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RTW Retailwinds, Inc. and Subsidiaries Consolidated Financial Statements Index to Financial Statements

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission File Number 1-32315

RTW RETAILWINDS, INC.
(Exact name of registrant as specified in its charter)

(212) 884-2000
(Registrant's telephone number, including area code)

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

         Securities registered pursuant to Section 12(g) of the Act: None.

(Title of Class)

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o     No ý

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o    No ý

         Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 ý     No o

         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 ý     No o

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

         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. (Check one):

         Indicate by check mark whether the registrant has filed a report on and attestation to it's management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered accounting public firm that prepared or issued its audit report. o

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

         The aggregate market value of common stock held by non-affiliates as of August 2, 2019 was approximately $63.3 million, using the closing price per share of $1.99, as reported on the New York Stock Exchange as of such date.

         The number of shares of registrant's common stock outstanding as of April 1, 2020 was 65,300,484.

DOCUMENTS INCORPORATED BY REFERENCE:

         Part III incorporates certain information by reference to the Proxy Statement for the 2020 Annual Meeting of Stockholders, which is to be filed within 165 days of the end of the fiscal year ended February 1, 2020 (as permitted by recent Securities and Exchange Commission guidance, including Release No. 34-88465).

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EXPLANATORY NOTE

        This Annual Report on Form 10-K for the fiscal year ended February 1, 2020 ("fiscal year 2019") is being filed pursuant to the order of the Securities and Exchange Commission contained in SEC Release No. 34-88465, dated March 25, 2020 (the "Order"). RTW Retailwinds, Inc. filed a Form 8-K ("the Form 8-K") on April 16, 2020, the original due date of the Form 10-K, indicating its reliance on the relief granted by the Order.

        Consistent with the Company's statements made in the Form 8-K, the Company was unable to file its fiscal year 2019 Form 10-K until June 9, 2020, and therefore relied on the Order due to circumstances related to the coronavirus pandemic ("COVID-19"). COVID-19 has caused disruptions to the Company's suppliers overseas and to its supply chain, has resulted in continued store closures, and led to furloughs for all store associates as well as terminating certain corporate personnel. As a result, COVID-19 and related events resulted in the Company's management devoting significant time and attention to assessing the existing and future impact of COVID-19 and those events on the Company's operations, financial position, and cash flows, and developing operational and financial plans to address those matters. This diverted management resources from completing all of the tasks necessary to file the Company's Annual Report by its original due date of April 16, 2020.

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ANNUAL REPORT ON FORM 10-K INDEX

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Special Note Regarding Forward-Looking Statements

        This Annual Report on Form 10-K includes forward-looking statements intended to qualify for safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. Some of these statements can be identified by terms and phrases such as "anticipate," "believe," "intend," "estimate," "expect," "continue," "could," "may," "plan," "project," "predict" and similar expressions and include references to assumptions that the Company believes are reasonable and relate to its future prospects, developments and business strategies. Factors that could cause the Company's actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to, (i) the risks associated with the spread of COVID-19 and its impact on the Company's sales and supply chain including the Company's store closures as a result therefrom and significant declines in revenues caused thereby, and that the Company has been considering available options including restructuring its obligations or seeking protection under the bankruptcy laws in which case there will likely not be any value distributed to its shareholders and its shares could be cancelled for no consideration; (ii) the Company's dependence on mall traffic for its sales and the continued reduction in the volume of mall traffic; (iii) the Company's ability to anticipate and respond to fashion trends; (iv) the impact of general economic conditions and their effect on consumer confidence and spending patterns; (v) changes in the cost of raw materials, distribution services or labor; (vi) the potential for economic conditions to negatively impact the Company's merchandise vendors and their ability to deliver products; (vii) the Company's ability to open and operate stores successfully; (viii) seasonal fluctuations in the Company's business; (ix) competition in the Company's market, including promotional and pricing competition; (x) the Company's ability to retain, recruit and train key personnel; (xi) the Company's reliance on third parties to manage some aspects of its business; (xii) the Company's reliance on foreign sources of production; (xiii) the Company's ability to protect its trademarks and other intellectual property rights; (xiv) the Company's ability to maintain, and its reliance on, its information technology infrastructure; (xv) the effects of government regulation; (xvi) the control of the Company by its largest shareholder and any potential change of ownership of the Company including the shares held by its largest shareholder; (xvii) the impact of tariff increases or new tariffs; and (xviii) those discussed under the heading "Item 1A. Risk Factors" in this Annual Report on Form 10-K. The Company undertakes no obligation to revise the forward-looking statements included in this Annual Report on Form 10-K to reflect any future events or circumstances. The Company's actual results, performance or achievements could differ materially from the results expressed or implied by these forward-looking statements.

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PART I

Item 1.    Business

Overview

        RTW Retailwinds, Inc., formerly known as New York & Company, Inc., (together with its subsidiaries, the "Company") is a specialty women's omni-channel retailer with a powerful multi-brand lifestyle platform providing curated fashion solutions that are versatile, on-trend, and stylish at a great value. The specialty retailer, first incorporated in 1918, has grown to now operate 387 retail and outlet locations in 33 states while also growing a substantial eCommerce business. The Company's portfolio includes branded merchandise from New York & Company, Fashion to Figure, and collaborations with Eva Mendes, Gabrielle Union and Kate Hudson. The Company's branded merchandise is sold exclusively at its retail locations and online at www.nyandcompany.com, www.nyandcompanycloset.com, www.fashiontofigure.com, and www.happyxnature.com.The target customers for the Company's merchandise are women between the ages of 25 and 49.

        The Company offers exclusive merchandise with assortments across categories consisting of wear-to-work, casual apparel and accessories, including pants, dresses, jackets, knit tops, blouses, sweaters, denim, t-shirts, activewear, handbags, jewelry and shoes. The Company's merchandise reflects current fashions and fulfills a broad spectrum of its customers' lifestyle and wardrobe requirements, providing every woman with a fashion strategy from work to weekend. The Company offers an inclusive range of merchandise sizes: 00 to 20, XXS to XXL, petite, tall, and plus.

        The Company positions itself as a source of fashion, quality and value by providing its customers with an appealing merchandise assortment at attractive price points, generally below those of department stores and other specialty retailers. In fiscal year 2019, the Company continued to invest in its omni-channel infrastructure to provide its customers with the ability to shop where, when and how they would like. In March 2020, the Company discontinued its omni-channel infrastructure investment. The Company's eCommerce channel currently represents approximately 34% of its business. The Company's stores are typically concentrated in medium to large population centers of the United States and are located in shopping malls, lifestyle centers, outlet centers, and off-mall locations, including urban street locations.

        The Company is facing a period of uncertainty because of the existing and future impact of the coronavirus ("COVID-19"). In March 2020, the COVID-19 outbreak in the United States initially led to reduced store traffic and the temporary reduction of operating hours for the Company's brick-and-mortar stores. As the impact of COVID-19 evolved, the Company took decisive action to temporarily close all of the Company's brick-and-mortar stores to ensure the health and safety of its employees, customers, and communities. As of the date of this filing, in accordance with the federal and state guidelines and the adoption of new health and safety recommendations resulting from the COVID-19 pandemic, the Company began re-opening its brick-and-mortar stores during the first week of June 2020. The Company will re-open stores utilizing a staggered approach, with the goal of all of its brick-and-mortar stores re-opened by the last week of June 2020. The Company cannot reasonably estimate the length or severity of COVID-19. The Company's revenues, results of operations, and cash flows have been materially adversely impacted, and are expected to be further materially adversely impacted, which raises substantial doubt about the Company's ability to continue as a going concern. Please see the "Risk factors" section of this Annual Report on Form 10-K including "Risk-Factors—The recent coronavirus outbreak has been declared a pandemic by the World Health Organization and has spread to the United States and many other parts of the world and has adversely affected the Company's business operations, store traffic, employee availability, financial condition, liquidity and cash flow and is expected to continue to negatively impact the business which could require the Company to restructure its obligations in a manner that would significantly impact its shareholders..." The Company has already experienced substantial and recurring losses from operations, and such losses

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have caused a retained deficit of $164.6 million as of February 1, 2020. As such, the Company has been considering available options including restructuring its obligations or seek protection under the bankruptcy laws in which case there will likely not be any value distributed to its shareholders and its shares could be cancelled for no consideration. The Company believes that seeking protection under the bankruptcy laws is probable.

        The Company's fiscal year is a 52- or 53-week year that ends on the Saturday closest to January 31. The 52-week year ended February 1, 2020 and the 52-week year ended February 2, 2019 are referred to herein as "fiscal year 2019" and "fiscal year 2018," respectively. The 52-week year ending January 30, 2021 is referred to herein as "fiscal year 2020."

The Company's Strategies

Transformation into a Digitally Dominant Retailer

        Prior to the impact of COVID-19, the Company planned to accelerate its strategy to reposition itself as a digitally dominant retailer. With that, it anticipated the closure of 150 stores over the next 18 months as a component of the Company's transformation to a digitally dominant portfolio of brands. If the Company seeks protection under the bankruptcy laws as discussed above, it could close more than 150 stores, or it may close all of its stores. The reduction of non-productive selling square feet is an integral component of the Company's goal to improve productivity and profitability across its chain of stores and online. Since the beginning of fiscal year 2014, the Company has closed 179 stores.

Evolve as a Broader Lifestyle Brand

        In November 2018, the Company changed its name to RTW Retailwinds, Inc. to establish a strong and distinct corporate identity reflecting the Company's multi-brand portfolio strategy. Prior to the impact of COVID-19, the Company had plans to maximize the power of its omni-channel retail platform and leverage its core operating strengths to become the premier incubator of celebrity and lifestyle brands, offering assortments across categories and channels.

        The Company's celebrity collaborations and sub-brand strategy deliver a differentiated experience for its customers, provide trending fashion and a versatile assortment that the Company believes will continue to broaden its reach as a lifestyle brand. The Company believes that its successful celebrity collaborations have also elevated the performance of the Company's other sub-brands and will continue to do so in the future. The Company currently has the following sub-brands: 7th Avenue Design Studio, Soho Jeans, Soho Street, the Eva Mendes Collection, and the Gabrielle Union Collection.

Enhance Brand Awareness, Increase Customer Engagement, and Drive Traffic

        The Company seeks to build and enhance the recognition, appeal and reach of its New York & Company® brand through its merchandise assortment, celebrity collaborations, expansion of its private label credit card and loyalty program ("Runway Rewards"), best-in-class customer service, and consistent marketing in-store, on its website and through mobile devices, including tablets. The Company plans to focus on new customer acquisition and retention of existing customers, and rebalance its marketing media mix and leverage its celebrity collaborations and sub-brands to amplify the New York & Company brand.

        The Company believes that its celebrity collaborations with Eva Mendes, Gabrielle Union, and Kate Hudson elevate and differentiate the New York & Company brand. The Company leverages its celebrity collaborations to create an emotional connection with its customers and increase overall brand awareness. The Company continually explores the addition of new celebrity collaborations.

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Drive eCommerce Growth and Expand Omni-Channel Capabilities

        The Company operates an omni-channel retail platform with the purpose of providing a seamless and consistent shopping experience across all channels of its business, allowing its customers to shop in stores, on mobile or desktop. In fiscal year 2019, net sales from eCommerce represented approximately 34% of the Company's business. The Company views the eCommerce channel (www.nyandcompany.com) as its largest store providing the broadest selection of merchandise, including exclusive styles and extended sizes. The Company's eCommerce store and mobile app are integral to the success of its omni-channel retail strategy, driving increased sales and traffic across all channels.

Design and Merchandising

        The Company's product development group, led by its merchant and design teams in collaboration with celebrity collaborators, is dedicated to consistently delivering high-quality and on trend fashion apparel and accessories at competitive prices to its customers. The Company seeks to provide its customers with key fashion items of the season and encourages through its store and digital footprint a versatile wardrobe that addresses customers' specific lifestyle needs. The Company offers a broad assortment of product inclusive of its successful celebrity collaborations, and lifestyle based sub-brands, along with a broad assortment of coordinating apparel items and accessories. The Company's merchandising, marketing and promotional efforts encourage multiple-unit and outfit purchases and focuses on customer loyalty.

        While the Company delivers select new items every two to four weeks to its stores in order to keep the merchandise current and to keep customers engaged, new product lines are introduced into the Company's stores in five major deliveries each year (spring, summer, fall, holiday and pre-spring). Product line development begins with the introduction of design concepts, key franchise styles and trend stories particular to each sub-brand in the selection for the product line. From a speed to market perspective, the Company has made several improvements to its product development calendar, which have shortened the total supply chain timeline. These changes, along with the implementation of a formalized "Fast Track" product development process, enables the Company to more effectively leverage runway and trend intelligence; and combined with improvements to the Company's logistics network provides more rapid delivery of product from concept to in-store. The Company's designers focus on overall concepts and identify and interpret the fashion trends for the season, identifying those particular apparel items and accessories that will appeal to its target customer, designing the product line and presenting it to the Company's merchants for review. The Company's merchants are responsible for developing seasonal strategies in partnership with their planning and allocation partners to maximize performance. Merchandising also develops a detailed list of desired apparel pieces and accessories to guide the designers. Merchandising is buying, testing, editing, placing product and pricing the line during the season on an ongoing basis. This integrated and internal development and tested approach to design, merchandising and sourcing, enables the Company to carry a versatile merchandise assortment that addresses customer demand while attempting to minimize inventory risk and maximize sales and profitability.

Sourcing

        The Company's sourcing approach focuses on quality, speed and cost in order to provide timely delivery of quality goods. This is accomplished by closely managing the product development cycle, from raw materials and garment production to store-ready packaging, logistics and customs clearance.

        Sourcing Relationships.    The Company purchases apparel and accessories products directly from manufacturers and in some instances from importers. The Company's relationships with its direct manufacturers are supported by independent buying agents, who help coordinate the Company's purchasing requirements with the factories. The Company's unit volumes, long-established vendor

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relationships and knowledge of fabric and production costs, combined with a flexible, diversified sourcing base, enable it to buy high-quality, low-cost goods. The Company is not subject to long-term production contracts with any of its vendors, manufacturers or buying agents. The Company's broad sourcing network allows it to meet its factory workplace standards; objectives of quality, cost, speed to market; and inventory efficiency by shifting merchandise purchases as required, and allows it to react quickly to changing market or regulatory conditions. The Company sources nearly all of its merchandise from three countries, with China, Vietnam and Indonesia representing approximately 95% of all merchandise purchases made during fiscal year 2019. The Company utilized two major apparel agents, which together represented approximately 63% of the Company's merchandise purchases during fiscal year 2019; however, no individual factory represented more than 8% of the Company's merchandise purchases.

        Quality Assurance and Compliance Monitoring.    The RTW Retailwinds, Inc. Global Compliance Program (the "Compliance Program") is administered by the Company's in-house compliance team, in partnership with third-party providers, and provides monitoring of country of origin, point of fabrication compliance, compliance with the Company's Code of Business Conduct for Suppliers, labor standards, and supply chain security. The Compliance Program includes supply chain labor standards and Customs-Trade Partnership Against Terrorism (C-TPAT) security audits, announced or unannounced, conducted by the Company's in-house compliance team, as well as the Company's primary third party audit firm and two additional third party audit firms. Subject to health and safety considerations, annual international and domestic visits are conducted by the Company's in-house compliance team for select vendors and their respective factories. The Company's in-house compliance team visits factories to ensure that factory management and associates understand and comply with the Company's Code of Business Conduct for Suppliers, labor standards and supply chain security standards. The Company's independent buying agents and importers also conduct in-line factory and final quality audits. In addition, all of the vendors that manufacture merchandise for the Company enter into a master sourcing agreement with the Company that specifies their obligations with respect to quality, safety and ethical business practices.

Distribution and Logistics

        The Company entered into a transition services agreement with L Brands in 2002 in connection with the acquisition of Lerner Holding (as amended, the "transition services agreement"). L Brands provides the Company with certain warehousing and distribution services under the transition services agreement. All of the Company's merchandise is received, processed, warehoused and distributed through L Brands' distribution center in Columbus, Ohio. Details about each receipt are supplied to the Company's store inventory planners, who determine how the product should be distributed among the Company's stores based on current inventory levels, sales trends and specific product characteristics. Advance shipping notices are electronically communicated to the stores.

        Under the transition services agreement, as amended, these services will terminate upon the earliest of the following: (i) 24 months from the date that L Brands notifies the Company that L Brands wishes to terminate the services; (ii) 24 months from the date that the Company notifies L Brands that the Company wishes to terminate the services; (iii) 60 days after the Company has given notice to L Brands that L Brands has failed to perform any material obligations under the agreement and such failure shall be continuing; (iv) 30 days after L Brands has given notice to the Company that the Company has failed to perform any material obligations under the agreement and such failure shall be continuing; (v) within 75 days of receipt of the annual proposed changes to the agreement schedules which outline the cost methodologies and estimated costs of the services for the coming year, if such proposed changes would result in a significant increase in the amount of service costs that the Company would be obligated to pay; (vi) 15 months after a change of control of the Company, at the option of L Brands; or (vii) upon reasonable notice under the prevailing circumstances by the Company

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to L Brands after a disruption of services due to force majeure that cannot be remedied or restored within a reasonable period of time. The Company believes that these services are provided at a competitive price and the Company anticipates continuing to use L Brands for these services.

        The Company relies on a third-party to operate its eCommerce stores, including fulfillment services. The third-party warehouse facility is located in Martinsville, Virginia. Merchandise is received in this location from L Brands' distribution center. The operation of the Company's eCommerce stores is covered by a master services agreement that is in effect through April 30, 2021.

Real Estate

        As of February 1, 2020, the Company operated 387 stores in 33 states, with an average of 5,004 selling square feet per store. The Company's growth and productivity statistics are reported based on selling square footage because management believes the use of selling square footage yields a more accurate measure of store productivity than gross square footage. All of the Company's stores are leased and are primarily located in medium to large population centers of the United States in shopping malls, lifestyle centers, outlet centers, and off-mall locations, including urban street locations. As of February 1, 2020, approximately 70% of the Company's store leases could be terminated by the Company within two years.

Historical Store Count

Historical Selling Square Footage

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Store Count by State as of February 1, 2020

        Site Selection.    The Company's real estate department is responsible for new store site selection. While selecting a specific location for a new store, the Company targets high-traffic real estate in locations with demographics reflecting concentrations of the Company's target customers and a complementary tenant mix.

        Each New York & Company store is typically 4,000 to 6,000 selling square feet. Each Outlet store is typically 3,000 to 5,000 selling square feet. Each Fashion to Figure store is typically 2,000 to 3,000 selling square feet.

        Store Display and Merchandising.    The Company's stores are designed to effectively display its merchandise and create an upbeat atmosphere. Expansive front windows allow potential customers to see easily into the store and are used as a vehicle to highlight major merchandising and promotional events. The open floor design allows customers to readily view the majority of the merchandise on display, while store fixtures allow for the efficient display of garments and accessories. Merchandise displays are modified on a weekly basis based on sales trends and inventory receipts. The Company's in-store product presentation utilizes a variety of different fixtures to highlight the product line's breadth and versatility. Complete outfits are displayed throughout the store using garments from a variety of product categories. The Company displays complete outfits to demonstrate how its customers can combine different pieces in order to increase unit sales.

        Pricing and Promotional Strategy.    The Company's pricing and promotional strategy is designed to drive customer traffic, maximize conversion and promote brand loyalty. The Company evaluates the efficacy of its promotional strategy on an ongoing basis to eliminate underproductive and inefficient promotional tactics, introduce new promotional logic, and identify category elasticities to align pricing and promotions with customer demand. The promotional pricing strategy is designed to encourage multiple-unit sales. Select key items are also prominently displayed in store windows at competitive prices to drive traffic into the stores.

        Inventory Management.    The Company's inventory management systems, which support the Company's omni-channel retail strategy, are designed to maximize merchandise profitability and increase inventory turns. The Company constantly monitors inventory turns on the selling floor and uses pricing and promotions to maximize sales and profitability and to achieve inventory turn goals. The Company is able to quickly distribute merchandise from its traditional retail stores to its Outlet stores to maximize sell-through and optimize its in-store merchandise assortment. The Company's inventory loss prevention program is integrated with the store operations and finance departments of its

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business. This program includes electronic article surveillance systems in a majority of stores, including sensor and ink tagging, as well as the use of data analytics, fraud prevention technology, the monitoring of merchandise returns, merchandise voids, employee sales and deposits, and educating store personnel on loss prevention.

        Field Sales Organization.    The Company's New York & Company and Outlet store teams are integrated as one organization, streamlining business processes to increase efficiency and reduce costs. Currently, the Company's field sales organization is organized into 4 regions. The 4 regions are organized into 16 districts. Each region is managed by a regional manager. The Company staffs approximately 16 district managers, with each typically responsible for the sales and operations of 24 stores on average. Each store is usually staffed with a store manager and 2 additional support staff. Higher volume stores may have additional positions as required. All stores are staffed with hourly sales associates. The Company has approximately 1,000 full-time in-store managers. The goal of the Company's field sales organization is to provide a memorable customer experience by creating an environment that is inspirational, exciting and fun. To accomplish this goal, the field sales organization is continuously engaged in various initiatives to improve talent assessment and acquisition processes, enhance brand education and communication training and increase engagement with the customer in store to drive sales and profitability. The Company seeks to instill enthusiasm and dedication in its store management personnel by maintaining an incentive-based bonus plan for its field managers. The program is currently based on monthly sales performance and seasonal inventory loss targets. The Company believes that this program effectively creates incentives for its senior field leaders and aligns their interests with the financial goals of the Company. The Company evaluates the selling and fitting room experience, visual merchandising standards, and the operational execution of running a productive store. Stores are required to meet or exceed established store standards to ensure the quality of the customers' overall in-store experience.

        The Company typically employs between 3,000 and 4,000 full- and part-time store sales associates, depending on the Company's seasonal needs. The Company has store operating policies and procedures and efficient point-of-sale ("POS") terminals and an in-store training program for new store employees. Detailed product descriptions are also provided to sales associates to enable them to gain familiarity with product offerings. The Company offers its sales associates a discount on the Company's apparel and accessories.

Brand Building and Marketing

        In November 2018, the Company changed its name to RTW Retailwinds, Inc. to establish a strong and distinct corporate identity reflecting the Company's multi-brand portfolio strategy. The Company's brands include New York & Company, Fashion to Figure, and Happy x Nature. While the Company has invested in the growth of its new brands, the Company believes that its New York & Company brand is among its most important assets. The Company's ability to continuously evolve its brand to appeal to the changing needs and priorities of its target customer is a key source of its competitive advantage. The Company believes its exclusive merchandise and sub-brands, including 7th Avenue Design Studio, Soho Jeans, Soho Street, Eva Mendes Collection, and Gabrielle Union Collection, combined with accessories, proprietary merchandise designs, value pricing, merchandise quality, in-store merchandise display and store service differentiate its brand from its competitors and drives strong brand recognition and endorsement by its target customers. The Company is leveraging its existing collaborations with celebrities Eva Mendes, Gabrielle Union and Kate Hudson to amplify the New York & Company brand. The Company believes its celebrity collaborations create an emotional connection with its customers and increase overall brand awareness. The Company continually explores the addition of new celebrity collaborations.

        The Company has invested in the development of its brands through, among other things, direct mail, Fashion Books, in-store marketing, digital marketing, email and text messaging programs, social

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media—Facebook, Instagram, Twitter, and Pinterest, public relations programs and select advertising. The Company also makes investments to enhance the overall customer experience through remodeling/refreshing existing stores, broadening its assortment online and consistently upgrading the online experience, both in desktop and mobile applications, including tablets, and focusing on customer service. For each of its brands, the Company consistently communicates brand image across all aspects of its business, including product design, store merchandising and shopping environments, channels of distribution, and marketing and advertising.

        The Company believes that it is strategically important to acquire new customers and communicate directly with its current customer base on a regular basis. The Company uses its customer database, which includes approximately four million customers who have made purchases within the last twelve months, to design marketing programs to attract its core customers.

Customer Credit

        The Company has a credit card processing agreement with Comenity Bank, a bank subsidiary of Alliance Data Systems Corporation ("ADS"), which provides the services of the Company's proprietary credit card program ("NY&C PLCC"). The Company allows payments on this credit card to be made at its stores as a service to its customers. ADS owns the credit card accounts, with no recourse to the Company. All of the Company's proprietary credit cards carry the New York & Company brand. These cards provide purchasing power to customers and an additional channel for the Company to communicate product offerings.

        The Company has a strong strategic focus on its private label credit card and its Runway Rewards loyalty program to increase the number of credit card holders and sales to such customers. NY&C PLCC sales represented 45% of total Company sales in fiscal year 2019.

        On July 14, 2016, the Company entered into a Second Amended and Restated Private Label Credit Card Program Agreement, effectively dated May 1, 2016, with Comenity Bank, which replaced the existing agreement with ADS and has a term through April 30, 2026 (the "ADS Agreement"). Pursuant to the terms of the ADS Agreement, ADS has the exclusive right to provide private label credit cards to customers of the Company. In connection with the execution of the ADS Agreement, the Company received $40.0 million in signing bonuses. The signing bonuses were payable in two installments, of which $17.5 million was received on July 28, 2016, and $22.5 million was received on January 10, 2017. In addition, over the 10-year term of the ADS Agreement, the Company will receive an increased level of royalty payments based on a percentage of private label credit card sales. During fiscal year 2019 and fiscal year 2018, the Company recognized $22.1 million and $23.7 million of revenue from royalties and the amortization of signing bonuses in connection with the ADS Agreement, respectively. Deferred revenue related to the ADS Agreement was $25.0 million at February 1, 2020, which will be amortized through April 30, 2026.

Information Technology

        Information technology is a key component of the Company's business strategy and the Company is committed to utilizing technology to enhance its competitive position. The Company's information systems integrate data from field sales, eCommerce sales, design, merchandising, planning and distribution, and financial reporting functions. The Company's core business systems consist of both purchased and internally developed software, operating on Microsoft, Oracle, and IBM platforms. These systems are accessed over a company-wide network through which associates have access to many key business applications.

        Sales, cash deposit and related credit card information are electronically collected from the stores' POS terminals and eCommerce websites on a daily basis. During this process, the Company also obtains information concerning inventory receipts and transmits pricing, markdown and shipment notification data. In addition, where and as permitted by law, the Company collects customer

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transaction data to grow and update its customer database. The merchandising staff and merchandise planning staff evaluate the sales and inventory information collected from the stores to make key merchandise planning decisions, including orders and markdowns. These systems enhance the Company's ability to optimize sales while limiting markdowns, achieve planned inventory turns, reorder successful styles, and effectively distribute new inventory to the stores.

        One of the Company's top priorities in fiscal year 2019 was optimizing its omni-channel retail strategy to provide a seamless and consistent customer shopping experience across store and eCommerce channels. The Company believes that its omni-channel retail strategy has improved its customers' shopping experiences, which will continue to enhance brand image and increase customer loyalty. Through fiscal year 2019, the Company continued to invest resources into omni-channel retail initiatives, with a particular focus on mobile, and leveraged the enhanced customer shopping experience to drive additional traffic and increase sales across all channels. The Company also invested in additional technology and services to enhance the customer experience on its digital channels: desktop and tablet, mobile web and mobile applications.

        The Company has implemented measures to prevent and detect security breaches and cyber incidents, and continues to invest in the fortification of its information systems, networks and infrastructure. The Company is dedicated to safeguarding the storage and transmission of customers' personal information, shopping preferences and credit card information, in addition to employee information and the Company's financial and strategic data.

Competition

        The retail and apparel industries are highly competitive. The Company competes with traditional department stores, specialty store retailers, discount apparel stores, international retailers opening large numbers of stores in the United States, and direct marketers for, among other things, customers, raw materials, market share, retail space, finished goods, sourcing and personnel. The Company differentiates itself from its competitors on the basis of its exclusive merchandise and multi-brand portfolio, including its celebrity collaborations and sub-brands, combined with accessories, proprietary merchandise designs, value pricing, merchandise quality, in-store merchandise display and store service. The Company believes that its talented, in-house design, marketing, sourcing and production teams, in partnership with a global network of vendors and factories provide a competitive advantage.

Seasonality

        The Company views the retail apparel market as having two principal selling seasons: spring (first and second quarter) and fall (third and fourth quarter). New product lines are introduced into the Company's stores in five major deliveries each year (spring, summer, fall, holiday and pre-spring). The Company's business experiences seasonal fluctuations in net sales and operating income, with a larger portion of its sales typically realized during the fourth quarter. Seasonal fluctuations also affect inventory levels. The Company must carry a significant amount of inventory, especially before the holiday season selling period in the fourth quarter and prior to the Easter and Mother's Day holidays toward the latter part of the first quarter and beginning of the second quarter. Due to COVID-19 overlapping the important holiday season selling period of Easter and Mother's Day, the Company was left with significant unsold inventory during Spring 2020.

Intellectual Property

        The Company's trademarks, including New York & Company®, NY&C®, Soho New York & Company Jeans®, Lerner®, Fashion to Figure®, and FTF® brands, are registered with the United States Patent and Trademark Office and with registries of many foreign countries. The Company also has long-term license agreements with its celebrity collaborators to use their name, likeness and other related materials to market specified brands.

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Employees and Labor Relations

        As of February 1, 2020, the Company had a total of 4,971 employees of which 1,413 were full-time employees and 3,558 were part-time employees, who are primarily store associates. The number of part-time employees fluctuates depending on the Company's seasonal needs. The collective bargaining agreement with the Local 1102 unit of the Retail, Wholesale and Department Store Union (RWDSU) AFL-CIO is in effect through August 31, 2021. Approximately 7% of the Company's total employees are covered by collective bargaining agreements and are primarily non-management store associates. The Company believes its relationship with its employees is good. As of the date of this filing, in accordance with the federal and state guidelines and the adoption of new health and safety recommendations resulting from the COVID-19 pandemic, the Company began re-opening its brick-and-mortar stores during the first week of June 2020. The Company will re-open stores utilizing a staggered approach, with the goal of all of its brick-and-mortar stores re-opened by the last week of June 2020. As a result of the temporary store closures related to COVID-19, the Company's store associates have been temporarily furloughed. For further information, see Note 15, "Subsequent Events," to the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

        In order to remain competitive in the retail apparel industry, the Company must attract, develop, and retain skilled employees in design, merchandising, supply chain, marketing, and other functions, as well as in its stores and distribution centers. The Company's success is also dependent, to a significant degree, on the continued contributions of key employees. For further information, please refer to "Item 1A. Risk Factors," appearing elsewhere in this Annual Report on Form 10-K.

Government Regulation

        The Company is subject to employment laws and regulations, including minimum wage requirements, intellectual property laws, consumer protection laws and regulations (including those relating to advertising and promotions, privacy and product safety), truth-in-lending and other laws and regulations with respect to the operation of the Company's stores and business generally, such as zoning and occupancy ordinances governing the importation and exportation of merchandise and the use of the Company's proprietary credit cards. Certain jurisdictions are considering or have enacted privacy and/or cyber security laws and regulations that do or could impose additional obligations on the Company. In addition, the Company is subject to Securities and Exchange Commission rules and regulations, state laws, Sarbanes-Oxley requirements, rules and regulations issued pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, other U.S. public company regulations, and various other requirements mandated for the textiles and apparel industries such as the Consumer Product Safety Improvement Act of 2008, California's Proposition 65 and similar state laws. The Company monitors changes in these laws and believes that it is in material compliance with applicable laws with respect to these practices.

        The majority of the Company's merchandise is manufactured by factories located outside of the United States. These products are imported and are subject to U.S. customs laws, which impose tariffs for textiles and apparel. Any major changes in United States tax policy or trade relations, such as the disallowance of tax deductions for imported merchandise or the imposition of unilateral tariffs on imported goods, could have a material adverse effect on the Company's business, results of operations and liquidity. In addition, some of the Company's imported products are eligible for certain duty-advantaged programs, including but not limited to the North American Free Trade Agreement, the Andean Trade Preference Act, the U.S. Caribbean Basin Trade Partnership Act and the Caribbean Basin Initiative.

        During fiscal year 2018, the United States began to impose additional tariffs on certain Chinese-made imported products which had minor impact on the Company's products. On

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September 1, 2019, additional tariffs were imposed on the majority of products the Company imports from China, such as apparel, accessories, and footwear, with subsequent partial reductions on February 14, 2020. The Company has been able to minimize the negative impact of these tariffs and new and/or incremental tariffs thus far, as the Company has been actively reducing its penetration of Chinese-made imported products and has engaged vendor participation to negotiate cost-sharing agreements, and has managed and adjusted future buys and product pricing. The Company sourced approximately 65% of its goods from China in fiscal year 2019, so any tariffs or other trade restrictions impacting the import of apparel and accessories from China could have a material adverse impact on the Company. However, the Company has taken steps to attempt to mitigate the impacts of tariffs on imports from China, including renegotiation of product costs, shifting merchandise mix, and sourcing merchandise from factories outside of China. There can be no assurance that these actions will mitigate the impact of existing tariffs and new and/or incremental tariffs and consequentially, the Company may experience a material adverse impact from such tariffs to its results of operations, financial position and cash flows.

Smaller Reporting Company Status

        The Company qualifies as a "smaller reporting company" as defined under Rule 12b-2 of the Exchange Act ("Rule 12b-2"). The Company will continue to qualify as a smaller reporting company if: (i) its public float is less than $250 million; or (ii) its annual revenues are less than $100 million and its public float is less than $700 million. Pursuant to Rule 12b-2, the Company determined it qualified as a smaller reporting company as of the last business day of its second fiscal quarter. As a smaller reporting company, the Company may use the smaller reporting company scaled disclosure accommodations of Regulation S-K and S-X in its filings.

Available Information

        The Company makes available free of charge on its website, www.nyandcompany.com, copies of its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") as soon as reasonably practicable after filing or furnishing such material electronically with the United States Securities and Exchange Commission. Copies of the charters of each of the Company's Audit Committee, Compensation Committee, and Nomination & Governance Committee, as well as the Company's Corporate Governance Guidelines, Code of Business Conduct for Associates, Code of Conduct for Principal Executive Officers and Key Financial Associates, and Code of Business Conduct for Suppliers, are also available on the website.

Item 1A.    Risk Factors

The recent coronavirus outbreak has been declared a pandemic by the World Health Organization and has spread to the United States and many other parts of the world and has adversely affected the Company's business operations, store traffic, employee availability, financial condition, liquidity and cash flow and is expected to continue to negatively impact the business which could require the Company to restructure its obligations or seek protection under the bankruptcy laws in which case there will likely not be any value distributed to its shareholders and its shares could be cancelled for no consideration. The Company believes that seeking protection under the bankruptcy laws is probable.

        The outbreak of the COVID-19 continues to grow in the United States and globally, and related government and private sector responsive actions have adversely affected the Company's business operations. It is impossible to predict the effect and ultimate impact of the COVID-19 pandemic as the situation is rapidly evolving.

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        In March 2020, the COVID-19 outbreak in the United States initially led to reduced store traffic and the temporary reduction of operating hours for the Company's brick-and-mortar stores. As the impact of COVID-19 evolved, the Company took decisive action to temporarily close all of the Company's brick-and-mortar stores to ensure the health and safety of its employees, customers, and communities. As of the date of this filing, in accordance with the federal and state guidelines and the adoption of new health and safety recommendations resulting from the COVID-19 pandemic, the Company began re-opening its brick-and-mortar stores during the first week of June 2020. The Company will re-open stores utilizing a staggered approach, with the goal of all of its brick-and-mortar stores re-opened by the last week of June 2020. The Company cannot reasonably estimate the length or severity of COVID-19. The Company's revenues, results of operations, and cash flows have been materially adversely impacted, and are expected to be further materially adversely impacted, which raises substantial doubt about the Company's ability to continue as a going concern.

        The Company's response to COVID-19 may also impact its customer loyalty. If the Company's customer loyalty is negatively impacted or consumer discretionary spending habits change, including in connection with rising levels of unemployment, the Company's market share may suffer as a result.

        Because the Company has temporarily closed all of its stores, the Company has taken steps to reduce operating costs and improve efficiency, including furloughing a substantial number of the Company's personnel and terminating certain corporate personnel. These steps may have an impact on the Company's ability to attract and retain associates in the future. If the Company is unable to attract and retain associates in the future, such as those associates who find other employment during the furlough period, the Company may experience operational challenges when it re-opens its stores. These risks related to the Company's business, financial condition, and results of operations, are especially heightened given the uncertainty as to the extent and duration of COVID-19's existing and future impact. The Company may also face demands or requests from its associates for additional compensation, healthcare benefits or other terms as a result of COVID-19 that could increase costs, and the Company could experience labor disputes or disruptions as it continues to implement its COVID-19 mitigation plans.

        All of the Company's corporate office associates are working remotely. As a result, the Company faces certain operational risks, including heightened cybersecurity risks. In addition, the Company cannot predict the impact that COVID-19 will have on its suppliers, vendors, and other business partners, and each of their financial conditions; however, any material effect on these parties could adversely impact the Company. The Company may not be able to mitigate the impact COVID-19 has had and will have on its business and has been considering available options including restructuring its obligations or seeking protection under the bankruptcy laws in which case there will likely not be any value distributed to its shareholders and its shares could be cancelled for no consideration.

The Company's audited financial statements include a statement that there is a substantial doubt about the Company's ability to continue as a going concern and a continuation of negative financial trends could result in the Company's inability to continue as a going concern.

        The Company's audited financial statements as of and for the year ended February 1, 2020 were prepared on the assumption that the Company would continue as a going concern. The Company's audited financial statements as of and for the year ended February 1, 2020 did not include any adjustments that might result from the outcome of this uncertainty. As a result of the existing and future impact of COVID-19 on the Company's operations as described above, management has determined that there is a substantial doubt about the Company's ability to continue as a going concern over the next twelve months and the Company's independent auditors have included a "going concern" explanatory paragraph in their report on the Company's financial statements as of and for the year ended February 1, 2020.

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        The Company may not be able to mitigate the impact COVID-19 has had and will have on its business and has been considering available options including restructuring its obligations or seeking protection under the bankruptcy laws in which case there will likely not be any value distributed to its shareholders and its shares could be cancelled for no consideration.

The Company's ability to accelerate its transformation to a digitally dominant retailer is a complex strategy that will require expertise and resources to execute. If the Company is unable to execute on the acceleration of its business transformation to a digitally dominant retailer, the Company may experience a material adverse effect to it results of operations, financial condition, liquidity and cash flows.

        Prior to the impact of COVID-19, the Company planned to accelerate its strategy to reposition itself as a digitally dominant retailer. With that, it anticipated the closure of 150 stores over the next 18 months as a component of the Company's transformation to a digitally dominant portfolio of brands. If the Company seeks protection under the bankruptcy laws as discussed above, it could close more than 150 stores, or it may close all of its stores. The reduction of non-productive selling square feet is an integral component of the Company's goal to improve productivity and profitability across its chain of stores and online.

        The Company planned to make strategic investments to grow as a digitally dominant multi-brand portfolio company, but these investments are now on hold. These investments may include the expansion of its celebrity collaborations and existing brands, launching new lifestyle brands, driving growth in the eCommerce channel, and rebalancing its marketing media mix to acquire new customers and retain existing customers. As such, during the three months ended November 2, 2019, the Company launched its Customer First initiative with the objective to reinvent all aspects of its marketing programs, from data analytics, creative storytelling, personalization and segmentation, and content creation with an intense focus on the customer. The Company remains focused on transforming its marketing efforts to be customer-first, data-driven and creatively optimized, which, when combined the Company believes will elevate the customer experience, engage new customers and retain existing customers.

        In addition, the Company planned to implement an organizational structure to support a digitally dominant business and growth as a multi-brand portfolio company. This included the Design and Merchandising department re-alignment to improve clarity of offer, optimize organizational efficiencies and reduce development expense.

        If the Company is unable to execute on the acceleration of its business transformation to a digitally dominant retailer, or any of the components of that strategic agenda, the Company may experience a material adverse effect to its results of operations, financial condition, liquidity and cash flows.

A continued reduction in the volume of mall traffic could significantly reduce the Company's sales and leave it with unsold inventory, reducing the Company's profits or creating losses.

        Many of the Company's stores are located in shopping malls. Sales at these stores are derived, in part, from the volume of traffic in those malls. The Company's sales volume and store traffic will be adversely affected by a continued decrease in the popularity of malls or other shopping centers in which the Company's stores are located, the closing of anchor stores important to driving mall traffic and therefore the Company's business, a decline in popularity of other stores in the malls or shopping centers in which the Company's stores are located, or a deterioration in the financial condition of shopping center operators or developers which could, for example, limit their ability to invest in improvements and finance tenant improvements for the Company and other retailers. Sales volume and mall traffic may be adversely affected by economic downturns in a particular area, competition from internet retailers, non-mall retailers and other malls where the Company does not have stores, and the

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impact of COVID-19 on consumer behavior. A continued reduction in mall traffic as a result of these or any other factors could materially adversely affect the Company's business.

If the Company is not able to respond to fashion trends in a timely manner, develop new merchandise or launch new product lines successfully, it may be left with unsold inventory, experience decreased profits or incur losses or suffer reputational harm to the image of its brands.

        The Company's success depends in part on management's ability to anticipate and respond to changing fashion tastes and consumer demands and to translate market trends into appropriate, saleable product offerings. Customer tastes and fashion trends change rapidly. If the Company is unable to successfully identify or react to changing styles or trends and misjudges the market for its products or any new product lines, its sales may be lower, gross margins may be lower and the Company may be faced with a significant amount of unsold finished goods inventory. In response, the Company may be forced to increase its marketing promotions or price markdowns, which could have a material adverse effect on its financial condition and results of operations. The Company's brand image may also suffer if customers believe that it is no longer able to offer the latest fashions. Some of the Company's brands are affiliated with celebrities; if the Company experiences an unplanned interruption in the collaboration with these celebrities, including Eva Mendes, Gabrielle Union, or Kate Hudson, for any reason, it may result in a decrease in net sales and profitability. The Company has long-term license agreements with its celebrity collaborators to use their name, likeness and other related materials to market specified brands. The Company may not be able to renew expiring licenses on terms that are favorable to the Company or at all, which could have a material adverse effect on the Company's results of operations, financial condition and cash flows.

The Company's inability to maintain the image of its brands, engage new and existing customers and gain market share could have a material adverse effect on the Company's business, financial condition and results of operations.

        The Company's success depends heavily on the value associated with its New York & Company brand, including its celebrity collaborations and sub-brands. The New York & Company name is integral to the Company's existing business, as well as to the implementation of its strategy for growing and expanding its business. Maintaining, promoting and growing the Company's brands will depend largely on the success of its design, merchandising and marketing efforts and its ability to provide a consistent, high-quality customer experience. The Company's reputation could be jeopardized if it fails to maintain high standards for merchandise quality and integrity and any negative publicity about these types of concerns may reduce demand for the Company's merchandise. While the Company's brands enjoy a loyal customer base, the success of the Company's growth strategy depends, in part, on the Company's ability to keep existing customers engaged as well as attract new customers to shop its brands. The Company's brands could be adversely affected if the Company's public image or reputation were to be tarnished, which could result in a material adverse effect on the Company's business. If the value associated with the Company's brands were to diminish, the Company's sales could decrease, causing decreased profits or losses.

        As the use of social media becomes more prevalent, the Company's susceptibility to risks related to social media increases. The immediacy of social media precludes the Company from having real-time control over postings made regarding the Company via social media, whether matters of fact or opinion. Information distributed via social media could result in negative publicity, causing damage to the Company's reputation, and therefore have a material adverse effect on its business, financial condition and results of operations.

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The failure of the Company's celebrity collaborators to protect their reputation could have a material adverse effect on the Company's business, reputation and brand image.

        The Company's success is partially dependent on the reputations of its celebrity collaborators, such as Eva Mendes, Gabrielle Union and Kate Hudson. The Company often relies on its celebrity collaborators to manage and maintain their brands, but these celebrity collaborators' reputation may be harmed due to factors outside the Company's control, which could negatively impact the Company's brand image and have a material adverse effect on its business. Certain of the Company's products bear the names and likeness of celebrities, whose brand or image may change without notice and who may not maintain the appropriate celebrity status or positive association among the consumer public to support projected sales levels. Damage to the reputations of the Company's celebrity collaborators could have a material adverse effect on the Company's results of operations, financial condition and cash flows, as well as require additional resources to rebuild the Company's reputation.

Fundamental shifts in the women's retail apparel industry could adversely affect the Company's business and financial performance.

        The growth and prominence of fast-fashion and value-fashion retailers and expansion of off-price retailers has fundamentally shifted customer expectations of affordable pricing and continued promotional pressure. The rise of these retailers as well as the shift in shopping preferences away from brick-and-mortar stores to the direct channel, where online-only businesses or those with robust direct channel capabilities can facilitate competitive entry and comparison shopping, have increased the difficulty of maintaining and gaining market share. In addition, the Company's customers are increasingly using mobile devices to make purchases online and to help them in making purchasing decisions when in the Company's stores. The Company's execution of its own omni-channel retail strategy to adapt to these changes, in relation to its competitors' actions as well as to its customers' adoption of new technology, presents a specific risk. If for any reason the Company is unable to implement its omni-channel retail strategy, provide a convenient and consistent experience for its customers across all channels, or provide its customers the products they want, when and where they want them at a compelling value proposition, then the Company's financial performance and brand image could be adversely affected. Further, unanticipated changes in pricing and other practices of the Company's competitors, including promotional activity, such as free shipping and pricing pressures, could have a material adverse effect on the Company's business.

Economic conditions may cause a decline in business and consumer spending which could adversely affect the Company's business and financial performance.

        The Company's business is impacted by general economic conditions, including the impact of COVID-19, and their effect on consumer confidence and the level of consumer spending on the merchandise the Company offers. These economic factors include recessionary cycles, interest rates, currency exchange rates, economic growth, wage rates, unemployment levels, energy prices, availability of consumer credit, and consumer confidence, among others. Economic conditions could negatively affect consumer purchases of the Company's merchandise and adversely impact the Company's business, financial condition and results of operations. Economic conditions could also negatively impact the Company's merchandise vendors and their ability to deliver products and sustain profits and sufficient liquidity. To counteract potential cash flow problems, the Company's merchandise vendors may require letters of credit or attempt to increase prices, pass through increased costs or seek some other form of relief, which may adversely impact the Company's business, financial condition and results of operations. In addition, economic conditions could negatively impact the Company's retail landlords and their ability to maintain their shopping centers in a first-class condition and otherwise perform their obligations, which could negatively impact traffic in the Company's stores leading to a decrease in sales and profitability. However, during COVID-19, the Company has taken steps to reduce

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operating costs and improve efficiency, including targeted reductions in capital expenditures, and engaging in conversations with landlords to defer April and May 2020 rent payments as well as conversations with vendors to defer payments until the Company's brick-and-mortar stores reopen. As of the date of this filing, the Company has received default notices from various landlords and vendors for non-payment.

The raw materials used to manufacture the Company's products and its distribution and labor costs are subject to availability constraints and price volatility, which could result in increased costs.

        The raw materials used to manufacture the Company's products are subject to availability constraints and price volatility caused by high demand for petroleum-based synthetic fabrics, weather, supply conditions, government regulations, economic climate and other unpredictable factors. The Company sources nearly all of its merchandise from three countries, with China, Vietnam and Indonesia representing approximately 95% of all merchandise purchases during fiscal year 2019. Any one of these countries could experience increased inflationary pressure, which could lead to increased costs for the Company. In addition, the Company's transportation and labor costs are subject to price volatility caused by the price of oil, supply of labor, governmental regulations, economic climate and other unpredictable factors. Increases in demand for, or the price of, raw materials, distribution services and labor, could have a material adverse effect on the Company's business, financial condition, results of operations, and cash flows. Furthermore, if the Company's vendors suffer prolonged manufacturing or transportation disruptions due to public health conditions or other unforeseen events, such as the COVID-19 pandemic, the Company's ability to source product could be adversely impacted which would adversely affect the Company's results of operations. However, during COVID-19, the Company has taken steps to reduce operating costs and improve efficiency, including targeted reductions in capital expenditures, and engaging in conversations with landlords to defer April and May 2020 rent payments as well as conversations with vendors to defer payments until the Company's brick-and-mortar stores reopen. As of the date of this filing, the Company has received default notices from various landlords and vendors for non-payment.

Fluctuations in comparable store sales in any one of the Company's channels, including stores, Outlets and eCommerce, or fluctuations in the Company's results of operations could cause the price of the Company's common stock to decline substantially.

        A store is included in the comparable store sales calculation after it has completed 13 full fiscal months of operations from the store's opening date or once it has been reopened after remodeling if the gross square footage did not change by more than 20%. Sales from the Company's eCommerce stores are included in comparable store sales. In addition, recognized royalty revenue and the amortization of signing bonuses received in connection with the ADS Agreement are included in comparable store sales.

        The Company's results of operations have fluctuated in the past and can be expected to fluctuate in the future. The Company cannot ensure that it will be able to achieve consistency in its future sales and cannot ensure a high level of comparable store sales in the future. If the Company experiences an extended shut down of its eCommerce stores, for any reason, the Company could lose revenues and experience a material decrease in comparable store sales and profits.

        The Company's comparable store sales and results of operations are affected by a variety of factors, including but not limited to:

•

fashion trends;



•

mall traffic, including the impact of COVID-19;

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•

the Company's ability to effectively market to its customers and drive traffic both online and into its stores;



•

calendar shifts of holiday or seasonal periods;



•

the effectiveness of the Company's supply chain and inventory management;



•

changes in the Company's merchandise mix;



•

the timing of promotional events;



•

weather conditions;



•

changes in general economic conditions and consumer spending patterns;



•

the Company's ability to retain, recruit and train qualified personnel;



•

actions of competitors or mall anchor tenants; and



•

pandemics (including COVID-19).

        If the Company's future comparable store sales fail to meet expectations, then the market price of the Company's common stock could decline substantially.

The Company's net sales, operating income and inventory levels fluctuate on a seasonal basis and decreases in sales or margins during the Company's peak seasons could have a disproportionate effect on its overall financial condition and results of operations.

        The Company's business experiences seasonal fluctuations in net sales and operating income, with a larger portion of its sales typically realized during its fourth quarter. Any decrease in sales or margins during the fourth quarter or peak holiday seasons could have a material adverse effect on the Company's financial condition and results of operations.

        Seasonal fluctuations also affect the Company's inventory levels. The Company must carry a significant amount of inventory, especially before the holiday season selling period in the fourth quarter and prior to the Easter and Mother's Day holidays toward the latter part of the first quarter and beginning of the second quarter. If the Company is not successful in selling its inventory, it may have to write down the value of its inventory or sell it at significantly reduced prices or the Company may not be able to sell such inventory at all, which could have a material adverse effect on the Company's financial condition and results of operations. Due to COVID-19 overlapping the important holiday season selling period of Easter and Mother's Day, the Company was left with significant unsold inventory during Spring 2020.

Since the Company relies significantly on international sources of production, it is at risk from a variety of factors that could leave it with inadequate or excess inventories, resulting in decreased profits or losses.

        The Company purchases apparel and accessories in international markets, with a significant portion coming from China, Vietnam and Indonesia. Any major changes in United States tax policy or trade relations, such as the disallowance of tax deductions for imported merchandise or the imposition of unilateral tariffs on imported goods, could have a material adverse effect on the Company's business, results of operations and liquidity. The Company does not have any long-term merchandise supply contracts and many of its imports are subject to existing or potential duties and tariffs. The Company competes with other companies for production facilities.

        The U.S. government is contemplating various actions regarding trade with China, including the possibility of levying additional tariffs on imports from China. U.S. trade policy could trigger retaliatory actions by affected countries resulting in "trade wars," which could increase the Company's cost of goods and/or reduce customer demand if the Company has to increase its prices.

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        The Company also faces a variety of other risks generally associated with doing business in international markets and importing merchandise from abroad, such as:

•

political or labor instability in countries where vendors are located;



•

political or military conflict involving the United States, which could cause a delay in the transportation of the Company's products and an increase in transportation costs;



•

heightened terrorism security concerns, which could subject imported goods to additional, more frequent or more thorough inspections, leading to delays in deliveries or impoundment of goods for extended periods or could result in decreased scrutiny by customs officials for counterfeit goods, leading to lost sales and damage to the reputation of the Company's brand;



•

natural disasters, disease epidemics, pandemics (including COVID-19) and health related concerns, which could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas;



•

the migration and development of manufacturers, which can affect where the Company's products are or will be produced;



•

imposition of regulations relating to imports and the Company's ability to adjust in a timely manner to changes in trade regulations, which among other things, could limit the Company's ability to source products from countries that have the labor and expertise needed to manufacture its products on a cost-effective basis;



•

imposition of duties, taxes and other charges on imports;



•

labor disputes, such as labor strikes or unrest or disruptions at the ports through which the Company imports its goods; and



•

currency volatility.

        Any of the foregoing factors, or a combination thereof, could have a material adverse effect on the Company's business.

The Company's manufacturers may be unable to manufacture and deliver products in a timely manner or meet its quality standards, which could result in lost sales, cancellation charges or excessive markdowns.

        The Company purchases apparel and accessories directly from third-party manufacturers and in some instances from importers. The Company utilized two major apparel agents, which together represented approximately 63% of the Company's merchandise purchases made during fiscal year 2019; however, no individual factory represented more than 8% of the Company's merchandise purchases. Similar to most other specialty retailers, the Company has short selling seasons for much of its inventory. Factors outside of the Company's control, such as manufacturing or shipping delays or quality problems, could disrupt merchandise deliveries and result in lost sales, product recalls, cancellation charges or excessive markdowns.

The Company may remodel/refresh and relocate a portion of its existing store base annually, and may open a select number of new stores. The Company may not be able to successfully remodel/refresh and relocate existing stores, or open new stores, on a timely basis or at all. In addition, opening new stores and relocating or remodeling/refreshing existing stores may strain its resources and cause the performance of its existing stores to suffer.

        The Company may remodel/refresh and relocate a portion of its existing store base annually, and may open a select number of new stores. The success of this strategy is dependent upon, among other things, the identification of suitable markets and sites for store locations, the negotiation of acceptable lease and renewal terms, including the renegotiation of existing rent concessions, the hiring, training

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and retention of competent sales personnel, and the effective management of inventory to meet the needs of new and existing stores in a timely basis. To the extent that the Company's new store openings are in existing markets, the Company may experience reduced net sales volumes in existing stores in those markets. The Company expects to fund its new stores through cash flow from operations and, if necessary, by borrowings under its revolving credit facility; however, if the Company experiences a decline in performance, the Company may slow or discontinue store openings. The Company may not be able to successfully execute any of these strategies on a timely basis. If the Company fails to successfully implement these strategies, its financial condition and results of operations would be adversely affected.

        In addition, continued consolidation in the commercial retail real estate market could affect the Company's ability to successfully negotiate favorable lease and renewal terms for its stores in the future. Should significant consolidation continue, a large portion of the Company's store base could be concentrated with one or a few entities that could then be in a position to dictate unfavorable terms due to their significant negotiating leverage. If the Company is unable to negotiate favorable lease terms with these entities, this could affect its ability to profitably operate its stores, which could adversely affect the Company's financial condition and results of operations.

Because of the Company's focus on keeping its inventory at the forefront of fashion trends, extreme and/or unseasonable weather conditions could have a disproportionately large effect on the Company's business, financial condition and results of operations because it would be forced to mark down inventory.

        Extreme weather conditions in the areas in which the Company's stores are located could have a material adverse effect on the Company's business, financial condition and results of operations. For example, heavy snowfall or other extreme weather conditions over a prolonged period might make it difficult for the Company's customers to travel to its stores. The Company's business is also susceptible to unseasonable weather conditions. For example, extended periods of unseasonably warm temperatures during the winter season or cool weather during the summer season could render a portion of the Company's inventory incompatible with those unseasonable conditions. These prolonged unseasonable weather conditions could adversely affect the Company's business, financial condition and results of operations.

If third parties who manage some aspects of the Company's business do not adequately perform their functions, the Company might experience disruptions in its business, leaving it with inadequate or excess inventories, among other adverse effects, resulting in decreased profits or losses.

        L Brands handles the distribution of the Company's merchandise through its distribution facility in Columbus, Ohio pursuant to a transition services agreement. The efficient operation of the Company's stores is dependent on its ability to distribute merchandise to locations throughout the United States in a timely manner. The Company depends on L Brands to receive, sort, pack and distribute substantially all of the Company's merchandise. As part of the transition services agreement, L Brands contracts with third-party transportation companies to deliver the Company's merchandise from international ports to their warehouses and to the Company's stores. Any failure by any of these third parties to respond adequately to the Company's warehousing and distribution needs would disrupt the Company's operations and negatively impact its profitability.

        The Company's Compliance Program is administered by its in-house compliance team, in partnership with various third-party providers, and provides monitoring of country of origin and point of fabrication compliance for U.S. Customs. Any failure of the Company, or its third-party providers, to fulfill their obligations under the Compliance Program, could disrupt the Company's operations and negatively impact its profitability.

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        Under the transition services agreement, warehousing and distribution services will terminate upon the earliest of the following: (i) 24 months from the date that L Brands notifies the Company that L Brands wishes to terminate the services; (ii) 24 months from the date that the Company notifies L Brands that the Company wishes to terminate the services; (iii) 60 days after the Company has given notice to L Brands that L Brands has failed to perform any material obligations under the agreement and such failure shall be continuing; (iv) 30 days after L Brands has given notice to the Company that the Company has failed to perform any material obligations under the agreement and such failure shall be continuing; (v) within 75 days of receipt of the annual proposed changes to the agreement schedules which outline the cost methodologies and estimated costs of the services for the coming year, if such proposed changes would result in a significant increase in the amount of service costs that the Company would be obligated to pay; (vi) 15 months after a change of control of the Company, at the option of L Brands; or (vii) upon reasonable notice under the prevailing circumstances by the Company to L Brands after a disruption of services due to force majeure that cannot be remedied or restored within a reasonable period of time. The Company believes that these services are provided at a competitive price and the Company anticipates continuing to use L Brands for these services. The Company's failure to successfully replace the services could have a material adverse effect on the Company's business and prospects.

        The Company uses a third party for its eCommerce operations, including order management, order fulfillment, customer care, and channel management services. A failure by the third party to adequately manage the Company's eCommerce operations may negatively impact the Company's profitability.

        The Company may rely on third parties for the implementation and/or management of certain aspects of its information technology infrastructure. Failure by any of these third parties to implement and/or manage the Company's information technology infrastructure effectively could disrupt its operations and negatively impact its profitability.

        The Company relies on a third party to administer its proprietary credit card program. The inability of the administration company to effectively service the credit card program could materially limit credit availability for the Company's customers, which would negatively impact the Company's revenues and, consequently, its profitability.

        A work stoppage resulting from, among other things, a dispute over a collective bargaining agreement covering employees of a third party relied on by the Company or employees of the Company, may cause disruptions in the Company's business and negatively impact its profitability.

The Company's marketing efforts rely upon the use of customer information. Restrictions on the availability or use of customer information could adversely affect the Company's marketing program, which could result in lost sales and a decrease in profits.

        The Company uses its customer database to market to its customers. Any limitations imposed on the use of such consumer data, whether imposed by federal or state governments or business partners, could have an adverse effect on the Company's future marketing activity. In addition, while the Company is compliant with Payment Card Industry Data Security Standards (PCI DSS), to the extent the Company's or its business partners' security procedures and protection of customer information prove to be insufficient or inadequate, the Company may become subject to litigation or other claims, which could expose it to liability and cause damage to its reputation or brand.

The Company relies on its manufacturers to use acceptable ethical business practices, and if they fail to do so, the New York & Company brand name, and its other brands, could suffer reputational harm and the Company's sales could decline or its inventory supply could be interrupted.

        The Company requires its manufacturers to operate in compliance with applicable laws, rules and regulations regarding working conditions, employment practices, product quality and safety, and

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environmental compliance. Additionally, the Company imposes upon its business partners operating guidelines that require additional obligations in order to promote ethical business practices. The Company's in-house compliance team, staff of third party inspection services companies, and the staff of the Company's non-exclusive buying agents and importers periodically visit and monitor the operations of the Company's manufacturers to determine compliance. However, the Company does not control its manufacturers or their labor and other business practices. If one of the Company's manufacturers violates labor or other laws or implements labor or other business practices that are generally regarded as unethical in the United States, the shipment of finished products to the Company could be interrupted, orders could be canceled, relationships could be terminated and the Company's reputation could be damaged. Any of these events could have a material adverse effect on the Company's revenues and, consequently, its results of operations.

The Company is subject to numerous laws and regulations, including federal and state minimum wage laws that could affect its operations. Changes in such laws and regulations could affect its profitability and impact the operation of its business through delayed shipments of its goods, increased costs, fines or penalties.

        The Company is subject to employment laws and regulations, including minimum wage requirements, intellectual property laws (including those relating to advertising and promotions, privacy and product safety), truth-in-lending and other laws and regulations with respect to the operation of the Company's stores and business generally, such as zoning and occupancy ordinances governing the importation and exportation of merchandise and the use of the Company's proprietary credit cards. In addition, the Company is subject to Securities and Exchange Commission rules and regulations, state laws, Sarbanes-Oxley requirements, rules and regulations issued pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, other U.S. public company regulations, and various other requirements mandated for the textiles and apparel industries such as the Consumer Product Safety Improvement Act of 2008, California's Proposition 65 and similar state laws. Although the Company monitors changes in these laws, if these laws change without the Company's knowledge, or are violated by the Company's employees, importers, buying agents, manufacturers or distributors, the Company could experience delays in shipments and receipt of goods or be subject to fines or other penalties under the controlling laws or regulations, any of which could have a material adverse effect on the Company's business, financial condition and results of operations.

        On April 4, 2016, the State of California passed legislation raising the hourly minimum wage to $15 by the end of year 2022. On the same day, the State of New York enacted similar legislation increasing the hourly minimum wage to $15 in New York City by the end of year 2018, and in other parts of the state by the end of year 2021. Such legislation requires mandatory annual increases to the hourly minimum wage in the interim. As a result, the Company increased the hourly minimum wage in California, New York City, and other parts of New York State, as well as in a number of other states, as required. In addition, certain jurisdictions are considering or have enacted privacy and/or cyber security laws and regulations that do or could impose additional obligations on the Company. For example, on January 1, 2020, the California Consumer Privacy Act of 2018 (the "CCPA") became effective. The CCPA requires certain companies to satisfy new requirements regarding the handling of personal and sensitive data, including its use, protection and the ability of California residents whose data is stored to know specifically what data each company has collected on them and, if they so choose, the right to demand that such companies delete their data, subject to certain exemptions defined in the statute. While the Company believes that it has sufficient measures in place to comply with its obligations under the CCPA, failure to comply with its requirements could result in civil penalties. However, the CCPA additionally provides a private right of action that allows consumers to seek, either individually or as a class, statutory or actual damages and injunctive and other relief, if their sensitive personal information is subject to unauthorized access and exfiltration, theft or disclosure as a result of a business's failure to implement and maintain required reasonable security procedures.

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As of the date of this filing, final regulations from the California Attorney General have not been released.

        Compliance with changes in these laws or regulations, including increasing minimum wage requirements and frequently changing requirements surrounding information security and privacy, could result in increased costs to the Company and could impact operational efficiency, which could have a material adverse effect on the Company's financial condition and results of operations.

The Company may be unable to protect its trademarks, which could diminish the value of its brands.

        The Company's trademarks are important to its success and competitive position. The Company's major trademarks are New York & Company, NY&C, Soho New York & Company Jeans, Lerner, Fashion to Figure, and FTF, and are protected in the United States and in some cases internationally. The Company engages in the following steps to protect and enforce its trademarks: file and prosecute trademark applications for registration in those countries where the marks are not yet registered; respond to office actions and examining attorneys in those countries where the marks are not yet registered; maintain its trademark portfolio in the United States; file statements of use, renewal documents, assignments, policing of marks and third party infringements; and handle the initiation and defense of opposition and/or cancellation proceedings. The Company is susceptible to others imitating the Company's products and infringing on the Company's intellectual property rights. Imitation or counterfeiting of the Company's products or other infringement of the Company's intellectual property rights could diminish the value of its brand or otherwise adversely affect its revenues. The actions the Company has taken to establish and protect its trademarks may not be adequate to prevent imitation of its products by others or to prevent others from seeking to invalidate its trademarks or block sales of its products as a violation of the trademarks and intellectual property rights of others. In addition, others may assert rights in, or ownership of, trademarks and other intellectual property rights of the Company or in marks that are similar to the Company's or marks that the Company licenses and/or markets and the Company may not be able to successfully resolve these types of conflicts to its satisfaction. In some cases, there may be trademark owners who have prior rights to the Company's marks because the laws of certain countries may not protect intellectual property rights to the same extent as do the laws of the United States. In other cases, there may be holders who have prior rights to similar marks. Failure to protect the Company's trademarks could result in a material adverse effect on the Company's business.

The Company relies on its information technology infrastructure, which includes third party and internally developed software, and purchased or leased hardware that support the Company's information technology, cybersecurity and various business processes. The Company's business, reputation and brand image could suffer if its infrastructure fails to perform as intended.

        The Company relies on purchased or leased hardware and software licensed from third parties or internally developed in order to manage its business. The Company's ability to maintain and upgrade its information technology infrastructure is critical to the success of its business and the continued enhancement of its omni-channel retail strategy. This hardware and software may not continue to be available on commercially reasonable terms or at all. Any disruptions to the Company's infrastructure or loss of the right to use any of this hardware or software could affect the Company's operations, which could negatively affect the Company's business until corrected or until equivalent technology is either developed by the Company or, if available, is identified, obtained and integrated. In addition, the software underlying the Company's operations can contain undetected errors. The Company may be forced to modify its operations until such problems are corrected and, in some cases, may need to implement enhancements to correct errors that it does not detect. Problems with the software underlying the Company's operations could result in loss of revenue, unexpected expenses and capital

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costs, diversion of resources, loss of market share and damage to the Company's reputation which could adversely affect the Company's business, financial condition and results of operations.

        Furthermore, the Company's information systems initiatives and omni-channel retail strategy are complex and require managerial and financial expertise to implement successfully. If the Company is unable to successfully implement new information system initiatives and execute its omni-channel retail strategy, or if the Company's customers are not provided with the intended benefits, the Company's reputation and brand image could suffer resulting in a material adverse effect on the Company's financial condition and results of operations.

        The Company and third parties that manage portions of the Company's secure data are subject to cybersecurity risks and incidents. The Company's business involves the storage and transmission of customers' personal information, shopping preferences and credit card information, in addition to employee information and the Company's financial and strategic data. The protection of the Company's customer, employee and Company data is vitally important to the Company. To date, data security breaches have not had a material impact on the Company's financial condition, operating results or business; however, the Company could suffer material financial or other losses in the future and it may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyberattacks or intrusions. While the Company has implemented measures to prevent and detect security breaches and cyber incidents, and continues to invest in the fortification of its information systems, networks and infrastructure, these systems may prove to be inadequate and result in the disruption, failure, misappropriation or corruption of the Company's systems and infrastructure because the techniques used to obtain unauthorized access are constantly changing and becoming increasingly more sophisticated and often are not recognized until launched against a target. The Company or its third-party service providers may not be able to anticipate these techniques or implement sufficient preventative measures. In addition, data security breaches can also occur as a result of non-technical issues, including breaches by the Company or by the Company's third-party service providers that result in the unauthorized release of personal or confidential information. Any failure of the Company's data protection and security measures and any failure of third parties that assist the Company in managing its secure data could jeopardize or result in the unauthorized disclosure, gathering, monitoring, misuse, corruption, loss, or destruction of confidential and other information. This could result in significant losses, including loss of customers and business opportunities, reputational damage, litigation, regulatory fines, penalties or intervention, reimbursement or other compensatory costs, or otherwise adversely affect the Company's business, financial condition or results of operations. Any of these events could result in litigation and legal liability, harm to the Company's reputation, loss of confidence in the Company's ability to protect sensitive information, a distraction to the Company's business, and the need to divert resources to remedy the issues, any of which could adversely affect the Company's business, financial condition and results of operations. Although the Company maintains cybersecurity insurance, there can be no assurance that the Company's insurance coverage will cover the particular cyber incident at issue or that such coverage will be sufficient, or that insurance proceeds will be paid to the Company in a timely manner.

Risks associated with the Company's eCommerce stores.

        The Company operates online stores at www.nyandcompany.com, www.nyandcompanycloset.com, www.fashiontofigure.com, www.fashiontofigurecloset.com, and www.happyxnature.com, which are integral to the success of the Company's omni-channel retail strategy and where it sells its largest assortment of its merchandise. The Company's eCommerce operations are subject to numerous risks, including unanticipated operating problems, reliance on third-party computer hardware and software providers, system failures, cybersecurity incidents and the need to invest in additional computer systems. The eCommerce operations also involve other risks that could have an impact on the Company's results of operations, including but not limited to diversion of sales from the Company's other stores, rapid

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technological change, liability for online content, credit card fraud and risks related to the failure of the computer systems that operate the website and its related support systems. If the Company is unable to successfully address and respond to these risks, revenues could be lost, costs could increase, and the Company's reputation may be damaged.

If the Company is unable to successfully develop and maintain a relevant and reliable omni-channel shopping experience for its customers, the Company's reputation could be adversely affected, sales could be lost and its profits could decrease.

        One of the Company's long-term growth initiatives is the expansion of the omni-channel shopping experience it provides customers through the integration of its retail stores, eCommerce stores and mobile applications. Omni-channel retailing is rapidly evolving and the Company's success depends on its ability to anticipate and implement innovations in customer experience and logistics in order to appeal to customers who increasingly rely on multiple channels to meet their shopping needs. If the Company is unable to innovate and successfully implement its omni-channel initiatives or does not meet customer expectations, revenues could be lost, costs could increase, and the Company's reputation may be damaged.

The Company relies upon independent third-party transportation providers for substantially all of its product shipments and is subject to increased shipping costs as well as the potential inability of its third-party transportation providers to deliver on a timely basis.

        The Company currently relies upon independent third-party transportation providers for substantially all of its product shipments, including shipments to and from all of its stores and to its customers. The Company's utilization of these delivery services for shipments is subject to risks which may impact a shipping company's ability to provide delivery services that adequately meet the Company's shipping needs, including risks related to employee strikes, labor and capacity constraints, and inclement weather. In addition, the Company is subject to increased shipping costs when fuel prices increase, when it uses expedited means of transportation such as air freight, and due to other economic factors affecting supply and demand within the transportation industry. If the Company changes the shipping companies it uses, it could face logistical difficulties that could adversely affect deliveries, and the Company would incur costs and expend resources in connection with such change. Moreover, the Company may not be able to obtain terms as favorable as those received from its current independent third-party transportation providers which, in turn, would increase its costs.

The Company is subject to customer payment-related risks that could increase its operating costs, expose it to fraud or theft, subject it to potential liability and potentially disrupt its business.

        The Company accepts payments using a variety of methods, including cash, checks, credit and debit cards, PayPal, Afterpay, its private label credit cards, and gift cards. Acceptance of these payment options subjects the Company to rules, regulations, contractual obligations and compliance requirements, including payment network rules and operating guidelines, data security standards and certification requirements, and rules governing electronic funds transfers. These requirements may change over time or be reinterpreted, making compliance more difficult or costly. Although no systems can completely prevent theft, security countermeasures have been deployed to reduce the potential for fraud and theft by criminals. Although the Company has taken steps to decrease its risk of a data breach, the Company may still suffer a data breach, which could have a material adverse effect on the Company's brand image, financial condition and results of operations.

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The covenants in the Company's revolving credit facility impose restrictions that may limit its operating and financial flexibility.

        On March 20, 2020, as a precautionary measure and to preserve financial flexibility, given the uncertain environment resulting from COVID-19 pandemic, the Company drew down $40 million under the Amendment No. 1 to Fourth Amended and Restated Loan and Security Agreement and Joinder (the "Loan Agreement," further described under "Long-Term Debt and Credit Facilities" below) at an interest rate equal to the LIBOR plus a margin of 1.25%. As a result of the COVID-19 pandemic and steps the Company took in response thereto, subsequent to February 1, 2020 and prior to June 3, 2020, the Company was in default under the Loan Agreement, although the Company did not receive any default notices from Wells Fargo, National Association, administrative agent and lender. The Company has obtained a forbearance of certain specified potential defaults under Amendment No. 2 to the Loan Agreement through June 30, 2020. For further information, see Note 15, "Subsequent Events," to the consolidated financial statement appearing elsewhere in this Annual Report on Form 10-K.

        The Company's credit facility contains a number of significant restrictions and covenants that limit its ability to:

•

incur additional indebtedness;



•

declare dividends, make distributions or redeem or repurchase capital stock, including the Company's common stock, or to make certain other restricted payments or investments;



•

sell assets, including capital stock of restricted subsidiaries;



•

agree to payment restrictions affecting the Company's restricted subsidiaries;



•

consolidate, merge, sell or otherwise dispose of all or substantially all of the Company's assets;



•

incur liens;



•

alter the nature of the Company's business;



•

enter into sale/leaseback transactions;



•

conduct transactions with affiliates; and



•

designate the Company's subsidiaries as unrestricted subsidiaries.

        In addition, the Company's credit facility includes additional restrictive covenants and prohibits it from prepaying its other indebtedness while indebtedness under its credit facility is outstanding. The agreement governing the Company's credit facility also requires it to achieve specified financial and operating results and maintain compliance with specified financial ratios. The Company's ability to comply with these ratios may be affected by events beyond the Company's control.

        The restrictions contained in the agreement governing the Company's credit facility could:

•

limit the Company's ability to plan for or react to market conditions or meet capital needs or otherwise restrict its activities or business plans; and



•

adversely affect the Company's ability to finance its operations, strategic acquisitions, investments or other capital needs or to engage in other business activities that would be in the Company's interest.

        A breach of any of these restrictive covenants or the Company's inability to comply with the required financial ratios could result in a default under the agreement governing its credit facility. If a default occurs, the lender under the credit facility may elect to declare all borrowings outstanding, together with accrued interest and other fees, to be immediately due and payable.

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        The lender also has the right in these circumstances to terminate any commitments the lender has to provide further borrowings. If the Company is unable to repay outstanding borrowings when due, the lender under the credit facility also has the right to proceed against the collateral, including the Company's available cash, granted to the lender to secure the indebtedness.

The Company may lose key personnel.

        The Company believes that it has benefited from the leadership and experience of its key executives. The loss of the services of any of these individuals could have a material adverse effect on the business and the prospects of the Company. Competition for key personnel in the retail industry is intense and the Company's future success will depend upon its ability to retain, recruit and train qualified personnel.

Provisions in the Company's restated certificate of incorporation and Delaware law may delay or prevent the Company's acquisition by a third party.

        The Company's restated certificate of incorporation contains a "blank check" preferred stock provision. Blank check preferred stock enables the Company's Board of Directors, without stockholders' approval, to designate and issue additional series of preferred stock with such dividend, liquidation, conversion, voting or other rights, including the right to issue convertible securities with no limitation on conversion, as the Company's Board of Directors may determine, including rights to dividends and proceeds in a liquidation that are senior to the common stock.

        These provisions may make it more difficult or expensive for a third party to acquire a majority of the Company's outstanding voting common stock. The Company is also subject to certain provisions of Delaware law which could delay, deter or prevent the Company from entering into a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in the Company's stockholders receiving a premium over the market price for their stock.

Item 1B.    Unresolved Staff Comments

        None.

Item 2.    Properties

        All of the Company's stores, encompassing approximately 2.5 million total gross square feet as of February 1, 2020, are leased under operating leases expiring in various years through 2031. As of February 1, 2020, approximately 70% of its store leases could be terminated by the Company within two years, and approximately 90% of the Company's store leases could be terminated by the Company within five years. The Company leases 182,709 square feet of office space at 330 West 34^th Street, New York, New York, which expires in 2030. Additionally, the Company owns a parcel of land located in Brooklyn, New York on which it operates one of its leased stores.

Item 3.    Legal Proceedings

        There are various claims, lawsuits and pending actions against the Company arising in the normal course of the Company's business. It is the opinion of management that the ultimate resolution of these matters will not have a material effect on the Company's financial condition, results of operations or cash flows. See Note 8, "Commitments and Contingencies," to the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

Item 4.    Mine Safety Disclosures

        Not Applicable.

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PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

        The Company's common stock is listed on the New York Stock Exchange under the symbol "RTW." The number of holders of record of common stock at April 3, 2020 was 147.

Issuer Sales of Equity Securities

        None.

Issuer Purchases of Equity Securities

        None.

Item 6.    Selected Financial Data

        As a "smaller reporting company," the Company is not required to provide the information required by this Item.

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

        The purpose of this section is to discuss and analyze the Company's consolidated financial condition, liquidity and capital resources, and results of operations. The following discussion should be read in conjunction with the Company's consolidated financial statements and the notes thereto appearing elsewhere in this Annual Report on Form 10-K.

Overview

        RTW Retailwinds, Inc., formerly known as New York & Company, Inc., is a specialty women's omni-channel retailer with a powerful multi-brand lifestyle platform providing curated fashion solutions that are versatile, on-trend, and stylish at a great value. The specialty retailer, first incorporated in 1918, has grown to now operate 387 retail and outlet locations in 33 states while also growing a substantial eCommerce business. The Company's portfolio includes branded merchandise from New York & Company, Fashion to Figure, and collaborations with Eva Mendes, Gabrielle Union and Kate Hudson. The Company's branded merchandise is sold exclusively at its retail locations and online at www.nyandcompany.com, www.nyandcompanycloset.com, www.fashiontofigure.com, www.fashiontofigurecloset.com, and www.happyxnature.com. The target customers for the Company's merchandise are women between the ages of 25 and 49.

        In March 2020, the COVID-19 outbreak in the United States initially led to reduced store traffic and the temporary reduction of operating hours for the Company's brick-and-mortar stores. As the impact of COVID-19 evolved, the Company took decisive action to temporarily close all of the Company's brick-and-mortar stores to ensure the health and safety of its employees, customers, and communities. As of the date of this filing, in accordance with the federal and state guidelines and the adoption of new health and safety recommendations resulting from the COVID-19 pandemic, the Company began re-opening its brick-and-mortar stores during the first week of June 2020. The Company cannot reasonably estimate the length or severity of COVID-19. The Company's revenues, results of operations, and cash flows have been materially adversely impacted, and are expected to be further materially adversely impacted, which raises substantial doubt about the Company's ability to continue as a going concern. The Company has already experienced substantial and recurring losses from operations, and such losses have caused a retained deficit of $164.6 million as of February 1, 2020. As such, the Company has been considering available options including restructuring its obligations or seeking protection under the bankruptcy laws in which case there will likely not be any

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value distributed to its shareholders and its shares could be cancelled for no consideration. The Company believes that seeking protection under the bankruptcy laws is probable.

        The Company's fiscal year is a 52- or 53-week year that ends on the Saturday closest to January 31. The 52-week year ended February 1, 2020 and the 52-week year ended February 2, 2019 are referred to herein as "fiscal year 2019" and "fiscal year 2018," respectively. The 52-week year ending January 30, 2021 is referred to herein as "fiscal year 2020."

General

        Net Sales.    Net sales consist of sales from comparable and non-comparable stores. A store is included in the comparable store sales calculation after it has completed 13 full fiscal months of operations from the store's opening date or once it has been reopened after remodeling if the gross square footage did not change by more than 20%. Sales from the Company's eCommerce stores are included in comparable store sales. In addition, recognized royalty revenue and the amortization of signing bonuses received under the Company's private label credit card agreement with Comenity Bank, a subsidiary of Alliance Data Systems Corporation (the "ADS Agreement") are included in comparable store sales. Non-comparable store sales include new stores, stores relocated within the same shopping center and remodeled stores that have a change in gross square footage of more than 20%, which have not completed 13 full fiscal months of operations, sales from closed stores, and sales from stores closed or in temporary locations during periods of remodeling. In addition, in a year with 53 weeks, sales in the last week of the year are not included in determining comparable store sales. Net sales from the sale of merchandise at the Company's stores are recognized when the customer takes possession of the merchandise and the purchases are paid for, primarily with either cash or credit card. Net sales, including shipping fees billed to customers, from the sale of merchandise at the Company's eCommerce stores are recognized when the merchandise is shipped to the customer and the purchases are paid for. A reserve is provided for projected merchandise returns based on prior experience.

        The Company issues gift cards and merchandise credits which do not contain provisions for expiration or inactivity fees. The portion of the dollar value of gift cards and merchandise credits that ultimately is not used by customers to make purchases is known as breakage and will be recognized as revenue, if the Company determines it is not required to escheat such amounts to government agencies under state escheatment laws. The Company recognizes gift card and merchandise credit breakage as revenue as each is redeemed based on their respective historical breakage rate. The Company determined the breakage rates for gift cards and merchandise credits based on their respective historical redemption patterns. The Company recognizes revenue on the remaining unredeemed gift cards and merchandise credits based on determining that the likelihood of redemption is remote and that there is no legal obligation to escheat the unredeemed amounts to relevant jurisdictions.

        Cost of Goods Sold, Buying and Occupancy Costs.    Cost of goods sold, buying and occupancy costs is comprised of direct inventory costs for merchandise sold, distribution costs, shipping costs, payroll and related costs for design, sourcing, production, merchandising, planning and allocation personnel, and store occupancy and related costs.

        Gross Profit.    Gross profit represents net sales less cost of goods sold, buying and occupancy costs.

        Selling, General and Administrative Expenses.    Selling, general and administrative expenses include selling, store management and corporate expenses, including payroll and employee benefits, employment taxes, management information systems, marketing, insurance, legal, store pre-opening and other corporate level expenses. Store pre-opening expenses include store level payroll, grand opening event marketing, travel, supplies and other store opening expenses.

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Fiscal Year 2019 Summary

        Throughout fiscal year 2019, the Company's key strategic initiatives were as follows: (i) leverage its celebrity collaborations to amplify the New York & Company brand, and evolve as a broader lifestyle brand through the growth of the Company's sub-brand strategy, including 7th Avenue Design Studio, Soho Jeans, Soho Street, Eva Mendes Collection, and Gabrielle Union Collection; (ii) enhance brand awareness and increase customer engagement, including new customer acquisition and retention of its loyal customer base to drive traffic online and into stores; (iii) drive growth in eCommerce sales and continue to elevate its omni-channel capabilities by providing an easy and seamless customer experience; (iv) optimize the Company's existing store base; (v) continue ongoing Project Excellence initiatives; and (vi) explore opportunities to invest in growth initiatives. Project Excellence is the Company's ongoing business re-engineering program which consists of a continuous analysis of business processes and organizational structure in an effort to improve sales productivity and operating efficiencies, as well as to reduce the Company's overall cost structure.

        In April 2019, the Company introduced Happy x Nature, Kate Hudson's first ready-to-wear collection supported by Kate Hudson's active and engaged social network. The Company will continue to focus on increasing brand awareness and sales.

        In April 2019, the Company introduced Uncommon Sense, a lingerie lifestyle brand. However, based on the Company's operating results during the nine months ended November 2, 2019 and the necessary decision to focus the Company's resources on improving the performance of the New York & Company brand, the Company decided to prioritize its efforts around its new businesses that have shown early potential, namely Fashion to Figure and Happy x Nature. As such, the Company has exited the Uncommon Sense brand. During fiscal year 2019, the Company recorded a $3.7 million charge to write-down Uncommon Sense inventory and $0.9 million of related severance and asset impairment charges.

        In the beginning of fiscal year 2019, the Company began rebalancing its marketing media mix and increasing its marketing investments to drive customer acquisition, grow its digital business and grow its new brands, Fashion to Figure and Happy x Nature. During the three months ended November 2, 2019, the Company launched its Customer First initiative with the objective to reinvent all aspects of its marketing programs, from data analytics, creative storytelling, personalization and segmentation, and content creation with an intense focus on the customer. The Company remains focused on transforming its marketing efforts to be customer-first, data-driven and creatively optimized, which, when combined the Company believes will elevate the customer experience, engage new customers and retain existing customers.

        Net sales for fiscal year 2019 were $827.0 million, as compared to $893.2 million for fiscal year 2018. Comparable store sales for fiscal year 2019 decreased 5.4%, as compared to an increase of 0.4% for fiscal year 2018. Net loss for fiscal year 2019 was $61.6 million, or a loss of $0.96 per diluted share, as compared to net income of $4.2 million, or earnings of $0.06 per diluted share, for fiscal year 2018. Non-GAAP adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization, adjusted for certain expenses) for fiscal year 2019 was negative $14.7 million, as compared to positive non-GAAP adjusted EBITDA of $33.2 million in fiscal year 2018. Please refer to the "Results of Operations" and "Reconciliation of GAAP to non-GAAP Financial Measures" sections below for a further discussion of the Company's operating results.

        Capital spending was $8.5 million for fiscal year 2019 and fiscal year 2018. During fiscal year 2019, the Company continued to invest in its information technology infrastructure and retail stores. These investments support further omni-channel initiatives, improved store productivity, and increased security levels across the Company's operating systems. During fiscal year 2019, the Company opened 6 New York & Company stores and 2 Fashion to Figure stores, converted 2 New York & Company stores to Outlet stores, remodeled/refreshed 6 existing stores, and closed 31 stores, ending fiscal year 2019 with

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387 stores, including 116 Outlet stores and 1.9 million selling square feet in operation. Included in the New York & Company store count at February 1, 2020 are 64 New York & Company stores that feature 18 Eva Mendes side-by-side stores and 45 New York & Company stores that feature Eva Mendes shop-in-shop boutiques, as well as 1 free-standing Eva Mendes store. As of February 1, 2020, approximately 70% of the Company's store leases could be terminated by the Company within two years.

        On October 24, 2019, the Company amended its existing credit facility with Wells Fargo Bank, N.A. (the "Loan Agreement"). The amendments provide for, but are not limited to: (i) an extension of the term of the revolving credit facility to October 24, 2024; (ii) a reduction of interest rates related to the revolving credit facility; (iii) a reduction of certain fees related to the revolving credit facility; and (iv) a release of certain intangible assets as collateral.

        On March 20, 2020, given the uncertain environment resulting from the COVID-19 pandemic, as a precautionary measure and to preserve financial flexibility, the Company drew down $40 million under the Loan Agreement at an interest rate equal to the LIBOR plus a margin of 1.25%. As a result of the COVID-19 pandemic and steps the Company took in response thereto, subsequent to February 1, 2020 and prior to June 3, 2020, the Company was in default under the Loan Agreement, although the Company did not receive any default notices from Wells Fargo, National Association, administrative agent and lender. The Company has obtained a forbearance of certain specified potential defaults under Amendment No. 2 to the Loan Agreement through June 30, 2020. For further information, see Note 15, "Subsequent Events," to the consolidated financial statement appearing elsewhere in this Annual Report on Form 10-K.

        For further information related to Amendment No. 1 to Fourth Amended and Restated Loan and Security Agreement and Joinder, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" section below.

Results of Operations

        The following tables summarize the Company's results of operations as a percentage of net sales and selected store operating data for fiscal year 2019 and fiscal year 2018:

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        The following table includes store count and selling square feet:

Fiscal Year 2019 Compared to Fiscal Year 2018

        Net Sales.    Net sales for fiscal year 2019 were $827.0 million, as compared to $893.2 million for fiscal year 2018. Comparable store sales for fiscal year 2018 decreased 5.4% following an increase of 0.4% for fiscal year 2018. In the comparable store base, average dollar sales per transaction decreased by 0.3%, and the number of transactions per average store decreased by 5.3%, as compared to fiscal year 2018. Contributing to the decrease in net sales was the Company's closing of 31 stores throughout fiscal year 2019, partially offset by growth in the eCommerce channel and sales from the new Fashion to Figure brand launched in the beginning of fiscal year 2018. Included in net sales for fiscal year 2019 and fiscal year 2018 is $22.1 million and $23.7 million of revenue, respectively, from royalties and the amortization of signing bonuses under the ADS Agreement. For further information, related to the ADS Agreement, please refer to Note 4, "Revenue Recognition" in the Notes to Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K.

        Gross Profit.    Gross profit for fiscal year 2019 was $232.1 million, or 28.1% of net sales, as compared to $279.0 million, or 31.2% of net sales, in fiscal year 2018. The decrease in gross profit as a percentage of net sales during fiscal year 2019, as compared to fiscal year 2018, reflects increased promotional activity, including $3.7 million of inventory markdowns related to the exit of the Uncommon Sense brand, decreased leverage of buying and occupancy costs on lower sales, and increased shipping costs primarily related to increased rates and partially from growth in the Company's eCommerce channel.

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        Selling, General and Administrative Expenses.    Selling, general and administrative expenses were $273.5 million, or 33.1% of net sales, for fiscal year 2019, as compared to $270.9 million, or 30.3% of net sales, for fiscal year 2018. Fiscal year 2019 selling, general and administrative expenses include $0.9 million of charges associated with the exit of the Uncommon Sense brand, $0.6 million of accelerated depreciation related to the re-platform of the Company's existing eCommerce site, $0.3 million of certain severance expense, and a $0.2 million legal accrual reversal. Fiscal year 2018 selling, general and administrative expenses include $3.5 million of non-operating charges, which includes $1.8 million of executive severance expense primarily related to a change in two leadership positions, $0.7 million of consulting expenses related to Project Excellence initiatives, and $1.1 million related to the Company's name change and Registration Statement plus certain other legal expenses.

        The increase in selling, general and administrative expenses as a percentage of net sales for fiscal year 2019, as compared to fiscal year 2018, is primarily due to a 16% increase in marketing expense, as the Company continues to invest in marketing to drive customer acquisition, grow its digital business, and grow its new brands, Fashion to Figure and Happy x Nature, which was partially offset by a decrease in variable compensation expense due to the Company's operating results.

        Loss from impairment charges.    Loss from impairment charges were $20.6 million, or 2.5% of net sales as compared to $1.6 million, or 0.2% of net sales last year. During fiscal year 2019, the Company recorded a non-cash charge of $12.0 million, representing the impairment of store operating lease assets established under the new lease accounting standard (ASU 2016-02, "Leases (Topic 842)") that was adopted as of the first day of fiscal year 2019. In addition, the Company recorded $8.6 million of non-cash impairment charges primarily related to underperforming store assets. This was primarily related to the Company's comprehensive review of its real estate portfolio and its plans to reposition itself as a digitally dominant retailer.

        Operating (Loss) Income.    For the reasons discussed above, operating loss for fiscal year 2019 was $61.9 million, or 7.5% of net sales, as compared to operating income of $6.5 million, or 0.7% of net sales, for fiscal year 2018.

        Interest Income, Net.    Net interest income was $0.8 million for fiscal year 2019 and fiscal year 2018.

        Loss on extinguishment of debt.    In connection with the early repayment of the $11.5 million outstanding balance of a $15 million, 5-year term loan (the "Term Loan") on April 5, 2018, the Company wrote off $0.2 million of unamortized deferred financing fees during fiscal year 2018. The Company can no longer borrow funds under the Term Loan.

        Provision for Income Taxes.    Provision for income taxes was $0.5 million for fiscal year 2019, as compared to $2.8 million for fiscal year 2018. The decrease in the provision for income taxes in fiscal year 2019, as compared to fiscal year 2018, is primarily due to a $1.6 million assessment related to a multi-year state tax audit and the adjustment of various other state tax reserves in the prior year. The Company continues to provide for adjustments to the deferred tax valuation allowance. For further information related to the deferred tax valuation allowance, please refer to Note 13, "Income Taxes" in the Notes to Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K.

        Net (Loss) Income.    For the reasons discussed above, net loss was $61.6 million, or a loss of $0.96 per diluted share, for fiscal year 2019, as compared to net income of $4.2 million, or earnings of $0.06 per diluted share, for fiscal year 2018.

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Reconciliation of GAAP to Non-GAAP Financial Measures

        A reconciliation of the Company's GAAP operating income (loss) to non-GAAP adjusted operating income (loss), and a reconciliation of GAAP net income (loss) to adjusted EBITDA, a non-GAAP measure, is indicated below for fiscal year 2019 and fiscal year 2018. Adjusted operating income (loss) and adjusted EBITDA are being presented because these are key measures used by the Company's management and board of directors to understand and evaluate the Company's core operating performance and trends, to prepare the financial budget and to develop short and long-term operational plans. In particular, the exclusion of certain expenses in calculating adjusted operating income (loss) and adjusted EBITDA can provide a useful measure for period-to-period comparisons of the Company's core business. Accordingly, the Company believes that adjusted operating income (loss) and adjusted EBITDA provide useful information to investors and others in understanding and evaluating the Company's operating results in the same manner as the Company's management and its board of directors. This non-GAAP financial information should be considered in addition to, not as a substitute for or as being superior to, measures of financial performance prepared in accordance with GAAP.

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        A reconciliation of the Company's GAAP net income (loss) to adjusted EBITDA, a non-GAAP measure, is indicated below:

Seasonality

        The Company views the retail apparel market as having two principal selling seasons: spring (first and second quarter) and fall (third and fourth quarter). New product lines are introduced into the Company's stores in five major deliveries each year (spring, summer, fall, holiday and pre-spring). The Company's business experiences seasonal fluctuations in net sales and operating income, with a larger portion of its sales typically realized during its fourth quarter. Seasonal fluctuations also affect inventory levels. The Company must carry a significant amount of inventory, especially before the holiday season selling period in the fourth quarter and prior to the Easter and Mother's Day holidays toward the latter part of the first quarter and beginning of the second quarter. Due to COVID-19 overlapping the important holiday season selling period of Easter and Mother's Day, the Company was left with significant unsold inventory during Spring 2020.

Liquidity and Capital Resources

        The Company may not be able to mitigate the impact COVID-19 has had and will have on its business and has been considering available options including restructuring its obligations or seeking protection under the bankruptcy laws, in which case there will likely not be any value distributed to the Company's shareholders and its shares could be cancelled for no consideration. The Company believes that seeking protection under the bankruptcy laws is probable.

        As previously announced, on June 3, 2020, RTW Retailwinds, Inc. and its wholly-owned direct and indirect subsidiaries, including Lerner New York, Inc., Lernco, Inc., Lerner New York Outlet, LLC, Lerner New York FTF, LLC, Lerner New York Holding, Inc., New York & Company Stores, Inc., Lerner New York GC, LLC and FTF GC, LLC entered into Amendment No. 2 to Fourth Amended and Restated Loan and Security Agreement and Joinder ("Amendment No. 2") with Wells Fargo Bank, National Association, as administrative agent and lender, which amends the Loan Agreement. The provisions of the Loan Agreement amended by Amendment No. 2 include, among other things: (i) reduction to the sub-facility for issuance of letters of credit (see below); (ii) increased interest rates applicable to Revolving Loans (see below); (iii) a current repayment of $20 million of amounts outstanding under the Loan Agreement; (iv) full repayment of the amounts outstanding under the Loan Agreement by August 15, 2020; (v) starting June 13, 2020, the sweep of cash in excess of $40 million to pay down amounts outstanding under the Loan Agreement; (vi) revised reporting requirements; (vii) reduction in advance rates used for the Borrowing Base calculation; and

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(viii) forbearance until June 30, 2020 of certain specified potential defaults. Please refer to the Company's Current Report on Form 8-K filed June 4, 2020 for a further description and copy of Amendment No. 2.

        The Company's primary uses of cash are to fund working capital, operating expenses, debt service and capital expenditures related primarily to the construction of new stores, remodeling/refreshing of existing stores, the development of the Company's information technology infrastructure, including the upgrade of corporate technology systems and the enhancement of its omni-channel capabilities. Historically, the Company has financed these requirements from internally generated cash flow. As a result of the COVID-19 pandemic and steps the Company took in response thereto, subsequent to February 1, 2020 and prior to June 3, 2020, the Company was in default under the Loan Agreement, although the Company did not receive any default notices from Wells Fargo, National Association, administrative agent and lender. The Company has obtained a forbearance of certain specified potential defaults under Amendment No. 2 to the Loan Agreement through June 30, 2020. For further information, see Note 15, "Subsequent Events," to the consolidated financial statement appearing elsewhere in this Annual Report on Form 10-K.

        The Company does not believe that cash flows from operations, its current cash balance and funds available under its credit facility will be sufficient to meet its working capital needs and planned capital expenditures through fiscal year 2020. Because of the COVID-19 outbreak, there is significant uncertainty surrounding the existing and future impact on the Company's results of operations and cash flows. The Company is proactively taking steps to increase available cash on hand including, but not limited to, targeted reductions in discretionary operating expenses and capital expenditures.

Operating Activities

        Net cash used in operating activities was $24.5 million during fiscal year 2019, as compared to net cash provided by operating activities of $27.1 million during fiscal year 2018. The increase in cash used in operating activities during fiscal year 2019, as compared to fiscal year 2018, is primarily the result of the Company's net loss during fiscal year 2019.

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Investing Activities

        Net cash used in investing activities was $8.1 million and $8.2 million, during fiscal year 2019 and fiscal year 2018, respectively. During fiscal year 2019, capital spending of $5.6 million was primarily related to spending on non-store capital projects, which principally represent continued investments in the Company's information technology infrastructure, eCommerce stores and mobile applications. In addition, the Company also had capital spending of $2.9 million related to the opening of 6 New York & Company stores, 2 Fashion to Figure stores, and the remodeling/refreshing of 6 existing locations. The $8.5 million of capital expenditures was partially offset by $0.4 million of insurance recoveries.

        As of February 1, 2020, approximately 70% of the Company's store leases could be terminated by the Company within two years.

Financing Activities

        Net cash used in financing activities was $2.2 million and $14.3 million in fiscal year 2019 and fiscal year 2018, respectively. Net cash used in financing activities during fiscal year 2019 consisted of $1.7 million of principal payments on capital lease obligations, $0.4 million of financing costs, and $0.1 million of employee payroll taxes for which shares were withheld. Net cash used in financing activities during fiscal year 2018 consisted primarily of the $11.5 million early repayment of the Term Loan, a $0.3 million quarterly amortization payment of the Term Loan, $2.0 million of principal payments on capital lease obligations, and $0.6 million of employee payroll taxes for which shares were withheld.

Long-Term Debt and Credit Facilities

        On October 24, 2019, RTW Retailwinds, Inc. and its wholly-owned direct and indirect subsidiaries, including Lerner New York, Inc., Lernco, Inc., Lerner New York Outlet, LLC, Lerner New York FTF, LLC, Lerner New York Holding, Inc., New York & Company Stores, Inc., Lerner New York GC, LLC and FTF GC, LLC entered into Amendment No. 1 to Fourth Amended and Restated Loan and Security Agreement and Joinder (the "Amendment") with Wells Fargo Bank, National Association, as administrative agent and lender, which amends that certain Fourth Amended and Restated Loan and Security Agreement, dated October 24, 2014 (the "Existing Agreement", as amended by the Amendment, the "Loan Agreement"). The Existing Agreement was scheduled to mature on October 24, 2019. All capitalized terms used herein without definition have the meanings ascribed to such terms in the Loan Agreement.

        The amendment to the Existing Agreement provides for, but is not limited to: (i) an extension of the term of the revolving credit facility to October 24, 2024; (ii) a reduction of interest rates related to the revolving credit facility (see below); (iii) a reduction of certain fees related to the revolving credit facility (see below); and (iv) a release of certain intangible assets as collateral.

        The maximum revolving credit facility commitment remains unchanged, providing the Company with up to $100 million of credit, consisting of a $75 million revolving credit facility (which includes a sub-facility for issuance of letters of credit up to $45 million), and a fully committed accordion option that allows the Company to increase the revolving credit facility up to $100 million in the aggregate or decrease it to a minimum of $60 million in the aggregate, subject to certain restrictions. Borrowing availability under the Company's revolving credit facility is determined by a monthly borrowing base calculation based on applying specified advance rates against inventory and certain other eligible assets. Under the Loan Agreement, the Company continues to be subject to a Minimum Excess Availability covenant equal to the greater of (i) 10% of the revolving credit facility commitment and (ii) $7.5 million. The Loan Agreement contains other covenants and conditions, including restrictions on the Company's ability to pay dividends on its common stock, incur additional indebtedness and to

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prepay, redeem, defease or purchase other debt. Subject to such restrictions, the Company may incur more debt for working capital, capital expenditures, stock repurchases, acquisitions and for other purposes.

        Under the terms of the Loan Agreement, the interest rates applicable to Revolving Loans have been reduced by 25 basis points. At the Company's option, Revolving Loans now bear interest at either (i) a floating rate equal to the LIBOR plus a margin of between 1.25% and 1.50% per year for LIBOR Rate Loans or (ii) a floating rate equal to the Base Rate plus a margin of between 0.25% and 0.50% per year for Base Rate Loans, with each such margin determined based upon the Company's Average Compliance Excess Availability. The fees the Company pays to the Lenders under the Loan Agreement have also been reduced and now the Company pays a monthly fee on outstanding commercial letters of credit at a rate of between 0.625% and 0.75% per year and on standby letters of credit at a rate of between 1.25% and 1.50% per year, with each such rate determined upon the Company's Average Compliance Excess Availability, plus a monthly fee on a proportion of the unused commitments under the Loan Agreement, which has been reduced to a rate of 0.20% per year.

        The maximum borrowing availability under the Loan Agreement is determined by a monthly borrowing base calculation based on applying specified advance rates against inventory and certain other eligible assets. As of February 1, 2020, the Company had availability under the Loan Agreement of $43.5 million, net of letters of credit outstanding of $8.2 million, as compared to availability of $35.0 million, net of letters of credit outstanding of $11.9 million, as of February 2, 2019. The $8.2 million of letters of credit outstanding at February 1, 2020 represent $8.1 million of standby letters of credit primarily related to the Company's corporate headquarters and certain insurance contracts and $0.1 million of commercial letters of credit. As of February 1, 2020, the Company had no borrowings outstanding under the Loan Agreement.

        On March 20, 2020, given the uncertain environment resulting from the COVID-19 pandemic, as a precautionary measure and to preserve financial flexibility, the Company drew down $40 million under the Loan Agreement at an interest rate equal to the LIBOR plus a margin of 1.25%. As a result of the COVID-19 pandemic and steps the Company took in response thereto, subsequent to February 1, 2020 and prior to June 3, 2020, the Company was in default under the Loan Agreement, although the Company did not receive any default notices from Wells Fargo, National Association, administrative agent and lender. The Company has obtained a forbearance of certain specified potential defaults under Amendment No. 2 to the Loan Agreement through June 30, 2020. For further information, see Note 15, "Subsequent Events," to the consolidated financial statement appearing elsewhere in this Annual Report on Form 10-K.

        The lender has been granted a pledge of the common stock of Lerner New York Holding, Inc. and certain of its subsidiaries, and a first priority security interest in substantially all other tangible assets of RTW Retailwinds, Inc. and its subsidiaries, as collateral for the Company's obligations under the Loan Agreement. In addition, RTW Retailwinds, Inc. and certain of its subsidiaries have fully and unconditionally guaranteed the obligations under the Loan Agreement, and such guarantees are joint and several.

Cash Requirements

        The Company does not believe that cash flows from operations, its current cash balance and funds available under its credit facility will be sufficient to meet its working capital needs and planned capital expenditures through fiscal year 2020. As a result of the impact of COVID-19 on the Company's operations as described above, management has determined that there is a substantial doubt about the Company's ability to continue as a going concern over the next twelve months and the Company's independent auditors have included a "going concern" explanatory paragraph in their report on the Company's financial statements as of and for the year ended February 1, 2020 included herein.

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        The Company may not be able to mitigate the impact COVID-19 has had and will have on its business and has been considering available options including restructuring its obligations or seeking protection under the bankruptcy laws in which case there will likely not be any value distributed to its shareholders and its shares could be cancelled for no consideration. The Company believes that seeking protection under the bankruptcy laws is probable.

Off-Balance Sheet Arrangements

        The Company does not have any off-balance sheet arrangements as defined by Item 303(a)(4) of Regulation S-K.

Commercial Commitments

        The following table summarizes the Company's commercial commitments as of February 1, 2020:

        Critical Accounting Policies.    The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that impact the amounts reported on the Company's consolidated financial statements and related notes. On an ongoing basis, management evaluates its estimates and judgments, including those related to inventories, long-lived assets, including right-of-use assets, intangible assets, and income taxes. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ materially from these judgments. Management believes the following estimates and assumptions are most significant to reporting the Company's results of operations and financial position.

        Inventory Valuation.    Inventories are valued at the lower of average cost or market, on a weighted average cost basis, using the retail method. The estimated market value of inventory is determined based on an analysis of historical sales trends of individual product categories, the impact of market trends and economic conditions, and a forecast of future demand, as well as plans to sell through inventory. Estimates may differ from actual results due to the quantity, quality, and mix of products in inventory, consumer and retailer preferences, and market conditions. The Company records a charge to cost of goods sold, buying and occupancy costs for all inventory on-hand when a permanent retail price reduction is reflected in its stores. In addition, management makes estimates and judgments regarding, among other things, initial markup, markdowns, future demand and market conditions, all of which significantly impact the ending inventory valuation. If actual future demand or market conditions are different than those projected by management, future period merchandise margin rates may be unfavorably or favorably affected. Other significant estimates related to inventory include shrink and obsolete and excess inventory which are also based on historical results and management's operating projections.

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        Impairment of Long-Lived Assets.    The Company evaluates long-lived assets in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification^TM ("ASC") Topic 360, "Property, Plant and Equipment." Long-lived assets are evaluated for recoverability whenever events or changes in circumstances indicate that an asset may have been impaired. The evaluation is performed at the individual store level, which is the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. In evaluating long-lived assets for recoverability, the Company estimates the future cash flows at the individual store level that are expected to result from the use of each store's assets based on historical experience, omni-channel strategy, knowledge, and market data assumptions. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the long-lived assets, an impairment loss, equal to the excess of the carrying amount over the fair value of the assets, is recognized. An impairment loss could have a material adverse impact on the Company's financial condition and results of operations. For further information related to the impairment of long-lived assets, please refer to Note 7, "Property and Equipment," in the Notes to Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K.

        Similarly, for right-of-use assets, these assets are evaluated for recoverability whenever events or changes in circumstances indicate that an asset may have been impaired, and are evaluated at the individual store level which is the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. However, in evaluating long-lived assets for recoverability, the Company determines the fair value of the assets by discounting the estimated market rental rates over the remaining term of the lease. These estimates can be affected by factors such as future store results, real estate demand, store closure plans, property specific discount rates, and economic conditions that can be difficult to predict. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the long-lived assets, an impairment loss, equal to the excess of the carrying amount over the fair value of the assets, is recognized. For further information related to the impairment of right-of-use assets, please refer to Note 3, "Leases," in the Notes to Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K.

        Intangible Assets.    The Company follows ASU 2012-02, "Testing Indefinite-Lived Intangible Assets for Impairment," which amends FASB ASC Topic 350, "Intangibles—Goodwill and Other" to permit an entity to first assess qualitative factors to determine if it is more likely than not that an indefinite-lived intangible asset is impaired and whether it is necessary to perform the impairment test of comparing the carrying amount with the recoverable amount of the indefinite-lived intangible asset.

        The Company's intangible assets relate to the New York & Company trademarks, which were initially valued at $14.8 million, and the Fashion to Figure trademarks and customer list acquired on February 2, 2018, which were valued at $1.4 million and $0.8 million, respectively. The New York & Company trademarks were initially valued using the "relief from royalty method" and were determined to have indefinite lives. The value of the Fashion to Figure trademarks and customer list represents the Company's cost to acquire such assets on February 2, 2018. The Company has determined the Fashion to Figure trademarks to have indefinite lives, and the customer list to have a useful life of five years over which time the value of the customer list will be amortized into selling, general and administrative expenses on the consolidated statement of operations.

        The Company's fiscal year 2019 and fiscal year 2018 impairment tests resulted in a fair value that significantly exceeded the carrying amount of the Company's trademarks. The calculation of estimated fair values used in the evaluation of long-lived assets and intangible assets requires estimates of future cash flows, growth rates, discount rates and other variables that are based on historical experience, knowledge, and market data. If actual experience differs materially from management's estimates or if changes in strategic direction occur, an impairment charge may be required. Management's estimates may be affected by factors such as those outlined in "Item 1A. Risk Factors." An impairment loss could have a material adverse impact on the Company's results of operations. In addition to assessing

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qualitative factors that could impact the fair value of the New York & Company and Fashion to Figure trademarks, the Company performed a sensitivity analysis on the key assumptions used in the trademark impairment analysis and has determined that a significant, negative change in the assumptions would not impact the Company's conclusion that no impairment was required.

        Income Taxes.    Income taxes are calculated in accordance with ASC Topic 740, "Income Taxes" ("ASC 740"), which requires the use of the liability method. Deferred tax assets and liabilities are recognized based on the difference between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Inherent in the measurement of deferred balances are certain judgments and interpretations of enacted tax laws and published guidance with respect to applicability to the Company's operations. A valuation allowance is established against deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The provisions in ASC 740 related to accounting for uncertain tax positions prescribe a comprehensive model of how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. In accordance with these provisions, the Company recognizes a tax benefit when a tax position is more likely than not to be sustained upon examination, based solely on its technical merits. The Company measures the recognized tax benefit as the largest amount of tax benefit that has greater than a 50% likelihood of being realized upon the ultimate settlement with a taxing authority. The Company reverses a previously recognized tax benefit if it determines that the tax position no longer meets the more-likely-than-not threshold of being sustained. The Company accrues interest and penalties related to unrecognized tax benefits in income tax expense. For further information related to deferred tax assets and the related valuation allowance, please refer to Note 13, "Income Taxes," in the Notes to Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K.

Recently Issued Accounting Pronouncements

        Please refer to Note 2, "Summary of Significant Accounting Policies," in the Notes to Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K.

Item 7A.    Quantitative and Qualitative Disclosures about Market Risk

        As a "smaller reporting company," the Company is not required to provide the information required by this Item.

Item 8.    Financial Statements and Supplementary Data

        The financial statements and schedule included in Part IV, "Item 15. Exhibits and Financial Statement Schedules" of this Annual Report on Form 10-K are incorporated herein by reference.

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

        None.

Item 9A.    Controls and Procedures

(a)

Evaluation of disclosure controls and procedures

        The Company carried out an evaluation, as of February 1, 2020, under the supervision and with the participation of the Company's management, including the Company's Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures are

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effective in ensuring that all information required to be filed in this Annual Report on Form 10-K was (i) recorded, processed, summarized and reported within the time period specified in the Securities and Exchange Commission's rules and forms and (ii) that the disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its Principal Executive and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b)

Report of management on internal control over financial reporting

        The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. The Company's internal control over financial reporting is a process designed to provide reasonable assurance to the Company's management and Board of Directors regarding the reliability of financial reporting and the preparation and fair presentation of published financial statements in accordance with accounting principles generally accepted in the United States.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of the effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        Management assessed the effectiveness of the Company's internal control over financial reporting as of February 1, 2020. In making this assessment, management used the criteria established in the Internal Control—Integrated Framework report issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the "COSO criteria").

        Based upon management's assessment and the COSO criteria, the Company's Principal Executive Officer and Principal Financial Officer believes that the Company maintained effective internal control over financial reporting as of February 1, 2020.

        The Company's independent auditors, BDO USA, LLP, an independent registered public accounting firm, have audited and reported on the consolidated financial statements of the Company and the effectiveness of the Company's internal control over financial reporting. The reports of the independent auditors appear below and on page 49 herein and expressed unqualified opinions on the consolidated financial statements and the effectiveness of the Company's internal control over financial reporting.

(c)

Changes in internal control over financial reporting

        There has been no change in the Company's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rule 13a-15 or 15d-15 that occurred during the Company's last fiscal quarter (the Company's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To Board of Directors and Stockholders
RTW Retailwinds, Inc.
New York, New York

Opinion on Internal Control over Financial Reporting

        We have audited the RTW Retailwinds, Inc. (formerly known as New York & Company, Inc.) and subsidiaries' (the "Company") internal control over financial reporting as of February 1, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the "COSO criteria"). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 1, 2020, based on the COSO criteria.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the consolidated balance sheets of the Company as of February 1, 2020 and February 2, 2019 , the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for each of the two fiscal years in the period ended February 1, 2020, and the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the "consolidated financial statements") and our report dated June 9, 2020 expressed an unqualified opinion thereon.

Basis for Opinion

        The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying "Item 9A. Controls and Procedures." Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

        We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide

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reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, LLP

We have served as the Company's auditor since 2016.

New York, New York
June 9, 2020

Item 9B.    Other Information

        None.

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PART III

Item 10.    Directors, Executive Officers and Corporate Governance

        The information required by this Item is incorporated herein by reference from the Company's Proxy Statement for the 2020 Annual Meeting of its Stockholders.

Item 11.    Executive Compensation

        The information required by this Item is incorporated herein by reference from the Company's Proxy Statement for the 2020 Annual Meeting of its Stockholders.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

        The information required by this Item is incorporated herein by reference from the Company's Proxy Statement for the 2020 Annual Meeting of its Stockholders.

Item 13.    Certain Relationships and Related Transactions, and Director Independence

        The information required by this Item is incorporated herein by reference from the Company's Proxy Statement for the 2020 Annual Meeting of its Stockholders.

Item 14.    Principal Accountant Fees and Services

        The information required by this Item is incorporated herein by reference from the Company's Proxy Statement for the 2020 Annual Meeting of its Stockholders.

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PART IV

Item 15.    Exhibits and Financial Statement Schedules

(a)

List of documents filed as part of this Annual Report:

1.

The following consolidated financial statements of the Company are filed as part of this Annual Report:

•

Report of Independent Registered Public Accounting Firm;

•

Consolidated Statements of Operations;

•

Consolidated Statements of Comprehensive (Loss) Income;

•

Consolidated Balance Sheets;

•

Consolidated Statements of Cash Flows;

•

Consolidated Statements of Stockholders' Equity; and

•

Notes to Consolidated Financial Statements.

2.

Financial Statement Schedule II Valuation and Qualifying Accounts

3.

Exhibits

        The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this Form 10-K.

Item 16.    Form 10-K Summary

        None.

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SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on June 9, 2020.

        Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated.

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RTW Retailwinds, Inc. and Subsidiaries

Consolidated Financial Statements

Index to Financial Statements

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To Board of Directors and Stockholders
RTW Retailwinds, Inc.
New York, New York

Opinion on the Consolidated Financial Statements

        We have audited the accompanying consolidated balance sheets of RTW Retailwinds, Inc. (formerly known as New York & Company, Inc.) and subsidiaries (the "Company") as of February 1, 2020 and February 2, 2019 , the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for each of the two fiscal years in the period ended February 1, 2020, and the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at February 1, 2020 and February 2, 2019, and the results of its operations and its cash flows for each of the two fiscal years in the period ended February 1, 2020, in conformity with accounting principles generally accepted in the United States of America.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of February 1, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June 9, 2020 expressed an unqualified opinion thereon.

Going Concern Uncertainty

        The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

        The COVID-19 pandemic has had a material adverse effect on the Company's results of operations, cash flows and liquidity. The Company has disclosed that it cannot reasonably estimate the length or severity of COVID-19 but it currently anticipates a material adverse impact on its financial position, revenues, results of operations, and cash flows during fiscal year 2020, which have been adversely impacted in the period subsequent to February 1, 2020.

        The Company has experienced substantial and recurring losses from operations and has deferred payment of amounts due to landlords and vendors. The Company has not paid rent to its landlords for its store locations for the months of April 2020 and May 2020. In addition, the Company has not made recent payments to many of its vendors. As of the date of this filing, the Company has received default notices from many landlords and vendors for non-payment. The Company may be in default of all of its store lease agreements as of the date of this filing but has not yet received a default notification from all landlords. All of the Company's retail stores closed on March 19, 2020, which has led to a subsequent impairment of the carrying values of the Company's inventory, right-of-use assets, fixed assets and other long-term assets, which the Company expects to be substantial and material.

        Further, the Company was in default under its Loan Agreement with Wells Fargo Bank, National Association and has obtained a forbearance of existing defaults under Amendment No. 2 to the Loan Agreement through June 30, 2020.

        As a consequence of the conditions present, the Company has been considering available options including restructuring its obligations or seeking protection under the bankruptcy laws, in which case there will likely not be any value distributed to its shareholders and its shares could be cancelled for no consideration. The Company has informed us that they believe that seeking protection under the

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bankruptcy laws is probable. The Company believes without seeking protection under the bankruptcy laws it does not have ability to raise additional capital at this time.

        These conditions result in substantial doubt about the Company's ability to continue as a going concern. Management's plans regarding these matters are also described in Note 1 of the Notes to the consolidated financial statements. Further information regarding this uncertainty can be found in the subsequent event disclosure in Note 15 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.

Change in Accounting Method Related to Leases

        As discussed in Notes 2 and 3 to the consolidated financial statements, the Company has changed its method of accounting for leases during the year ended February 1, 2020 due to the adoption of the Accounting Standards Update, Leases (Topic 842).

Basis for Opinion

        These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

        We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

        Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ BDO USA, LLP

We have served as the Company's auditor since 2016.

New York, New York
June 9, 2020

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RTW Retailwinds, Inc. and Subsidiaries

Consolidated Statements of Operations

RTW Retailwinds, Inc. and Subsidiaries

Consolidated Statements of Comprehensive (Loss) Income

See accompanying notes.

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RTW Retailwinds, Inc. and Subsidiaries

Consolidated Balance Sheets