Fair Value Measurements

3 Months Ended

May 01, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

6. Fair Value Measurements

Certain assets and liabilities are carried at fair value in accordance with GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

• Level 1 - Quoted prices in active markets for identical assets or liabilities.

• Level 2 - Observable inputs, other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices for similar assets or liabilities in markets that are not active; or other inputs other than quoted prices that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities, including interest rates and yield curves, and market corroborated inputs.

• Level 3 - Unobservable inputs for the asset or liability that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. These are valued based on management’s estimates and assumptions that market participants would use in pricing the asset or liability.

The following table presents the carrying value and fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of May 1, 2021 (in thousands):

			Fair Value
	Carrying Value		Level 1		Level 2		Level 3
Recurring fair value measurements:
Warrants	$	34,642	$	-	$	34,642	$	-
Derivative liability		4,586		-		4,586		-
Total recurring fair value measurements	$	39,228	$	-	$	39,228	$	-
Financial instruments not carried at fair value:
Total debt	$	231,741	$	-	$	225,820	$	-
Total financial instruments not carried at fair value	$	231,741	$	-	$	225,820	$	-

The following table presents the carrying value and fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of January 30, 2021 (in thousands):

			Fair Value
	Carrying Value		Level 1		Level 2		Level 3
Recurring fair value measurements:
Warrants	$	15,997	$	-	$	15,997	$	-
Derivative liability		2,436		-		2,436		-
Total recurring fair value measurements	$	18,433	$	-	$	18,433	$	-
Financial instruments not carried at fair value:
Total debt	$	231,511	$	-	$	220,010	$	-
Total financial instruments not carried at fair value	$	231,511	$	-	$	220,010	$	-

The Company determines the fair value of its financial assets and liabilities using the following methodologies:

• Warrants - The fair value is determined based on a pricing model that uses share prices from actively quoted stock markets that are readily accessible and observable.

• Derivative Liability - The fair value is determined using an option pricing model with a Monte Carlo simulation. Key assumptions include the Company’s stock price, 90.6% volatility, 0.01% risk-free rate and 0.0% dividend yield.

• Debt - These debt instruments include the Term Loan, Priming Loan and subordinated term loan. The debt instruments are recorded at cost, net of debt issuance costs and any related discount. The fair value of the debt instruments is obtained based on observable market prices quoted on public exchanges for similar instruments.

The methodology used by the Company to determine the fair value of its financial assets and liabilities at May 1, 2021, is the same as that used at January 30, 2021.

The Company believes that the carrying amounts of its other financial instruments, including cash, accounts receivable, accounts payable and any amounts drawn on its revolving credit facilities, consisting primarily of instruments without extended maturities, based on management’s estimates, approximates their fair value due to the short-term maturities of these instruments.

Assets and Liabilities with Recurring Fair Value Measurements - Certain assets and liabilities may be measured at fair value on an ongoing basis. We did not elect to apply the fair value option for recording financial assets and financial liabilities. Other than the warrants, derivative liability and total debt, we do not have any assets or liabilities which we measure at fair value on a recurring basis.

Assets and Liabilities with Nonrecurring Fair Value Measurements - Certain assets and liabilities are not measured at fair value on an ongoing basis. These assets and liabilities, which include long-lived assets, goodwill, and intangible assets, are subject to fair value adjustment in certain circumstances. From time to time, the fair value is determined on these assets as part of related impairment tests. Other than impairment accounting adjustments, no adjustments to fair value or fair value measurements were required for non-financial assets and liabilities for all periods presented. See Note 4, Assets Impairments, for additional information.