Item 2.02 Results of Operations and Financial Condition
On April 28, 2023, iMedia Brands, Inc. ("we", "us", "our" or the "Company")
filed a Form 12b-25 notifying the United States Securities and Exchange
Commission ("SEC") that it is unable to file its Annual Report on Form 10-K for
the year ended January 28, 2023 (the "Annual Report"), by the prescribed due
date without unreasonable effort or expense because the Company requires
additional time to complete its analysis and accounting for the income tax
provision, certain accounting methodology for the Company's wholly-owned
advertising platform, iMedia Digital Services, the accounting and disclosure
related to the goodwill impairment charges, disclosure of the Company's
liquidity disclosures as part of assessing the Company's ability to continue as
a going concern as the Company has determined there is substantial doubt about
its ability to continue as a going concern, and the accounting and disclosure of
the subsequent event related to the recent sale-leaseback transaction which
closed on April 10, 2023.
The Company has determined its disclosure controls and procedures and internal
controls over financial reporting were not effective as of December 31, 2022, as
the material weaknesses described in Part II, Item 9A of its Annual Report on
Form 10-K for the year ended January 29, 2022, related to its control
environment, risk assessment, control activities, and information &
communication are not remediated. The Company is in the process of finalizing
its evaluation of its internal control over financial reporting and may identify
additional material weaknesses based on further review and analysis in its
Annual Report.
In the Form 12b-25, the Company disclosed the following information regarding
the results of operations and financial condition of the Company:
? The Company anticipates that its statement of operations for the three-month
period ended January 28, 2023, will reflect (1) a decrease in net sales to
approximately $133.5 million, compared with net sales of $193.8 million for the
comparable prior year period, (2) a significant increase in the pre-tax net
loss to approximately $62.7 million, compared with a pre-tax net loss of $5
million for the comparable prior year period, and (3) a significant increase in
operating expenses to approximately $102.9 million, compared with operating
expenses of $74.5 million for the comparable prior year period.
? The Company anticipates that its statement of operations for the fiscal year
ended January 28, 2023, will reflect (1) a decrease in net sales to
approximately $544.5 million, compared to net sales of $551.1 for the prior
fiscal year, (2) a significant increase in the pre-tax net loss to
approximately $108.6 million, compared to a $22 million pre-tax net loss for
the prior fiscal year, and (3) a significant increase in operating expenses to
approximately $295.8 million, compared to operating expenses of $295.7 million
for the prior fiscal year.
The Company disseminated a press release dated April 12, 2023, describing its
unaudited results of operations for the three and twelve month periods ended
January 28, 2023. The results of operations discussed above have been updated to
include an estimated $38.5 million of goodwill impairment that the Company
expects to recognize in the fourth quarter of fiscal year 2023. A copy of the
Press Release was furnished as Exhibit 99.1 to the Company's current report on
Form 8-K filed with the SEC on April 12, 2023 (the "Earnings Form 8-K").
The Company recently identified adjustments to the preliminary results included
in the Company's press release furnished with the Earnings Form 8-K, primarily
related to goodwill impairment, which is currently estimated to be approximately
$38.5 million, which will increase operating expenses and net loss previously
included in the Press Release. The Company is not currently able to disclose the
change to net loss as the analysis of the income tax provision has not yet been
completed.
The amounts reported above are still under review by the Company and may differ
once reported in the Company's Annual Report to be filed by the Company. The
Company intends to file its Annual Report, as soon as reasonably possible, but
there can be no assurance that the Company will be able to file its Annual
Report by the prescribed due date or that any estimates will not change.
In accordance with General Instruction B.2 of Form 8-K, the information in this
Item 2.02 shall not be deemed to be "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934, or otherwise subject to the liability of that
section, and shall not be incorporated by reference into any registration
statement or other document filed under the Securities Act of 1933, or the
Securities Exchange Act of 1934, except as shall be expressly set forth by
specific reference in that filing.
Item 2.06 Material Impairments
On April 28, 2023, the Company concluded that because of the lower financial
performance than expected in the current fiscal year, decline in the market
capitalization of the Company, and the lower projected results over the next
three years, a material impairment to the Company's goodwill would need to be
recorded. As a result, the Company expects to record an impairment charge of
$38.5 million related to the Company's goodwill during the three and twelve
month periods ended January 28, 2023. The Company does not expect any future
cash expenditures related to the impairment.
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