UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 30, 2021

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-37495

iMedia Brands, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Minnesota		41-1673770
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

6740 Shady Oak Road, Eden Prairie, MN 55344-3433

(Address of Principal Executive Offices, including Zip Code)

952-943-6000

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	IMBI	The Nasdaq Stock Market, LLC
8.5% Senior Notes due 2026	IMBIL	The Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ◻	Accelerated filer ◻	Non-accelerated filer ☑	Smaller reporting company ☑
			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of December 1, 2021 there were 21,560,514 shares of the registrant’s common stock, $0.01 par value per share, outstanding.

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iMEDIA BRANDS, INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS

October 30, 2021

Part I. Financial Information	Page
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of October 30, 2021 and January 30, 2021	3
Condensed Consolidated Statements of Operations for the Three-Month and Nine-Month Periods Ended October 30, 2021 and October 31, 2020	4
Condensed Consolidated Statements of Shareholders’ Equity for the Three-Month and Nine-Month Periods Ended October 30, 2021 and October 31, 2020	5
Condensed Consolidated Statements of Cash Flows for the Nine-Month Periods Ended October 30, 2021 and October 30, 2020	6
Notes to Condensed Consolidated Financial Statements as of October 30, 2021	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3. Quantitative and Qualitative Disclosures About Market Risk	45
Item 4. Controls and Procedures	45
Part II. Other Information	45
Item 1. Legal Proceedings	45
Item 1A. Risk Factors	46
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3. Defaults Upon Senior Securities	47
Item 4. Mine Safety Disclosures	47
Item 5. Other Information	47
Item 6. Exhibits	48
Signatures	50

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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
Current assets:
Cash	$	51,352	$	15,485
Restricted Cash		2,168		—
Accounts receivable, net		66,948		61,951
Inventories		92,001		68,715
Current portion of television broadcast rights, net		21,349		19,725
Prepaid expenses and other		15,922		7,853
Total current assets		249,740		173,729
Property and equipment, net		44,932		41,988
Television broadcast rights, net		41,865		7,028
Intangible assets and goodwill, net		35,769		2,359
Other assets		13,161		1,533
TOTAL ASSETS	$	385,467	$	226,637
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	62,235	$	77,995
Accrued liabilities		39,592		29,509
Current portion of television broadcast rights obligations		25,937		29,173
Current portion of long term credit facility		—		2,714
Current portion of operating lease liabilities		1,046		462
Deferred revenue		541		213
Total current liabilities		129,351		140,066
Long term broadcast rights liability		45,742		7,358
Other long term liabilities		13,403		1,497
Long term credit facility		46,650		50,666
8.50% Senior Unsecured Notes		73,768		—
Total liabilities		308,914		199,587
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 shares authorized as of October 30, 2021 and January 30, 2021; 21,560,514 and 13,019,061 shares issued and outstanding as of October 30, 2021 and January 30, 2021		213		130
Additional paid-in capital		537,987		474,375
Accumulated deficit		(464,424)		(447,455)
Accumulated other comprehensive loss		(371)		—
Total shareholders’ equity		73,405		27,050
Equity of the non-controlling interest	$	3,148	$	—
Total equity	$	76,553	$	27,050
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	385,467	$	226,637

The accompanying notes are an integral part of these condensed consolidated financial statements.

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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		2020

	(In thousands, except share and per share data)
Net sales	$	130,681	$	109,025	$	357,325	$	329,374
Cost of sales		76,260		68,211		208,911		206,711
Gross profit		54,421		40,814		148,414		122,663
Operating expense:
Distribution and selling		39,302		31,490		108,907		97,100
General and administrative		10,746		4,687		24,569		15,158
Depreciation and amortization		9,741		7,977		24,727		16,700
Restructuring costs		634		55		634		264
Total operating expense		60,423		44,209		158,837		129,222
Operating loss		(6,002)		(3,395)		(10,423)		(6,559)
Other income (expense):
Interest income		85		1		124		2
Interest expense		(3,551)		(1,339)		(6,245)		(3,920)
Loss on debt extinguishment		(9)		—		(663)		—
Total other expense, net		(3,475)		(1,338)		(6,784)		(3,918)
Loss before income taxes		(9,477)		(4,733)		(17,207)		(10,477)
Income tax provision		(15)		(15)		(45)		(45)
Net loss	$	(9,492)	$	(4,748)	$	(17,252)	$	(10,522)
Less: Net loss attributable to non-controlling interest		—		—		(282)		—
Net loss attributable to shareholders		(9,492)		(4,748)		(16,970)		(10,522)
Net loss per common share	$	(0.44)	$	(0.39)	$	(0.91)	$	(1.05)
Net loss per common share — assuming dilution	$	(0.44)	$	(0.39)	$	(0.91)	$	(1.05)
Weighted average number of common shares outstanding:
Basic		21,503,340		12,177,990		18,710,658		10,000,383
Diluted		21,503,340		12,177,990		18,710,658		10,000,383

The accompanying notes are an integral part of these condensed consolidated financial statements.

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iMEDIA BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)


	Common Stock
				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	13,019,061	$	130	$	474,375	$	(447,455)	$	—	$	—	$	27,050
Net loss	—		—		—		(3,228)		—		(150)		(3,378)
Common stock issuances pursuant to equity compensation awards	76,341		1		(262)		—		—		—		(261)
Share-based payment compensation	—		—		668		—		—		—		668
Common stock and warrant issuance	3,289,000		33		21,191		—		—		—		21,224
Investment of non-controlling interest	—		—		—		—		—		3,430		3,430
BALANCE, May 1, 2021	16,384,402		164		495,972		(450,683)		—		3,280		48,733
Net loss	—		—		—		(4,249)		—		(132)		(4,381)
Common stock issuances pursuant to equity compensation awards	39,094		—		—		—		—		—		—
Share-based payment compensation	—		—		768		—		—		—		768
Common stock and warrant issuance	4,830,918		48		40,095		—		—		—		40,143
BALANCE, July 31, 2021	21,254,414	$	212	$	536,835	$	(454,932)	$	—	$	3,148	$	85,263
Net loss	—		—		—		(9,492)		—		—		(9,492)
Common stock issuances pursuant to equity compensation awards	306,100		1		67		—		—		—		68
Share-based payment compensation	—		—		949		—		—		—		949
Common stock issuance	—		—		136		—		—		—		136
Other Comprehensive Income (loss)	—		—		—		—		(371)		—		(371)
BALANCE, October 30, 2021	21,560,514	$	213	$	537,987	$	(464,424)	$	(371)	$	3,148	$	76,553


	Common Stock
				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	8,208,227	$	82	$	452,833	$	(434,221)	$	—	$	—	$	18,694
Net loss	—		—		—		(6,828)		—		—		(6,828)
Common stock issuances pursuant to equity compensation awards	32,652		1		(3)		—		—		—		(2)
Share-based payment compensation	—		—		615		—		—		—		615
Common stock and warrant issuance	731,937		7		1,418		—		—		—		1,425
BALANCE, May 2, 2020	8,972,816		90		454,863		(441,049)		—		—		13,904
Net loss	—		—		—		1,054		—		—		1,054
Common stock issuances pursuant to equity compensation awards	64,456		1		(6)		—		—		—		(5)
Share-based payment compensation	—		—		108		—		—		—		108
Common stock and warrant issuance	1,104,377		10		2,375				—		—		2,385
BALANCE, August 1, 2020	10,141,649	$	101	$	457,340	$	(439,995)	$	—	$	—	$	17,446
Net loss	—		—		—		(4,748)		—		—		(4,748)
Common stock issuances pursuant to equity compensation awards	313		—		(1)		—		—		—		(1)
Exercise of warrants	114,698		1		(1)		—		—		—		—
Share-based payment compensation	—		—		504		—		—		—		504
Common stock and warrant issuance	2,760,000		28		15,805		—		—		—		15,833
BALANCE, October 31, 2020	13,016,660	$	130	$	473,647	$	(444,743)	$	—	$	—	$	29,034

The accompanying notes are an integral part of these condensed consolidated financial statements.

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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:
Net loss	$	(17,252)	$	(10,522)
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
Depreciation and amortization		27,565		19,697
Share-based payment compensation		2,385		1,227
Payments for television broadcast rights		(21,926)		(5,292)
Amortization of deferred financing costs		556		148
Loss on debt extinguishment		663		—
Changes in operating assets and liabilities:
Accounts receivable, net		3,453		10,055
Inventories		(17,996)		7,197
Deferred revenue		10		90
Prepaid expenses and other		(8,269)		1,472
Accounts payable and accrued liabilities		(18,046)		(14,964)
Net cash (used for) provided by operating activities		(48,857)		9,108
INVESTING ACTIVITIES:
Property and equipment additions		(7,247)		(3,680)
Acquisitions		(23,500)		—
Vendor exclusivity deposit		(6,000)		—
Net cash used for investing activities		(36,747)		(3,680)
FINANCING ACTIVITIES:
Proceeds from issuance of revolving loan		56,736		14,400
Proceeds from issuance of common stock and warrants		61,368		20,043
Proceeds from issuance of term loan		28,500		—
Proceeds from issuance of long term bonds		80,000		—
Payments on revolving loan		(77,736)		(28,800)
Payments on term loan		(12,440)		(2,036)
Payments for business acquisition		—		(238)
Payments for common stock issuance costs		—		(39)
Payments on finance leases		(70)		(75)
Payments for restricted stock issuance		(134)		(8)
Payments for deferred financing costs		(11,180)		—
Payments on sellers note		(1,000)		—
Payments for debt extinguishment costs		(405)		—
Net cash provided by financing activities		123,639		3,247
Net increase in cash and restricted cash		38,035		8,675
BEGINNING CASH AND RESTRICTED CASH		15,485		10,287
ENDING CASH AND RESTRICTED CASH	$	53,520	$	18,962
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid	$	3,612	$	3,307
Income taxes paid	$	62	$	80
Television broadcast rights obtained in exchange for liabilities	$	55,647	$	30,633
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment purchases included in accounts payable	$	915	$	459
Other long term liability issued in exchange for acquired assets	$	10,000	$	-
Common stock issuance costs included in accrued liabilities	$	122	$	361
Equipment acquired through finance lease obligations	$	-	$	62

The accompanying notes are an integral part of these condensed consolidated financial statements.

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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 15,000,000 shares. The Articles of Incorporation, as amended, now provide that the Company is authorized to issue 10,000,000 shares of capital stock and 20,000,000 shares of common stock.

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(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 52 weeks. Fiscal 2021 will end January 29, 2022 and will contain 52 weeks. The three and nine-month periods ended October 30, 2021 and October 31, 2020 each consisted of 13 and 39 weeks.

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 $6,223,000 and $5,271,000, included in accrued liabilities, and a right of return asset of $3,139,000 and $2,749,000, included in Prepaid Expenses and Other.

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 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.

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 $43,117,000 and $49,736,000 of net receivables due from customers under the ValuePay installment program and total reserves for estimated uncollectible amounts of $2,629,000 and $3,132,000. The decrease in the total reserve as a percentage of receivables is primarily due to the Company’s recently shortened active collections cycle, whereby the Company is pursuing collection for a shorter period prior to selling and writing off its receivables while yielding a comparable recovery rate.

(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:



		October 30,		January 30,
	Balance Sheet Line Item	2021		2021
Derivatives designated as hedging instruments:
Foreign currency derivatives	Accrued liabilities	$	371,000	$	—
Total			371,000		—

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:

Foreign currency derivatives

Other income (expense)

—

Total

—

On September 28, 2021, the Company completed the transaction relating to the public offering, issuance and sale of $80.0 million aggregate principal amount of 8.50% Senior Unsecured Notes due 2026 (the “Notes”) at a public offering price equal to $25.00 per Note (the “Offering”). The Notes are classified as Level 2, will pay interest quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on December 31, 2021, at a rate of 8.50% per year and will mature on September 30, 2026.

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 $46,650,000 as of October 30, 2021. The fair value of the Siena Lending Group and Green Lake Real Estate Finance LLC credit facilities approximated, and were based on, their carrying value due to the variable rate nature of the financial instrument.

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 $0 and $53,380,000. As of October 30, 2021 and January 30, 2021, $0 and $2,714,000 of the long-term variable rate PNC Credit Facility was classified as current. The fair value of the PNC Credit Facility approximated, and was based on, its carrying value due to the variable rate nature of the financial instrument.

(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	$	99,301,000	$	43,655,000
Less accumulated amortization		(36,087,000)		(16,902,000)
Television broadcast rights, net	$	63,214,000	$	26,753,000

Table of Contents

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 $55.7 million and $30.6 million during the first nine months of fiscal year 2021 and 2020, which represent the present value of payments for the television broadcast rights associated with the channel position placement. Television broadcast rights are amortized on a straight-line basis over the lives of the individual agreements. The remaining weighted average lives of the television broadcast rights was 4.0 years as of October 30, 2021. Amortization expense related to the television broadcast rights was $8.0 million and $19.2 million for the three and nine-month periods ended October 30, 2021 and $6.2 million and $11.3 million for the three and nine-month periods ended October 31, 2020 and is included in depreciation and amortization within the condensed consolidated statements of operations. Estimated broadcast rights amortization expense is $26.2 million for fiscal 2021, $18.2 million for fiscal 2022, $11.1 million for fiscal 2023, $11.1 million for fiscal 2024, $11.1 million for fiscal 2025 and $4.6 million thereafter. The liability relating to the television broadcast rights was $71.7 million as of October 30, 2021, of which $25.9 million was classified as current in the accompanying condensed consolidated balance sheets. Interest expense related to the television broadcast rights obligation was $952,000 and $2,049,000 during the three and nine-month periods ended October 30, 2021 and $488,000 and $891,000 during the three and nine-month periods ended October 31, 2020.

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:


		October 30, 2021				January 30, 2021
	Estimated	Gross				Gross
	Useful Life	Carrying			Accumulated	Carrying		Accumulated
	(In Years)	Amount		Amortization		Amount		Amortization
Trade Names	3-15	$	3,957,000	$	(225,000)	$	1,568,000	$	(124,000)
Technology	4		11,133,000		(396,000)		772,000		(228,000)
Customer Lists	3-5		13,225,000		(339,000)		339,000		(93,000)
Vendor Exclusivity	5		192,000