What changed in this filing

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Item 1. Financial Statements

2021-08-31 compared with 2021-05-27 · 155 added, 86 removed, 397 unchanged (38% of the section changed)

3 unchanged sentences

(In thousands, except share data)

July 31, 2021

January 30, 2021

26 unchanged sentences

Preferred stock, $ 0.01 par value, 1,000,000 shares authorized, none issued

Common stock, $ 0.01 par value, 100,000,000 shares authorized, 76,212,032 and 64,656,384 shares issued at May 1, 2021 and January 30, 2021, respectively

Common stock, $ 0.01 par value, 100,000,000 shares authorized, 76,289,743 and 64,656,384 shares issued at July 31, 2021 and January 30, 2021, respectively

Additional paid-in capital

Treasury stock at cost, 12,755,873 shares at May 1, 2021 and January 30, 2021

Treasury stock at cost, 12,755,873 shares at July 31, 2021 and January 30, 2021

Accumulated deficit

7 unchanged sentences

For the Three Months Ended

For the Six Months Ended

July 31, 2021

August 1, 2020

July 31, 2021

August 1, 2020

(Fiscal 2021)

(Fiscal 2020)

(Fiscal 2021)

(Fiscal 2020)

Cost of goods sold including occupancy costs

8 unchanged sentences

Net income (loss)

Net income (loss) per share - basic and diluted

Net income (loss) per share - basic

Net income (loss) per share - diluted

Weighted-average number of common shares outstanding:

4 unchanged sentences

For the Three Months Ended

For the Six Months Ended

July 31, 2021

August 1, 2020

July 31, 2021

August 1, 2020

(Fiscal 2021)

(Fiscal 2020)

(Fiscal 2021)

(Fiscal 2020)

Net income (loss)

22 unchanged sentences

Balance at May 1, 2021

Board of directors compensation

Stock compensation expense

Exercise of stock options

Accumulated other comprehensive income (loss):

Pension plan, net of taxes

Foreign currency, net of taxes

Balance at July 31, 2021

The accompanying notes are an integral part of the consolidated financial statements.

14 unchanged sentences

Balance at May 2, 2020

Stock compensation expense

Deferred stock vested

Accumulated other comprehensive income (loss):

Pension plan, net of taxes

Foreign currency, net of taxes

Balance at August 1, 2020

The accompanying notes are an integral part of the consolidated financial statements.

2 unchanged sentences

(In thousands)

For the three months ended

For the six months ended

July 31, 2021

August 1, 2020

(Fiscal 2021)

24 unchanged sentences

Debt issuance costs

Proceeds from the exercise of stock options

Net cash provided by (used for) financing activities

20 unchanged sentences

The Company began reopening stores in late April and by the end of June 2020 all retail stores had been reopened, but the majority with reduced operating hours.

In March 2020, as a proactive measure, the Company drew $ 30.0 million under its revolving facility in order to increase the Company’s cash position and preserve financial flexibility.

During the second quarter of fiscal 2020, the Company entered into rent concessions with the majority of its landlords, in the form of rent abatements, rent deferments and, to a lesser extent, lease term extensions.

As a result of the impact of the pandemic on our business in fiscal 2020, including the closure of all of our stores in the first quarter of fiscal 2020, results for the first quarter fiscal of 2021 may not be comparable to the results for the first quarter of fiscal 2020.

While vaccines are being widely distributed and many areas where our stores are located are beginning to re-open with limited or no restrictions, the duration of the COVID-19 pandemic and its variants remain uncertain and could continue to have a material adverse impact on the Company’s results of operations, financial condition and cash flows.

As a result of the impact of the pandemic on our business in fiscal 2020, including the temporary closure of all of our stores in fiscal 2020, results for the second quarter and first six months of fiscal 2021 may not be comparable to the results for the second quarter and first six months of fiscal 2020.

While vaccines are being widely distributed and many areas where our stores are located currently have limited or no restrictions, the duration of the COVID-19 pandemic and its variants remain uncertain and could continue to have a material adverse impact on the Company’s results of operations, financial condition and cash flows.

Segment Information

2 unchanged sentences

The Company considers its stores and direct operating segments to be similar in terms of economic characteristics, production processes and operations, and has therefore aggregated them into one reportable segment, retail segment, consistent with its omni-channel business approach.

Due to the immateriality of the wholesale segment’s revenues, profits and assets, its operating results are aggregated with the retail segment for both periods.

In fiscal 2018, the Company purchased the rights to the domain name “dxl.com.” The domain name has a carrying value of $ 1.2 million and is considered an indefinite-lived asset.

During the first three months ended May 1, 2021, no event or circumstance occurred which would cause a reduction in the fair value of this intangible asset.

Due to the immateriality of the wholesale segment’s revenues, profits and assets, its operating results are aggregated with the retail segment for all periods presented.

Fair Value of Financial Instruments

10 unchanged sentences

The fair value of long-term debt is classified within Level 2 of the valuation hierarchy.

At May 1, 2021, the fair value approximated the carrying amount based upon terms available to the Company for borrowings with similar arrangements and remaining maturities.

The fair value of the “dxl.com” domain name, an indefinite-lived asset, is measured on a non-recurring basis in connection with the Company’s annual impairment test and is classified within Level 3 of the valuation hierarchy.

See Intangibles above.

At July 31, 2021, the fair value approximated the carrying amount based upon terms available to the Company for borrowings with similar arrangements and remaining maturities.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and short-term borrowings approximate fair value because of the short maturity of these instruments.

1 unchanged sentence

Other comprehensive income (loss) includes amounts related to foreign currency and pension plans and is reported in the Consolidated Statements of Comprehensive Income (Loss).

Other comprehensive income (loss) and reclassifications from AOCI for the three months ended May 1, 2021 and May 2, 2020, respectively, were as follows:

Other comprehensive income (loss) and reclassifications from AOCI for the three and six months ended July 31, 2021 and August 1, 2020, respectively, were as follows:

July 31, 2021

August 1, 2020

For the three months ended:

7 unchanged sentences

Balance at end of quarter

July 31, 2021

August 1, 2020

For the six months ended:

(in thousands)

Balance at beginning of fiscal year

Other comprehensive income (loss) before

reclassifications, net of taxes

Amounts reclassified from accumulated other

comprehensive income, net of taxes (1)

Other comprehensive income (loss) for the period

Balance at end of quarter

Includes the amortization of the unrecognized loss on pension plans, which was charged to “Selling, General and Administrative” Expense on the Consolidated Statements of Operations for all periods presented.

The amortization of the unrecognized loss, before tax, was $ 165,000 for the three-month period ended May 2, 2020.

For the three months ended May 1, 2021, the Company recognized income of $ 12,000 as a result of a change in amortization from average remaining future service to average remaining lifetime.

The amortization of the unrecognized loss, before tax, was $ 176,000 and $ 341,000 for the three and six months ended August 1, 2020, respectively.

For the three and six months ended July 31, 2021, the Company recognized income of $ 12,000 and $ 24,000 , respectively, as a result of a change in amortization from average remaining future service to average remaining lifetime.

There was no related tax effect for either period.

1 unchanged sentence

All share-based payments, including grants of employee stock options and restricted stock, are recognized as an expense in the Consolidated Statements of Operations based on their fair values and vesting periods.

The fair value of stock options is determined using the Black-Scholes valuation model and requires the input of subjective assumptions.

The fair value of stock options is determined

using the Black-Scholes valuation model and requires the input of subjective assumptions.

These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (the “expected term”), the estimated volatility of the Company’s common stock price over the expected term and the number of options that will ultimately not complete their vesting requirements (“forfeitures”).

3 unchanged sentences

Actual results and future changes in estimates may differ from the Company’s current estimates.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model based on the assumptions in the table below as it relates to stock options granted during the first three months of fiscal 2021.

There were no grants of stock options during the first three months of fiscal 2020.

July 31, 2021

August 1, 2020

Expected volatility

97.4% - 104.9%

82.3% - 87.8%

Risk-free interest rate

0.31% - 0.60%

0.22% - 0.27%

Expected life

3.0 - 4.0 yrs.

Dividend rate

8 unchanged sentences

The amount of impairment, if any, is measured based on projected discounted future cash flows using a discount rate reflecting the Company’s average cost of funds.

For the first quarter of fiscal 2021, the Company recognized a non-cash gain of $ 0.8 million, related to the Company’s decision to close certain retail stores, which resulted in a revaluation of the existing lease liabilities.

To the extent that such gain related to previously recorded impairment charges against the operating lease right-of-use asset, $ 0.7 million of the gain was included as an offset to asset impairment charges with the remaining $ 0.1 million of the gain included as a reduction in store occupancy costs.

In the first quarter of fiscal 2020, as a result of the significant impact of the COVID-19 pandemic on the Company’s business and the continued uncertainty at that time, the Company recorded an impairment charge of $ 16.3 million in the first quarter of fiscal 2020.

For the second quarter and first six months of fiscal 2021, the Company recognized a non-cash gain of $ 0.4 million and $ 1.1 million, related to the Company’s decision to close certain retail stores, which resulted in a revaluation of the existing lease liabilities.

The portion of the gain that related to previously recorded impairment charges against the operating lease right-of-use asset was included as an offset to previously recorded asset impairment charges.

Accordingly, for the second quarter and first six months of fiscal 2021, $ 0.4 million and $ 1.0 million were included as an offset to asset impairment charges.

The remaining $ 0.1 million of the $1.1 million gain for the first six months of fiscal 2021 was included as a reduction of store occupancy costs.

In the first six months of fiscal 2020, as a result of the significant impact of the COVID-19 pandemic on the Company’s business and the continued uncertainty at that time, the Company recorded an impairment charge of $ 16.3 million.

The impairment charge included approximately $ 12.5 million for the write-down of certain right-of-use assets and $ 3.8 million for the write-down of property and equipment, related to stores where the carrying value exceeded fair value.

2 unchanged sentences

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments, initial direct costs and any lease incentives are included in the value of those right-of use assets.

Right-of-use (“ROU”) assets and lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments, initial direct costs and any lease incentives are included in the value of those right-of use assets.

As the interest rate implicit in the Company’s leases is not readily determinable, the Company utilizes its incremental borrowing rate, based on information available at the lease measurement date to determine the present value of future payments.

1 unchanged sentence

The Company also made an accounting policy election that the recognition requirement of ASC 842 will not be applied to certain, if any, non-store leases, with a term of 12 months or less, recognizing those lease payments on a straight-line basis over the lease term.

At May 1, 2021, the Company had no short-term leases.

At July 31, 2021, the Company had no short-term leases.

The Company’s store leases typically contain options that permit renewals for additional periods of up to five years each.

In general, for store leases with an initial term of 10 years or more, the options to extend are not considered reasonably certain at lease commencement.

For stores leases with an initial term of 5 years, the Company evaluates each lease independently and, only when the Company considers it reasonably certain that it will exercise an option to extend, will the associated payment of that option be included in the measurement of the right-of-use asset and lease liability.

included in the measurement of the right-of-use asset and lease liability.

Renewal options are not included in the lease term for automobile and equipment leases because they are not considered reasonably certain of being exercised at lease commencement.

Renewal options were not considered for the Company’s corporate headquarters and distribution center lease, which was entered into in 2006 and was for an initial 20 -year term .

R enewal options were not considered for the Company’s corporate headquarters and distribution center lease, which was entered into in 2006 and was for an initial 20 -year term .

At the end of the initial term, the Company will have the opportunity to extend this lease for six additional successive periods of five years .

6 unchanged sentences

Recently Issued Accounting Pronouncements

No new accounting pronouncements, issued or effective during the first three months of fiscal 2021, have had or are expected to have a significant impact on the Company’s Consolidated Financial Statements.

No new accounting pronouncements, issued or effective during the first six months of fiscal 2021, have had or are expected to have a significant impact on the Company’s Consolidated Financial Statements.

Revenue Recognition

9 unchanged sentences

Revenue from the Company’s wholesale operations is recognized at the time the wholesale customer takes physical receipt of the merchandise, net of any identified discounts in accordance with each individual order.

For the first three months of fiscal 2021 and fiscal 2020, chargebacks were immaterial.

For the first six months of fiscal 2021 and fiscal 2020, chargebacks were immaterial.

Unredeemed Gift Cards, Gift Certificates, and Credit Vouchers.

3 unchanged sentences

Breakage is recognized over two years in proportion to historical redemption trends and is recorded as sales in the Consolidated Statements of Operations.

The gift card liability, net of breakage, was $ 2.2 million and $ 2.8 million at May 1, 2021 and January 30, 2021, respectively.

The gift card liability, net of breakage, was $ 2.0 million and $ 2.8 million at July 31, 2021 and January 30, 2021, respectively.

Unredeemed Loyalty Coupons.

The Company offers a free loyalty program to its customers for which points accumulate based on the purchase of merchandise.

Over 90 % of the Company’s customers participate in the loyalty program.

Approximately 90 % of the Company’s customers participate in the loyalty program.

Under ASC 606, Revenue from Contracts with Customers , these loyalty points provide the customer with a material right and a distinct performance obligation with revenue deferred and recognized when the points are expected to redeem or expire.

The cycle of earning and redeeming loyalty points is generally under one year in duration.

The loyalty accrual, net of breakage, was $ 1.0 million and $ 1.0 million at May 1, 2021 and January 30, 2021, respectively.

The loyalty accrual, net of breakage, was $ 1.3 million and $ 1.0 million at July 31, 2021 and January 30, 2021, respectively.

Shipping and handling costs are accounted for as fulfillment costs and are included in cost of sales for all periods presented.

3 unchanged sentences

Substantially all of the Company’s revenue is generated from its stores and direct businesses.

The operating results from the

wholesale segment, which were immaterial, have been aggregated with this reportable segment, but the revenues are separately reported below.

The operating results from the wholesale segment, which were immaterial, have been aggregated with this reportable segment, but the revenues are separately reported below.

Accordingly, the Company has determined that the following sales channels depict the nature, amount, timing, and uncertainty of how revenue and cash flows are affected by economic factors:

For the three months ended

For the six months ended

(in thousands)

July 31, 2021

August 1, 2020

July 31, 2021

August 1, 2020

Retail segment

10 unchanged sentences

The Company’s obligations under the Credit Facility are secured by a lien on substantially all of its assets.

At May 1, 2021, the Company had outstanding borrowings under the Revolving Facility of $ 33.6 million, before unamortized debt issuance costs of $ 0.2 million.

At May 1, 2021, outstanding standby letters of credit were $ 2.7 million and there were no outstanding documentary letters.

Unused excess availability was $ 51.1 million at May 1, 2021.

Average monthly borrowings outstanding under the Revolving Facility during the first three months of fiscal 2021 were $ 51.2 million, resulting in an average unused excess availability of approximately $ 24.3 million.

At July 31, 2021, the Company had no outstanding borrowings under the Revolving Facility.

At July 31, 2021, outstanding standby letters of credit were $ 2.7 million and there were no outstanding documentary letters.

Unused excess availability was $ 65.1 million at July 31, 2021.

Average monthly borrowings outstanding under the Revolving Facility during the first six months of fiscal 2021 were $ 32.7 million, resulting in an average unused excess availability of approximately $ 42.5 million.

The Company’s ability to borrow under the Revolving Facility was determined using an availability formula based on eligible assets, with increased advance rates based on seasonality.

2 unchanged sentences

The Company was also subject to an unused line fee of 0.25 %.

At May 1, 2021, the Company’s prime-based interest rate was 5.25 %.

At May 1, 2021, the Company had approximately $ 28.0 million of its outstanding borrowings in LIBOR-based contracts with an interest rate of 4.00 %.

The LIBOR-based contracts expired on May 3, 2021 .

When a LIBOR-based borrowing expires, the borrowings revert back to prime-based borrowings unless the Company enters into a new LIBOR-based borrowing arrangement.

Borrowings and repayments under the Revolving Facility for the three months ended May 1, 2021 and May 2, 2020 were as follows:

For the three months ended

At July 31, 2021, the Company’s prime-based interest rate was 5.25 %.

Borrowings and repayments under the Revolving Facility for the first six months ended July 31, 2021 and August 1, 2020 were as follows:

For the six months ended

(in thousands)

July 31, 2021

August 1, 2020

Net borrowings (repayments)

The fair value of the amount outstanding under the Revolving Facility at May 1, 2021 approximated the carrying value.

Long-Term Debt

Long-term debt at May 1, 2021 and January 30, 2021 is as follows:

Long-term debt at July 31, 2021 and January 30, 2021 is as follows:

(in thousands)

July 31, 2021

January 30, 2021

10 unchanged sentences

The new FILO loan expires on May 24, 2023 , but may be automatically extended in connection with any extension of the revolving facility under the Credit Agreement, but no later than March 16, 2026, without approval from the FILO lender.

Borrowings made under the new FILO loan will bear interest, at the LIBOR rate (with a LIBOR floor of 1.0 %) plus an applicable margin rate of 7.50 % through September 16, 2021.

Borrowings made under the new FILO loan bear interest, at the LIBOR rate (with a LIBOR floor of 1.0 %) plus an applicable margin rate of 7.50 % through September 16, 2021.

Thereafter, the applicable margin rate will be 7.50 % for so long as the Company’s 12-month trailing consolidated EBITDA (as defined in the Credit Facility, as amended) measured as of the end of each month is less than $ 18.0 million, or 7.00 % when the 12-month trailing consolidated EBITDA is equal to or greater than $18.0 million.

Accordingly, the interest rate at May 1, 2021 was 8.5 %.

The Company paid interest and fees totaling $ 1.1 million and $ 0.7 million for the three months ended May 1, 2021 and May 2, 2020, respectively.

Accordingly, the interest rate at July 31, 2021 was 8.5 0%.

The Company paid interest and fees totaling $ 1.7 million and $ 1.6 million for the six months ended July 31, 2021 and August 1, 2020, respectively.

The Company leases all of its store locations and its corporate headquarters, which also includes its distribution center, under operating leases.

7 unchanged sentences

The election applies to any lessor-provided lease concession related to the impact of the COVID-19 pandemic, provided the concession does not result in a substantial increase in the rights of the lessor or in the obligations of the lessee.

The Company has opted not to elect this practical expedient and instead account for these rent concessions as lease modifications in accordance with ASC 842.

As of May 1, 2021, the Company’s operating leases liabilities represent the present value of the remaining future minimum lease payments updated based on concessions and lease modifications.

The following table is a summary of the Company’s components of net lease cost for the first quarter ended May 1, 2021 and May 2, 2020:

The Company opted not to elect this practical expedient and instead accounted for these rent concessions as lease modifications in accordance with ASC 842.

As of July 31, 2021, the Company’s operating leases liabilities represent the present value of the remaining future minimum lease payments updated based on concessions and lease modifications.

The following table is a summary of the Company’s components of net lease cost for the three and six months ended July 31, 2021 and August 1, 2020:

For the three months ended

For the six months ended

July 31, 2021

August 1, 2020

July 31, 2021

August 1, 2020

(in thousands)

3 unchanged sentences

Variable lease costs include the cost of property taxes, insurance and common area maintenance fees related to its leases.

Supplemental cash flow and balance sheet information related to leases for the three months ended May 1, 2021 and May 2, 2020 is as follows:

Supplemental cash flow and balance sheet information related to leases for the six months ended July 31, 2021 and August 1, 2020 is as follows:

(dollars in thousands)

For the three months ended

For the six months ended

Cash paid for amounts included in the measurement of lease liabilities:

July 31, 2021

August 1, 2020

Operating cash flows for operating leases (1)

1 unchanged sentence

Right-of-use assets obtained in exchange for operating lease liabilities

Net decrease in right-of-use assets due to lease modifications

associated with rent concessions and lease exits

Weighted average remaining lease term

Weighted average discount rate

The cash paid for the first quarter of fiscal 2021 includes prepaid rent for May 2021 of $ 3.8 million.

There was no unpaid rent at May 1, 2021.

Due to store closures in the first quarter of fiscal 2020, the Company did not make scheduled rent payments, due April 1, 2020, of $ 4.2 million.

This amount was included in the Accounts Payable at May 2, 2020.

The Company also did no t prepay May rent in the first quarter of fiscal 2020.

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities recorded on the Consolidated Balance Sheet as of May 1, 2021:

The increase in cash payments for the first six months of fiscal 2021 as compared to the first six months of fiscal 2020 is due to rent abatements and deferments negotiated in the second quarter of fiscal 2020 for rent obligations while stores were closed.

The cash paid for the first six months of fiscal 2021 also includes prepaid rent for August 2021 of $ 3.8 million.

(in thousands)

9 unchanged sentences

See Note 6, Stock-Based Compensation .

At May 1, 2021, the Company has three active LTIPs:

2019-2021 LTIP, 2020-2022 LTIP and the 2021-2023 LTIP.

Each participant in the plan participates based on that participant’s “Target Cash Value” which is defined as the participant’s annual base salary (on the participant’s effective date) multiplied by his or her LTIP percentage.

At July 31, 2021, the Company has three active LTIPs:

the 2019-2021 LTIP, 2020-2022 LTIP and 2021-2023 LTIP.

Each participant in the LTIP participates based on that participant’s “Target Cash Value” which is defined as the participant’s annual base salary (on the participant’s effective date) multiplied by his or her LTIP percentage.

Under each LTIP, 50 % of each participant’s Target Cash Value is subject to time-based vesting and 50 % is subject to performance-based vesting.

The time-based awards under the 2019-2021 LTIP were granted in a combination of 50 % RSUs and 50 % cash.

For the 2020-2022 LTIP, the time-based awards were granted in a combination of 50 % stock options and 50 % cash, and for the 2021-2023 LTIP the time-based awards were granted in a combination of 25 % stock options and 75 % cash.

For the 2020-2022 LTIP, the time-based awards were granted in a

combination of 50 % stock options and 50 % cash, and for the 2021-2023 LTIP , the time-based awards were granted in a combination of 25 % stock options and 75 % cash.

Performance targets for the 2019-2021 LTIP, 2020-2022 LTIP and 2021-2023 LTIP were established and approved by the Compensation Committee on August 7, 2019, June 11, 2020, and March 8, 2021, respectively.

4 unchanged sentences

Approximately half of the compensation expense for each LTIP relates to the time-based awards, which are being expensed straight-line over 44 months, 46 months and 49 months, respectively.

At May 1, 2021, the performance targets under the 2019-2021 LTIP was not deemed probable and, therefore, no accrual related to performance awards has been recorded.

The Company has accrued $ 0.3 million under the 2020-2022 LTIP and $ 0.1 million under the 2021-2023 LTIP for the performance awards.

At July 31, 2021, the Company has accrued $ 1.2 million under the 2019-2021 LTIP, $ 0.7 million under the 2020-2022 LTIP and $ 0.4 million under the 2021-2023 LTIP for the performance awards.

Stock-Based Compensation

5 unchanged sentences

The Company’s shareholders approved amendments to increase the share reserve by 2,800,000 shares on August 8, 2019 and by an additional 1,740,000 shares on August 12, 2020.

At May 1, 2021, the Company had 22,901 shares available under the 2016 Plan.

At July 31, 2021, the Company had 22,901 shares available under the 2016 Plan.

Subsequent to the end of the second quarter of fiscal 2021, on August 5, 2021, the Company’s shareholders approved an amendment to increase the share reserve by 4,855,000 shares.

In accordance with the terms of the 2016 Plan, any shares outstanding under the previous 2006 Incentive Compensation Plan (the “2006 Plan”) at August 4, 2016 that subsequently terminate, expire or are cancelled for any reason without having been exercised or paid are added back and become available for issuance under the 2016 Plan, with stock options being added back on a one-for-one basis and full-value awards being added back on a 1 to 1.9 basis.

At May 1, 2021, 412,826 stock options remained outstanding under the 2006 Plan.

At July 31, 2021, 412,826 stock options remained outstanding under the 2006 Plan.

The 2016 Plan is administered by the Compensation Committee.

2 unchanged sentences

Except with respect to 5 % of the shares available for awards under the 2016 Plan, no award will become exercisable unless such award has been outstanding for a minimum period of one year from its date of grant.

The following tables summarize the share activity and stock option activity for the first three months of fiscal 2021:

The following tables summarize the share activity and stock option activity for the first six months of fiscal 2021:

Deferred shares (2)

5 unchanged sentences

Shares vested/issued

Shares canceled

Outstanding non-vested shares at end of quarter

During the first three months of fiscal 2021, the vesting of RSUs was primarily related to the time-based awards under the Company’s LTIP plans, see Note 5, Long-Term Incentive Plans .

During the first six months of fiscal 2021, the vesting of RSUs was primarily related to the time-based awards under the Company’s LTIP plans, see Note 5, Long-Term Incentive Plans .

Represents compensation to certain directors, in lieu of cash, in accordance with their irrevocable elections.

Beginning in fiscal 2021, all equity issued to directors for compensation, in lieu of cash, is issued only from the Non-Employee Director Compensation Plan.

The outstanding deferred shares will vest upon the director’s separation from service .

The outstanding deferred shares will be issued upon the director’s separation from service .

The 720,000 shares of performance stock units (“PSUs”), with a fair value of $ 1.0 million, represent a sign-on grant to Mr.

2 unchanged sentences

All PSUs will expire on April 1, 2023 if no performance metric is achieved.

The $ 1.0 million is being expensed over the respective derived service periods of each tranche of 16 months , 25 months and 30 months , respectively.

The $ 1.0 million fair value has been expensed over the respective derived service periods of each tranche of 16 months, 25 months and 30 months, respectively.

The respective fair value and derived service periods assigned to the PSUs were determined using a Monte Carlo model based on:

8 unchanged sentences

Options granted (1)

Options expired and canceled

Options exercised

Options expired and canceled

Outstanding options at end of quarter

1 unchanged sentence

Primarily represents the grant of stock options to purchase an aggregate of 1,078,913 shares of the Company’s common stock, at an exercise price of $ 0.69 per share, in connection with the time-based grant of awards under its 2021-2023 LTIP, see Note 5, Long-Term Incentive Plans.

In the first quarter of fiscal 2021, the Company also granted to active participants of the LTIP, a discretionary grant of stock options to purchase an aggregate 414,337 shares of the Company’s common stock, at an exercise price of $ 0.75 per share, which will vest ratably over 3 years

For the first three months of fiscal 2021, the Company granted stock options to purchase an aggregate of 1,518,154 shares of common stock and 8,054 restricted stock units.

For the first three months of fiscal 2020, the Company granted 45,714 shares of deferred stock.

In March 2021, the Company also granted to active participants of the LTIP, a discretionary grant of stock options to purchase an aggregate of 414,337 shares of the Company’s common stock, at an exercise price of $ 0.75 per share, which will vest ratably over 3 years .

For the first six months of fiscal 2021, the Company granted stock options to purchase an aggregate of 1,518,154 shares of common stock and 8,054 restricted stock units.

For the first six months of fiscal 2020, the Company granted stock options to purchase an aggregate of 3,185,542 shares of common stock and 45,714 shares of deferred stock.

Non-Employee Director Compensation Plan

The Company granted 136,482 shares of common stock, with a fair value of approximately $ 109,186 , to certain of its non-employee directors as compensation in lieu of cash in the first three months of fiscal 2021.

The Company granted 206,923 shares of common stock, with a fair value of approximately $ 218,369 , to certain of its non-employee directors as compensation in lieu of cash in the first six months of fiscal 2021.

Stock Compensation Expense

The Company recognized total stock-based compensation expense of $ 0.3 million and $ 0.5 million for the first three months of fiscal 2021 and fiscal 2020, respectively.

The total compensation cost related to time-vested stock options, RSU and PSU awards not yet recognized as of May 1, 2021 was approximately $ 2.5 million, net of estimated forfeitures, which will be expensed over a weighted average remaining life of 30 months.

The Company recognized total stock-based compensation expense of $ 0.6 million and $ 0.8 million for the first six months of fiscal 2021 and fiscal 2020, respectively.

The total compensation cost related to time-vested stock options, RSU and PSU awards not yet recognized as of July 31, 2021 was approximately $ 2.2 million, net of estimated forfeitures, which will be expensed over a weighted average remaining life of 29 months.

Earnings per Share

1 unchanged sentence

For the three months ended

For the six months ended

July 31, 2021

August 1, 2020

July 31, 2021

August 1, 2020

(in thousands )

3 unchanged sentences

Diluted weighted average common shares outstanding

Common stock equivalents of 261 shares for the three months ended May 2, 2020 were excluded due to the net loss.

Common stock equivalents of 178 shares and 206 shares for the three and six months ended August 1, 2020 were excluded due to the net loss.

The following potential common stock equivalents were excluded from the computation of diluted earnings per share in each period, because the exercise price of such options was greater than the average market price per share of common stock for the respective periods or because the unearned compensation associated with stock options, restricted stock units, or deferred stock had an anti-dilutive effect.

For the three months ended

For the six months ended

July 31, 2021

August 1, 2020

July 31, 2021

August 1, 2020

(in thousands, except exercise prices)

5 unchanged sentences

$0.53 - $7.02

The above options, which were outstanding at May 1, 2021, expire from January 31, 2023 to March 9, 2031 .

$2.25 - $5.50

$0.53 - $7.02

The above options, which were outstanding at July 31, 2021, expire from January 31, 2023 to June 29, 2028 .

Excluded from the computation of basic and diluted earnings per share for both periods were 720,000 shares of unvested performance stock units.

These performance-based awards will be included in the computation of basic and diluted earnings per share if, and when, the respective performance targets are achieved.

In addition, 435,568 shares and 335,073 shares of deferred stock at May 1, 2021 and May 2, 2020, respectively, were excluded from basic earnings per share.

In addition, 435,568 shares and 327,382 shares of deferred stock at July 31, 2021 and August 1, 2020, respectively, were excluded from basic earnings per share.

Outstanding shares of deferred stock are not considered issued and outstanding until the vesting date of the deferral period.

1 unchanged sentence

On February 5, 2021, the Company sold, pursuant to a stock purchase agreement and through a registered direct offering, an aggregate of 11,111,111 shares of its common stock, for a gross purchase price of $ 5.0 million, before payment of offering costs of $ 0.6 million.

The Company intends to use the net proceeds from the offering for working capital and other general corporate purposes.

During the first quarter of fiscal 2021 and fiscal 2020, the Company recorded income tax expense of $ 28,000 and $ 20,000 , respectively, related primarily to state margin tax.

The Company used the net proceeds from the offering for working capital and other general corporate purposes.

During the second quarter and first six months of fiscal 2021, the Company recorded income tax expense of $ 426,000 and $ 454,000 , respectively, primarily related to income tax in states where NOL usage is statutorily limited.

During the second quarter and first six months of fiscal 2020, the Company recorded income tax expense of $ 24,000 and $ 44,000 , respectively, related primarily to state margin tax.

The Company’s effective tax rate will generally differ from the U.S.

1 unchanged sentence

Since the end of fiscal 2014, the Company has maintained a full valuation allowance against its deferred tax assets.

While the Company has projected it will return to profitability, generate taxable income and ultimately emerge from a three-year cumulative loss, the Company believes that a full valuation allowance remains appropriate at this time, based on the Company’s forecast for fiscal 2021.

While the Company has returned to profitability for the first six months of fiscal 2021, and has projected that it will generate taxable income and ultimately emerge from a three-year cumulative loss, the Company believes that a full valuation allowance remains appropriate until the Company generates a more consistent history of profitability.

Realization of the Company’s deferred tax assets is dependent on generating sufficient taxable income in the near term.

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements