its inventory receipts and reorders in order to ensure its inventory investment levels remain commensurate with the Company's current sales trends. The Company also monitors the collection of its credit card and ValuePay installment receivables and manages vendor payment terms in order to more effectively manage the Company's working capital which includes matching cash receipts from the Company's customers, to the extent possible, with related cash payments to the Company's vendors. ValuePay remains a cost-effective promotional tool for the Company. The Company continues to make strategic use of its ValuePay program in an effort to increase sales and to respond to similar competitive programs.

The Company experienced a decline in net sales and a decline in its active customer file during fiscal 2020, 2019 and 2018 and a corresponding impact to the Company's profitability. The Company has taken or is taking the following steps to enhance its operations and liquidity position: completed equity public offerings during the first quarter of fiscal 2021 and third quarter of fiscal 2020 in which the Company received proceeds of $21.2 million and $15.8 million, respectively, after deducting underwriters’ discounts and commissions and other offering costs; entered into a private placement securities purchase agreement in which the Company received gross proceeds of $6.0 million during the first quarter of fiscal 2019; entered into a common stock and warrant purchase agreement in which the Company received gross proceeds of $4.0 million during the first half of fiscal 2020; implemented a reduction in overhead costs totaling $22 million in expected annualized savings for the reductions made during fiscal 2019 and an additional $16 million in expected annualized savings for the reductions made during the first quarter of fiscal 2020, primarily driven by a reduction in the Company's work force; negotiated improved payment terms with the Company's inventory vendors; reduced capital expenditures in fiscal 2020 compared to prior years; renegotiating with certain cable and satellite distributors to reduce service costs and improve payment terms; and managed the Company's inventory receipts in fiscal 2020 to reduce inventory on hand.

The Company's ability to fund operations and capital expenditures in the future will be dependent on its ability to generate cash flow from operations, maintain or improve margins, decrease the rate of decline in its sales and to use available funds from its PNC Credit Facility. The Company's ability to borrow funds is dependent on its ability to maintain an adequate borrowing base and its ability to meet its credit facility's covenants (as described above). The Company believes that it is probable its existing cash balances, together with the cost cutting measures described above and its availability under the PNC Credit Facility, will be sufficient to fund the Company's normal business operations over the next twelve months from the issuance of this report.

v3.21.1
Shareholders' Equity
12 Months Ended
Jan. 30, 2021
Equity [Abstract]  
Shareholders' Equity

(10)  Shareholders’ Equity

Common Stock

Effective July 13, 2020, the Company amended its Articles of Incorporation to increase the authorized number of common shares from 5,000,000 to 20,000,000. As of January 30, 2021, the Company had 10,000,000 shares of capital stock authorized, of which 400,000 was designated as preferred stock, and had 20,000,000 shares of common stock authorized. As of the same date, no shares of capital stock or preferred stock were outstanding and 13,019,061 shares of common stock were issued and outstanding. The board of directors may establish new classes and series of capital stock by resolution without shareholder approval; however, in certain circumstances the Company is required to obtain approval under the PNC Credit Facility.

Preferred Stock

The Company has authorized 400,000 Series A Junior Participating Cumulative Preferred Stock, $0.01 par value, during fiscal 2015 as part of the Shareholder Rights Plan. As of January 30, 2021, there were zero shares issued and outstanding. See Note 14 - "Income Taxes" for additional information.

Dividends

The Company has never declared or paid any dividends with respect to its capital or common stock. The Company is restricted from paying dividends on its stock by its PNC Credit Facility.

Public Offering

On August 28, 2020, the Company completed a public offering, in which the Company issued and sold 2,760,000 shares of its common stock at a public offering price of $6.25 per share, including 360,000 shares sold upon the exercise of the underwriter’s option to purchase additional shares. After underwriter discounts and commissions and other offering costs, net proceeds from the public offering were approximately $15,833,000.

April 2020 Private Placement Securities Purchase Agreement

On April 14, 2020, the Company entered into a common stock and warrant purchase agreement with certain individuals and entities, pursuant to which the Company sold an aggregate of 1,836,314 shares of the Company's common stock, issued warrants to purchase an aggregate of 979,190 shares of the Company's common stock at a price of $2.66 per share, and fully-paid warrants to purchase an aggregate 114,698 shares of the Company's common stock at a price of $0.001 per share in a private placement, for an aggregate cash purchase price of $4,000,000. The initial closing occurred on April 17, 2020 and the Company received gross proceeds of $1,500,000. Additional closings occurred on May 22, 2020, June 8, 2020, June 12, 2020 and July 11, 2020 and the Company received gross proceeds of $2,500,000. The Company incurred approximately $190,000 of issuance costs during the first half of fiscal 2020. The Warrants are indexed to the Company's publicly traded stock and were classified as equity. The par value of the shares issued was recorded within common stock, with the remainder of the proceeds, less issuance costs, recorded as additional paid in capital in the accompanying consolidated balance sheets. The Company used the proceeds for general working capital purposes.

The purchasers consisted of the following: Invicta Media Investments, LLC, Michael and Leah Friedman and Hacienda Jackson LLC. Invicta Media Investments, LLC is owned by Invicta Watch Company of America, Inc. (“IWCA”), which is the designer and manufacturer of Invicta-branded watches and watch accessories, one of the Company's largest and longest tenured brands. Michael and Leah Friedman are owners and officers of Sterling Time, LLC (“Sterling Time”), which is the exclusive distributor of IWCA’s watches and watch accessories for television home shopping and the Company's long-time vendor. IWCA is owned by the Company's Vice Chair and director, Eyal Lalo, and Michael Friedman also serves as a director of the Company. A description of the relationship between the Company, IWCA and Sterling Time is contained in Note 19 - “Related Party Transactions.” Further, Invicta Media Investments, LLC and Michael and Leah Friedman comprise a “group” of investors within the meaning of Section 13(d)(3) of the Securities and Exchange Act of 1934, as amended, that is the Company's largest shareholder.

The warrants have an exercise price per share of $2.66 and are exercisable at any time and from time to time from six months following their issuance date until April 14, 2025. The Company has included a blocker provision in the purchase agreement whereby no purchaser may be issued shares of the Company's common stock if the purchaser would own over 19.999% of the Company's outstanding common stock and, to the extent a purchaser in this offering would own over 19.999% of the Company's outstanding common stock, that purchaser will receive fully-paid warrants (in contrast to the coverage warrants that will be issued in this transaction, as described above) in lieu of the shares that would place such holder’s ownership over 19.999%. Further, the Company included a similar blocker in the warrants (and amended the warrants purchased by the purchasers on May 2, 2019, if any) whereby no purchaser of the warrants may exercise a warrant if the holder would own over 19.999% of the Company's outstanding common stock.

During the third quarter of fiscal 2020, the fully-paid warrants were exercised for the purchase of 114,698 shares of the Company's common stock.

May 2019 Private Placement Securities Purchase Agreement

On May 2, 2019, the Company entered into a private placement securities purchase agreement with certain accredited investors pursuant to which the Company: (a) sold, in the aggregate, 800,000 shares of the Company’s common stock at a price of $7.50 per share and (b) issued five-year warrants ("5-year Warrants") to purchase 350,000 shares of the Company’s common stock at an exercise price of $15.00 per share. The 5-year Warrants are exercisable in whole or in part from time to time through the expiration date of May 2, 2024. The purchasers included Invicta Media Investments, LLC, Retailing Enterprises, LLC, Michael and Leah Friedman, Timothy Peterman and certain other private investors. Retailing Enterprises, LLC is a party in which the Company entered into an agreement to liquidate obsolete inventory. Under the purchase agreement, the purchasers agreed to customary standstill provisions related to the Company for a period of two years, as well as to vote their shares in favor of matters recommended by the Company’s board of directors for shareholder approval. In addition, the Company agreed in the purchase agreement to appoint Eyal Lalo as vice chair of the Company’s board of directors, Michael Friedman to the Company’s board of directors and Timothy Peterman as the Company’s chief executive officer.

In connection with the closing under the Purchase Agreement, the Company entered into certain other agreements with IWCA, Sterling Time and the purchasers, including a five-year vendor exclusivity agreement with Sterling Time and IWCA. The vendor exclusivity agreement grants the Company the exclusive right in television shopping to market, promote and sell the products from IWCA.

The Company received gross proceeds of $6.0 million and incurred approximately $175,000 of issuance costs. The Company allocated the proceeds of the stock offering to the shares of common stock issued. The par value of the shares issued was recorded within common stock, with the remainder of the proceeds, less issuance costs, recorded as additional paid in capital in the accompanying consolidated balance sheets. The Company has used the proceeds for general working capital purposes. The 5-year Warrants were issued primarily as consideration for a five-year vendor exclusivity agreement with IWCA and Sterling Time. The aggregate market value of the 5-year Warrants on the grant date was $193,000, which was recorded as an intangible asset and is being amortized as cost of sales over the agreement term. The 5-year Warrants are indexed to the Company’s publicly traded stock and were classified as equity. As a result, the fair value of the 5-year Warrants was recorded as an increase to additional paid-in capital.

Warrants

As of January 30, 2021, the Company had outstanding warrants to purchase 1,714,120 shares of the Company’s common stock, of which 1,714,120 are fully exercisable. The warrants expire approximately five years from the date of grant. The following table summarizes information regarding warrants outstanding at January 30, 2021:

    

Warrants

    

Warrants

    

Exercise Price

    

Grant Date

Outstanding

Exercisable

(Per Share)

Expiration Date

September 19, 2016

 

297,616

 

297,616

$

29.00

 

September 19, 2021

November 10, 2016

 

33,386

 

33,386

$

30.00

 

November 10, 2021

January 23, 2017

 

48,930

 

48,930

$

17.60

 

January 23, 2022

March 16, 2017

 

5,000

 

5,000

$

19.20

 

March 16, 2022

May 2, 2019

 

349,998

 

349,998

$

15.00

 

May 2, 2024

April 17, 2020

367,197

367,197

$

2.66

April 14, 2025

May 22, 2020

122,398

122,398

$

2.66

April 14, 2025

June 8, 2020

122,399

122,399

$

2.66

April 14, 2025

June 12, 2020

122,398

122,398

$

2.66

April 14, 2025

July 11, 2020

244,798

244,798

$

2.66

April 14, 2025

On November 27, 2018, the Company issued warrants to Fonda, Inc. for 150,000 shares of its common stock in connection with and as consideration for entering into a services and trademark licensing agreement between the companies. The aggregate market value on the date of the award was $441,000 and was being amortized as cost of sales over the three-year services and trademark licensing agreement term. On July 29, 2019, the Company and Fonda, Inc. agreed to terminate the services and trademark licensing agreement and the warrants for 150,000 shares were forfeited.

Commercial Agreement with Shaquille O’Neal

On November 18, 2019, the Company entered into a commercial agreement (“Shaq Agreement”) and restricted stock unit award agreement (“RSU Agreement”) with ABG-Shaq, LLC (“Shaq”) pursuant to which certain products would be sold bearing certain intellectual property rights of Shaquille O’Neal on the terms and conditions set forth in the Shaq Agreement. In exchange for such services and pursuant to the RSU Agreement, the Company issued 400,000 restricted stock units to Shaq that vest in three separate tranches. The first tranche of 133,333 restricted stock units vested on November 18, 2019, which was the date of grant. The second tranche of 133,333 restricted stock units will vest February 1, 2021 and the final tranche of 133,334 restricted stock units will vest February 1, 2022. Additionally, in connection with the Shaq Agreement, the Company entered into a registration rights agreement with respect to the restricted stock units pursuant to which the Company agreed to register the common stock issuable upon settlement of the restricted stock units in accordance with the terms and conditions therein. The restricted stock units each settle for one share of the Company’s common stock. The aggregate market value on the date of the award was $2,595,000 and is being amortized as cost of sales over the three-year commercial term. The estimated fair value is based on the grant date closing price of the Company’s stock.

Compensation expense relating to the restricted stock unit grant was $865,000 for fiscal 2020. As of January 30, 2020, there was $1,730,000 of total unrecognized compensation cost related to the award. That cost is expected to be recognized over a weighted average period of 2.0 years.

Restricted Stock Award

On November 23, 2018, the Company entered into a restricted stock award agreement with Flageoli Classic Limited, LLC (“FCL”) granting FCL 150,000 restricted shares of the Company’s common stock in connection with and as consideration for entering into a vendor exclusivity agreement with the Company. The vendor exclusivity agreement grants us the exclusive right in television shopping to market, promote and sell products under the trademark of Serious Skincare, a skin-care brand that launched on the Company’s television network on January 3, 2019. Additionally, the agreement identifies Jennifer Flavin-Stallone as the primary spokesperson for the brand on the Company’s television network. The restricted

shares vested in three tranches. Of the restricted shares granted, 50,000 vested on January 4, 2019, which was the first business day following the initial appearance of the Serious Skincare brand on the Company’s television network, 50,000 vested on January 4, 2020 and 50,000 vested on January 4, 2021. The aggregate market value on the date of the award was $1,408,000 and was amortized as cost of sales over the three-year vendor exclusivity agreement term. The estimated fair value of the restricted stock is based on the grant date closing price of the Company’s stock for time-based vesting awards.

Compensation expense relating to the restricted stock award grant was $697,000, $469,000 and $89,000 for fiscal 2020, fiscal 2019 and fiscal 2018. As of January 30, 2021, there was $153,000 of total unrecognized compensation cost related to non-vested restricted stock unit grants. That cost is expected to be recognized over a weighted average period of 0.1 years. The total fair value of restricted stock vested during fiscal 2020 was $229,000.

A summary of the status of the Company’s non-vested restricted stock award activity as of January 30, 2021 and changes during the twelve-month period then ended is as follows:

Restricted Stock

Weighted

Average

Grant Date

    

Shares

    

Fair Value

Non-vested outstanding, February 1,2020

 

50,000

$

9.39

Granted

 

$

Vested

 

(50,000)

$

9.39

Non-vested outstanding, January 30,2021

 

$

Stock Compensation Plans

The Company's 2020 Equity Incentive Plan ("2020 Plan") provides for the issuance of up to 3,000,000 shares of the Company's common stock. The 2020 Plan is administered by the human resources and compensation committee of the board of directors and provides for awards for employees, directors and consultants. All employees and directors of the Company and its affiliates are eligible to receive awards under the 2020 Plan. The types of awards that may be granted under the 2020 Plan include incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based awards. Stock options may be granted to employees at such exercise prices as the human resources and compensation committee may determine but not less than 100% of the fair market value of the common stock as of the date of grant (except in the limited case of "substitute awards" as defined by the 2020 Plan). No stock option may be granted more than 10 years after the effective date of the respective plan's inception or be exercisable more than 10 years after the date of grant. Except for market-based options, options granted generally vest over three years in the case of employee stock options and vest immediately on the date of grant in the case of director options, and have contractual terms of 10 years from the date of grant. The 2020 Plan was approved by the Company's shareholders at the 2020 Annual Meeting of Shareholders on July 13, 2020.

The Company also maintains the 2011 Omnibus Incentive Plan ("2011 Plan"). Upon the adoption and approval of the 2020 Plan, the Company ceased making awards under the 2011 Plan. Awards outstanding under the 2011 Plan continue to be subject to the terms of the 2011 Plan, but if those awards subsequently expire, are forfeited or cancelled or are settled in cash, the shares subject to those awards will become available for awards under the 2020 Plan. Similarly, the Company ceased making awards under its 2004 Omnibus Stock Plan ("2004 Plan") on June 22, 2014, but outstanding awards under the 2004 Plan remain outstanding in accordance with its terms.

Stock-Based Compensation - Stock Options

Compensation is recognized for all stock-based compensation arrangements by the Company. Stock-based compensation expense for fiscal 2020, fiscal 2019 and fiscal 2018 related to stock option awards was $121,000, $681,000 and $1,157,000. The Company has not recorded any income tax benefit from the exercise of stock options due to the uncertainty of realizing income tax benefits in the future.

The fair value of each time-based vesting option award is estimated on the date of grant using the Black-Scholes option pricing model that uses assumptions noted in the following table. Expected volatilities are based on the historical volatility of the Company’s stock. Expected term is calculated using the simplified method taking into consideration the option’s contractual life and vesting terms. The Company uses the simplified method in estimating its expected option term because it believes that historical exercise data cannot be accurately relied upon at this time to provide a reasonable basis for estimating an expected term due to the extreme volatility of its stock price and the resulting unpredictability of its stock option exercises. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Expected dividend yields were not used in the fair value computations as the Company has never declared or paid dividends on its common stock and currently intends to retain earnings for use in operations.

    

Fiscal 2019

    

Fiscal 2018

Expected volatility:

 

75% - 82%

72% - 78%

Expected term (in years):

 

6 years

 

6 years

Risk-free interest rate:

 

1.4% - 2.6%

2.8% - 3.0%

A summary of the status of the Company’s stock option activity as of January 30, 2021 and changes during the year then ended is as follows:

Weighted

Weighted

Average 

Average 

2011

Exercise 

2004

Exercise 

Plan

Price

Plan

Price

Balance outstanding, February 1, 2020

 

247,000

$

12.44

 

6,000

$

51.52

Granted

 

$

 

$

Exercised

 

$

 

$

Forfeited or canceled

 

(213,000)

$

12.37

 

(3,000)

$

48.92

Balance outstanding, January 30, 2021

 

34,000

$

12.87

 

3,000

$

53.49

Options exercisable at January 30, 2021

 

25,000

$

15.00

 

3,000

$

53.49

The following table summarizes information regarding stock options outstanding at January 30, 2021:

Options Outstanding

Options Vested or Expected to Vest

    

    

    

Weighted

    

    

    

    

Weighted

    

Average 

Average 

Weighted

Remaining 

Weighted

Remaining 

Average 

Contractual 

Aggregate

Average 

Contractual 

Aggregate

Number of

Exercise 

Life 

Intrinsic 

Number of

Exercise 

Life 

Intrinsic 

Option Type

Shares

Price

 

(Years)

Value

Shares

Price

 

(Years)

Value

2011 Incentive:

 

34,000

$

12.87

 

6.1

$

8,000

 

32,000

$

13.14

 

6.0

$

9,000

2004 Incentive:

 

3,000

$

53.49

 

3.1

$

 

3,000

$

53.49

 

3.1

$

The weighted average grant-date fair value of options granted in fiscal 2019 and fiscal 2018 was $3.12 and $7.35. The total intrinsic value of options exercised during fiscal 2020, fiscal 2019 and fiscal 2018 was $0, $0 and $26,000. As of January 30, 2021, total unrecognized compensation cost related to stock options was $12,000 and is expected to be recognized over a weighted average period of approximately 1.1 years.

Stock Option Tax Benefit

The exercise of certain stock options granted under the Company’s stock option plans give rise to compensation, which is included in the taxable income of the applicable employees and deductible by the Company for federal and state income tax purposes. Such compensation results from increases in the fair market value of the Company’s common stock subsequent to the date of grant of the applicable exercised stock options and these increases are not recognized as an expense for financial accounting purposes, as the options were originally granted at the fair market value of the Company’s common stock on the date of grant. The related tax benefits will be recorded if and when realized, and totaled $0, $0 and $7,000 in fiscal 2020,

fiscal 2019 and fiscal 2018. The Company has not recorded any income tax benefit from the exercise of stock options in these fiscal years, due to the uncertainty of realizing income tax benefits in the future.

Stock-Based Compensation - Restricted Stock Units

Compensation expense relating to restricted stock unit grants was $277,000, $1,031,000 and $1,792,000 for fiscal 2020, fiscal 2019 and fiscal 2018. As of January 30, 2021, there was $987,000 of total unrecognized compensation cost related to non-vested restricted stock unit grants. That cost is expected to be recognized over a weighted average period of 2.0 years. The total fair value of restricted stock units vested during fiscal 2020, fiscal 2019 and fiscal 2018 was $337,000, $434,000 and $1,216,000. The estimated fair value of restricted stock units is based on the grant date closing price of the Company’s stock for time-based vesting awards and a Monte Carlo valuation model for market-based vesting awards.

The Company has granted time-based restricted stock units to certain key employees as part of the Company’s long-term incentive program. The restricted stock units generally vest in three equal annual installments beginning one year from the grant date and are being amortized as compensation expense over the three-year vesting period. The Company has also granted restricted stock units to non-employee directors as part of the Company’s annual director compensation program. Each restricted stock unit grant vests or vested on the day immediately preceding the next annual meeting of shareholders following the date of grant. The grants are amortized as director compensation expense over the twelve-month vesting period.

The Company granted 146,000 performance share units to the Company's Chief Executive Officer as part of the Company's long-term incentive program during the first quarter of fiscal 2020. The number of shares earned is based on the Company's achievement of pre-established goals for liquidity over the measurement period from February 2, 2020 to January 30, 2021. Any earned performance share units will vest on January 28, 2023, so long as the executive's service has been continuous through the vest date. The number of units that may actually be earned and become eligible to vest pursuant to this award can be between 0% and 125% of the target number of performance share units. The Company recognizes compensation expense on these performance share units ratably over the requisite performance period of the award to the extent management views the performance goals as probable of attainment.  The grant date fair value of these performance share units is based on the grant date closing price of the Company's stock.

The Company granted 94,000 and 75,000 market-based restricted stock performance units to executives and key employees as part of the Company’s long-term incentive program during fiscal 2019 and fiscal 2018. No such market-based restricted stock performance units were granted during fiscal 2020. The number of restricted stock units earned is based on the Company’s total shareholder return ("TSR") relative to a group of industry peers over a three-year performance measurement period. Grant date fair values were determined using a Monte Carlo valuation model based on assumptions as follows:

    

Fiscal 2019

    

Fiscal 2018

Total grant date fair value

 

$482,000

$859,000

Total grant date fair value per share

 

$5.14

$10.70 - $13.00

Expected volatility

 

74% - 82%

73% - 76%

Weighted average expected life (in years)

 

3 years

3 years

Risk-free interest rate

 

1.7% - 2.3%

2.4% - 2.7%

The percent of the target market-based performance vested restricted stock unit award that will be earned based on the Company’s TSR relative to the peer group is as follows:

    

Percentage of

 

Percentile Rank

Units Vested

 

< 33%

 

0

%

33%

 

50

%

50%

 

100

%

100%

 

150

%

On May 2, 2019, Timothy A. Peterman was appointed as Chief Executive Officer and entered into an executive employment agreement. In conjunction with the employment agreement, the Company granted 68,000 market-based restricted stock performance units to Mr. Peterman. The market-based restricted stock performance units vest in three tranches, each tranche consisting of one-third of the units subject to the award. Tranche 1 vested on May 2, 2020, the one-year anniversary of the grant date. Tranche 2 will vest on the date the Company’s average closing stock price for 20 consecutive trading days equals or exceeds $20.00 per share and the executive has been continuously employed at least one year. Tranche 3 will vest on the date the Company’s average closing stock price for 20 consecutive trading days equals or exceeds $40.00 per share and the executive has been continuously employed at least two years. The vesting of the second and third tranches can occur any time on or before May 1, 2029. The total grant date fair value was estimated to be $220,000 and is being amortized over the derived service periods for each tranche.

Grant date fair values and derived service periods for each tranche were determined using a Monte Carlo valuation model based on assumptions, which included a weighted average risk-free interest rate of 2.5%, a weighted average expected life of 2.9 years and an implied volatility of 80% and were as follows for each tranche:

    

Fair Value

    

Derived Service

(Per Share)

Period

Tranche 1 (one year)

$

3.66

 

1.00 Year

Tranche 2 ($20.00/share)

$

3.19

 

3.27 Years

Tranche 3 ($40.00/share)

$

2.85

 

4.53 Years

A summary of the status of the Company’s non-vested restricted stock unit activity as of January 30, 2021 and changes during the twelve-month period then ended is as follows:

Restricted Stock Units

Market-Based Units

Time-Based Units

    

Performance-Based Units

    

Total

    

    

Weighted

    

    

Weighted

    

Weighted

    

Weighted

Average

Average 

Average

Average 

Grant Date

Grant Date 

Grant Date

Grant Date 

Shares

    

Fair Value

    

Shares

Fair Value

    

Shares

    

Fair Value

    

Shares

Fair Value

Non-vested outstanding, February 1,2020

 

129,000

$

6.49

 

435,000

$

5.96

 

$

564,000

$

6.08

Granted

 

$

 

471,000

$

2.35

 

146,000

1.69

617,000

$

2.20

Vested

 

$

 

(103,000)

$

4.41

 

(103,000)

$

4.41

Forfeited

 

(69,000)

$

9.05

 

(67,000)

$

4.22

 

(136,000)

$

6.70

Non-vested outstanding, January 30,2021

 

60,000

$

3.52

 

736,000

$

4.03

 

146,000

$

1.69

942,000

$

3.64

v3.21.1
Business Segments and Sales by Product Group
12 Months Ended
Jan. 30, 2021
Segment Reporting [Abstract]  
Business Segments and Sales by Product Group

(11)  Business Segments and Sales by Product Group

During fiscal 2019, the Company changed its reportable segments into two reporting segments: “ShopHQ” and “Emerging.” In light of strategic shifts in the Company’s emerging businesses, the Company’s Chief Executive Officer began reviewing operating results of the Emerging segment separately from its core business, ShopHQ. The chief operating decision maker is the Company’s Chief Executive Officer and Interim Chief Financial Officer. These segments reflect the way the Company’s chief operating decision maker evaluates the Company’s business performance and manages its operations. All of Company’s sales are made to customers residing in the United States.

The Company does not allocate assets between the segments for our internal management purposes, and as such, they are not presented here. There were no significant inter-segment sales or transfers during fiscal 2020, fiscal 2019 and fiscal 2018. The Company allocates corporate support costs (such as finance, human resources, warehouse management and legal) to our operating segments based on their estimated usage and based on how the Company manages the business.

ShopHQ

The ShopHQ segment encompasses the Company’s nationally distributed shopping entertainment network. ShopHQ sells and distributes its products to consumers through its video commerce television, online website and mobile platforms.

Emerging

The Emerging segment consists of the Company’s developing business models. This segment includes the Company’s Media Commerce Services, which offers creative and interactive advertising, OTT app services and third-party logistics. The Media Commerce Services brands include Float Left and third-party logistics business i3PL. Float Left is a business comprised of connected TVs, video-based content, application development and distribution, including technical consulting services, software development and maintenance related to video distribution. The Emerging segment also encompasses the ShopHQHealth, ShopBulldogTV, J.W. Hulme, and OurGalleria.com. ShopHQHealth is a health and wellness focused network that offers a robust assortment of products and services dedicated to addressing the physical, spiritual and mental health needs of its customers. ShopBulldog TV is a niche television shopping network geared towards male consumers. J.W. Hulme is a business specializing in artisan-crafted leather products, including handbags and luggage. J.W. Hulme products are distributed primarily through jwhulme.com, retails stores, and programming on ShopHQ. OurGalleria.com is a higher-end online marketplace for discounted merchandise.

Net Sales by Segment and Significant Product Groups

For the Years Ended

    

January 30,

    

February 1,

    

February 2,

2021

2020

2019

(in thousands)

ShopHQ

Net merchandise sales by category:

 

  

 

  

 

  

Jewelry & Watches

$

161,999

$

200,893

$

206,021

Home & Consumer Electronics

 

62,910

 

106,025

 

135,184

Beauty & Wellness

 

124,222

 

80,945

 

102,099

Fashion & Accessories

 

45,261

 

65,616

 

94,295

All other (primarily shipping & handling revenue)

 

42,750

 

42,628

 

52,630

Total ShopHQ

 

437,142

 

496,107

 

590,229

Emerging

 

17,029

 

5,715

 

6,408

Consolidated net sales

$

454,171

$

501,822

$

596,637

Performance Measures by Segment

For the Years Ended

    

January 30,

    

February 1,

    

February 2,

2021

2020

2019

(in thousands)

Gross profit

  

  

ShopHQ

$

160,190

$

162,809

$

205,036

Emerging

$

6,863

$

828

$

1,811

Consolidated gross profit

$

167,053

$

163,637

$

206,847

Operating loss

 

  

 

  

 

  

ShopHQ

$

(3,616)

$

(46,956)

$

(17,173)

Emerging

 

(4,324)

 

(5,569)

 

(1,451)

Consolidated operating loss

$

(7,940)

$

(52,525)

$

(18,624)

Depreciation and amortization

 

  

 

  

 

  

ShopHQ (a)

$

27,264

$

11,395

$

10,065

Emerging

 

714

 

619

 

99

Consolidated depreciation and amortization

$

27,978

$

12,014

$

10,164

(a)Includes distribution facility depreciation of $3,955,000, $3,957,000 and $3,921,000 for fiscal 2020, fiscal 2019 and fiscal 2018. Distribution facility depreciation is included as a component of cost of sales within the accompanying consolidated statements of operations.

v3.21.1
Leases
12 Months Ended
Jan. 30, 2021
Leases [Abstract]  
Leases

(12) Leases

The Company leases certain property and equipment, such as transmission and production equipment, satellite transponder and office equipment. The Company also leases office space used by its Emerging segment's Float Left and retail space used by its Emerging segment retailer, J.W. Hulme. The Company determines if an arrangement is a lease at inception. Leases with an initial term of 12 months or less are not recorded on accompanying consolidated balance sheets.

Right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease liabilities and right-of-use assets are recognized at commencement date based on the present value of lease payments over the lease term. As the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Some of the Company's leases include options to extend the term, which is only included in the lease liability and right-of-use assets calculation when it is reasonably certain the Company will exercise that option. As of January 30, 2021, the lease liability and right-of-use assets did not include any lease extension options.

The Company has lease agreements with lease and non-lease components, and has elected to account for these as a single lease component. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The components of lease expense were as follows:

    

For the Years Ended

January 30, 2021

February 1, 2020

Operating lease cost

$

972,000

$

1,007,000

Short-term lease cost

 

63,000

 

153,000

Variable lease cost (a)

 

90,000

 

96,000

(a)Includes variable costs of finance leases.

For the years ended January 30, 2021 and February 1, 2020, finance lease costs included amortization of right-of-use assets of $76,000 and $73,000 and interest on lease liabilities of $7,000 and $8,000.

Supplemental cash flow information related to leases was as follows:

    

For the Years Ended

January 30, 2021

 

February 1, 2020

Cash paid for amounts included in the measurement of lease liabilities:

 

  

  

Operating cash flows used for operating leases

$

1,095,000

$

950,000

Operating cash flows used for finance leases

 

7,000

 

8,000

Financing cash flows used for finance leases

103,000

71,000

Right-of-use assets obtained in exchange for lease liabilities:

Operating leases

1,299,000

318,000

Finance leases

 

62,000

 

188,000

The weighted average remaining lease term and weighted average discount rates related to leases were as follows:

    

January 30, 2021

 

February 1, 2020

Weighted average remaining lease term:

 

  

Operating leases

 

2.8 years

1.4 years

Finance leases

 

1.1 years

1.9 years

Weighted average discount rate:

 

  

Operating leases

 

6.8%

5.6%

Finance leases

 

5.7%

5.3%

Supplemental balance sheet information related to leases is as follows:

Leases

    

Classification

    

January 30, 2021

 

February 1, 2020

Assets

 

  

 

  

  

Operating lease right-of-use assets

 

Other assets

$

1,116,000

$

832,000

Finance lease right-of-use assets

 

Property and equipment, net

 

101,000

 

143,000

Total lease right-of-use assets

 

  

$

1,217,000

$

975,000

Operating lease liabilities

 

  

 

  

 

  

Current portion of operating lease liabilities

 

Current portion of operating lease liabilities

$

462,000

$

704,000

Operating lease liabilities, excluding current portion

 

Other long term liabilities

 

646,000

 

129,000

Total operating lease liabilities

 

  

 

1,108,000

 

833,000

Finance lease liabilities

 

  

 

  

 

  

Current portion of finance lease liabilities

 

Current liabilities: Accrued liabilities

 

86,000

 

80,000

Finance lease liabilities, excluding current portion

 

Other long term liabilities

 

19,000

 

66,000

Total finance lease liabilities

 

  

 

105,000

 

146,000

Total lease liabilities

 

  

$

1,213,000

$

979,000

Future maturities of lease liabilities as of January 30, 2021 are as follows:

Fiscal year

    

Operating Leases

    

Finance Leases

2021

$

518,000

$

90,000

2022

 

313,000

 

18,000

2023

 

250,000

 

2024

 

141,000

 

Thereafter

 

 

Total lease payments

 

1,222,000

 

108,000

Less imputed interest

 

(114,000)

 

(3,000)

Total lease liabilities

$

1,108,000

$

105,000

As of January 30, 2021, the Company had executed a $2.7 million operating lease that had not yet commenced. This operating lease will replace the Company's current satellite transponder agreement, will commence during the first quarter of fiscal 2021 and have a lease term through October 31, 2025. As of January 30, 2021, the Company had no finance leases that had not yet commenced.

v3.21.1
Business Acquisitions
12 Months Ended
Jan. 30, 2021
Business Combinations [Abstract]  
Business Acquisitions

(13) Business Acquisitions

Float Left Interactive, Inc.

In November 2019, the Company entered into an asset purchase agreement and acquired substantially all the assets of Float Left, a business comprised of connected TVs, video-based content, application development and distribution, including technical consulting services, software development and maintenance related to video distribution. The Company plans to utilize Float Left’s team and technology platform to further grow its content delivery capabilities in OTT platforms while providing new revenue opportunities.

The acquisition has been accounted for under the purchase method of accounting, and accordingly, the purchase price has been allocated to the identifiable assets and liabilities assumed pursuant to the asset purchase agreement based on fair values at the acquisition date. The operating results of Float Left, which were not material, have been included in the consolidated financial statements of the Company since the date of acquisition. The supplementary proforma information, assuming this acquisition occurred as of the beginning of the prior periods, and the operations of Float Left for the period from the November 26, 2019 acquisition date through the end of fiscal 2019 were immaterial. The Company incurred $78,000 of acquisition-related costs and are included in general and administrative expense in the accompanying fiscal 2019 consolidated statement of operations. The acquisition date fair value of consideration transferred for Float Left was approximately $1,102,000, which consisted of $353,000 of cash, net of cash acquired, $459,000 of common stock and $290,000 of contingent consideration.

The estimated fair value of the common stock issued as purchase consideration, 100,000 shares, is based on the issue date closing price of the Company’s stock. The purchase includes contingent consideration of up to 50,000 additional shares of our common stock in the event certain performance metrics are satisfied relating to the Float Left business following closing. The estimated fair value of contingent consideration is primarily based on the Float Left’s projected performance for each of the next two fiscal years following the closing date and the closing price of the Company’s stock.

The following table summarizes our allocation of the Float Left purchase consideration:

    

Fair Value