Related-Party Transactions

9 Months Ended

Oct. 30, 2021

Related Party Transactions [Abstract]

Related-Party Transactions

Related-Party Transactions

The Company leases one store under a lease arrangement with Preferred Growth Properties, LLC (formerly AL Florence Realty Holdings 2010, LLC), a wholly owned subsidiary of Books-A-Million, Inc. ("BAMM"). One of our Directors, Terrance G. Finley is an executive officer of BAMM. Minimum annual lease payments are $0.1 million, if not in co-tenancy, and the lease termination date is February 28, 2022. In August 2021, the Company exercised an option to extend the term of the lease by five years, which new term commences on March 1, 2022 and terminates on February 28, 2027. The minimum annual lease payment of $0.1 million did not change. The minimum annual lease payment of $0.1 million did not change. Minimum lease payments remaining under the lease at October 30, 2021 and October 31, 2020 were $0.6 million and $0.1 million, respectively.

The Company honored certain contracts in place for its wholly owned subsidiary, City Gear, LLC, upon acquisition, which included agreements with Memphis Logistics Group, T.I.G. Construction and Merchant's Capital of which Michael E. Longo, the Company's President and CEO, had an interest in, either directly or indirectly, at acquisition.

Memphis Logistics Group ("MLG")

MLG provided logistics and warehousing services to the Company's wholly-owned subsidiary, City Gear. Mr. Longo owned a majority interest in MLG and the initial contract term was effective through June 2020 but was extended to June 2021. Effective January 29, 2021, Mr. Longo fully divested his ownership interest in MLG and he no longer has any involvement with its management. MLG subsequently reorganized as Riverhorse Logistics, LLC.

In the 13-weeks and 39-weeks ended October 31, 2020, payments to MLG under the contract were $2.2 million and $5.6 million, respectively. The amount outstanding to MLG at January 30, 2021 and October 31, 2020 was $0.3 million and $0.2 million, respectively, and is included in accounts payable on our unaudited condensed consolidated balance sheets.

T.I.G. Construction ("TIG")

TIG historically performed the majority of new store and store remodel construction for City Gear and is owned by a close relative of Mr. Longo. For the 13-weeks ended October 30, 2021 and October 31, 2020, payments to TIG for its services were $1.8 million and $1.4 million, respectively. For the 39-weeks ended October 30, 2021 and October 31, 2020, payments to TIG for its services were $4.4 million and $3.7 million, respectively. The amount outstanding to TIG at October 30, 2021, January 30, 2021, and October 31, 2020 was approximately $0.3 million, $26,000, and $0.1 million, respectively, and is included in accounts payable on our unaudited condensed consolidated balance sheets.

Merchant's Capital ("MC")

Merchant's Capital owned the office building where City Gear had its corporate offices in Memphis, Tennessee. Mr. Longo is a 33.3% partner in MC. The initial lease term ended on December 31, 2019 but was extended to April 30, 2020 to allow for the transition of City Gear's corporate office to the Company's Birmingham, Alabama headquarters. In the 13-weeks ended October 30, 2021 and October 31, 2020, there were no lease payments to MC. In the 39-weeks ended October 31, 2020, lease payments to MC were $51,200. There were no amounts outstanding to MC at October 30, 2021, January 30, 2021, or October 31, 2020.

Retail Security Gates, LLC ("RSG")

During the second quarter of Fiscal 2022, a close relative of Mr. Longo purchased a 50% interest in an existing Company vendor, which was reorganized as RSG. We utilize RSG for specially manufactured store front security gates. For the 13-weeks and 39-weeks ended October 30, 2021, payments to RSG were $0.1 million and $0.2 million, respectively. The amount

outstanding to RSG at October 30, 2021 was $36,000, and is included in accounts payable on our unaudited condensed consolidated balance sheets.

In addition to the related party interests listed above, Mr. Longo also has a membership interest in the earnout discussed in Note 4 - Fair Value of Financial Instruments. Pursuant to the Membership Interest and Warrant Purchase Agreement dated October 29, 2018, and based on Fiscal 2020 financial results, the former members and warrant holders of City Gear were entitled to and were paid the first earnout payment of $10.0 million in June 2020. Based on Fiscal 2021 financial results, the remaining earnout payment of $15.0 million was achieved and paid to the former members and warrant holders of City Gear in April 2021. Mr. Longo's share of the earnout payments was approximately 22.8% or approximately $2.3 million of the initial earnout payment and approximately 22.8% or approximately $3.4 million of the second earnout payment.