UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
OR
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As of December 1, 2021 there were
iMEDIA BRANDS, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
October 30, 2021
2
PART I — FINANCIAL INFORMATION
Item 1.FINANCIAL STATEMENTS
iMEDIA BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| October 30, 2021 |
| January 30, 2021 | |||
(In thousands, except share and | ||||||
per share data) | ||||||
ASSETS |
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Current assets: |
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Cash | $ | | $ | | ||
Restricted Cash | | | ||||
Accounts receivable, net |
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Inventories |
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Current portion of television broadcast rights, net | | | ||||
Prepaid expenses and other |
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Total current assets |
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Property and equipment, net |
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Television broadcast rights, net | | | ||||
Intangible assets and goodwill, net | | | ||||
Other assets |
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TOTAL ASSETS | $ | | $ | | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable | $ | | $ | | ||
Accrued liabilities |
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Current portion of television broadcast rights obligations | | | ||||
Current portion of long term credit facility |
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Current portion of operating lease liabilities |
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Deferred revenue |
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Total current liabilities |
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Long term broadcast rights liability |
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Other long term liabilities | | | ||||
Long term credit facility |
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Total liabilities |
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Commitments and contingencies |
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Shareholders' equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Accumulated other comprehensive loss | ( | | ||||
Total shareholders’ equity |
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Equity of the non-controlling interest | $ | | $ | | ||
Total equity | $ | | $ | | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
iMEDIA BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three-Month | For the Nine-Month | ||||||||||||
Periods Ended | Periods Ended | ||||||||||||
October 30, | October 31, | October 30, | October 31, | ||||||||||
| 2021 |
| 2020 |
| 2021 |
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(In thousands, except share and per share data) | |||||||||||||
Net sales | $ | | $ | | $ | | $ | | |||||
Cost of sales |
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Gross profit |
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Operating expense: |
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Distribution and selling |
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General and administrative |
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Depreciation and amortization |
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Restructuring costs |
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Total operating expense |
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Operating loss |
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Other income (expense): |
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Interest income |
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Interest expense |
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Loss on debt extinguishment |
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Total other expense, net |
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Loss before income taxes |
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Income tax provision |
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Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||
Less: Net loss attributable to non-controlling interest | — | — | ( | — | |||||||||
Net loss attributable to shareholders | ( | ( | ( | ( | |||||||||
Net loss per common share | $ | ( | $ | ( | $ | ( | $ | ( | |||||
Net loss per common share — assuming dilution | $ | ( | $ | ( | $ | ( | $ | ( | |||||
Weighted average number of common shares outstanding: |
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Diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
iMEDIA BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
| Common Stock |
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Additional | Additional Other | Equity of | Total | ||||||||||||||||||
Number | Paid-In | Accumulated | Comprehensive | Non-Controlling | Shareholders' | ||||||||||||||||
of Shares |
| Par Value | Capital | Deficit | Income (Loss) | Interest | Equity | ||||||||||||||
For the Nine-Month Period Ended October 30, 2021 |
| (In thousands, except share data) | |||||||||||||||||||
BALANCE, January 30, 2021 |
| | $ | | $ | | $ | ( | $ | — | $ | — | $ | | |||||||
Net loss |
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| ( |
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Common stock issuances pursuant to equity compensation awards |
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Share-based payment compensation |
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Common stock and warrant issuance |
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Investment of non-controlling interest | — | — | — | — | — | | | ||||||||||||||
BALANCE, May 1, 2021 |
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Net loss |
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Common stock issuances pursuant to equity compensation awards |
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Share-based payment compensation |
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Common stock and warrant issuance | | | | — | — | — | | ||||||||||||||
BALANCE, July 31, 2021 |
| | $ | | $ | | $ | ( | $ | — | $ | | $ | | |||||||
Net loss |
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Common stock issuances pursuant to equity compensation awards |
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Share-based payment compensation |
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Common stock issuance |
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Other Comprehensive Income (loss) | — | — | — | — | ( | — | ( | ||||||||||||||
BALANCE, October 30, 2021 |
| | $ | | $ | | $ | ( | $ | ( | $ | | $ | |
| Common Stock |
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Additional | Additional Other | Equity of | Total | ||||||||||||||||||
Number | Paid-In | Accumulated | Comprehensive | Non-Controlling | Shareholders' | ||||||||||||||||
of Shares |
| Par Value | Capital | Deficit | Income (loss) | Interest | Equity | ||||||||||||||
For the Nine-Month Period Ended October 31, 2020 |
| (In thousands, except share data) | |||||||||||||||||||
BALANCE, February 1, 2020 |
| | $ | | $ | | $ | ( | $ | — | $ | — | $ | | |||||||
Net loss |
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| ( |
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Common stock issuances pursuant to equity compensation awards |
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Share-based payment compensation |
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Common stock and warrant issuance |
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BALANCE, May 2, 2020 |
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Net loss |
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Common stock issuances pursuant to equity compensation awards |
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Share-based payment compensation |
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Common stock and warrant issuance | | | | — | — | | |||||||||||||||
BALANCE, August 1, 2020 |
| | $ | | $ | | $ | ( | $ | — | $ | — | $ | | |||||||
Net loss |
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Common stock issuances pursuant to equity compensation awards |
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Exercise of warrants | | | ( | — |
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Share-based payment compensation |
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Common stock and warrant issuance |
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BALANCE, October 31, 2020 |
| | $ | | $ | | $ | ( | $ | — | $ | — | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
iMEDIA BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Nine-Month Period Ended | ||||||
October 30, 2021 | October 31, 2020 | |||||
(in thousands) | ||||||
OPERATING ACTIVITIES: |
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Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash provided by (used for) operating activities: |
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Depreciation and amortization |
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Share-based payment compensation |
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Payments for television broadcast rights | ( | ( | ||||
Amortization of deferred financing costs |
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Loss on debt extinguishment |
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Changes in operating assets and liabilities: |
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Accounts receivable, net |
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Inventories |
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Deferred revenue |
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Prepaid expenses and other |
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Accounts payable and accrued liabilities |
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Net cash (used for) provided by operating activities |
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INVESTING ACTIVITIES: |
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Property and equipment additions |
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Acquisitions | ( | — | ||||
Vendor exclusivity deposit | ( | — | ||||
Net cash used for investing activities |
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FINANCING ACTIVITIES: |
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Proceeds from issuance of revolving loan |
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Proceeds from issuance of common stock and warrants |
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Proceeds from issuance of term loan | | — | ||||
Proceeds from issuance of long term bonds | | — | ||||
Payments on revolving loan |
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Payments on term loan |
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Payments for business acquisition |
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Payments for common stock issuance costs |
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Payments on finance leases |
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Payments for restricted stock issuance |
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Payments for deferred financing costs |
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Payments on sellers note | ( | — | ||||
Payments for debt extinguishment costs |
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Net cash provided by financing activities |
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Net increase in cash and restricted cash |
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BEGINNING CASH AND RESTRICTED CASH |
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ENDING CASH AND RESTRICTED CASH | $ | | $ | | ||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||
Interest paid | $ | | $ | | ||
Income taxes paid | $ | | $ | | ||
Television broadcast rights obtained in exchange for liabilities | $ | | $ | | ||
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||
Property and equipment purchases included in accounts payable | $ | | $ | | ||
Other long term liability issued in exchange for acquired assets | $ | | $ | - | ||
Common stock issuance costs included in accrued liabilities | $ | | $ | | ||
Equipment acquired through finance lease obligations | $ | | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
iMEDIA BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 30, 2021
(Unaudited)
(1) General
iMedia Brands, Inc. and its subsidiaries (“we,” “our,” “us,” or the “Company”) is a leading interactive media company capitalizing on the convergence of entertainment, ecommerce, and advertising. The Company owns a growing, global portfolio of Entertainment, Consumer Brands and Media Commerce Services businesses that cross promote and exchange data with each other to optimize the engagement experiences it creates for advertisers and consumers. The Company’s growth strategy revolves around its ability to increase its expertise and scale using interactive video to engage customers within multiple business models and multiple sales channels. The Company believes its growth strategy builds on its core strengths and provides an advantage in these marketplaces.
The Company’s entertainment television networks are ShopHQ, ShopBulldogTV, ShopHealthHQ and the newly acquired 123tv. ShopHQ is the Company’s flagship, nationally distributed shopping entertainment network that offers a mix of proprietary, exclusive, and name-brand merchandise in the categories of Jewelry and Watches, Home, Beauty and Health, and Fashion and Accessories, directly to consumers 24 hours a day using engaging interactive video. ShopBulldogTV, which launched in the fourth quarter of fiscal 2019, is a niche television shopping entertainment network that offers male-oriented products and services to men and to women shopping for men. ShopHealthHQ, which launched in the third quarter of fiscal 2020, is a niche television shopping entertainment network that offers women and men products and services focused on health and wellness categories such as physical, mental and spiritual health, financial and motivational wellness, weight management and telehealth medical services. 123tv, which the Company acquired on November 5, 2021 (see Note 17 – “Subsequent Events” for additional information), is the leading German interactive media company, disrupting Germany's TV retailing marketplace with its expertise in proprietary live and automated auctions that emotionally engage customers with 123tv's balanced merchandising mix of compelling products shipped directly to their homes.
The Company’s engaging, interactive video programming is distributed primarily in linear television through cable and satellite distribution agreements, agreements with telecommunications companies and arrangements with over-the-air broadcast television stations. This interactive programming is also streamed live online at shophq.com, shopbulldogtv.com and shophealthhq.com, which are comprehensive digital commerce platforms that sell products which appear on the Company’s television networks as well as offer an extended assortment of online-only merchandise. The Company’s interactive video is also available on over-the-top ("OTT") platforms and ConnectedTV platforms (“CTV”) such as Roku, AppleTV, and Samsung connected televisions, 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"), Cooking with Shaquille O’Neal, Kate & Mallory, Live Fit MD and TheCloseout.com. Christopher & Banks and TheCloseout.com, a deeply discounted branded online marketplace, were acquired during the first quarter of fiscal year 2021.
The Company’s media commerce services brands are iMedia Digital Services (“iMDS”) and i3PL, the Company’s customer solutions and logistics services business. iMDS is comprised of Synacor’s Portal and Advertising business, which the Company purchased on July 30, 2021 (see Note #16 – “Business Acquisitions” for additional information), and its existing OTT app platform, Float Left.
Amendment to Articles of Incorporation
Effective July 13, 2020, the Company amended its Articles of Incorporation to increase the authorized shares of common stock by
7
(2) Basis of Financial Statement Presentation
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles ("GAAP") in the United States of America have been condensed or omitted in accordance with these rules and regulations. The accompanying condensed consolidated balance sheet as of January 30, 2021 has been derived from the Company’s audited financial statements for the fiscal year ended January 30, 2021. The information furnished in the interim condensed consolidated financial statements includes normal recurring adjustments and reflects all adjustments which, in the opinion of management, are necessary for a fair presentation of these financial statements. Although management believes the disclosures and information presented are adequate, these interim condensed consolidated financial statements should be read in conjunction with the Company’s most recent audited financial statements and notes thereto included in its annual report on Form 10-K for fiscal year ended 2020. Operating results for the three and nine-month periods ended October 30, 2021 are not necessarily indicative of the results that may be expected for fiscal year ending January 29, 2022.
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.
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
Recently Adopted Accounting Standards
In June 2016, the FASB issued guidance on the accounting for credit losses on financial instruments, Topic 326, Financial Instruments—Credit Losses (Accounting Standards Update (“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 and did not have a material impact on the Company’s condensed consolidated financial statements.
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 condensed consolidated financial statements.
Recently Issued Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (“Topic 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This update provides optional expedients and exceptions for applying generally accepted accounting principles to certain contract modifications and hedging relationships that reference London Inter-bank Offered Rate (LIBOR) or another reference rate expected to be discontinued. Topic 848 is effective upon issuance and generally can be applied through December 31, 2022. The Company is currently evaluating the impact of Topic 848 on the consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-14). This new guidance eliminates the requirement to calculate the implied fair value of goodwill to measure a
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goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The changes are effective for smaller reporting companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is permitted. The Company is currently evaluating the impact that this guidance will have on its consolidated financial statements.
(3) Revenue
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. As of October 30, 2021 and January 30, 2021, the Company recorded a merchandise return liability of $
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 10 - "Business Segments and Sales by Product Group."
As of October 30, 2021, the Company had
Accounts Receivable
The Company’s accounts receivable is comprised primarily of customer receivables from its ValuePay program, but also includes vendor receivables, credit card receivables and other receivables. The Company’s ValuePay program is an installment payment program 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 and from credit card companies and are reflected net of reserves for estimated uncollectible amounts. As of October 30, 2021 and January 30, 2021, the Company had approximately $
(4) 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).
The Company entered into a foreign currency forward contract on October 26, 2021 to reduce the short-term effects of foreign currency fluctuations on their investment in German subsidiary 123tv. The Company’s primary objective in holding derivatives is to
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reduce the volatility of their investment in 123tv associated with changes in foreign currency exchange rates. The Company’s derivatives expose the Company to credit risk to the extent that the counterparties may be unable to meet the terms of the arrangement. The Company does, however, seek to mitigate such risks by limiting our counterparties to major financial institutions. Management does not expect material losses as a result of defaults by counterparties.
The fair values of the Company’s derivative instruments classified as Level 2 financial instruments and the line items within the accompanying consolidated balance sheets to which they were recorded are summarized as of October 30, 2021 and January 30, 2021, follows:
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| October 30, | January 30, | |||||
Balance Sheet Line Item | 2021 |
| 2021 | |||||
Derivatives designated as hedging instruments: |
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Foreign currency derivatives | Accrued liabilities | $ | | $ | — | |||
Total |
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Three-Month Periods Ended | Nine-Month Periods Ended | |||||||||||||
| Line Item in Statement |
| October 30, | October 31, |
| October 30, | October 31, | |||||||
of Operations | 2021 |
| 2020 | 2021 |
| 2020 | ||||||||
Derivatives designated as hedging instruments: |
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Foreign currency derivatives | Other income (expense) | $ | — | $ | — | $ | — | $ | — | |||||
Total |
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On September 28, 2021, the Company completed the transaction relating to the public offering, issuance and sale of $
On July 30, 2021, the Company entered into long-term variable rate credit agreements with Siena Lending Group and Green Lake Real Estate Finance LLC, which are classified as Level 2 and had a combined carrying value of $
The Company had no Level 3 investments that use significant unobservable inputs as of October 30, 2021 and January 30, 2021.
Also, on July 30, 2021, the PNC revolver and term loan were paid in full, and the PNC Credit Facility was terminated. As of October 30, 2021 and January 30, 2021, the Company’s long-term variable rate PNC Credit Facility (as defined below), classified as Level 2, had carrying values of $
(5) Television Broadcast Rights
Television broadcast rights in the accompanying condensed consolidated balance sheets consisted of the following:
| October 30, 2021 |
| January 30, 2021 | |||
Television broadcast rights | $ | | $ | | ||
Less accumulated amortization |
| ( |
| ( | ||
Television broadcast rights, net | $ | | $ | |
10
During the first nine months of fiscal 2021 and full year fiscal 2020, the Company entered into certain affiliation agreements with television service providers for carriage of its television programming over their systems, including channel placement rights, which ensure the Company keeps its channel position on the service provider’s channel line-up during the term. The Company recorded television broadcast rights of $
In addition to the Company securing broadcast rights for channel position, the Company’s affiliation agreements generally provide that it will pay each operator a monthly service fee, most often based on the number of homes receiving the Company’s programming, and in some cases marketing support payments. Monthly service fees are expensed as distribution and selling expense within the condensed consolidated statement of operations.
(6) Intangible Assets
Intangible assets in the accompanying condensed consolidated balance sheets consisted of the following:
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