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Note 2 - Related Party
 9 Months Ended
Nov. 01, 2025
Notes to Financial Statements  
Related Party Transactions Disclosure [Text Block]

Note 2 – Related Party

 

Strategic partnership with Beyond — The Company entered into a strategic partnership with Beyond on October 21, 2024, with the purpose of enabling cohesive collaboration between the companies, leveraging the strengths of each business to drive sustainable profitable growth and value for all stakeholders. As part of this partnership with Beyond, the companies entered into a $17.0 million term loan credit agreement (the “Beyond Credit Agreement”), an $8.0 million subscription agreement (the “Subscription Agreement”), a seven-year collaboration agreement (the “Collaboration Agreement”) and a trademark license agreement (the “Trademark License Agreement”). Proceeds of $17.0 million from the Beyond Credit Agreement, in the form of an $8.5 million non-convertible term loan (“Non-Convertible Term Loan”) and an $8.5 million convertible term loan (“Convertible Term Loan”) were used by the Company to repay its existing FILO term loan (“FILO Term Loan”), including prepayment fees and transaction expenses, and to reduce borrowings under the existing revolving credit facility. The $8.0 million equity purchase under the Subscription Agreement and the mandatory conversion of the Convertible Term Loan with accrued interest were both approved by the Company’s shareholders at the Company’s Special Meeting of Shareholders on February 5, 2025 in accordance with Nasdaq Listing Rules resulting in the issuance of 8,934,465 shares of Common Stock to Beyond, which completed the transaction. On May 7, 2025 the Company entered into an additional $5.2 million term loan (the “Additional Term Loan”) with Beyond to provide flexibility for general working capital purposes and for the support of the Company’s updated store conversion strategy. The Additional Term Loan and the existing $8.5 million term loan (collectively the “Beyond Term Loan”) are convertible into shares of the Company’s common stock at a price determined at the time of such conversion election, but subject to Nasdaq shareholder approval rules, if applicable. On September 15, 2025, the Company entered into an amendment to the Beyond Credit Agreement which provides a delayed-draw term loan in an aggregate principal amount of $20.0 million (the “Beyond Delayed Draw Term Loan Commitments”).

 

In connection with the closing of the Beyond Amendment and the Fourth Amendment described above, the Company entered into an amendment to the Existing Purchase Agreement (the Existing Purchase Agreement, as amended by the amendment, the “Purchase Agreement”), related to Kirkland's right, title, and interest in and to its trademarks and domain names comprised of or containing the element KIRKLAND'S increasing the purchase price from $5.0 million to $10.0 million. The consummation of the Purchase Agreement was conditioned upon obtaining the consent of Bank of America, N.A., as Administrative Agent and Collateral Agent for the Lenders (in such capacities, the “Agent”) and the release of all liens on the Kirkland’s Brand, each of which was obtained and documented in the Fourth Amendment dated September 15, 2025. The Purchase Agreement closed concurrently in connection with the closings of the Beyond Amendment and the Fourth Amendment on September 15, 2025, and in connection with  the assignment of the Kirkland’s Brand to Beyond, the Amended and Restated Trademark License Agreement dated August 15, 2025 was amended, such that Beyond licenses the Kirkland’s Brand to the Company in connection with the Company’s operation of its then existing Kirkland’s-branded retail stores and e-commerce websites and any other retail stores or e-commerce websites approved by Beyond in its sole discretion (the “Second Amended and Restated Trademark License Agreement”). Pursuant to that amendment, the license with respect to Kirkland’s stores expires upon the earlier of (i) the rebranding or closure of such stores, or (ii) two years from the date of the amendment, and the license for other goods and services is terminable by Beyond upon expiration of the Kirkland’s stores license. Based on the contractual cash flows pursuant to the Second Amended and Restated Trademark License Agreement, the Company has not recognized any royalty expense relative to their use of the intellectual property, which is a relationship with a related party and may not be at arm’s length. For further discussion on the agreements with Beyond, refer to “Note 6 — Fair Value Measures”, “Note 10 — Long-Term Debt”, “Note 11 — Subscription Agreement” and “Note 15 — Subsequent Events”.

 

Collaboration Agreement fees — Under the terms of the Collaboration Agreement, the Company gave Beyond the right to receive a percentage of future revenues generated by the Company over the life of the Collaboration Agreement. The sale of a percentage of the Company’s future revenue to Beyond has been accounted for as debt financing, as the Company has significant continuing involvement in the generation of the related cash flows. As a result, the Company recorded the proceeds from these fees as debt, which will be accreted in interest expense using the effective interest rate method over the life of the arrangement. The debt was initially recorded at its fair value, net of allocated discount and deferred costs.

 

The liability and the related interest expense for these fees are based on the Company’s current estimates of future payments expected to be made over the life of the Collaboration Agreement. The Company will periodically assess the expected payments using internal projections. To the extent our future estimates of payments are greater or less than previous estimates, the Company will prospectively recognize related non-cash interest expense. For further discussion refer to “Note 6 — Fair Value Measures”, and “Note 10 — Long-Term Debt”.