Basis of Presentation

The unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared by Christopher & Banks Corporation and its subsidiaries (collectively referred to as “Christopher & Banks”, “the Company”, “we” or “us”) pursuant to the current rules and regulations of the United States ("U.S.") Securities and Exchange Commission. Accordingly, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been omitted, pursuant to such rules and regulations. These unaudited condensed consolidated financial statements, except the condensed consolidated balance sheet as of February 3, 2018 derived from the Company's audited financial statements, should be read in conjunction with the audited financial statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended February 3, 2018.

The results of operations for the interim period shown in this report are not necessarily indicative of results to be expected for the full fiscal year. In the opinion of management, the information contained herein reflects all adjustments, consisting only of normal adjustments, except as otherwise stated in these notes, considered necessary to present fairly our financial position, results of operations, and cash flows as of May 5, 2018, and April 29, 2017 and for all periods presented.

Recently issued accounting pronouncements

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases, which requires that any lease arrangements longer than twelve months result in an entity recognizing an asset and liability on its balance sheet. The updated guidance is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted. The provisions of this new guidance are to be applied using a modified retrospective approach, with elective reliefs. The Company is currently evaluating the guidance and its impact on our consolidated financial statements and the related internal controls over financial reporting. The Company expects the adoption of this standard will have a material impact on its consolidated balance sheet for recognition of lease-related assets and liabilities. We will adopt the ASU beginning in the first quarter of fiscal 2019.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. ASU 2016-18 requires that a statement of cash flows explain the change during the period among the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU 2016-18 is effective for public companies for fiscal years and interim periods within those years beginning after December 15, 2017. There was no adjustment to prior year financial statements as the Company had no restricted cash in prior years. In the current year, the Company included $1.7 million of restricted cash in cash and cash equivalents within the statement of cash flows related to cash held in escrow in conjunction with the sale-leaseback transaction that occurred during the fiscal period ended May 5, 2018.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. The Company adopted ASC 606, Revenue from Contracts with Customers and all the related amendments (“new revenue standard”) on February 4, 2018 using the modified retrospective method for all contracts. The additional disclosures required by the ASU have been included in Note 6 Revenue. Results for reporting periods beginning February 4, 2018 reflect the application of ASC 606, while the results for prior reporting periods were prepared under the guidance of ASC 605, Revenue Recognition (“previous guidance”). We recorded a net increase to opening equity of $2.0 million as of February 4, 2018 due to the cumulative impact of adopting the new standard, with the impact primarily related to the recognition of gift card breakage. Further, as a result of applying the modified retrospective method, the following adjustments were made to accounts on the condensed consolidated balance sheet as of February 4, 2018 (in thousands):



	February 3, 2018		ASC 606 Adjustments			February 4, 2018
Balance Sheet
Assets
Merchandise inventories	$	41,361	$	(482	)	$	40,879
Prepaid expenses and other current assets	2,715		482			3,197

Liabilities
Accrued liabilities and other current liabilities	26,201		(1,983		)	24,218

Equity
Retained earnings	34,993		1,983			36,976

Impact on Financial Statements

The following tables summarize the impacts of adopting ASC 606 on the Company’s condensed consolidated financial statements as of and for the quarter ended May 5, 2018 (in thousands):

Condensed Consolidated Balance Sheets



	As reported		Balance without adoption of ASC 606		Effect of change Higher/(lower)
Balance Sheet
Assets
Merchandise inventories	$	46,380	$	47,209	$	(829	)
Prepaid expenses and other current assets	4,806		3,977		829

Liabilities
Accrued liabilities and other current liabilities	23,226		23,306		(80		)

Equity
Retained earnings	31,658		31,578		80

Condensed Consolidated Statement of Operations and Comprehensive Loss



	As reported			Balance without adoption of ASC 606			Effect of change Higher/(lower)
Statement of Operations and Comprehensive Loss
Net sales	$	85,901		$	85,821		$	80
Net loss	(5,319		)	(5,399		)	80

Net loss per share:
Basic	$	(0.14	)	$	(0.14	)	$	0.00
Diluted	$	(0.14	)	$	(0.14	)	$	0.00

We reviewed all other significant newly-issued accounting pronouncements and concluded they are either not applicable to our operations, or that no material effect is expected on our consolidated financial statements as a result of future adoption.