XML 64 R27.htm IDEA: XBRL DOCUMENT v3.20.1
Subsequent Events (Notes)
12 Months Ended
Feb. 01, 2020
Subsequent Events [Abstract]  
Subsequent Events
Subsequent Events
Impact of COVID-19 on the Company's Business
The COVID-19 pandemic may have a significant impact on the Company's business, including operations and customer demand. There is significant uncertainty concerning the magnitude of the impact and duration of the COVID-19 pandemic. The following events related to the COVID-19 pandemic may result in lost revenue to the Company: limitations on the ability of manufacturers to manufacture the products the Company sells; limitations on the ability of the Company's suppliers to obtain the products it sells or to meet delivery requirements and commitments; limitations on the ability of the Company's employees to perform their work due to illness caused by the pandemic or local, state or federal orders requiring associates to remain at home; limitations on the ability of grounds and air transport to deliver the Company's packages to customers; limitations on the ability of the Company's customers to purchase the Company's products and services; disruptions to the Company's customers’ supply chains or purchasing patterns; and limitations on the ability of our customers to pay us on a timely basis.
The Company is experiencing disruptions in its business as it implements modifications to employee and on-air experts travel, employee work locations and cancellation of remote broadcasts, among other modifications. Certain states have issued executive orders requiring all workers to remain at home, unless their work is critical, essential or life-sustaining. Based on the various standards published to date, the work the Company's employees perform may not qualify as critical, essential or life-sustaining and could be adversely impacted by such orders. During the first quarter of fiscal 2020, the Company eliminated approximately 300 positions as a result of and to prepare for the potential financial impacts of the COVID-19 pandemic. In addition, the Company may need to further reduce its employee base as a result of COVID-19. Looking ahead, the Company has developed contingency plans to reduce costs further if the situation continues to deteriorate. The Company will continue to actively monitor the situation and may take further actions that alter the Company's business operations as may be required by federal, state or local authorities or that the Company determines are in the best interests of its associates, customers, suppliers and shareholders. As a result, at the time of this filing, the Company is unable to determine or predict the overall impact the COVID-19 pandemic will have on our business, results of operations, liquidity or capital resources.
Private Placement Securities Purchase Agreement
On April 14, 2020, the Company entered into a common stock and warrant purchase agreement with certain individuals and entities, pursuant to which the Company will issue and sell an aggregate of 1,958,384 shares of the Company's common stock and warrants to purchase an aggregate of 979,190 shares of our common stock in a private placement, for an aggregate cash purchase price of $4,000,000.
The initial closing occurred on April 16, 2020 and the Company issued an aggregate of 734,394 shares and warrants to purchase an aggregate of 367,197 shares of the Company's common stock for an aggregate cash purchase price of $1,500,000. Pursuant to the purchase agreement, subsequent closings each with an aggregate cash purchase price of $500,000, are expected to occur on each of May 23, 2020, June 1, 2020, and June 13, 2020, in which an aggregate of 244,798 shares and warrants to purchase an aggregate of 122,399 shares of the Company's common stock will be issued and sold at each closing, and a closing with an aggregate cash purchase price of $1,000,000 is scheduled to occur on July 11, 2020, in which an aggregate of 489,596 shares and warrants to purchase an aggregate of 244,798 shares of the Company's common stock will be issued and sold at this closing. The warrants will have an exercise price per share of $2.66 and are exercisable at any time and from time to time from six months following their issuance date until April 14, 2025. The Company has included a blocker provision in the purchase agreement whereby no purchaser may be issued shares of our common stock if the purchaser would own over 19.999% of our outstanding common stock and, to the extent a purchaser in this offering would own over 19.999% of the Company's outstanding common stock, that purchaser will receive fully-paid warrants (in contrast to the coverage warrants that will be issued in this transaction, as described above) in lieu of the shares that would place such holder’s ownership over 19.999%. Further, the Company included a similar blocker in the warrants (and amended the warrants purchased by the purchasers on May 2, 2019, if any) whereby no purchaser of the warrants may exercise a warrant if the holder would own over 19.999% of our outstanding common stock.
In addition, Sterling Time, an affiliate of Mr. Friedman, agreed that the Company is not required to pay any amounts otherwise payable to Sterling Time for providing vendor goods and services to the Company so long as the Company’s accounts payable balance to Sterling Time does not exceed (a) $3,000,000 through the last day of the Company’s third fiscal quarter of fiscal year 2020 and (b) $4,000,000 during the Company’s fourth fiscal quarter of fiscal year 2020.
The purchasers consist of the following: Invicta Media Investments, LLC, Michael and Leah Friedman and Hacienda Jackson LLC. Invicta Media Investments, LLC is owned by Invicta Watch Company of America, Inc., which is the designer and manufacturer of Invicta-branded watches and watch accessories, one of our largest and longest tenured brands. Michael and Leah Friedman are owners and officers of Sterling Time, LLC , which is the exclusive distributor of Invicta Watch Company of America’s watches and watch accessories for television home shopping and our long-time vendor. Invicta Watch Company of America is owned by our Vice Chair and director, Eyal Lalo, and Michael Friedman also serves as a director of our company. Further, Invicta Media Investments, LLC and Michael and Leah Friedman comprise a “group” of investors within the meaning of Section 13(d)(3) of the Securities and Exchange Act of 1934, as amended, that is our largest stockholder.
Under the purchase agreement, the purchasers agreed to customary standstill provisions related to our company for a period of two years through May 2, 2022, as well as to vote their shares in favor of matters recommended by our board of directors for approval by our shareholders for the same time period. Additionally, on April 14, 2020, we entered into a registration rights agreement with the purchasers, pursuant to which we agreed to register the shares of common stock and the shares issuable upon exercise of warrants held by the purchasers in accordance with the terms and conditions therein.