v3.22.1

Notes Payable | 12 Months Ended
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Jan. 29, 2022
Debt Disclosure [Abstract] |
Notes Payable | NOTE 7—NOTES PAYABLE Notes payable consisted of the following at January 29, 2022 and January 30, 2021 (in thousands):
|  | January 29, 2022 |  |  | January 30, 2021 |
6% promissory note due February 17, 2024 |  | $ | 1,250 |  |  | $ | 1,250 |
1% promissory note due April 16, 2022 |  |  | — |  |  |  | 3,098 |
1% promissory note due March 10, 2026 |  |  | 2,000 |  |  |  | — |
10% secured note due November 23, 2022 |  |  | 3,677 |  |  |  | — |
Total face amount |  |  | 6,927 |  |  |  | 4,348 |
Amount classified as current |  |  | 3,988 |  |  |  | 2,478 |
Amount classified as long-term |  | $ | 2,939 |  |  | $ | 1,870 |
Maturities of notes payable are as follows: Fiscal 2023 - $3,988,000; Fiscal 2024 - $533,000; Fiscal 2025 - $1,784,000; Fiscal 2026 - $533,000 and Fiscal 2027 - $89,000. On September 25, 2019, in connection with the acquisition of Simply Mac, the Company issued a $7,858,000 secured promissory note to GameStop. The note bore interest at a rate equal to 12% per annum and called for the Company to make four equal installment payments of $1,965,000, plus accrued interest, on each 3 month anniversary of the note. The note was secured by, among other things, the Simply Mac inventory and accounts receivable. On March 11, 2020, the Company and GameStop entered into an agreement to amend and restate the promissory note. The amended promissory note reduced the principal balance of the note from $7,858,000 to $1,250,000, reduced the interest rate to 6% per annum and extended the maturity date to February 17, 2024. Additionally, the amended note released all prior security and collateral under the original note and is unsecured. The parties also entered into a Termination Agreement, whereby the Company agreed to pay GameStop an aggregate amount of $335,152, payable in twelve equal monthly installments of $27,929 with the first installment due April 30, 2020, in satisfaction of certain post-closing amounts owed to GameStop under the Stock Purchase Agreement and certain agreements related thereto, less amounts owed to the Company from GameStop under the Stock Purchase Agreement relating to the post-closing working capital adjustment thereunder. The Company also made a onetime cash payment of $250,000 to GameStop and released to GameStop $345,000 of funds held in escrow in connection with the Simply Mac acquisition. As a result of these agreements, the Company recorded a gain of $6,961,000 on the extinguishment of debt. On April 16, 2020, the Company secured a $3,098,000, 2-year loan from a regional bank (the “Lender”) pursuant to the U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) under Title I of the Coronavirus Aid, Relief, and Economic Security Act passed by Congress and signed into law on March 27, 2020 (“CARES Act”). The note bears interest at 1.0% per annum and no payments were due for the first six months. In accordance with the applicable provisions of the CARES Act, on October 19, 2020, the Company filed its forgiveness application (the “Application”) with the Lender. The Company certified in the Application that 100% of the loaned funds were utilized during the 24-week covered period commencing April 16, 2020 to pay for qualified payroll and payroll related costs, and as such, requested that the entire principal balance be forgiven. The Application was approved by the lender and the SBA, and the loan with accrued interest aggregating $3,139,000 was extinguished on August 17, 2021. On March 10, 2021, the Company secured a second-draw, $2,000,000, 1.0%, 5-year loan from the Lender pursuant to the PPP. No payments are due on this loan until the earlier of: (a) the date on which the amount of loan forgiveness determined under the CARES Act is remitted to the Lender by the SBA, (b) the date that the SBA advises Lender that all or part of the loan has not been forgiven, provided that the Company has applied for forgiveness within 10 months of the end of the forgiveness period of the loan or (c) if the Borrower fails to apply for forgiveness by the end of the forgiveness period, a date that is not earlier than the date that is 10 months after the last day of the forgiveness period. In accordance with the applicable provisions of the CARES Act, on October 28, 2021, the Company filed its forgiveness application with the Lender. The Company certified in the Application that 100% of the loaned funds were utilized during the 22-week covered period commencing March 10, 2021 to pay for qualified payroll and payroll related costs, and as such, requested that the entire principal balance be forgiven. The Application is subject to review by both the Lender and the SBA, after which the Company will be notified as to whether the Application is approved. If the Application is denied or partially approved, the Company will be required to make equal monthly payments to fully amortize any remaining balance by March 10, 2026. On November 23, 2021, the Company entered into a loan and security agreement with a finance company. Under the agreement, the Company could borrow up to $6,000,000 prior to January 31, 2022 in increments of no less then $500,000 to purchase inventory. The agreement calls for weekly payments of 75% of the sales of inventory purchased with loan proceeds. The principal balance bears interest at the prime rate plus 6.75% per annum with the prime rate having a floor of 3.25%. Interest is accrued daily and payable monthly. In addition, the Company paid a 2% loan fee of $120,000, which amount was added to principal upon execution of the agreement. The agreement, which is secured by substantially all of the assets of the Company and is guaranteed by an entity that is affiliated with SOL Global, matures on November 23, 2022, and contains other customary terms and conditions for agreements of its type. As of January 29, 2022, the Company had borrowed $4,608,000 and repaid $3,731,000 resulting in a remaining principal balance of $877,000. On January 18, 2022, the agreement was amended to enable the Company to borrow an additional $2,800,000. This additional borrowing raised the combined principal balance at January 29, 2022 to $3,677,000. The additional borrowing is to be repaid in 14 weekly principal payments of $200,000 beginning February 25, 2022. Interest expense for notes payable for Fiscal 2022 and Fiscal 2021 amounted to $274,000 and $1,048,000, respectively, including accretion of discounts in Fiscal 2021 of $668,000. Derivative Liability: In connection with the issuance by the Company during 2019 of certain convertible notes and warrants, as well as subsequent conversions of certain notes into common stock and warrants, the conversion features and warrants were deemed to qualify as derivatives to be separately accounted for in accordance with ASC 815. These warrants were valued at the issuance date and at each subsequent measurement date, and are level 3 measurements. The derivative liabilities were marked-to-market at December 31, 2019, February 1, 2020 and at March 31, 2020, the date the underlying notes were exchanged (see Note 11). The valuation at March 31, 2020 resulted in a decrease in value of the derivative liability of $543,000 that was recorded as other income for Fiscal 2021.

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